<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1996
REGISTRATION NO. 33-63825
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
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)
------------------------
COPY 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. / /
------------------------
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
- -------- ----------------------------------------- -----------------------------------------
<C> <S> <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 JANUARY 9, 1996
PROSPECTUS
3,860,000 SHARES
A M E R C O
SERIES D FLOATING RATE REDEEMABLE PREFERRED STOCK
LOGO LOGO LOGO
This Prospectus relates to 3,860,000 shares of Series D Floating Rate
Redeemable 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 at a
price of $50 per share, plus accrued and unpaid dividends thereon to the date of
redemption. 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 Reports of the Company on Form 10-Q for the
quarters ended June 30 and September 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 900 underground
storage tanks as of September 30, 1995 and has been named a "potentially
responsible party" with respect to the disposal of hazardous wastes at ten
federal and two 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."
3
<PAGE> 6
NO PUBLIC MARKET FOR SECURITIES; POSSIBLE VOLATILITY OF PRICE
There is no public market for the Securities. The Securities have not been
approved for listing on the New York Stock Exchange or on any other stock
exchange. The lack of a public market for the Securities may have an adverse
effect on the liquidity and the price of the Securities. The price for the
Securities may be influenced by many factors, including the operating
performance of the Company, the depth and liquidity of the market, if any, for
the Securities, investor perception of the Company and general economic and
market conditions.
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. The ratio for the six months ended September 30,
1995 may not be indicative of the ratio to be expected for fiscal 1996 because,
among other reasons, the Company's U-Haul business is seasonal, with
substantially all of its earnings being generated in the first and second
quarters of each fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31,
- ------------- ----------------------------------------
1995 1995 1994 1993 1992 1991
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
2.60 1.87 1.64 1.45 1.21 N/A
</TABLE>
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 1,100 Company-owned U-Haul Centers and
approximately 12,700 independent dealers throughout the United States and
Canada. U-Haul's rental equipment fleet consists of approximately 83,000 trucks
and approximately 90,000 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
11.7 million square feet of self-storage space through the management of
approximately 650 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.
[ 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 six months ended September 30,
1995 and 1994 has been derived from the Company's unaudited quarterly report on
Form 10-Q for the quarter ended September 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 six months ended September 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 six
months ended September 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 SIX
MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, SEPTEMBER 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 $ 607,104 $ 591,833
Premiums and net investment income..... 177,733 162,151 139,465 126,756 126,620 94,672 90,020
---------- ---------- ---------- ---------- ----------
1,240,863 1,134,855 1,040,911 971,884 986,664 701,776 681,853
---------- ---------- ---------- ---------- ----------
Operating expense and cost of sales.... 783,933 735,841 697,700 661,229 668,149 426,136 393,008
Benefits, losses and amortization of
deferred acquisition costs........... 144,303 130,168 115,969 99,091 126,626 75,898 71,955
Depreciation........................... 151,409 133,485 110,105 109,641 114,589 76,275 74,755
Interest expense....................... 67,762 68,859 67,958 76,189 80,815 35,554 33,297
---------- ---------- ---------- ---------- ----------
1,147,407 1,068,353 991,732 946,150 990,179 613,863 573,015
---------- ---------- ---------- ---------- ----------
Pretax earnings (loss) from
operations........................... 93,456 66,502 49,179 25,734 (3,515) 87,913 108,838
Income tax expense..................... (33,424) (19,853) (17,270) (4,940) (6,354) (31,854) (39,354)
---------- ---------- ---------- ---------- ----------
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) 56,059 69,484
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) $ 56,059 $ 69,484
========== ========== ========== ========== ==========
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) $ 1.31 $ 1.70
Net earnings (loss) per common
share(3)............................. 1.23 .89 .83 .53 (.25) 1.31 1.70
Weighted average common shares
outstanding(2)....................... 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080 37,931,825 37,053,707
Cash dividends declared................ $ 12,964 $ 7,900 $ 1,994 -- $ 1,176 $ 6,482 $ 6,482
Ratio of earnings to fixed
charges(1)........................... 1.87 1.64 1.45 1.21 --(1) 2.60 3.10
MARCH 31, SEPTEMBER 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 $1,243,171 $1,267,671
Total assets........................... 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977 2,698,382 2,506,079
Notes and loans payable................ 881,222 723,764 697,121 733,322 804,826 796,738 752,529
Stockholders' equity................... 686,784 651,787 479,958 451,888 435,180 747,424 708,784
</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 years ended March 31, 1995 and 1994, and for the six months
ended September 30, 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)
Six Months Ended September 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 six months ended September 30, 1995 and 1994. 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. 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>
SIX MONTHS ENDED SEPTEMBER 30, 1995
Revenues:
Outside............................... $ 602,687 $ 24,265 $ 74,824 $ -- $ 701,776
Intersegment.......................... (270) 708 4,662 (5,100) --
---------- -------- -------- --------- ----------
Total revenues................. $ 602,417 $ 24,973 $ 79,486 $ (5,100) $ 701,776
========== ======== ======== ========= ==========
Operating profit...................... $ 106,787 $ 6,838 $ 9,572 $ 270 $ 123,467
========== ======== ======== =========
Interest expense...................... 35,554
----------
Pretax earnings from operations....... $ 87,913
==========
Identifiable assets at September 30... $1,854,491 $ 563,138 $593,506 $ (312,753) $2,698,382
========== ======== ======== ========= ==========
SIX MONTHS ENDED SEPTEMBER 30, 1994
Revenues:
Outside............................... $ 588,897 $ 19,682 $ 73,274 $ -- $ 681,853
Intersegment.......................... (41) 744 8,939 (9,642) --
---------- -------- -------- --------- ----------
Total revenues................. $ 588,856 $ 20,426 $ 82,213 $ (9,642) $ 681,853
========== ======== ======== ========= ==========
Operating profit...................... $ 124,197 $ 6,295 $ 11,602 $ 41 $ 142,135
========== ======== ======== =========
Interest expense...................... 33,297
----------
Pretax earnings from operations....... $ 108,838
==========
Identifiable assets at September 30... $1,733,767 $ 462,229 $577,127 $ (267,044) $2,506,079
========== ======== ======== ========= ==========
</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>
SIX MONTHS ENDED SEPTEMBER 30, 1995 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1994
U-Haul
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $9.0 million, approximately
1.8%, to $500.2 million in the first six months of fiscal 1996. The increase in
the first six months of fiscal 1996 is primarily attributable to an increase in
net revenues from the rental of moving related equipment and self-storage
facilities which increased in the aggregate by $13.3 million to $512.1 million,
as compared to $498.8 million in the first six months of fiscal 1995. Moving
related rental revenues benefited from transactional growth (volume) within the
truck fleet. Revenues from the rental of self-storage facilities were positively
impacted by additional rentable square footage. Other revenues decreased in the
aggregate by $4.3 million.
Net sales revenues were $102.7 million in the first six months of fiscal
1996, which represents an increase of approximately 5.1% from the first six
months of fiscal 1995 net sales of $97.7 million. Revenue growth from the sale
of moving support items (i.e. boxes, etc.), hitches, and propane resulted in a
$5.3 million increase during the six month period, which was offset by a $0.6
million decrease in revenue from gasoline sales
8
<PAGE> 11
consistent with the Company's ongoing efforts to remove underground storage
tanks and gradually discontinue gasoline sales.
Cost of sales was $58.0 million in the first six months of fiscal 1996,
which represents an increase of approximately 8.8% from $53.3 million for the
same period in fiscal 1995. This increase in cost of sales reflects a $3.8
million increase in material costs from the sale of moving support items,
hitches, and propane reflecting higher sales levels and a $1.0 million increase
in allowances for inventory shrinkage and other inventory adjustments.
Operating expenses increased to $361.4 million in the first six months of
fiscal 1996 from $336.6 million in the first six months of fiscal 1995, an
increase of approximately 7.0%. The change from the prior year primarily
reflects a $19.7 million increase in rental equipment maintenance costs which
reflects rental fleet expansion and transactional growth and a $6.2 million
increase in personnel costs due to the increase in rental and sales activity.
All other operating expense categories decreased in the aggregate by $3.8
million, approximately 4.6%, to $77.5 million.
Depreciation expense for the six month period was $76.3 million, as
compared to $74.8 million during the same period of the prior year.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $8.9 million for the six months ended June 30, 1995, or 69.1% of total
premiums for that period. This represents an increase of $0.7 million, or 8.5%
over the same period in 1994. 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
$4.0 million for the six months ended June 30, 1995, an increase of $1.7 million
from 1994. This increase in direct premium is primarily attributable to the
credit insurance business ($3.0 million in premiums). Oxford's direct business
related to group life and disability coverage issued to employees of the Company
for the six months ended June 30, 1995 accounted for approximately 7.4% of
premiums. Other direct lines, including the credit insurance business, accounted
for approximately 23.5% of Oxford's premiums for the six months ended June 30,
1995.
Net investment income before intercompany eliminations was $8.0 million and
$7.7 million for the six months June 30, 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 $2.9
million and $1.2 million for the six months ended June 30, 1995 and 1994,
respectively. Oxford had $1.0 million of other income for both of the six month
periods ended June 30, 1995 and 1994, respectively.
Benefits and expenses incurred were $18.1 million for the six months ended
June 30, 1995, an increase of 28.3% over 1994. Comparable benefits and expenses
incurred for 1994 were $14.1 million. This increase is primarily due to death
and disability benefits incurred and an increase in the amortization of deferred
acquisition costs.
Operating profit before intercompany eliminations increased by $0.5
million, or approximately 7.9%, in 1995 to $6.8 million, primarily due to an
increase in gains on the disposition of fixed maturity investments that was
partially offset by the amortization of deferred acquisitions costs.
RWIC -- Property and Casualty
RWIC gross premium writings for the six months ended June 30, 1995 were
$81.4 million as compared to $93.6 million in the first six months of 1994. The
rental industry market accounts for a significant share of total premiums,
approximately 41.5% and 40.5% in the first six months 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
9
<PAGE> 12
in this area decreased during the first six months of 1995 to $27.9 million, or
34.3% of total gross premiums, from comparable 1994 figures of $38.7 million, or
41.4% 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 were 16.9% of
total gross written premiums in 1995 as compared to 13.9% 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 6.3% of the
total gross written premium during the first six months of 1995.
Net earned premiums decreased $2.9 million, or 4.4%, to $63.5 million for
the six months ended June 30, 1995, compared with premiums of $66.4 million for
the six months ended June 30, 1994. The premium decrease 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 $69.9 million for the six months ended
June 30, 1995, a decrease of $0.7 million or 1.0% over 1994. Comparable
underwriting expenses incurred for the first six months of 1994 were $70.6
million. The decrease is due to a reduction in acquisition expenses, which is
the result of lower commission rates on start up programs, offset by an increase
in administrative expenses and taxes related to increased concentration in
states with higher premium tax rates.
Net investment income was $15.3 million for the six months ended June 30,
1995, an increase of 3.4% over the 1994 level of net investment income of $14.8
million. The marginal increase is the result of the shift in types of securities
held in the portfolio.
RWIC completed the first six months of 1995 with income before tax expense
of $9.6 million as compared to $11.6 million for the comparable period ended
June 30, 1994. This represents a decrease of $2.0 million, or 17.2% over 1994.
Deterioration in the level of anticipated 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 $2.3 million to $35.6 million for the six
months ended September 30, 1995, as compared to $33.3 million for the six months
ended September 30, 1994. The increase was attributable to higher average debt
levels outstanding.
Consolidated Group
As a result of the foregoing, pretax earnings of $87.9 million were
realized in the six months ended September 30, 1995, as compared to $108.8
million for the same period in 1994. After providing for income taxes, net
earnings for the six months ended September 30, 1995 were $56.1 million, as
compared to $69.5 million for the same period of the prior year.
QUARTER ENDED SEPTEMBER 30, 1995 VERSUS QUARTER ENDED SEPTEMBER 30, 1994
U-Haul
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $3.0 million, approximately
1.1%, to $266.3 million in the second quarter of fiscal 1996. This increase
reflects a $7.3 million increase in net revenues from the rental of moving
related equipment and self-storage facilities primarily reflecting growth in
truck rental transactions and additional rentable square footage.
Net sales revenues were $49.6 million in the second quarter of fiscal 1996,
which represents an increase of approximately 6.8% from the second quarter of
fiscal 1995 net sales of $46.4 million. Revenue growth from the sale of moving
support items (i.e. boxes, etc.), hitches, and propane resulted in a $3.1
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.
10
<PAGE> 13
Cost of sales totaled $29.0 million in the second quarter of fiscal 1996,
which represents an increase of 12.8% from $25.7 million for the same period in
fiscal 1995. This increase in cost of sales reflects a $2.0 million rise in
material costs from the sale of moving support items and propane which can be
primarily attributed to higher sales levels and a $1.0 million increase in
allowances for inventory shrinkage and other inventory adjustments.
Operating expenses increased to $184.0 million in the second quarter of
fiscal 1996 from $175.9 million in the second quarter of fiscal 1995, an
increase of approximately 4.6%. The change from the prior year is almost
entirely due to higher rental equipment maintenance costs reflecting an increase
in fleet size and transaction levels. In the aggregate, all other operating
expense categories decreased by $5.6 million in the second quarter of fiscal
1996 reflecting efforts to contain expense growth during this period.
Depreciation expense for the three month period was $38.6 million, as
compared to $37.5 million during the same period of the prior year.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $4.9 million for the quarter ended June 30, 1995, or 70.9% of total
premiums for that period. This represents an increase of $0.5 million over the
same period in 1994 or an increase of 11.4%. Reinsurance premiums are primarily
from term life insurance, matured deferred annuity contracts, and credit
insurance business. This increase is primarily attributable to the recent (4th
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 June 30, 1995, an increase of $0.1 million.
This increase in direct premium is primarily attributable to the credit
insurance business. Oxford's direct business related to group life and
disability coverage issued to employees of the Company for the quarter ended
June 30, 1995 accounted for approximately 6.8% of premiums. Other direct lines,
including the credit business, accounted for approximately 22.3% of Oxford's
premiums for the quarter ended June 30, 1995.
Net investment income before intercompany eliminations was $4.2 million and
$4.1 million for the quarter ended June 30, 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 $2.8
million and $1.0 million for the quarters ended June 30, 1995 and 1994,
respectively. Oxford had $0.5 million of other income, for both of the quarters
ended June 30, 1995 and 1994, respectively.
Benefits and expenses incurred were $10.1 million for the quarter ended
June 30, 1995, an increase of 34.7% over 1994. Comparable benefits and expenses
incurred for 1994 were $7.5 million. This increase is primarily due to
disability benefits incurred and an increase in the amortization of deferred
acquisition costs, primarily as a result of the increase in realized capital
gains on fixed maturity investments.
Operating profit before intercompany eliminations decreased by $0.2
million, or approximately 4.6% as compared to $4.2 million for the quarters
ended June 30, 1995 and 1994, respectively.
RWIC -- Property and Casualty
RWIC gross premium writings for the quarter ended June 30, 1995 were $45.2
million as compared to $48.0 million in the second quarter of 1994. The rental
industry market accounts for a significant share of total premiums,
approximately 60.1% and 59.5% in the second 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 second quarter of 1995 to $7.7 million, or 17.1%
of total gross premiums, from comparable 1994 figures of $11.7 million, or 24.4%
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 were 16.5% of
total gross written premiums in 1995 as compared to 12.2% in 1994. RWIC expanded
its direct business in 1995 to include multiple peril
11
<PAGE> 14
coverage for a variety of commercial properties and businesses. These premiums
accounted for 6.3% of the total gross written premium during second quarter
1995.
Net earned premiums increased $3.2 million, or 8.8% to $39.5 million for
the quarter ended June 30, 1995, compared with premiums of $36.3 million for the
quarter ended June 30, 1994. The premium increase was primarily due to timing
differences related to run-off and start up programs.
Underwriting expenses incurred were $42.4 million for the quarter ended
June 30, 1995, an increase of $2.5 million, or 6.3% over 1994. Comparable
underwriting expenses incurred for the first quarter of 1994 were $39.9 million.
The increase is commensurate with the increase in premiums.
Net investment income was $7.7 million for the quarter ended June 30, 1995,
a decrease of 2.5% over 1994 net investment income of $7.9 million.
RWIC completed the second quarter of 1995 with income before tax expense of
$4.5 million as compared to $4.6 million for the comparable period ended June
30, 1994. This represents a decrease of $0.1 million, or 2.2% over 1994.
Interest Expense
Interest expense was unchanged at $16.7 million for the quarter ended
September 30, 1995. Higher average debt levels were offset by a reduction in the
average cost of borrowed funds.
Consolidated Group
As a result of the foregoing, pretax earnings of $55.1 million were
realized in the quarter ended September 30, 1995, as compared to $63.0 million
for the same period in 1994. After providing for income taxes, net earnings for
the quarter ended September 30, 1995 were $35.2 million, as compared to $40.1
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.
12
<PAGE> 15
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 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.
13
<PAGE> 16
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 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. For a discussion of the impact interest rate
derivatives have had on the Company's interest expense, see Note 5 to the
Consolidated Financial Statements.
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
14
<PAGE> 17
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
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
15
<PAGE> 18
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 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.
For a discussion of the impact interest rate derivatives have had on the
Company's interest expense, see Note 5 to the Consolidated Financial Statements.
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.
16
<PAGE> 19
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the ten
quarters in the period beginning April 1, 1993 and ending September 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. MARCH SEPT.
30, DEC. 31, 31, JUNE 30, 30,
1994 1994 1995 1995 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total revenues.......................... $359,520 $295,888 $260,282 $330,509 $371,267
Net earnings (loss)..................... 40,071 1,907 (11,359) 20,862 35,197
Net earnings (loss) per common
share(1)(2)........................... 1.00 (.04) (.44) .46 .84
QUARTER ENDED
--------------------------------------------------------
SEPT. MARCH
JUNE 30, 30, DEC. 31, 31, JUNE 30,
1993 1993 1993 1994 1994
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenues.......................... $291,348 $324,968 $267,448 $251,091 $322,333
Net earnings (loss)..................... 17,359 30,601 1,799 (9,575) 29,413
Net earnings (loss) per common
share(1).............................. .45 .79 (.02) (.33) .71
</TABLE>
- ---------------
(1) For the quarters ended December 31, 1993, March 31, June 30, September 30,
December 31, 1994, March 31, June 30, and September 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 September 30, 1995, net property, plant and
equipment represented approximately 67.3% of total U-Haul assets and
approximately 46.1% of consolidated assets. In the first six months of fiscal
1996, capital expenditures were $143.1 million, as compared to $255.2 million in
the first six months of fiscal 1995. 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 $145.9 million in the first six months of
fiscal 1996, as compared to $162.6 million in the first six months of fiscal
1995. The decrease of $16.7 million is primarily due to a decrease in net change
of operating assets and liabilities, specifically an increase in receivables and
accounts payable and accrued liabilities and with a decrease in 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 consideration. Benefit and claim statistics are continually monitored
to provide projections of future cash requirements.
17
<PAGE> 20
Cash provided (used) by operating activities were ($2.2) million and $9.8
million for the six months ended June 30, 1995 and 1994, respectively. Cash
flows from new annuity reinsurance agreements increased investment contract
deposits as well as the purchase of fixed maturities. Cash flows from financing
activities of new annuity reinsurance agreements were approximately $90.0
million for the six months ended June 30, 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 June 30, 1995 and 1994,
short-term investments amounted to $15.1 million and $9.1 million, respectively.
Management believes that the overall sources of liquidity will continue to meet
foreseeable cash needs.
Stockholder's equity of Oxford, increased to $99.6 million in 1995 from
$91.0 million in 1994. Ponderosa holds all of the common stock of RWIC.
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. 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 $0.6 million and $12.4 million
for the six months ended June 30, 1995 and June 30, 1994, respectively. The
change is due to decreased net income and reinsurance losses payable, offset by
a decrease in accounts receivable as compared to a large increase during the
first half of 1994.
RWIC's short-term investment portfolio was $5.4 million at June 30, 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 96.7% 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 96.3% of total liabilities.
Stockholder's equity increased 6.5% from $168.1 million at December 31,
1994 to $179.1 million at June 30, 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 six months ended June 30, 1995.
CONSOLIDATED GROUP
At September 30, 1995, total notes and loans payable outstanding was $796.7
million as compared to $881.2 million at March 31, 1995, and $752.5 million at
September 30, 1994.
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 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.
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<PAGE> 21
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 September 30, 1995, the
Company had $796.7 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $405.0 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. At September 30, 1995 the
Company was in compliance with these covenants.
The Company is further restricted in the amount of dividends and
distributions that it may issue or pay, and in the issuance of certain types of
preferred stock. As of September 30, 1995, the most restrictive of such
covenants limiting dividends 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) $65.8 million and (ii) 50% of consolidated
net income computed on a cumulative basis for the entire period subsequent to
September 30, 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. See "Description of Securities -- Dividends." Furthermore, 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.
19
<PAGE> 22
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
September 30, 1995, $9,120,000 of yellow page directory costs were reported as
assets, with related amortization expense of $11,427,000 for the quarter ended
September 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.
20
<PAGE> 23
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 September 30, 1995, the Company's
distribution network included over 1,100 U-Haul Centers and over 12,700
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 September
30, 1995, such self-storage facilities were located at or near approximately 59%
of the Company's U-Haul Centers. Beginning in 1974, the Company introduced the
sale and installation of hitches and towing systems, as well as the sale of
support items such as packing and moving aids. During 1983, the Company expanded
its range of do-it-yourself rental products to include tools and equipment for
the homeowner and small contractor and other general rental items.
In 1969, the Company acquired Oxford to provide employee health and life
insurance for the Company in a cost-effective manner. In 1973, the Company
formed RWIC to provide automobile liability insurance for the U-Haul truck and
trailer rental customers.
Commencing in 1987, the Company began the implementation of a strategic
plan designed to emphasize reinvestment in its core do-it-yourself rental,
moving, and storage business. The plan included a fleet renewal program (see
"Business -- U-Haul Operations -- Rental Equipment Fleet"), and provided for the
discontinuation of certain unprofitable and unrelated operations. As part of its
plan, the Company discontinued the operation of its full-service moving van
lines, initiated the phase out of its recreational vehicle rental operations,
and began the disposition of its recreational vehicle rental fleet. The
disposition of the moving van lines' assets and the recreational vehicle rental
fleet were completed in 1988 and 1992, respectively. The Company also eliminated
various types of rental equipment and closed certain warehouses and repair
facilities. The Company believes that its refocused business strategy enabled
U-Haul to generate higher revenues and to achieve significant cost savings.
Since 1987, the Company has sold surplus real estate assets with a book
value of approximately $40.2 million for total proceeds of approximately $81.5
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
21
<PAGE> 24
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 7,200 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 77,000 new trucks between March 1987 and September 1995 and
reduced the overall average age of its truck fleet from approximately 11 years
at March 1987 to approximately five and one-half years at September 1995. During
this period, approximately 63,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 58% 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
22
<PAGE> 25
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.
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 September 30, 1995, U-Haul's rental equipment fleet consisted of
approximately 83,000 trucks and approximately 90,000 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 September 30, 1995, over 1,100 Company-operated
U-Haul Centers and over 12,700 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
23
<PAGE> 26
expansion or replacement purposes. U-Haul has instituted performance
compensation programs that focus on accomplishment and reward strong performers.
SELF-STORAGE BUSINESS
U-Haul entered the self-storage business in 1974 and since that time has
increased the rentable square footage of its storage locations through the
acquisition of existing facilities and new construction. In addition, the
Company has entered into management agreements to manage self-storage properties
owned by other companies and is expanding its ownership of self-storage
facilities. The Company also provides financing and management services for
independent self-storage businesses.
Through approximately 650 Company-owned locations in the United States and
Canada, the Company offers for rent more than 11.7 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 September 30, 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 1,300 employees and the
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<PAGE> 27
percentage of part-time employees increases to approximately 43% of the total
workforce. The Company's employees are non-unionized, and management believes
that its relations with its employees are satisfactory.
INSURANCE OPERATIONS
OXFORD -- LIFE INSURANCE
Oxford underwrites life, health and annuity insurance, both as a direct
writer and as an assuming reinsurer. Oxford's direct 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 the Company. In addition, direct premium includes
individual life insurance acquired from other insurers. Oxford administers the
Company'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.
25
<PAGE> 28
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 the next page 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.
26
<PAGE> 29
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------------------------------------------------------------------
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <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 $226,324 $236,019 $238,762 $314,482 $329,741
Paid (Cumulative)
as of:
One year
later... 24,602 41,170 54,627 49,681 59,111 50,992 55,128 65,532 83,923 70,382
Two years
later... 50,628 77,697 92,748 91,597 89,850 87,850 97,014 105,432 123,310
Three years
later... 70,719 105,160 124,278 110,834 114,979 116,043 120,994 126,390
Four years
later... 84,936 126,734 137,744 129,261 133,466 132,703 133,338
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... 101,097 138,287 167,211 187,663 200,888 206,701 229,447 231,779 251,450 321,058
Two years
later... 107,111 147,968 192,272 190,715 202,687 206,219 221,450 224,783 254,532
Three years
later... 115,746 168,096 192,670 194,280 203,343 199,925 211,988 223,403
Four years
later... 119,977 168,040 199,576 195,917 199,304 198,986 207,642
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 $ 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.
27
<PAGE> 30
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".
28
<PAGE> 31
ENVIRONMENTAL MATTERS
UNDERGROUND STORAGE TANKS
The Company owns properties that, as of September 30, 1995, contained a
total of approximately 900 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 $21.7 million for removal and remediation of
1,879 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.
29
<PAGE> 32
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.
30
<PAGE> 33
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the
Securities.
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 not issue the Securities to the Trust until the Plan, as
described below, has been approved by the bankruptcy court and the terms of the
transaction are deemed by the bankruptcy court to fully satisfy the judgment in
the Shoen Litigation. 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 resulting from the Shoen Litigation
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 ("Shoen
Eaton"), and by Maran, Inc. ("Maran") (the Non-Stockholder Plaintiffs, the
Stockholder-Plaintiffs, Shoen Eaton, and Maran shall collectively be referred to
as the "plaintiffs"). The Company was also a defendant in the action as
originally filed, but was dismissed from the action on August 15, 1994. The
plaintiffs 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 Common 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. In addition, on February 21, 1995 judgment was entered against
Edward J. Shoen in the amount of $7 million as punitive damages. On March 23,
1995, Edward J. Shoen filed a notice of appeal with respect to the award of
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 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. Furthermore, 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 propose the
31
<PAGE> 34
same funding and treatment of the plaintiffs' claims resulting from the judgment
in the Shoen Litigation. The plans of reorganization, as amended, shall
collectively be referred to as the "Plan."
In early October 1995, the Director-Defendants made written demand upon the
Company to make them whole for losses resulting from the judgment in the Shoen
Litigation. The Director-Defendants have also asserted substantial claims
against the Company related to or arising from the Shoen Litigation, including,
but not limited to, claims for financial losses, emotional distress, loss of
business and/or professional reputation, loss of credit standing and breach of
contract. The Director-Defendants claim that their actions that form the basis
for the judgment in the Shoen Litigation were actions within the scope of the
Director-Defendants' duties and that such actions were undertaken in good faith
and for the benefit of the Company.
In addition, the Director-Defendants retain unexpired appeal rights with
respect to the Shoen Litigation. If the Director-Defendants exercise such appeal
rights, the damage award may be sustained and/or increased and the Company may
be exposed to increased liability to the Director-Defendants under existing
indemnity agreements, which liability includes the obligation to pay the legal
fees and expenses of prosecuting appeals.
In recognition of the foregoing and of the substantial risks associated
with an appeal of the Shoen Litigation, on October 17, 1995, the Company entered
into an agreement (the "Agreement") with the Director-Defendants resolving the
foregoing issues. Under the Agreement, the Company agreed, among other things,
to fund the Plan and to release the Director-Defendants from all claims the
Company may have against them arising from the Shoen Litigation. In addition,
the Director-Defendants agreed, (i) to release, subject to certain exceptions,
the Company from any claim they may have against it pursuant to any
indemnification agreements, (ii) to assign all rights they have under the Shoen
Litigation to the Company, (iii) to waive all appeal rights related to the Shoen
Litigation (not including Edward J. Shoen's appeal of the punitive damage
award), and (iv) not to oppose the Company should it elect to exercise its right
of first refusal on any Common Stock to be transferred by the plaintiffs upon
satisfaction of the judgment in the Shoen Litigation.
Under the Plan, on September 19, 1995, the Director-Defendants entered into
a Stock Purchase Agreement with Maran contingent upon bankruptcy court approval.
Under the Stock Purchase Agreement, the Director-Defendants agreed to purchase
3,343,076 shares of Common Stock held by Maran in exchange for approximately
$22.7 million. The Stock Purchase Agreement was approved by the bankruptcy court
on October 10, 1995. On October 18, 1995, the Company exercised its right of
first refusal and redeemed the Common Stock that was the subject of the Stock
Purchase Agreement for the price set forth therein. In addition, on September
19, 1995, the Director-Defendants, Shoen Eaton, Maran, and the Company entered
into a Settlement Agreement, contingent upon bankruptcy court approval,
providing for the payment to Shoen Eaton of approximately $41.4 million 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. The Settlement Agreement was approved by the bankruptcy court on
October 10, 1995, and the payment was made on October 18, 1995. As a result of
the foregoing, and after giving effect to the discount achieved through
settlement, approximately $84.6 million of the judgment in the Shoen Litigation
has been satisfied.
With respect to the Non-Stockholder Plaintiffs, the Company will transfer
to the Trust, property having a stipulated or adjudicated value of approximately
$275.2 million. Each of the Non-Stockholder Plantiffs will receive a trust
certificate representing an undivided, fractional beneficial interest in the
Trust. The property transferred to the Trust under the Plan is subject to
adjustment by the Company prior to approval of the Plan, but is expected to
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 $13.5
million; (iv) real property held free and clear by the Company or it
subsidiaries having a total fair value of approximately $42.7 million; and (v)
approximately $13.5 million in cash. In addition, under the Plan, the
Stockholder-Plantiffs will receive 4,056,034 shares of the Company's 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 $101,400,850 of the Company's Series B 8.25% Preferred Stock, the
judgment will be satisfied.
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<PAGE> 35
The Plan was approved by the bankruptcy court on January , 1995. The
Company is unable to determine with certainty the Plan's impact on the Company's
financial condition, results of operations, cash flows, or capital expenditure
plans. However, as a result of funding the Plan, the Company will incur
additional costs in the future in the form of dividends on preferred stock and
interest on borrowed funds. For example, dividends on the Securities and on the
Series B 8.25% Preferred Stock (at current dividend rates), will aggregate
approximately $20.6 million per year. In addition, the Company's outstanding
Common Stock will be reduced by 14,911,900 shares. While the Plan will have the
effect of reducing the Company's net income, the Company does not expect
earnings per common share to be adversely affected by the Plan. However,
uncertainties remain about the Plan, including the tax treatment of the payments
to be made by the Company under the Plan. Specifically, the Company plans to
deduct for income tax purposes approximately $302.5 million in payments made by
the Company pursuant to the Plan, which will reduce the Company's income tax
liability by approximately $111.9 million. While the Company believes that such
income tax deduction is appropriate, there can be no assurance that the
deduction ultimately will be allowed in full. Accordingly, for tax and other
reasons, the Plan could result in material changes in stockholders' equity and
earnings per common share. No provision has been made in the Company's financial
statements for any payments to be made to the plaintiffs or to the Trust under
the Plan.
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.
33
<PAGE> 36
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 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 September 30, 1995, the aggregate amount
available for dividends commencing October 1, 1995, was approximately $65.8
million. At current interest rates, dividends payable on the Securities will be
approximately $12.2 million per year. In addition, dividends payable on other
series of the Company's preferred stock are approximately $21.3 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
34
<PAGE> 37
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 held by the Trust, by the Non-Stockholder Plaintiffs or by
any "affiliate" (as defined in the Rules and Regulations under the Securities
Act) of any of the Non-Stockholder Plaintiffs (an "Affiliate") 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
$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. In addition, any Securities held by the Trust, by
the Non-Stockholder Plaintiffs or by an Affiliate 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, transferred, or otherwise disposed of by
the Trust, by the Non-Stockholder Plaintiffs, or by any Affiliate unless such
Securities have been first offered to the Company pursuant to its right of
redemption (the "Right of Redemption"). The Right of Redemption does not apply
to Securities held by any party other than the Trust, the Non-Stockholder
Plaintiffs or any Affiliate and does not apply to any transfer from the Trust to
any Non-Stockholder Plaintiff or any Affiliate. Under the Right of Redemption, a
holder of the Securities (to which the Right of Redemption applies) must give
the Company advance written notice of its intention to sell, transfer or
otherwise dispose of any Securities. Such notice shall state the number of
shares of the Securities proposed to be transferred. Thereafter, the Company
shall have a period of 21 days to notify the holder of the Securities of its
intention to exercise its Right of Redemption with respect to such Securities.
If the Company exercises its Right of Redemption, it shall have a period of 120
days to redeem all or part of such Securities (as the case may be) at a price of
$50 per share, plus accrued and unpaid dividends thereon to the date of
redemption. If the Company fails to so notify the holder of the Securities with
the 21 day period, the Securities for which notice was given as described above
may be transferred; provided, however, that if the Securities are not
transferred within 270 days after the 21-day period expires, the holder of the
Securities must comply with the Right of Redemption again.
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 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
35
<PAGE> 38
have been conferred and exercisable on the basis of one vote per share of
preferred stock) will be able to nominate and elect to the Board of Directors of
the Company at the next annual meeting of stockholders and at each subsequent
meeting called for the election of directors, two directors who shall serve
until the next succeeding annual meeting of stockholders when their successors
are duly elected and qualified or until all of the dividends accumulated on the
Securities have been paid or set aside for payment, whichever occurs first. 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.
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.
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.
36
<PAGE> 39
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
REPORT:
Report of Independent Accountants -- AMERCO and Consolidated Subsidiaries........... F-2
AUDITED FINANCIAL STATEMENTS
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
SCHEDULES
Condensed Financial Information of Registrant -- Schedule I......................... F-42
Amounts Receivable from Related Parties and Underwriters, Promoters and Employees
other than Related Parties -- Schedule II........................................ F-46
Supplemental Information (for Property -- Casualty Insurance
Underwriters) -- Schedule V...................................................... F-47
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1995, March 31, 1995 and September
30, 1994......................................................................... F-48
Consolidated Statements of Earnings for the Six Months ended September 30, 1995 and
1994............................................................................. F-50
Consolidated Statements of Changes in Stockholders' Equity for the Six Months ended
September 30, 1995 and 1994...................................................... F-51
Consolidated Statements of Earnings for the Quarters ended September 30, 1995 and
1994............................................................................. F-53
Consolidated Statements of Cash Flows for the Six Months ended September 30, 1995
and
1994............................................................................. F-54
Notes to Consolidated Financial Statements.......................................... F-55
</TABLE>
F-1
<PAGE> 40
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.
PRICE WATERHOUSE LLP
Phoenix, Arizona
June 26, 1995
F-2
<PAGE> 41
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> 42
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> 43
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> 44
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> 45
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 and end 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> 46
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> 47
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> 48
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 that is no
longer necessary for use in the Company's current operations, and available for
sale/lease, was approximately $27,466,000. Such surplus real estate is carried
at cost, less accumulated depreciation, which is less than or approximate to net
realizable value.
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. See
Note 5 for a further discussion of such agreements.
F-10
<PAGE> 49
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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
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> 50
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> 51
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> 52
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> 53
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):
<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
-------- ------ ------- --------
</TABLE>
F-15
<PAGE> 54
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1994 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 $ 9,801 $ 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
======== ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1993 PAR VALUE COST GAINS LOSSES VALUE
------------------------------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
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>
<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
-------- ------ ------- --------
</TABLE>
F-16
<PAGE> 55
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 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>
<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
======== ========
</TABLE>
F-17
<PAGE> 56
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>
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
======== ========
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
DECEMBER 31, 1993 COST FAIR VALUE
--------------------------------------------------------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C>
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>
<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.
F-18
<PAGE> 57
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS -- (CONTINUED)
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.
Investments, other consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
1995 1994
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Short-term investments.................................................. $ 26,841 $14,513
Mortgage loans.......................................................... 79,498 47,870
Real estate, foreclosed properties...................................... 11,464 --
U.S. government security mutual fund.................................... 5,883 9,880
Policy loans............................................................ 10,095 10,718
Other................................................................... 1,439 1,757
-------- -------
$135,220 $84,738
======== =======
</TABLE>
Short-term investments consists primarily of fixed maturities with a
maturity of less than one year from acquisition date. Mortgage loans,
representing first lien mortgages held by the insurance subsidiaries, are
carried at unpaid balances, less allowance for possible losses and any
unamortized premium or discount. Real estate obtained through foreclosures and
held for sale is carried at the lower of cost or net realizable value. U.S.
government securities mutual fund is carried at cost which approximates market.
Policy loans are carried at their unpaid balance.
F-19
<PAGE> 58
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> 59
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> 60
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 Exchange Agreements with Mark
V. Shoen and James P. Shoen. Pursuant to the exchange agreements, in exchange
for 3,475,520 and 2,278,814 shares of common stock owned by Mark V. Shoen and
James P. Shoen, Mark V. Shoen and James P. Shoen received 3,475,520 and
2,278,814 shares of Series A common stock, respectively. The common stock and
the Series A common stock possess identical rights and privileges.
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. The common stock and the Series A common stock possess identical rights
and privileges.
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.
The common stock and the Series A common stock possess identical rights and
privileges.
F-22
<PAGE> 61
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
======== ======== ========
</TABLE>
Deferred tax liabilities (assets) are comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
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> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
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)
<S> <C> <C> <C> <C> <C>
(12) REINSURANCE -- (CONTINUED)
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> 69
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> 70
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> 71
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> 72
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> 73
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> 74
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> 75
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> 76
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> 77
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> 78
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> 79
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> 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-42
<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-43
<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-44
<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-45
<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-46
<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>
RESERVES AMORTI-
FOR UNPAID CLAIMS AND ZATION PAID
CLAIMS CLAIM ADJUSTMENT OF CLAIMS
DEFERRED AND EXPENSES INCURRED 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)
<C> <S> <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
<CAPTION>
NET
PREMIUMS
WRITTEN
YEAR (2)
- ------------ --------
<C> <C>
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-47
<PAGE> 86
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
---------- -------------
SEPTEMBER 30,
1995 (AUDITED) (UNAUDITED)
-------------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 33,283 $ 35,286 $ 41,882
Receivables.............................................. 338,489 300,238 260,727
Inventories.............................................. 51,402 50,337 47,691
Prepaid expenses......................................... 21,814 25,933 21,029
Investments, fixed maturities............................ 800,481 705,428 701,220
Investments, other....................................... 139,681 135,220 97,727
Deferred policy acquisition costs........................ 51,304 49,244 49,940
Other assets............................................. 18,757 30,057 18,192
---------- ---------- ----------
Property, plant and equipment, at cost:
Land................................................... 210,928 214,033 202,987
Buildings and improvements............................. 738,535 735,624 710,680
Furniture and equipment................................ 184,189 179,016 174,139
Rental trailers and other rental equipment............. 258,264 245,892 225,498
Rental trucks.......................................... 933,013 913,641 905,669
General rental items................................... 49,581 51,890 54,131
---------- ---------- ----------
2,374,510 2,340,096 2,273,104
Less accumulated depreciation.......................... 1,131,339 1,065,850 1,005,433
---------- ---------- ----------
Total property, plant and equipment............ 1,243,171 1,274,246 1,267,671
---------- ---------- ----------
$ 2,698,382 $2,605,989 $ 2,506,079
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-48
<PAGE> 87
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
---------- -------------
SEPTEMBER 30,
1995 (AUDITED) (UNAUDITED)
-------------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities............... $ 150,198 $ 127,613 $ 149,940
Notes and loans........................................ 796,738 881,222 752,529
Policy benefits and losses, claims and loss expenses
payable............................................. 475,220 475,187 464,883
Liabilities from premium deposits...................... 374,407 304,979 300,069
Cash overdraft......................................... 23,450 31,363 27,013
Other policyholders' funds and liabilities............. 25,843 20,378 8,805
Deferred income........................................ 9,533 7,426 8,652
Deferred income taxes.................................. 95,569 71,037 85,404
---------- ---------- ----------
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 September
30, 1995, March 31, 1995 and September 30, 1994..... -- -- --
Serial common stock, with or without par value,
150,000,000 shares authorized....................... -- -- --
Series A common stock of $0.25 par value, authorized
10,000,000 shares, issued 5,762,495 shares as of
September 30, 1995 and March 31, 1995, and 9,238,015
shares as of September 30, 1994..................... 1,441 1,441 2,309
Common stock of $0.25 par value, authorized 150,000,000
shares, issued 34,237,505 shares as of September 30,
1995 and March 31, 1995, and 30,761,985 shares as of
September 30, 1994.................................. 8,559 8,559 7,691
Additional paid-in capital............................. 165,675 165,675 165,651
Foreign currency translation........................... (10,599) (12,435) (10,027)
Unrealized gain (loss) on investments.................. 6,771 (6,483) (3,615)
Retained earnings...................................... 611,166 561,589 577,523
---------- ---------- ----------
783,013 718,346 739,532
Less:
Cost of common shares in treasury, (1,380,937 shares
as of September 30, 1995 and 1,335,937 shares as
of March 31, 1995 and September 30, 1994)......... 11,457 10,461 10,461
Unearned employee stock ownership plan shares....... 24,132 21,101 20,287
---------- ---------- ----------
Total stockholders' equity..................... 747,424 686,784 708,784
Contingent liabilities and commitments...................
---------- ---------- ----------
$ 2,698,382 $2,605,989 $ 2,506,079
========== ========== ==========
</TABLE>
F-49
<PAGE> 88
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues
Rental and other revenue.......................................... $ 504,429 $ 494,145
Net sales......................................................... 102,675 97,688
Premiums.......................................................... 71,385 67,597
Net investment income............................................. 23,287 22,423
---------- ----------
Total revenues............................................ 701,776 681,853
Costs and expenses
Operating expense................................................. 368,135 339,720
Cost of sales..................................................... 58,001 53,288
Benefits and losses............................................... 68,099 66,279
Amortization of deferred acquisition costs........................ 7,799 5,676
Depreciation...................................................... 76,275 74,755
Interest expense.................................................. 35,554 33,297
---------- ----------
Total costs and expenses.................................. 613,863 573,015
Pretax earnings from operations..................................... 87,913 108,838
Income tax expense.................................................. (31,854) (39,354)
---------- ----------
Net earnings.............................................. $ 56,059 $ 69,484
========== ==========
Earnings per common share:
Net earnings........................................................ $ 1.31 $ 1.70
========== ==========
Weighted average common shares outstanding.......................... 37,931,825 37,053,707
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-50
<PAGE> 89
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Series A common stock of $0.25 par value: Authorized 10,000,000 shares,
issued 5,762,495 as of September 30, 1995 and 5,762,495 as of March
31, 1995 and 9,238,015 as of September 30, 1994
Beginning of period.................................................. $ 1,441 1,438
Exchange for common stock......................................... -- 871
-------- --------
End of period........................................................ 1,441 2,309
-------- --------
Common stock of $0.25 par value:
Authorized 150,000,000 shares, issued 34,237,505 as of September 30,
1995, and March 31, 1995 and 30,761,985 as of September 30, 1994
Beginning of period.................................................. 8,559 8,562
Exchange for common stock......................................... -- (871)
-------- --------
End of period........................................................ 8,559 7,691
-------- --------
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................................................. 1,836 1,125
-------- --------
End of period........................................................ (10,599) (10,027)
-------- --------
Unrealized gain (loss) on investments:
Beginning of period.................................................. (6,483) 679
Change during period................................................. 13,254 (4,294)
-------- --------
End of period........................................................ 6,771 (3,615)
-------- --------
Retained earnings:
Beginning of period.................................................. 561,589 514,521
Net earnings...................................................... 56,059 69,484
Dividends paid to stockholders:
Preferred stock: ($1.06 per share for 1995 and 1994,
respectively).................................................... (6,482) (6,482)
-------- --------
End of period........................................................ $611,166 $577,523
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-51
<PAGE> 90
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Less:
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.................................................. 3,167 2,955
Proceeds from loan................................................ (136) (119)
-------- --------
End of period........................................................ 24,132 20,287
-------- --------
Total stockholders' equity............................................. $747,424 $708,784
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE> 91
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues
Rental and other revenue.......................................... $ 269,118 265,183
Net sales......................................................... 49,559 46,386
Premiums.......................................................... 40,683 36,038
Net investment income............................................. 11,907 11,913
---------- ----------
Total revenues................................................. 371,267 359,520
Costs and expenses
Operating expense................................................. 186,091 174,179
Cost of sales..................................................... 29,042 25,738
Benefits and losses............................................... 40,858 39,867
Amortization of deferred acquisition costs........................ 4,871 2,592
Depreciation...................................................... 38,582 37,473
Interest expense.................................................. 16,722 16,659
---------- ----------
Total costs and expenses....................................... 316,166 296,508
Pretax earnings from operations..................................... 55,101 63,012
Income tax expense.................................................. (19,904) (22,941)
---------- ----------
Net earnings................................................... $ 35,197 40,071
========== ==========
Earnings per common share:
Net earnings........................................................ $ 0.84 1.00
========== ==========
Weighted average common shares outstanding.......................... 37,905,225 36,999,879
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE> 92
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net earnings....................................................... $ 56,059 $ 69,484
Depreciation and amortization................................... 84,339 82,684
Provision for losses on accounts receivable..................... 2,819 1,868
Net gain on sale of real and personal property.................. 581 132
Gain on sale of investments..................................... (2,970) (1,066)
Changes in policy liabilities and accruals...................... (3,334) 26,568
Additions to deferred policy acquisition costs.................. (11,954) (7,770)
Net change in other operating assets and liabilities............ 18,404 27,705
-------- ---------
Net cash provided by operating activities............................ 143,944 199,605
-------- ---------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment................................... (143,082) (255,231)
Fixed maturities................................................ (162,081) (86,291)
Real estate..................................................... (5,629) (8)
Mortgage loans.................................................. (7,384) (36,087)
Proceeds from sale of investments:
Property, plant and equipment................................... 97,030 88,669
Fixed maturities................................................ 89,348 100,522
Real estate..................................................... 570 459
Mortgage loans.................................................. 17,573 5,374
Changes in other investments....................................... 1,186 (834)
-------- ---------
Net cash used by investing activities................................ (112,469) (183,427)
-------- ---------
Cash flows from financing activities:
Net change in short-term borrowings................................ (163,500) 16,250
Proceeds from notes................................................ 140,184 66,000
Loan to leveraged employee stock ownership plan.................... (3,168) (2,955)
Proceeds from leveraged employee stock ownership plan.............. 137 119
Principal payments on notes........................................ (61,168) (53,485)
Net change in cash overdraft....................................... (7,913) 454
Dividends paid..................................................... (6,482) (6,482)
Purchase of treasury shares........................................ (996) --
Investment contract deposits....................................... 101,667 13,661
Investment contract withdrawals.................................... (32,239) (26,300)
-------- ---------
Net cash provided (used) by financing activities..................... (33,478) 7,262
-------- ---------
Increase (decrease) in cash and cash equivalents..................... (2,003) 23,440
Cash and cash equivalents at beginning of period..................... 35,286 18,442
-------- ---------
Cash and cash equivalents at end of period........................... $ 33,283 $ 41,882
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE> 93
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, MARCH 31, 1995 AND SEPTEMBER 30, 1994
(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 September 30, 1995 and 1994, and the
related consolidated statements of earnings, changes in stockholders' equity and
cash flows for the six months ended September 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 six months ended September 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
JUNE 30, 1995 OF SHARES COST GAINS LOSSES VALUE
- --------------------------------------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED HELD-TO-MATURITY
U.S. treasury securities and government
obligations................................ $ 20,355 $ 20,280 $ 1,784 $ (5) $ 22,059
U.S. government agency mortgage backed
securities................................. $ 62,793 62,251 875 (2,444) 60,682
Obligations of states and political
subdivisions............................... $ 32,035 31,560 1,931 (143) 33,348
Corporate securities......................... $ 186,613 191,434 4,005 (1,881) 193,558
Mortgage-backed securities................... $ 126,457 124,776 2,616 (1,935) 125,457
Redeemable preferred stocks.................. 33 1,973 363 (7) 2,329
-------- ------- ------- --------
432,274 11,574 (6,415) 437,433
-------- ------- ------- --------
CONSOLIDATED AVAILABLE-FOR-SALE
U.S. treasury securities and government
obligations................................ $ 9,685 9,794 1,234 -- 11,028
U.S. government agency mortgage backed
securities................................. $ 9,410 9,230 189 (118) 9,301
States, municipalities and political
subdivisions............................... $ 2,385 2,353 36 (18) 2,371
Corporate securities......................... $ 263,727 264,511 10,477 (1,573) 273,415
Mortgage-backed securities................... $ 70,044 70,315 2,863 (1,086) 72,092
-------- -------- ------- ------- --------
356,203 14,799 (2,795) 368,207
-------- ------- ------- --------
Total.............................. $ 788,477 $ 26,373 $ (9,210) $ 805,640
======== ======= ======= ========
</TABLE>
F-55
<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
A summary consolidated balance sheet (unaudited) for Ponderosa Holdings,
Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments -- fixed maturities............................. $ 800,481 $ 701,220
Other investments........................................... 117,940 97,727
Receivables................................................. 151,546 150,841
Deferred policy acquisition costs........................... 51,304 49,940
Due from affiliate.......................................... 22,603 (1,531)
Deferred federal income taxes............................... 4,671 7,957
Other assets................................................ 8,099 18,600
---------- ----------
Total assets...................................... $1,156,644 $1,024,754
========== ==========
Policy liabilities and accruals............................. $ 409,521 $ 398,602
Unearned premiums........................................... 65,699 66,111
Premium deposits............................................ 374,407 300,069
Other policyholders' funds and liabilities.................. 28,263 14,613
---------- ----------
Total liabilities................................. 877,890 779,395
Stockholder's equity........................................ 278,754 245,359
---------- ----------
Total liabilities and stockholder's equity........ $1,156,644 $1,024,754
========== ==========
</TABLE>
A summarized consolidated income statement (unaudited) for Ponderosa
Holdings, Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Premiums....................................................... $ 76,442 $ 76,865
Net investment income.......................................... 23,516 22,498
Other income................................................... 4,471 3,245
-------- --------
Total revenue........................................ 104,429 102,608
Benefits and losses............................................ 68,099 66,279
Amortization of deferred policy acquisition costs.............. 7,799 5,676
Other expenses................................................. 12,121 12,756
-------- --------
Income from operations............................... 16,410 17,897
Federal income tax expense..................................... (4,617) (5,675)
-------- --------
Net income..................................................... $ 11,793 $ 12,222
======== ========
</TABLE>
4. CONTINGENT LIABILITIES AND COMMITMENTS
During the six months ended September 30, 1995, U-Haul Leasing & Sales Co.,
a wholly-owned subsidiary of U-Haul International, Inc., entered into eight
transactions, whereby the Company sold rental trucks and subsequently leased
them back. AMERCO has guaranteed $6,406,000 of residual values at
F-56
<PAGE> 95
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
4. CONTINGENT LIABILITIES AND COMMITMENTS -- (CONTINUED)
September 30, 1995 on these assets at the end of the lease term. Following are
the lease commitments for the leases executed during the six months ended
September 30, 1995, which have a term of more than one year (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED LEASE
MARCH 31, COMMITMENTS
------------------------------------------------ -----------
<S> <C>
1996............................................ $ 5,426
1997............................................ 9,297
1998............................................ 9,297
1999............................................ 9,297
2000............................................ 9,297
Thereafter...................................... 22,467
-------
$65,081
=======
</TABLE>
See discussion related to the Shoen Litigation under Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
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 costs 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.
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>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Receivables............................................ $(35,299) $(41,291)
======== ========
Inventories............................................ $ (1,065) $ 1,321
======== ========
Accounts payable and accrued liabilities............... $ 22,585 $ 23,758
======== ========
</TABLE>
Income taxes paid in cash amounted to $143,000 and $5,566,000 for 1995 and
1994, respectively.
Interest paid in cash amounted to $36,755,000 and $30,878,000 for 1995 and
1994, respectively.
6. RELATED PARTIES
Subsequent to March 31, 1995, the Company continued to loan TWO SAC
Self-Storage Corporation (TWO SAC) funds for the purchase of an additional 33
self-storage properties. Twenty-six of such self-storage properties were
purchased from the Company at a price equal to the Company's acquisition cost
plus capitalized costs. As of September 30, 1995, the outstanding balance of TWO
SAC's loans from the Company, including interest, was $46,723,000. During the
six months ended September 30, 1995, principal payments of $218,000 and interest
of $961,000 have been received from TWO SAC. Mark V. Shoen, a major
F-57
<PAGE> 96
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
6. RELATED PARTIES -- (CONTINUED)
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. The Company anticipates that it will sell TWO SAC approximately 4 more
properties that have been acquired by the Company since June 1993.
During the six months ended September 30, 1995, the Company received
principal payments of $757,000, interest payments of $3,975,000, and management
fees of $527,000 from SAC Self-Storage Corporation (SAC). As of September 30,
1995, the outstanding balance of SAC's loans from the Company, including
interest, was $54,055,000. Mark V. Shoen, a major stockholder, director and
officer of the Company owns all of the issued and outstanding voting common
stock of SAC.
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 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 length 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 September 30, 1995,
$9,120,000 of yellow page directory costs were reported as assets, with relating
amortization expense of $11,427,000 for the six months ended September 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-58
<PAGE> 97
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
8. SUBSEQUENT EVENTS
On October 18, 1995, the Company redeemed 3,343,076 shares of Common Stock
held by Maran, Inc. in exchange for approximately $22,733,000 and paid
approximately $41,352,000 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. See discussion of the Shoen
Litigation under Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.
On November 7, 1995, the Company declared a cash dividend of $3,241,000
($0.53125 per preferred share) to preferred stockholders of record as of
November 17, 1995.
F-59
<PAGE> 98
======================================================
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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.............................. 21
Use of Proceeds....................... 31
The Trust............................. 31
Shoen Litigation...................... 31
Description of Securities............. 33
Legal Opinions........................ 36
Experts............................... 36
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
3,860,000 SHARES
AMERCO
LOGO LOGO LOGO
SERIES D
FLOATING RATE PREFERRED STOCK
------------------------
PROSPECTUS
------------------------
, 1995
======================================================
<PAGE> 99
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> 100
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
--------- --------------------------------------------------------------------------------
<S> <C>
2.1 -- Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J.
Shoen and Summary of Plan Provisions(1)
2.2 -- Debtor's First Amendment Modifying the Amended and Restated Plans of
Reorganization Proposed by the Debtors(2)
2.3 -- Debtors' Second Amendment Modifying the Amended and Restated Plans of
Reorganization Proposed by the Debtors*
2.4 -- Debtors' Third Amendment Modifying the Amended and Restated Plans of
Reorganization Proposed by the Debtors*
4.1 -- Restated Articles of Incorporation(3)
4.2 -- Form of Stock Certificate
4.3 -- Restated By-Laws of AMERCO as of August 15, 1995(2)
4.4 -- Certificate of Designation for Series D Floating Rate Preferred Stock
5 -- Opinion re Legality
10.1 -- AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Plan(4)
10.2 -- U-Haul Dealership Contract(4)
10.3 -- Share Repurchase and Registration Rights Agreement(4)
10.4 -- Share Repurchase and Registration Rights Agreement(4)
10.5 -- Management Consulting Agreement(4)
10.6 -- Management Consulting Agreement(4)
10.7 -- ESOP Loan Credit Agreement(5)
10.8 -- ESOP Loan Agreement(5)
10.9 -- Trust Agreement for the AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan(5)
10.10 -- Amended Indemnification Agreement(5)
10.11 -- Indemnification Trust Agreement(5)
10.12 -- W.E. Carty Installment Sales Agreement(5)
10.13 -- Exchange Agreement with Mark V. Shoen(6)
10.14 -- Exchange Agreement with James P. Shoen(6)
10.15 -- Exchange Agreement with Edward J. Shoen(6)
10.16 -- Exchange Agreement with Mark V. Shoen(7)
10.17 -- W.E. Carty Contract of Purchase and Sale of Land(6)
10.18 -- Promissory Notes between SAC Self-Storage Corporation and a subsidiary of
AMERCO(8)
10.19 -- Promissory Notes between TWO SAC Self Storage Corporation and a subsidiary
of AMERCO(2)
10.20 -- Management Agreement between SAC Self Storage Corporation and a subsidiary
of AMERCO(2)
10.21 -- Management Agreement between TWO SAC Self Storage Corporation and a
subsidiary of AMERCO(2)
10.22 -- Settlement Agreement with Paul F. Shoen(9)
10.23 -- Settlement Agreement, dated September 19, 1995, among Mary Anna Shoen
Eaton, Maran, Inc., Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds, William E. Carty and AMERCO(2)
10.24 -- Full and Final Release of All Claims, dated September 19, 1995, executed by
Maran, Inc., Mary Anna Shoen Eaton and Timothy Eaton(2)
10.25 -- Full and Final Release of All Claims, dated September 19, 1995, executed by
AMERCO, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds
and William E. Carty(2)
</TABLE>
II-2
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
--------- --------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
10.26 -- Stock Purchase Agreement, dated September 19, 1995, among Mary Anna Shoen
Eaton, Maran, Inc., Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds and William E. Carty(2)
10.27 -- Agreement, dated October 17, 1995, among AMERCO, Edward J. Shoen, James P.
Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty(2)
10.28 -- Directors' Release, dated October 17, 1995, executed by Edward J. Shoen,
James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty in
favor of AMERCO(2)
10.29 -- AMERCO Release, dated October 17, 1995, executed by AMERCO in favor of
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and
William E. Carty(2)
12 -- Statements re Computation of Ratios*
23.1 -- Consent of Independent Accountants*
23.2 -- 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(9)
</TABLE>
- ---------------
* Previously filed.
(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 Quarterly Report on Form 10-Q for
the quarter ended September 30, 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 Annual Report on Form 10-K for
the year ended March 31, 1993, File No. 0-7862.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1990, File No. 0-7862.
(6) Incorporated by reference to the Company's Registration Statement on Form
S-2, Registration No. 33-54289.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994, File No. 0-7862.
(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.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1995, 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> 102
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 5th day of January,
1996.
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
Pre-Effective Amendment No. 2 to this registration statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- ----------------
<C> <S> <C>
/s/ EDWARD J. SHOEN President and Chairman of the January 5, 1996
- ------------------------------------------ Board (Principal executive
Edward J. Shoen officer)
* Treasurer (Principal financial January 5, 1996
- ------------------------------------------ and accounting officer)
Gary B. Horton
* Director January 5, 1996
- ------------------------------------------
Mark V. Shoen
* Director January 5, 1996
- ------------------------------------------
James P. Shoen
Director January , 1996
- ------------------------------------------
William E. Carty
Director January , 1996
- ------------------------------------------
John M. Dodds
* Director January 5, 1996
- ------------------------------------------
Charles J. Bayer
* Director January 5, 1996
- ------------------------------------------
Richard J. Herrera
Director January , 1996
- ------------------------------------------
Aubrey K. Johnson
By: /s/ EDWARD J. SHOEN
- ------------------------------------------
*Edward J. Shoen
(Attorney-in-fact)
</TABLE>
II-4
<PAGE> 103
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
--------- ------------------------------------------------------------------
<S> <C>
2.1 -- Amended and Restated Debtor's Plan of Reorganization Proposed by
Edward J. Shoen and Summary of Plan Provisions(1)
2.2 -- Debtor's First Amendment Modifying the Amended and Restated Plans
of Reorganization Proposed by the Debtors(2)
2.3 -- Debtors' Second Amendment Modifying the Amended and Restated Plans
of Reorganization Proposed by the Debtors*
2.4 -- Debtors' Third Amendment Modifying the Amended and Restated Plans
of Reorganization Proposed by the Debtors*
4.1 -- Restated Articles of Incorporation(3)
4.2 -- Form of Stock Certificate
4.3 -- Restated By-Laws of AMERCO as of August 15, 1995(2)
4.4 -- Certificate of Designation for Series D Floating Rate Preferred
Stock
5 -- Opinion re Legality
10.1 -- AMERCO Employee Savings, Profit Sharing and Employee Stock
Ownership Plan(4)
10.2 -- U-Haul Dealership Contract(4)
10.3 -- Share Repurchase and Registration Rights Agreement(4)
10.4 -- Share Repurchase and Registration Rights Agreement(4)
10.5 -- Management Consulting Agreement(4)
10.6 -- Management Consulting Agreement(4)
10.7 -- ESOP Loan Credit Agreement(5)
10.8 -- ESOP Loan Agreement(5)
10.9 -- Trust Agreement for the AMERCO Employee Savings, Profit Sharing
and Employee Stock Ownership Plan(5)
10.10 -- Amended Indemnification Agreement(5)
10.11 -- Indemnification Trust Agreement(5)
10.12 -- W.E. Carty Installment Sales Agreement(5)
10.13 -- Exchange Agreement with Mark V. Shoen(6)
10.14 -- Exchange Agreement with James P. Shoen(6)
10.15 -- Exchange Agreement with Edward J. Shoen(6)
10.16 -- Exchange Agreement with Mark V. Shoen(7)
10.17 -- W.E. Carty Contract of Purchase and Sale of Land(6)
10.18 -- Promissory Notes between SAC Self-Storage Corporation and a
subsidiary of AMERCO(8)
10.19 -- Promissory Notes between TWO SAC Self Storage Corporation and a
subsidiary of AMERCO(2)
10.20 -- Management Agreement between SAC Self Storage Corporation and a
subsidiary of AMERCO(2)
10.21 -- Management Agreement between TWO SAC Self Storage Corporation and
a subsidiary of AMERCO(2)
10.22 -- Settlement Agreement with Paul F. Shoen(9)
10.23 -- Settlement Agreement, dated September 19, 1995, among Mary Anna
Shoen Eaton, Maran, Inc., Edward J. Shoen, James P. Shoen, Aubrey
K. Johnson, John M. Dodds, William E. Carty and AMERCO(2)
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBERED
NUMBER TITLE PAGE
--------- ------------------------------------------------------------------ ----------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C> <C>
10.24 -- Full and Final Release of All Claims, dated September 19, 1995,
executed by Maran, Inc., Mary Anna Shoen Eaton and Timothy
Eaton(2)
10.25 -- Full and Final Release of All Claims, dated September 19, 1995,
executed by AMERCO, Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds and William E. Carty(2)
10.26 -- Stock Purchase Agreement, dated September 19, 1995, among Mary
Anna Shoen Eaton, Maran, Inc., Edward J. Shoen, James P. Shoen,
Aubrey K. Johnson, John M. Dodds and William E. Carty(2)
10.27 -- Agreement, dated October 17, 1995, among AMERCO, Edward J. Shoen,
James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E.
Carty(2)
10.28 -- Directors' Release, dated October 17, 1995, executed by Edward J.
Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and
William E. Carty in favor of AMERCO(2)
10.29 -- AMERCO Release, dated October 17, 1995, executed by AMERCO in
favor of Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John
M. Dodds and William E. Carty(2)
12 -- Statements re Computation of Ratios*
23.1 -- Consent of Independent Accountants*
23.2 -- 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(9)
</TABLE>
- ---------------
* Previously filed.
(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 Quarterly Report on Form 10-Q for
the quarter ended September 30, 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 Annual Report on Form 10-K for
the year ended March 31, 1993, File No. 0-7862.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1990, File No. 0-7862.
(6) Incorporated by reference to the Company's Registration Statement on Form
S-2, Registration No. 33-54289.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994, File No. 0-7862.
(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.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1995, File No. 0-7862.
<PAGE> 105
APPENDIX A
DESCRIPTION OF GRAPHIC MATERIAL
<TABLE>
<C> <S> <C>
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 5 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.
</TABLE>
<PAGE> 1
EXHIBIT 4.2
PREFERRED STOCK PREFERRED STOCK
NUMBER SHARES
D__________ AMERCO(R) ____________
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF NEVADA CERTAIN DEFINITIONS
CUSIP 023586 40 7
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE SERIES D FLOATING RATE
PREFERRED STOCK, NO PAR VALUE, OF
AMERCO
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ G. V. KLINEFELTER AMERCO /s/ EDWARD J. SHOEN
- --------------------- [CORPORATE SEAL] ---------------------
SECRETARY NEVADA PRESIDENT
COUNTERSIGNED AND REGISTERED:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY:_____________________________
AUTHORIZED SIGNATURE
<PAGE> 2
The transfer of the shares represented by this certificate by any "Original
Holder" (as defined in the Certificate of Designation pursuant to which the
Series D Floating Rate Preferred Stock was created) is subject to a Right of
Redemption as provided in the Certificate of Designation and no transfer of
this certificate or the shares represented hereby shall be valid or effective
unless and until the provisions of the Right of Redemption shall have been
satisfied.
The Corporation will furnish to any stockholder, upon request and without
charge, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights, so far as the same shall have been fixed, and of the
authority of the Board of Directors to designate and fix any preferences,
rights and limitations of any wholly unissued series. Any such request should
be addressed to the Secretary of the Corporation at 1325 Airmotive Way, Suite
100, Reno, Nevada 89502-3239.
The following abbreviations, when used in the Inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - _____________Custodian ______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ________________________________
(State)
UNIF TRF MIN ACT - _________ Custodian (until age _____)
(Cust)
___________ under Uniform Transfers
(Minor)
to Minors Act _______________________
(State)
Additional abbreviations may also be used though not in the above list
FOR VALUE REVEIVED, ______________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
<TABLE>
<S> <C>
___________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
___________________________________________________________________________________________________
___________________________________________________________________________________________________
____________________________________________________________________________________________________Shares
of the preferred stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
_________________________________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated__________________________________
X________________________________________
X________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By_________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO
SEC RULE 17AD-15.
</TABLE>
<PAGE> 1
EXHIBIT 4.4
CERTIFICATE OF DESIGNATION, PREFERENCE, AND RIGHTS OF
SERIES D FLOATING RATE PREFERRED STOCK
OF
AMERCO
---------------------------------------
Under Section 78.195(6) of the Nevada General Corporation Law
---------------------------------------
We, Edward J. Shoen and Gary V. Klinefelter, being the President and
the Secretary, respectively, of AMERCO, a corporation organized and existing
under the laws of Nevada (the "Corporation"), do hereby certify that, pursuant
to authority conferred upon the Board of Directors by the Corporation's Restated
Articles of Incorporation and by Section 78.195(6) of the Nevada General
Corporation Law, the Board of Directors adopted, by unanimous written consent,
the following resolutions providing for the issuance of a series of preferred
stock:
RESOLVED, that pursuant to authority vested in the Board of Directors
of the Corporation by Article 5 of the Restated Articles of Incorporation of
this Corporation, a series of preferred stock is hereby established, the
distinctive designation of which shall be "Series D Floating Rate Preferred
Stock" (such series being hereafter called "Series D Preferred Stock"), and the
preferences and relative participating, optional, or other special rights of
Series D Preferred Stock and the qualifications, limitations, or restrictions
thereof to the extent not heretofore set forth in the Restated Articles of
Incorporation of the Corporation as from time to time amended (the "Articles of
Incorporation"), are as follows:
(a) Designation. A series of preferred stock is hereby
designated "Series D Floating Rate Preferred Stock." The number of
shares constituting the Series D Preferred Stock is 3,860,000. Shares
of the Series D Preferred Stock shall have a liquidation preference of
$50.00 per share and shall have no par value.
(b) Dividend Rate.
(i) Holders of the Series D Preferred Stock shall be
entitled to receive dividends at a floating rate per share. The
dividend to rate for all quarters ending on or before February
29, 1996, will be [ %]. Such dividends shall be
cumulative from the date of original issue of such shares and
shall be payable, when and as declared by the Board of
Directors, 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, commencing
March 1, 1996. 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: (a) the three-month United
States Treasury yield; (b) the ten-year United States Treasury
yield; and (c) the thirty-year United States Treasury yield;
provided, however, that the dividend rate shall not be less
than 5.50% nor more than 10.50% per annum. Each dividend shall
be paid to the holders of record of shares of the Series D
Preferred Stock as they appear on the stock records of the
Corporation on the applicable record date, not exceeding 15
days preceding the payment date thereof, as shall be fixed by
the Board of Directors. Dividends on account of arrears for any
past dividend periods may be declared and paid at any time,
without reference to any regular dividend payment date, to
holders of record on such date as may be fixed by the Board of
Directors, which shall not exceed 15 days preceding such
dividend payment date thereof.
<PAGE> 2
(ii) No dividends shall be declared or paid or set
apart for payment on any shares of any class or classes of
stock of the Corporation or any series thereof ranking, as to
dividends, on a parity with or junior to the Series D Preferred
Stock 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 set apart for such
payment, on the Series D Preferred Stock for all dividend
payment periods terminating on or prior to the date of payment
of such dividend. When dividends are not paid in full, as
aforesaid, upon the shares of the Series D Preferred Stock and
any other shares of any class or classes of stock or series
thereof ranking on a parity as to dividends with the Series D
Preferred Stock, all dividends declared upon shares of the
Series D Preferred Stock and any other shares of such class or
classes of series thereof ranking on a parity as to dividends
with the Series D Preferred Stock shall be declared pro rata so
that the amount of dividends declared per share of the Series D
Preferred Stock and such other shares shall in all cases bear
to each other the same ratio that accrued dividends per share
on the shares of the Series D Preferred Stock and such other
shares bear to each other. Holders of shares of the Series D
Preferred Stock shall not be entitled to any dividend, whether
payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on the Series D
Preferred Stock. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment
or payments on the Series D Preferred Stock that may be in
arrears.
(iii) So long as any shares of the Series D Preferred
Stock are outstanding, no dividend (other than a dividend in
common stock or in any other shares ranking junior to the
Series D Preferred Stock as to dividends and upon Liquidation
(as defined in subsection (f)(i) and other than as provided in
paragraph (ii) of this subsection (b)) shall be declared or
paid or set aside for payment or other distribution declared or
made upon the shares of any class or classes of stock of the
Corporation or any series thereof ranking junior to or on a
parity with the Series D Preferred Stock as to dividends or
upon Liquidation nor shall any of the shares of any class or
classes of stock of the Corporation or any series thereof
ranking junior to or on a parity with the Series D Preferred
Stock as to dividends or upon Liquidation be redeemed,
purchased, or otherwise acquired or any consideration paid (or
any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by the Corporation, or any
subsidiary thereof (except by conversion into or exchange for
shares of the Corporation ranking junior to the Series D
Preferred Stock as to dividends and upon liquidation), unless,
in each case, the full cumulative dividends on all outstanding
shares of the Series D Preferred Stock shall have been or
contemporaneously are declared and paid, or declared and a sum
sufficient for payment thereof is set apart for payment, for
all past dividend payment periods.
(iv) Dividends payable on the Series D Preferred
Stock for any period less than a full quarterly dividend
period, and for the dividend period beginning on the date of
issuance of the shares of the Series D Preferred Stock, shall
be computed on the basis of a 360-day year consisting of 12
30-day months. The amount of dividends payable on shares of the
Series D Preferred Stock for each full quarterly dividend
period shall be computed by dividing by 4 the rate per share as
determined in subsection (b)(i).
(c) Redemption.
(i) The shares of the Series D Preferred Stock
shall not be redeemable prior to December 1, 2001, except under
the Special Call or under the Right of Redemption (both defined
below). On and after December 1, 2001, the Corporation, at its
option, may redeem shares of the Series D Preferred Stock, as a
whole or in part, for cash, at any time or from time to time,
at a redemption price of $50.00 per share plus, in each case,
accrued and unpaid dividends thereon to the date fixed for
redemption.
2
<PAGE> 3
(ii) In the event that fewer than all the
outstanding shares of the Series D Preferred Stock are to be
redeemed, the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method as
may be determined by the Board of Directors in its sole
discretion to be equitable.
(iii) In the event the Corporation shall redeem
shares of the Series D Preferred Stock, notice of such
redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the
redemption date (or less than 30 days prior to the redemption
date if such redemption is pursuant to the Special Call), to
each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock records of
the Corporation, or by publishing notice thereof in The Wall
Street Journal or The New York Times, or, if neither such
newspaper is then being published, any other daily newspaper of
national circulation (each, an "Authorized Newspaper"). If the
Corporation elects to provide such notice by publication, it
shall also promptly mail notice of such redemption to each
holder of the shares of the Series D Preferred Stock to be
redeemed. Each such mailed or published notice shall state: (v)
the redemption date; (w) the number of shares of the Series D
Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (x) the redemption
price; (y) the place or places where certificates for such
shares are to be surrendered for payment of the redemption
price; and (z) that dividends on the shares to be redeemed will
cease to accrue on such redemption date. No defect in the
notice of redemption or in the mailing thereof shall affect the
validity of the redemption proceedings, and the failure to give
notice to any holder of shares of the Series D Preferred Stock
to be so redeemed shall not affect the validity of the notice
given to the other holders of shares of the Series D Preferred
Stock to be so redeemed.
(iv) Notice having been mailed as aforesaid, then,
notwithstanding that the certificates evidencing the shares of
the Series D Preferred Stock shall not have been surrendered,
from and after the redemption date (unless default shall be
made by the Corporation in providing money for the payment of
the redemption price) dividends on the shares of the Series D
Preferred Stock so called for redemption shall cease to accrue,
and said shares shall no longer be deemed to be outstanding,
and all rights of the holders thereof as stockholders
(including dividend and voting rights) of the Corporation
(except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance
with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of
Directors shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption
price aforesaid. In case fewer than all the shares represented
by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares without cost to
the holder thereof.
(v) Any shares of the Series D Preferred Stock that
shall at any time have been redeemed shall, after such
redemption, in the discretion of the Board of Directors of the
Corporation, be (x) held in treasury or (y) resume the status
of authorized but unissued shares of preferred stock, without
designation as to series, until such shares are once more
designated as part of a particular series by the Board of
Directors.
(vi) Notwithstanding the foregoing provisions of
this subsection (c), if any dividends on the Series D Preferred
Stock are in arrears, no shares of the Series D Preferred Stock
shall be redeemed unless all outstanding shares of the Series D
Preferred Stock are simultaneously redeemed, and the
Corporation shall not, and shall not permit any subsidiary
thereof to, purchase or otherwise acquire any shares of the
Series D Preferred Stock; provided, however, that the foregoing
shall not prevent the purchase or acquisition of shares of the
Series D Preferred Stock
3
<PAGE> 4
pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of the Series D Preferred
Stock.
(vii) Any shares of the Series D Preferred Stock held
by Leonard S. Shoen, Samuel W. Shoen, Michael L. Shoen, Cecilia
Shoen Hanlon, Theresa Shoen Romero, or Katrina Shoen Carlson,
by any trust for the benefit of the foregoing, or by any
"affiliate" (as defined in the Rules and Regulations under the
Securities Act of 1933, as amended) of the foregoing
(collectively, the "Original Holders") as of the date of the
Corporation's notice to the holders of record of the Series D
Preferred Stock in accordance with subsection (c)(iii), may be
called by the Corporation in increments of $25,000,000 at a
price of $50.00 per share, using the proceeds from any one or
more of the following (the "Special Call"): (1) the sale of
common stock of the Corporation or of any subsidiary of the
Corporation; (2) the sale of preferred stock of the Corporation
or of any subsidiary of the Corporation; (3) the sale of assets
of the Corporation or of any subsidiary of the Corporation; or
(4) the sale of one or more of the Corporation's subsidiaries.
In addition, any shares of Series D Preferred Stock, regardless
of whether such shares are held by the Original Holders as of
the date of the Corporation's notice to holders of record of
the Series D Preferred Stock (as described below), may be
called by the Corporation in increments of $25,000,000 at a
price of $51.75 per share at any time using the proceeds from
any one or more of the following: (1) the sale of common stock
of the Corporation or of any subsidiary of the Corporation; (2)
the sale of assets of the Corporation or of any subsidiary of
the Corporation; or (3) the sale of one or more the
Corporation's subsidiaries. The Corporation must notify the
holders of record of the Series D Preferred Stock in accordance
with subsection (c)(iii) within 60 days from the date of one of
the foregoing special occurrences of the Corporation's
intention to exercise its Special Call. The Corporation must
exercise its Special Call within 30 days of such notification.
(viii) All shares of Series D Preferred Stock held by
an Original Holder are subject to a right of redemption (the
"Right of Redemption"). The Right of Redemption does not apply
to shares of Series D Preferred Stock held by any party other
than the Original Holders and does not apply to any transfer
to an Original Holder from any trust for the benefit of such
Original Holder. In case any Original Holder of the Series
D Preferred Stock shall wish to make any sale, transfer
or other disposition of all or any part of the Series D
Preferred Stock held by such Original Holder, such Original
Holder shall first notify the Corporation in writing,
designating the number of shares of Series D Preferred Stock
which such Original Holder desires to dispose of. The
Corporation shall have a period of 21 calendar days following
the date of its receipt of such notice to determine whether it
wishes to purchase such Series D Preferred Stock. Such
determination shall be made by the Corporation by its delivery
to such Original Holder of a written acceptance of such offer
within such 21-day period. If such notice is timely delivered
to such Original Holder, the Corporation shall be obligated to
purchase from the Original Holder and the Original Holder shall
be obligated to sell to the Corporation, the Series D Preferred
Stock specified in the notice to the Corporation within 120
days following the date of the Corporation's notice to the
Original Holder for a price of $50.00 per share, plus accrued
and unpaid dividends thereon to the date of redemption. If the
Corporation shall not so accept such offer within such 21-day
period, then such Original Holder shall be entitled, for a
period of 270 days commencing on the first day after the date
on which such 21-day period expires, to dispose of all or any
part of the shares of Series D Preferred Stock designated in
such notice to the Corporation. If such Original Holder shall
not dispose of all or any part of such shares within such
270-day period (or, in the event of a sale of part thereof, the
shares remaining untransferred), such shares shall continue to
be subject in all respects to the Right of Redemption. The
Secretary of the Corporation is authorized to place a legend
describing the Right of Redemption on the certificates
representing shares of Series D Preferred Stock.
(d) Conversion. The holders of shares of the Series D
Preferred Stock shall not have any rights herein to convert such shares
into or exchange such shares for shares of any other class or classes
or of any other series of any class or classes of stock of the
Corporation.
(e) Voting. The shares of the Series D Preferred Stock
shall not have any voting powers either general or special, except as
required by law and except that:
4
<PAGE> 5
(i) So long as any of the shares of the Series D
Preferred Stock are outstanding, the consent of the holders of
at least two-thirds of all the shares of the Series D Preferred
Stock at the time outstanding, given in person or by proxy,
either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of the Series D
Preferred Stock shall vote together as a separate class, shall
be necessary for authorizing, affecting or validating the
amendment, alteration, or repeal of any of the provisions of
the Articles of Incorporation of the Corporation or of any
certificate amendatory thereof or supplemental thereto
(including any certificate of amendment or any similar document
relating to any series of preferred stock) that would adversely
affect the powers, preferences, or special rights of the Series
D Preferred Stock, including the creation or authorization of
any class of stock that ranks senior to the Series D Preferred
Stock with respect to dividends or upon Liquidation. Any
amendment or any resolution or action of the Board of Directors
that would create or issue any series of preferred stock out of
the authorized shares of preferred stock, or that would
authorize, create, or issue any shares or class of stock
(whether or not already authorized), ranking junior to or on a
parity with the Series D Preferred Stock with respect to the
payment of dividends and distributions and distributions upon
any Liquidation, shall not be considered to affect adversely
the powers, preferences, or special rights of the outstanding
shares of the Series D Preferred Stock; and
(ii) In the event that the Corporation shall have
failed to declare and pay or set apart for payment in full the
dividends accumulated on the outstanding shares of the Series D
Preferred Stock for any six quarterly dividend payment periods,
and all such preferred dividends remain unpaid (a "Preferred
Dividend Default"), the holders of outstanding shares of the
Series D Preferred Stock (voting separately as a class with the
holders of all 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) shall be entitled to
nominate and elect to the Board of Directors of the Corporation
at the next annual meeting of stockholders and at each
subsequent meeting called for the election of directors that
occurs during a Preferred Dividend Default, two directors who
shall serve until the next succeeding annual meeting of
stockholders when their successors are duly elected and
qualified or until the full dividends accumulated on all
outstanding shares of the Series D Preferred Stock have been
declared and paid in full, whichever occurs first. In such
case, the entire board of directors shall be increased by two
directors. Upon termination of such special voting rights
attributable to all holders of shares of the Series D Preferred
Stock and any other series of preferred stock, each director
elected by the holders of shares of the Series D Preferred
Stock and the holders of any other series of preferred stock
(hereinafter referred to as a "Preferred Stock Director")
pursuant to such special voting rights shall, without further
action, be deemed to have resigned, subject always to the
election of directors pursuant to the foregoing provisions in
case of a future Preferred Dividend Default. Any Preferred
Stock Director may be removed at any time with or without cause
by, and shall not be removed otherwise than by, the vote of the
holders of record of two-thirds of the outstanding shares of
the Series D Preferred Stock and all other series of preferred
stock who were entitled to participate in such Preferred Stock
Director's election, voting as a separate class, at a meeting
called for such purpose or by written consent as, and to the
extent, permitted by law and the Articles of Incorporation and
the Bylaws of the Corporation. So long as a Preferred Dividend
Default shall continue, any vacancy in the office of a
Preferred Stock Director shall be filled by written consent of
the Preferred Stock Director remaining in office or, if none
remains in office, by vote of the holders of record of a
majority of the outstanding shares of the Series D Preferred
Stock and all other series of preferred stock who are then
entitled to participate in the election of such Preferred Stock
Directors as provided above. As long as a Preferred Dividend
Default shall continue, holders of shares of the Series D
Preferred Stock shall not, as such stockholders, be entitled to
vote on the election or removal of directors other than
Preferred Stock Directors, but shall not be divested of any
other voting rights provided to such stockholders by law with
respect to any other matter to be acted upon by the
stockholders of the Corporation. The Preferred Stock Directors
shall each be entitled to one vote per director on any matter.
(f) Liquidation Rights.
(i) Upon the dissolution, liquidation, or winding up
of the affairs of the Corporation, whether voluntary or
involuntary (collectively, a "Liquidation"), after payment or
provision for
5
<PAGE> 6
payment has been made of the debts and other liabilities of the
Corporation and payment or provision for payment has been made
on all amounts required to be paid in respect of all
outstanding shares of any class or classes of stock of the
Corporation or series thereof ranking senior to the shares of
the Series D Preferred Stock, the holders of the shares of the
Series D Preferred Stock shall be entitled, subject to
paragraph (iv) of this subsection (f), to receive out of the
assets of the Corporation, before any payment or distribution
shall be made on common stock or on any other class of stock
ranking junior to Series D Preferred Stock upon Liquidation,
the amount of $50.00 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final distribution.
(ii) Neither the sale, transfer, or lease of all or
any part of the property or business of the Corporation, nor
the merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be
a Liquidation for the purposes of this subsection (f).
(iii) After the payment to the holders of the shares
of the Series D Preferred Stock of the full preferential
amounts provided for in this subsection (f), the holders of the
Series D Preferred Stock as such shall have no right or claim
to any of the remaining assets of the Corporation and the
shares of the Series D Preferred Stock shall no longer be
deemed to be outstanding or be entitled to any other powers,
preferences, rights, or privileges, including voting rights,
and such shares shall be surrendered for cancellation to the
Corporation.
(iv) In the event the assets of the Corporation
available for distribution to the holders of shares of the
Series D Preferred Stock upon any Liquidation shall be
insufficient to pay in full all amounts to which such holders
are entitled pursuant to paragraph (i) of this subsection (f),
no such distribution shall be made on account of any shares of
any series of preferred stock ranking on a parity with the
shares of the Series D Preferred Stock upon such Liquidation
unless proportionate distributive amounts shall be paid on
account of the shares of the Series D Preferred Stock, ratably,
in proportion to the full distributable amounts to which
holders of all such parity shares are respectively entitled
upon such Liquidation.
(g) Priority. Holders of the Corporation's Series A
8 1/2% Preferred Stock shall be entitled to the receipt of dividends or
of amounts distributable upon Liquidation of the Corporation, in
preference or priority to the holders of shares of the Series D
Preferred Stock. Any shares of any class or classes of the Corporation
or series thereof shall be deemed to rank:
(i) Prior to the shares of the Series D Preferred
Stock, either as to dividends or upon Liquidation, if the
holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon
Liquidation of the Corporation, in preference or priority to
the holders of shares of the Series D Preferred Stock;
(ii) On a parity with shares of the Series D
Preferred Stock, either as to dividends or upon Liquidation,
whether or not the dividend rates, dividend payment dates, or
redemption or Liquidation prices per share or sinking fund
provisions, if any, be different from those of the Series D
Preferred Stock, if the holders of such shares shall be
entitled to the receipt of dividends or of amounts
distributable upon Liquidation of the Corporation, in
proportion to their respective dividend rates or Liquidation
prices, without preference or priority, one over the other, as
between the holders of such shares and the holders of shares of
the Series D Preferred Stock; and
(iii) Junior to shares of the Series D Preferred
Stock, either as to dividends or upon Liquidation, if such
class is common stock or if the holders of shares of the Series
D Preferred Stock shall be entitled to receipt of dividends or
of amounts distributable upon Liquidation of the Corporation,
in preference or priority to the holders of shares of such
class or classes.
6
<PAGE> 7
(h) Sinking or Retirement Fund. The shares of the
Series D Preferred Stock shall not be entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption
of such shares.
(i) Miscellaneous.
(i) Subject to subsection (c)(iii) above, all
notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier
of receipt thereof or three business days after the mailing
thereof if sent by first-class mail with postage prepaid,
addressed: if to the Corporation, to its offices at 1325
Airmotive Way, Suite 100, Reno, Nevada 89502-3239 (Attention:
Secretary); if to a holder, to the address thereof shown on the
security register maintained by the registrar for the Series D
Preferred Stock; or to such other address as the Corporation or
holder, as the case may be, shall have designated by notice
similarly given.
(ii) In the event a holder of shares of the Series D
Preferred Stock shall not by written notice designate the name
to whom payment upon redemption of any shares of the Series D
Preferred Stock should be made or the address to which the
certificate or certificates representing such shares, or such
payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the
holder of such shares as shown on the records of the
Corporation and to send the certificate or certificates
representing such shares, or such payment, to the address of
such holder shown on the records of the Corporation.
IN WITNESS WHEREOF, we have hereunto set our hands and seals as
President and Secretary, respectively, of the Corporation this ______ day of
December, 1995 and we hereby affirm that the foregoing Certificate is our act
and deed and the act and deed of the Corporation and that the facts stated
herein are true.
------------------------------------
President
------------------------------------
Secretary
7
<PAGE> 8
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
December, 1995, by Edward J. Shoen, the President of AMERCO, a Nevada
corporation, on behalf of the corporation.
------------------------------------
NOTARY PUBLIC
My Commission Expires:
- -----------------------
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
December, 1995, by Gary V. Klinefelter, the Secretary of AMERCO, a Nevada
corporation, on behalf of the corporation.
------------------------------------
NOTARY PUBLIC
My Commission Expires:
- -----------------------
8
<PAGE> 1
EXHIBIT 5
January 8, 1996
AMERCO
1325 Airmotive Way, Suite 100
Reno, Nevada 89502
RE: Registration Statement on Form S-2
(File No. 33-63825).
---------------------
Gentlemen:
You have requested our opinion as special Nevada counsel for
AMERCO, a Nevada corporation ("AMERCO"), in connection with the proposed offer
and sale by AMERCO of up to 3,860,000 shares of its Series D Floating Rate
Preferred Stock ("Series D Floating Rate Preferred Stock"). The Series D
Floating Rate Preferred Stock is the subject of a Registration Statement on Form
S-2 (File No. 33-63825) (the "Registration Statement").
In connection with this opinion, we have examined:
1. the Registration Statement;
2. the Restated Articles of Incorporation of AMERCO, as
amended, certified by the Nevada Secretary of State;
3. the Restated By-laws of AMERCO certified by the
Secretary of AMERCO;
4. resolutions to be adopted by the Board of Directors
of AMERCO in the form of the Certificate of Designations, Preferences and Rights
of Series D Floating Rate Preferred Stock attached as Exhibit 4.4 to
the Registration Statement ("Certificate of Designations"); and
5. a draft of the stock certificate for the Series D
Floating Rate Preferred Stock ("Series D Floating Rate Preferred Stock
Certificate").
We have assumed the disclosure to the Board of Directors of AMERCO the
interest of certain directors of AMERCO in the adoption of the Certificate of
Designation, the notation thereof in the minutes and the adoption of the
Certificate of Designation by a vote of the Board of Directors of AMERCO by a
vote sufficient for the purpose without counting the vote of the interested
directors. We assume that the transactions contemplated by the Certificate of
Designation are fair to AMERCO at the time of the adoption of the Certificate
of Designation by the Board of Directors of AMERCO.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to originals of all copies of all documents submitted
to us. We have relied upon the certificates of all public officials and
corporate officers with respect to the accuracy of all matters contained
therein.
In rendering the opinion set forth herein, we have further assumed:
<PAGE> 2
AMERCO
December 7, 1995
Page 2
1. the Registration Statement being declared effective by
the Securities and Exchange Commission (the "Commission");
2. the due adoption of the Certificate of Designations
authorizing the issuance of 3,860,000 shares of Series D Floating Rate Preferred
Stock by the Board of Directors of AMERCO and the filing thereof with the Nevada
Secretary of State as required by Nevada law;
3. the offering and sale of the Series D Floating Rate
Preferred Stock in the manner set forth in the Registration Statement;
4. the due execution, authentication and delivery of the
Series D Floating Rate Preferred Stock Certificate; and
5. the delivery of the Preferred Stock to the "Settlement
Trust" as described in the Registration Statement.
Based upon the foregoing, we are of the opinion that:
1. The shares of Series D Floating Rate Preferred Stock to be
issued by AMERCO when issued, will be validly issued, fully paid and
nonassessable shares of Series D Floating Rate Preferred Stock.
2. Under the laws of the State of Nevada, no personal liability
will attach to the holders of any of the Series D Floating Rate Preferred Stock
by reason of their ownership
thereof.
We disclaim liability as an expert under the securities laws of the
United States or any other jurisdiction.
Nothing herein shall be deemed an opinion as to the laws of any
jurisdiction other than the State of Nevada.
This opinion is intended solely for the use of AMERCO in connection
with the Series D Floating Rate Preferred Stock. It may not be relied upon by
any other person or for any other purpose, or reproduced or filed publicly by
any person, without the written consent of this firm; provided, however, we
hereby consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the references to this firm contained in the Registration
Statement.
Very truly yours,
LIONEL SAWYER & COLLINS
