<PAGE>
1994 AMERCO(REGISTERED TRADEMARK) ANNUAL REPORT
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
(in thousands except per share data)
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues 1,134,855 1,040,911 971,884 986,664 950,639
Pretax earnings (loss) 66,502 49,179 25,734 (3,515) 21,547
Net earnings (loss) 40,184 31,909 20,794 (9,869) 18,031
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effects of change in accounting
principle per common share 1.06 0.83 0.53 (0.25) 0.46
Net earnings (loss) per common share 0.89 0.83 0.53 (0.25) 0.46
Total assets 2,344,442 2,024,023 1,979,324 1,822,977 1,725,660
Stockholders' equity 651,787 479,958 451,888 435,180 446,294
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OFFICERS
Age Office
--- ----------------------------------
<S> <C> <C>
Edward J. Shoen 45 Chairman of the Board and President
Mark V. Shoen 43 Director
James P. Shoen 34 Director
William E. Carty 67 Director
John M. Dodds 57 Director
Charles J. Bayer 54 Director
Richard J. Herrera 40 Director
Aubrey K. Johnson 72 Director
Gary B. Horton 50 Treasurer
Gary V. Klinefelter 46 Secretary and General Counsel
John A. Lorentz 67 Assistant Secretary
Rocky D. Wardrip 36 Assistant Treasurer
George R. Olds 52 Assistant Secretary
</TABLE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
-------------------------------
For the fiscal year ended March 31, 1994
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
-------------------------------
For the transition period from ______________________ to _______________________
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
- - ----------- ----------------------------------- ------------------
<S> <C> <C>
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Registrant Title of Class on Which Registered
- - ---------- -------------- ----------------------
<S> <C> <C>
AMERCO Serial preferred stock, New York Stock Exchange
with or without par value
U-Haul International, Inc. None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Registrant Title of Class
---------- --------------
<S> <C>
AMERCO Common
U-Haul International, Inc. None
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
38,664,063 shares of AMERCO Common Stock, $.25 par value, were outstanding
at June 24, 1994. The aggregate market value of AMERCO Common Stock held by
non-affiliates (i.e., stock held by persons other than officers and directors of
AMERCO or those persons who are parties to the stockholders agreement referenced
in footnote 1 to the stock ownership Table in Part III, Item 12 of this report)
as of June 24, 1994 was $344,680,253. This is computed by reference to the
appraised market value of $17.00 per share.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value,
were outstanding at June 24, 1994. None of these shares were held by non-
affiliates.
Portions of the Registrants definitive proxy statement relating to its
annual meeting of stockholders to be held July 21, 1994 are incorporated by
reference into Part III hereof.
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
ITEM 1. BUSINESS................................... 3
A. THE COMPANY........................... 3
B. HISTORY............................... 3
C. BUSINESS STRATEGY..................... 4
D. BUSINESS OF U-HAUL.................... 6
E. BUSINESS OF INSURANCE COMPANIES....... 9
F. BUSINESS OF AMERCO REAL ESTATE........ 15
ITEM 2. PROPERTIES................................. 15
ITEM 3. LEGAL PROCEEDINGS.......................... 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS........................... 19
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS..... 19
ITEM 6. SELECTED FINANCIAL DATA.................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................. 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA....................................... 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES................................ 35
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................ 35
ITEM 11. EXECUTIVE COMPENSATION..................... 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT...................... 35
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS............................... 35
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K.......... 36
<PAGE> 3
PART I
ITEM 1. BUSINESS
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 Form 10-K, 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 Form 10-K, 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 tradename U-Haul(REGISTERED TRADEMARK). 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.
See Note 20 of Notes to Consolidated Financial Statements
in Item 8 for financial information regarding the Company's three
primary industry segments, which are represented by U-Haul, Oxford
and RWIC.
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 March 31,
1994, the Company's distribution network included approximately
1,100 U-Haul Centers and approximately 11,500 independent dealers.
In March 1974, in conjunction with the acquisition and
construction of U-Haul Centers, the Company entered the self-
<PAGE> 4
storage business. As of March 31, 1994, such self-storage
facilities were located at or near approximately 59% 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.
Commencing in 1987, 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. The Company believes that its
refocused business strategy enabled U-Haul to generate higher
revenues and to achieve significant cost savings.
Since 1987, the Company has sold surplus real estate
assets with a book value of approximately $38.1 million for total
proceeds of approximately $76.4 million. At March 31, 1994, the
book value of the Company's real estate assets deemed to be surplus
was approximately $18.4 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.
<PAGE> 5
Through its "Moving Made Easier" (REGISTERED TRADEMARK) 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"(REGISTERED TRADEMARK) and "Safestor"(REGISTERED TRADEMARK),
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.
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 6,000 independent dealers.
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 63,000 new
trucks between March 1987 and March 1994 and reduced the overall
average age of its truck fleet from approximately 11 years at March
1987 to approximately 5 years at March 1994. During this period,
approximately 60,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 48% 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.
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'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
<PAGE> 6
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'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, motorhome 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"(REGISTERED TRADEMARK) 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"(REGISTERED TRADEMARK), which provides moving customers with a damage
waiver, cargo protection, and medical and life coverage, and (ii) "Safestor",
(REGISTERED TRADEMARK) which provides self-storage rental customers with
various insurance coverages.
<PAGE> 7
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 March 31, 1994, U-Haul's rental equipment fleet
consisted of approximately 72,000 trucks and approximately 90,000
trailers. Rental trucks are offered in five sizes and range in
size from the ten-foot "Mini-Mover"(REGISTERED TRADEMARK) to the
twenty-six-foot "Super-Mover"(REGISTERED TRADEMARK). 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 March 31, 1994,
approximately 1,100 Company-owned U-Haul Centers and approximately
11,500 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.
<PAGE> 8
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. The Company also provides financing and
management services for independent self-storage businesses.
Through approximately 650 Company-owned locations in the
United States and Canada, the Company offers for rent more than
13.0 million square feet of self-storage space. The Company's self-
storage facility locations have an average of 20,000 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 1994, occupancy
rates increased to approximately 91% from approximately 85% in the
prior year. During fiscal 1994 and fiscal 1993, delinquent rentals
as a percentage of total storage rentals were approximately 5% in
each year, which rate the Company considers to be satisfactory.
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.
<PAGE> 9
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 and $177.7 million in fiscal 1994.
During fiscal 1994, the Company, as part of its fleet renewal
program, resumed the purchase and manufacture of new trucks with
the objective of increasing the size of the truck fleet.
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
For the period ending March 31, 1994, the Company's non-seasonal
workforce consisted of approximately 11,300 employees comprised of
approximately 46% part-time and 54% full-time employees. During
the summer months, the Company increases its workforce by
approximately 2,300 employees and the percentage of part-time
employees increases to approximately 54% of the total workforce.
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. Oxford's
direct lines are primarily related to group life and disability
coverage issued to employees of AMERCO and its subsidiaries. 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 writings 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
<PAGE> 10
revenues for the year ended December 31, 1993. Oxford administers
AMERCO's self-insured group health and dental plans.
Oxford's reinsurance assumed lines, which accounted for
approximately 88.7% of Oxford's premium revenues for the year ended
December 31, 1993, include individual life insurance coverage,
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 reinsured 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 38% 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.
RWIC provides a liability for unpaid losses that is based
on the estimated ultimate cost of settling claims reported prior to
the end of the accounting period, estimates received from ceding
reinsurers and estimates for incurred but unreported losses based
on RWIC's historical experience supplemented by insurance industry
historical experience. Unpaid loss adjustment expenses are based
on historical ratios of loss adjustment expense paid to losses
paid.
The liabilities are estimates necessary to settle all
claims as of the date of the stated reserves and all incurred but
not reported claims. RWIC updates the reserves as additional facts
regarding claims become apparent. In addition, court decisions,
economic conditions and public attitudes impact the estimation of
reserves and also the ultimate cost of claims. In estimating
reserves, no attempt is made to isolate inflation from the combined
effect of numerous factors including inflation. Unpaid losses and
unpaid loss expenses are not discounted.
RWIC's unpaid loss and loss expenses are certified
annually by an independent actuarial consulting firm as required by
state regulation.
<PAGE> 11
<TABLE>
The following table is a reconciliation in summary form,
for each of the last three years, of the beginning and end of year
unpaid loss and loss expenses:
<CAPTION>
Year Ended December 31
------------------------
1993 1992 1991
------------------------
(in thousands)
<S> <C> <C> <C>
Unpaid loss and loss expenses,
beginning of year $ 238,762 236,019 226,324
--------- ------- -------
Losses and loss adjustment expenses:
attributable to the current year 91,044 96,451 74,510
Increase (Decrease) attributable
to prior years 12,688 (4,241) 3,124
--------- ------- -------
Total 103,732 92,210 77,634
--------- ------- -------
Payments:
Loss and loss adjustment expenses
attributable to current year 20,200 23,936 12,810
Payments attributable to prior years 83,923 65,531 55,129
--------- ------- -------
Total 104,123 89,467 67,939
--------- ------- -------
Increase due to adoption of FAS113 76,111 - -
--------- ------- -------
Unpaid loss and loss expenses,
end of year $ 314,482 238,762 236,019
========= ======= =======
</TABLE>
Effective December 31, 1993, RWIC adopted Statement of
Financial Accounting Standards (SFAS) No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts". The primary impact of SFAS No. 113 is the requirement
to report assets and liabilities relating to reinsured contracts
gross of the effects of reinsurance. Previously, RWIC reported
such effects on a net basis. As a result of adoption of SFAS No.
113, the liability for unpaid losses and loss adjustment expenses
as of December 31, 1993 has been increased approximately $76
million to reflect policy liabilities without regard to
reinsurance. A corresponding amount due from reinsurers on unpaid
losses, including amounts related to claims incurred but not
reported, has also been reflected.
The table on page 12 illustrates the change in unpaid
loss and loss expenses. The first line shows the reserves as
originally reported at the end of the stated year. The second
section, reading down, shows the cumulative amounts paid as of the
end of successive years with respect to that reserve. The third
section, reading down, shows reestimates of the original recorded
reserve as of the end of successive years. The last section
compares the latest reestimated reserve amount to the reserve
amount as originally established. This last section is cumulative
and should not be summed.
<PAGE> 12
<TABLE>
Unpaid Loss and Loss Expenses
December 31
----------------------------------------------------------------------------------------------
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve for Unpaid
Loss and Loss
Adjusment Expenses: $ 67,129 90,315 123,342 146,391 168,688 199,380 207,939 226,324 236,019 238,762 314,482
- - -------------------
Paid (Cumulative)
as of:
-----------------
One year later 21,140 24,602 41,170 54,627 49,681 59,111 50,992 55,128 65,532 83,923
Two years later 35,340 50,628 77,697 92,748 91,597 89,850 87,850 97,014 105,432
Three years later 47,544 70,719 105,160 124,278 110,834 114,979 116,043 120,994
Four years later 56,197 84,936 126,734 137,744 129,261 133,466 132,703
Five years later 61,826 95,583 133,421 151,354 142,618 145,864
Six years later 68,722 98,018 142,909 161,447 152,579
Seven years later 68,496 102,805 151,379 169,601
Eight years later 70,822 109,055 158,728
Nine years later 74,809 114,334
Ten years later 77,700
Reserve Reestimated
as of:
- - -------------------
One year later 72,462 101,097 138,287 167,211 187,663 200,888 206,701 229,447 231,779 251,450
Two years later 74,850 107,111 147,968 192,272 190,715 202,687 206,219 221,450 224,783
Three years later 76,811 115,746 168,096 192,670 194,280 203,343 199,925 211,988
Four years later 80,453 119,977 168,040 199,576 195,917 199,304 198,986
Five years later 82,823 119,513 175,283 201,303 195,203 200,050
Six years later 82,209 122,791 178,232 202,020 196,176
Seven years later 81,894 125,863 182,257 202,984
Eight years later 83,943 128,815 184,266
Nine years later 85,816 132,207
Ten years later 86,856
Initial reserve
in excess
of (less than)
reestimated reserve:
- - ----------------------
Amount (cumulative) $(19,727) (41,892) (60,924) (56,593) (27,488) (670) 8,953 14,336 11,236 (12,688)
</TABLE>
<PAGE> 13
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 liabilities for unpaid losses and loss expenses.
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. 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
<PAGE> 14
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 report, Oxford
is in compliance with these requirements. The NAIC has adopted 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. RWIC
will adopt the minimum risk-based capitalization requirements in
fiscal 1995. Adoption will have no material effect on RWIC.
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.
<PAGE> 15
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".
ITEM 2. PROPERTIES
The Company and its subsidiaries own property, plant and
equipment that are utilized in the manufacture, repair and rental
of U-Haul equipment and that provide offices for the Company. See
Note 14 of Notes to Consolidated Financial Statements in Item 8 for
information regarding the leasing obligations of the Company and
its subsidiaries, including those under U-Haul TRAC leases. See "U-
Haul Operations - General" in Item 1. Such facilities exist
throughout the United States and Canada. The majority of land and
buildings used by U-Haul is owned in fee and is substantially
unencumbered. In addition, U-Haul owns certain real estate not
currently used in its operations. U-Haul operates approximately
1,100 U-Haul centers (approximately 650 of which rent self-storage
space), 7 manufacturing facilities, and 23 repair facilities.
ENVIRONMENTAL MATTERS
Underground Storage Tanks
The Company owns properties that, as of March 31, 1994,
contained a total of approximately 1,600 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 1994, the Company incurred expenditures totaling
approximately $16.3 million for removal and remediation of
approximately 1,123 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 1994 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
<PAGE> 16
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
fifteen federal or state superfund hazardous waste sites located in
twelve states. Under applicable laws and regulations the Company
could be held jointly and severally liable for the costs to clean-
up these sites. Currently, the Company has entered into buyout
agreement settlements for seven of the sites and one site is under
negotiation for settlement. Four of the sites have been inactive
for more than two years and two of the sites have been disputed by
the Company with no response for more than two years. One site is
under state clean-up direction. Based upon the information
currently available to the Company regarding these fifteen 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 fifteen
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 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 onsite 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 reasonably 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 Form 10-K.
In addition, the Company has been named by the State of
Washington as a PLP along with 12 other PLPs with respect to
<PAGE> 17
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 Form 10-K, 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 reasonably 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 Form 10-
K, 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 indemnification's do not cover pre-
<PAGE> 18
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.
ITEM 3. LEGAL PROCEEDINGS
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 siting 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 Sophia M. Shoen
and Paul F. Shoen against the Company were convened on June 19, 1994.
In the arbitration, Sophia M. Shoen asserts that the Company has
breached its obligations to her by failing to timely register the sale
of her shares and by failing to remove the right of first refusal on
all Company common stock. Paul F. Shoen asserts that the Company has
breached its obligations to him by failing to consummate the purchase
from him of 58,824 shares of
<PAGE> 19
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. Sophia M. Shoen and
Paul F. Shoen assert that, as a consequence of these alleged breaches, they
have the right to give notice of their release from a Stockholder Agreement
described under Item 12. Security Ownership of Certain Beneficial Owners
and Management. The Company disagrees with the above assertions. An
arbitration hearing on these issues is presently scheduled for July 26, 1994.
The Company and its subsidiaries are defendants in a
number of suits and claims incident to the type of business
conducted and several administrative proceedings arising from state
and local provisions that regulate the removal and/or clean up of
underground fuel storage tanks. It is the opinion of management
that none of the suits, claims or proceedings involving the
Company, individually or in the aggregate, are expected to result
in any material loss and, accordingly, no provision has been made
in the accompanying financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of June 24, 1994, there were 161 holders of record of
the Company's common stock in comparison to 165 as of August 12,
1993. No established public trading market exists for the purchase
and sale of the Company's common stock, and to the best knowledge
and belief 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:
<TABLE>
<CAPTION>
Date Cash Dividend per Common Share
---- ------------------------------
<S> <C>
August 4, 1992 $ .0258
October 6, 1992 .0258
August 3, 1993 .0814
</TABLE>
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 paid during fiscal 1993 and
fiscal 1994 are not indicative of future dividends and there is no
assurance that dividends on common stock will be declared in the
future. See Note 5 of Notes to Consolidated Financial Statements
in Item 8 for a discussion of certain contractual restrictions on
the Company's ability to pay dividends. See Note 19 of Notes to
<PAGE> 20
Consolidated Financial Statements in Item 8 for a discussion of
certain statutory restrictions on Ponderosa's ability to pay
dividends to the Company.
See Note 15 of Notes to Consolidated Financial Statements
in Item 8 for a discussion of the Company's non-cash dividends.
See Note 6 of Notes to Consolidated Financial Statements in Item 8
for a discussion of changes to common shares outstanding and per
share amounts.
The common stock of U-Haul is wholly-owned by the
Company. As a result, no active trading market exists for the
purchase and sale of such common stock. No cash dividends were
declared to the Company by U-Haul during the two most recent fiscal
years.
<PAGE> 21
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended March 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Summary of Operations
Rental, net sales and other revenue $ 972,704 901,446 845,128 860,044 830,998
Premiums and net investment income 162,151 139,465 126,756 126,620 119,641
--------- --------- ---------- ---------- ----------
1,134,855 1,040,911 971,884 986,664 950,639
--------- --------- ---------- ---------- ----------
Operating expense and cost of sales 735,841 697,700 661,229 668,149 627,396
Benefits, losses and amortization
of deferred acquisition costs 130,168 115,969 99,091 126,626 121,602
Depreciation 133,485 110,105 109,641 114,589 105,437
Interest expense 68,859 67,958 76,189 80,815 74,657
--------- --------- ---------- ---------- ----------
1,068,353 991,732 946,150 990,179 929,092
--------- --------- ---------- ---------- ----------
Pretax earnings (loss) from operations 66,502 49,179 25,734 (3,515) 21,547
Income tax benefit (expense) (19,853) (17,270) (4,940) (6,354) (3,516)
--------- --------- ---------- ---------- ----------
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effects of change in accounting
principle 46,649 31,909 20,794 (9,869) 18,031
Extraordinary loss on early
extinguishment of debt (3,370) - - - -
Cumulative effects of change in
accounting principle (3,095) - - - -
--------- --------- ---------- ---------- ----------
Net Earnings (loss) $ 40,184 31,909 20,794 (9,869) 18,031
========= ========= ========== ========== ==========
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effects of change in accounting
principle per common share $ 1.06 .83 .53 (.25) .46
Net earnings per common share .89 .83 .53 (.25) .46
Weighted average common shares
outstanding 38,664,063 38,664,063 38,880,069 39,213,080 39,483,960
Cash dividends declared 7,900 1,994 - 1,176 2,575
Ratio of earnings to fixed charges (1) 1.64 1.45 1.21 -(1) 1.20
</TABLE>
<PAGE> 22
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA, continued
<CAPTION>
As of March 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total property, plant and equipment,
net $ 1,174,236 989,603 987,095 1,040,342 975,675
Total assets 2,344,442 2,024,023 1,979,324 1,822,977 1,725,660
Notes and loans payable 723,764 697,121 733,322 804,826 749,113
Stockholders' equity 651,787 479,958 451,888 435,180 446,294
<FN>
(1) 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, preferred stock
dividends, 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,
pretax earnings were not sufficient to cover fixed charges by an amount of $4.2 million.
</TABLE>
<PAGE> 23
ITEM 7. 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 1994, 1993, and 1992 that would materially
affect the Company's consolidated financial position or results of
operations as of and for the fiscal years ended March 31, 1994,
1993, and 1992, respectively.
The following management discussion and analysis should
be read in conjunction with Notes 1, 19, and 20 of Notes to
Consolidated Financial Statements in Item 8, 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
YEARS ENDED MARCH 31, 1994, 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 fiscal
years ended March 31, 1994, 1993, and 1992. 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>
1994
Revenues:
Outside $965,839 $31,357 $137,659 - $1,134,855
Intersegment (357) 2,834 18,862 $(21,339) -
-------- ------- -------- -------- ----------
Total Revenue $965,482 $34,191 $156,521 $(21,339) $1,134,855
======== ======= ======== ======== ==========
Operating profit $106,248 $ 9,106 $ 20,705 (698) $ 135,361
======== ======= ======== ========
Interest expense 68,859
-----------
Pretax earnings from
operations $ 66,502
===========
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
==========
</TABLE>
<PAGE> 24
<TABLE>
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- --------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
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
===========
</TABLE>
FISCAL YEAR ENDED MARCH 31, 1994 VERSUS FISCAL YEAR ENDED MARCH 31, 1993
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 $63.3 million, approximately 8.5%, to $809.4 million
in fiscal 1994. The increase from fiscal 1993 is primarily
attributable to a $52.2 million increase in net revenues from the
rental of moving related equipment, which benefited from
transactional growth reflecting higher utilization and rental fleet
expansion. Revenues from the rental of self-storage facilities
increased by $6.6 million to $70.5 million in fiscal 1994, an
increase of approximately 10.3%. Storage revenues were positively
impacted by additional rentable square footage, higher average
occupancy levels, and higher average rental rates. All other
revenue categories increased in the aggregate by $8.7 million
during the current year which primarily reflects increases in gains
on note sales of approximately $5.0 million and interest income.
Net Sales were $156.0 million in fiscal 1994, which
represented an increase of approximately 7.2% from fiscal 1993 net
sales of $145.5 million. Revenue growth from the sale of hitches,
moving support items (i.e. boxes, etc.), and propane net sales
increased $10.7 million during the current year.
Cost of sales was $92.2 million in fiscal 1994, which
represented a decrease of approximately 1.0% from fiscal 1993. The
reduction in fiscal 1994 reflects a combination of the absence of
recreational vehicle sales, reduced levels of outside repair and a
reduction in inventory adjustments which fully offset increased
material costs corresponding to the increase in hitch, moving
support and propane sales.
Operating expenses increased to $633.6 million in fiscal
1994 from $599.8 million in fiscal 1993, an increase of
approximately 5.6%. The change from the prior year reflects
increases in almost all major expense categories with the exception
of lease expense for equipment. Rental equipment maintenance costs
increased by $27.4 million reflecting fleet expansion, higher
utilization, a marginal increase in the age of the fleet and
increased emphasis on maximizing rental equipment available to rent
<PAGE> 25
by reducing downtime. Lease expense for equipment declined from
$117.6 million in fiscal 1993 to $82.9 million in fiscal 1994, a
decrease of approximately 29.5%, reflecting lease terminations,
lease restructuring and lower finance costs on new leases
originated during the current year. All other operating expense
categories increased in the aggregate by $41.1 million,
approximately 12.4%, to $373.0 million which is primarily
attributable to higher levels of rental and sales activity.
Depreciation expense during fiscal 1994 was $133.5
million as compared to $110.1 million in the prior year, reflecting
the addition of new trucks and trailers and the acquisition of
trucks that were previously leased.
OXFORD - LIFE INSURANCE
Premiums from Oxford's reinsurance lines before
intercompany eliminations were $15.8 million for the year ended
December 31, 1993, an increase of $0.9 million, approximately 6.0%
over 1992 and accounted for 88.7% of Oxford's premiums in 1993.
These premiums are primarily from term life insurance and single
and flexible premium deferred annuities. Increases in premiums are
primarily from the anticipated increase in annuitizations as a
result of the maturing of deferred annuities.
Premiums from Oxford's direct lines before intercompany
eliminations were $2.0 million in 1993, a decrease of $1.0 million
(33%) 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
subsidiary companies accounted for approximately 6.3% of Oxford's
premiums in 1993. Other direct lines accounted for approximately
5.0% of Oxford's premiums in 1993.
Net investment income before intercompany eliminations
was $12.6 million and $11.5 million for the years ended December
31, 1993 and 1992, respectively. Gains on the disposition of fixed
maturity investments were $2.1 million and $4.7 million. Oxford
had $1.8 million and $2.2 million of other income, for 1993 and
1992, respectively.
Benefits and expenses incurred were $24.4 million for the
year ended December 31, 1993, an increase of 5.2% over 1992.
Comparable benefits and expenses incurred for 1992 were $23.2
million. This increase is primarily due to the increase in
annuitizations discussed above.
Operating profit after intercompany eliminations
decreased by $3.4 million, approximately 27.6%, in 1993 to $8.9
million, primarily due to the decrease in gains on fixed maturity
investments.
<PAGE> 26
RWIC - PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December
31, 1993 were $175.1 million, compared to $155.2 million in 1992,
an increase of approximately 12.8% The rental industry market
accounted for a significant share of these premiums, approximately
37% and 40% 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. Selected general
agency lines, principally commercial multiple peril, surety and
excess workers' compensation and casualty accounted for 8.1%, 3.2%
and 5.4% respectively, of gross premium writings in 1993, compared
to approximately 15.4%, 2.8% and 11.9% respectively in 1992. RWIC
also underwrites reinsurance via broker markets, and premiums in
this area increased from $47.1 million in 1992 to $59.5 million in
1993 due to favorable market conditions.
Net earned premiums increased $24.3 million,
approximately 24%, to $125.4 million for the year ended December
31, 1993. This compares with net earned premiums of $101.1 million
for the year ended December 31, 1992. The premium increase was
primarily due to increased writings in the reinsurance area, along
with growth in the excess workers' compensation line of RWIC's
general agency business.
Underwriting expenses incurred were $135.6 million for
the year ended December 31, 1993, an increase of $17.8 million,
approximately 15.1% over 1992. Comparable underwriting expenses
incurred for 1992 were $117.8 million. Higher underwriting
expenses are due to larger premium volumes being written in 1993
which increased acquisition costs and commensurate reserves.
Net investment income was $27.4 million in 1993, a
decrease of approximately 6.5%, as compared to 1992 net investment
income of $29.3 million. This decrease is due primarily to lower
rates available in the high quality fixed income market. RWIC's
net realized gain on the sale of investments was $2.1 million and
$0.7 million in 1993 and 1992, repectively, while other income
totaled $1.4 million and $2.9 million.
RWIC completed 1993 with net after tax income of $14.8
million as compared to $11.8 million for the comparable period
ended December 1992. This represents an increase of $3.0 million,
or 25.4% over 1992. The increase is due to a combination of better
underwriting results and unplanned gains on bond calls. Net income
at December 31, 1992 of $11.8 million includes the effect of
adopting SFAS 109 (Accounting for Income Taxes), previously
reported December 31, 1992 net income was $12.8 million.
<PAGE> 27
INTEREST EXPENSE
Interest expense was $68.8 million in fiscal 1994, as
compared to $68.0 million in fiscal 1993. The increase reflects
higher average levels of debt outstanding (see liquidity and
capital resources), a higher proportion of fixed rate debt, and a
lengthening of maturities offset by lower cost of funds.
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
<PAGE> 28
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%.
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 83.3% of Oxford's premiums in 1992.
These premiums are primarily from term life insurance and single
and flexible premium deferred annuities. Reductions in premiums
reflect the anticipated decrease in renewal premiums as a result of
normal attrition and mortality, combined with the fact that during
1992 Oxford reduced its activities in the reinsurance market
compared to 1991 because of unfavorable market conditions.
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 accounted for approximately
5.9% 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. Gains on the disposition of fixed
maturity investments were $4.7 million and $0.1 million. 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 disposition or
prepayments 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 fixed maturity investments associated with interest-sensitive
products, resulting in a charge of approximately $2.0 million.
<PAGE> 29
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, fleetowners, 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 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 reflects lower average debt levels outstanding and
favorable refinance costs on maturing debt.
<PAGE> 30
RESULT OF OPERATIONS - CONSOLIDATED GROUP
As a result of the foregoing, pre-tax earnings of $66.0
million were realized in fiscal 1994 as compared to $49.2 million
in fiscal 1993 and $25.7 million in fiscal 1992. After providing
for income taxes, extraordinary costs associated with the early
retirement of debt and the cumulative effect of a change in
accounting principle, net earnings for fiscal 1994 were $40.2
million as compared to $31.9 million in fiscal 1993 and $20.8
million in fiscal 1992.
LIQUIDITY AND CAPITAL RESOURCES
U-HAUL OPERATIONS
To meet the needs of its customers, U-Haul must maintain
a large inventory of fixed asset rental items. At March 31, 1994,
net property, plant and equipment represented approximately 73.7%
of total U-Haul assets and approximately 50.1% of consolidated
assets. In fiscal 1994, capital expenditures increased to $530.5
million, as compared to $130.8 million in fiscal 1993, due to
expansion of the rental truck fleet, the 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 and the issuance of preferred
stock.
Cash flows from operations was $202.3 million in fiscal
1994, as compared to $162.8 million in fiscal 1993. The increase
results from an increase in net earnings and depreciation and
amortization.
At March 31, 1994, total notes and loans payable
outstanding was $723.8 million as compared to $697.1 million at
March 31, 1993. This increase reflects the impact of higher levels
of capital additions and expenditures for premature lease
terminations initiated by the Company.
During each of the fiscal years ending March 31, 1995,
1996, 1997, U-Haul estimates gross capital expenditures will
average approximately $360 million as a result of the expansion of
the rental truck fleet and storage segment. 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 $460 million. Management estimates that U-Haul will
fund approximately 55% 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 fiscal 1994, the Company arranged approximately
$652 million in debt, lease and equity financing which has
significantly increased liquidity available to the Company in the
<PAGE> 31
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 $4.1 million, $6.2 million, and $185.6 million for the
years ended December 31, 1993, 1992, and 1991, respectively. In
1991, cash flows from new reinsurance agreements were approximately
$154.0 million. During 1993 and 1992 there were no cash flows from
new reinsurance agreements. In addition to cash flow from
operations and financing activities, a substantial amount of liquid
funds are available through Oxford's short-term portfolio. At
December 31, 1993 and 1992, short-term investments amounted to $8.4
million and $12.2 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 $86.9 million in 1993 from $90.8 million in
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 $1.0 million. 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 regulatory approval.
Statutory surplus that can be distributed as dividends without
prior regulatory approval is $17,619,000 at December 31, 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 $6.2 million
at December 31, 1993. This level of liquid assets, combined with
budgeted cash flow, is believed by management to be adequate to
meet periodic needs. The structure of the long-term portfolio is
designed to match future cash needs. Through capital and operating
budgets, RWIC seeks to schedule cash needs in accordance with
investment and underwriting proceeds. RWIC does not have plans for
any near-term large capital outlays.
<PAGE> 32
RWIC maintains a diversified investment portfolio,
primarily in bonds at varying maturity levels. Ninety-eight
percent of the bond portfolio consists of investment grade
securities. The maturity distribution is designed to provide
sufficient liquidity to meet future cash needs. Current liquidity
is adequate, with current invested assets equal to 99.7% of total
liabilities.
The liability for unpaid losses is based on the estimated
ultimate cost of settling claims reported prior to the end of the
accounting period, estimates received from ceding reinsurers, and
estimates for unreported losses based on the historical experience
of RWIC, supplemented by insurance industry historical experience.
The liability for unpaid loss adjustment expenses is based on
historical ratios of loss adjustment expenses paid to losses paid.
Unpaid loss and loss expenses are not discounted.
Stockholder's equity of RWIC increased approximately
10.4% to $165.1 million in 1993 from $149.6 million in 1992.
Stockholder's equity at December 31, 1992 includes the impact of
adopting SFAS 109 Accounting for Income Taxes (as previously
reported, RWIC's stockholder's equity as of that date was $134.7
million). As of March 31, 1994, stockholders' equity of RWIC was
$170.2 million.
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 March 31, 1994, the Company had
$723.8 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $141.5
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 March 31, 1994,
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.
<PAGE> 33
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,
"Employers' Accounting for Postretirement 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 by
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
recognized by the Company at April 1, 1993 was $5.0 million. Net
of income taxes, the cumulative effect of adoption at April 1, 1993
was $3.1 million.
Further, during the first quarter of fiscal 1994 the
Company adopted the 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 $11.1 million net increase in deferred
income taxes payable. The Company adopted this change
retroactively to April 1, 1988. For additional information, see
Note 7 of Notes to Consolidated Financial Statements in Item 8.
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 effect of this statement on
the Company's financial position or results of operations will not
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." Effective January 1, 1993, the Company
adopted the standard. The primary impact on the Company's
financial statements is the requirement to report assets and
liabilities relating to reinsured contracts gross of the effects of
reinsurance. Previously, such effects were reported on a net
<PAGE> 34
basis. As a result of adoption of the standard, unpaid losses and
loss expenses as of March 31, 1994 have been increased by
approximately $76 million to reflect the Company's policy
liabilities without regard to reinsurance. A corresponding amount
due from reinsurers on unpaid losses, including amounts related to
claims incurred but not reported, has also been reflected.
Additionally, unearned premiums have been increased by
approximately $12 million for policy premiums ceded to reinsurers
for which the coverage period has not yet expired. Prepaid
insurance premiums of a corresponding amount have also been
reflected in the consolidated balance sheet. The consolidated
balance sheet as of March 31, 1993 has not been restated to reflect
the adoption of the standard.
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan", was issued by
the Financial Accounting Standards Board in May 1993. This
standard is effective for years beginning after December 15, 1994.
The standard requires that an impaired loan's fair value be
measured and compared to the recorded investment in the loan. If
the fair value of the loan is less than the recorded investment in
the loan, a valuation allowance is established. The Company has
not completed an evaluation of the effect of this standard.
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.
This standard requires classification of debt securities into one
of the following three categories based on management's intention
with regard to such securities: held-to-maturity, available-for-
sale and trading. Securities classified as held-to-maturity are
recorded at cost adjusted for the amortization of premiums or
accretion of discounts while those classified as available-for-sale
are recorded at fair value with unrealized gains or losses reported
on a net basis in a separate component of shareholders' equity.
Securities classified as trading are recorded at fair value with
unrealized gains or losses reported on a net basis in income.
Effective December 31, 1993, RWIC adopted the standard. RWIC does
not currently maintain a trading portfolio. Oxford and U-Haul have
not completed an evaluation of this standard.
Statement of Position 93-7, "Reporting on Advertising
Costs", was issued by the Accounting Standards Executive Committee
in December 1993. This statement of position provides guidance on
financial reporting on advertising costs in annual financial
statements. The statement of position requires reporting
advertising costs as expenses when incurred or when the advertising
takes place, reporting the costs of direct-response advertising,
and amortizing the amount of direct-response advertising reported
as assets. This statement of position is effective for financial
statements for years beginning after June 15, 1994. The Company
currently matches certain advertising costs with revenue generated
in future periods, and at March 31, 1994, $8.2 million in
advertising costs are deferred and included in prepaid expenses.
<PAGE> 35
The Company has completed an evaluation of the effect of this
statement of position but has not determined the timing of
adoption.
IMPACT OF INFLATION
Inflation has had no material financial effect on the
Company's results of operations in the years discussed.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants and Consolidated
Financial Statements of the Company, including the notes to such
statements, are set forth on pages 37 through 96, and are hereby
incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
The Registrant has had no disagreements with its
independent accountants in regard to accounting and financial
disclosure and has not changed its independent accountants in the
24 months prior to date of filing.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Reference is hereby made to "Directors, Director
Nominees, and Executive Officers" in the Company's Proxy Statement
relating to the annual meeting of stockholders to be held on July
21, 1994 (the "1994 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Reference is hereby made to "Executive Compensation" and
"Compensation Committee Interlocks and Insider Participation" in
the 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Reference is hereby made to "Security Ownership of
Certain Beneficial Owners and Management" in the 1994 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is hereby made to "Certain Relationships and
Related Transactions" in the 1994 Proxy Statement.
<PAGE> 36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
Page No.
--------
1. All Financial Statements
Report of Independent Accountants - AMERCO and
Consolidated Subsidiaries 37
Consolidated Balance Sheets -
March 31, 1994 and 1993 38
Consolidated Statements of Earnings -
Years ended March 31, 1994, 1993 and 1992 40
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 1994, 1993 and 1992 41
Consolidated Statements of Cash Flows - Years ended
March 31, 1994, 1993 and 1992 43
Notes to Consolidated Financial Statements -
March 31, 1994, 1993 and 1992 45
Summary of Earnings of Independent Trailer Fleets 83
Notes to Summary of Earnings of Independent
Trailer Fleets 84
2. Financial Statement Schedules required to be filed
by Item 8 and Paragraph (d) of this Item 14
Amounts Receivable from Related Parties and Under-
writers, Promoters and Employees Other than Related
Parties -- Schedule II 86
Condensed Financial Information of Registrant --
Schedule III 87
Property, Plant and Equipment - Years ended
March 31, 1994, 1993 and 1992 -- Schedule V 92
Accumulated Depreciation of Property, Plant
and Equipment - Years ended March 31, 1994,
1993 and 1992 -- Schedule VI 94
Supplemental Information (for Property-Casualty
Insurance Underwriters) -- Schedule XIV 96
All other schedules are omitted as the required
information is not applicable or the information is presented in
the financial statements or related notes.
3. Exhibits Filed
Exhibit No. Description
----------- -----------
3.1 Restated By-Laws of AMERCO as of February 8, 1994
12 Statement Re: Computation of Ratios
28 Information Furnished to State Insurance Regulators
(b) No report on Form 8-K has been filed during the last quarter
of the period covered by this report.
<PAGE> 36
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INTENTIONALLY BLANK
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AMERCO
In our opinion, the consolidated financial statements and schedules listed in
the index appearing under Item 14(a)(1) and (2) on page 36 present fairly, in
all material respects, the financial position of AMERCO and its subsidiaries at
March 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As described in Notes 1 and 11 to the consolidated financial statements, the
Company changed its method of accounting for ceded reinsurance, certain
investments and postretirement benefits in fiscal 1994.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Summary of Earnings of Independent
Trailer Fleets included on pages 83 through 85 of this Form 10-K is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relating to the basic
financial statements taken as a whole.
/S/ PRICE WATERHOUSE
Phoenix, Arizona
June 24, 1994
<PAGE> 38
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
<CAPTION>
Assets 1994 1993
----------------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents $ 18,442 21,291
Receivables 204,814 79,672
Inventories 49,012 51,437
Prepaid expenses 24,503 26,985
Investments, fixed maturities 719,605 647,505
Investments, other 84,738 129,535
Deferred policy acquisition costs 47,846 49,748
Other assets 21,246 28,247
-------- ---------
Property, plant and equipment, at cost:
Land 186,210 180,171
Buildings and improvements 676,297 614,343
Furniture and equipment 163,495 158,366
Rental trailers and other rental
equipment 212,187 203,024
Rental trucks 820,395 609,306
General rental items 57,421 61,699
--------- ---------
2,116,005 1,826,909
Less accumulated depreciation 941,769 837,306
--------- ---------
Total property, plant and equipment 1,174,236 989,603
--------- ---------
$ 2,344,442 2,024,023
========= =========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1994 1993
---------------------
(in thousands)
<S> <C> <C>
Liabilities:
Accounts payable and accrued
liabilities $ 124,062 113,653
Notes and loans 723,764 697,121
Policy benefits and losses, claims
and loss expenses payable 439,266 336,838
Liabilities from premium deposits 312,708 320,961
Cash overdraft 26,559 24,851
Other policyholders' funds and
liabilities 9,592 9,200
Deferred income 5,913 6,328
Deferred income taxes 50,791 35,113
--------- ---------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized; 6,100,000 issued
without par value and outstanding
as of March 31, 1994 and none
issued or outstanding as of March
31, 1993 - -
Serial common stock, with or without
par value, 150,000,000 shares
authorized - -
Series A common stock of $.25 par
value. Authorized 10,000,000
shares, issued 5,754,334 shares
in 1994, none in 1993 1,438 -
Common stock of $.25 par value.
Authorized 150,000,000 shares,
issued 34,245,666 shares in 1994
and 40,000,000 shares in 1993 8,562 10,000
Additional paid-in capital 165,651 19,331
Foreign currency translation
adjustment (11,152) (6,122)
Retained earnings 515,200 482,163
--------- ---------
679,699 505,372
Less:
Cost of common shares in treasury
(1,335,937 shares as of March
31, 1994 and March 31, 1993) 10,461 10,461
Loan to leveraged employee stock
ownership plan 17,451 14,953
--------- ---------
Total stockholders' equity 651,787 479,958
Contingent liabilities and commitments _________ _________
$ 2,344,442 2,024,023
========= =========
</TABLE>
<PAGE> 40
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
<CAPTION>
1994 1993 1992
----------------------------------
(in thousands except per share data)
<S> <C> <C> <C>
Revenues
Rental and other revenue $ 816,666 755,932 689,139
Net sales 156,038 145,514 155,989
Premiums 123,344 98,825 87,126
Net investment income 38,807 40,640 39,630
---------- ---------- ----------
Total revenues 1,134,855 1,040,911 971,884
Costs and expenses
Operating expense 643,662 604,596 558,313
Cost of sales 92,179 93,104 102,916
Benefits and losses 120,825 106,617 93,652
Amortization of deferred
acquisition costs 9,343 9,352 5,439
Depreciation 133,485 110,105 109,641
Interest expense 68,859 67,958 76,189
---------- ---------- ----------
Total costs and
expenses 1,068,353 991,732 946,150
Pretax earnings
from operations 66,502 49,179 25,734
Income tax (expense) (19,853) (17,270) (4,940)
---------- ---------- ----------
Earnings from operations before
extraordinary loss on early
extinguishment of debt and
cumulative effect of change
in accounting principle 46,649 31,909 20,794
Extraordinary loss on early
extinguishment of debt, net (3,370) - -
Cumulative effect of change in
accounting principle, net (3,095) - -
---------- ---------- ----------
Net earnings $ 40,184 31,909 20,794
========== ========== ==========
Earnings per common share:
Earnings from operations
before extraordinary loss
on early extinguishment of
debt and cumulative effect
of change in accounting
principle $ 1.06 .83 .53
Extraordinary loss on early
extinguishment of debt, net (.09) - -
Cumulative effect of change
in accounting principle, net (.08) - -
---------- ---------- ----------
Net earnings $ .89 .83 .53
========== ========== ==========
Weighted average common
shares outstanding 38,664,063 38,664,063 38,880,069
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 41
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
<CAPTION>
1994 1993 1992
-------------------------
(in thousands)
<S> <C> <C> <C>
Series A common stock of $.25 par
value: Authorized 10,000,000
shares, issued 5,754,334 in 1994,
none in 1993 and 1992
Beginning of year $ - - -
Exchange for common stock 1,438 - -
------- ------ ------
End of year 1,438 - -
------- ------ ------
Common stock of $.25 par value:
Authorized 150,000,000 shares
in 1994 and 1993 and 65,000,000
shares in 1992, 34,245,666 issued
in 1994, 40,000,000 issued in
1993 and 1992
Beginning of year 10,000 10,000 10,000
Exchange for Series A common
stock (1,438) - -
-------- ------ ------
End of year 8,562 10,000 10,000
-------- ------ ------
Additional paid-in capital:
Beginning of year 19,331 19,331 18,158
Interest received on notes
receivable - restricted
stock purchase plan - - 1,173
Issuance of preferred stock 146,320 - -
------- ------ ------
End of year 165,651 19,331 19,331
------- ------ ------
Foreign currency translation:
Beginning of year (6,122) (3,551) (2,378)
Change during year (5,030) (2,571) (1,173)
------- ------ ------
End of year (11,152) (6,122) (3,551)
------- ------ ------
</TABLE>
<PAGE> 42
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
<CAPTION>
1994 1993 1992
---------------------------
(in thousands)
<S> <C> <C> <C>
Retained earnings:
Beginning of year 482,163 452,202 431,408
Net earnings 40,184 31,909 20,794
Dividends paid to stockholders:
Preferred stock: ($.78 per share
for 1994) (4,753) - -
Common stock: ($.08, $.05 per
share for 1994 and 1993,
respectively) (3,147) (1,994) -
Tax benefits related to ESOP
dividends 74 46 -
Change in net unrealized gain
on investments 679 - -
--------- ------- -------
End of year 515,200 482,163 452,202
--------- ------- -------
Treasury stock:
Beginning of year 10,461 10,461 4,500
Net increase (648,017 shares
for 1992) - - 5,961
--------- ------- -------
End of year 10,461 10,461 10,461
--------- ------- -------
Notes receivable - restricted
stock purchase plan:
Beginning of year - - 4,236
Cancellation of notes - - (4,236)
--------- ------- -------
End of year - - -
--------- ------- -------
Loan to leveraged employee stock
ownership plan:
Beginning of year 14,953 15,633 13,272
Increase in loan 4,335 1,120 4,078
Proceeds from loan (1,837) (1,800) (1,717)
--------- ------- --------
End of year 17,451 14,953 15,633
--------- ------- -------
Total stockholders' equity $ 651,787 479,958 451,888
========= ======= ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 43
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
<CAPTION>
1994 1993 1992
---------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net earnings $ 40,184 31,909 20,794
Depreciation and amortization 148,740 128,530 124,368
Provision for losses on accounts
receivable 1,938 2,354 1,276
Net gain on sale of real and
personal property (2,114) (2,428) (3,740)
Gain on sale of investments (4,195) (5,392) (691)
Cumulative effect of change
in accounting principle 3,095 - -
Changes in policy liabilities
and accruals 13,330 22,637 10,971
Additions to deferred policy
acquisition costs (7,440) (8,735) (14,801)
Net change in other operating
assets and liabilities 8,781 (6,063) 6,674
------- -------- --------
Net cash provided by operating
activities 202,319 162,812 144,851
Cash flows from investing
activities:
Purchases of investments:
Property, plant and equipment (530,520) (130,841) (68,754)
Fixed maturities (280,345) (276,946) (364,448)
Real estate (176) (529) (846)
Mortgage loans (64,467) (54,346) (19,591)
Proceeds from sales of
investments:
Property, plant and equipment 214,543 20,656 16,241
Fixed maturities 211,437 251,808 222,272
Real estate 1,552 1,882 195
Mortgage loans 81,619 5,984 3,516
Changes in other investments 8,539 37,475 (54,096)
------- -------- --------
Net cash used by investing
activities (357,818) (144,857) (265,511)
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 44
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
<CAPTION>
1994 1993 1992
----------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing
activities:
Net change in notes payable and
commercial paper 21,750 2,975 (160,562)
Proceeds from notes 186,000 55,000 185,000
Loan to leveraged Employee Stock
Ownership Plan (4,335) (1,120) (4,078)
Proceeds from leveraged Employee
Stock Ownership Plan 1,837 1,800 1,717
Principal payments on notes (181,107) (94,176) (95,942)
Issuance of preferred stock 146,320 - -
Extraordinary loss on early
extinguishment of debt (3,370) - -
Net change in cash overdraft 1,708 5,307 (1,227)
Treasury stock acquisitions - - (552)
Dividends paid (7,900) (1,994) -
Investment contract deposits 31,932 51,047 200,534
Investment contract withdrawals (40,185) (27,889) (10,534)
-------- ------- --------
Net cash (used) provided by
financing activities 152,650 (9,050) 114,356
-------- ------- --------
Increase (Decrease) in cash (2,849) 8,905 (6,304)
Cash and cash equivalents at
beginning of year 21,291 12,386 18,690
-------- ------- --------
Cash and cash equivalents at
end of year $ 18,442 21,291 12,386
======== ======= ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 45
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1994, 1993 and 1992
(1) Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts of the parent corporation, AMERCO, and its subsidiaries, all
of which are wholly-owned. All material intercompany accounts and
transactions of AMERCO and its subsidiaries (herein called the "Company" or
the "consolidated group") have been eliminated.
The operating results and financial position of AMERCO's consolidated
insurance operations are determined as of December 31 of each year. There
were no effects related to intervening events which would significantly
affect consolidated financial position or results of operations for the
financial statements presented herein. See Note 19 of Notes to
Consolidated Financial Statements of AMERCO for additional information
regarding the subsidiary.
Description of Business: The consolidated group's principal line of business
is the rental of various kinds of equipment, principally trucks, automobile-
type trailers, auto transports and general rental items, including floor
care items, tools for home and garden use, recreational equipment and
accessories under the brand name U-Haul and the sale of related products
and services. In addition, the consolidated group is engaged in the rental
of self-storage facilities for the storage of household goods and other
forms of personal property. Through Ponderosa Holdings, Inc.,
("Ponderosa"), which serves as the holding company for Oxford Life
Insurance Company ("Oxford") and Republic Western Insurance Company
("RWIC"), the Company operates in various life, annuity, group health and
property/ casualty insurance products. A portion of the insurance
subsidiaries' business is conducted with members of the consolidated group.
Foreign Currency: The consolidated financial statements include the accounts
of U-Haul Co. (Canada) Ltd., a subsidiary of AMERCO.
Assets (including property, plant and equipment) and liabilities,
denominated in currencies other than U.S. dollars, are translated to U.S.
dollars at the exchange rate as of the balance sheet date. Income and
expense amounts (including depreciation expense) are translated at the
average exchange rate during the fiscal year.
Cash and Cash Equivalents: The Company considers liquid investments with an
original maturity of three months or less to be cash equivalents.
<PAGE> 46
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable
of Ponderosa include premiums and agents' balances due net of commissions
payable and amounts due from ceding reinsurers. Accounts receivable of
Ponderosa are reduced by amounts considered to be uncollectible. Accounts
receivable of the Company's rental subsidiaries principally include trade
accounts receivable and mortgage and other notes receivable. Allowance
for doubtful accounts are provided based on historical collection loss
experience and a review of the current status of existing receivables by
the Company's rental subsidiaries.
Inventories: Inventories are primarily valued at the lower of cost (last-in
first-out) (LIFO) or market.
Investments: Fixed maturities consist of bonds and redeemable preferred
stock which are carried at cost, adjusted for amortization of premium or
accretion of discount. Oxford's intent is to hold these investments until
maturity. Mortgage loans on real estate are carried at unpaid balances,
less allowance for possible losses and any unamortized premium or discount.
Real estate is carried at cost less accumulated depreciation. Policy loans
are carried at their unpaid balance. Short-term investments consist of
other securities scheduled to mature within one year of their acquisition
date. Amounts held by ceding reinsurers represent obligations due to
Oxford. These obligations of the ceding company are supported by
investments in fixed maturities. See Note 4 of Notes to Consolidated
Financial Statements of AMERCO.
Interest on bonds is recognized when earned. Dividends on preferred stocks
are recognized on ex-dividend dates. Realized gains and losses on the sale
of investments are recognized at the trade date and included in net income
using the specific identification method.
Deferred Policy Acquisition Costs: Commissions and other costs incurred in
acquiring traditional life insurance, interest sensitive life and annuity
policies, group health insurance and property-casualty insurance which vary
with and are primarily related to the production of new business, have been
deferred.
Traditional life, annuity and group health acquisition costs are amortized
over the premium paying period of the related policies in proportion to the
ratio of annual premium income to expected total premium income. Such
expected premium income is estimated using assumptions as to mortality and
withdrawals consistent with those used in calculating the policy benefit
reserves.
<PAGE> 47
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Acquisition costs for interest sensitive life insurance and annuity policies
are being amortized over the lives of the policies in relation to the
present value of estimated gross profits from surrender charges and
investment, mortality and expense margins.
Property-casualty acquisition costs are amortized over the related contract
period which generally does not exceed one year.
Property, Plant and Equipment: Property, plant and equipment are carried at
cost and are depreciated on the straight-line and accelerated methods over
the estimated useful lives of the assets. Maintenance and repairs are
charged to operating expenses as incurred. Major overhaul costs of rental
equipment, principally trucks, are amortized over an estimated period
benefitted of one year. Renewals and betterments are capitalized. Gains
and losses on dispositions of property, plant and equipment are included in
other revenue as realized. Interest costs incurred as part of the initial
acquisition of assets are capitalized. Interest expense of $595,000,
$159,000 and $234,000 was capitalized in the years ended 1994, 1993 and
1992, respectively.
Rental truck extended warranty costs are amortized over a period of 5 or 6
years. The amount amortized is based on an annual percentage provided by
the truck manufacturer. Extended warranty costs of $2,830,000 are deferred
as of March 31, 1993 and are included in prepaid expenses. Extended
warranty costs deferred as of March 31, 1994 are immaterial.
Certain recoverable environmental costs related to the removal of
underground storage tanks or related contamination are capitalized and
depreciated over the estimated useful lives of the properties. The
capitalized costs improve the safety or efficiency of the property as
compared to when the property was originally acquired or are incurred in
preparing the property for sale.
Financial Instruments: The Company enters into interest rate swap
agreements to reduce its interest rate exposure. Amounts to be paid or
received under the agreements are accrued as interest rates change and are
recognized as incurred. Although the Company is exposed to credit loss for
the interest rate differential in the event of nonperformance by the
counterparties to the agreements, it does not anticipate nonperformance by
the counterparties.
<PAGE> 48
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
At March 31, 1994, interest rate swap agreements with an aggregate notional
amount of $193,000,000 were outstanding. At March 31, 1994, a value of
$14,000,000 was determined from treasury rates combined with a swap spread
which represents the estimated amount the Company would pay to terminate
the agreements. The Company has one additional swap outstanding in the
amount of $15,000,000 which is a component of a note agreement with a bank.
The fair value of the swap component of the agreement cannot be separated
from the entire note agreement to determine the estimated fair value. The
amount of the note outstanding at March 31, 1994 is $15,000,000 with a
fixed yen interest rate of 6.2% and a maturity date of November 30, 1994.
The Company has mortgage loans which potentially expose the Company to
credit risk. The portfolio of notes is principally comprised of mini-
warehouse storage facilities and other residential and commercial
properties. The Company has not experienced losses related to the notes
from individual notes or groups of notes in any particular industry or
geographic area.
At March 31, 1994, mortgage notes with a book value of $90,876,000 were
outstanding. The estimated fair value of the notes at March 31, 1994 was
$92,778,000. The value was determined using discounted cash flows at a
rate of 7.1% for residential and commercial notes and from bids related to
the mini-warehouse storage notes. At March 31, 1993, mortgage notes with a
book value of $104,888,000 were outstanding. The estimated fair value of
the notes at March 31, 1993 was $107,367,000. Other financial instruments
that are subject to fair value disclosure requirements are carried in the
financial statements at amounts that approximate fair value.
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of temporary cash investments and trade
receivables. The Company places its temporary cash investments with
financial institutions and limits the amount of credit exposure to any one
financial institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers and their
dispersion across many different industries and geographic areas.
Policy Benefits and Losses, Claims and Loss Expenses Payable: Liabilities
for policy benefits payable on traditional life and annuity policies are
established in amounts adequate to meet estimated future obligations on
policies in force. These liabilities are computed using the net level
premium method and include mortality and withdrawal assumptions which are
based upon recognized actuarial tables and contain margins for adverse
deviation. At December 31, 1993, interest assumptions used to compute
policy benefits payable range from 2 1/2% to 11 1/4%.
<PAGE> 49
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
With respect to interest sensitive life and annuity policies, the liability
for policy benefits and expenses payable consists of policy account
balances that accrue to the benefit of the policyholders, excluding
surrender charges.
Liabilities for group health and other policy claims and benefits payable
represent estimates of payments to be made on insurance claims for reported
losses and estimates of losses incurred but not yet reported. These
estimates are based on past claims experience and consider current claim
trends as well as social and economic conditions.
Liabilities for property-casualty losses represent the estimated ultimate
unpaid cost of settling claims reported prior to the end of the accounting
period, estimates received from ceding reinsurers and estimates for
unreported losses based on historical experience supplemented by insurance
industry historical experience. Unpaid loss adjustment expenses are based
on historical ratios of loss adjustment expenses paid to losses paid.
Rental and Other Revenue: AMERCO recognizes its share of rental revenue on
the accrual basis pursuant to contractual arrangements between AMERCO,
fleet owners, rental dealers and customers. See Note 8 of Notes to
Consolidated Financial Statements of AMERCO for further discussion.
Premium Revenue: Group health and property-casualty gross premiums are
prorated over the term of the related contracts. Traditional life and
annuity premiums are recognized as revenue when due from policyholders.
Revenue for interest sensitive life insurance and annuity policies consist
of surrender charges that have been assessed against policy account
balances during the period. Benefits and expenses are associated with
amortization of policy acquisition costs.
Reinsurance: Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases
consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts. Premiums ceded to other
companies have been reported as a reduction of premium income. Amounts
applicable to reinsurance ceded for future policy benefits, unearned
premium reserves, and claim liabilities have been reported as reductions of
these items, and expense allowances received in connection with reinsurance
ceded have been accounted for as a reduction of the related policy
acquisition costs and are deferred and amortized accordingly.
<PAGE> 50
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Income Taxes: Deferred income taxes are provided for all items included in
the Consolidated Statements of Earnings which are reported in different
accounting periods for tax purposes.
Effective fiscal 1991, the Company elected to file a consolidated federal
income tax return with its insurance subsidiaries. Previously, federal
income tax returns were filed separately by the insurance company
subsidiaries. See Note 7 of Notes to Consolidated Financial Statements of
AMERCO.
New Accounting Standards:
Statement of Financial Accounting Standards No. 112 - Employers' Accounting
for Postemployment Benefits.
Issued in November 1992, this 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 impact of adoption of this
statement will not be material.
Statement of Financial Accounting Standards No. 113 - Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts.
Effective January 1, 1993, the Company adopted SFAS 113. The primary impact
on the Company's financial statements is the requirement to report assets
and liabilities relating to reinsured contracts gross of the effects of
reinsurance. Previously, such effects were reported on a net basis. As a
result of the adoption of SFAS 113, unpaid losses and loss expenses as of
March 31, 1994 have been increased by approximately $76 million to reflect
the Company's policy liabilities without regard to reinsurance. A
corresponding amount due from reinsurers on unpaid losses, including
amounts related to claims incurred but not reported, has also been
reflected. Additionally, unearned premiums have been increased by
approximately $12 million for policy premiums ceded to reinsurers for which
the coverage period has not yet expired. Prepaid reinsurance premiums of a
corresponding amount have also been reflected in the accompanying
consolidated balance sheet. The consolidated balance sheet as of March 31,
1993 has not been restated to reflect the adoption of SFAS 113 as of that
date.
<PAGE> 51
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan", was issued by the Financial
Accounting Standards Board in May 1993. This standard is effective
for years beginning after December 15, 1994. The standard requires
that an impired loan's fair value be measured and compared to the
recorded investment in the loan. If the fair value of the loan is
less than the recorded investment in the loan, a valuation allowance
is established. The Company has not completed an evaluation of the
effect of the standard.
Statement of Financial Accounting Standards No. 115 - Accounting for Certain
Investments in Debt and Equity Securities.
Effective December 31, 1993, RWIC adopted SFAS 115. This statement requires
classification of debt securities into one of the following three
categories based on management's intention with regard to such securities:
held-to-maturity, available-for-sale and trading. Securities classified as
held-to-maturity are recorded at cost adjusted for the amortization of
premiums or accretion of discounts while those classified as available-for-
sale are recorded at fair value with unrealized gains or losses reported on
a net basis as a separate component of stockholders' equity. Securities
classified as trading, if any, are recorded at fair value with unrealized
gains or losses reported on a net basis in income. RWIC does not currently
maintain a trading portfolio. U-Haul and Oxford will adopt this statement
in fiscal 1995. An evaluation of this statement has not been completed by
U-Haul or Oxford.
Statement of Position 93-7, "Reporting on Advertising Costs", was issued by
the Accounting Standards Executive Committee in December 1993. This
statement of position provides guidance on financial reporting on
advertising costs in annual financial statements. The statement of
position requires reporting advertising costs as expenses when incurred or
when the advertising takes place, reporting the costs of direct-response
advertising, and amortizing the amount of direct-response advertising
reported as assets. This statement of position is effective for financial
statements for years beginning after June 15, 1994. The Company currently
matches certain advertising costs with revenue generated in future periods,
and at March 31, 1994, $8.2 million in advertising costs are deferred and
included in prepaid expenses. The Company has completed an evaluation of
the effect of this statement of position but has not determined the timing
of adoption.
Earnings per share: Earnings per common share are computed based on the
weighted average number of shares outstanding and net income reduced for
preferred dividends. See Note 6 of Notes to Consolidated Financial
Statements of AMERCO for further discussion.
Financial Statement Presentation: Certain reclassifications have been made
to the financial statements for the years ended 1993 and 1992 to conform
with the current year's presentation.
<PAGE> 52
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Receivables
<TABLE>
A summary of receivables follows:
<CAPTION>
Year ended
1994 1993
-------------------
(in thousands)
<S> <C> <C>
Trade accounts receivable $ 16,073 8,658
Mortgage and note receivables,
net of discount 45,288 23,267
Premiums and agents' balances
in course of collection 29,078 11,281
Reinsurance recoverable 81,760 8,945
Accrued investment income 13,565 15,263
Independent dealer receivable 6,870 11,259
Other receivables 14,189 2,547
------- ------
206,823 81,220
Less allowance for doubtful accounts (2,009) (1,548)
------- ------
$ 204,814 79,672
======= ======
</TABLE>
(3) Inventories
<TABLE>
A summary of inventory components follows:
<CAPTION>
Year ended
1994 1993
-------------------
(in thousands)
<S> <C> <C>
Trailers, truck and recreational
vehicle parts and accessories $ 31,684 33,799
Moving aids and promotional items 7,032 6,080
Hitches and towing components 10,236 11,414
Other 60 144
------ ------
$ 49,012 51,437
====== ======
</TABLE>
Certain general and administrative expenses are allocated to ending
inventories. Such costs remaining in inventory at years-ended 1994, 1993
and 1992 are estimated at $7,679,000, $7,224,000 and $7,100,000,
respectively. For the years-ended March 31, 1994, 1993 and 1992, aggregate
general and administrative costs were $430,209,000, $467,390,000 and
$426,021,000, respectively.
LIFO inventories, which represent approximately 98% of total inventories at
year-end 1994 (95% at year-end 1993), would have been $3,591,000 greater at
year-end 1994 ($3,325,000 at year-end 1993) if the consolidated group had
used the FIFO method.
<PAGE> 53
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments
<TABLE>
Major categories of net investment income consists of the following (in
thousands):
<CAPTION>
December 31,
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Fixed maturities $ 52,903 54,836 45,438
Real estate 142 235 111
Policy loans 609 566 418
Mortgage loans 4,669 5,751 4,423
Short-term, amounts held by
ceding reinsurers, net and
other investments 874 2,481 3,336
------ ------ ------
Investment revenue 59,197 63,869 53,726
Investment expenses 20,390 23,229 14,096
------ ------ ------
Net investment income $ 38,807 40,640 39,630
====== ====== ======
</TABLE>
<TABLE>
A comparison of amortized cost to market for fixed maturities is as follows
(in thousands):
<CAPTION>
Par Value Gross Gross Estimated
December 31, 1993 or number Amortized unrealized unrealized market
- - ----------------- of shares cost gains losses value
OXFORD --------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities
and government
obligations $ 10,340 $ 9,395 949 - 10,344
U.S. government
agency mortgage
backed
securities $ 69,653 69,053 1,626 448 70,231
States,
municipalities
and political
subdivisions $ 1,000 1,003 28 - 1,031
Foreign government
securities $ 1,000 1,002 152 - 1,154
Corporate
securities $ 191,177 194,940 11,499 924 205,515
Mortgage-backed
securities $ 41,001 40,252 1,182 282 41,152
Public utility
securities $ 38,950 37,844 2,503 - 40,347
------- ------ ----- -------
Total $ 353,489 17,939 1,654 369,774
======= ====== ===== =======
</TABLE>
<PAGE> 54
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
<TABLE>
<CAPTION>
December 31, 1993 Par Value Gross Gross Estimated
- - ----------------- or number Amortized unrealized unrealized market
RWIC of shares cost gains losses value
Held-to-Maturity --------- --------- ---------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities and
government
obligations $ 38,213 $ 39,425 3,025 55 42,395
States,
municipalities
and political
subdivisions $ 43,625 43,154 4,345 334 47,165
Corporate
securities $ 195,350 202,401 8,444 1,577 209,268
Mortgage-backed
securities $ 36,085 36,140 488 368 36,260
Redeemable
preferred stock 2,300 2,300 400 - 2,700
------- ------ ----- -------
323,420 16,702 2,334 337,788
RWIC
Available-for-Sale
U.S. Treasury
securities and
government
obligations $ 6,000 6,125 1,175 - 7,300
States,
municipalities
and political
subdivisions $ 40 40 - 2 38
Corporate
securities $ 19,000 19,233 23 152 19,104
Mortgage-backed
securities $ 16,098 16,254 - - 16,254
-------- ------ ----- -------
41,652 1,198 154 42,696
------- ------ ----- -------
Total $ 365,072 17,900 2,488 380,484
======= ====== ===== =======
</TABLE>
<PAGE> 55
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
<TABLE>
<Caption.
Par Value Gross Gross Estimated
December 31, 1992 or number Amortized unrealized unrealized market
- - ----------------- of shares cost gains losses value
Consolidated ---------- --------- ---------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities and
government
obligations $ 80,657 81,211 4,193 28 85,376
U.S. government
agency mortgage
backed
securities 40,070 38,292 622 285 38,629
States,
municipalities
and political
subdivisions $ 72,320 70,978 6,782 150 77,610
Foreign government
securities $ 1,000 1,002 97 - 1,099
Corporate
securities $ 322,152 325,610 11,969 606 336,973
Mortgage-backed
securities $ 72,813 71,993 2,513 11 74,495
Public utility
securities $ 55,041 53,186 2,178 40 55,324
Redeemable
preferred stock 58 5,233 613 156 5,690
------- ------ ----- -------
Total $ 647,505 28,967 1,276 675,196
======= ====== ===== =======
</TABLE>
The fair value of fixed maturities are based on publicly quoted market
prices at the close of trading December 31, 1993 or December 31, 1992, as
appropriate.
The amortized cost and estimated market value of debt securities by
contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<PAGE> 56
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
<TABLE>
<CAPTION>
December 31, 1993 Amortized Estimated
- - ----------------- cost fair value
OXFORD --------- ----------
(in thousands)
<S> <C> <C>
Due in one year or less $ 15,362 15,641
Due after one year through five years 118,343 125,274
Due after five years through ten years 108,693 115,402
After ten years 1,786 2,074
------- -------
244,184 258,391
Mortgage-backed securities 109,305 111,383
------- -------
Total $ 353,489 369,774
======= =======
RWIC
Held-to-Maturity
Due in one year or less $ 35,997 32,090
Due after one year through five years 148,894 155,908
Due after five years through ten years 90,443 100,726
After ten years 9,646 10,104
------- -------
284,980 298,828
Mortgage-backed securities 36,140 36,260
Redeemable preferred stock 2,300 2,700
------- -------
323,420 337,788
RWIC
Available-for-sale
Due after one year through five years 9,864 9,829
Due after five years through ten years 8,185 8,838
After ten years 7,349 7,775
------- -------
25,398 26,442
Mortgage-backed securities 16,254 16,254
------- -------
41,652 42,696
------- -------
Total $ 365,072 380,484
======= =======
</TABLE>
<PAGE> 57
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
<TABLE>
<CAPTION>
Estimated
Amortized fair market
December 31, 1992 cost value
----------------- --------- -----------
(in thousands)
<S> <C> <C>
Due in one year or less $ 46,930 49,484
Due after one year through five years 231,130 241,272
Due after five years through ten years 219,678 226,201
After ten years 34,249 39,425
------- -------
531,987 556,382
Mortgage-backed securities 110,285 113,124
Redeemable preferred stock 5,233 5,690
Totals ------- -------
$ 647,505 675,196
======= =======
</TABLE>
Proceeds from sales of investments in debt securities during 1993 and 1992
were $25,409,000 and $114,229,000, respectively. Gross gains of
$1,665,000 and $4,872,000 and gross losses of $91,000 and $951,000 were
realized on those sales during 1993 and 1992, respectively. Proceeds
from maturities and early redemptions of investments in debt securities
during 1993 and 1992 were $169,089,000 and $137,047,000. Gross gains of
$2,326,000 and $1,463,000 and gross losses of $254,000 and $99,000 were
realized on these securities during 1993 and 1992, respectively.
At December 31, 1993, 1992 and 1991 fixed maturities include bonds with an
amortized cost of $15,450,000, $15,461,000 and $15,456,000,
respectively, on deposit with insurance regulatory authorities to meet
statutory requirements.
Mortgage loans are reported net of allowance for possible losses of
$525,000 in both 1993 and 1992.
<TABLE>
Other investments consist of the following:
<CAPTION>
December 31,
1993 1992
---------------------
(in thousands)
<S> <C> <C>
Mortgage loans on real estate $ 47,869 84,361
Real estate, net 1,651 1,793
Policy loans 10,718 9,978
Short-term and other investments 24,500 33,403
------ -------
Totals $ 84,738 129,535
====== =======
</TABLE>
<PAGE> 58
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Notes and Loans Payable
<TABLE>
Notes and loans payable consist of the following:
<CAPTION>
Year ended
1994 1993
------------------
(in thousands)
<S> <C> <C>
Mortgages payable, secured
5.0% to 10.25% interest rates,
due through 2016 $ 1,246 2,448
Medium-term notes payable, unsecured
8.50% to 11.50% interest
rates, due through 2000 198,870 289,670
Notes payable to insurance companies,
unsecured 5.89% to 10.27% interest
rates, due through 2006 281,000 140,000
Notes payable to banks, unsecured
2.94% to 9.40% interest
rates, due through 1999 94,800 138,900
Other notes payable, unsecured
9.50% interest rate,
due through 2005 98 103
Notes payable to banks under
revolving lines of credit, unsecured
3.81% to 4.06% interest rates, 97,750 106,000
Other short-term promissory notes 50,000 20,000
------- -------
$ 723,764 697,121
======= =======
</TABLE>
Mortgages payable are secured by land and buildings at various locations,
which carry a net book value of $13,900,000 at year-end 1994.
<PAGE> 59
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Notes and Loans Payable, continued
Domestic/Eurodollar revolving credit loans are available from participating
banks under an agreement which provides for a total credit line of
$170,500,000 through the expiration date of the revolving term of September
25, 1995. The Company may elect to borrow under the credit agreement in
the form of Eurodollar borrowings or domestic dollar borrowings. Depending
on the form of borrowing elected, interest will be based on the prime rate,
the certificate of deposit rate, the federal funds effective rate or the
interbank offering rate and in addition, margin interest rates will be
charged. Loans may also be at a fixed rate based upon the discretion of
the borrower and lender. At March 31, 1994, the weighted average interest
rate on borrowings outstanding was 3.97%. Facility fees, which are based
upon the amount of credit line, aggregated $588,000 and $381,000 for 1994
and 1993, respectively. Prior to August 1992, the agreement required
payment of commitment fees. Commitment fees, which are based upon any
unused credit line, aggregated $230,000 for 1993. As of year-end 1994,
loans outstanding under the revolving credit line totaled $45,000,000.
Management intends to refinance the borrowings on a long-term basis by
either replacing them with long-term obligations, renewing or extending
them.
<TABLE>
<CAPTION>
Year ended
1994 1993 1992
-----------------------------
(in thousands)
<S> <C> <C> <C>
A summary of revolving credit
activity follows:
Weighted average interest rate
during the year 3.62% 4.36% 6.66%
at year end 3.93% 3.56% 5.55%
Maximum amount outstanding
during the year $ 159,750 126,000 278,621
Average amount outstanding
during the year $ 67,354 96,667 156,153
A summary of notes payable
follows:
Weighted average interest rate:
during the year 3.80% 4.09% 6.17%
at year end 4.04% 3.66% 5.20%
Maximum amount outstanding
during the year $ 50,000 25,000 33,756
Average amount outstanding
during the year $ 11,380 14,167 18,109
</TABLE>
<PAGE> 60
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Notes and Loans Payable, continued
AMERCO has lines of credit with various banks totaling $106,289,000 at March
31, 1994.
The Company has executed interest rate swap agreements ("SWAPS") to
potentially mitigate the impact of changes in interest rates on its
floating rate debt. These agreements effectively change the Company's
interest rate exposure on $208,000,000 of floating rate notes to a weighted
average fixed rate of 8.61%. The SWAP's mature at the time the related
notes mature.
During fiscal 1994, SWAP's aggregating approximately $77.0 million were
terminated. In addition, the Company exercised existing SWAP agreements
aggregating approximately $50.0 million during fiscal 1994. Incremental
interest expense associated with SWAP activity was $11,989,000 and
$9,724,000 during 1994 and 1993, respectively.
The notes payable and the loan agreements contain certain restrictive
covenants including limits on the incurrence of other indebtedness,
restrictions on related party transactions, and restrictions on the
aggregate amount of dividends payable to Common stockholders and
repurchases of capital stock. Under the most restrictive dividend
covenant, AMERCO is prohibited from paying dividends if, at the time of
payment, cumulative dividends are in excess of the sum of $15,000,000 plus
50% of consolidated net income as defined, for the entire period subsequent
to March 31, 1993.
During the first and third quarters of fiscal 1994, the Company purchased
$25.2 million of its medium-term notes originally due in fiscal 1995
through 2000. The weighted average rate of the notes purchased is 9.34%.
The purchase resulted in an extraordinary charge of $1,897,000 net of
$1,021,000 of tax benefit.
During the fourth quarter of fiscal 1994, the Company terminated swaps with
a notional value of $77 million originally due in fiscal 1995. The
terminations resulted in an extraordinary charge of $1,473,000 net of
$793,000 of tax benefit.
In April 1994, the Company terminated three $10 million floating-rate notes.
The notes were due to mature in fiscal years 1995, 1996 and 1997.
<PAGE> 61
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Notes and Loans Payable, continued
In May 1994, the Company terminated five revolving credit agreements
providing committed lines of credit totaling $259 million; amounts
outstanding under these agreements at March 31, total $118 million. The
Company subsequently entered into two revolving credit loans. The
agreements provide for lines of credit of $185 million and $365 million
through the maturity dates of May 1995 and June 1997, respectively. The
Company may elect to borrow under the credit agreements in the form of
Eurodollar borrowings or domestic dollar borrowings. Depending on the form
of borrowing elected, interest will be based on the prime rate, the
certificate of deposit rate, the Federal funds effective rate or the
interbank offering rate. Under the three-year agreement, loans may also be
at a fixed rate based upon the discretion of the borrower and lender.
In June 1994, the Company entered into a $10 million uncommitted revolving
credit agreement. Interest on the loans is based upon the discretion of
the lender.
The aggregate annual maturities of long-term debt for the next five years, as
adjusted for the transactions referred to in the immediately preceding
paragraph, if the revolving credit lines are converted to term notes are
$187,601,000 in 1995, $107,168,000 in 1996, $152,387,000 in 1997,
$61,971,000 in 1998 and $62,765,000 in 1999.
(6) Stockholders' Equity
In October 1990, the stockholders approved an amendment to the Company's
Articles of Incorporation to reduce the par value of the Common Stock from
$100.00 per share to $0.25 per share and to effect a 400-for-1 stock split
whereby each issued share of Common Stock, $100.00 par value, was converted
into 400 shares of Common Stock, $0.25 par value per share. The number of
shares of Common Stock authorized increased from 107,500 to 65,000,000
shares. The amendment also changed the par value of the Company's
Preferred Stock from no par value to $.01 par value per share and increased
the number of preferred shares authorized from 100,000 to 5,000,000 shares.
All references in the accompanying financial statements to the number of
common shares and per-share amounts reflect the above described change in
outstanding shares.
<PAGE> 62
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Stockholders' Equity, continued
In October 1992, the stockholders approved an amendment to the Company's
Articles of Incorporation to increase the authorized capital stock of the
Company to a total of 350,000,000 shares from 65,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock. The increased capital stock
consists of 150,000,000 shares of Common Stock, 150,000,000 shares of
Serial Common Stock and 50,000,000 shares of Preferred Stock. The Board of
Directors (the Board) may authorize the Serial Common Stock to be issued in
such series and on such terms as the Board shall determine. The amendment
also clarifies the voting rights of the Preferred Stock and allows the
issuance of Preferred Stock with or without par value.
In October 1993, the Company issued 6,100,000 shares of 8.5% cumulative, no
par, non-voting preferred stock. The preferred stock is not convertible
into, or exchangeable for, shares of any other class or classes of stock of
the Company. Dividends are payable quarterly in arrears and have priority
as to dividends over the Company's common stock. The preferred stock is
not redeemable prior to December 1, 2000. On or after December 1, 2000,
the Company, at its option, may redeem all or part of the preferred stock,
for cash at $25.00 per share plus accrued and unpaid dividends to the
redemption date.
(7) Income Taxes
<TABLE>
The components of the consolidated expense (benefit) for income taxes
applicable to operations are as follows:
<CAPTION>
Year ended
1994 1993 1992
----------------------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 2,112 1,800 -
State 185 726 346
Deferred:
Federal 16,365 13,902 4,629
State 1,191 842 (35)
------ ------ -----
$ 19,853 17,270 4,940
====== ====== =====
</TABLE>
<PAGE> 63
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
<TABLE>
Deferred tax liabilities (assets) are comprised as follows:
<CAPTION>
Year ended
1994 1993 1992
----------------------------
(in thousands)
<S> <C> <C> <C>
Accelerated depreciation of
property, plant and equipment $ 145,391 134,466 125,223
Benefit of tax NOL and credit
carryforwards (74,905) (85,326) (94,880)
Rental equipment overhaul costs
amortized 751 1,126 2,089
Deferred inventory adjustments (1,177) (356) (736)
Deferred acquisition costs 15,361 15,761 15,781
Deferred gain from
intercompany transactions (894) (2,780) (1,376)
Bad debt expense (1,635) (1,429) (1,650)
Accrued expense on future
dealer benefits (3,347) (2,576) (2,051)
Accrued vacation and sick-pay (1,182) (1,132) (1,203)
Accelerated retirement deductions - 860 860
Customer deposit liability (2,375) - -
Deferred revenue from
sale/leaseback (1,357) (1,779) (2,396)
Accrued retirement expense (1,755) - -
Policy benefits and losses,
claims and loss expenses
payable (24,022) (24,986) (23,126)
Other (283) 1,041 1,611
-------- ------- -------
Total $ 48,571 32,890 18,146
======= ======= =======
</TABLE>
<PAGE> 64
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
<TABLE>
Actual tax expense reported on earnings from operations differs from the
"expected" tax expense amount (computed by applying the United States
federal corporate tax rate of 35% in 1994, and 34% in 1993 and 1992) as
follows:
<CAPTION>
Year ended
1994 1993 1992
----------------------------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax
expense $ 23,276 16,938 8,749
Increases (reductions) in taxes
resulting from:
Tax-exempt interest income (1,525) (2,278) (2,927)
Dividends received deduction (101) (289) (421)
Net reinsurance effect 120 116 117
Canadian subsidiary income
tax (expense) benefit
unrealized (204) 230 909
Net tax settlement - - 31
True-up of prior year
estimated current tax (1,327) - -
Federal tax benefit of
state and local taxes (482) (534) (106)
Other (1,280) 1,519 (1,723)
------ ------ ------
Actual federal tax
expense 18,477 15,702 4,629
State and local income tax
expense 1,376 1,568 311
------ ------ -----
Actual tax expense
of operations $ 19,853 17,270 4,940
====== ====== ======
</TABLE>
<PAGE> 65
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
<TABLE>
The 1993 and 1992 financial statements have been restated to give
retroactive effect to the adoption of SFAS 109. The impact on previously
issued financial statements, income (loss), is as follows (in thousands
except per share data):
<CAPTION>
Year ended
1993 1992
------------------
(in thousands)
<S> <C> <C>
Earnings:
Effect of change on income
before extraordinary item
as originally reported $ (2,309) 1,890
Effect of change on net
income as originally reported (8,687) (886)
Earnings per common share:
Effect of change on income
before extraordinary item
as originally reported $ (.06) .05
Effect of change on net
income as originally reported (.22) (.02)
</TABLE>
Under the provisions of the Tax Reform Act of 1984 (the Act), the balance in
Oxford's account designated "Policyholders' Surplus Account" is frozen at
its December 31, 1983 balance of $19,251,000. Federal income taxes (Phase
III) will be payable thereon at applicable current rates if amounts in this
account are distributed to the stockholder or to the extent the account
exceeds a prescribed maximum. Oxford did not incur a Phase III liability
for the years ended December 31, 1993, 1992 and 1991.
The Internal Revenue Service has examined AMERCO's income tax returns for
the years ended 1987 through 1989. All issues have been agreed to and
provisions have been made in the financial statements. An examination of
years ended 1990 and 1991 is currently underway. The tax effect of the
adjustments which have been proposed have been reflected in the current
year's tax provision.
At year-end 1994 AMERCO and RWIC have non-life net operating loss
carryforwards available to offset taxable income in future years of
$166,955,000 for tax purposes. These carryforwards expire in 2000 through
2007. AMERCO also has investment tax credit and other credit carryforwards
of $7,319,000 for tax purposes which expire in 1999 through 2004. The use
of certain carryforwards may be limited or prohibited if a reorganization
or other change in corporate ownership were to occur.
<PAGE> 66
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
Provision for federal income taxes has not been made for the difference
between the Company's book and tax bases of its investment in Ponderosa,
since the Company believes such difference to be permanent in duration.
(8) Transactions With Fleet Owners and Other Rental Equipment Owners
Fleet Owners (independent rental equipment owners) own approximately 25% of
all U-Haul rental trailers, .07% of all U-Haul rental trucks and certain
other rental equipment. There are over 5,600 fleet owners, including
certain officers, directors, employees and stockholders of the Company.
All rental equipment is operated under contract with U-Haul, a wholly-owned
subsidiary of AMERCO, whereby U-Haul administers the operations and
marketing of such equipment and in return receives a percentage of rental
fees paid by customers. AMERCO guarantees performance of these contracts.
Based on the terms of various contracts, rental fees are distributed to the
subsidiaries of AMERCO (for services as operators), to the fleet owners
(including certain subsidiaries and related parties of AMERCO) and to
Rental Dealers (including Company-operated U-Haul Centers).
The Company owns over 99% of all general rental items and the remainder of
the rental equipment is consigned to AMERCO and its consolidated
subsidiaries. The equipment is operated under various contracts with
subsidiaries of AMERCO, whereby the consolidated group administers the
operations and marketing of the equipment. In return the investors receive
a percentage of the rental fees paid by customers.
Oxford reinsures short-term accidental death and medical insurance risks for
customers who rent vehicles owned by the Company and fleet owners.
Premiums earned were $1,428,000, $1,399,000 and $1,917,000 in 1994, 1993
and 1992, respectively.
RWIC insures and reinsures general liability, auto liability, commercial
multiple peril and worker's compensation coverage for member companies of
the consolidated group. Premiums earned by RWIC on these policies amounted
to $18,800,000, $18,300,000 and $21,900,000 in 1994, 1993 and 1992,
respectively and were eliminated in consolidation.
RWIC insures and reinsures certain risks of U-Haul customers and independent
fleet owners. Premiums earned on these policies amounted to $32,800,000,
$31,700,000 and $33,800,000 in 1994, 1993, and 1992, respectively.
<PAGE> 67
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Dealer Financial Security Plan
In September 1984, the Company adopted an unfunded dealer financial security
plan (the Security Plan) for its independent dealers and their key
employees who elected to enroll in the plan. Subsequent to the initial
enrollment in the Security Plan, the Company suspended the plan to
additional enrollees. Under the Security Plan, deductions are made from
dealer commissions in return for future benefits including death,
disability and retirement benefits. These benefits are paid directly from
the general assets of the Company. Life insurance is carried on each
Security Plan participant in favor of the Company to indirectly fund future
benefit payments. Total deductions withheld from commissions for 1994,
1993, and 1992 were $613,000, $714,000 and $729,000, respectively. Total
insurance premium expense for the years ended 1994, 1993 and 1992 amounted
to $1,304,000, $1,300,000 and $1,391,000, respectively. Benefits paid
under the Security Plan for the years ended 1994, 1993 and 1992 were
insignificant.
(10) Employee Benefit Plans
AMERCO and its subsidiaries participate in the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership Plan (the Plan) which is
designed to provide all eligible employees with savings for their
retirement and to acquire a proprietary interest in the Company.
The Plan has three separate features: a profit sharing feature (the Profit
Sharing Plan) under which the Employer may make contributions on behalf of
participants; a savings feature (the Savings Plan) which allows
participants to defer income under Section 401k of the Internal Revenue
Code of 1986; and an employee stock ownership feature (the ESOP) under
which the Company may make contributions of AMERCO common stock or cash to
acquire such stock on behalf of participants. Generally, employees of the
Company are eligible to participate in the Plan upon completion of a one
year service requirement.
At its discretion, profits of such amounts as determined by the Board of
Directors (which shall not exceed the amounts that are deductible under the
Internal Revenue Code) may be contributed to the Profit Sharing Plan at the
end of each Plan year to a designated trustee and administered and applied
in accordance with the terms of the trust agreement. The Company did not
contribute to the Profit Sharing Plan during the years ended 1994, 1993 and
1992.
<PAGE> 68
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Employee Benefit Plans, continued
Under the Savings Plan, an employee may make pre-tax contributions of up to
eighteen percent of base salary. Participants are immediately vested in
all contributions plus actual earnings thereon.
The ESOP is designed to enable eligible employees to acquire a proprietary
interest in the Company. The Company may, in its sole and absolute
discretion, elect to contribute to the trust fund amounts to be used by the
ESOP trustee to purchase shares of the $.25 par value common stock of the
Company and/or the Company may contribute stock directly to the trust fund.
To fund the ESOP trust (ESOT), the Company borrowed $16,000,000 repayable
over ten years in annual installments of $1,600,000 beginning December
1989. Proceeds of this borrowing were loaned to the ESOT on the same terms
and are used by the ESOT to purchase shares of AMERCO common stock.
Interest payments under this agreement were $253,000 in 1994, $402,000 in
1993 and $566,000 in 1992. With each loan payment, a portion of the stock
is allocated to the participating employees' accounts. Contributions to
the ESOT charged to expense were $2,269,000, $2,255,000 and $1,023,000 for
the years ended 1994, 1993 and 1992, respectively.
To fund additional purchases of the Company stock, the ESOT borrowed
$1,172,000 from the Company repayable over ten years under a stock pledge
agreement. The interest rate is based upon the average interest rate paid
by the Company. Interest payments amounted to $90,000, $105,000 and
$101,000 for 1994, 1993 and 1992, respectively. As of March 31, 1994,
$820,000 is outstanding under this agreement.
During fiscal year 1991, the Company executed an additional stock pledge
agreement with the ESOT to make loans available in an aggregate principal
amount equal to $10,000,000 over a five year commitment period. Borrowings
under the agreement are repaid based upon a twenty year amortization
period. Interest is based upon the average rate paid by AMERCO under all
promissory notes, commercial paper and other evidences of indebtedness
issued by AMERCO and outstanding as of the date the rate is to be
calculated. Under this agreement, $9,331,000 is outstanding at March 31,
1994. Interest payments under this agreement were $474,000 and $366,000
for 1994 and 1993, respectively. Subsequent to March 31, 1994 borrowings
total $418,000.
The Plan held 1,111,557 shares in trust valued at the appraised value of
$17.00 per share as of March 31, 1994.
<PAGE> 69
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Employee Benefit Plans, continued
In April, 1994 the ESOT modified the 1991 agreement to increase the
commitment from $10,000,000 to $20,000,000 and extend the commitment
period an additional five years.
During fiscal 1989, the Company adopted a Key Employee Stock Purchase Plan
(the KESPP) authorizing it to sell to employees and non-employee directors
of the Company up to 3,240,000 shares of common stock of the Company at a
per share price of $6.79, the fair market value of such shares on the date
such plan was adopted. Pursuant to authorization by the Board of
Directors, five key employees purchased 3,239,600 shares under the KESPP
for cash and promissory notes at the rate of nine percent per annum. In
July 1989, the Plan purchased 1,904,000 shares of the Company's $.25 par
value common stock from four key employees at a per share price of $8.63,
the fair market value of such shares on the date of sale. Principal and
interest payments on the promissory notes were received by the Company from
the key employees.
Oxford insures various group life and group disability insurance plans
covering employees of the consolidated group. As of January 1, 1991, the
Company elected to self-fund its group-health and dental plans. Premiums
earned were $1,325,000, $1,037,000 and $308,000 for the years ended 1994,
1993 and 1992, respectively and were eliminated in consolidation.
(11) Postretirement Benefits
The Company provides medical and life insurance benefits to retired
employees and eligible dependents over age 65 if the employee meets
specified age and service requirements.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" effective April 1, 1993. The standard requires that
employers use the accrual method of accounting for postretirement
benefits. Prior to 1994, the Company recognized these costs, which were
not material, as claims were incurred. The Company elected to immediately
recognize the cumulative effect of the change in accounting for
postretirement benefits of $5.0 million ($3.1 million net of income tax
benefit) which represents the accumulated postretirement benefit
obligation (APBO) existing at April 1, 1993. In addition, the impact of
the change in 1994 ongoing operations is an increase in expense of about
$1.1 million ($672 thousand after income taxes). The Company continues to
fund medical and life insurance benefit costs as claims are incurred.
<PAGE> 70
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits, continued
<TABLE>
The components of net periodic postretirement benefit cost are as follows
(in thousands):
<CAPTION>
1994
-----
<S> <C>
Service cost for benefits earned
during the period $ 489
Interest cost on APBO 598
-----
Net periodic postretirement benefit cost $ 1,087
=====
</TABLE>
<TABLE>
The amounts recognized in the Company's balance sheet at March 31, 1994 were
as follows (in thousands):
<CAPTION>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 1,848
Eligible active employees 413
Other active employees 3,832
-----
Accrued postretirement benefit cost $ 6,093
=====
</TABLE>
The discount rate used in determining the APBO was 7.75%. The assumed
health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.3% in 1994, declining annually to
an ultimate rate of 3.5% in 2010. The assumed health care cost trend rate
reflects a $20,000 maximum lifetime benefit included in the Company's
plan.
If the health care cost trend rate assumptions were increased by 1.0%, the
APBO, as of March 31, 1994, would be increased by approximately $950
thousand. The effect of this change on the sum of the service cost and
interest cost components of net periodic postretirement benefit cost for
1994 would be an increase of approximately $148 thousand.
<PAGE> 71
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Supplemental Income Statement Information
<TABLE>
Supplemental income statement information from operations is as follows:
<CAPTION>
Year ended
1994 1993 1992
------------------------------
(in thousands)
<S> <C> <C> <C>
Maintenance and repairs $ 205,511 170,688 141,267
======= ======= =======
Depreciation and amortization $ 148,740 128,530 124,368
======= ======= =======
Taxes, other than income taxes:
Payroll $ 18,950 16,302 15,400
Premiums 2,182 2,429 2,670
Property and other 27,874 25,364 26,398
------ ------ ------
$ 49,006 44,095 44,468
====== ======= =======
Lease expense $ 84,359 119,106 123,368
====== ======= =======
Advertising costs $ 26,291 23,180 23,078
====== ======= =======
</TABLE>
(13) Reinsurance
The Company assumes and cedes reinsurance on both a coinsurance and risk
premium basis. The Company obtains reinsurance for that portion of risks
exceeding retention limits.
The Company also reinsures a wide range of property-casualty risks with
third parties and insures general and auto liability, multiple peril and
worker's compensation coverage for the consolidated group, independent
fleet owners and customers as a direct writer and as a reinsurer through
third party companies.
To the extent that a reinsurer is unable to meet its obligation under the
related reinsurance agreements, the Company would remain liable for the
unpaid losses and loss expenses. Pursuant to certain of these agreements,
the Company holds letters of credit in the amount of $17,000,000 from
reinsurers. The Company has issued letters of credit totaling
approximately $2,200,000 in favor of certain ceding companies.
Losses and loss expense recoveries from reinsurers of $24,300,000 and
$25,400,000 were recognized in 1993 and 1992, respectively.
<PAGE> 72
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Reinsurance, continued
RWIC is a reinsurer of municipal bond insurance through an agreement with
MBIA Inc. Premium generated through this agreement is recognized pro rata
over the contract coverage period. The related unearned premium as of
December 31, 1993 and 1992 was $4,400,000 and $4,700,000, respectively.
RWIC's share of case loss reserves related to this coverage is
approximately $41,000 at December 31, 1993. RWIC's aggregate exposure for
Class 1 municipal bond insurance was $686,000,000 as of December 31, 1993.
<TABLE>
A summary of reinsurance transactions by business segment follows:
<CAPTION>
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
------ --------- ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year end 1994
- - -------------
Life insurance
in force $ 19,860 524 2,979,714 2,999,050 99%
====== === ========= =========
Premiums earned:
Life $ 53 16 8,876 8,913 99%
Accident and
health 1,120 209 1,455 2,366 61
Annuity - - 5,419 5,419 100
Property
casualty 81,676 45,122 70,092 106,646 66
------ ------ ------ -------
Total $ 82,849 45,347 85,842 123,344
====== ====== ====== =======
Year end 1993
- - -------------
Life insurance
in force $ 20,983 547 3,375,548 3,395,984 99%
====== === ========= =========
Premiums earned:
Life $ 81 - 9,910 9,991 99%
Accident and
health 996 103 2,111 3,004 70
Annuity 202 - 2,907 3,109 94
Property
casualty 73,523 39,016 48,214 82,721 58
------ ------ ------ ------
Total $ 74,802 39,119 63,142 98,825
====== ====== ====== ======
</TABLE>
<PAGE> 73
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Reinsurance, continued
<TABLE>
<CAPTION>
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
------ --------- ---------- ------ -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year end 1992
Life insurance
in force $ 21,044 571 3,988,265 4,008,738 99%
====== === ========= =========
Premiums earned:
Life $ 153 14 11,680 11,819 99%
Accident and
health 1,051 16 4,574 5,609 82
Annuity 72 54 2,784 2,802 99
Property
casualty 71,786 33,205 28,315 66,896 42
------ ------ ------ ------
Total $ 73,062 33,289 47,353 87,126
====== ====== ====== ======
</TABLE>
(14) Contingent Liabilities and Commitments
The Company and certain members of the Company's Board of Directors are
defendants in an action where the plaintiffs, certain stockholders of the
Company 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. The plaintiffs seek equitable relief, compensatory damages, and
punitive damages. All claims for equitable relief that would have allowed
the plaintiffs to sit on the Board of Directors have been dismissed,
subject only to the right of the plaintiffs to appeal such dismissal. The
Company and director-defendants filed a motion for summary judgement that
would be dispositive of all remaining claims. A ruling on this motion is
expected at any time. If the motion is not granted a trial is scheduled to
begin on August 17, 1994. The remaining claims for damages are not
expected to result in a material loss to the Company.
The Company is a defendant in a number of suits and claims incident to the
type of business conducted and several administrative proceedings arising
from state and local provisions that regulate the removal and/or clean up
of underground fuel storage tanks. Management's opinion is that none of
the suits or claims involving AMERCO and/or its subsidiaries is expected to
result in any material loss.
<PAGE> 74
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Contingent Liabilities and Commitments, continued
<TABLE>
The Company occupies certain facilities and uses certain equipment under
operating lease commitments with terms expiring through 2079. Lease expense
was $84,359,000, $119,106,000 and $123,368,000 for the years ended 1994,
1993 and 1992, respectively. During the year ended March 31, 1994, U-Haul
Leasing & Sales Co., a wholly-owned subsidiary of U-Haul, entered into
twenty-seven transactions, and entered into four additional subsequent
transactions whereby the Company sold rental trucks and subsequently leased
them back. AMERCO has guaranteed $39,205,000 of residual values at March
31, 1994 and $3,109,000 of residual values subsequent to March 31, 1994 on
these assets at the end of lease term. Certain leases contain renewal and
fair market value purchase options and mileage and other restrictions
similar to those disclosed in Note 5 for notes payable and loan agreements.
Following are the lease commitments for leases having terms of more than
one year (in thousands):
<CAPTION>
Year end 1994
-----------------------------
Additions
Property, plant Rental Subsequent
Year ended and other equipment Trucks to year-end Total
---------- ------------------- ------ ----------- -----
<S> <C> <C> <C> <C>
1995 $ 2,781 51,014 6,506 60,301
1996 1,094 36,099 8,143 45,336
1997 775 29,217 8,143 38,135
1998 598 29,217 8,143 37,958
1999 432 29,217 8,143 37,792
Thereafter 4,873 42,442 17,920 65,235
------ ------- ------ -------
$ 10,553 217,206 56,998 284,757
====== ======= ====== =======
</TABLE>
The Company has reduced future lease commitments during the year ended March
31, 1994 in the amount of $37,238,000 through the early termination of
certain leases. Residual value guarantees were also reduced by
$34,036,000 in connection with the terminations.
<PAGE> 75
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Preferred Stock Purchase Rights
In July 1988, the Company's Board of Directors adopted a stockholder-rights
plan, and such rights were distributed as a dividend at the rate of one
right for each outstanding share of the Company's common stock to the
holders of record of common shares on July 29, 1988. As a result of the
400-for-1 common stock split that occurred on October 1, 1990, each
outstanding share of common stock currently has one four-hundredth of a
right associated with it. When exercisable, each right will entitle its
holder to purchase from the Company one one-hundredth of a share of the new
Series C Preferred Stock of the Company at a price of $15,000. AMERCO has
reserved 5,000 shares of authorized but unissued preferred stock for the
Series C Preferred Stock authorized in this stockholder-rights plan. The
rights will become exercisable if a person or group of affiliated or
associated persons acquire or obtain the right to acquire beneficial
ownership of 50% or more of the common stock without approval of a majority
of the Board of Directors of the Company. The majority approval must be
made by members of the Board who were members as of July 25, 1988
(Disinterested Directors) or subsequent members elected to the Board if
such persons are recommended or approved by a majority of the Disinterested
Directors. The rights will expire on July 29, 1998 unless earlier redeemed
by the Company pursuant to authorization by a majority of the Disinterested
Directors.
In the event the Company is acquired in a merger or other business
combination transaction after the rights become exercisable, provision
shall be made so that each holder of a right shall have the right to
receive, upon exercise thereof and payment of the exercise price, that
number of common shares of such corporation which at the time of such
transaction would have a market or book value of two times the exercise
price of the right. If the Company is the surviving company, each holder
would have the right to receive, upon payment of the exercise price, common
shares with a market or book value of two times the exercise price.
(16) Stock Option Plan
In October 1992, the stockholders approved a ten year incentive plan
entitled the AMERCO Stock Option and Incentive Plan (the Plan) for officers
and key employees of the Company.
Under the Plan, Incentive Stock Options (ISOs), Non-qualified Stock Options,
Stock Appreciation Rights (SAR), Restricted Stock Dividend Equivalents and
Performance Shares may be awarded. The aggregate numbers of shares of
stock subject to award under the Plan may not exceed 3,000,000. The stock
subject to the Plan is AMERCO Common Stock unless prior to the date the
first award is made under the Plan, a Committee of at least two Board
members determines, in its discretion, to utilize another class of the
Company's stock. No options or awards have been granted under the Plan.
<PAGE> 76
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(16) Stock Option Plan, continued
The Plan provides for the granting of ISOs as defined under the Internal
Revenue Code and Non-qualified Stock Options under such terms and
conditions as the Committee determines in its discretion. The ISOs may be
granted at prices not less than one-hundred percent of the fair market
value at the date of grant with a term not exceeding ten years.
The Plan provides for the granting of SARs subject to certain conditions and
limitations to holders of options under the Plan. SARs permit the optionee
to surrender an exercisable option for an amount equal to the excess of the
market price of the common stock over the option price when the right is
exercised.
Under the Restricted Stock feature of the Plan, a specified number of common
shares may be granted subject to certain restrictions. Restriction
violations during a specified period result in forfeiture of the stock.
The Committee may, in its discretion, impose any restrictions on a
Restricted Stock award.
The Plan authorizes the Committee to grant Dividend Equivalents in
connection with options. Dividend Equivalents are rights to receive
additional shares of Company stock at the time of exercise of the option to
which such Dividend Equivalents apply.
Under the Plan, Performance Share units may be granted. Each unit is deemed
to be the equivalent of one share of Company stock and such units are
credited to a Performance Share account. The value of the units at the
time of award or payment is the fair market value of an equivalent number
of shares of stock. At the end of the award period, payment may be made
subject to certain predetermined criteria and restrictions.
(17) Related Party Transactions
AMERCO and Consolidated Subsidiaries have related party transactions with
certain major stockholders, directors and officers of the consolidated
group as disclosed in Notes 10 and 19 of Notes to Consolidated Financial
Statements of AMERCO.
Additionally, during the years ended 1994, 1993 and 1992, a subsidiary of
AMERCO purchased $2,607,000, $2,608,000 and $2,681,000, respectively, of
printing from a company wherein an officer is a major stockholder, director
and officer of AMERCO.
Management believes that these transactions were consummated on terms
equivalent to those that prevail in arm's-length transactions.
<PAGE> 77
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(18) Supplemental Cash Flows Information
<TABLE>
During the year ended March 31, 1992, the Company received 648,000 shares of
common stock in exchange for cash and the cancellation of a restricted
stock purchase plan note receivable and accrued interest and returned the
shares to the treasury. In conjunction with the transaction, non-cash
financing activities were recorded as follows (in thousands):
<CAPTION>
<S> <C>
Restricted stock purchase plan notes
receivable cancelled $ 4,236
Additional paid-in capital recognized 1,173
Common stock exchanged at fair
market value (5,961)
-----
Cash paid on exchange $ (552)
=====
</TABLE>
<TABLE>
The (increase) decrease in receivables, inventories and accounts payable and
accrued liabilities net of other operating and investing activities
follows:
<CAPTION>
Year ended
1994 1993 1992
--------------------------------------
(in thousands)
<S> <C> <C> <C>
Receivables $ (19,945) (4,508) (10,156)
======== ======= ========
Inventories $ 2,425 (4,664) 15,211
======== ======= =========
Accounts payable and
accrued liabilities $ 11,538 (1,899) 2,659
======== ======= =========
</TABLE>
Cash paid for income taxes amounted to $3,275,000, $303,000 and $1,970,000
for 1994, 1993 and 1992, respectively.
Interest paid in cash amounted to $71,448,000, $81,115,000 and $78,488,000
for 1994, 1993 and 1992, respectively.
<PAGE> 78
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(19) Summarized Consolidated Financial Information of Ponderosa Holdings, Inc.
and its Subsidiaries
<TABLE>
A summary consolidated balance sheet for Ponderosa Holdings, Inc. and its
subsidiaries is presented below:
<CAPTION>
December 31,
1993 1992
------------------
(in thousands)
<S> <C> <C>
Investments - fixed maturities $ 719,605 647,505
Other investments 84,738 129,535
Receivables 138,049 37,264
Deferred policy acquisition costs 47,846 49,748
Due from affiliate 4,927 12,899
Deferred federal income taxes 8,350 9,305
Other assets 8,744 18,743
--------- -------
Total assets $ 1,012,259 904,999
========= =======
Policy liabilities and accruals $ 380,424 298,162
Unearned premiums 58,842 39,094
Premium deposits 312,708 320,961
Other policyholders' funds and liabilities 13,399 11,570
--------- -------
Total liabilities 765,373 669,787
Stockholder's equity 246,886 235,212
--------- -------
Total liabilities and
stockholder's equity $ 1,012,259 904,999
========= =======
</TABLE>
<TABLE>
A summarized consolidated income statement for Ponderosa Holdings, Inc. and
subsidiaries is presented below:
<CAPTION>
Year ended December 31,
1993 1992 1991
----------------------------------
(in thousands)
<S> <C> <C> <C>
Premiums $ 142,347 118,206 109,372
Net investment income 40,019 40,817 39,752
Other income (loss) 7,447 10,495 1,381
------- ------- -------
Total revenue 189,813 169,518 150,505
Benefits and losses 120,825 106,617 93,652
Amortization of deferred policy
acquisition costs 9,343 9,352 5,439
Other expenses 29,834 24,993 19,119
------- ------- -------
Income from operations 29,811 28,556 32,295
Federal income tax expense (8,723) (7,387) (12,442)
------- ------- -------
Earnings from operations before
change in accounting principle 21,088 21,169 19,853
Cumulative effect of a change
in accounting principle (93) - -
------- ------- -------
Net income $ 20,995 21,169 19,853
======= ======= =======
</TABLE>
<PAGE> 79
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(19) Summarized Consolidated Financial Information of Ponderosa Holdings, Inc.
and its Subsidiaries, continued
Applicable laws and regulations of the State of Arizona require maintenance
of minimum capital determined in accordance with statutory accounting
practices in the amount of $1,000,000. In addition, the amount of dividends
which 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 regulatory approval. Statutory surplus which can be distributed as
dividends is $17,619,000 at December 31, 1993.
The consolidated audited statutory net income for the years ended December
31, 1993, 1992 and 1991 was $20,644,000, $19,708,000 and $20,984,000,
respectively; audited statutory capital and surplus was $176,194,000 and
$170,762,000 at December 31, 1993 and 1992, respectively.
(20) Industry Segment and Geographic Area Data
Industry Segment Data - AMERCO's three industry segments are Rental
operations, Life insurance and Property/Casualty insurance. Rental
operations is composed of the operations of U-Haul International, Inc.,
which is engaged in the rental of various kinds of equipment and sales of
related products and services. Life insurance is composed of the
operations of Oxford Life Insurance Company which operates in various life,
accident and health and annuity lines. Property/Casualty insurance is
composed of the operations of Republic Western Insurance Company which
operates in various property and casualty lines.
<PAGE> 80
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Industry Segment and Geographic Area Data, continued
<TABLE>
Information concerning operations by industry segment follows:
<CAPTION>
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- --------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
1994
- - ----
Revenues:
Outside $ 965,839 31,357 137,659 - 1,134,855
Intersegment (357) 2,834 18,862 (21,339) -
------- ------ ------- -------- ---------
Total revenue $ 965,482 34,191 156,521 (21,339) 1,134,855
======= ====== ======= ======== =========
Pretax
operating
profit $ 106,248 9,106 20,705 (698) 135,361
======= ===== ====== =====
Interest
expense 68,859
-------
Pretax
earnings
from
operations 66,502
=======
Identifiable
assets $1,593,044 461,464 550,795 (260,861) 2,344,442
========= ======= ======= ======= =========
Depreciation/
amortization $ 137,220 4,277 7,243 - 148,740
======= ===== ===== ======= =========
Capital
expenditures $ 530,520 - - - 530,520
======== ===== ===== ======= =========
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
======= ====== ======= ====== =========
Pretax
operating
profit $ 88,581 12,325 16,231 - 117,137
======= ====== ====== ======
Interest
expense 67,958
-------
Pretax
earnings
from
operations 49,179
=======
Identifiable
assets $1,377,386 472,669 422,079 (248,111) 2,024,023
========= ======= ======= ======= =========
Depreciation/
amortization $ 118,438 5,353 4,739 - 128,530
========= ======= ======= ======= =========
Capital
expenditures $ 130,841 - - - 130,841
========= ======= ======= ======= =========
</TABLE>
<PAGE> 81
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Industry Segment and Geographic Area Data, continued
<TABLE>
<CAPTION>
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- --------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
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
======= ====== ======= ====== =======
Pretax
operating
profit $ 69,628 11,056 21,239 - 101,923
======= ====== ======= ======
Interest
expense 76,189
-------
Pretax
earnings
from
operations 25,734
=======
Identifiable
assets $1,354,758 457,324 402,190 (234,948) 1,979,324
========= ======= ======= ======= =========
Depreciation/
amortization $ 118,637 2,712 3,019 - 124,368
========= ======= ======= ======= =========
Capital
expenditures $ 68,754 - - - 68,754
========= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Geographic Area Data - United States Canada Consolidated
-----------------------------------------
(in thousands)
<S> <C> <C> <C>
1994
----
Revenues $ 1,106,761 28,094 1,134,855
Pretax earnings (loss)
from operations $ 65,919 583 66,502
Identifiable assets $ 2,298,948 45,494 2,344,442
1993
----
Revenues $ 1,013,884 27,027 1,040,911
Pretax earnings (loss)
from operations $ 49,855 (676) 49,179
Identifiable assets $ 1,983,419 40,604 2,024,023
1992
----
Revenues $ 947,181 24,703 971,884
Pretax earnings (loss)
from operations $ 28,407 (2,673) 25,734
Identifiable assets $ 1,942,361 36,963 1,979,324
</TABLE>
<PAGE> 82
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Subsequent Events
On May 3, 1994, the Company declared a cash dividend of $3,241,000
($.53125 per preferred share) to preferred stockholders of record as
of May 13, 1994.
Subsequent to the date of these financial statements, the board of
directors of Oxford declared a dividend of its stock in RWIC to
Ponderosa.
<PAGE> 83
SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
Additional Information
<TABLE>
The following Summary of Earnings of Independent Trailer Fleets is presented for
purposes of analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits of the basic
financial statements by Price Waterhouse, independent accountants, whose report thereon appears
elsewhere herein.
<CAPTION>
Years Ended March 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands except earnings per $100 of average investment)
<S> <C> <C> <C> <C> <C>
Earnings data (note A):
Fleet Owner income:
Credited to Fleet Owner gross
rental income $ 6,556 7,827 9,814 14,508 15,296
Credited to Distribution, Accident
and Canadian Duty Fund (note D) 71 114 118 247 195
-------- ----- ----- ------ ------
Total Fleet Owner income 6,627 7,941 9,932 14,755 15,491
-------- ----- ----- ------ ------
Fleet Owner operation expenses:
Charged to Fleet Owner (note C) 2,404 3,100 4,389 8,558 8,112
Charged to Distribution, Accident
and Canadian Duty Funds (note D) 237 290 274 456 401
-------- ----- ----- ------ ------
Total Fleet Owner operation
expenses 2,641 3,390 4,663 9,014 8,513
-------- ----- ----- ------ ------
Fleet Owner earnings before
Distribution Accident and
Canadian Duty Funds credit,
depreciation and income taxes 3,986 4,551 5,269 5,741 6,978
Distribution, Accident and Canadian
Duty Funds credit (note D) 165 176 156 209 206
-------- ----- ----- ------ ------
Net Fleet Owner earnings before
depreciation and income taxes $ 4,151 4,727 5,425 5,950 7,184
======== ===== ===== ====== ======
Investment data (note A):
Amount at end of year $ 5,257 6,332 7,749 9,914 12,604
Average amount during year $ 5,668 6,976 8,911 10,459 13,406
======== ===== ===== ====== ======
Net Fleet Owner earnings before
depreciation and income taxes
per $100 of average investment
(note B) $ 73.23 67.76 60.88 56.89 53.59
======== ===== ===== ====== ======
<FN>
The accompanying notes are an integral part of this Summary of Earnings of Independent Trailer Fleets.
</TABLE>
<PAGE> 84
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
Additional Information
(A) The accompanying Summary of Earnings of Independent Trailer Fleets
includes the operations of trailers under the brand name of "U-Haul"
owned by Independent Fleet Owners. Earnings data represent the
aggregate results of operations before depreciation and taxes.
Investment data represent the cost of trailers and investments before
accumulated depreciation.
Fleet Owner income is based on Rental Dealer reports of rentals
transacted through the day preceding the last Monday of each month and
received by U-Haul International, Inc. by the end of the month and
affiliated Rental Company U-Haul Center reports of rentals transacted
through the last day of each month. Payments to Fleet Owners for
trailers lost or retired from rental service as a result of damage
by accident have not been reflected in this summary because such
payments do not relate to earnings before depreciation and income
taxes but, rather, investment (depreciation).
The investment data is based upon the cost of trailers to the Fleet Owners
as reflected by sales records of affiliated manufacturing companies.
(B) The summary of earnings data stated in terms of amount per $100 of average
investment represents the aggregate results of operations (earnings data)
divided by the average amount of investment during the periods. The
average amount of investment is based upon a simple average of the month-
end investment during each period. Average earnings data is not
necessarily representative of an individual Fleet Owner's earnings.
<TABLE>
(C) A summary of operations expenses charged directly to Independent Fleet Owners follows:
Year ended March 31,
----------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Licenses $ 520 593 686 833 728
Public liability insurance 392 510 1,047 1,657 1,955
Repairs and maintenance 1,492 1,997 2,656 6,068 5,429
-------- ----- ----- ----- ------
$ 2,404 3,100 4,389 8,558 8,112
======== ===== ===== ===== =====
</TABLE>
(D) The Fleet Owners, Rental Dealers, U-Haul International, Inc. and affiliated
Rental Companies forego normal commissions on a portion of gross rental
fees designated for transfer to the Distribution Fee Fund, the Accident
Fund, and the Canadian Duty Fund. Designated expenses, otherwise
chargeable to Fleet Owners, are paid from these Funds to the extent of
the financial resources of the Funds. The amounts designated
"Distribution, Accident and Canadian Duty Funds credit" in the
accompanying summary of earnings represent Operator Contribution expenses
borne by the Funds, which exceed Independent Fleetowner commissions
foregone.
<PAGE> 85
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS, continued
Additional Information
<TABLE>
(E) Commissions foregone for transfer to the Distribution, Accident and Canadian
Duty Funds (net of fees in excess of expenses incurred) follows:
<CAPTION>
Affiliated Fleet Owners
-------------------------
Rental Affiliated
Companies Companies Independent Total
---------- ---------- ----------- -----
(in thousands)
<S> <C> <C> <C> <C>
Year ended:
March 31, 1994 873 399 71 1,343
March 31, 1993 879 358 114 1,351
March 31, 1992 875 390 118 1,383
March 31, 1991 1,070 452 247 1,769
March 31, 1990 849 311 195 1,355
</TABLE>
<TABLE>
(F) A summary of Independent Fleet Owner expenses incurred by the Funds follows:
<CAPTION>
Year ended March 31,
---------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Accident repairs $ 1,085 1,199 1,142 1,170 993
Distribution of trailers, paid from redistribution and
Canadian duty fees 0 0 37 124 50
----- ----- ----- ----- -----
Total Fleet Owner expenditures 1,085 1,199 1,179 1,294 1,043
Less portion allocated to fleets owned by affiliated
companies 848 909 905 838 642
----- ----- ----- ----- -----
Total Independent Fleet Owner expenses paid
by funds 237 290 274 456 401
Add portion allocated to fleets owned by affiliated
companies 848 909 905 838 642
Return of investment (accident reimbursement) 258 152 204 475 312
----- ----- ----- ----- -----
Total expenses incurred by Funds $ 1,343 1,351 1,383 1,769 1,355
===== ===== ===== ===== =====
</TABLE>
<PAGE> 86
Schedule II
AMERCO and Consolidated Subsidiaries
Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other than Related Parties
March 31, 1994
<TABLE>
<CAPTION> Deductions
Balance at Amounts Amounts Balance at
Debtor March 31, 1993 Additions collected written off March 31, 1994
------ -------------- --------- ---------------------- --------------
<S> <C> <C> <C> <C> <C>
Edward J. Shoen - $1,106,823 $1,106,823 - -
============ ========== ========== ========== ===========
<FN>
Edward J. Shoen is the Chairman of the Board and President of AMERCO.
</TABLE>
<PAGE> 87
<TABLE> Schedule III
Condensed Financial Information of Registrant
AMERCO
Balance Sheets
March 31,
<CAPTION>
1994 1993
___________________
(in thousands)
<S> <C> <C>
Assets
- - ------
Cash $ 1,084 1,060
Investment in subsidiaries 468,254 437,102
Due from unconsolidated subsidiaries 985,539 788,446
Other assets 9,254 9,203
--------- ---------
$ 1,464,131 1,235,811
========= =========
Liabilities and Stockholders' Equity
- - ------------------------------------
Liabilities:
Notes and loans $ 722,518 694,673
Other liabilities 80,495 56,064
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 10,000 10,000
Additional paid-in capital 165,651 19,331
Foreign currency translation (11,152) (6,122)
Retained earnings:
Beginning of year 482,163 452,202
Net earnings 40,184 31,909
Dividends paid (7,826) (1,948)
Change in net unrealized gain on investments 679 -
--------- ---------
515,200 482,163
Less:
Cost of common shares in treasury 10,461 10,461
Loan to Leveraged Employee Stock
Ownership plan 8,120 9,837
--------- ---------
Total stockholders' equity 661,118 485,074
--------- ---------
$ 1,464,131 1,235,811
========= =========
<FN>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
</TABLE>
<PAGE> 88
<TABLE>
Schedule III, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Earnings
Years Ended March 31,
<CAPTION>
1994 1993 1992
--------------------------------
(in thousands except per share data)
<S>
Revenues <C> <C> <C>
- - --------
Net interest income from
subsidiaries $ 68,327 67,014 153,155
Other revenue 753 233 504
---------- ---------- ----------
Total revenues 69,080 67,247 153,659
---------- ---------- ----------
Expenses
Interest expense 68,327 67,014 74,080
Other expenses 9,565 9,082 3,917
---------- ---------- ----------
Total expenses 77,892 76,096 77,997
---------- ---------- ----------
Operating income (loss) (8,812) (8,849) 75,662
Equity in earnings (losses) of
unconsolidated subsidiaries 71,659 57,514 (57,534)
Income tax benefit (expense) (19,293) (16,756) 1,036
Extraordinary loss on early
extinguishment of debt, net (3,370) - -
---------- ---------- ----------
Net earnings $ 40,184 31,909 19,164
========== ========== ==========
Earnings per common share $ .89 .83 .49
========== ========== ==========
Weighted average common
shares outstanding 38,664,063 38,664,063 38,880,069
========== ========== ==========
<FN>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
</TABLE>
<PAGE> 89
<TABLE>
Schedule III, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Cash Flows
Years Ended March 31,
<CAPTION>
1994 1993 1992
--------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 40,184 31,909 19,164
Amortization, net 850 1,231 546
Equity in earnings (losses) of
subsidiaries 49,288 38,419 (28,797)
(Increase) decrease in amounts due
from unconsolidated subsidiaries (197,093) 10,914 (24,594)
Net change in operating assets and
liabilities (53,872) (46,605) 94,460
Other, net (3,945) (3,843) (1,892)
--------- ------- --------
Net cash provided (used) by operations (164,588) 32,025 58,887
--------- ------- --------
Cash flows from financing activities:
Net change in short term borrowings 21,750 3,000 (152,000)
Proceeds from notes 186,000 55,000 185,000
Proceeds from Leveraged Employee
Stock Ownership Plan 1,717 1,718 1,717
Principal payments on notes (179,905) (89,704) (93,216)
Issuance of preferred stock 146,320 - -
Treasury stock acquisitions - - (552)
Dividends paid (7,900) (1,994) -
Extraordinary loss on early
extinguishment of debt (3,370) - -
--------- ------- ---------
Net cash provided (used) by
financing activities 164,612 (31,980) (59,051)
--------- ------- --------
Increase (Decrease) in cash 24 45 (164)
Cash at beginning of year 1,060 1,015 1,179
--------- ------- --------
Cash at end of year $ 1,084 1,060 1,015
======== ======= ========
<FN>
Income taxes paid in cash amounted to $3,025,000, $42,000 and $1,750,000 for
1994, 1993 and 1992, respectively. Interest paid in cash amounted to
$81,115,000, $80,365,000 and $76,118,000 for 1994, 1993 and 1992,
respectively.
<FN>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
</TABLE>
<PAGE> 90
Schedule III, continued
Condensed Financial Information of Registrant
AMERCO
Notes to Condensed Financial Information
March 31, 1994, 1993 and 1992
(1) Summary of Significant Accounting Policies
AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the
holding company of all companies affiliated with the U-Haul Rental
System. The financial statements of the Registrant should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included in this Form 10-K.
The Company is included in a consolidated Federal income tax return with all
of its U.S. subsidiaries. Accordingly, the provision for income taxes
has been calculated for Federal income taxes of the Registrant and
subsidiaries included in the consolidated return of the Registrant
excluding Oxford Life Insurance Company (Oxford) and Republic Western
Insurance Company (RWIC). State taxes for all subsidiaries and Federal
taxes for Oxford and RWIC are allocated to the respective subsidiaries.
The financial statements include only the accounts of the Registrant (a
Nevada corporation), which include certain of the corporate operations of
AMERCO. The debt and related interest expense of the Registrant have
been allocated to the consolidated subsidiaries. The intercompany
interest income and expenses are eliminated in the consolidated financial
statements.
(2) Guarantees
AMERCO has guaranteed performance of fleet owner contract obligations of U-
Haul International, Inc., a wholly-owned subsidiary, and residual values
on certain long-term leases. See Notes 8 and 14 of Notes to Consolidated
Financial Statements.
<PAGE> 91
Schedule III, continued
Condensed Financial Information of Registrant
AMERCO
Notes to Condensed Financial Information
March 31, 1994, 1993 and 1992
(3) Notes and Loans Payable
<TABLE>
Notes and loans payable consist of the following:
<CAPTION>
Year end
1994 1993
-------------------
(in thousands)
<S> <C> <C>
Medium-term notes payable
8.50% to 11.50% interest
rates, due through 2000 $ 198,870 289,670
Note payable to insurance companies
5.89% to 10.27% interest
rates, due through 2006 281,000 140,000
Notes payable to banks
2.94% to 9.40% interest
rates, due through 1999 94,800 138,900
Other notes payable
9.50% interest rate,
due through 2005 98 103
Unsecured notes payable to banks
under revolving lines of credit
3.81% to 4.06% interest rates 97,750 106,000
Other short-term promissory notes 50,000 20,000
------- -------
$ 722,518 694,673
======= =======
<FN>
For additional information, see Note 5 of Notes to Consolidated Financial
Statements.
</TABLE>
<PAGE> 92
<TABLE>
Schedule V
AMERCO AND CONSOLIDATED SUBSIDIARIES
Property, Plant and Equipment
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Balance at (a) Balance at
beginning Additions Retirements Transfers end
of period at cost or sales add (deduct) of period
--------- --------- ----------- ------------ ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land $ 180,171 7,625 1,586 - 186,210
Buildings and improvements 614,343 65,855 3,901 - 676,297
Furniture and equipment 158,366 9,286 5,146 989 163,495
Rental trailers and other rental equipment 203,024 16,029 6,866 - 212,187
Rental trucks 609,306 421,562 209,772 (701) 820,395
General rental items 61,699 10,163 14,153 (288) 57,421
--------- ------- ------- ----- ---------
Total $ 1,826,909 530,520 241,424 - 2,116,005
========= ======= ======= ===== =========
Year ended March 31, 1993:
Land $ 181,844 242 1,915 - 180,171
Buildings and improvements 598,045 21,796 5,498 - 614,343
Furniture and equipment 157,242 14,502 13,643 265 158,366
Rental trailers and other rental equipment 163,481 51,851 12,272 (36) 203,024
Rental trucks 585,635 40,171 16,292 (208) 609,306
General rental items 70,560 2,279 11,119 (21) 61,699
--------- ------- ------ ----- ---------
Total $ 1,756,807 130,841 60,739 - 1,826,909
========= ======= ====== ===== =========
<FN>
(a) Transfers among classifications.
</TABLE>
<PAGE> 93
<TABLE>
Schedule V, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
Property, Plant and Equipment
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Balance at (a) Balance at
beginning Additions Retirements Transfers end
of period at cost or sales add (deduct) of period
--------- --------- ----------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1992:
Land $ 185,581 - 3,737 - 181,844
Buildings and improvements 588,844 14,809 5,610 2 598,045
Furniture and equipment 163,765 3,796 11,258 939 157,242
Rental trailers and other rental equipment 142,446 31,865 10,676 (154) 163,481
Rental trucks 588,090 16,664 18,857 (262) 585,635
General rental items 79,371 1,620 9,906 (525) 70,560
--------- ------- ------ ----- ---------
Total $ 1,748,097 68,754 60,044 - 1,756,807
========= ======= ====== ===== =========
<FN>
(a) Transfers among classifications.
</TABLE>
<PAGE> 94
<TABLE>
Schedule VI
AMERCO AND CONSOLIDATED SUBSIDIARIES
Accumulated Depreciation of
Property, Plant and Equipment
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Additions
Balance at charged to (a) Balance at
beginning costs and Retirements Transfers end
of period expenses or sales add (deduct) of period
--------- -------- ----------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Buildings and improvements $ 266,135 11,142 2,043 - 275,234
Furniture and equipment 125,409 10,824 4,596 449 132,086
Rental trailers and other rental equipment 104,684 19,869 5,494 - 119,059
Rental trucks 293,251 87,278 5,835 (223) 374,471
General rental items 47,827 4,372 11,054 (226) 40,919
------- ------- ------ ----- -------
Total $ 837,306 133,485 29,022 - 941,769
======= ======= ====== ===== =======
Year ended March 31, 1993:
Buildings and improvements $ 257,594 10,851 2,310 - 266,135
Furniture and equipment 127,346 10,321 12,381 123 125,409
Rental trailers and other rental equipment 96,890 18,322 10,502 (26) 104,684
Rental trucks 234,983 66,698 8,353 (77) 293,251
General rental items 52,899 3,913 8,965 (20) 47,827
------- ------- ------ ----- -------
Total $ 769,712 110,105 42,511 - 837,306
======= ======= ====== ===== =======
<FN>
(a) Transfers among classifications.
</TABLE>
<PAGE> 95
<TABLE>
Schedule VI, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
Accumulated Depreciation of
Property, Plant and Equipment
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Additions
Balance at charged to (a) Balance at
beginning costs and Retirements Transfers end
of period expenses or sales add (deduct) of period
--------- -------- ----------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1992:
Buildings and improvements $ 249,581 10,857 2,844 - 257,594
Furniture and equipment 125,637 11,245 10,234 698 127,346
Rental trailers and other rental equipment 88,336 17,583 8,930 (99) 96,890
Rental trucks 187,671 65,230 17,747 (171) 234,983
General rental items 56,530 4,726 7,929 (428) 52,899
------- ------- ------ ----- -------
Total $ 707,755 109,641 47,684 - 769,712
======= ======= ====== ===== =======
<FN>
(a) Transfers among classifications.
</TABLE>
<PAGE> 96
<TABLE>
Schedule XIV
AMERCO AND CONSOLIDATED SUBSIDIARIES
Supplemental Information (For Property-Casualty Insurance Underwriters)
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Reserves Amorti-
for Unpaid zation Paid
Claims Claims and of Claims
Deferred and Claim Adjustment Deferred and
Policy Claim Net Net Expenses Incurred Policy Claim Net
Affiliation Acqui- Adjust- Discount Earned Invest- Related to Acqui- Adjust- Premiums
With sition ment if any, Unearned Premiums ment Current Prior sition ment Written
Year Registrant Costs Expenses Deducted Premiums (1) Income Year Year Costs Expenses (2)
- - --- ---------- ----- -------- -------- -------- -------- ------ ------- ---- ----- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
94 Consolidated
property -
casualty entity $ 6,644 314,482 N/A 58,842 105,801 27,446 91,044 12,688 5,377 104,123 113,672
93 Consolidated
property -
casualty entity 5,377 238,762 N/A 39,094 82,721 29,320 96,451 (4,241) 3,570 89,467 97,348
92 Consolidated
property -
casualty entity 3,570 236,019 N/A 23,513 66,896 29,475 74,510 3,124 2,424 67,939 70,934
<FN>
(1) The earned premiums are reported net of intersegment transactions. Earned
premiums eliminated in consolidation amount to $18,798,000, $18,344,000 and
$21,938,000 for the years ended 1994, 1993 and 1992, respectively.
<FN>
(2) The premiums written are reported net of intersegment transactions.
Premiums written eliminated in consolidation amount to $18,335,000,
$18,616,000 and $22,836,000 for the years ended 1994, 1993 and 1992,
respectively.
</TABLE>
<PAGE> 97
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERCO
By: /S/ EDWARD J. SHOEN
-------------------
Edward J. Shoen
Chairman of the Board
Dated: June 24, 1994
<TABLE>
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ EDWARD J. SHOEN Chairman of the Board June 24, 1994
- - -------------------- (Principal Executive
Edward J. Shoen Officer)
/S/ GARY B. HORTON Principal Financial June 24, 1994
- - -------------------- and Accounting Officer
Gary B. Horton
/S/ MARK V. SHOEN Director June 24, 1994
- - -------------------
Mark V. Shoen
/S/ JAMES P. SHOEN Director June 24, 1994
- - -------------------
James P. Shoen
/S/ JOHN M. DODDS Director June 24, 1994
- - -------------------
John M. Dodds
/S/ CHARLES J. BAYER Director June 24, 1994
- - --------------------
Charles J. Bayer
</TABLE>
<PAGE>
<TABLE>
Quarterly Financial Data
(in thousands except per share amounts, unaudited)
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- -------------- --------------
1994 1993 1994 1993 1994 1993 1994 1993
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues 291,348 274,744 324,968 303,871 267,448 242,921 251,091 219,375
Pretax earnings from operations before interest 46,987 56,436 63,857 57,841 21,825 6,024 2,692 (3,164)
Earnings (loss) from operations before
extraordinary item and cumulative
effect of change in accounting principle 20,863 24,982 30,369 26,736 3,696 (6,843) (8,279) (12,966)
Net income 17,359 24,982 30,601 26,736 1,799 (6,843) (9,575) (12,966)
Per share amounts:
Earnings (loss) from operations before
extraordinary item and cumulative
effect of change in accounting principle 0.54 0.65 0.78 0.69 0.03 (0.18) (0.29) (0.33)
Net income 0.45 0.65 0.79 0.69 (0.02) (0.18) (0.33) (0.33)
<FN>
Earnings per share are computed based on the weighted number of shares outstanding and net income reduced for preferred dividends.
In October 1993, the Company issued 6,100,000 shares of 8.5% cumulative, no par, non-voting preferred stock.
</TABLE>
<PAGE>
STOCKHOLDER INFORMATION
Market for AMERCO's Common Equity and Related Stockholder Matters
As of June 24, 1994, there were 161 holders of record of the Company's common
stock in comparison to 165 as of August 12, 1993. 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:
<TABLE>
<CAPTION>
Date Cash Dividend per Common Share
---- ------------------------------
<S> <C>
August 4, 1992 $ 0.0258
October 6, 1992 $ 0.0258
August 3, 1993 $ 0.0814
</TABLE>
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 paid
during fiscal 1993 and fiscal 1994 are not indicative of future dividends and
there is no assurance that dividends on common stock will be declared in the
future.
Corporate Business
AMERCO, a Nevada corporation, was incorporated in April 1969, and is the
holding company for U-Haul International, Inc., Ponderosa Holdings, Inc., and
Amerco Real Estate Company (collectively, the "Company"). The Company had its
origin in 1945 under the name "U-Haul Trailer Rental Company." The Company is
primarily engaged in the short-term rental of trucks, trailers and related
equipment to the do-it-yourself mover. The Company also sells related moving
products and services, and rents self-storage facilities and general rental
items. In addition, the Company's insurance subsidiaries engage in the life
and property/casualty insurance and reinsurance businesses.
Corporate Headquarters
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
(702) 688-6300
Independent Accountants
Price Waterhouse
Phoenix, Arizona
<PAGE>
Form 10-K
Copies of AMERCO's Annual Report on Form 10-K are available, at no cost
upon request, by contacting:
Roberta Duy
Financial Reporting
U-Haul International, Inc.
P. O. Box 21502
Phoenix, Arizona 85036-1502
Transfer Agent
John A. Lorentz
Registrar
John A. Lorentz
