<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERCO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0106815
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
------------------------
1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY V. KLINEFELTER, ESQ.
GENERAL COUNSEL
AMERCO
1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
JON S. COHEN, ESQ.
SNELL & WILMER L.L.P.
ONE ARIZONA CENTER
PHOENIX, ARIZONA 85004-0001
(602) 382-6247
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
________________________________________________________________________________________________________
Series D Floating Rate Preferred
Stock......................... 3,860,000 $50 $193,000,000 $66,552
========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the rules and regulations under the Securities Act
of 1933 (the "Securities Act").
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a) MAY
DETERMINE.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-2
FILED AS PART OF REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM
NUMBER
IN FORM
S-2 ITEM CAPTION IN FORM S-2 CAPTION IN PROSPECTUS
- -------- ------------------------ ---------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page; Cross Reference Sheet; Cover
Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Available
Information; Information Incorporated by
Reference; Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Risk Factors; The Company; Ratio of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Inapplicable
6. Dilution................................. Inapplicable
7. Selling Security Holders................. Inapplicable
8. Plan of Distribution..................... The Trust; Shoen Litigation
9. Description of Securities to be
Registered............................... Description of Securities
10. Interests of Named Experts and Counsel... Legal Opinions; Experts
11. Information with Respect to the
Registrant............................... Risk Factors; The Company; Selected
Consolidated Financial Data; Management's
Discussion and Analysis; Business;
Financial Statements
12. Incorporation of Certain Information by
Reference................................ Information Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1995
PROSPECTUS
3,860,000 SHARES
A M E R C O
SERIES D FLOATING RATE PREFERRED STOCK
[PONDEROSA LOGO] [U-HAUL LOGO] [AMERCO LOGO]
This Prospectus relates to 3,860,000 shares of Series D Floating Rate
Preferred Stock (the "Securities") of AMERCO (the "Company"), a holding company
for U-Haul International, Inc., Ponderosa Holdings, Inc., Amerco Real Estate
Company, and other companies. The Securities, which are described more fully
herein, (i) provide for cash dividends, payable quarterly, at a floating rate
based on the three-month, ten-year or thirty-year United States Treasury rate,
and (ii) have a liquidation preference of $50 per share. The Securities are
redeemable at the option of the Company at any time, and from time to time,
after December 1, 2001 or earlier upon certain occurrences. The Securities will
be issued in an amount having an aggregate stated value of $193,000,000 and each
share of the Securities will have a stated value of $50. See "Description of
Securities."
The Company hereby offers the Securities to a Settlement Trust (the
"Trust") for the benefit of Leonard S. Shoen, Samuel W. Shoen, Michael L. Shoen,
Cecilia Shoen Hanlon, Theresa Shoen Romero, and Katrina Shoen Carlson (the
"Non-Stockholder Plaintiffs").
No person is authorized to give the information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with this Prospectus and, if given or made, any such
information or representation must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy securities in any state or other jurisdiction
where, or to any person to whom, it is unlawful to make such an offer or a
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.
The Securities offered hereby involve risk. See "Risk Factors" on page 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
The Company has filed with the Commission a registration statement (the
"Registration Statement") with respect to the Securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information contained in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, which may be examined without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from the Public Reference Section of the Commission at prescribed
rates. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each statement being qualified in all
respects by such reference.
The Company's Series A 8 1/2% Preferred Stock is listed on the New York
Stock Exchange and the Company's Common Stock is traded on Nasdaq. Reports,
proxy statements, and other information filed by the Company may be inspected
and copied at the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and at the National Association of Securities Dealers, 1735 K Street,
N.W., Washington, D.C. 20007.
INFORMATION INCORPORATED BY REFERENCE
The Annual Report of the Company on Form 10-K for the fiscal year ended
March 31, 1995, the Quarterly Report of the Company on Form 10-Q for the quarter
ended June 30, 1995, the Report by Issuer of Securities Quoted on Nasdaq on Form
10-C filed with the Commission on October 25, 1995, and the Current Report on
Form 8-K filed with the Commission on May 5, 1995 are incorporated herein by
reference.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will cause to be furnished without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any documents described above,
other than certain exhibits to such documents. Requests should be addressed to
the Company's principal executive offices: AMERCO, Investor Relations, 1325
Airmotive Way, Suite 100, Reno, Nevada 89502; telephone: (702) 688-6300.
2
<PAGE> 5
RISK FACTORS
THE FOLLOWING MATTERS, INCLUDING THOSE MENTIONED ELSEWHERE, SHOULD BE
CONSIDERED CAREFULLY BY A PROSPECTIVE INVESTOR IN EVALUATING A PURCHASE OF THE
SECURITIES.
DEPENDENCE UPON KEY PERSONNEL
The success and growth of the Company since 1987 has been dependent upon
the performance of its senior management team, the loss of whose services could
have an adverse effect on the Company. There is no assurance that the senior
management will remain employed by the Company. The Company has not entered into
employment contracts with anyone on the senior management team and has not
granted restricted stock or stock option awards to any employee pursuant to the
Company's Stock Option and Incentive Plan. However, Edward J., Mark V., and
James P. Shoen are members of the Company's senior management and have
substantial common stock holdings in the Company.
ENVIRONMENTAL MATTERS
The Company owns properties that contained approximately 1,000 underground
storage tanks as of March 31, 1995 and has been named a "potentially responsible
party" with respect to the disposal of hazardous wastes at ten federal or state
superfund sites. See "Business -- Environmental Matters."
QUARTERLY FLUCTUATIONS -- SEASONALITY
The Company's results of operations have historically fluctuated from
period to period, including on a quarterly basis. In particular, the Company's
U-Haul business is seasonal and a majority of the Company's revenues and
substantially all of its net earnings from its U-Haul business are generated in
the first and second quarters of each fiscal year (April through September). In
addition, the Company's results of operations have in the past been and will
continue to be affected by a wide variety of factors, including natural
disasters and other events that are beyond the control of the Company. For
example, the results of operations of RWIC in fiscal 1992 and 1993 were
adversely affected due to losses related to Hurricane Andrew. Results of
operations in any period should not be considered indicative of the results to
be expected for any future periods, and fluctuations in operating results may
also result in fluctuations in the price of the Securities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
REGULATED INDUSTRIES
The Company's insurance subsidiaries are subject to considerable regulation
and supervision in the states in which they transact business. State laws
regulate transactions and dividends between an insurance company and its parent
or affiliates. It is not possible to predict the future impact of changing state
and federal regulation on the operations of the Company's insurance
subsidiaries. See "Business -- Insurance Operations -- Regulation."
DIVIDENDS
Certain of the Company's credit agreements contain restrictions on the
ability of the Company to pay dividends and distributions on capital stock.
There can be no assurance that the Company will be able to pay dividends on the
Securities offered hereby in compliance with such restrictions. However, as of
the date of this Prospectus, the restrictions would not prevent the Company from
declaring or paying dividends on the Securities or on the Company's other series
of preferred stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Credit
Agreements" and "Description of Securities -- Dividends."
ABILITY TO ISSUE SERIAL COMMON STOCK AND PREFERRED STOCK
The Board of Directors has the authority to issue up to 50,000,000 shares
of preferred stock and up to 150,000,000 shares of serial common stock and to
fix the rights, preferences, privileges, and restrictions,
3
<PAGE> 6
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of the Securities will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of serial common stock and
preferred stock, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring, or preventing a change in
control of the Company. Furthermore, holders of such serial common stock or
preferred stock may have other rights that could have a material adverse effect
on the market value of the Securities. See "Description of Securities."
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios of earnings to fixed
charges for the periods indicated. 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.
THREE MONTHS
ENDED
JUNE 30, YEARS ENDED MARCH 31,
------------ ----------------------------------------
1995 1995 1994 1993 1992 1991
------------ ---- ---- ---- ---- ----
1.73 1.87 1.64 1.45 1.21 N/A
4
<PAGE> 7
THE COMPANY
The Company is the holding company for U-Haul International, Inc.
("U-Haul"), Ponderosa Holdings, Inc. ("Ponderosa"), and Amerco Real Estate
Company ("AREC"). Throughout this Prospectus, unless the context otherwise
requires, the term "Company" includes all of the Company's subsidiaries.
Founded in 1945, 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. The Company's do-it-yourself moving business
operates under the U-Haul name through an extensive and geographically diverse
distribution network of approximately 1,000 Company-owned U-Haul Centers and
approximately 13,200 independent dealers throughout the United States and
Canada. U-Haul's rental equipment fleet consists of approximately 81,000 trucks
and approximately 91,000 trailers. Additionally, U-Haul sells related products
and services and rents self-storage facilities and various kinds of equipment.
U-Haul entered the self-storage business in 1974 and offers for rent more than
15.0 million square feet of self-storage space through the management of
approximately 700 locations. AREC owns a majority of the real estate used in
connection with the foregoing businesses.
Ponderosa serves as the holding company for the Company's insurance
businesses. Ponderosa's two principal subsidiaries are Oxford Life Insurance
Company ("Oxford") and Republic Western Insurance Company ("RWIC"). Oxford
primarily reinsures life, health, and annuity type insurance products and
administers the Company's self-insured employee health plan. RWIC originates and
reinsures property and casualty type insurance products for various market
participants, including independent third parties, the Company's customers, and
the Company.
The Company's principal executive offices are located at 1325 Airmotive
Way, Suite 100, Reno, Nevada 89502, and the telephone number of the Company is
(702) 688-6300.
The following chart represents the corporate structure of the major
operating subsidiaries of the Company.
[FLOW CHART]
5
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial information, insofar as it relates to each
of the fiscal years ended March 31, 1995, 1994, 1993, 1992, and 1991, has been
derived from and is qualified by reference to the financial statements and other
information and data contained in the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995, which is incorporated by reference. The
selected financial information related to the three months ended June 30, 1995
and 1994 has been derived from the Company's unaudited quarterly report on Form
10-Q for the quarter ended June 30, 1995, which is incorporated by reference
herein. Oxford and RWIC have been consolidated on the basis of fiscal years
ended December 31. To give effect to Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," the Company has restated its financial
statements to April 1, 1988. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Other." The summaries for the
three months ended June 30, 1995 and 1994 are unaudited; however, in the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. The results of operations for the
three months ended June 30, 1995 may not be indicative of the results to be
expected for fiscal 1996 because, among other reasons, the Company's U-Haul
business is seasonal, with a majority of its revenue and substantially all of
its net earnings being generated in the first and second quarters of each fiscal
year.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1995 1994 1993 1992 1991 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Rental, net sales and other revenue.... $1,063,130 $ 972,704 $ 901,446 $845,128 $860,044 $ 288,427 $ 280,264
Premiums and net investment income..... 177,733 162,151 139,465 126,756 126,620 42,032 42,069
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,240,863 1,134,855 1,040,911 971,884 986,664 330,509 322,333
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating expense and cost of sales.... 783,933 735,841 697,700 661,229 668,149 211,003 193,091
Benefits, losses and amortization of
deferred acquisition costs........... 144,303 130,168 115,969 99,091 126,626 30,169 29,496
Depreciation........................... 151,409 133,485 110,105 109,641 114,589 37,693 37,282
Interest expense....................... 67,762 68,859 67,958 76,189 80,815 18,832 16,638
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,147,407 1,068,353 991,732 946,150 990,179 297,697 276,507
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pretax earnings (loss) from
operations........................... 93,456 66,502 49,179 25,734 (3,515) 32,812 45,826
Income tax expense..................... (33,424) (19,853) (17,270) (4,940) (6,354) (11,950) (16,413)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle............................ 60,032 46,649 31,909 20,794 (9,869) 20,862 29,413
Extraordinary loss on early
extinguishment of debt............... -- (3,370) -- -- -- -- --
Cumulative effect of change in
accounting principle................. -- (3,095) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss).................... $ 60,032 $ 40,184 $ 31,909 $ 20,794 $ (9,869) $ 20,862 $ 29,413
========== ========== ========== ========== ========== ========== ==========
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle per common share(3)........ $ 1.23 $ 1.06 $ .83 $ .53 $ (.25) $ .46 $ .71
Net earnings (loss) per common
share(3)............................. 1.23 .89 .83 .53 (.25) .46 .71
Weighted average common shares
outstanding(2)....................... 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080 37,958,426 37,107,536
Cash dividends declared................ $ 12,964 $ 7,900 $ 1,994 -- $ 1,176 $ 3,241 $ 3,241
Ratio of earnings to fixed
charges(1)........................... 1.87 1.64 1.45 1.21 --(1) 1.73 1.80
MARCH 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1995 1994 1993 1992 1991 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Balance Sheet Data:
Total property, plant and equipment,
net.................................. $1,274,246 $1,174,236 $ 989,603 $ 987,095 $1,040,342 $1,268,623 $1,224,674
Total assets........................... 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977 2,688,002 2,411,381
Notes and loans payable................ 881,222 723,764 697,121 733,322 804,826 866,132 725,565
Stockholders' equity................... 686,784 651,787 479,958 451,888 435,180 706,635 673,803
</TABLE>
- ---------------
(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.
(2) Reflects the adoption of Statement of Position 93-6, "Employer's Accounting
for Employee Stock Ownership Plans."
(3) For the fiscal year ended March 31, 1995 and 1994, Earnings (loss) and net
earnings per common share were computed after giving effect to the dividends
on the Company's Series A 8 1/2% preferred stock.
6
<PAGE> 9
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 1994, 1993, and 1992 corresponds to the
Company's fiscal years 1995, 1994, and 1993, respectively. There have been no
events related to such subsidiaries between January 1 and March 31 of 1995,
1994, or 1993 that would materially affect the Company's consolidated financial
position or results of operations as of and for the fiscal years ended March 31,
1995, 1994, and 1993, respectively.
The following management's discussion and analysis should be read in
conjunction with Notes 1, 19, and 20 of Notes to Consolidated Financial
Statements, which discuss the principles of consolidation, summarized
consolidated financial information, and industry segment and geographic area
data, respectively. In consolidation, all intersegment premiums are eliminated
and the benefits, losses, and expenses are retained by the insurance companies.
RESULTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, 1995 and 1994
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 quarters ended June 30, 1995 and 1994. Rental operations is
composed of the operations of U-Haul and Amerco Real Estate Company. Life
insurance is composed of the operations of Oxford Life Insurance Company.
Property and casualty insurance is composed of the operations of Republic
Western Insurance Company (RWIC). The Company's results of operations have
historically fluctuated from quarter to quarter. In particular, the Company's
U-Haul rental operations are seasonal and a majority of the Company's revenues
and substantially all of its earnings from its U-Haul rental operations are
generated in the first and second quarters each fiscal year (April through
September).
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
---------- --------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
QUARTER ENDED JUNE 30, 1995
Revenues:
Outside............................... $ 286,835 $ 10,238 $ 33,436 $ -- $ 330,509
Intersegment.......................... -- 367 (793) 426 --
---------- --------- -------- ---------- ----------
Total revenues................. $ 286,835 $ 10,605 $ 32,643 $ 426 $ 330,509
========== ========= ======== ========== ==========
Operating profit...................... $ 43,897 $ 2,622 $ 5,125 $ -- $ 51,644
========== ========= ======== ==========
Interest expense...................... 18,832
----------
Pretax earnings from operations....... $ 32,812
==========
Identifiable assets at June 30........ $1,854,491 $ 530,918 $589,446 $ (286,853) $2,688,002
========== ========= ======== ========== ==========
QUARTER ENDED JUNE 30, 1994
Revenues:
Outside............................... $ 279,144 $ 8,112 $ 35,077 $ -- $ 322,333
Intersegment.......................... -- 372 2,627 (2,999) --
---------- --------- -------- ---------- ----------
Total revenues................. $ 279,144 $ 8,484 $ 37,704 $ (2,999) $ 322,333
========== ========= ======== ========== ==========
Operating profit...................... $ 53,588 $ 1,875 $ 7,001 $ -- $ 62,464
========== ========= ======== ==========
Interest expense...................... 16,638
----------
Pretax earnings from operations....... $ 45,826
==========
Identifiable assets at June 30........ $1,659,617 $ 461,407 $565,496 $ (275,139) $2,411,381
========== ========= ======== ========== ==========
</TABLE>
7
<PAGE> 10
Years Ended March 31, 1995, 1994, and 1993
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, 1995, 1994, and 1993. 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>
1995
Revenues:
Outside................................. $1,056,874 $ 39,347 $144,642 $ -- $1,240,863
Intersegment............................ (42) 1,444 20,657 (22,059) --
---------- -------- -------- --------- ----------
Total revenues................... $1,056,832 $ 40,791 $165,299 $ (22,059) $1,240,863
========== ======== ======== ========= ==========
Operating profit.......................... $ 128,278 $ 9,824 $ 23,074 $ 42 161,218
========== ======== ======== =========
Interest expense.......................... 67,762
----------
Pretax earnings from operations........... $ 93,456
==========
Identifiable assets....................... $1,827,995 $479,778 $579,821 $(281,605) $2,605,989
========== ======== ======== ========= ==========
1994
Revenues:
Outside................................. $ 965,839 $ 31,357 $137,659 $ -- $1,134,855
Intersegment............................ (357) 2,834 18,862 (21,339) --
---------- -------- -------- --------- ----------
Total revenues................... $ 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
==========
Identifiable assets....................... $1,593,044 $461,464 $550,795 $(260,861) $2,344,442
========== ======== ======== ========= ==========
1993
Revenues:
Outside................................. $ 891,599 $ 33,619 $115,693 $ -- $1,040,911
Intersegment............................ -- 2,630 18,402 (21,032) --
---------- -------- -------- --------- ----------
Total revenues................... $ 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
==========
Identifiable assets....................... $1,377,386 $472,669 $422,079 $(248,111) $2,024,023
========== ======== ======== ========= ==========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1995 VERSUS QUARTER ENDED JUNE 30, 1994
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 $6.1 million, approximately
2.7%, to $233.9 million in the first quarter of fiscal 1996. The increase
reflects higher net revenues from the rental of moving related equipment and
self-storage facilities which increased in the aggregate by $6.0 million due to
growth (volume) in truck rental transactions, additional rentable square
footage, and improved self-storage pricing.
Net sales revenues were $53.1 million in the first quarter of fiscal 1996,
which represents an increase of approximately 3.5% from the first quarter of
fiscal 1995 net sales of $51.3 million. Revenue growth from the sale of moving
support items (i.e. boxes, etc.), hitches, and propane resulted in a $2.2
million increase during the quarter, which was offset by a $0.3 million decrease
in gasoline sales consistent with the Company's ongoing efforts to remove
underground storage tanks and gradually discontinue gasoline sales.
Cost of sales was $29.0 million in the first quarter of fiscal 1996, which
represents an increase of approximately 5.1% from $27.6 million for the same
period in fiscal 1995. This increase in cost of sales
8
<PAGE> 11
primarily reflects higher material costs from the sale of moving support items
and propane which can be primarily attributed to higher sales levels.
Operating expenses increased to $176.3 million in the first quarter of
fiscal 1996 from $160.7 million in the first quarter of fiscal 1995, an increase
of $15.6 million (approximately 9.7%). The change from the prior year primarily
reflects higher rental equipment maintenance costs due to an increase in fleet
size and transaction levels ($6.0 million), an increase in lease expense due to
new leases originated during the last twelve months ($2.2 million), and
increased personnel expense due to higher levels of business activity ($4.0
million). All other operating expense categories increased in the aggregate by
$3.4 million compared to the prior year.
Depreciation expense for the quarter was $37.7 million, as compared to
$37.3 million during the same period of the prior year, reflecting storage
acquisitions and construction in the past twelve months.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $4.1 million for the quarter ended March 31, 1995, an increase of $0.3
million, approximately 7.9% over 1994 and accounted for 66.9% of Oxford's
premiums for the period. Reinsurance premiums are primarily from term life
insurance, matured deferred annuity contracts, and credit insurance business.
This increase in premiums is primarily attributable to the recent (fourth
quarter 1994) reinsurance agreement of credit insurance business.
Premiums from Oxford's direct lines before intercompany eliminations were
$2.0 million for the quarter ended March 31, 1995, an increase of $1.6 million
from 1994. This increase in direct premium is primarily attributable to the
credit insurance business ($1.5 million in premiums). Oxford's direct business
related to group life and disability coverage issued to employees of the Company
for the quarter ended March 31, 1995 accounted for approximately 8.1% of
premiums. Other direct lines, including the credit insurance business, accounted
for approximately 25.0% of Oxford's premiums for the quarter ended March 31,
1995.
Net investment income before intercompany eliminations was $3.9 million and
$3.6 million for the quarters ended March 31, 1995 and 1994, respectively. This
increase is primarily due to increasing margins on the interest sensitive
business. Gains on the disposition of fixed maturity investments were $0.2
million for both 1995 and 1994. Oxford had $0.5 million of other income for both
of the quarters ended March 31, 1995 and 1994.
Benefits and expenses incurred were $8.0 million for the quarter ended
March 31, 1995, an increase of 21.2% over 1994. Comparable benefits and expenses
incurred for 1994 were $6.6 million. This increase is primarily due to death
benefits incurred and Oxford's recent entrance into the credit insurance
business, partially offset by a decrease in the amortization of deferred
acquisition costs.
Operating profit before intercompany eliminations increased by $0.7
million, or approximately 36.8%, in 1995 to $2.6 million, primarily due to
increased margins on the interest sensitive business.
RWIC -- Property and Casualty
RWIC gross premium writings for the quarter ended March 31, 1995 were $36.2
million as compared to $47.7 million in the first quarter of 1994. The rental
industry market accounts for a significant share of total premiums,
approximately 18.3% and 19.7% in the first quarters of 1995 and 1994,
respectively. These writings include U-Haul customers, fleetowners and U-Haul as
well as other rental industry insureds with similar characteristics. RWIC
continues underwriting professional reinsurance via broker markets. Premiums in
this area decreased during the first quarter of 1995 to $20.2 million, or 55.8%
of total gross premiums, from comparable 1994 figures of $29.1 million, or 61.0%
of total premiums. This decrease can be primarily attributed to RWIC electing
not to renew several treaties because of inadequate pricing and market
conditions. Premium writings in selected general agency lines are expected to
remain consistent with prior years as evidenced by 17.4% share of written
premiums in 1995 as compared to 14.9% share in 1994. RWIC expanded its direct
business in 1995 to include multiple peril coverage for a variety of commercial
properties and businesses. These premiums accounted for 6.4% of the total gross
written premium during first quarter 1995.
Net earned premiums decreased $6.1 million, or 20.3%, to $24.0 million for
the quarter ended March 31, 1995, compared with premiums of $30.1 million for
the quarter ended March 31, 1994. The premium decrease
9
<PAGE> 12
was primarily due to one time changes in premium earning methodology and timing
differences related to run-off and start up programs.
Underwriting expenses incurred were $27.5 million for the quarter ended
March 31, 1995, a decrease of $3.2 million, or 10.4% over 1994. Comparable
underwriting expenses incurred for the first quarter of 1994 were $30.7 million.
The decrease is due to a reduction in acquisition expenses, which decreased
proportionately with written premiums.
Net investment income was $7.6 million for the quarter ended March 31,
1995, an increase of 10.1% over 1994 net investment income of $6.9 million. The
marginal increase is the result of the shift in types of securities held in the
portfolio.
RWIC completed the first quarter of 1995 with income before tax expense of
$5.1 million as compared to $7.0 million for the comparable period ended March
31, 1994. This represents a decrease of $1.9 million, or 27.1% over 1994. Worse
than expected underwriting results in the Company's assumed reinsurance and
rental industry liability lines were offset by improved results in its general
agency lines.
Interest Expense
Interest expense increased by $2.2 million to $18.8 million for the quarter
ended June 30, 1995, as compared to $16.6 million for the quarter ended June 30,
1994. Higher average debt levels outstanding caused the increase.
Consolidated Group
As a result of the foregoing, pretax earnings of $32.8 million were
realized in the quarter ended June 30, 1995, as compared to $45.8 million for
the same period in 1994. After providing for income taxes, net earnings for the
quarter ended June 30, 1995 were $20.9 million, as compared to $29.4 million for
the same period of the prior year.
FISCAL YEAR ENDED MARCH 31, 1995 VERSUS FISCAL YEAR ENDED MARCH 31, 1994
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 $78.2 million, approximately
9.7%, to $887.6 million in fiscal 1995. The increase from fiscal 1994 is
primarily attributable to a $68.6 million increase in net revenues from the
rental of moving related equipment. Moving related revenues benefited from
transactional (volume) growth within the truck and trailer fleets. Revenues from
the rental of self-storage facilities increased by $9.7 million to $80.2 million
in fiscal 1995, an increase of approximately 13.8%. Storage revenues continue to
be positively impacted by additional rentable square footage and higher average
rental rates. Other revenue categories decreased in the aggregate by $0.1
million, with declines in general rental item revenues and other miscellaneous
revenues, offset by increases in interest income and gains on the sale of
property, plant and equipment.
Net sales were $170.2 million in fiscal 1995 which represents an increase
of approximately 9.1% from fiscal 1994 net sales of $156.0 million. Revenue
growth from moving support sale items (i.e., boxes, etc.), hitches and propane
resulted in an $11.2 million increase, offset by a $1.9 million decrease in
revenue from gasoline sales consistent with the Company's ongoing efforts to
remove underground storage tanks and gradually discontinue gasoline sales.
Cost of sales was $93.5 million in fiscal 1995, as compared to $92.2
million in fiscal 1994. The decrease in cost of sales reflects a reduction in
the provision for obsolete inventory between the two years due to management's
continued emphasis on disposing of such inventory, including the complete
liquidation of RV parts inventory during fiscal 1994. The decrease is also
reflective of improved margins on hitch sales. Increased material costs from the
sale of moving support sale items and propane, which can be primarily attributed
to higher sales levels, partially offset these decreases.
Operating expenses increased to $683.7 million in fiscal 1995 from $633.6
million in fiscal 1994, an increase of approximately 7.9%. The change from the
prior year reflects a $36.9 million increase in rental equipment maintenance
costs. Efforts to minimize downtime, an increase in fleet size and higher
transaction levels are primarily responsible for the increase. Lease expense
declined by $17.9 million to $66.5 million
10
<PAGE> 13
reflecting lease terminations, lease restructuring, and lower finance costs on
new leases originated during the past two years. All other operating expense
categories increased in the aggregate by $31.0 million, approximately 8.3%, to
$402.5 million. These increases are consistent with the growth in revenues.
Depreciation expense during fiscal 1995 was $151.4 million as compared to
$133.5 million in the prior year, reflecting the increase in fleet size and real
property acquisitions.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $17.4 million for the year ended December 31, 1994, an increase of $1.6
million, approximately 10.1% over 1993 and accounted for 73.8% of Oxford's
premiums in 1994. These premiums are primarily from term life insurance and
matured deferred annuity contracts. 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
$6.2 million in 1994, an increase of $4.2 million, or 210% from the prior year.
This increase in direct premium revenues is primarily attributable to Oxford's
entrance into the credit life and credit accident and health business ($4.4
million in premium revenues). Oxford's direct business related to group life and
disability coverage issued to employees of the Company for the year ended
December 31, 1994 accounted for approximately 7.2% of premiums. Other direct
lines, including the credit business, accounted for approximately 19.0% of
Oxford's premiums in 1994.
Net investment income before intercompany eliminations was $14.1 million
and $12.6 million for the years ended December 31, 1994 and 1993, respectively.
This increase is due to increasing margins on the interest sensitive business.
Gains on the disposition of fixed maturity investments were $1.3 million and
$2.1 million for 1994 and 1993, respectively. Oxford had $1.9 million and $1.8
million of other income for 1994 and 1993, respectively.
Benefits and expenses incurred were $31.0 million for the year ended
December 31, 1994, an increase of 27.0% over 1993. Comparable benefits and
expenses incurred for 1993 were $24.4 million. This increase is primarily due to
the increase in reserves caused by the increase in annuitizations discussed
above.
Operating profit before intercompany eliminations decreased by $0.1
million, or approximately 1.0%, in 1994 to $9.7 million, primarily due to the
decrease in gains on sale of fixed maturity investments. Such decrease was
partially offset by the increasing margins on the interest sensitive business.
RWIC -- Property and Casualty
RWIC gross premium writings for the year ended December 31, 1994 were
$179.2 million as compared to $175.1 million in 1993. This represents an
increase of $4.1 million, or 2.3%. As in prior years, the rental industry market
accounts for a significant share of total premiums, approximately 42.8% and
36.6% in 1994 and 1993, respectively. These writings include U-Haul customers,
fleetowners and U-Haul as well as other rental industry insureds with similar
characteristics. Growth is also occurring in selected general agency lines.
These premiums accounted for approximately 15.1% of gross written premiums for
1994, compared to 12.9% in 1993. RWIC continues underwriting professional
reinsurance via broker markets, and premiums in this area decreased in 1994 to
$58.3 million, or 32.5% of total gross premiums, from comparable 1993 figures of
$70.2 million, or 40.1% of total premiums.
Net earned premiums increased $8.0 million, or 6.38% to $133.4 million for
the year ended December 31, 1994, compared with premiums of $125.4 million for
the year ended December 31, 1993. The premium increase was primarily due to
planned increased writings in the rental industry and general agency lines.
Underwriting expenses incurred were $142.1 million for the twelve months
ended December 31, 1994, an increase of $5.6 million, or 4.1% over 1993.
Comparable underwriting expenses incurred for 1993 were $136.5 million. The
increase in underwriting expenses is due to the larger premium volume being
written in 1994, which increased acquisition costs and commensurate reserves.
The ratio of underwriting expenses to net earned premiums decreased from 1.09 in
1993 to 1.07 in 1994. This improvement is primarily attributable to
11
<PAGE> 14
improved loss experience combined with continued market rate strength which
affects the Company's assumed reinsurance area.
Net investment income was $29.0 million for the year ended December 31,
1994, an increase of 5.8% over 1993 net investment income of $27.4 million. The
increase is due to an increased asset base generated from larger premium volume.
RWIC completed 1994 with income before taxes before intercompany
eliminations of $23.2 million as compared to $19.9 million for the comparable
period ended December 1993. This represents an increase of $3.3 million or 16.6%
over 1993. Improved underwriting results in the Company's assumed reinsurance
area was offset by declines in its workers' compensation and rental industry
liability lines.
Interest Expense
Interest expense decreased by $1.0 million to $67.8 million in fiscal 1995,
as compared to $68.8 million in fiscal 1994. While average debt levels
outstanding increased, the decrease in interest expense reflects a reduction in
the average cost of funds.
Results of Operations -- Consolidated Group
As a result of the foregoing, pre-tax earnings of $93.5 million were
realized in fiscal 1995 as compared to $66.5 million in fiscal 1994. After
providing for income taxes, net earnings for fiscal 1995 were $60.0 million as
compared to $40.2 million for the same period of the prior year. The
consolidated results for the prior year reflect a cumulative effect adjustment
resulting from the adoption of Statement of Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
extraordinary costs associated with early extinguishment of debt.
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 (volume)
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 fiscal 1994 which primarily
reflects increases in gains on note sales of approximately $5.0 million and
interest income.
Net sales revenues 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 from the sale of hitches, moving support items (i.e., boxes, etc.), and
propane increased $10.7 million during fiscal 1994.
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 repairs 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 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
12
<PAGE> 15
originated during fiscal 1994. 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. The
decrease is primarily attributable to an experience refund incurred on the
Company's group life insurance business. 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.
The increase was primarily due to a decrease in interest credited to
policyholders because of the increase in annuitizations. Gains on the
disposition of fixed maturity investments were $2.1 million and $4.7 million for
the years ended December 31, 1993 and 1992, respectively. 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 before intercompany eliminations decreased by $3.4
million, approximately 25.8%, in 1993 to $9.8 million, primarily due to the
decrease in gains on fixed maturity investments.
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
gross premiums in this area increased from $51.5 million in 1992 to $70.2
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. These planned increases are due to strong rates and reduced capacity
in the reinsurance market and increased marketing emphasis on the long standing
presence in the excess workers' compensation market.
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
13
<PAGE> 16
increased acquisition costs and commensurate reserves. The ratio of underwriting
expenses to net premiums earned improved from 1.17 in 1992 to 1.08 in 1993. This
improvement was primarily attributable to improved loss experience in the
Company's assumed reinsurance area, including the lack of catastrophic losses
such as those related to Hurricane Andrew in 1992, as well as the previously
mentioned strength in rates.
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, respectively, while other income
totaled $1.4 million and $2.9 million, respectively.
RWIC completed 1993 with income before tax expense before intercompany
eliminations of $19.9 million as compared to $15.5 million for the comparable
period ended December 1992. This represents an increase of $4.4 million, or
28.4% over 1992. The increase is due to a combination of better underwriting
results and unplanned gains on bond calls.
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.
Extraordinary Loss on Extinguishment of Debt
During the first and third quarters of fiscal 1994, the Company
extinguished $25.2 million of its medium-term notes originally due in fiscal
1995 through 2000. The weighted average rate of the notes purchased was 9.34%.
The purchase resulted in an extraordinary charge of $1.9 million, net of $1.0
million of tax benefit.
During the fourth quarter of fiscal 1994, the Company terminated swaps with
a notional value of $77.0 million originally due in fiscal 1995. The
terminations resulted in an extraordinary charge of $1.5 million, net of $0.8
million of tax benefit.
Results of Operations -- Consolidated Group
As a result of the foregoing, pre-tax earnings of $66.5 million were
realized in fiscal 1994 as compared to $49.2 million in fiscal 1993. After
providing for income taxes, extraordinary costs associated with the early
extinguishment 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.
14
<PAGE> 17
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the eight
quarters in the period beginning July 1, 1993 and ending June 30, 1995. The
Company believes that all necessary adjustments have been included in the
amounts stated below to present fairly, and in accordance with generally
accepted accounting principles, the selected quarterly information when read in
conjunction with the consolidated financial statements included herein. The
Company's results of operations have historically fluctuated from period to
period, including on a quarterly basis. In particular, the Company's U-Haul
business is seasonal and a majority of the Company's revenues and substantially
all of its net earnings from its U-Haul business are generated in the first and
second quarters of each fiscal year (April through September). The operating
results for the periods presented are not necessarily indicative of results for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1995 1995
---------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total revenues.................................. $361,115 $295,888 $260,282 $330,509
Net earnings (loss)............................. 40,071 1,907 (11,359) 20,862
Net earnings (loss) per common share(1)(2)...... 1.00 (.04) (.44) .46
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1993 1993 1994 1994
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total revenues.................................. $324,968 $267,448 $251,091 $322,333
Net earnings (loss)............................. 30,601 1,799 (9,575) 29,413
Net earnings (loss) per common share(1)......... .79 (.02) (.33) .71
</TABLE>
- ---------------
(1) For the quarters ended December 31, 1993, March 31, June 30, September 30,
December 31, 1994, March 31, and June 30, 1995, net earnings (loss) per
common share amounts were computed after giving effect to the dividend on
the Company's Series A 8 1/2% Preferred Stock.
(2) Reflects the adoption of Statement of Position 93-6, "Employers' Accounting
for Employee Stock Ownership Plan."
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 June 30, 1995, net property, plant and equipment
represented approximately 68.4% of total U-Haul assets and approximately 47.2%
of consolidated assets. In the first quarter of fiscal 1996, capital
expenditures were $70.1 million, as compared to $144.8 million in the first
quarter of fiscal 1995, reflecting new rental truck acquisitions, purchase of
trucks previously leased, and real property acquisitions. The decrease in
capital expenditures from the prior year is due to a decrease in new rental
truck acquisitions. These acquisitions were funded with internally generated
funds from operations, and debt financings.
Cash flows from operations were $61.9 million in the first quarter of
fiscal 1996, as compared to $113.2 million in the first quarter of fiscal 1995.
The decrease of $51.3 million is primarily due to a decrease in net change of
operating assets and liabilities, specifically an increase in receivables, and
decreases in accounts payable and accrued liabilities and deferred income taxes.
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
15
<PAGE> 18
consideration. Benefit and claim statistics are continually monitored to provide
projections of future cash requirements.
Cash provided by operating activities were $3.7 million and $0.8 million
for the quarters ended March 31, 1995 and 1994, respectively. Cash flows from
new annuity reinsurance agreements increase investment contract deposits as well
as the purchase of fixed maturities. Cash flows from financing activities of new
annuity reinsurance agreements were approximately $55.0 million for the quarter
ended March 31, 1995. In addition to cash flow from operating and financing
activities, a substantial amount of liquid funds is available through Oxford's
short-term portfolio. At March 31, 1995 and 1994, short-term investments
amounted to $10.8 million and $18.5 million, respectively. Management believes
that the overall sources of liquidity will continue to meet foreseeable cash
needs.
Stockholder's equity of Oxford, excluding investment of RWIC (in prior
years), increased to $90.4 million in 1995 from $88.2 million in 1994. Ponderosa
now holds 100% of the common stock of RWIC as a result of a property dividend
made by Oxford on June 30, 1994.
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 $400,000. In
addition, the amount of dividends that can be paid to stockholders by insurance
companies domiciled in the State of Arizona is limited. Any dividend in excess
of the limit requires prior regulatory approval. As a result of the dividend of
RWIC stock on June 30, 1994, the state of Arizona must approve future dividends
made through June 30, 1995. 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
Cash flows from operating activities were $3.4 million and $8.2 million for
the quarters ended March 31, 1995 and March 31, 1994, respectively. The change
is due to decreased net income and increased reserves related to premium
writings, offset by a small change in accounts receivable as compared to a large
increase during the first quarter of 1994.
RWIC's short-term investment portfolio was $17.1 million at March 31, 1995.
This level of liquid assets, combined with budgeted cash flow, is adequate to
meet periodic needs. This balance also reflects funds in transition from
maturity proceeds to long-term investments. The structure of the long-term
portfolio is designed to match future cash needs. Capital and operating budgets
allow RWIC to accurately schedule cash needs.
RWIC maintains a diversified investment portfolio, primarily in bonds at
varying maturity levels. Approximately 95.7% of the 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 96.7% of total liabilities.
Stockholder's equity increased 3.6% from $168.1 million at December 31,
1994 to $174.1 million at March 31, 1995. RWIC considers current stockholder's
equity to be adequate to support future growth and absorb unforeseen risk
events. RWIC does not use debt or equity issues to increase capital and
therefore has no exposure to capital market conditions. RWIC paid no
stockholder's dividends during the quarter ended March 31, 1995.
Consolidated Group
At June 30, 1995, total notes and loans payable outstanding was $866.1
million as compared to $881.2 million at March 31, 1995, and $725.6 million at
June 30, 1994. The increase from 1994 reflects the expansion in the rental fleet
and self-storage operation.
During each of the fiscal years ending March 31, 1996, 1997, and 1998,
U-Haul estimates gross capital expenditures will average approximately $350
million as a result of the expansion of the rental fleet and self-storage
operation. This level of capital expenditures, combined with an average of
approximately $100 million
16
<PAGE> 19
in annual long-term debt maturities during this same period, are expected to
create annual average funding needs of approximately $450 million. Management
estimates that U-Haul will fund approximately 60% of these requirements with
internally generated funds, including proceeds from the disposition of older
trucks and other asset sales. The remainder of the anticipated capital
expenditures are expected to be financed through existing credit facilities, new
debt placements, and equity offerings.
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.
Principally to finance its fleet of trucks and trailers, the Company routinely
enters into sale and leaseback transactions. As of June 30, 1995, the Company
had $866.1 million in total notes and loans payable outstanding and unutilized
committed credit of approximately $252.0 million.
Certain of the Company's credit agreements contain restrictive financial
and other covenants, including, among others, covenants with respect to
incurring additional indebtedness, maintaining certain financial ratios, and
placing certain additional liens on its properties and assets. In addition,
these credit agreements contain provisions that could result in a required
prepayment upon a "change in control" of the Company.
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 a 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. 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 adopted this statement during
the first quarter of fiscal 1996 with no material impact on its financial
condition or result of operations.
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. The Company
(excluding RWIC) adopted the standard effective fiscal 1995, except for RWIC
which adopted the standard effective December 31, 1993. The net unrealized loss
of approximately $1,569,000 at June 30, 1995 is reflected as a separate
component of shareholders' equity. The Company does not currently maintain a
trading portfolio.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
was issued by the Financial Accounting Standards Board in March 1995. This
standard is effective for fiscal years beginning after December 15, 1995, and
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition.
17
<PAGE> 20
If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise, an impairment loss is not recognized. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the asset.
The Company has not completed an evaluation of the effect 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. The Company adopted this statement during the first quarter of
fiscal 1996. The Company logs data which substantiates that truck and trailer
rental reservations are placed during the customer's telephone call. At June 30,
1995, $9,072,000 of yellow page directory costs were reported as assets, with
related amortization expense of $5,700,000 for the quarter ended June 30, 1995.
Other pronouncements issued by the Financial Accounting Standards Board
with future effective dates are either not applicable or not material to the
consolidated financial statements of the Company
IMPACT OF INFLATION
Inflation has had no material financial effect on the Company's results of
operations in the years discussed.
18
<PAGE> 21
BUSINESS
HISTORY
The Company was founded in 1945 under the name "U-Haul Trailer Rental
Company". From 1945 to 1975, the Company rented trailers and trucks on a one-way
and in-town(R) (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, 1995, the Company's
distribution network included over 1,000 U-Haul Centers and over 13,200
independent dealers.
In March 1974, in conjunction with the acquisition and construction of
U-Haul Centers, the Company entered the self-storage business. As of March 31,
1995, such self-storage facilities were located at or near approximately 67% 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 $39.2 million for total proceeds of approximately $79.3
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.
Through its "Moving Made Easier(R)" program, the Company strives to offer
its customers a high quality, reliable, and convenient fleet of trucks and
trailers at reasonable prices while simultaneously offering other related
products and services, including moving accessories, self-storage facilities,
and other items often desired by the do-it-yourself mover. The rental trucks
purchased in the fleet renewal program have been designed with the
do-it-yourself customer in mind to include features such as low decks, air
conditioning, power steering, automatic transmissions, soft suspensions, AM/FM
cassette stereo systems, and over-the-cab storage. The Company has introduced
certain insurance products, including "Safemove(R)" and "Safestor(R)", to
19
<PAGE> 22
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.
Since 1987, the Company has more than doubled the number of U-Haul rental
locations, with a net addition of over 7,700 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 73,000 new trucks between March 1987 and March 1995 and reduced
the overall average age of its truck fleet from approximately 11 years at March
1987 to approximately five years at March 1995. During this period,
approximately 62,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 55% 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 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 coverage, self-storage property coverage, motor home insurance
coverage, and general rental equipment coverage. RWIC has used and plans to
continue to use this knowledge to expand its customer base by offering similar
products to customers other than U-Haul. In addition, RWIC plans to expand its
involvement in specialized areas by offering commercial multi-peril and excess
workers' compensation 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) in-town(R)
(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 in-town(R)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 in-town(R) rental transactions.
20
<PAGE> 23
As part of the Company's integrated approach to the do-it-yourself moving
market, U-Haul has a variety of product offerings. U-Haul's "Moving Made
Easier(R)" program is designed to offer clean, well-maintained rental trucks and
trailers at a price the customer can afford and to provide support items such as
furniture pads, hand trucks, appliance and utility dollies, mirrors, tow bars,
tow dollies, and bumper hitches. The Company also sells boxes, tape, and
packaging materials and rents additional items such as floor polishers and
carpet cleaning equipment at its U-Haul Center locations. U-Haul Centers also
install hitches and sell propane, and some of them sell gasoline. U-Haul sells
insurance packages such as (i) "Safemove(R)", which provides moving customers
with a damage waiver, cargo protection, and medical and life coverage, and (ii)
"Safestor(R)", which provides self-storage rental customers with various
insurance coverages.
The U-Haul truck and trailer rental business tends to be seasonal with more
transactions and revenues generated in the spring and summer months than during
the balance of the year. The Company attributes this seasonality to the
preference of do-it-yourself movers to move during this time. Also, consistent
with do-it-yourself mover preferences, the number of rental transactions tends
to be higher on weekends than on weekdays.
RENTAL EQUIPMENT FLEET
As of March 31, 1995, U-Haul's rental equipment fleet consisted of
approximately 81,000 trucks and approximately 91,000 trailers. Rental trucks are
offered in five sizes and range in size from the ten-foot "Mini-Mover(R)" to the
twenty-six-foot "Super-Mover(R)". In addition, U-Haul offers pick-up trucks and
cargo vans at many of its locations. Trailers range between six feet and twelve
feet in length and are offered in both open and closed box configurations.
DISTRIBUTION NETWORK
The Company's U-Haul products and services are marketed across the United
States and Canada through, as of March 31, 1995, over 1,000 Company-operated
U-Haul Centers and over 13,200 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 11 districts, each supervised by an area
district vice president. Within the districts, the Company has established local
marketing companies, each of which, guided by a marketing company president, is
responsible for retail marketing at all U-Haul Centers and independent dealers
within its respective geographic area.
Although rental dealers are independent, U-Haul area field managers work
with the dealer network by reviewing each independent dealer's facilities,
auditing their activities, and providing training on securing more customers 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.
21
<PAGE> 24
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 expanding its ownership of self-storage
facilities. The Company also provides financing and management services for
independent self-storage businesses.
Through approximately 700 Company-owned locations in the United States and
Canada, the Company offers for rent more than 15.0 million square feet of
self-storage space. The Company's self-storage facility locations range in size
from 1,000 to 147,000 square feet of storage space, with individual storage
spaces ranging in size from 16 square feet to 200 square feet.
The primary market for storage rooms is customers storing household goods.
The majority of customers renting storage rooms are in the process of a move.
Even with an increase of over 31,000 new and acquired storage rooms during
fiscal 1995, average occupancy remained high, ranging from mid-80% to low-90%
with very little seasonal variations. During fiscal 1995 and fiscal 1994,
delinquent rentals as a percentage of total storage rentals were approximately
6% 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 eight Company-owned manufacturing and assembly facilities in the United
States.
The Company services and maintains its trucks and trailers through an
extensive preventive 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.
COMPETITION
The do-it-yourself moving truck and trailer rental market is highly
competitive and dominated by national operators in both the in-town(R) 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. The top three
national firms, including the Company, Public Storage and Shurgard, only account
for ten percent of total industry square footage. Efficient management of
occupancy and delinquency rates, as well as price and convenience, are key
competitive factors.
EMPLOYEES
For the period ended March 31, 1995, the Company's non-seasonal workforce
consisted of approximately 12,000 employees comprised of approximately 41%
part-time and 59% full-time employees. During the summer months, the Company
increases its workforce by approximately 400 employees and the percentage of
part-time employees increases to approximately 46% of the total workforce. The
Company's employees are non-unionized, and management believes that its
relations with its employees are satisfactory.
22
<PAGE> 25
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 writings are primarily
related to the underwriting of credit life and accident and health business
which accounted for 18.6% of Oxford's premium revenues for the year ended
December 31, 1994. Oxford's other direct lines are related to group life and
disability coverage issued to employees of AMERCO and its subsidiaries. For the
year ended December 31, 1994, approximately 7.2% of Oxford's premium revenues
resulted from business with AMERCO and its subsidiaries. In addition, direct
premium includes individual life insurance acquired from other insurers. Oxford
administers AMERCO's self-insured group health and dental plans.
Oxford's reinsurance assumed lines, which accounted for approximately 73.8%
of Oxford's premium revenues for the year ended December 31, 1994, include
individual life insurance coverage, annuity coverages, excess loss health
insurance coverage, credit life, credit accident and health 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, 1994, approximately 40% 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 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's liability for unpaid losses is based on estimates of the 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 of the amount 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.
23
<PAGE> 26
Activity in the liability for unpaid claims and claim adjustment expenses
is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1....................................... $314,482 $320,509 $325,453
Less reinsurance recoverable............................. 76,111 81,747 89,434
-------- -------- --------
Net balance at January 1................................... 238,371 238,762 236,019
Incurred related to:
Current year............................................. 102,782 91,044 96,451
Prior years.............................................. 6,576 12,688 (4,241)
-------- -------- --------
Total incurred............................................. 109,358 103,732 92,210
Paid related to:
Current year............................................. 22,269 20,200 23,936
Prior years.............................................. 70,382 83,923 65,531
-------- -------- --------
Total paid................................................. 92,651 104,123 89,467
Net balance at December 31................................. 255,078 238,371 238,762
Plus reinsurance recoverable............................. 74,663 76,111 81,747
-------- -------- --------
Balance at December 31..................................... $329,741 $314,482 $320,509
======== ======== ========
</TABLE>
As a result of changes in estimates of insured events in prior years, the
provision for unpaid loss and loss adjustment expenses (net of reinsurance
recoveries of $26.5 million and $24.3 million in 1994 and 1993, respectively)
increased by $6.6 million and $12.7 million in 1994 and 1993, respectively,
because of higher than anticipated losses and related expenses for claims
associated with assumed reinsurance and certain retrospectively rated policies.
The table on page 25 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.
24
<PAGE> 27
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1984 1985 1986 1987 1988 1989
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Reserve for Unpaid
Loss and Loss
Adjustment Expenses:.... $ 90,315 $123,342 $146,391 $168,688 $199,380 $207,939
Paid (Cumulative)
as of:
One year later........ 24,602 41,170 54,627 49,681 59,111 50,992
Two years later....... 50,628 77,697 92,748 91,597 89,850 87,850
Three years later..... 70,719 105,160 124,278 110,834 114,979 116,043
Four years later...... 84,936 126,734 137,744 129,261 133,466 132,703
Five years later...... 95,583 133,421 151,354 142,618 145,864 142,159
Six years later....... 98,018 142,909 161,447 152,579 153,705
Seven years later..... 102,805 151,379 169,601 158,531
Eight years later..... 109,055 158,728 173,666
Nine years later...... 114,334 162,082
Ten years later....... 117,465
Reserve Reestimated
as of:
One year later........ 101,097 138,287 167,211 187,663 200,888 206,701
Two years later....... 107,111 147,968 192,272 190,715 202,687 206,219
Three years later..... 115,746 168,096 192,670 194,280 203,343 199,925
Four years later...... 119,977 168,040 199,576 195,917 199,304 198,986
Five years later...... 119,513 175,283 201,303 195,203 200,050 197,890
Six years later....... 122,791 178,232 202,020 196,176 198,001
Seven years later..... 125,863 182,257 202,984 196,770
Eight years later..... 128,815 184,266 202,654
Nine years later...... 132,207 187,247
Ten years later....... 136,854
Initial Reserve in
Excess of (Less than)
Reestimated Reserve:
Amount (Cumulative).... $(46,539) $(63,905) $(56,263) $(28,082) $ 1,379 $ 10,049
DECEMBER 31
----------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
Reserve for Unpaid
Loss and Loss
Adjustment Expenses:.... $226,324 $236,019 $238,762 $314,482 $329,741
Paid (Cumulative)
as of:
One year later........ 55,128 65,532 83,923 70,382
Two years later....... 97,014 105,432 123,310
Three years later..... 120,994 126,390
Four years later...... 133,338
Five years later......
Six years later.......
Seven years later.....
Eight years later.....
Nine years later......
Ten years later.......
Reserve Reestimated
as of:
One year later........ 229,447 231,779 251,450 321,058
Two years later....... 221,450 224,783 254,532
Three years later..... 211,988 223,403
Four years later...... 207,642
Five years later......
Six years later.......
Seven years later.....
Eight years later.....
Nine years later......
Ten years later.......
Initial Reserve in
Excess of (Less than)
Reestimated Reserve:
Amount (Cumulative).... $ 18,682 $ 12,616 $(15,770) $ (6,576)
</TABLE>
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 99.0% of Oxford's portfolio and 95.5% of RWIC's portfolio consist
of investment grade securities. The maturity distributions are designed to
provide sufficient liquidity to meet future cash needs.
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<PAGE> 28
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, conduct market
surveys, and the filing of reports on financial condition; licensing agents;
regulating aspects of the insurance companies' relationship with their agents;
restricting expenses, commissions, and new business issued; imposing
requirements relating to policy contents; restricting use of some underwriting
criteria; regulating rates, forms, and advertising; limiting the grounds for
cancellations or non-renewal of policies; regulating solicitation and
replacement practices; and specifying what might constitute unfair practices.
State laws also regulate transactions and dividends between an insurance company
and its parent or affiliates, and generally require prior approval or
notification for any change in control of the insurance subsidiary.
In the past few years, the insurance and reinsurance regulatory framework
has been subjected to increased scrutiny by the National Association of
Insurance Commissioners (the NAIC), state legislatures, insurance regulators,
and the United States Congress. State legislatures have considered or enacted
legislative proposals that alter, and in many cases increase, state authority to
regulate insurance companies and holding company systems. The NAIC and state
insurance regulators have been examining existing laws and regulations with an
emphasis on insurance company investment and solvency issues. Legislation has
been introduced in Congress that could result in the federal government assuming
some role in the regulation of the insurance industry. It is not possible to
predict the future impact of changing state and federal regulation on the
operations of Oxford and RWIC.
Beginning in 1993, the NAIC adopted and implemented minimum risk-based
capitalization requirements for life insurance companies, including Oxford. As
of the date of this prospectus, Oxford is in compliance with these requirements.
The NAIC has also adopted a model for establishing minimum risk-based
capitalization requirements for property and casualty insurance and reinsurance
companies in 1994. As of the date of this prospectus, RWIC is in compliance with
these requirements.
COMPETITION
The insurance industry is competitive. Competitors include a large number
of life insurance companies and property and casualty insurance companies, some
of which are owned by stockholders and others of which are owned by
policyholders (mutual). Many companies in competition with Oxford and RWIC have
been in business for a longer period of time or possess substantially greater
financial resources. Competition in the insurance business is based upon price,
product design, and services rendered to producers and policyholders.
AMERCO REAL ESTATE OPERATIONS
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".
26
<PAGE> 29
ENVIRONMENTAL MATTERS
UNDERGROUND STORAGE TANKS
The Company owns properties that, as of March 31, 1995, contained a total
of approximately 1,000 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 1995, the Company incurred expenditures
totaling approximately $21.0 million for removal and remediation of 1,709 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 1995 may
not be representative of future experience. However, the Company believes that
compliance with laws and regulations, and cleanup and liability costs related to
USTs will not have a material adverse effect on the Company's financial
condition or operating results.
In fiscal 1989, the Company instituted a program to test its USTs for
leakage and to remove all but approximately 100 of the approximately 2,755 USTs
then existing by the year 2000. The approximately 100 USTs expected to remain at
the conclusion of the Company's testing and removal program are currently
anticipated to consist primarily of waste oil tanks not required to be removed
under current laws and regulations and gasoline tanks located at its remote
rental locations where their use is deemed necessary to service the Company's
moving customers. The Company currently budgets $5 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, but not in excess of
the net realizable value of such properties.
FEDERAL SUPERFUND SITES
The Company has been named as a "potentially responsible party" (PRP) with
respect to the disposal of hazardous wastes at ten federal superfund hazardous
waste sites located in ten 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 nine of the sites for de minimis amounts. One of the sites has
been disputed by the Company with no response for eight years. Based upon the
information currently available to the Company regarding these ten 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 ten superfund sites will not have a material adverse effect on
the Company's financial condition or operating results.
WASHINGTON STATE HAZARDOUS WASTE SITES
The Company owns one parcel of 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 ongoing 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 as of the date
of this prospectus.
27
<PAGE> 30
In addition, the Company has been named by the State of Washington as a PLP
along with 12 other PLPs with respect to another state-listed hazardous waste
site known as the "Yakima Railroad Site". The Yakima Valley Spray Site is
located within the Yakima Railroad Site. The Company has been notified that the
Yakima Railroad Site involves potential groundwater contamination in an area of
approximately two square miles. The Company has contested its designation as a
PLP at this site, but, at the date of this prospectus, no formal ruling has been
issued in this matter.
In February 1992, the State of Washington issued an enforcement order to
the Company and eight other parties requiring conduct of an interim remedial
action involving the provision of bottled water to households that obtain
drinking water from wells within the Yakima Railroad Site. Without conceding any
liability, the Company and several of the other PLPs have implemented the
bottled water program. The State of Washington has stated its intention to
expand the existing municipal water system to supply municipal water to those
households currently receiving bottled water, and it is estimated that the cost
thereof will be approximately $6 million, with such cost being allocated among
the PLPs.
In addition, there will be costs associated with remedial measures to
address the regional groundwater contamination issue. The process of site
assessment on the Yakima Railroad Site is ongoing 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 prospectus, other than the indication of the expansion of the municipal
water system, there has been no formal indication from the State of Washington
of its intentions regarding future cost recoveries at the Yakima Railroad Site.
OTHER
The Company owns eight 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 200 properties to various
businesses. The Company has a policy of leasing properties subject to an
environmental indemnification from the lessee for operations conducted by the
lessee. It should be recognized, however, that such indemnifications do not
cover pre-existing conditions and may be limited by the lessee's financial
capabilities. In any event, to the extent that any lessee does not perform any
of its obligations under applicable environmental laws and regulations, the
Company may remain potentially liable to governmental authorities and other
third parties for environmental conditions at the leased properties.
Furthermore, as between the Company and its lessees, disputes may arise as to
allocations of liability with respect to environmental conditions at the leased
properties.
Finally, it should be recognized that the Company's present and past
facilities have been in operation for many years and, over that time in the
course of those operations, some of the Company's facilities have generated,
used, stored, or disposed of substances or wastes that are or might be
considered hazardous. Therefore, it is possible that additional environmental
issues may arise in the future, the precise nature of which the Company cannot
now predict.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the
Securities.
28
<PAGE> 31
THE TRUST
As part of the bankruptcy proceedings resulting from the Shoen Litigation
described below, the Company has agreed to issue the Securities to the Trust.
The Company will pay all charges and expenses of the transfer agent in
connection with the issuance of the Securities to the Trust. The Company will
not pay any commission or other remuneration to any broker, dealer, salesman, or
other person in connection with the issuance of the Securities to the Trust. The
issuance of the Securities will be made in accordance with the bankruptcy
proceedings described below.
SHOEN LITIGATION
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and
William E. Carty, who are current members of the Board of Directors of the
Company and Paul F. Shoen, who is a former director are defendants in an action
in the Superior Court of the State of Arizona, Maricopa County, entitled Samuel
W. Shoen, M.D., et al. v. Edward J. Shoen, et al., No. CV88-20139 (the "Shoen
Litigation"), instituted August 2, 1988 by the Non-Stockholder Plaintiffs, by
certain affiliates of the Non-Stockholder Plaintiffs that own Common Stock of
the Company (the "Stockholder-Plaintiffs"), by Mary Anna Shoen Eaton, and by
Maran, Inc. (the Non-Stockholder Plaintiffs, the Stockholder Plaintiffs, Mary
Anna Shoen Eaton, and Maran, Inc. shall collectively be referred to as the
"plaintiffs"). The plaintiffs alleged, among other things, that certain
plaintiffs were wrongfully excluded from sitting on the Company's Board of
Directors in 1988 through the sale of Company common stock to certain key
employees. That sale allegedly prevented the plaintiffs from gaining a majority
position in the Company's voting stock and control of the Company's Board of
Directors. The plaintiffs alleged various breaches of fiduciary duty and other
unlawful conduct by the individual defendants and sought equitable relief,
compensatory damages, punitive damages, and statutory post judgment interest.
Based on the plaintiffs' theory of damages (that their stock has little or
no current value), the Court ruled that the plaintiffs elected as their remedy
in this lawsuit to transfer their shares of stock to the defendants upon the
satisfaction of the judgment. On October 7, 1994, the jury determined that the
defendants breached their fiduciary duties and such breach diminished the value
of the plaintiffs' stock. On February 21, 1995, judgment was entered against the
defendants in the amount of approximately $461.8 million plus interest and
taxable costs.
Pursuant to separate indemnification agreements, the Company has agreed to
indemnify the defendants to the fullest extent permitted by law or the Company's
Articles of Incorporation or By-Laws, for all expenses and damages, if any,
incurred by the defendants in this proceeding, subject to certain exceptions. In
addition, the transfer of Common Stock from the plaintiffs to the defendants
would implicate rights held by the Company. For example, pursuant to the
Company's By-Laws, the Company has certain rights of first refusal with respect
to the transfer of the plaintiffs' stock. In addition, the defendants' rights to
acquire the plaintiffs' stock may present a corporate opportunity which the
Company is entitled to exercise.
On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds, and William E. Carty (the "Director-Defendants") filed for
protection under Chapter 11 of the federal bankruptcy laws, resulting in the
issuance of an order automatically staying the execution of the judgment against
those defendants. In late April 1995, the Director-Defendants, in cooperation
with the Company, filed plans of reorganization in the United States Bankruptcy
Court for the District of Arizona, all of which proposed the same funding and
treatment of the plaintiffs' claims resulting from the judgment in the Shoen
Litigation. The plans of reorganization, as amended on October 16, 1995, shall
collectively be referred to as the "Plan." The Company has agreed to be the
funding source for the Plan.
Under the Plan, on October 18, 1995, the Company redeemed 3,343,076 shares
of Common Stock held by Maran, Inc. in exchange for approximately $22.7 million
and paid approximately $41.4 million to Mary Anna Shoen Eaton in exchange for a
full release of all claims against the Company and the Director-Defendants,
including all claims asserted by her in the Shoen Litigation. In addition, under
the Plan, the Company will transfer (or cause to be transferred) to the Trust,
property having a stipulated or adjudicated value of approximately $276.6
million. Each of the Non-Stockholder Plaintiffs will receive a trust certificate
29
<PAGE> 32
representing an undivided, fractional beneficial interest in the Trust. The
property transferred to the Trust will consist of (i) the Securities; (ii) a
1993 REMIC certificate held by the Company with a face value of approximately
$12.5 million evidencing a pool of 61 commercial mortgage loans which are
secured by mortgages or deeds of trust on 60 self-storage properties; (iii)
mortgage loans held by the Company or one or more of its subsidiaries with an
aggregate principal balance of approximately $13.8 million; (iv) real property
held free and clear by the Company or its subsidiaries having a total fair value
of approximately $47.2 million, and (v) approximately $10.1 million in cash. In
addition, under the Plan, the Stockholder-Plaintiffs will receive 4,056,034
shares of Series B 8.25% Preferred Stock in exchange for 14,911,900 shares of
Common Stock. Upon the funding of the Trust and the exchange of the
Stockholder-Plaintiffs' Common Stock for the Series B 8.25% Preferred Stock, the
judgment will be satisfied.
DESCRIPTION OF SECURITIES
The following summary of the principal terms and provisions of the
Securities does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Restated Articles of
Incorporation and the Certificate of Designation relating to the Securities (the
"Certificate of Designation"), which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Securities will consist of 3,860,000 shares of Series D Floating Rate
Preferred Stock, no par value per share, liquidation preference $50 per share.
The Securities will not be convertible into, or exchangeable for, shares of any
other class or classes of stock of the Company. The Securities will have
priority as to dividends over the Company's common stock and any other series or
class of stock hereafter issued by the Company that ranks junior as to dividends
to the Securities. The Securities will be subordinate to the Company's Series A
8 1/2% Preferred Stock, but senior to the Company's Series B 8.25% Preferred
Stock.
DIVIDENDS
Holders of the Securities will be entitled to receive dividends per share
at a floating rate. The dividend rate for all quarters ending on or before
February 29, 1996 will be [ %]. Such dividends will be cumulative from the
date of original issue and will be payable, when and as declared by the Board of
Directors out of funds legally available therefor, quarterly for each of the
quarters ending February, May, August, and November of each year, payable in
arrears on the first business day that is not a legal holiday of each succeeding
March, June, September, and December, respectively. The first dividend, which
will be paid on March 1, 1996 will be for less than a full quarter and will be
paid with respect to the period commencing on the issue date of the Securities
and ending February 29, 1996. Each such dividend will be distributed to holders
of record of the Securities as they appear on the books of the registrar
maintained for such purpose at the close of business on the record date. The
record date will not exceed 15 days preceding the payment date.
Dividends on the Securities will accrue regardless of whether there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Securities will
accumulate as of the dividend payment date on which they first become payable,
but no interest, or sum of money in lieu of interest, will be payable in respect
of any dividend payment or payments on the Securities that may be in arrears.
Dividends payable on the Securities for any period less than a quarterly
dividend period, and for the dividend period beginning on the date of issuance
of the Securities, will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
Except as set forth below, no dividends will be declared or paid or set
apart for payment on any shares of any class or classes of stock of the Company
or any series thereof ranking, as to dividends, on a parity with or junior to
the Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Securities for all dividend
periods terminating on or prior to the date of payment of such dividend. When
dividends are not so paid in full (or a sum sufficient for such full payment is
not so set apart) upon the Securities, and any shares of any class or classes of
stock or series thereof ranking on a parity as to dividends
30
<PAGE> 33
with the Securities, all dividends declared (if any) on the Securities and any
other shares of such class or classes or series thereof ranking on a parity as
to dividends with the Securities will be declared pro-rata so that the amount of
dividends declared per share on the Securities and such other shares will in all
cases bear to each other the same ratio that accrued dividends per share on the
Securities and such other shares bear to each other.
The Certificate of Designation provides, unless all dividends on the
Securities shall have been paid in full, that (i) no dividend will be declared
and paid or declared and a sum sufficient therefor set apart for payment (other
than a dividend payable in the Company's common stock or in any other class
ranking junior to the Securities as to dividends and liquidation preferences or
other than the pro-rata dividend distributions described above) or other
distribution declared or made upon the shares of the Company's common stock or
upon any other class ranking junior to or on a parity with the Securities as to
dividends or liquidation preferences and (ii) no shares of the Company's common
stock or class of stock ranking junior to or on a parity with the Securities as
to dividends or liquidation preferences may be redeemed, purchased, or otherwise
acquired by the Company or any subsidiary thereof except by conversion into or
exchange for shares of the capital stock of the Company ranking junior to the
Securities as to dividends and liquidation preferences.
The Company is restricted in the amount of dividends that it may pay
pursuant to covenants contained in its credit agreements. At the date of this
Prospectus, the most restrictive of such covenants provides that the Company may
pay cash dividends on its capital stock only in an amount not exceeding, in the
aggregate computed on a cumulative basis, the sum of (i) [$44.5] million and
(ii) 50% of consolidated net income computed on a cumulative basis for the
entire period subsequent to March 31, 1995 (or if such consolidated net income
is a deficit figure, then minus 100% of such deficit); provided such dividend is
paid within 30 days of being declared. At March 31, 1995 the aggregate amount
available for dividends commencing April 1, 1995, was approximately [$44.5]
million. At current interest rates, dividends payable on the Securities will be
approximately [$12.33] million per year. In addition, dividends payable on other
series of the Company's preferred stock are approximately [$23.2] million per
year.
DIVIDEND RATE RESET
On the first business day of each March, June, September, and December, the
dividend rate for the next quarterly period will be reset. The new rate for the
next quarterly period will be equal to 1.05 multiplied by the highest rate of
the following: (i) the three-month United States Treasury yield; (ii) the
ten-year United States Treasury yield; and (iii) the thirty-year United States
Treasury yield; provided, however, that the dividend rate shall not be less than
5.50% nor more that 10.50% per annum.
CONVERTIBILITY
The Securities are not convertible into, or exchangeable for, other
securities or property.
REDEMPTION [CALL PROVISIONS]
The Securities are not callable prior to December 1, 2001 except under the
Special Call or under the Right of Redemption (both as defined below). On and
after that date, the Company, at its option upon not less than 30 nor more than
60 days' notice may redeem shares of the Securities, at any time or from time to
time, at a redemption price of $50 per share, plus accrued and unpaid dividends
thereon to the date of redemption. The Securities will not be entitled to any
sinking fund. While there is an arrearage in the payment of dividends on the
Securities, none of the Securities may be redeemed (unless all outstanding
Securities are simultaneously redeemed) and the Company may not purchase or
otherwise acquire any of the Securities, except that such restriction will not
prevent the purchase or acquisition of shares of the Securities pursuant to a
purchase or exchange offer made on the same terms to all holders of the
Securities.
SPECIAL CALL PROVISION
Any Securities that have not been sold in a public offering (other than the
offering to which this Prospectus relates) as of the date of the Company's
notice to holders of record of the Securities (as described
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<PAGE> 34
below) may be called by the Company in increments of $25 million at a price of
$50 per share during the non-call period using the proceeds from any one or more
of the following (the "Special Call"): (1) the sale of common stock of the
Company or of any subsidiary of the Company; (2) the sale of preferred stock of
the Company or of any subsidiary of the Company; (3) the sale of assets of the
Company or of any subsidiary of the Company; or (4) the sale of one or more of
the Company's subsidiaries. Any Securities that have been sold in a public
offering (other than the offering to which this Prospectus relates) as of the
date of the Company's notice to holders of record of the Securities (as
described below) may be called by the Company in increments of $25 million at a
price of [$51.75] per share during the non-call period using the proceeds from
any one or more of the following: (1) the sale of common stock of the Company or
of any subsidiary of the Company; (2) the sale of assets of the Company or of
any subsidiary of the Company; or (3) the sale of one or more of the Company's
subsidiaries. The Company must notify the holders of record of the Securities
within 60 days from the date of one of the foregoing special occurrences of the
Company's intention to exercise its Special Call. The Company must exercise its
Special Call within 30 days of such notification.
RIGHT OF REDEMPTION
The Securities may not be sold in a public offering (other than the
offering to which this Prospectus relates) unless such Securities have been
first offered to the Company pursuant to its right of redemption (the "Right of
Redemption"). Under the Right of Redemption, a holder of the Securities must
give the Company 180 days advance written notice of its intention to sell any
Securities in a public offering. Such notice shall state the number of shares of
the Securities proposed to be sold to the public. Thereafter, the Company shall
have a period of 180 days to redeem all or part of such Securities at a price of
$50 per share, plus accrued and unpaid dividends thereon to the date of
redemption. If the Company fails to redeem all or part of the Securities for
which notice was given as described above during the 180 day period, the holder
of the Securities may sell in a public offering any such Securities not redeemed
by the Company; provided, however, that if the Securities are not sold to the
public within [ ] days after the notice to the Company, the holder of the
Securities must comply with the Right of Redemption again. Purchasers of the
Securities in a public offering (other than purchasers in the offering to which
this Prospectus relates) and all subsequent holders shall acquire such
Securities free of the Right of Redemption.
LIQUIDATION PREFERENCE
Upon any dissolution, liquidation, or winding up of the affairs of the
Company, whether voluntary or involuntary, after payment or provision for
payment has been made of the debts and other liabilities of the Company and
payment or provision for payment has been made on all amounts required to be
paid in respect of any senior class or classes of preferred stock, the holders
of the Securities will be entitled, subject to certain exceptions, to receive
the amount of $50 per share, plus accrued and unpaid dividends thereon to the
date of final distribution.
VOTING
Except as set forth below or otherwise, from time to time, required by law
or the Company's Restated Articles of Incorporation, holders of the Securities
will not have any voting rights. Whenever dividends payable on any of the
Securities shall be in arrears for six consecutive calendar quarters, the
holders of such shares (voting separately as a class with any holders of any
other cumulative preferred stock upon which like voting rights have been
conferred and exercisable on the basis of one vote per share of preferred stock)
will be able to vote for the election of two additional directors of the Company
at the next annual meeting of stockholders and at each subsequent meeting called
for the election of directors until all of the dividends accumulated on the
Securities have been paid or set aside for payment. In such case, the entire
Board of Directors would be increased by two directors. In addition, the
affirmative vote of holders of at least two thirds of the outstanding shares of
each class of preferred stock, voting together as a class, is required to
authorize any amendment, alteration, or repeal of the Company's Restated
Articles of Incorporation or any Certificate of Amendment that would adversely
affect the powers, preferences, or special rights of the holders of the
Securities, including the issuance of any class of stock with superior dividends
and or liquidation preferences.
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<PAGE> 35
Although Nevada law gives the Board of Directors of the Company broad power
to limit or deny voting rights, even if voting rights are denied by action of
the Board of Directors, pursuant to Nevada Revised Statutes sec. 78.390 the
holders of non-voting shares are permitted to vote in circumstances where an
amendment of the Company's Restated Articles of Incorporation could adversely
impact their class. Thus, if any proposed action would alter or change any
preference or any relative or other right given to any class or series of
outstanding shares, the action must be approved by the vote, in addition to the
affirmative vote otherwise required, of the holders representing a majority of
the voting power of each class or series affected by the action, regardless of
limitations or restrictions on the voting power thereof. In addition, pursuant
to Nevada Revised Statutes sec. 78.453 separate voting by a class of
stockholders is required on a plan of merger if the plan contains a provision
that, if contained in a proposed amendment to the Company's Articles of
Incorporation, would entitle the stockholders to vote as a class on a proposed
amendment.
TRANSFER AGENT
The transfer agent and registrar for the Securities is Chemical Mellon
Shareholder Services, L.L.C.
LEGAL OPINIONS
The validity of the Securities offered hereunder will be passed upon for
the Company by Lionel, Sawyer & Collins, 300 S. 4th Street, Suite 1700, Las
Vegas, Nevada 89101 in reliance with respect to matters of law of the State of
Arizona upon Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004.
EXPERTS
The consolidated financial statements of the Company as of March 31, 1995
and 1994 and for each of the three years in the period ended March 31, 1995
included herein have been so included in reliance on the report (which contains
an explanatory paragraph relating to certain litigation described in Note 14 to
the consolidated financial statements) of Price Waterhouse LLP, independent
accountants, given upon the authority of said firm as experts in auditing and
accounting.
33
<PAGE> 36
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
REPORT:
Report of Independent Accountants -- AMERCO and Consolidated Subsidiaries........... F-2
AUDITED FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION:
Consolidated Balance Sheets -- March 31, 1995 and 1994.............................. F-3
Consolidated Statements of Earnings -- Years ended March 31, 1995, 1994 and 1993.... F-5
Consolidated Statements of Changes in Stockholders' Equity -- Years ended March 31,
1995, 1994 and 1993.............................................................. F-6
Consolidated Statements of Cash Flows -- Years ended March 31, 1995, 1994 and
1993............................................................................. F-8
Notes to Consolidated Financial Statements --....................................... F-9
Summary of Earnings of Independent Trailer Fleets................................... F-42
Notes to Summary of Earnings of Independent Trailer Fleets.......................... F-43
SCHEDULES
Condensed Financial Information of Registrant -- Schedule I......................... F-45
Amounts Receivable from Related Parties and Underwriters, Promoters and Employees
other than Related Parties -- Schedule II........................................ F-49
Supplemental Information (for Property -- Casualty Insurance
Underwriters) -- Schedule V...................................................... F-50
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1995, March 31, 1995 and June 30, 1994... F-51
Consolidated Statements of Earnings for the Quarters ended June 30, 1995 and 1994... F-53
Consolidated Statements of Changes in Stockholders' Equity for the Quarters ended
June 30, 1995 and 1994........................................................... F-54
Consolidated Statements of Cash Flows for the Quarters ended June 30, 1995 and
1994............................................................................. F-56
Notes to Consolidated Financial Statements --....................................... F-57
</TABLE>
F-1
<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 accompanying index present fairly, in all material respects, the
financial position of AMERCO and its subsidiaries at March 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended March 31, 1995, 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 discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for certain investments in fiscal 1995.
As discussed in Notes 1 and 11 to the consolidated financial statements, the
Company changed its method of accounting for certain investments and
postretirement benefits in fiscal 1994, respectively.
As discussed in Note 14, certain current and former directors of the
Company have sought protection under federal bankruptcy laws as a result of
litigation brought by certain shareholders. Because of existing indemnification
agreements, the Company may be liable, wholly or in part, for damages attributed
to the defendants. In addition, the Company may participate as the funding
source for the Plan of Reorganization filed by the defendants described further
in Note 14. The ultimate outcome of the litigation cannot be determined at
present. No provision for any liability that may result from this matter has
been made in the accompanying consolidated financial statements.
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 F-42 through F-44 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 relation to the basic
financial statements taken as a whole.
PRICE WATERHOUSE LLP
Phoenix, Arizona
June 26, 1995
F-2
<PAGE> 38
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 35,286 $ 18,442
Receivables......................................................... 300,238 204,814
Inventories......................................................... 50,337 49,012
Prepaid expenses.................................................... 25,933 24,503
Investments, fixed maturities....................................... 705,428 719,605
Investments, other.................................................. 135,220 84,738
Deferred policy acquisition costs................................... 49,244 47,846
Other assets........................................................ 30,057 21,246
---------- ----------
Property, plant and equipment, at cost:
Land.............................................................. 214,033 186,210
Buildings and improvements........................................ 735,624 676,297
Furniture and equipment........................................... 179,016 163,495
Rental trailers and other rental equipment........................ 245,892 212,187
Rental trucks..................................................... 913,641 820,395
General rental items.............................................. 51,890 57,421
---------- ----------
2,340,096 2,116,005
Less accumulated depreciation..................................... 1,065,850 941,769
---------- ----------
Total property, plant and equipment....................... 1,274,246 1,174,236
---------- ----------
$2,605,989 $2,344,442
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 39
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities............................ $ 127,613 $ 124,062
Notes and loans..................................................... 881,222 723,764
Policy benefits and losses, claims and loss expenses payable........ 475,187 439,266
Liabilities from premium deposits................................... 304,979 312,708
Cash overdraft...................................................... 31,363 26,559
Other policyholders' funds and liabilities.......................... 20,378 9,592
Deferred income..................................................... 7,426 5,913
Deferred income taxes............................................... 71,037 50,791
---------- ----------
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, 1995 and 1994....................................... -- --
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 5,762,495 shares in 1995, issued 5,754,334 shares
in 1994.......................................................... 1,441 1,438
Common stock of $.25 par value. Authorized 150,000,000 shares,
issued 34,237,505 shares in 1995 and 34,245,666 shares in 1994... 8,559 8,562
Additional paid-in capital.......................................... 165,675 165,651
Foreign currency translation adjustment............................. (12,435) (11,152)
Unrealized gain (loss) on investments............................... (6,483) 679
Retained earnings................................................... 561,589 514,521
---------- ----------
718,346 679,699
Less:
Cost of common shares in treasury (1,335,937 shares as of
March 31, 1995 and 1994)....................................... 10,461 10,461
Unearned employee stock ownership plan shares.................... 21,101 17,451
---------- ----------
Total stockholders' equity.................................. 686,784 651,787
Contingent liabilities and commitments
---------- ----------
$2,605,989 $2,344,442
========== ==========
</TABLE>
F-4
<PAGE> 40
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Rental and other revenue................................. $ 892,926 $ 816,666 $ 755,932
Net sales................................................ 170,204 156,038 145,514
Premiums................................................. 135,648 123,344 98,825
Net investment income.................................... 42,085 38,807 40,640
---------- ---------- ----------
Total revenues................................... 1,240,863 1,134,855 1,040,911
Costs and expenses
Operating expense........................................ 690,448 643,662 604,596
Cost of sales............................................ 93,485 92,179 93,104
Benefits and losses...................................... 133,407 120,825 106,617
Amortization of deferred acquisition costs............... 10,896 9,343 9,352
Depreciation............................................. 151,409 133,485 110,105
Interest expense......................................... 67,762 68,859 67,958
---------- ---------- ----------
Total costs and expenses......................... 1,147,407 1,068,353 991,732
Pretax earnings from operations............................ 93,456 66,502 49,179
Income tax expense......................................... (33,424) (19,853) (17,270)
---------- ---------- ----------
Earnings from operations before extraordinary loss on early
extinguishment of debt and cumulative effect of change in
accounting principle..................................... 60,032 46,649 31,909
Extraordinary loss on early extinguishment of debt, net.... -- (3,370) --
Cumulative effect of change in accounting principle, net... -- (3,095) --
---------- ---------- ----------
Net earnings..................................... $ 60,032 $ 40,184 $ 31,909
========== ========== ==========
Earnings per common share:
Earnings from operations before extraordinary loss on
early extinguishment of debt and cumulative effect of
change in accounting principle........................ $ 1.23 $ 1.06 $ .83
Extraordinary loss on early extinguishment of debt,
net................................................... -- (.09) --
Cumulative effect of change in accounting principle,
net................................................... -- (.08) --
---------- ---------- ----------
Net earnings..................................... $ 1.23 $ .89 $ .83
========== ========== ==========
Weighted average common shares outstanding................. 38,190,552 38,664,063 38,664,063
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 41
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Series A common stock of $.25 par value: Authorized
10,000,000 shares,issued 5,762,495 in 1995, 5,754,334 in
1994, and none in 1993
Beginning of year...................................... $ 1,438 $ -- $ --
Exchange for Series A common stock................... 871 1,438 --
Exchange for common stock............................ (868) -- --
-------- -------- -------
End of year............................................ 1,441 1,438 --
-------- -------- -------
Common stock of $.25 par value: Authorized 150,000,000
shares in 1995, 1994 and 1993, 34,237,505 issued in 1995,
34,245,666 in 1994 and 40,000,000 issued in 1993
Beginning of year...................................... 8,562 10,000 10,000
Exchange for Series A common stock................... (871) (1,438) --
Exchange for common stock............................ 868 -- --
-------- -------- -------
End of year............................................ 8,559 8,562 10,000
-------- -------- -------
Additional paid-in capital:
Beginning of year......................................... 165,651 19,331 19,331
Issuance of preferred stock............................ -- 146,320 --
Issuance of common shares under leveraged employee
stock ownership plan................................. 24 -- --
-------- -------- -------
End of year............................................... 165,675 165,651 19,331
-------- -------- -------
Foreign currency translation:
Beginning of year......................................... (11,152) (6,122) (3,551)
Change during year..................................... (1,283) (5,030) (2,571)
-------- -------- -------
End of year............................................... (12,435) (11,152) (6,122)
-------- -------- -------
Unrealized gains (losses) on investments:
Beginning of year......................................... 679 -- --
Change during year..................................... (7,162) 679 --
-------- -------- -------
End of year............................................... (6,483) 679 --
-------- -------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 42
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -- (CONTINUED)
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Retained earnings:
Beginning of year........................................ $514,521 $482,163 $452,202
Net earnings.......................................... 60,032 40,184 31,909
Dividends paid to stockholders:
Preferred stock: ($2.13 and $0.78 per share for 1995
and 1994, respectively)............................. (12,964) (4,753) --
Common stock: ($.08 and $.05 per share for 1994 and
1993, respectively)................................. -- (3,147) (1,994)
Tax benefits related to leveraged employee stock
ownership plan dividends............................ -- 74 46
-------- -------- --------
End of year.............................................. 561,589 514,521 482,163
-------- -------- --------
Treasury stock:
Beginning of year........................................ 10,461 10,461 10,461
Unearned employee stock ownership plan shares:
Beginning of year........................................ 17,451 14,953 15,633
Increase in loan...................................... 5,672 4,335 1,120
Proceeds from loan.................................... (2,022) (1,837) (1,800)
-------- -------- --------
End of year.............................................. 21,101 17,451 14,953
-------- -------- --------
Total stockholders' equity................................. $686,784 $651,787 $479,958
======== ======== ========
</TABLE>
F-7
<PAGE> 43
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................ $ 60,032 $ 40,184 $ 31,909
Depreciation and amortization......................... 163,890 148,740 128,530
Provision for losses on accounts receivable........... 4,958 1,938 2,354
Net gain on sale of real and personal property........ (3,390) (2,114) (2,428)
Gain on sale of investments........................... (868) (4,195) (5,392)
Cumulative effect of change in accounting principle... -- 3,095 --
Changes in policy liabilities and accruals............ 38,401 13,330 22,637
Additions to deferred policy acquisition costs........ (12,119) (7,440) (8,735)
Net change in other operating assets and
liabilities........................................ (16,501) 8,781 (6,063)
--------- --------- ---------
Net cash provided by operating activities............... 234,403 202,319 162,812
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment...................... (434,992) (530,520) (130,841)
Fixed maturities................................... (186,000) (280,345) (276,946)
Real estate........................................ (11,576) (176) (529)
Mortgage loans..................................... (107,571) (64,467) (54,346)
Proceeds from sales of investments:
Property, plant and equipment...................... 185,098 214,543 20,656
Fixed maturities................................... 192,428 211,437 251,808
Real estate........................................ 927 1,552 1,882
Mortgage loans..................................... 18,535 81,619 5,984
Changes in other investments.......................... (12,327) 8,539 37,475
--------- --------- ---------
Net cash used by investing activities................... (355,478) (357,818) (144,857)
Cash flows from financing activities:
Net change in short-term notes payable and commercial
paper.............................................. 178,750 21,750 2,975
Proceeds from notes................................... 68,845 186,000 55,000
Loan to leveraged Employee Stock Ownership Plan....... (5,672) (4,335) (1,120)
Proceeds from leveraged Employee Stock Ownership
Plan............................................... 2,022 1,837 1,800
Principal payments on notes........................... (90,137) (181,107) (94,176)
Issuance of preferred stock........................... -- 146,320 --
Extraordinary loss on early extinguishment of debt.... -- (3,370) --
Net change in cash overdraft.......................... 4,804 1,708 5,307
Dividends paid........................................ (12,964) (7,900) (1,994)
Investment contract deposits.......................... 51,908 31,932 51,047
Investment contract withdrawals....................... (59,637) (40,185) (27,889)
--------- --------- ---------
Net cash provided (used) by financing activities........ 137,919 152,650 (9,050)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents........ 16,844 (2,849) 8,905
Cash and cash equivalents at beginning of year.......... 18,442 21,291 12,386
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 35,286 $ 18,442 $ 21,291
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 44
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 between January 1 and March 31 of 1995,
1994 or 1993, that would materially affect the 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. Such transactions have been eliminated in consolidation.
Foreign Currency: The consolidated financial statements include the
accounts of U-Haul Co. (Canada) Ltd., a subsidiary of AMERCO.
Assets 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 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.
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. An allowance for
doubtful accounts is 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 are carried in accordance with Statement of
Financial Accounting Standards No. 115 (SFAS 115) as described under "New
Accounting Standards" later in this note. Oxford adopted SFAS 115 effective
January 1, 1994 and RWIC adopted SFAS 115 effective December 31, 1993. In prior
years, Oxford's fixed maturities were carried at cost, adjusted for amortization
of premium or accretion of discount. AMERCO and its subsidiaries, excluding
Ponderosa, have no investments which are subject to SFAS 115. Mortgage loans on
real estate are carried at unpaid balances, net of 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. See Note 4 of Notes to Consolidated
Financial Statements of AMERCO.
F-9
<PAGE> 45
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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, accident and 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.
Credit life and health acquisition costs are deferred and amortized over
the term of the contracts in relation to premiums earned.
Acquisition costs for annuity policies are 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 the estimated period benefitted. 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 construction of assets are capitalized. Interest
expense of $1,727,000, $595,000 and $159,000 was capitalized in the years ended
1995, 1994 and 1993, respectively.
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.
At March 31, 1995, the book value of the Company's real estate deemed to be
surplus was approximately $27,466,000.
Financial Instruments: The Company enters into interest rate swap
agreements to reduce its interest rate exposure; the Company does not use them
for trading purposes. 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.
At March 31, 1995, interest rate swap agreements with an aggregate notional
amount of $193,000,000 were outstanding. Management estimates that at March 31,
1995 and 1994, the Company would be required to pay $6,000,000 and $14,000,000,
respectively, to terminate the agreements. Such amounts were determined from
current treasury rates combined with swap spreads on agreements outstanding.
The Company has mortgage loans which potentially expose the Company to
credit risk. The portfolio of notes is principally collateralized by
mini-warehouse storage facilities and other residential and commercial
F-10
<PAGE> 46
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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, 1995, mortgage notes with a book value of $135,424,000 were
outstanding. The estimated fair value of the notes at March 31, 1995 was
$138,862,000. The estimated fair values were determined using discounted cash
flow method, using interest rates currently offered for similar loans to
borrowers with similar credit ratings. At March 31, 1994, mortgage notes with a
book value of $42,482,000 were outstanding. The estimated fair value at March
31, 1994 was approximate to the book value. 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,
1994, interest assumptions used to compute policy benefits payable range from
2.5% to 12.8%.
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 accident and 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.
With respect to property-casualty, 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 RWIC's historical experience 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. Amounts recoverable from reinsurers on unpaid losses are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Adjustments to the liability for unpaid losses and loss
expenses as well as amounts recoverable from reinsurers on unpaid losses are
charged or credited to expense in periods in which they are made.
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: Accident and health, credit life and health, and
property-casualty gross premiums are recognized over the term of the related
contracts. Traditional life and annuity premiums are recognized as revenue when
due from policyholders. Revenue for annuity policies consists of investment
margins and surrender charges that have been assessed against policy account
balances during the period.
F-11
<PAGE> 47
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Reinsurance: Reinsurance premiums, commissions, and expense reimbursements
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. See also "Policy Benefits and Losses, Claims and
Loss Expenses" above.
Income Taxes: In addition to charging income for taxes paid or payable,
the provision for income taxes reflects deferred income taxes resulting from
changes in temporary differences between the tax bases of assets and liabilities
and their reported amounts in the financial statements. The effect on deferred
income taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company files a consolidated federal income tax return with its
insurance subsidiaries.
New Accounting Standards:
Statement of Financial Accounting Standards No. 114 -- Accounting by
Creditors for Impairment of a Loan. 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 will adopt this statement in the first quarter of
fiscal 1996. The Company believes that the adoption will have no material impact
on its financial condition or results of operations.
Statement of Financial Accounting Standards No. 115 -- Accounting for
Certain Investments in Debt and Equity Securities. Effective January 1, 1994,
U-Haul and Oxford adopted SFAS 115. RWIC adopted SFAS 115 effective December 31,
1993. 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. The Company does
not currently maintain a trading portfolio.
Statement of Financial Accounting Standards No. 121 -- Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
Effective for fiscal years beginning after December 15, 1995, the standard
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset. The Company has
not completed an evaluation of the effect of this standard.
Effective April 1, 1994, the Company adopted Statement of Position 93-6
"Employers' Accounting for Employee Stock Ownership Plans" for shares purchased
subsequent to December 31, 1992. Accordingly, the shares pledged as collateral
are reported as unearned ESOP shares in the statement of financial position. As
shares purchased after December 31, 1992 are released from collateral, the
Company reports compensation expense equal to the current market price of the
shares, and the shares become outstanding for earnings-per-
F-12
<PAGE> 48
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
New Accounting Standards -- (Continued)
share computations. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt and accrued interest.
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. The Company will adopt this statement in the first quarter of
fiscal 1996. The Company believes that the adoption will have no material impact
on its financial condition or results of operations.
Other pronouncements issued by the Financial Standards Board with future
effective dates are either not applicable or not material to the consolidated
financial statements of the Company.
Earnings per share: Earnings per common share are computed based on the
weighted average number of shares outstanding, excluding shares of the employee
stock ownership plan that have not been committed to be released. Net income is
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 1994 and 1993 to conform with
the current year's presentation.
(2) RECEIVABLES
A summary of receivables follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts receivable...................................... $ 12,527 $ 16,073
Mortgage and note receivables, net of discount................. 78,499 45,288
Note receivable and accrued interest from SAC and TWO SAC...... 65,255 --
Premiums and agents' balances in course of collection.......... 33,150 29,078
Reinsurance recoverable........................................ 84,270 81,760
Accrued investment income...................................... 13,377 13,565
Independent dealer receivable.................................. 8,749 6,870
Other receivables.............................................. 9,050 14,189
-------- --------
304,877 206,823
Less allowance for doubtful accounts........................... (4,639) (2,009)
-------- --------
$300,238 $204,814
======== ========
</TABLE>
During fiscal 1995, a subsidiary of the Company made a loan to SAC
Self-Storage Corporation (SAC) in the total principal amount of $54,671,000 for
the purchase of 44 self-storage properties by SAC. Of the 44 SAC properties, SAC
acquired 24 from the Company or its subsidiaries at a purchase price of
$26,287,000. All 24 of these properties were acquired by the Company or its
subsidiaries since June 1993. These 24 properties were sold to SAC for an amount
equal to the Company's acquisition cost plus capitalized costs.
F-13
<PAGE> 49
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) RECEIVABLES -- (CONTINUED)
Such properties are currently being managed by the Company pursuant to a
management agreement, under which the Company receives a management fee equal to
6% of the gross receipts from the properties. The management fee percentage is
consistent with the fee received by the Company for other properties managed by
the Company. For fiscal 1995, SAC incurred management fees to the Company in the
amount of $327,000. The SAC loan consists of two notes, a senior note in the
amount of $45,500,000 bearing interest at the rate of 9% and a junior note in
the amount of $9,171,000 bearing interest at the rate of 13%. As of March 31,
1995, accrued interest on the senior note was $2,008,000 and $385,000 on the
junior note. Subsequent to March 31, 1995, senior principal paid was $546,000,
senior interest paid was $2,008,000 and junior interest paid was $133,000. Both
the senior note and the junior note are secured by senior and junior mortgages,
respectively, on all 44 properties. The SAC notes mature in 2004, or on demand.
The Company believes that the transactions with SAC were consummated on terms
equivalent to those that prevail in arms-length transactions.
In addition, during fiscal 1995, a subsidiary of the Company has been in
the process of loaning TWO SAC Self-Storage Corporation (TWO SAC) funds to
purchase approximately four self-storage properties. Subsequent to year end, the
Company funded the purchase of 14 additional properties by TWO SAC. As of March
31, 1995, $7,840,000 in principal was due from TWO SAC, while interest of
$351,000 has been accrued. No payment of principal or interest will be made
until the notes are finalized. Such properties are currently or will be managed
by the Company pursuant to a management agreement, under which the Company
receives a management fee equal to 6% of the gross receipts from the properties.
The management fee percentage is consistent with the fee received by the Company
for other properties managed by the Company. The TWO SAC loan will consist of
two notes, a senior note bearing interest at the rate of 9% and a junior note
bearing interest at the rate of 13%. The TWO SAC notes will be secured by senior
and junior mortgages and are expected to mature in 2004 or 2005, or on demand.
TWO SAC anticipates acquiring approximately 28 properties from the Company that
had been acquired by the Company or its subsidiaries since June 1993.
Mark V. Shoen, a major stockholder, director, and officer of the Company,
owns all of the issued and outstanding voting common stock of SAC and TWO SAC.
The SAC Non-Business Trust dated as of May 24, 1995 with IBJ Schroder Bank &
Trust Company as Trustee, owns all of the issued and outstanding nonvoting stock
of SAC and TWO SAC. Edward J. Shoen and James P. Shoen, major stockholders,
directors and officers of the Company, formerly were directors and stockholders
of SAC and TWO SAC. Edward J. Shoen continues to serve as an officer of SAC and
TWO SAC. Mark V. Shoen has capitalized SAC and TWO SAC via a contribution of
92,000 shares of AMERCO common stock each to SAC and TWO SAC. Mark V. Shoen has
indicated to the Company that he intends, after reserving sufficient funds for
expenses and other reasonable amounts, to distribute any remaining SAC and TWO
SAC funds to the SAC Non-Business Trust. The SAC Non-Business Trust is required
to distribute funds to its Beneficiary, which must be a non-profit entity
benefitting the college age children of the Company's employees. At present, the
Beneficiary is the U-Haul Scholarship Foundation, which exists to award
scholarships to the children of the Company's qualifying employees. All
scholarships will be awarded on behalf of the U-Haul Scholarship Foundation by
an independent panel of educators.
F-14
<PAGE> 50
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) INVENTORIES
A summary of inventory components follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Trailers, truck and recreational vehicle parts and accessories... $ 31,636 $ 31,684
Moving aids and promotional items................................ 7,127 7,032
Hitches and towing components.................................... 11,516 10,236
Other............................................................ 58 60
------- -------
$ 50,337 $ 49,012
======= =======
</TABLE>
Certain general and administrative expenses are allocated to ending
inventories. Such costs remaining in inventory at fiscal years ended 1995, 1994
and 1993 are estimated at $6,848,000, $7,679,000 and $7,224,000, respectively.
For the fiscal years ended March 31, 1995, 1994 and 1993, aggregate general and
administrative costs were $377,471,000, $430,209,000 and $467,390,000,
respectively.
LIFO inventories, which represent approximately 98% of total inventories at
March 31, 1995 and 1994 would have been $3,657,000 and $3,591,000 greater at
March 31, 1995 and 1994, respectively, if the consolidated group had used the
FIFO method.
(4) INVESTMENTS
Major categories of net investment income consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities...................................... $ 53,236 $ 52,903 $ 54,836
Real estate........................................... 223 142 235
Policy loans.......................................... 604 609 566
Mortgage loans........................................ 5,338 4,669 5,751
Short-term, amounts held by ceding reinsurers, net and
other investments................................... 2,064 874 2,481
------- ------- -------
Investment income..................................... 61,465 59,197 63,869
Less investment expenses.............................. 19,380 20,390 23,229
------- ------- -------
Net investment income................................. $ 42,085 $ 38,807 $ 40,640
======= ======= =======
</TABLE>
A comparison of amortized cost to estimated fair value for fixed maturities
is as follows (in thousands):
F-15
<PAGE> 51
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1994 OF SHARES COST GAINS LOSSES VALUE
----------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED HELD-TO-MATURITY
U.S. treasury securities and
government obligations............. $ 28,342 $ 28,254 $ 229 $ 523 $ 27,960
U.S. government agency mortgage
backed securities.................. $ 52,394 52,081 207 6,414 45,874
Obligations of states and political
subdivisions....................... $ 32,285 31,931 1,822 349 33,404
Corporate securities................. $ 223,825 228,605 1,117 6,002 223,720
Mortgage-backed securities........... $ 110,785 109,127 382 9,371 100,138
Redeemable preferred stocks.......... 35 2,126 233 -- 2,359
-------- ------ ------- --------
$ 452,124 $ 3,990 $ 22,659 $ 433,455
-------- ------ ------- --------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1994 PAR VALUE COST GAINS LOSSES VALUE
----------------- --------- --------- ---------- ---------- ---------
CONSOLIDATED AVAILABLE-FOR-SALE
U.S. treasury securities and
government obligations............. $ 9,685 $ 9,801 $ 430 $ 32 $ 10,199
U.S. government agency mortgage
backed securities.................. $ 8,982 8,868 602 84 9,386
States, municipalities and political
subdivisions....................... $ 3,325 3,610 -- 47 3,563
Foreign government securities........ $ 2,500 2,534 28 17 2,545
Corporate securities................. $ 210,184 211,495 864 8,419 203,940
Mortgage-backed securities........... $ 26,699 26,528 126 2,983 23,671
-------- ------ ------- --------
262,836 2,050 11,582 253,304
-------- ------ ------- --------
Total...................... $ 714,960 $ 6,040 $ 34,241 $ 686,759
======== ====== ======= ========
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1993 PAR VALUE COST GAINS LOSSES VALUE
----------------- --------- --------- ---------- ---------- ---------
OXFORD
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>
F-16
<PAGE> 52
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1993 OF SHARES COST GAINS LOSSES VALUE
----------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
RWIC HELD-TO-MATURITY
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
-------- ------ ------- --------
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1993 OF SHARES COST GAINS LOSSES VALUE
----------------- --------- --------- ---------- ---------- ---------
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>
Fixed maturities fair value are based on publicly quoted market prices at
the close of trading December 31, 1994 or December 31, 1993, 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.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
DECEMBER 31, 1994 COST FAIR VALUE
----------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED HELD-TO-MATURITY
Due in one year or less........................................ $ 27,181 $ 27,037
Due after one year through five years.......................... 155,096 155,296
Due after five years through ten years......................... 89,559 86,131
After ten years................................................ 17,626 17,569
-------- --------
289,462 286,033
Mortgage-backed securities..................................... 160,536 145,063
Redeemable preferred stock..................................... 2,126 2,359
-------- --------
$ 452,124 $433,455
-------- --------
</TABLE>
F-17
<PAGE> 53
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
DECEMBER 31, 1994 COST FAIR VALUE
------------------ --------- ----------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED AVAILABLE-FOR-SALE
Due in one year or less........................................ $ 12,609 $ 12,596
Due after one year through five years.......................... 80,128 78,286
Due after five years through ten years......................... 127,496 122,268
After ten years................................................ 5,207 5,366
-------- --------
225,440 218,516
Mortgage-backed securities..................................... 37,396 34,788
-------- --------
262,836 253,304
-------- --------
Total................................................ $ 714,960 $686,759
======== ========
AMORTIZED ESTIMATED
DECEMBER 31, 1993 COST FAIR VALUE
----------------- --------- ----------
(IN THOUSANDS)
OXFORD
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 2,075
-------- --------
244,184 258,392
Mortgage-backed securities..................................... 109,305 111,382
-------- --------
Total................................................ $ 353,489 $369,774
======== ========
AMORTIZED ESTIMATED
DECEMBER 31, 1993 COST FAIR VALUE
----------------- --------- ----------
(IN THOUSANDS)
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
-------- --------
</TABLE>
F-18
<PAGE> 54
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
DECEMBER 31, 1993 COST FAIR VALUE
----------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C>
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>
Proceeds from sales of investments in debt securities during 1994 and 1993
were $71,242,000 and $25,409,000, respectively. Gross gains of $1,447,000 and
$1,665,000 and gross losses of $332,000 and $91,000 were realized on those sales
during 1994 and 1993, respectively. Proceeds from maturities and early
redemptions of investments in debt securities during 1994 and 1993 were
$117,233,000 and $169,089,000. Gross gains of $633,000 and $2,326,000 and gross
losses of $510,000 and $254,000 were realized on these securities during 1994
and 1993, respectively.
At December 31, 1994 and 1993 fixed maturities include bonds with an
amortized cost of $16,775,000 and $15,450,000, respectively, on deposit with
insurance regulatory authorities to meet statutory requirements.
Real estate held for investment, net of accumulated depreciation of
$357,000 in 1994 and $329,000 in 1993, is comprised of land, buildings and
building improvements. Depreciation on buildings is computed using the
straight-line method. The general range of useful lives for buildings is 15 to
40 years. Depreciation on building improvements is computed utilizing the
straight-line method or an accelerated method over the range of useful lives of
10 to 15 years.
At December 31, 1994 and 1993, mortgage notes held by Ponderosa with a book
value of $79,498,000 and $48,395,000, respectively, were outstanding. The
estimated fair value of the notes at December 31, 1994 and 1993 was $86,132,000
and $50,297,000, respectively. The estimated fair values were determined using
discounted cash flow method, using interest rates currently offered for similar
loans to borrowers with similar credit ratings. Ponderosa s investment in
mortgage loans, included as a component of investments, are reported net of
allowance for possible losses of $525,000 in both 1994 and 1993.
F-19
<PAGE> 55
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Short-term promissory notes.................................... $ 33,500 $ 50,000
Notes payable to banks under revolving lines of credit,
unsecured 6.43% to 6.74% interest rates,..................... 293,000 97,750
Medium-term notes payable, unsecured 8.50% to 11.50% interest
rates, due through 2000...................................... 169,270 198,870
Notes payable to insurance companies, unsecured 5.89% to 10.27%
interest rates, due through 2010............................. 336,000 281,000
Notes payable to banks, unsecured 5.375% to 5.67% interest
rates, due through 1999...................................... 45,700 94,800
Mortgages payable, secured 5.0% to 10.00% interest rates, due
through 2016................................................. 3,660 1,246
Other notes payable, unsecured 9.50% interest rate, due through
2005......................................................... 92 98
-------- --------
$881,222 $723,764
======== ========
</TABLE>
Mortgages payable are secured by land and buildings at various locations,
which carry a net book value of $13,976,000 at year-end 1995.
Domestic/Eurodollar revolving credit loans are available from participating
banks under an agreement which provides for a total credit line of $365,000,000
through the expiration date of the revolving term of June 1, 1997. 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, 1995,
the weighted average interest rate on borrowings outstanding was 6.48%.
Facility fees, which are based upon the amount of credit line, aggregated
$901,000 and $588,000 for 1995 and 1994, respectively. As of year-end 1995,
loans outstanding under the revolving credit line totaled $293,000,000.
Management intends to refinance the borrowings on a long-term basis by either
replacing them with long-term obligations, renewing or extending them.
F-20
<PAGE> 56
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) NOTES AND LOANS PAYABLE -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
A summary of revolving credit activity follows:
Weighted average interest rate:
during the year......................................... 5.62% 3.62% 4.36%
at year end............................................. 6.48% 3.93% 3.56%
Maximum amount outstanding during the year................. $293,000 159,750 126,000
Average amount outstanding during the year................. $191,146 67,354 96,667
A summary of notes payable follows:
Weighted average interest rate:
during the year......................................... 5.25% 3.80% 4.09%
at year end............................................. 6.44% 4.04% 3.66%
Maximum amount outstanding during the year................. $135,000 50,000 25,000
Average amount outstanding during the year................. $ 46,604 11,380 14,167
</TABLE>
AMERCO has lines of credit with various banks totaling $275,001,000 at
March 31, 1995.
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 $193,000,000 of floating rate notes to a weighted average fixed rate
of 8.62%. The SWAP's mature at the time the related notes mature. During the
year a swap with a notional value of $15,000,000 matured. Incremental interest
expense associated with SWAP activity was $7,092,000 and $11,989,000 during 1995
and 1994, respectively.
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,
1995, 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. See also Note 14.
In May 1995, the Company amended a $185 million revolving credit agreement
to extend the maturity to September 1995.
The annual maturities of long-term debt for the next five years, if the
revolving credit lines are outstanding to maturity, are:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgages..................................... $ 422 $ 236 $ 443 $ 188 $ 131
Medium-term and other notes................... 74,226 66,807 14,258 11,009 3,010
Insurance Placements.......................... 11,000 63,833 45,762 50,762 44,247
Bank Placements............................... 21,600 21,600 1,600 900 --
Revolving Credit.............................. -- -- 293,000 -- --
-------- -------- -------- ------- -------
$107,248 $152,476 $355,063 $62,859 $47,388
======== ======== ======== ======= =======
</TABLE>
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.
F-21
<PAGE> 57
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) NOTES AND LOANS PAYABLE -- (CONTINUED)
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.
(6) STOCKHOLDERS' EQUITY
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.
On February 1, 1994, the Company entered into an Exchange Agreement with
Mark V. Shoen. Pursuant to the exchange agreement, in exchange for 3,475,520
shares of common stock owned by Mark V. Shoen, Mark V. Shoen received 3,475,520
shares of Series A common stock.
On April 13, 1994, the Company and Edward J. Shoen entered into an
Agreement in Principle pursuant to which the Company agreed to acquire all of
the outstanding capital stock of EJOS, Inc., all of which stock was held by
Edward J. Shoen and a certain irrevocable trust established by Edward J. Shoen,
in exchange for the same number of shares of the Company's common stock as were
held by EJOS, Inc. In exchange for EJOS, Inc.'s capital stock, Edward J. Shoen
and the irrevocable trust established by Edward J. Shoen received 3,483,681 and
559,443 shares of the Company's common stock, respectively. The exchange
described above was effected in accordance with the terms of an Agreement and
Plan of Exchange of Shares of EJOS, Inc. and AMERCO, dated May 18, 1994, among
EJOS, Inc., the Company, Edward J. Shoen, and the irrevocable trust established
by Edward J. Shoen. Edward J. Shoen is a major stockholder, Chairman of the
Board, and President of the Company.
On August 24, 1994, the Company entered into an Exchange Agreement with
Edward J. Shoen, the Company's Chairman of the Board and President. Pursuant to
the exchange agreement, in exchange for 3,483,681 shares of common stock owned
by Edward J. Shoen, Edward J. Shoen received 3,483,681 shares of Series A common
stock.
On November 28, 1994, the Company entered into an Exchange Agreement with
Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the
exchange agreement, in exchange for 3,475,520 shares of Series A common stock
owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of common stock.
F-22
<PAGE> 58
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
The components of the consolidated expense for income taxes applicable to
operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.......................................... $ 12,629 $ 2,112 $ 1,800
State............................................ 1,038 185 726
Deferred:
Federal.......................................... 19,678 16,365 13,902
State............................................ 79 1,191 842
-------- -------- --------
$ 33,424 $ 19,853 $ 17,270
======== ======== ========
Deferred tax liabilities (assets) are comprised as follows:
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
Accelerated depreciation of:
property, plant and equipment.................... $155,756 $145,391 $134,466
Benefit of tax NOL and credit carryforwards........ (64,076) (74,905) (85,326)
Rental equipment overhaul costs amortized.......... 419 751 1,126
Deferred inventory adjustments..................... (103) (1,177) (356)
Deferred acquisition costs......................... 15,720 15,361 15,761
Deferred gain from intercompany transactions....... 459 (894) (2,780)
Bad debt expense................................... (1,935) (1,635) (1,429)
Accrued expense on future dealer benefits.......... (3,451) (3,347) (2,576)
Accrued vacation and sick-pay...................... (1,338) (1,182) (1,132)
Accelerated retirement deductions.................. -- -- 860
Customer deposit liability......................... (2,884) (2,375) --
Deferred revenue from sale/leaseback............... (437) (1,357) (1,779)
Accrued retirement expense......................... (2,279) (1,755) --
Policy benefits and losses, claims and loss
expenses payable................................. (24,671) (24,022) (24,986)
Other.............................................. (2,455) (283) 1,041
-------- -------- --------
Total......................................... $ 68,725 $ 48,571 $ 32,890
======== ======== ========
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
Balance comprised of:
Deferred tax assets.............................. $ 2,312 $ 2,220 $ 2,223
Deferred tax liability........................... 71,037 50,791 35,113
-------- -------- --------
Net deferred taxes................................. $ 68,725 $ 48,571 $ 32,890
======== ======== ========
</TABLE>
F-23
<PAGE> 59
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
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 1995 and 1994, and 34% in 1993) as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense.................... $ 32,696 $ 23,276 $ 16,938
Increases (reductions) in taxes resulting from:
Tax-exempt interest income....................... (1,243) (1,525) (2,278)
Dividends received deduction..................... (62) (101) (289)
Net reinsurance effect........................... 120 120 116
Canadian subsidiary income tax (expense)
benefit unrealized............................ (1,078) (204) 230
True-up of prior year estimated current tax...... 1,030 (1,327) --
Federal tax benefit of state and local taxes..... (391) (482) (534)
Other............................................ 1,235 (1,280) 1,519
-------- -------- --------
Actual federal tax expense.................... 32,307 18,477 15,702
State and local income tax expense............... 1,117 1,376 1,568
-------- -------- --------
Actual tax expense of operations.............. $ 33,424 $ 19,853 $ 17,270
======== ======== ========
</TABLE>
The 1993 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):
<TABLE>
<CAPTION>
YEAR ENDED
--------------
1993
--------------
(IN THOUSANDS)
<S> <C>
Earnings:
Effect of change on income before extraordinary item as originally
reported........................................................ $ (2,309)
Effect of change on net income as originally reported.............. (8,687)
Earnings per common share:
Effect of change on income before extraordinary item as originally
reported........................................................ $ (.06)
Effect of change on net income as originally reported.............. (.22)
</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, 1994, 1993 and 1992.
The Internal Revenue Service has examined AMERCO's income tax returns for
the years ended 1990 and 1991. All agreed issues have been provided for in the
financial statements including the application of such adjustments to open
years. The tax effect of the unagreed issues will not have a material impact on
the financial statements.
At year-end 1995 AMERCO and RWIC have non-life net operating loss
carryforwards available to offset taxable income in future years of $106,500,000
for tax purposes. These carryforwards expire in 2000 through 2007. AMERCO also
has investment tax credit and other credit carryforwards of $885,000 for tax
purposes which expire in 1999 through 2005. AMERCO has alternative minimum tax
credit carry forwards of
F-24
<PAGE> 60
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
$16,575,000 which do not have an expiration date, but may only be utilized in
years in which regular tax exceeds alternative minimum tax. The use of certain
carryforwards may be limited or prohibited if a reorganization or other change
in corporate ownership were to occur.
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.
During 1994, Oxford dividended their investment in RWIC common stock to
Ponderosa at its book value. As a result of such dividend, a deferred
intercompany gain arose due to the difference between the book value and fair
value of such common stock. However, such gain can only be triggered if certain
events occur. To date, no events have occurred which would trigger such gain
recognition. No deferred taxes have been provided in the accompanying
consolidated financial statements as management believes that no events will
occur to trigger such gain.
(8) TRANSACTIONS WITH FLEET OWNERS AND OTHER RENTAL EQUIPMENT OWNERS
Fleet Owners (independent rental equipment owners) own approximately 21% of
all U-Haul rental trailers, .04% of all U-Haul rental trucks and certain other
rental equipment. There are over 5,400 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 during the years ended December 31, 1994, 1993 and 1992 were $1,556,000,
$1,428,000 and $1,399,000, respectively.
RWIC insures and reinsures general liability, auto liability, commercial
general liability and worker's compensation coverage for member companies of the
consolidated group. Premiums earned by RWIC during the years ended December 31,
1994, 1993 and 1992 on these policies amounted to $20,600,000, $18,800,000 and
$18,300,000, respectively, and were eliminated in consolidation.
RWIC insures and reinsures certain risks of U-Haul customers and
independent fleet owners. Premiums earned during the years ended December 31,
1994, 1993 and 1992 on these policies amounted to $39,300,000, $32,800,000 and
$31,700,000, respectively.
(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
F-25
<PAGE> 61
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) DEALER FINANCIAL SECURITY PLAN -- (CONTINUED)
carried on each Security Plan participant in favor of the Company to indirectly
fund future benefit payments. Total deductions withheld from commissions for
1995, 1994, and 1993 were $466,000, $613,000 and $714,000, respectively. Total
insurance premium expense for the years ended 1995, 1994 and 1993 amounted to
$1,294,000, $1,304,000 and $1,300,000, respectively. Benefits paid under the
Security Plan for the years ended 1995, 1994 and 1993 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 1995, 1994 and 1993.
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 $313,000 in 1995, $253,000 in 1994 and $402,000 in
1993.
To fund additional purchases of the Company stock, in May 1990 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 $72,000, $90,000 and $105,000 for
1995, 1994 and 1993, respectively. As of March 31, 1995, $703,000 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. 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.
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, $14,790,000 is outstanding at March 31, 1995. Interest payments under
this agreement were $745,000, $474,000 and $366,000 for 1995, 1994 and 1993,
respectively. Subsequent to March 31, 1995 borrowings total $6,600,000.
F-26
<PAGE> 62
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Shares are released from collateral and allocated to active employees based
on the proportion of debt service paid in the plan year. Contributions to the
ESOT charged to expense were $2,571,000, $2,269,000 and $2,255,000 for the years
ended 1995, 1994 and 1993, respectively.
Effective April 1, 1994, the Company adopted Statement of Position 93-6
"Employers' Accounting for Employee Stock Ownership Plans" for shares purchased
subsequent to December 31, 1992. Accordingly, the shares pledged as collateral
are reported as unearned ESOP shares in the statement of financial position. As
shares purchased after December 31, 1992 are released from collateral, the
Company reports compensation expense equal to the current market price of the
shares, and the shares become outstanding for earnings-per-share computations.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of
debt and accrued interest.
Shares purchased prior to December 31, 1992 are not accounted for under the
above guidance. Dividends are recorded as a reduction of retained earnings,
shares are considered outstanding for earnings-per-share calculations, and
compensation expense is based upon debt service.
The ESOP shares as of March 31 were as follows (in thousands):
<TABLE>
<CAPTION>
SHARES ISSUED SHARES ISSUED
PRIOR TO SUBSEQUENT TO
DECEMBER, 1992 DECEMBER, 1992
------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Allocated shares............................ 1,233 1,109 13 1
Shares committed to be released............. -- -- 8 --
Unreleased shares........................... 1,211 1,443 594 291
------- ------- ------- -------
Total ESOP shares........................... 2,444 2,552 615 292
======= ======= ======= =======
Fair value of unreleased shares............. $11,298 $13,134 $12,697 $ 4,947
======= ======= ======= =======
</TABLE>
For purposes of this schedule, fair value of unreleased shares issued prior
to December 31, 1992 is defined as the historical cost of such shares. Fair
value of unreleased shares issued subsequent to December 31, 1992 and held at
March 31, 1995 is defined as the March 31, 1995 trading value of such shares.
Fair value of unreleased shares issued subsequent to December 31, 1992 and held
at March 31, 1994 is defined as the appraised value as such shares were not
traded in an active market at that date. Management considers the actual fair
value of the shares to be in excess of their trading value at March 31, 1995.
See also Note 17.
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. Premiums earned were $1,896,000,
$1,325,000 and $1,037,000 for the years ended 1995, 1994 and 1993, respectively
and were eliminated in consolidation. As of January 1, 1991, the Company elected
to self-fund its group-health and dental plans.
F-27
<PAGE> 63
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) POSTRETIREMENT AND POSTEMPLOYMENT 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 uses the accrual method of accounting for postretirement
benefits. Prior to 1994, the Company recognized these costs, which were not
material, as claims were incurred. Upon adoption of SFAS 106, 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 ongoing operations is an increase in expense of about $592,000 and
$1,087,000 in 1995 and 1994, respectively. The Company continues to fund medical
and life insurance benefit costs as claims are incurred.
The components of net periodic postretirement benefit cost for 1995 and
1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Service cost for benefits earned during the period..... $ 210 $ 489
Interest cost on APBO.................................. 382 598
---- ------
Net periodic postretirement benefit cost............... $ 592 $ 1,087
==== ======
</TABLE>
The 1995 and 1994 postretirement benefit liability included the following
components (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of postretirement benefit obligation:
Retirees....................................................... $(1,638) $(1,848)
Eligible active plan participants.............................. (341) (413)
Other active plan participants................................. (3,105) (3,832)
------- -------
Accumulated postretirement benefit obligation.................... (5,084) (6,093)
Unrecognized prior service gain..................................
Unrecognized net loss............................................ (1,601) --
------- -------
$(6,685) $(6,093)
======= =======
</TABLE>
The discount rate assumptions used in computing the information above were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- -----
<S> <C> <C>
Accumulated postretirement benefit obligation............. 8.5% 7.75%
</TABLE>
The year-to-year fluctuations in the discount rate assumptions primarily
reflect changes in U.S. interest rates. The discount rate represents the
expected yield on a portfolio of high-grade (AA-AAA rated or equivalent)
fixed-income investments with cash flow streams sufficient to satisfy benefit
obligations under the plans when due.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.0% in 1995, declining annually to an
ultimate rate of 4.0% 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, 1995 would be increased by approximately $800,000. The
effect of this change on the sum of the service cost and interest cost
components of net periodic postretirement benefit cost for 1995 would be an
increase of approximately $140,000.
Postemployment benefits provided by the Company are not material.
F-28
<PAGE> 64
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) 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 maximum amount of life insurance retained on any
one life is $100,000.
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 $14,800,000 from reinsurers. The
Company has issued letters of credit totaling approximately $22,700,000 in favor
of certain ceding companies.
During fiscal 1995 Oxford issued a letter of credit of approximately $20.6
million in favor of certain ceding companies. AMERCO has guaranteed such letter
of credit.
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,
1994 and 1993 was $4,400,000 for each period. RWIC's share of case loss reserves
related to this coverage is approximately $41,000 at December 31, 1994. RWIC's
aggregate exposure for Class 1 municipal bond insurance was $709,000,000 as of
December 31, 1994.
A summary of reinsurance transactions by business segment follows:
<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 1995
Life insurance in force....... $32,046 $ 500 $2,729,372 $2,760,918 99%
======= ======= ========== ==========
Premiums earned:
Life....................... $ 1,601 $ 16 $ 8,149 $ 9,734 84%
Accident and health........ 3,980 198 1,513 5,295 29%
Annuity.................... 61 -- 7,696 7,757 99%
Property casualty.......... 86,869 40,871 66,864 112,862 59%
------- ------- ---------- ----------
Total................. $92,511 $ 41,085 $ 84,222 $ 135,648
======= ======= ========== ==========
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
======= ======= ========== ==========
</TABLE>
F-29
<PAGE> 65
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE
CEDED ASSUMED OF AMOUNT
DIRECT TO OTHER FROM OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
(12) REINSURANCE -- (CONTINUED)
<S> <C> <C> <C> <C> <C>
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>
(13) CONTINGENT LIABILITIES AND COMMITMENTS
The Company occupies certain facilities and uses certain equipment under
operating lease commitments with terms expiring through 2079. Lease expense was
$66,487,000, $84,359,000 and $119,106,000 for the years ended 1995, 1994 and
1993, respectively. During the year ended March 31, 1995, U-Haul Leasing & Sales
Co., a wholly-owned subsidiary of U-Haul, entered into fifteen transactions,
whereby the Company sold rental trucks and subsequently leased them back.
Subsequent to year end, no additional lease agreements were executed. AMERCO has
guaranteed $42,537,000 of residual values at March 31, 1995 on these assets at
the end of the respective lease terms. 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):
<TABLE>
<CAPTION>
PROPERTY, PLANT RENTAL
YEAR ENDED AND OTHER EQUIPMENT TRUCKS TOTAL
---------- ------------------- -------- --------
<S> <C> <C> <C>
1996......................................... $1,512 $ 58,777 $ 60,289
1997......................................... 1,019 52,051 53,070
1998......................................... 750 52,051 52,801
1999......................................... 540 52,051 52,591
2000......................................... 409 52,051 52,460
Thereafter................................... 4,993 48,838 53,831
------ -------- --------
$9,223 $315,819 $325,042
====== ======== ========
</TABLE>
The Company is a defendant in a number of suits and claims incident to the
types of business it conducts and several administrative proceedings arising
from state and local provisions that regulate the removal and/or cleanup of
underground fuel storage tanks. It is the opinion of management that none of
such suits, claims, or proceedings involving the Company, individually or in the
aggregate, are expected to result in a material loss. Also see Notes 12 and 14.
(14) LEGAL PROCEEDINGS
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and
William E. Carty, who are current members of the Board of Directors of the
Company and Paul F. Shoen, who is a former director are defendants in an action
in the Superior Court of the State of Arizona, Maricopa County, entitled Samuel
W. Shoen, M.D., et al. v. Edward J. Shoen, et al., No. CV88-20139, instituted
August 2, 1988 (the Shoen
F-30
<PAGE> 66
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) LEGAL PROCEEDINGS -- (CONTINUED)
Litigation). The Company was also a defendant in the action as originally filed,
but the Company was dismissed from the action on August 15, 1994. The
plaintiffs, who collectively hold 47.3% of the Company's common stock and who
are all members of a stockholder group that is currently opposed to existing
Company management have alleged, among other things, that certain of the
individual plaintiffs were wrongfully excluded from sitting on the Company's
Board of Directors in 1988 through the sale of Company common stock to certain
key employees. That sale allegedly prevented the plaintiffs from gaining a
majority position in the Company's voting stock and control of the Company's
Board of Directors. The plaintiffs alleged various breaches of fiduciary duty
and other unlawful conduct by the individual defendants and sought equitable
relief, compensatory damages, punitive damages, and statutory post judgment
interest.
Based on the plaintiffs' theory of damages (that their stock has little or
no current value), the Court ruled that the plaintiffs elected as their remedy
in this lawsuit to transfer their shares of stock to the defendants upon the
satisfaction of the judgment. On October 7, 1994, the jury determined that the
defendants breached their fiduciary duties and such breach diminished the value
of the plaintiffs' stock. The jury also determined the value of the plaintiffs'
stock in 1988 to be $81.12 per share or approximately $1.48 billion. On February
2, 1995, the judge in this case granted the defendants' motion for remittitur or
a new trial on the issue of damages. The judge determined that the value of the
plaintiffs' stock in 1988 was $25.30 per share or approximately $461.8 million.
On February 13, 1995, the plaintiffs filed a statement accepting the remittitur.
The jury also awarded the plaintiffs $70 million in punitive damages against
Edward J. Shoen. The judge ruled that this punitive damage award was excessive
and granted Edward J. Shoen's motion for remittitur or a new trial on the issue
of punitive damages. The judge reduced the award of punitive damages against
Edward J. Shoen to $7 million. On February 13, 1995, the plaintiffs filed a
statement accepting the remittitur reducing the punitive damage to $7 million.
On February 21, 1995, judgment was entered against the defendants. On March 23,
1995, Edward J. Shoen filed a notice of appeal with respect to the award of
punitive damages and the plaintiffs have subsequently cross-appealed the judge's
remittitur of the punitive damages.
Pursuant to separate indemnification agreements, the Company has agreed to
indemnify the defendants to the fullest extent permitted by law or the Company's
Articles of Incorporation or By-Laws, for all expenses and damages, if any,
incurred by the defendants in this proceeding, subject to certain exceptions.
With respect to the defendants who have filed for protection under the federal
bankruptcy laws (as described below), the extent of the Company's
indemnification obligations may be an issue in the bankruptcy proceedings.
Before the Company will have any indemnification obligations, the defendants
must request indemnification from the Company and a determination must be made
under Nevada law as to the validity of the indemnification claims. The
defendants have not attempted to make demands upon or prosecute their
indemnification claims against the Company. The Company reserves the right to
contest the validity of any indemnification claims made by the defendants. The
extent of the Company's obligation under the indemnification agreements, if any,
cannot be reasonably estimated. No provision has been made in the Company's
consolidated financial statements for any possible indemnification claims. If
valid indemnification claims are made, the Company believes that it can fulfill
any such indemnification obligations consistent with its existing credit
agreements, or in the alternative, the Company may seek the waiver or amendment
of certain of the provisions of one or more of its credit agreements when the
indemnification obligations are determined. The Company believes, but no
assurance can be given, that it can obtain any necessary waivers or amendments.
Any attempted transfer of common stock from the plaintiffs to the
defendants will implicate rights held by the Company. For example, pursuant to
the Company's By-Laws, the Company has certain rights of first refusal with
respect to the transfer of the plaintiffs' stock. In addition, the defendants'
rights to acquire the plaintiffs' stock may present a corporate opportunity
which the Company is entitled to exercise.
On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds, and William E. Carty (the Director-Defendants) filed for
protection under Chapter 11 of the federal bankruptcy
F-31
<PAGE> 67
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) LEGAL PROCEEDINGS -- (CONTINUED)
laws, resulting in the issuance of an order automatically staying the execution
of the judgment against those defendants. In late April 1995, the
Director-Defendants, in cooperation with the Company, filed plans of
reorganization in the United States Bankruptcy Court for the District of Arizona
(collectively, the Plan), all of which propose the same funding and treatment of
the plaintiffs claims resulting from the judgment in the Shoen Litigation.
Under the Plan, the Director-Defendants will transfer (or cause to be
transferred) to a trust (the Trust), property having a stipulated or adjudicated
value in excess of $461.8 million. Each of the plaintiffs would receive a trust
certificate representing an undivided, fractional beneficial interest in the
Trust. The property transferred to the Trust is expected to consist of (i)
approximately $300 million in Series B 7 1/2% non-voting cumulative preferred
stock issued by the Company or one of its subsidiaries; (ii) a 1993 REMIC
certificate held by the Company with a face value of $11,518,000 evidencing a
pool of 61 commercial mortgage loans which are secured by mortgages or deeds of
trust on 60 self-storage properties; (iii) mortgage loans with an aggregate
principal balance of approximately $109,914,000 on property held by the Company,
one or more of its subsidiaries, or two corporations affiliated with the
Company; and (iv) real property held free and clear by the Company or its
subsidiaries having a total fair value of approximately $50 million. Upon the
funding of the Trust, the plaintiffs participating in the Trust will have their
judgment satisfied and will be obligated to transfer their shares of common
stock to the Company or its designee.
Alternatively, and in lieu of their respective proportionate shares of the
property to be transferred to the Trust, each of the plaintiffs may elect to
participate in a settlement and receive a discounted cash payment in full
satisfaction of his or her claim (the Settlement). The Settlement provides for a
cash fund of up to $350 million to be paid by the Company to satisfy the claims
of all plaintiffs electing to participate in the Settlement. Any plaintiff
electing to participate in the Settlement will receive a pro rata distribution
of such fund based on the percentage of all of the plaintiffs' stock held by
such plaintiff. Any plaintiff so electing will not participate in or be entitled
to any interest in the Trust and the amount of property transferred to the Trust
will be correspondingly reduced. The Company plans to fund the Settlement
through its existing lines of credit, additional debt or equity issuances, asset
sales or a combination of the foregoing. The Company will determine which
financing source or sources to use to fund the Settlement based on, among other
things, market conditions as they exist from time to time and the number of
plaintiffs electing to participate in the Settlement. The Company is unable to
estimate the amount or cost of the financing, if any, necessary to fund the
Settlement. Upon receipt of the cash distribution pursuant to the Settlement,
the plaintiffs electing to participate in the Settlement will be obligated to
transfer their common stock to the Company or its designee.
The Company expects the court to consider the Plan during 1995. However,
there is no assurance that the Plan will be confirmed by the federal bankruptcy
court or that the Plan as confirmed will operate as described above. The
Company's participation in the Plan is subject to the approval of the Board of
Directors. Because of the Plan's complexity and the alternatives provided to the
plaintiffs under the Plan, and because the Plan has not yet been confirmed, the
Company is unable to determine the Plan's impact on the Company's financial
condition, results of operations, or capital expenditure plans. However, as a
result of funding the Plan, the Company is likely to incur additional costs in
the future in the form of dividends on preferred stock and/or interest on
borrowed funds.
No provision has been made in the Company's financial statements for any
payments to be made to the plaintiffs or the Trust pursuant to the Plan. In
addition, in the event any consideration paid by the Company for the
plaintiffs'stock is in excess of the fair value of the stock received by the
Company, the Company will be required to record an expense equal to that
difference.
On April 25, 1995, the Director-Defendants filed an action in the United
States Bankruptcy Court for the District of Arizona entitled Edward J. Shoen, et
al. v. Leonard S. Shoen, et al., Case No. 95-1430-PHX-
F-32
<PAGE> 68
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) LEGAL PROCEEDINGS -- (CONTINUED)
JMM, Adversary No. 95-284, seeking injunctive relief to prevent the Company from
conducting its 1994 and 1995 annual meetings of stockholders until the Plan is
confirmed and/or to prevent the plaintiffs from voting the common stock that
they are required to transfer pursuant to the Shoen Litigation. The Director-
Defendants alleged that despite the election by the plaintiffs to transfer their
common stock and thereby disengage themselves from Company ownership, the
plaintiffs have two members of their stockholder group nominated to fill two
director positions which are scheduled for election at the 1994 annual meeting
of stockholders. The Director-Defendants argued that it is inappropriate to base
the plaintiffs right to vote at stockholders meetings on their record ownership
of common stock which is the subject of the judgment in the Shoen Litigation.
The Director-Defendants further alleged that if the Company is not enjoined from
holding the 1994 and 1995 annual meetings until the Plan is confirmed and if the
plaintiffs are not enjoined from voting their common stock, the plaintiffs are
likely to elect up to half of the members of the Company's Board of Directors
before the end of 1995 because the plaintiffs currently control more common
stock than the stockholder group that supports existing Company management. The
election of Board of Director nominees supported by the plaintiffs would be
likely to disrupt the Company's ability to support and fund the Plan. Such
disruption, the Director-Defendants alleged, would affect their ability to
reorganize and would cause them substantial and irreparable injury. On June 8,
1995 the court enjoined the Company from conducting its 1994 and 1995 annual
meetings of stockholders until an order is entered confirming or denying
confirmation of the Plan, or until further order of the court.
Sophia M. Shoen, Paul F. Shoen and the Company are parties to separate
Share Repurchase and Registration Rights Agreements which require all disputes
relating thereto to be resolved by arbitration. On April 8, 1994, Sophia M.
Shoen and Paul F. Shoen commenced the dispute resolution process. Private
arbitration proceedings pursuant to these agreements were convened on June 19,
1994. All of the claims asserted by Paul F. Shoen in the arbitration have been
dismissed pursuant to a settlement agreement described in the following
paragraph. In the arbitration, Sophia M. Shoen asserted that the Company has
breached its obligations to her by failing to timely register the sale of her
shares which were sold to the public in November 1994 and by failing to remove
the right of first refusal on all of the Company's common stock. Sophia M. Shoen
asserted that, as a consequence of this alleged breach, she was entitled to give
notice of termination of a stockholder agreement among Edward J. Shoen, Mark V.
Shoen, James P. Shoen, Paul F. Shoen, Sophia M. Shoen, certain trusts for the
benefit of the foregoing, and the AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan (the Stockholder Agreement). The Company disagrees
with the above assertions. Sophia M. Shoen gave such notice of termination on
July 11, 1994. The arbitration hearings concluded on August 21, 1994. It is
unknown when the arbitration panel will render a decision. Mark V. Shoen, as a
party to the Stockholder Agreement, has filed a lawsuit against Sophia M. Shoen
to which the Company is not a party, seeking a declaratory judgment that the
Stockholder Agreement has not been terminated and remains in full force and
effect.
The Company, the Company's Board of Directors, the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership Plan (the ESOP), and the trustees of
the ESOP were defendants in an action in the United States District Court for
the District of Nevada entitled Paul F. Shoen v. AMERCO, et al., No.
CV-N-94-0475-ECR, instituted July 19, 1994 and dismissed February 10, 1995. On
February 9, 1995, Paul F. Shoen executed a settlement agreement with the Company
and the other defendants resolving all of his claims in this case and in the
arbitration described in the preceding paragraph. As part of the settlement, the
Company agreed, among other things, to select and appoint independent trustees
for the ESOP and to place Paul F. Shoen on management's slate of directors for
the 1994 annual meeting of stockholders which was originally delayed by judicial
order at the request of Paul F. Shoen.
The Company, certain members of the Company's Board of Directors, and
others are defendants in actions currently pending in United States District
Court for the District of Nevada entitled Sidney Wisotzky
F-33
<PAGE> 69
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) LEGAL PROCEEDINGS -- (CONTINUED)
and Dorothy Wisotzky, et al. v. Edward J. Shoen, et al., No. CV-N-94-771-HDM
(filed October 28, 1994), Evan Julber v. Edward J. Shoen, et al., No.
CV-N-94-00811-HDM (filed November 16, 1994), and Anne Markin v. Edward J. Shoen,
et al., No. CV-N-94-00821-ECR (filed November 18, 1994) (collectively referred
to as the Securities Suit). The plaintiffs in these cases, who claim to have
purchased the Company's Series A 8 1/2% Preferred Stock, are seeking class
action certification and are defining the class as all persons who purchased or
otherwise acquired the Series A 8 1/2% Preferred Stock of the Company from
October 14, 1993 through October 18, 1994, inclusive, and who sustained damage
as a result of such purchases. The plaintiffs alleged among other things, that
the defendants violated the federal securities laws by inflating the price of
the Series A 8 1/2% Preferred Stock via false and misleading statements,
concealing material adverse information, and taking other manipulative actions,
and that the Prospectus for the Series A 8 1/2% Preferred Stock, certain Form
10-K and Form 10-Q filings made by the Company, and the Company's Notice and
Proxy Statement dated July 8, 1994 contained false and misleading statements and
omissions regarding the Shoen Litigation. In addition, the Company and certain
members of the Company's Board of Directors, are defendants in an action
currently pending in United States District Court for the District of Nevada
entitled Bernard L. and Frieda Goldwasser, et al. v. Edward J. Shoen, et al.,
No. CV-N-94-00810-ECR (filed November 16, 1994) (the Derivative Suit). The
plaintiffs in this case allege derivatively on behalf of the Company, that the
defendants breached their fiduciary duties to the Company and its stockholders
by causing the Company to violate the federal securities laws, by concealing the
financial responsibility of the Company for the claims asserted in the Shoen
Litigation, by subjecting the Company to adverse publicity, and by misusing
their corporate control for personal benefit. In addition, the plaintiffs are
seeking equitable and/or injunctive relief to prevent the defendants in this
case from causing the Company to indemnify the defendants in the Shoen
Litigation against their liability in that case. The plaintiffs in these cases
are requesting unspecified compensatory damages as well as attorneys' fees and
costs. The Company and the individual defendants deny the plaintiffs'
allegations of wrongdoing and intend to vigorously defend themselves in these
actions.
(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.
F-34
<PAGE> 70
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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.
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.
To date, no stock options have been granted.
(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 2, 6, 8, 19 and 20 of Notes to Consolidated Financial
Statements of AMERCO.
Additionally, during the years ended 1995, 1994 and 1993, a subsidiary of
AMERCO purchased $3,417,000, $2,607,000 and $2,608,000, respectively, of
printing from a company wherein an officer is a major stockholder, director and
officer of AMERCO.
Pursuant to a Share Repurchase and Registration Rights Agreement, dated May
1, 1992, among Sophia M. Shoen, Sophmar, Inc., and the Company, Sophia M. Shoen
had the right to require the Company to repurchase, with certain limitations, up
to $3,000,000 of Common Stock owned by her. The Sophia Shoen Registration Rights
Agreement provides that the Company's obligations to repurchase any shares from
Sophia M. Shoen may be satisfied if such shares are purchased by the ESOP Trust.
Pursuant to the Sophia Shoen Registration Rights Agreement, on June 30, 1994,
Sophia M. Shoen sold 88,235 shares of Common Stock to the ESOP Trust at the then
appraised value of $17.00 per share, for an aggregate sales price of
approximately $1,500,000. In addition, Sophia M. Shoen, subject to certain
limitations and restrictions, may also elect under the Sophia Shoen Registration
Rights Agreement to cause the Company to effect a
F-35
<PAGE> 71
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) RELATED PARTY TRANSACTIONS -- (CONTINUED)
registration under the Securities Act of 1933, as amended, and applicable state
securities laws of shares of Common Stock held by her. Sophia M. Shoen sold
575,000 shares of Common Stock to the public in late 1994 pursuant to her
registration rights. Sophia M. Shoen is a major stockholder of the Company.
Pursuant to a Management Consulting Agreement, dated as of May 1, 1992,
Sophia M. Shoen agreed to provide environmental and other consulting services to
the Company. In consideration for these services, the Company agreed to pay
Sophia M. Shoen a yearly fee of $100,000. The Management Consulting Agreement
terminated May 1, 1995.
In April 1994, William E. Carty sold 46.5% of 90.88 acres of land to the
Company for cash in the amount of $4,000,000. An independent opinion of value
was used to determine the Company's offer to purchase and the purchase was
completed below the amount so determined. William E. Carty is a director of the
Company.
On November 28, 1994, the Company entered into an Exchange Agreement with
Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the
Exchange Agreement, in exchange for 3,475,520 shares of Series A Common Stock
owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of Common Stock.
Pursuant to a Share Repurchase and Registration Rights Agreement, dated as
of March 1, 1992, among Paul F. Shoen, Pafran, Inc., and the Company, Paul F.
Shoen had the right to require the Company to repurchase, with certain
limitations, up to $3,000,000 of Common Stock owned by him. The Paul Shoen
Registration Rights Agreement provides that the Company's obligation to
repurchase any shares from Paul F. Shoen shall be satisfied if such shares are
purchased by the ESOP Trust. Pursuant to the Paul Shoen Registration Rights
Agreement, (i) on June 30, 1994, Paul F. Shoen sold 58,825 shares of Common
Stock to the ESOP Trust at the then appraised value of $17.00 per share for an
aggregate sales price of approximately $1,000,000 and (ii) on January 17, 1995,
Paul F. Shoen sold 50,632 shares of Common Stock to the ESOP Trust at the most
recent closing price for the Common Stock trading on Nasdaq of $19.75 per share
for an aggregate sales price of approximately $1,000,000. In addition, Paul F.
Shoen, subject to certain limitations and restrictions, may also elect under the
Paul Shoen Registration Rights Agreement to cause the Company to effect a
registration under the Securities Act of 1933, as amended, and applicable state
securities laws of shares of Common Stock held by him. Paul F. Shoen sold
500,000 shares of Common Stock to the public in March of 1995 pursuant to his
registration rights. Paul F. Shoen is a major stockholder of the Company.
On February 9, 1995, Paul F. Shoen executed a settlement agreement with the
Company whereby Paul F. Shoen agreed to the dismissal of certain claims he had
asserted in an arbitration proceeding and in an action in the United States
District Court for the District of Nevada. In exchange for Paul F. Shoen's
agreement to dismiss such claims, the Company agreed, among other things, to
work in good faith toward appointing independent trustees for the ESOP and to
place Paul F. Shoen on the management s slate of directors for the 1994 Annual
Meeting of Stockholders. In addition, the settlement agreement provides for the
Company to pay Paul F. Shoen $925,000 and for the Company to receive a full
release of all claims by Paul F. Shoen through the settlement date, including
but not limited to, claims for reimbursement of attorneys fees related to all
matters to which Paul F. Shoen is or was a party. The terms of the settlement
will not result in a material adverse effect of the Company's financial
condition or results of operations.
Pursuant to a Management Consulting Agreement, dated as of March 5, 1992,
Paul F. Shoen agreed to provide management consulting services to the Company on
matters relating to the Company's business and the organization and management
of the Company. In consideration for these services, the Company has agreed to
pay Paul F. Shoen a yearly fee of $200,000. A total of $100,000 was paid for the
year ended March 31, 1995. The Management Consulting Agreement terminated on
March 1, 1995.
F-36
<PAGE> 72
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) RELATED PARTY TRANSACTIONS -- (CONTINUED)
Management believes that these transactions were consummated on terms
equivalent to those that prevail in arm's-length transactions.
(18) SUPPLEMENTAL CASH FLOW INFORMATION
The (increase) decrease in receivables, inventories and accounts payable
and accrued liabilities net of other operating and investing activities follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Receivables............................................. $(57,645) $(19,945) $(4,508)
======== ======== =======
Inventories............................................. $ (1,325) $ 2,425 $(4,664)
======== ======== =======
Accounts payable and accrued liabilities................ $ 3,549 $ 11,538 $(1,899)
======== ======== =======
</TABLE>
Cash paid for income taxes amounted to $9,465,000, $3,275,000 and $303,000
for 1995, 1994 and 1993, respectively.
Interest paid amounted to $67,191,000, $71,448,000 and $81,115,000 for
1995, 1994 and 1993, respectively.
(19) SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES
A summary consolidated balance sheet for Ponderosa Holdings, Inc. and its
subsidiaries is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments -- fixed maturities............................... $ 705,428 $ 719,605
Other investments............................................. 116,151 84,738
Receivables................................................... 136,527 138,049
Deferred policy acquisition costs............................. 49,244 47,846
Due from affiliate............................................ 15,165 4,927
Deferred federal income taxes................................. 12,090 8,350
Other assets.................................................. 25,007 8,744
---------- ----------
Total assets........................................ $1,059,612 $1,012,259
========== ==========
Policy liabilities and accruals............................... $ 411,249 $ 380,424
Unearned premiums............................................. 63,938 58,842
Premium deposits.............................................. 304,979 312,708
Other policyholders' funds and liabilities.................... 25,739 13,399
---------- ----------
Total liabilities................................... 805,905 765,373
Stockholder's equity.......................................... 253,707 246,886
---------- ----------
Total liabilities and stockholder's equity.......... $1,059,612 $1,012,259
========== ==========
</TABLE>
F-37
<PAGE> 73
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(19) SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES -- (CONTINUED)
A summarized consolidated income statement for Ponderosa Holdings, Inc. and
subsidiaries is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Premiums............................................... $156,963 $142,347 $118,206
Net investment income.................................. 43,096 40,019 40,817
Other income (loss).................................... 5,958 7,447 10,495
-------- -------- --------
Total revenue................................ 206,017 189,813 169,518
Benefits and losses.................................... 133,407 120,825 106,617
Amortization of deferred policy acquisition costs...... 10,896 9,343 9,352
Other expenses......................................... 28,816 29,834 24,993
-------- -------- --------
Income from operations....................... 32,898 29,811 28,556
Federal income tax expense............................. (9,460) (8,723) (7,387)
-------- -------- --------
Earnings from operations before change in accounting
principle............................................ 23,438 21,088 21,169
Cumulative effect of a change in accounting
principle............................................ -- (93) --
-------- -------- --------
Net income............................................. $ 23,438 $ 20,995 $ 21,169
======== ======== ========
</TABLE>
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 $400,000 for Oxford and $1,000,000 for RWIC. 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 $20,268,000 at December 31, 1994.
The consolidated audited statutory net income for the years ended December
31, 1994, 1993 and 1992 was $20,858,000, $20,644,000 and $19,708,000,
respectively; audited statutory capital and surplus was $205,699,000 and
$176,194,000 at December 31, 1994 and 1993, 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.
F-38
<PAGE> 74
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(20) INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA -- (CONTINUED)
Information concerning operations by industry segment follows:
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
---------- --------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995
Revenues:
Outside............................... $1,056,874 $ 39,347 $ 144,642 $ -- $ 1,240,863
Intersegment.......................... (42) 1,444 20,657 (22,059) --
---------- -------- -------- --------- ----------
Total revenue.................... $1,056,832 $ 40,791 $ 165,299 $ (22,059) $ 1,240,863
========== ======== ======== ========= ==========
Pretax operating profit................. $ 128,278 $ 9,824 $ 23,074 $ 42 161,218
========== ======== ======== =========
Interest expense...................... 67,762
----------
Pretax earnings from operations.... $ 93,456
==========
Identifiable assets..................... $1,827,995 $ 479,778 $ 579,821 $ (281,605) $ 2,605,989
========== ======== ======== ========= ==========
Depreciation/ amortization.............. $ 150,187 $ 4,790 $ 8,913 $ -- $ 163,890
========== ======== ======== ========= ==========
Capital expenditures.................... $ 434,992 $ -- $ -- $ -- $ 434,992
========== ======== ======== ========= ==========
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
========== ======== ======== ========= ==========
</TABLE>
F-39
<PAGE> 75
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>
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>
<TABLE>
<CAPTION>
GEOGRAPHIC AREA DATA -- UNITED STATES CANADA CONSOLIDATED
----------------------- ------------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
1995
Revenues....................................... $ 1,212,285 $28,578 $ 1,240,863
Pretax earnings (loss) from operations......... $ 90,378 $ 3,078 $ 93,456
Identifiable assets............................ $ 2,552,564 $53,425 $ 2,605,989
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
</TABLE>
(21) SUBSEQUENT EVENTS
During April 1995, the Board of Directors approved the indemnification, to
the fullest extent permitted by law, of each member of the Boards Special
Committee. The Special Committee was established in December 1994 for the
purpose of making recommendations to the full Board of Directors as to the
fairness to the public shareholders of the Company of any proposed transaction
which may be submitted by management.
On May 2, 1995, the Company declared a cash dividend of $3,241,000 ($.53125
per preferred share) to preferred stockholders of record as of May 12, 1995.
On May 31, 1995, the Company purchased 45,000 shares of common stock into
treasury.
See Notes 2, 5 and 14 for other subsequent event disclosures.
F-40
<PAGE> 76
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(22) SUBSEQUENT EVENTS (UNAUDITED)
On August 15, 1995, the Company declared a cash dividend of $3,241,000
($.53125 per preferred share) to preferred stockholders of record as of August
25, 1995.
Subsequent to year end, the Company executed a private placement with
certain lenders for an aggregate principal amount of $140 million.
Subsequent to March 31, 1995, the Company funded the purchase of 33
properties by TWO SAC. After such funding, principal outstanding from TWO SAC
totalled $46,958,000.
Under the Plan, as amended, on October 18, 1995, the Company redeemed
3,343,076 shares of Common Stock held by Maran, Inc. in exchange for
approximately $22.7 million and paid approximately $41.4 million to Mary Anna
Shoen Eaton in exchange for a full release of all claims against the Company and
the Director-Defendants, including all claims asserted by her in the Shoen
Litigation. In addition, under the Plan, as amended, the Company will transfer
(or cause to be transferred) to the Trust, property having a stipulated or
adjudicated value of approximately $276.6 million. Each of the Non-Stockholder
Plaintiffs will receive a trust certificate representing an undivided,
fractional beneficial interest in the Trust. The property transferred to the
Trust will consist of (i) approximately $193.0 million in Series D dividend
paying, non-voting, cumulative Floating Rate Preferred Stock issued by the
Company; (ii) a 1993 REMIC certificate held by the Company with a face value of
approximately $12.5 million evidencing a pool of 61 commercial mortgage loans
which are secured by mortgages or deeds of trust on 60 self-storage properties;
(iii) mortgage loans held by the Company or one or more of its subsidiaries with
an aggregate principal balance of approximately $13.8 million; (iv) real
property held free and clear by the Company or its subsidiaries having a total
fair value of approximately $47.2 million, and (v) approximately $10.1 million
in cash. In addition, under the Plan, the Stockholder-Plaintiffs will receive
4,056,034 shares of Series B 8.25% Preferred Stock in exchange for 14,911,900
shares of Common Stock. Upon the funding of the Trust and the exchange of the
Stockholder-Plaintiffs' Common Stock for the Series B 8.25% Preferred Stock, the
judgment will be satisfied. Participation in the Plan, as amended, was approved
by the Board of Directors during October 1995.
On October 27, 1995, the Company and the plaintiffs filed a Stipulation to
Dismiss the Securities Suit. Further, on October 27, 1995, the Company and the
plaintiffs filed a Settlement and Stipulation to Dismiss the Derivative Suit.
F-41
<PAGE> 77
SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
ADDITIONAL INFORMATION
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 LLP, independent accountants, whose report thereon appears elsewhere
herein.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ -------
(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.................................... $5,288 $6,556 $7,827 $9,814 $14,508
Credited to Distribution, Accident and
Canadian Duty Fund (Note D)............... 66 71 114 118 247
------ ------ ------ ------ -------
Total Fleet Owner income............... 5,354 6,627 7,941 9,932 14,755
------ ------ ------ ------ -------
Fleet Owner operation expenses:
Charged to Fleet Owner (Note C)............. 2,127 2,404 3,100 4,389 8,558
Charged to Distribution, Accident and
Canadian Duty Funds (Note D).............. 234 237 290 274 456
------ ------ ------ ------ -------
Total Fleet Owner operation expenses... 2,361 2,641 3,390 4,663 9,014
------ ------ ------ ------ -------
Fleet Owner earnings before Distribution
Accident and Canadian Duty Funds
credit, depreciation and income
taxes.................................. 2,993 3,986 4,551 5,269 5,741
Distribution, Accident and Canadian Duty Funds
credit (Note D)............................. 168 165 176 156 209
------ ------ ------ ------ -------
Net Fleet Owner earnings before
depreciation and income taxes.......... $3,161 $4,151 $4,727 $5,425 $ 5,950
====== ====== ====== ====== =======
Investment data (Note A):
Amount at end of year.......................... $4,382 $5,257 $6,332 $7,749 $ 9,914
====== ====== ====== ====== =======
Average amount during year..................... $4,820 $5,668 $6,976 $8,911 $10,459
====== ====== ====== ====== =======
Net Fleet Owner earnings before
depreciation and income taxes per $100
of average investment (Note B)......... $65.59 $73.23 $67.76 $60.88 $ 56.89
====== ====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of this Summary of Earnings of
Independent Trailer Fleets.
F-42
<PAGE> 78
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.
(C) A summary of operations expenses charged directly to Independent Fleet
Owners follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Licenses...................................... $ 503 $ 520 $ 593 $ 686 $ 833
Public liability insurance.................... 320 392 510 1,047 1,657
Repairs and maintenance....................... 1,304 1,492 1,997 2,656 6,068
------ ------ ------ ------ ------
$2,127 $2,404 $3,100 $4,389 $8,558
====== ====== ====== ====== ======
</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.
(E) Commissions foregone for transfer to the Distribution, Accident and
Canadian Duty Funds (net of fees in excess of expenses incurred) follows:
<TABLE>
<CAPTION>
FLEET OWNERS
AFFILIATED --------------------------
RENTAL AFFILIATED
COMPANIES COMPANIES INDEPENDENT TOTAL
---------- ---------- ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended:
March 31, 1995....................... 986 465 66 1,517
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
</TABLE>
F-43
<PAGE> 79
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS -- (CONTINUED)
ADDITIONAL INFORMATION
(F) A summary of Independent Fleet Owner expenses incurred by the Funds
follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Accident repairs.............................. $1,295 $1,085 $1,199 $1,142 $1,170
Distribution of trailers, paid from
redistribution and Canadian duty fees....... 0 0 0 37 124
------ ------ ------ ------ ------
Total Fleet Owner expenditures...... 1,295 1,085 1,199 1,179 1,294
Less portion allocated to fleets owned by
affiliated companies........................ 1,061 848 909 905 838
------ ------ ------ ------ ------
Total Independent Fleet Owner
expenses paid by funds............ 234 237 290 274 456
Add portion allocated to fleets owned by
affiliated companies........................ 1,061 848 909 905 838
Return of investment (accident
reimbursement).............................. 222 258 152 204 475
------ ------ ------ ------ ------
Total expenses incurred by Funds.... $1,517 $1,343 $1,351 $1,383 $1,769
====== ====== ====== ====== ======
</TABLE>
F-44
<PAGE> 80
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
BALANCE SHEETS
MARCH 31,
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash.............................................................. $ 5,967 $ 1,084
Investment in subsidiaries........................................ 527,050 468,254
Due from unconsolidated subsidiaries.............................. 1,077,014 985,539
Other assets...................................................... 6,042 9,254
---------- ----------
$1,616,073 $1,464,131
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and loans................................................... $ 811,562 $ 722,518
Other liabilities................................................. 103,029 80,495
---------- ----------
Stockholders' equity:
Preferred stock................................................... -- --
Common stock...................................................... 10,000 10,000
Additional paid-in capital........................................ 165,675 165,651
Foreign currency translation...................................... (12,435) (11,152)
Net unrealized gain (loss) on investments......................... (6,483) 679
Retained earnings:
Beginning of year.............................................. 514,521 482,163
Net earnings................................................... 60,032 40,184
Dividends paid................................................. (12,964) (7,826)
---------- ----------
561,589 514,521
Less:
Cost of common shares in treasury.............................. 10,461 10,461
Unearned employee stock ownership plan shares.................. 6,403 8,120
---------- ----------
Total stockholders' equity................................ 701,482 661,118
---------- ----------
$1,616,073 $1,464,131
========== ==========
</TABLE>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-45
<PAGE> 81
SCHEDULE I -- (CONTINUED)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
STATEMENTS OF EARNINGS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Net interest income from subsidiaries.......... $ 66,050 $ 68,327 $ 67,014
Other revenue.................................. 465 753 233
-------- -------- --------
Total revenues......................... 66,515 69,080 67,247
-------- -------- --------
EXPENSES
Interest expense............................... 66,050 68,327 67,014
Other expenses................................. 11,515 9,565 9,082
-------- -------- --------
Total expenses......................... 77,565 77,892 76,096
-------- -------- --------
Operating income (loss)........................ (11,050) (8,812) (8,849)
Equity in earnings (losses) of unconsolidated
subsidiaries................................ 102,583 71,659 57,514
Income tax benefit (expense)................... (31,501) (19,293) (16,756)
Extraordinary loss on early extinguishment of
debt, net................................... -- (3,370) --
-------- -------- --------
Net earnings................................ $ 60,032 $ 40,184 $ 31,909
======== ======== ========
Earnings per common share................... $ 1.23 $ .89 $ .83
======== ======== ========
Weighted average common shares
outstanding............................... 38,190,552 38,664,063 38,664,063
========== ========== ==========
</TABLE>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-46
<PAGE> 82
SCHEDULE I -- (CONTINUED)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................. $ 60,032 $ 40,184 $ 31,909
Amortization, net.......................................... 545 850 1,231
Equity in earnings (losses) of subsidiaries................ 67,139 49,288 38,419
(Increase) decrease in amounts due from unconsolidated
subsidiaries............................................ (91,475) (197,093) 10,914
Net change in operating assets and liabilities............. (100,961) (53,872) (46,605)
Other, net................................................. (8,194) (3,945) (3,843)
--------- --------- --------
Net cash provided (used) by operations....................... (72,914) (164,588) 32,025
--------- --------- --------
Cash flows from financing activities:
Net change in short term borrowings.......................... 178,750 21,750 3,000
Proceeds from notes.......................................... -- 186,000 55,000
Proceeds from Leveraged Employee Stock Ownership Plan........ 1,717 1,717 1,718
Principal payments on notes.................................. (89,706) (179,905) (89,704)
Issuance of preferred stock.................................. -- 146,320 --
Dividends paid............................................... (12,964) (7,900) (1,994)
Extraordinary loss on early extinguishment of debt........... -- (3,370) --
--------- --------- --------
Net cash provided (used) by financing activities............. 77,797 164,612 (31,980)
--------- --------- --------
Increase (Decrease) in cash.................................. 4,883 24 45
Cash at beginning of year.................................... 1,084 1,060 1,015
--------- --------- --------
Cash at end of year.......................................... $ 5,967 $ 1,084 $ 1,060
========= ========= ========
</TABLE>
Income taxes paid in cash amounted to $8,794,000, $3,025,000 and $42,000
for 1995, 1994 and 1993, respectively. Interest paid in cash amounted to
$65,840,000, $81,115,000 and $80,365,000 for 1995, 1994 and 1993, respectively.
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-47
<PAGE> 83
SCHEDULE I -- (CONTINUED)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
NOTES TO CONDENSED FINANCIAL INFORMATION
(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 13 of Notes to Consolidated Financial
Statements.
(3) NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
<TABLE>
<CAPTION>
YEAR END
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Medium-term notes payable 8.50% to 11.50% interest rates, due through
2000................................................................. $169,270 $198,870
Note payable to insurance companies 5.89% to 10.27% interest rates, due
through 2006......................................................... 270,000 281,000
Notes payable to banks 5.38% to 5.67% interest rates, due through
1999................................................................. 45,700 94,800
Other notes payable 9.50% interest rate, due through 2005.............. 92 98
Unsecured notes payable to banks under revolving lines of credit 6.43%
to 6.74% interest rates.............................................. 293,000 97,750
Other short-term promissory notes...................................... 33,500 50,000
-------- --------
$811,562 $722,518
======== ========
</TABLE>
For additional information, see Note 5 of Notes to Consolidated Financial
Statements.
F-48
<PAGE> 84
SCHEDULE II
AMERCO AND CONSOLIDATED SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
MARCH 31, 1995
<TABLE>
<CAPTION>
DEDUCTIONS
-------------------------
BALANCE AT AMOUNTS AMOUNTS BALANCE AT
DEBTOR MARCH 31, 1994 ADDITIONS COLLECTED WRITTEN OFF MARCH 31, 1995
------ -------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
SAC Self-Storage
Corporation................. -- $57,063,393 -- -- $57,063,393
=========== =========== =========== =========== ===========
TWO SAC Self-Storage.......... -- $ 8,191,536 -- -- $ 8,191,536
=========== =========== =========== =========== ===========
</TABLE>
Mark V. Shoen, a Director of AMERCO and major shareholder of AMERCO is the
sole voting shareholder of SAC Self-Storage Corporation and TWO SAC Self-Storage
Corporation.
F-49
<PAGE> 85
SCHEDULE V
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION (FOR PROPERTY-CASUALTY INSURANCE UNDERWRITERS)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
CLAIMS AND
RESERVES CLAIM ADJUSTMENT AMORTI-
FOR UNPAID ZATION PAID
CLAIMS EXPENSES INCURRED OF CLAIMS
DEFERRED AND DEFERRED AND
POLICY CLAIM NET NET RELATED TO POLICY CLAIM
AFFILIATION ACQUI- ADJUST- DISCOUNT EARNED INVEST- ------------------ ACQUI- ADJUST-
WITH SITION MENT IF ANY, UNEARNED PREMIUMS MENT CURRENT PRIOR SITION MENT
YEAR REGISTRANT COSTS EXPENSES DEDUCTED PREMIUMS (1) INCOME YEAR YEAR COSTS EXPENSES
- ---- -------------- -------- ---------- --------- --------- -------- ------- -------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95.......... Consolidated
property --
casualty
entity......... $8,973 $329,741 N/A $63,938 $112,862 $29,026 $102,782 $ 6,576 $6,644 $92,651
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
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
NET
PREMIUMS
WRITTEN
YEAR (2)
- ---- --------
95.......... $119,952
94.......... 113,672
93.......... 97,348
</TABLE>
- ---------------
(1) The earned premiums are reported net of intersegment transactions. Earned
premiums eliminated in consolidation amount to $20,575,000, $18,798,000 and
$18,344,000 for the years ended 1995, 1994 and 1993, respectively.
(2) The premiums written are reported net of intersegment transactions. Premiums
written eliminated in consolidation amount to $19,407,000, $18,335,000 and
$18,616,000 for the years ended 1995, 1994 and 1993, respectively.
F-50
<PAGE> 86
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................. $ 29,604 $ 35,286
Receivables........................................................... 322,859 300,238
Inventories........................................................... 52,422 50,337
Prepaid expenses...................................................... 24,455 25,933
Investments, fixed maturities......................................... 761,115 705,428
Investments, other.................................................... 146,618 135,220
Deferred policy acquisition costs..................................... 52,622 49,244
Other assets.......................................................... 29,684 30,057
---------- ----------
Property, plant and equipment, at cost:
Land................................................................ 217,611 214,033
Buildings and improvements.......................................... 734,061 735,624
Furniture and equipment............................................. 182,158 179,016
Rental trailers and other rental equipment.......................... 256,730 245,892
Rental trucks....................................................... 925,671 913,641
General rental items................................................ 51,058 51,890
---------- ----------
2,367,289 2,340,096
Less accumulated depreciation....................................... 1,098,666 1,065,850
---------- ----------
Total property, plant and equipment......................... 1,268,623 1,274,246
---------- ----------
$2,688,002 $2,605,989
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-51
<PAGE> 87
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities............................ $ 145,011 $ 127,613
Notes and loans..................................................... 866,132 881,222
Policy benefits and losses, claims and loss expenses payable........ 474,277 475,187
Liabilities from premium deposits................................... 347,718 304,979
Cash overdraft...................................................... 23,291 31,363
Other policyholders' funds and liabilities.......................... 34,320 20,378
Deferred income..................................................... 9,521 7,426
Deferred income taxes............................................... 81,097 71,037
---------- ----------
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 June 30, 1995, March 31, 1995 and June 30, 1994............... -- --
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 5,762,495 shares as of June 30, 1995 and March 31,
1995, and 5,754,334 shares as of June 30, 1994................... 1,441 1,441
Common stock of $.25 par value, authorized 150,000,000 shares,
issued 34,237,505 shares as of June 30, 1995 and March 31, 1995
and 34,245,666 shares as of June 30, 1994........................ 8,559 8,559
Additional paid-in capital.......................................... 165,675 165,675
Foreign currency translation........................................ (11,736) (12,435)
Unrealized gain(loss) on investments................................ (1,569) (6,483)
Retained earnings................................................... 579,210 561,589
---------- ----------
741,580 718,346
Less:
Cost of common shares in treasury, (1,380,937 shares as of June
30, 1995 and 1,335,937 shares as of March 31, 1995 and June 30,
1994)........................................................... 11,457 10,461
Unearned employee stock ownership plan shares.................... 23,488 21,101
---------- ----------
Total stockholders' equity.................................. 706,635 686,784
Contingent liabilities and commitments................................
---------- ----------
$2,688,002 $2,605,989
========== ==========
</TABLE>
F-52
<PAGE> 88
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues
Rental and other revenue.......................................... $ 235,311 $ 228,962
Net sales......................................................... 53,116 51,302
Premiums.......................................................... 30,702 31,559
Net investment income............................................. 11,380 10,510
---------- ----------
Total revenues............................................ 330,509 322,333
Costs and expenses
Operating expense................................................. 182,044 165,541
Cost of sales..................................................... 28,959 27,550
Benefits and losses............................................... 27,241 26,412
Amortization of deferred acquisition costs........................ 2,928 3,084
Depreciation...................................................... 37,693 37,282
Interest expense.................................................. 18,832 16,638
---------- ----------
Total costs and expenses.................................. 297,697 276,507
Pretax earnings from operations..................................... 32,812 45,826
Income tax expense.................................................. (11,950) (16,413)
---------- ----------
Net earnings.............................................. $ 20,862 $ 29,413
========== ==========
Earnings per common share:
Net earnings........................................................ $ 0.46 $ 0.71
========== ==========
Weighted average common shares outstanding.......................... 37,958,426 37,107,536
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE> 89
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
QUARTERS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Series A common stock of $.25 par value: Authorized 10,000,000 shares,
issued 5,762,495 as of June 30, 1995 and 5,762,495 as of March 31,
1995 and 5,754,334 as of June 30, 1994 Beginning and end of period... $ 1,441 $ 1,438
-------- --------
Common stock of $.25 par value: Authorized 150,000,000 shares, issued
34,237,505 as of June 30, 1995, and as of March 31, 1995 and
34,245,666 as of June 30, 1994 Beginning and end of period........... 8,559 8,562
-------- --------
Additional paid-in capital:
Beginning and end of period.......................................... 165,675 165,651
-------- --------
Foreign currency translation:
Beginning of period.................................................. (12,435) (11,152)
Change during period................................................. 699 (309)
-------- --------
End of period........................................................ (11,736) (11,461)
-------- --------
Unrealized gain (loss) on investments:
Beginning of period.................................................. (6,483) 679
Change during period................................................. 4,914 (1,047)
-------- --------
End of period........................................................ (1,569) (368)
-------- --------
Retained earnings:
Beginning of period.................................................. 561,589 514,521
Net earnings...................................................... 20,862 29,413
Dividends paid to stockholders:
Preferred stock: ($.53 per share for 1995 and 1994,
respectively).............................................. (3,241) (3,241)
-------- --------
End of period........................................................ $579,210 $540,693
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE> 90
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
QUARTERS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Treasury stock:
Beginning of period.................................................. $ 10,461 $ 10,461
Net increase (45,000 shares in 1995)................................. 996 --
-------- --------
End of period........................................................ 11,457 10,461
-------- --------
Unearned employee stock ownership plan shares:
Beginning of period.................................................. 21,101 17,451
Increase in loan.................................................. 2,523 2,919
Proceeds from loan................................................ (136) (119)
-------- --------
End of period........................................................ 23,488 20,251
-------- --------
Total stockholders' equity............................................. $706,635 $673,803
======== ========
</TABLE>
F-55
<PAGE> 91
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTERS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net earnings........................................................ $ 20,862 $ 29,413
Depreciation and amortization.................................... 40,565 41,489
Provision for losses on accounts receivable...................... 1,568 736
Net gain on sale of real and personal property................... (16) (131)
Gain on sale of investments...................................... (337) 30
Changes in policy liabilities and accruals....................... (4,960) 11,766
Additions to deferred policy acquisition costs................... (7,109) (4,155)
Net change in other operating assets and liabilities............. 18,641 43,182
-------- ---------
Net cash provided by operating activities............................. 69,214 122,330
-------- ---------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment.................................... (70,149) (144,794)
Fixed maturities................................................. (86,329) (31,098)
Real estate...................................................... (653) (8)
Mortgage loans................................................... (4,662) (5,504)
Proceeds from sale of investments:
Property, plant and equipment.................................... 38,015 58,868
Fixed maturities................................................. 37,863 30,756
Real estate...................................................... 691 220
Mortgage loans................................................... 6,177 1,442
Changes in other investments........................................ (8,802) (10,507)
-------- ---------
Net cash used by investing activities................................. (87,849) (100,625)
-------- ---------
Cash flows from financing activities:
Net change in short-term borrowings................................. 2,000 46,250
Loan to leveraged employee stock ownership plan..................... (2,523) (2,919)
Proceeds from leveraged employee stock ownership plan............... 136 119
Principal payments on notes......................................... (17,090) (44,449)
Net change in cash overdraft........................................ (8,072) (11,990)
Dividends paid...................................................... (3,241) (3,241)
Purchase of treasury shares......................................... (996) --
Investment contract deposits........................................ 60,383 6,966
Investment contract withdrawals..................................... (17,644) (11,266)
-------- ---------
Net cash provided (used) by financing activities...................... 12,953 (20,530)
-------- ---------
Increase in cash and cash equivalents................................. (5,682) 1,175
Cash and cash equivalents at beginning of period...................... 35,286 18,442
-------- ---------
Cash and cash equivalents at end of period............................ $ 29,604 $ 19,617
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-56
<PAGE> 92
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. 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 consolidated balance sheets as of June 30, 1995 and 1994, and the related
consolidated statements of earnings, changes in stockholders' equity and cash
flows for the quarters ended June 30, 1995 and 1994 are unaudited; in the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year.
The operating results and financial position of AMERCO's consolidated
insurance operations are determined on a quarter lag. There were no effects
related to intervening events which would significantly affect consolidated
position or results of operations for the financial statements presented herein.
The financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the Company's annual
financial statements and notes.
Earnings per share are computed based on the weighted average number of
shares outstanding, excluding shares of the employee stock ownership plan that
have not been committed to be released. Net income is reduced for preferred
dividends.
Certain reclassifications have been made to the financial statements for
the quarter ended June 30, 1994 to conform with the current year's presentation.
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is as follows
(in thousands, except for par value):
<TABLE>
<CAPTION>
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
MARCH 31, 1995 OF SHARES COST GAINS LOSSES VALUE
- -------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED HELD-TO-MATURITY
U.S. treasury securities and government
obligations................................ $ 20,400 $ 20,284 $ 918 $ (23) $ 21,179
U.S. government agency mortgage backed
securities................................. $ 65,381 64,797 321 (5,354) 59,764
Obligations of states and political
subdivisions............................... $ 30,105 29,804 1,932 (425) 31,311
Corporate securities......................... $ 191,263 196,517 1,465 (5,671) 192,311
Mortgage-backed securities................... $ 128,413 126,685 903 (8,042) 119,546
Redeemable preferred stocks.................. 33 1,966 303 (11) 2,258
-------- ------- -------- --------
$ 440,053 $ 5,842 $ (19,526) $ 426,369
-------- ------- -------- --------
</TABLE>
F-57
<PAGE> 93
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
2. INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
MARCH 31, 1995 PAR VALUE COST GAINS LOSSES VALUE
- -------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED AVAILABLE-FOR-SALE
U.S. treasury securities and government
obligations................................ $ 9,685 $ 9,797 $ 714 $ -- $ 10,511
U.S. government agency mortgage backed
securities................................. $ 3,410 3,232 68 (206) 3,094
States, municipalities and political
subdivisions............................... $ 5,825 6,098 109 (12) 6,195
Corporate securities......................... $ 262,874 262,628 4,157 (4,967) 261,818
Mortgage-backed securities................... $ 41,699 41,431 358 (2,345) 39,444
-------- ------- -------- --------
323,186 5,406 (7,530) 321,062
-------- ------- -------- --------
Total.............................. $ 763,239 $ 11,248 $ (27,056) $ 747,431
======== ======= ======== ========
</TABLE>
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES
A summary consolidated balance sheet (unaudited) for Ponderosa Holdings,
Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments -- fixed maturities............................. $ 761,115 $ 718,438
Other investments........................................... 126,747 94,392
Receivables................................................. 142,643 132,944
Deferred policy acquisition costs........................... 52,622 48,917
Due from affiliate.......................................... 12,999 9,125
Deferred federal income taxes............................... 8,720 8,195
Other assets................................................ 15,518 14,892
---------- ----------
Total assets...................................... $1,120,364 $1,026,903
========== ==========
Policy liabilities and accruals............................. $ 407,632 $ 385,539
Unearned premiums........................................... 66,645 64,292
Premium deposits............................................ 347,718 308,408
Other policyholders' funds and liabilities.................. 33,891 11,543
---------- ----------
Total liabilities................................. 855,886 769,782
Stockholder's equity........................................ 264,478 257,121
---------- ----------
Total liabilities and stockholder's equity........ $1,120,364 $1,026,903
========== ==========
</TABLE>
F-58
<PAGE> 94
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES -- (CONTINUED)
A summarized consolidated income statement (unaudited) for Ponderosa
Holdings, Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
QUARTERS ENDED JUNE
30,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Premiums......................................................... $30,097 $34,352
Net investment income............................................ 11,531 10,554
Other income..................................................... 1,601 1,267
------- -------
Total revenue.......................................... 43,229 46,173
Benefits and losses.............................................. 27,241 26,412
Amortization of deferred policy acquisition costs................ 2,928 3,084
Other expenses................................................... 5,313 7,801
------- -------
Income from operations................................. 7,747 8,876
Federal income tax expense....................................... (1,890) (2,742)
------- -------
Net income....................................................... $ 5,857 $ 6,134
======= =======
</TABLE>
4. CONTINGENT LIABILITIES AND COMMITMENTS
During the three months ended June 30, 1995, U-Haul Leasing & Sales Co., a
wholly-owned subsidiary of U-Haul International, Inc., entered into one
transaction, whereby they sold rental trucks and subsequently leased them back.
AMERCO has guaranteed $991,000 of residual values at June 30, 1995 on these
assets at the end of the lease term. Following are the lease commitments for the
lease executed during the three months ended June 30, 1995, which have a term of
more than one year (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED LEASE
MARCH 31, COMMITMENTS
---------- -----------
<S> <C>
1996............................................ $ 1,164
1997............................................ 1,553
1998............................................ 1,553
1999............................................ 1,553
2000............................................ 1,553
Thereafter...................................... 3,493
-------
$10,869
=======
</TABLE>
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. The Company owns property within two state
hazardous waste sites in the State of Washington. At this time, the remedial
clean-up cost or range of costs for such sites cannot be estimated. Management's
opinion is that none of these suits or claims involving AMERCO and/or its
subsidiaries is expected to result in any material loss.
F-59
<PAGE> 95
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
5. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories and accounts payable
and accrued liabilities net of other operating and investing activities follows:
<TABLE>
<CAPTION>
QUARTERS ENDED
JUNE 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Receivables............................................ $(23,625) $(14,042)
======== ========
Inventories............................................ $ (2,085) $ 7,092
======== ========
Accounts payable and accrued liabilities............... $ 20,933 $ 39,141
======== ========
</TABLE>
Income taxes paid in cash amounted to none and $224,000 for 1995 and 1994,
respectively.
Interest paid in cash amounted to $20,906,000 and $20,569,000 for 1995 and
1994, respectively.
6. RELATED PARTIES
Subsequent to March 31, 1995, a subsidiary of the Company continued to loan
TWO SAC Self-Storage Corporation (TWO SAC) funds for the purchase of an
additional 18 self-storage properties. As of June 30, 1995, $28,597,000 in
principal was due from TWO SAC, while interest of $797,000 has been accrued. No
payment of principal or interest will be made until the notes are finalized.
Mark V. Shoen, a major stockholder, director and officer of the Company owns all
of the issued and outstanding voting common stock of TWO SAC. The TWO SAC notes
will be secured by senior and junior mortgages and are expected to mature in
2004 or 2005, or on demand. TWO SAC anticipates acquiring approximately 28
properties from the Company that had been acquired by the Company or its
subsidiaries since June 1993.
On May 31, 1995, the Company purchased 45,000 shares of the Company's
Common Stock from Paul F. Shoen, a major stockholder of the Company, for
$996,000 or $22.125 per share. The transaction was effected on Nasdaq.
7. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 114 -- Accounting by
Creditors for Impairment of a Loan. 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 adopted this statement during the first quarter of
fiscal 1996, with no material impact on its financial condition or results of
operations.
Statement of Financial Accounting Standards No. 121 -- Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
Effective for fiscal years beginning after December 15, 1995, the standard
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an
F-60
<PAGE> 96
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
7. NEW ACCOUNTING STANDARDS -- (CONTINUED)
impairment loss is not recognized. Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity expects to hold
and use should be based on the fair value of the asset. The Company has not
completed an evaluation of the effect of this standard.
Statement of Position 93-7, Reporting on Advertising Costs -- as 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. The Company's direct response
advertising consists primarily of yellow page directories. The amortization
period is the life of the directory, the majority of which is one year. The
Company logs data which substantiates that truck and trailer rental reservations
are placed during the customer's telephone call. At June 30, 1995, $9,072,000 of
yellow page directory costs were reported as assets, with relating amortization
expense of $5,700,000 for the quarter ended June 30, 1995.
Other pronouncements issued by the Financial Standards Board with future
effective dates are either not applicable or not material to the consolidated
financial statements of the Company.
F-61
<PAGE> 97
================================================================================
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE UNDERWRITERS, OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS
Available Information................. 2
Information Incorporated by
Reference........................... 2
Risk Factors.......................... 3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 4
The Company........................... 5
Selected Consolidated Financial
Data................................ 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 7
Business.............................. 19
Use of Proceeds....................... 28
The Trust............................. 29
Shoen Litigation...................... 29
Description of Securities............. 30
Legal Opinions........................ 33
Experts............................... 33
Index to Financial Statements......... F-1
===============================================================================
================================================================================
3,860,000 SHARES
AMERCO
[PONDEROSA LOGO] [U-HAUL LOGO] [AMERCO LOGO]
SERIES D
FLOATING RATE PREFERRED STOCK
------------------------
PROSPECTUS
------------------------
, 1995
===============================================================================
<PAGE> 98
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.......... $ 65,552
Printing and Engraving Expenses.............................. 20,000*
Legal Fees and Expenses...................................... 50,000*
Accounting Fees and Expenses................................. 25,000*
Transfer Agent Fees.......................................... 2,500*
Other Expenses............................................... 1,948*
--------
Total Expenses..................................... $165,000*
========
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law requires the Company to indemnify
officers and directors for any expenses incurred by any officer or director in
connection with any actions or proceedings, whether civil, criminal,
administrative, or investigative, brought against such officer or director
because of his or her status as an officer or director, to the extent that the
director or officer has been successful on the merits or otherwise in defense of
the action or proceeding. The Nevada General Corporation Law permits a
corporation to indemnify an officer or director, even in the absence of an
agreement to do so, for expenses incurred in connection with any action or
proceeding if such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by independent legal
counsel in a written opinion authorized by a majority vote of a quorum of
directors consisting of disinterested directors, or by independent legal counsel
in a written opinion if a quorum of disinterested directors cannot be obtained.
The Company's Restated Articles of Incorporation eliminate personal liability of
directors and officers, to the Company or its stockholders, for damages for
breach of their fiduciary duties as directors or officers, except for liability
(i) for acts or omissions that involve intentional misconduct, fraud, or a
knowing violation of law, or (ii) for the unlawful payment of dividends. In
addition, the Company's By-Laws provide that the Company shall indemnify, to the
fullest extent authorized or permitted by law, any person made, or threatened to
be made, a defendant in any threatened, pending, or completed action, suit, or
proceeding by reason of the fact that he or she was a director or officer of the
Company. The Company has also executed Indemnification Agreements that provide
that certain of the Company's directors and officers shall be indemnified and
held harmless by the Company to the fullest extent permitted by applicable law
or the Restated Articles of Incorporation or By-Laws of the Company. The Company
has established a trust fund with Harris Trust and Savings Bank as trustee in
order to fund its obligations under the Indemnification Agreements. The Company
has agreed to maintain a minimum balance in the trust fund of $1,000,000. The
Nevada General Corporation Law prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law may permit an
officer or director to apply to the court for approval of indemnification even
if the officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law. The Nevada General Corporation Law
also provides that indemnification of directors is not permitted for the
unlawful payment of distributions, except for those directors registering their
dissent to the payment of the distribution.
II-1
<PAGE> 99
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
--------- -------
<S> <C>
1 -- Settlement Trust Agreement*
2 -- Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J.
Shoen and Summary of Plan Provisions(1)
4.1 -- Restated Articles of Incorporation(3)
4.2 -- Form of Stock Certificate*
4.3 -- Restated By-Laws*
4.4 -- Certificate of Designation*
5 -- Opinion re Legality*
10.1 -- AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Plan(4)
10.2 -- U-Haul Dealership Contract(5)
10.3 -- Share Repurchase and Registration Rights Agreement(5)
10.4 -- Share Repurchase and Registration Rights Agreement(5)
10.5 -- Management Consulting Agreement(6)
10.6 -- Management Consulting Agreement(6)
10.7 -- ESOP Loan Credit Agreement(6)
10.8 -- ESOP Loan Agreement(6)
10.9 -- Trust Agreement for the AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership(6)
10.10 -- Amended Indemnification Agreement(6)
10.11 -- Indemnification Trust Agreement(6)
10.12 -- W.E. Carty Installment Sales Agreement(6)
10.13 -- Exchange Agreement with Mark V. Shoen(7)
10.14 -- Exchange Agreement with James P. Shoen(7)
10.15 -- Exchange Agreement with Edward J. Shoen(7)
10.16 -- Exchange Agreement with Mark V. Shoen(4)
10.17 -- W.E. Carty Contract of Purchase and Sale of Land(7)
10.18 -- Promissory Notes between SAC Self-Storage Corporation and a subsidiary of
AMERCO(8)
10.19 -- Settlement Agreement with Paul F. Shoen(2)
10.20 -- Settlement Agreement with Mary Anna Shoen Eaton and Maran, Inc.*
12 -- Statements re Computation of Ratios*
23.1 -- Consent of Independent Accountants
23.2 -- Consent of Snell & Wilmer L.L.P. (included in Exhibit 5)*
23.3 -- Consent of Lionel, Sawyer & Collins (included in Exhibit 5)*
24 -- Power of Attorney (included on signature page of Registration Statement)
28 -- Information from Reports Furnished to State Insurance Regulatory
Authorities(2)
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995, File No. 0-7862.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1995, File No. 0-7862.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1992, File No. 0-7862.
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994, File No. 0-7862.
II-2
<PAGE> 100
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1993, File No. 0-7862.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1990, File No. 0-7862.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-2, Registration No. 33-54289.
(8) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, File No. 0-7862.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on the 30th day of
October, 1995.
AMERCO
By: /s/ EDWARD J. SHOEN
-----------------------------------
Edward J. Shoen
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes Edward J. Shoen, Gary B. Horton, Rocky D. Wardrip, and Gary V.
Klinefelter and each of them, as attorney-in-fact, to sign in his name and
behalf, individually and in each capacity designated below, and to file any
amendments, including post-effective amendments to this registration statement.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ EDWARD J. SHOEN President and Chairman of October 30, 1995
- ------------------------------------------ the Board (Principal
Edward J. Shoen executive officer)
/s/ GARY B. HORTON Treasurer (Principal October 30, 1995
- ------------------------------------------ financial and accounting
Gary B. Horton officer)
/s/ MARK V. SHOEN Director October 30, 1995
- ------------------------------------------
Mark V. Shoen
/s/ JAMES P. SHOEN Director October 30, 1995
- ------------------------------------------
James P. Shoen
Director October , 1995
- ------------------------------------------
William E. Carty
Director October , 1995
- ------------------------------------------
John M. Dodds
/s/ CHARLES J. BAYER Director October 30, 1995
- ------------------------------------------
Charles J. Bayer
/s/ RICHARD J. HERRERA Director October 30, 1995
- ------------------------------------------
Richard J. Herrera
Director October , 1995
- ------------------------------------------
Aubrey K. Johnson
</TABLE>
II-4
<PAGE> 102
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
--------- -----
<S> <C>
1 -- Settlement Trust Agreement*
2 -- Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J.
Shoen and Summary of Plan Provisions(1)
4.1 -- Restated Articles of Incorporation(3)
4.2 -- Form of Stock Certificate*
4.3 -- Restated By-Laws*
4.4 -- Certificate of Designation*
5 -- Opinion re Legality*
10.1 -- AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Plan(4)
10.2 -- U-Haul Dealership Contract(5)
10.3 -- Share Repurchase and Registration Rights Agreement(5)
10.4 -- Share Repurchase and Registration Rights Agreement(5)
10.5 -- Management Consulting Agreement(6)
10.6 -- Management Consulting Agreement(6)
10.7 -- ESOP Loan Credit Agreement(6)
10.8 -- ESOP Loan Agreement(6)
10.9 -- Trust Agreement for the AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership(6)
10.10 -- Amended Indemnification Agreement(6)
10.11 -- Indemnification Trust Agreement(6)
10.12 -- W.E. Carty Installment Sales Agreement(6)
10.13 -- Exchange Agreement with Mark V. Shoen(7)
10.14 -- Exchange Agreement with James P. Shoen(7)
10.15 -- Exchange Agreement with Edward J. Shoen(7)
10.16 -- Exchange Agreement with Mark V. Shoen(4)
10.17 -- W.E. Carty Contract of Purchase and Sale of Land(7)
10.18 -- Promissory Notes between SAC Self-Storage Corporation and a subsidiary of
AMERCO(8)
10.19 -- Settlement Agreement with Paul F. Shoen(2)
10.20 -- Settlement Agreement with Mary Anna Shoen Eaton and Maran, Inc.*
12 -- Statements re Computation of Ratios*
23.1 -- Consent of Independent Accountants
23.2 -- Consent of Snell & Wilmer L.L.P. (included in Exhibit 5)*
23.3 -- Consent of Lionel, Sawyer & Collins (included in Exhibit 5)*
24 -- Power of Attorney (included on signature page of Registration Statement)
28 -- Information from Reports Furnished to State Insurance Regulatory
Authorities(2)
</TABLE>
- ---------------
* To be filed by amendment
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995, File No. 0-7862.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1995, File No. 0-7862.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1992, File No. 0-7862.
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994, File No. 0-7862.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1993, File No. 0-7862.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1990, File No. 0-7862.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-2, Registration No. 33-54289.
(8) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, File No. 0-7862.
<PAGE> 103
APPENDIX A
DESCRIPTION OF GRAPHIC MATERIAL
1. Location: Outside Front Cover and Outside Back Cover Pages of Prospectus
Item: Logos
Description: Logos of the three principal subsidiaries of Amerco; Ponderosa
Holdings, Inc., U-Haul International, Inc., and Amerco Real
Estate Company situated horizontally beside one another
directly under the heading of the Prospectus containing the
name of the Company.
2. Location: Page 10 of the Prospectus
Item: Corporate Structure
Description: A chart showing the corporate structure of the Company and its
major subsidiaries. The chart shows the Company on top, above
its three principal subsidiaries; Ponderosa Holdings, Inc.,
U-Haul International, Inc., and Amerco Real Estate Company
situated horizontally beside one another. Directly below
Ponderosa Holdings, Inc. are its subsidiaries, Oxford Life
Insurance Company and Republic Western Insurance Company,
situated horizontally beside one another.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-2 of our report dated June 26, 1995, which
contains an explanatory paragraph related to certain litigation, relating to the
consolidated financial statements of AMERCO, which appears in such Prospectus.
We also consent to the application of such report to the Financial Statement
Schedules for the three years ended March 31, 1995 listed under Item 14(a) of
AMERCO's Annual Report on Form 10-K for the year ended March 31, 1995 when such
schedules are read in conjunction with the financial statements referred to in
our report. The audits referred to in such report also included these Financial
Statement Schedules. We also consent to the reference to us under the heading
"Experts".
PRICE WATERHOUSE LLP
October 30, 1995
Phoenix, Arizona
