<PAGE> 1
Rule 424(b)(5)
File No. 333-1195
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 24, 1996)
$175,000,000
LOGO
AMERCO
7.85% SENIOR NOTES DUE 2003
The 7.85% Senior Notes Due 2003 (the "Notes") will mature on May 15, 2003.
Interest on the Notes is payable on May 15 and November 15 of each year,
commencing November 15, 1996. The Notes will be issued by AMERCO, a holding
company for U-Haul International, Inc. and other companies (the "Company"). The
Notes may not be redeemed prior to maturity and the Notes do not provide for any
sinking fund. Upon a Change of Control Triggering Event (as defined), holders of
the Notes will have the right to require the Company to purchase all or any part
of the Notes at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest (if any) to the date of purchase. See
"Description of Notes -- Purchase at the Option of Holders Upon a Change of
Control."
The Notes offered hereby will be represented by one or more Global Securities
(as defined) representing Book-Entry Securities and will be registered in the
name of Cede & Co., the nominee of The Depository Trust Company, which will act
as Depository. Beneficial interests in Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described herein under "Description
of Notes," Notes in certificated form will not be issued in exchange for the
Global Securities. Settlement for Notes will be made in immediately available
funds. The Notes will trade in the Depository's Same-Day Funds Settlement System
until maturity, and secondary market trading activity for the Notes will
therefore settle in immediately available funds. Except as described in
"Description of Notes -- Same-Day Funds Settlement System and Payment," all
payments of principal and interest will be made by the Company in immediately
available funds. See "Description of Notes -- Same-Day Funds Settlement System
and Payment" in this Prospectus Supplement and "Description of Debt Securities"
in the accompanying Prospectus.
The Notes will be general unsecured obligations of the Company and will rank
pari passu in right of payment with all senior indebtedness and senior in right
of payment to any future subordinated indebtedness of the Company. The Notes
will be effectively subordinated to all secured indebtedness of the Company and
to all indebtedness and other liabilities of the Company's subsidiaries.
SEE "RISK FACTORS" ON PAGES 5-7 OF THE ACCOMPANYING PROSPECTUS FOR INFORMATION
RELEVANT TO AN INVESTMENT IN THE NOTES.
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 SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
Per Note............................................ 99.970% .625% 99.345%
Total............................................... $174,947,500 $1,093,750 $173,853,750
==========================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from May 6, 1996.
(2) Before deducting expenses payable by the Company estimated at approximately
$355,000.
The Notes offered by this Prospectus Supplement are offered by the Underwriters
subject to prior sale, withdrawal, cancellation, or modification of the offer
without notice, to delivery to and acceptance by the Underwriters, and to
certain further conditions. It is expected that delivery of the Notes will be
made at the offices of Salomon Brothers Inc, New York, New York or through the
facilities of The Depository Trust Company, on or about May 6, 1996.
SALOMON BROTHERS INC
LEHMAN BROTHERS
CITICORP SECURITIES, INC.
The date of this Prospectus Supplement is May 1, 1996.
<PAGE> 2
------------------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR
DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
S-2
<PAGE> 3
THE COMPANY
The Company is the holding company for its principal subsidiary, U-Haul
International, Inc. ("U-Haul"). The Company's U-Haul rental operations
represented 84.4%, 85.2%, and 85.1% of the Company's total revenue for the nine
months ended December 31, 1995, fiscal year ended March 31, 1995, and fiscal
year ended March 31, 1994, respectively. The Company is also a holding company
for Ponderosa Holdings, Inc. ("Ponderosa") and Amerco Real Estate Company
("AREC"). Throughout this Prospectus Supplement, unless the context otherwise
requires, the term "Company" includes all of the Company's subsidiaries.
U-Haul U-Move Operations. 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 13,000 independent dealers
throughout the United States and Canada. The Company believes it has more moving
equipment rental locations than its two largest competitors combined. U-Haul's
rental equipment fleet consists of approximately 84,000 trucks and approximately
102,000 trailers. The Company, as part of its fleet renewal program, purchased
approximately 78,000 new trucks between March 1987 and December 1995 and reduced
the overall average age of its truck fleet from approximately eleven years at
March 1987 to approximately five years at December 1995. Since 1990, U-Haul has
replaced approximately 59% of its trailer fleet with new, more aerodynamically
designed trailers better suited to the low height profile of many newly
manufactured automobiles. Additionally, U-Haul sells related products (such as
boxes, tape and packaging materials) and rents various kinds of equipment (such
as floor polishing and carpet cleaning equipment).
U-Haul Self-Storage Rental Operations. U-Haul entered the self-storage
business in 1974 and offers for rent more than 17.9 million square feet of
self-storage space through approximately 800 Company-owned or managed storage
locations. The Company believes it is the second largest self-storage operator
(in terms of square feet) in the industry. The Company believes its self-storage
operations are complementary to its do-it-yourself moving business. All of its
self-storage space is located at or near a U-Haul Center or an independent
dealer.
Ponderosa. 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").
For financial statement presentation, the Company's insurance subsidiaries
report on a calendar year basis while the Company reports on a fiscal year
basis.
Oxford primarily reinsures life, health, and annuity type insurance
products and administers the Company's self-insured employee health plan.
Approximately 7.2% of Oxford's premium revenue results from business with the
Company. Oxford's revenues represented 3.6%, 3.1%, and 2.8% of the Company's
total revenue for the nine months ended December 31, 1995, fiscal year ended
March 31, 1995, and fiscal year ended March 31, 1994, respectively.
Approximately 99% of Oxford's invested assets are in investment grade fixed
income securities. Oxford is rated "A-VII" by A.M. Best.
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. RWIC's principal strategy is to capitalize
on its knowledge of insurance products aimed at the moving and rental markets.
Approximately 40% of RWIC's written premiums result from U-Haul and
U-Haul-affiliated underwriting activities. RWIC's revenues represented 12.0%,
11.7%, and 12.1% of the Company's total revenue for the nine months ended
December 31, 1995, fiscal year ended March 31, 1995, and fiscal year ended March
31, 1994, respectively. Approximately 95.5% of RWIC's invested assets are in
investment grade fixed income securities. RWIC is rated "A+-VIII" by A.M. Best.
S-3
<PAGE> 4
AREC. AREC owns and actively manages most of the Company's real estate
assets, including the Company's U-Haul Center locations. In addition to its
U-Haul operations, AREC actively seeks to lease or dispose of the Company's
surplus properties.
RECENT DEVELOPMENTS
As disclosed in the accompanying Prospectus, on March 15, 1996, a
long-standing legal dispute involving the Shoen family and related to control of
the Company was resolved. As part of the resolution, the Company will pay
approximately $315.2 million (and potentially accrued interest since February
21, 1995) to certain non-management members of the Shoen family and their
affiliates. As a result, these shareholders will be required to relinquish all
of their 12,426,836 shares of Common Stock to the Company.
Prior to the March 15, 1996 resolution, the Company had repurchased
5,828,140 shares and paid approximately $133.2 million related to the dispute.
The remaining payment of $315.2 million will be made prior to October 1, 1996
and, upon payment, the Company will have purchased a total of 18,256,976 shares,
representing 47.3% of the total shares outstanding. The Company has several
potential funding sources. It anticipates funding the remaining payment from the
proceeds of the sale of at least $200 million of the Company's capital stock,
and up to $150 million of surplus or nonessential assets including real estate
and mortgage notes.
The long-standing legal dispute has required an increased amount of
management's time the past eighteen months, which will no longer be required
going forward. Since the current management was put in place in 1987, the
Company has pursued a strategic plan that emphasizes its core do-it-yourself
rental, moving, and storage business, and increased revenues from $864 million
in fiscal 1987 to $1.2 billion in fiscal 1995, with net income increasing from
$2.2 million in fiscal 1987 to $60 million in fiscal 1995.
USE OF PROCEEDS
The Company intends to apply the net proceeds from the sale of the Notes to
the payment at maturity of a portion of the Company's long-term debt. The debt
to be repaid with the proceeds of the Notes bears interest at rates ranging from
5.67% to 10.27% and matures on dates ranging from June 1, 1996 through August
15, 1997.
RATIO OF EARNINGS TO FIXED CHARGES
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, 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 nine months ended December 31, 1995 may not be
indicative of the ratio to be expected for fiscal 1996 because, among other
reasons, the Company's U-Haul rental operations are seasonal and proportionally
more of its earnings are generated in the first and second quarters of each
fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
- ------------ ----------------------------------------
1995 1995 1994 1993 1992 1991
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
2.28 1.99 1.67 1.45 1.21 N/A
</TABLE>
S-4
<PAGE> 5
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1995, and as adjusted to give effect to the issuance of
the Notes offered hereby.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt.............................. $128,691 $ 12,058
Notes Payable..................................................... 40,000 40,000
Long-Term Debt:
3-year credit facility(1)....................................... 258,000 258,000
Senior Notes due 1997-2010...................................... 408,667 350,300
Medium-Term Notes and Other..................................... 55,275 55,275
Securities offered hereunder.................................... -- 175,000
-------- ---------
Total Notes and Loans................................... $890,633 $ 890,633
======== =========
Stockholders' equity:
Serial preferred stock, with or without par value, authorized
50,000,000 shares; 6,100,000 issued without par value and
outstanding.................................................. $ -- $ --
Serial common stock, with or without par value, authorized
150,000,000 shares........................................... -- --
Series A Common Stock of $0.25 par value, authorized 10,000,000
shares, issued 5,762,495 shares.............................. 1,441 1,441
Common Stock of $0.25 par value, authorized 150,000,000 shares,
issued 34,237,505 shares..................................... 8,559 8,559
Additional paid in capital...................................... 165,756 165,756
Foreign currency translation.................................... (11,895) (11,895)
Unrealized gain (loss) on investments........................... 5,635 5,635
Retained earnings............................................... 610,076 610,076
Less:
Cost of common shares in treasury............................ 61,069 61,069
Unearned employee stock ownership plan shares................ 23,329 23,329
-------- ---------
Total Stockholders' Equity:............................. $695,174 $ 695,174
======== =========
</TABLE>
- ---------------
(1) The 3-year credit facility is a $365 million unsecured revolving credit
facility with a maturity date of June 1, 1998.
S-5
<PAGE> 6
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 nine months ended December 31,
1995 and 1994 has been derived from the Company's unaudited quarterly report on
Form 10-Q for the quarter ended December 31, 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 also "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Other" and "Shoen
Litigation" in the accompanying Prospectus. The summaries for the nine months
ended December 31, 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 nine months
ended December 31, 1995 may not be indicative of the results to be expected for
fiscal 1996 because, among other reasons, the Company's U-Haul rental operations
are seasonal and proportionally more of its revenue and net earnings are
generated in the first and second quarters of each fiscal year.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <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
Premiums and net investment income............................... 177,733 162,151 139,465 126,756 126,620
---------- ---------- ---------- ---------- ----------
1,240,863 1,134,855 1,040,911 971,884 986,664
---------- ---------- ---------- ---------- ----------
Operating expense, advertising expense, and cost of sales........ 783,933 735,841 697,700 661,229 668,149
Benefits, losses and amortization of deferred acquisition costs.. 144,303 130,168 115,969 99,091 126,626
Depreciation..................................................... 151,409 133,485 110,105 109,641 114,589
Interest expense................................................. 67,762 68,859 67,958 76,189 80,815
---------- ---------- ---------- ---------- ----------
1,147,407 1,068,353 991,732 946,150 990,179
---------- ---------- ---------- ---------- ----------
Pretax earnings (loss) from operations........................... 93,456 66,502 49,179 25,734 (3,515)
Income tax expense............................................... (33,424) (19,853) (17,270) (4,940) (6,354)
---------- ---------- ---------- ---------- ----------
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)
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)
========== ========== ========== ========== ==========
Earnings (loss) from operations before extraordinary loss on
early extinguishment of debt and cumulative effect of change
in accounting principle per common share(2)..................... $ 1.23 $ 1.06 $ .83 $ .53 $ (.25)
Net earnings (loss) per common share(2).......................... 1.23 .89 .83 .53 (.25)
Weighted average common shares outstanding(3).................... 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080
Cash dividends declared:
Preferred Stock................................................. $ 12,964 $ 4,753 $ -- $ -- $ --
Common Stock.................................................... -- 3,147 1,994 -- 1,176
Ratios:
Ratio of EBITDA to Interest(4).................................. 4.80 4.13 3.61 2.97 2.55
<CAPTION>
FOR THE NINE
MONTHS ENDED
DECEMBER 31,
-----------------------
1995(1) 1994
---------- ----------
Summary of Operations:
Rental, net sales and other revenue.............................. $ 858,894 $ 835,124
Premiums and net investment income............................... 150,334 141,587
1,009,228 976,711
Operating expense, advertising expense, and cost of sales........ 659,616 585,332
Benefits, losses and amortization of deferred acquisition costs.. 125,549 116,884
Depreciation..................................................... 79,049 112,631
--------- ---------
Interest expense................................................. 52,684 50,871
--------- ---------
916,898 865,718
Pretax earnings (loss) from operations........................... 92,330 110,993
Income tax expense............................................... (34,120) (39,602)
Earnings (loss) from operations before extraordinary loss on
early extinguishment of debt and cumulative effect of change
in accounting principle......................................... 58,210 71,391
Extraordinary loss on early extinguishment of debt............... -- --
Cumulative effect of change in accounting principle.............. -- --
---------- ----------
Net earnings (loss).............................................. $ 58,210 $ 71,391
========== ==========
Earnings (loss) from operations before extraordinary loss on
early extinguishment of debt and cumulative effect of change
in accounting principle per common share(2)..................... $ 1.32 $ 1.67
Net earnings (loss) per common share(2).......................... 1.32 1.67
Weighted average common shares outstanding(3).................... 36,796,961 37,025,575
Cash dividends declared:
Preferred Stock................................................. $ 9,723 $ 9,723
Common Stock.................................................... -- --
Ratios:
Ratio of EBITDA to Interest(4).................................. 4.51 5.63
<CAPTION>
MARCH 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total property, plant and equipment, net....... $1,274,246 $1,174,236 $ 989,603 $ 987,095 $1,040,342
Total assets................................... 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977
Notes and loans payable........................ 881,222 723,764 697,121 733,322 804,826
Stockholders' equity........................... 686,784 651,787 479,958 451,888 435,180
<CAPTION>
DECEMBER 31,
-----------------------
1995(4) 1994
---------- ----------
Balance Sheet Data:
Total property, plant and equipment, net....... $1,260,933 $1,262,853
Total assets................................... 2,748,795 2,537,422
Notes and loans payable........................ 890,633 827,592
Stockholders' equity........................... 695,174 705,577
</TABLE>
- ---------------
(1) Reflects the adoption of Statement of Position 93-7, "Reporting on
Advertising Costs."
(2) For the fiscal years ended March 31, 1995 and 1994, and for the nine months
ended December 31, 1995 and 1994, earnings (loss) and net earnings per
common share were computed after giving effect to the dividends on the
Company's Series A 8 1/2% preferred stock.
(3) Reflects the adoption of Statement of Position 93-6, "Employer's Accounting
for Employee Stock Ownership Plans."
(4) For purposes of computing the ratio of EBITDA to Interest, "EBITDA" consists
of net earnings (loss) before interest, taxes, depreciation, and
amortization. EBITDA is not intended to represent cash flow or any other
measure of performance in accordance with generally accepted accounting
principles. EBITDA is included herein because certain investors find it to
be a useful tool in understanding cash flow generated from operations that
is available for debt service, taxes and capital expenditures.
S-6
<PAGE> 7
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as "Debt Securities")
supplements, and to the extent inconsistent therewith supersedes, the
description of the general terms and provisions of Debt Securities set forth in
the Prospectus, to which description reference is hereby made. Capitalized terms
not otherwise defined herein shall have the meanings given to them in the
Prospectus. For purposes of the following description, references to the Company
shall mean AMERCO.
The Notes will be issued under the Indenture, dated as of May 1, 1996 (the
"Debt Securities Indenture"), as supplemented by a Supplemental Indenture, to be
dated as of May 6, 1996 (the "Supplemental Indenture") between the Company and
Citibank, N.A., as trustee (the "Trustee") and will be limited to $175,000,000
aggregate principal amount and will mature on May 15, 2003. Subject to the
following paragraph, the Notes will bear interest at the rate per annum shown on
the cover of this Prospectus Supplement from and including May 6, 1996 or from
the most recent Interest Payment Date on which interest has been paid or
provided for, payable semiannually on May 15 and November 15 of each year,
commencing November 15, 1996, to the person in whose name a Note (or any
predecessor Note) is registered at the close of business on the May 1 or
November 1, as the case may be, next preceding such Interest Payment Date.
If at any time on or prior to December 31, 1996 (a) the rating of the Notes
by Standard & Poor's Rating Group shall decrease below BBB-, or (b) the rating
of the Notes by Moody's Investors Service, Inc. shall decrease below Ba1, or (c)
the rating of the Notes by Duff & Phelps Credit Rating Co. shall decrease below
BBB-, then, from and including the Interest Payment Date next succeeding the
date on which any of the rating events described in clauses (a), (b) or (c)
shall have occurred, the interest rate payable on the Notes shall be increased
by 1.00% per annum. Such increased interest rate shall remain in effect until
the Interest Payment Date next succeeding the date on which (i) the rating of
the Notes by Standard & Poor's Rating Group shall be equal to or higher than
BBB-, (ii) the rating of the Notes by Moody's Investors Service, Inc. shall be
equal to or higher than Ba1, and (iii) the rating of the Notes by Duff & Phelps
Credit Rating Co. shall be equal to or higher than BBB-, in which case the
interest rate on the Notes shall be restored from and including such Interest
Payment Date to the interest rate per annum shown on the cover of this
Prospectus Supplement.
The Notes may not be redeemed prior to maturity and the Notes will not be
subject to any sinking fund.
The Notes will be general unsecured obligations of the Company. The Notes
will rank pari passu in right of payment with all senior indebtedness of the
Company, and senior in right of payment to all future subordinated indebtedness
of the Company. As of December 31, 1995, after giving effect to this offering
and the application of the proceeds thereof, the Company would have had
approximately $821.4 million of unsecured debt (including the Notes) and the
Subsidiaries had approximately $69.2 million of secured debt. The Notes will be
effectively subordinated to (i) any secured indebtedness of the Company to the
extent of the assets securing that indebtedness and (ii) all indebtedness for
money borrowed and other liabilities of Subsidiaries.
The Notes are obligations exclusively of the Company. Since the operations
of the Company are primarily conducted through Subsidiaries, the cash flow and
the consequent ability to service debt, including the Notes, of the Company, is
primarily dependent upon the earnings of its Subsidiaries and the distribution
of those earnings to, or upon loans or other payments of funds by those
Subsidiaries to, the Company. The payment of dividends and the making of loans
and advances to the Company by its Subsidiaries may be subject to statutory or
insurance regulatory restrictions, are dependant upon the earnings of those
Subsidiaries and are subject to various business considerations.
S-7
<PAGE> 8
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more permanent global notes (each,
a "Global Security") deposited with, or on behalf of, The Depository Trust
Company, as Depository under the Debt Securities Indenture and the Supplemental
Indenture (the "Depository"), and registered in the name of the Depository's
nominee. Except as set forth below, (1) owners of beneficial interests in a
Global Security will not be entitled to have Notes represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
owners or holders thereof under the Debt Securities Indenture and the
Supplemental Indenture and (2) each Global Security may be transferred, in whole
and not in part, only to another nominee of the Depository or to a successor of
the Depository or its nominee. Accordingly, beneficial interests in the Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depository and its participants. The laws of some states
require certain purchasers of securities to take physical delivery thereof in
definitive form. The depository arrangements described above and such laws may
impair the ability to own or transfer beneficial interests in a Global Security.
Owners of beneficial interests in any Global Security will not be entitled to
receive Notes in definitive form and will not be considered holders of Notes
unless (1) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time the Depository
ceases to be a clearing agency registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (2) the Company executes and delivers to
the Trustee a Company Order that such Global Security shall be so exchangeable
or (3) there shall have occurred and be continuing an Event of Default or an
event which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to the Notes (a "Default"). In such
circumstances, upon surrender by the Depository or a successor depository of any
Global Security, Notes in definitive form will be issued to each person that the
Depository or a successor depository identifies as the beneficial owner of the
related Notes. Upon such issuance, the Trustee is required to register such
Notes in the name of, and cause such Notes to be delivered to, such person or
persons (or nominees thereof). Such Notes would be issued in fully registered
form without coupons, in denominations of $1,000 and integral multiples thereof.
The Depository has advised the Company and the Underwriters as follows: The
Depository is a limited-purpose trust company organized under the laws of the
State of New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of section 17A of the Exchange Act. The Depository
was created to hold securities for its participants (the "Participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's direct Participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depository. Access to the Depository's
book-entry system is also available to others (the "Indirect Participants"),
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. The Depository agrees with and represents to its Participants that
it will administer its book-entry system in accordance with its rules and
by-laws and requirements of law.
Principal and interest payments on Notes registered in the name of or held
by the Depository or its nominee will be made to the Depository or its nominee,
as the case may be, as the registered owner of the Global Security representing
such Notes. Under the terms of the Debt Securities Indenture and the
Supplemental Indenture, the Company and the Trustee will treat the persons in
whose names the Notes are registered as the holders of such Notes for the
purpose of receiving payment of principal and interest on such Notes and for all
other purposes whatsoever. Therefore, none of the Company, the Trustee or any
paying agent has any direct responsibility or liability for the payment of
principal of or interest on the Notes to owners of beneficial interests in any
Global Security. The Depository has advised the Company and the Trustee that its
current practice is to
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credit the accounts of Participants with payments of principal or interest on
the date payable in amounts proportionate to their respective holdings in
principal amount of beneficial interests in a Global Security as shown in the
records of the Depository, unless the Depository has reason to believe that it
will not receive payment on such date. The Depository's current practice is to
credit such accounts, as to interest, in next-day funds and, as to principal, in
same-day funds. Payments by Participants and Indirect Participants to owners of
beneficial interests in a Global Security will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of the Participants and Indirect Participants.
The Depository has advised the Company that it will take any action
permitted to be taken by an owner or Holder of Notes only at the direction of
one or more Participants to whose account with the Depository such Holder's
Notes are credited. Additionally, the Depository has advised the Company that it
will take such actions with respect to any percentage of the beneficial interest
of holders who hold Notes through Participants only at the direction of and on
behalf of Participants whose account holders include undivided interests that
satisfy any such percentage. The Depository may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose account Holders include such undivided
interests.
SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds or, at the option of the Company in the
case of Notes issued in definitive form, by check in the case of interest
payments.
Secondary trading in long-term notes of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, the Notes will trade in
the Depository's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Notes will therefore be required by the
Depository to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
Notes shall have the right to require the Company to purchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date (the "Change of Control
Purchase Price"). Without the appropriate consent of the holders of the Notes,
neither the Board of Directors of the Company nor the Trustee may waive the
provisions of the Supplemental Indenture requiring the Company to make a Change
of Control Offer upon a Change of Control Triggering Event. Events that
constitute a Change of Control may not require approval by the Company's Board
of Directors.
Within 30 days following any Change of Control Triggering Event, the
Company shall (i) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News Service or similar business news service in the
United States and (ii) mail a notice to the Trustee and each holder of Notes
stating: (1) that a Change of Control Triggering Event has occurred and a Change
of Control Offer is being made pursuant to the covenant in the Supplemental
Indenture entitled "Purchase of Securities at the Option of Holders Upon a
Change of Control" and that all Notes timely tendered will be accepted for
payment; (2) the purchase price and the purchase date, which date shall be,
subject to any contrary requirements of applicable law, a business day no
earlier than 30 days nor later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"); (3) that any Note (or portion thereof)
accepted for payment (and duly paid on the Change of Control Payment Date)
pursuant to the Change of Control Offer shall cease to accrue interest
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after the Change of Control Payment Date; (4) that any Notes (or portions
thereof) not tendered will continue to accrue interest; (5) a description of the
transaction or transactions constituting the Change of Control Triggering Event;
and (6) the procedures that holders of Notes must follow in order to tender
their Notes (or portions thereof) for payment and the procedures that holders of
Notes must follow in order to withdraw an election to tender Notes (or portions
thereof) for payment.
The Company will comply, to the extent then applicable and required by law,
with the requirements of Rule 14e-1 under the Exchange Act, and any other
securities laws and regulations thereunder in connection with the purchase of
Notes pursuant to the Change of Control Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions relating to
the Change of Control Offer, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
Except as described above with respect to a Change of Control Triggering
Event, the Debt Securities Indenture and the Supplemental Indenture do not
contain any other provisions that permit the holders of the Notes to require
that the Company purchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
The Change of Control purchase feature is a result of negotiations between
the Company and the Underwriters. Management has no present intention to engage
in a transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Supplemental Indenture,
but that could increase the amount of indebtedness for money borrowed
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings. The Debt Securities Indenture and the Supplemental Indenture do
not contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
The Company may not currently have adequate financial resources to effect a
repurchase of the Notes upon a Change of Control Triggering Event and there can
be no assurance that the Company will have such resources in the future. The
inability of the Company to repurchase the Notes upon a Change of Control
Triggering Event would constitute an Event of Default.
The occurrence of certain of the events that would constitute a Change of
Control could trigger a prepayment obligation under certain of the Company's
credit agreements and debt obligations, and failure to effect such prepayment
could constitute an event of default under such credit agreements and debt
obligations. If the Company is not able to obtain requisite consents or waivers
from the lenders under such credit agreements and the holders of such debt
obligations, the Company may be unable to fulfill its repurchase obligations
following a Change of Control Triggering Event, thereby resulting in a default
under the Debt Securities Indenture and the Supplemental Indenture and
permitting the pursuit of remedies under the Debt Securities Indenture and the
Supplemental Indenture in the manner described under "Events of Default." Future
indebtedness of the Company may also contain prohibitions of certain events that
would constitute a Change of Control or require such indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the holders of
Notes of their right to require the Company to repurchase the Notes could cause
a default under such indebtedness, even if the Change of Control Triggering
Event itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders upon a
repurchase may be limited by the Company's then existing financial resources. In
the event that a Change of Control Offer occurs at a time when the Company does
not have sufficient available funds to pay the Change of Control Purchase Price
for all Notes tendered pursuant to such offer or a time when the Company is
prohibited from purchasing the Notes (and the Company is unable either to obtain
the consent of the holders of the relevant indebtedness or to
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repay such indebtedness), an Event of Default would occur under the Debt
Securities Indenture and the Supplemental Indenture.
CERTAIN COVENANTS
Limitation on Liens Securing Indebtedness. The Company will not, and will
not permit any Consolidated Subsidiary to, create or incur, or suffer to be
incurred or to exist, at any time, any Lien on its or their property, whether
now owned or hereafter acquired, or upon any income or profits therefrom, to
secure the payment of any indebtedness for money borrowed of the Company or of
any Consolidated Subsidiary or of any other Person, unless all obligations of
the Company on or in respect of the Notes are equally and ratably and validly
secured by such Lien by proceedings and documents reasonably satisfactory to the
Trustee, except that the provisions of this paragraph shall not prohibit the
following:
(a) Liens existing as of the Issue Date securing indebtedness for
money borrowed of the Company and its Consolidated Subsidiaries outstanding
on such date;
(b) Liens (i) incurred after the Issue Date given (on or within 120
days of the date of acquisition, construction or improvement) to secure the
payment of the purchase price or construction costs incurred by the Company
or a Consolidated Subsidiary in connection with the acquisition,
construction or improvement of real and personal property useful and
intended to be used in carrying on the business of the Company or such
Consolidated Subsidiary, or (ii) on fixed assets useful and intended to be
used in carrying on the business of the Company or a Consolidated
Subsidiary existing at the time of acquisition or construction thereof by
the Company or such Consolidated Subsidiary or at the time of acquisition
by the Company or a Consolidated Subsidiary of any business entity then
owning such fixed assets, whether or not such existing Liens were given to
secure the payment of the purchase price or construction costs of the fixed
assets to which they attach, so long as Liens permitted by this clause (ii)
were not incurred, extended or renewed in contemplation of such acquisition
or construction, provided that any such Liens permitted by this clause (b)
shall attach solely to the property acquired, constructed, improved or
purchased;
(c) Liens for taxes, assessments or other governmental levies or
charges not yet due or which are subject to a good faith contest;
(d) Liens incidental to the conduct of the Company's and its
Subsidiaries' businesses or their ownership of property and other assets
not securing any indebtedness for money borrowed and not otherwise incurred
in connection with the borrowing of money or obtaining of credit, and which
do not in the aggregate materially diminish the value of the Company's or
Subsidiaries' property or assets when taken as a whole, or materially
impair the use thereof in the operation of their businesses;
(e) Liens in respect of any interest or title of a lessor in any
property subject to a Capitalized Lease permitted under "-- Limitation on
Sale and Leaseback";
(f) Liens arising in respect of judgments against the Company, except
for any judgment in an amount in excess of $1,000,000 which is not
discharged or execution thereof stayed pending appeal within 45 days after
entry thereof;
(g) Liens in favor of the Company or any Consolidated Subsidiary of
the Company;
(h) Liens consisting of minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way, utilities
and other similar purposes, or zoning or other restrictions as to use of
real property, that are necessary for the conduct of the operations of the
Company and its Subsidiaries or that customarily exist on properties of
corporations engaged in similar businesses and are similarly situated and
that do not in any event materially impair their use in the operations of
the Company and its Subsidiaries; and
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(i) Liens renewing, extending or refunding any Lien permitted by the
preceding clauses of this paragraph; provided, however, that the principal
amount of indebtedness for money borrowed secured by such Lien immediately
prior thereto is not increased and such Lien is not extended to any other
assets or property.
Notwithstanding the foregoing, the Company or any Consolidated Subsidiary
may create or assume Liens, in addition to those otherwise permitted by the
preceding clauses of this paragraph, securing indebtedness for money borrowed of
the Company or any Consolidated Subsidiary issued or incurred after the Issue
Date, provided that at the time of such issuance or incurrence, the aggregate
amount of all Secured Indebtedness and Attributable Debt would not exceed 15% of
Consolidated Net Tangible Assets.
In the event that any property of the Company or any Consolidated
Subsidiary is subjected to a Lien not otherwise permitted by this paragraph, the
Company will make or cause to be made a provision whereby the Notes will be
secured (together with other indebtedness for money borrowed then entitled
thereto and equal in rank to the Notes), to the full extent permitted under
applicable law, equally and ratably with all other obligations secured thereby,
and in any case the Notes shall (but only in such event) have the benefit, to
the full extent that the holders of the Notes may be entitled thereto under
applicable law, of an equitable Lien on such property equally and ratably
securing the Notes and such other obligations.
Limitation on Sale and Leaseback. The Company will not, and will not
permit any Consolidated Subsidiary to, enter into any arrangement, directly or
indirectly, whereby the Company or such Consolidated Subsidiary shall, in one
transaction or a series of related transactions, (i) sell, transfer or otherwise
dispose of any property owned by the Company or any Consolidated Subsidiary and
(ii) more than 120 days after the later of the date of initial acquisition of
such property or completion or occupancy thereof, as the case may be, by the
Company or such Consolidated Subsidiary, rent or lease, as lessee, such property
or substantially identical property or any material part thereof (a "Sale and
Leaseback Transaction"), provided that the foregoing restriction shall not apply
to any Sale and Leaseback Transaction if (a) immediately after the consummation
of such Sale and Leaseback Transaction and after giving effect thereto, no
Default or Event of Default shall exist and (b) any one of the following
conditions is satisfied:
(i) the lease concerned constitutes a Capitalized Lease and at the
time of entering into such Sale and Leaseback Transaction and after giving
effect thereto and to any Liens incurred pursuant to "-- Limitation on
Liens Securing Indebtedness", the aggregate amount of all Secured
Indebtedness and Attributable Debt would not exceed 15% of Consolidated Net
Tangible Assets; or
(ii) the lease has a term which in the aggregate would not exceed 36
months (including any extensions or renewals thereof at the option of the
lessee); or
(iii) the sale of such property is for cash consideration which equals
or exceeds the fair market value thereof (as determined in good faith by
the Company) and the net proceeds from such sale are applied, within 30
days of the date of the sale thereof, to the payment (other than payments
due at maturity or in satisfaction of, or applied to, any mandatory or
scheduled payment or prepayment obligation) of indebtedness for money
borrowed of the Company which ranks, in right of payment, on a parity with
or senior to the Notes.
Restrictive Agreements. The Company will not and will not permit any of
its Consolidated Subsidiaries to enter into any indenture, agreement, instrument
or other arrangement which, directly or indirectly, prohibits or restrains, or
has the effect of prohibiting or restraining, or imposes materially adverse
conditions upon, the ability of any Consolidated Subsidiary to make loans or
advances to the Company or to declare and pay dividends or make distribution on
shares of such Consolidated Subsidiary's capital stock (whether now or hereafter
outstanding); provided, however, that any agreement to subordinate indebtedness
for money borrowed owing from any
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Consolidated Subsidiary to the Company or owing between Consolidated
Subsidiaries pursuant to any Priority Debt or to any guarantee of such
indebtedness for money borrowed shall not be deemed to violate this paragraph so
long as any such agreement to subordinate does not directly or indirectly
prohibit or restrain the ability of any such Consolidated Subsidiary to make
loans or advances to the Company or to declare and pay dividends or make
distributions on shares of such Consolidated Subsidiary's capital stock (whether
now or hereafter outstanding).
Corporate Existence. The Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and material rights (charter and statutory) and material franchises of the
Company; provided, however, that the Company shall not be required to preserve
any such right or franchise if the Board of Directors shall determine that the
preservation of such rights and franchises is no longer desirable in the conduct
of the business of the Company and its Consolidated Subsidiaries considered as a
whole, and that the loss thereof is not disadvantageous in any material respect
to the holders of the Notes.
EVENTS OF DEFAULT
The Notes are subject to the Events of Default described under "Description
of Debt Securities -- Events of Default" in the accompanying Prospectus in
addition to the Events of Default described below. The following are additional
Events of Default under the Supplemental Indenture and the Debt Securities
Indenture with respect to the Notes: (a) (i) the failure by the Company or any
Subsidiary to pay indebtedness for money borrowed (including Debt Securities of
other series) in an aggregate principal amount exceeding $10,000,000 at the
later of final maturity or upon the expiration of any applicable period of grace
with respect to such principal amount or (ii) acceleration of the maturity of
any indebtedness for money borrowed of the Company or any Subsidiary in excess
of $10,000,000, if such failure to pay or acceleration is not discharged or such
acceleration is not annulled within 15 days after due notice; and (b) the
failure to perform any covenant or warranty of the Company in the Supplemental
Indenture described herein under "Purchase at the Option of Holders Upon a
Change of Control" (including the failure to purchase the Notes required to be
purchased pursuant to a Change of Control Offer in accordance with the terms of
such Change of Control Offer).
APPLICATION OF DEFEASANCE PROVISIONS
The Notes are subject to defeasance and covenant defeasance as described
under "Description of Debt Securities -- Defeasance" in the accompanying
Prospectus. The Supplemental Indenture will provide with respect to the Notes
that the Company may omit to comply with the covenants described under "Purchase
at the Option of Holders Upon a Change of Control", "Certain
Covenants -- Limitation on Liens Securing Indebtedness", "Certain
Covenants -- Limitation on Sale and Leaseback", and "Certain
Covenants -- Restrictive Agreements" and that violations of such covenants will
not be deemed to be an Event of Default under the Supplemental Indenture, the
Debt Securities Indenture and the Notes to the extent that the conditions
described under "Description of Debt Securities -- Defeasance" in the
accompanying Prospectus are met.
MODIFICATION AND WAIVER
The Notes are subject to the provisions described under "Description of
Debt Securities -- Modification and Waiver" in the accompanying Prospectus in
addition to the following provision. A modification or amendment to the
Supplemental Indenture may not waive the Company's obligation to make a Change
of Control Offer without the written consent of the holders of at least
two-thirds in aggregate principal amount of the then outstanding Notes.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Supplemental Indenture. Reference is made to the Debt
Securities Indenture and the Supplemental Indenture for the full definition of
all such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Attributable Debt" means indebtedness for money borrowed deemed to be
incurred in respect of a Sale and Leaseback Transaction and shall be, at the
date of determination, the present value (discounted at the actual rate of
interest implicit in such transaction, compounded annually), of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Leaseback Transaction.
"Capital Stock" means, with respect to any person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interests, or any other participation, right, warrant, option, or other interest
in the nature of an equity interest in such person, but excluding debt
securities convertible or exchangeable into such equity interest.
"Capitalized Lease" means any lease the obligation for Rentals with respect
to which is required to be capitalized on a consolidated balance sheet of the
lessee and its subsidiaries in accordance with GAAP.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of
the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act;
provided, however, that a group formed solely for the purpose of voting
securities shall not be deemed to be a group for purpose of this definition),
other than the Company, any employee benefit plan of the Company or any
Subsidiary, or Permitted Persons, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 35% or
more of the total voting power of the fully diluted Voting Stock of the Company,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by the Board of Directors of the
Company or whose nomination for election by the shareholders of the Company was
approved by a vote of 66-2/3% of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office, (iii) the Company consolidates or merges with or into any other person
or any other person consolidates or merges with or into the Company, in either
case, other than a consolidation or merger (a) with a Wholly-Owned Consolidated
Subsidiary in which all of the Voting Stock of the Company outstanding
immediately prior to the effectiveness thereof is changed into or exchanged for
substantially the same consideration or (b) (1) pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or exchanged
for cash, securities or other property with the effect that the "beneficial
owners" of the outstanding Voting Stock of the Company, immediately prior to
such transaction, beneficially own, directly or indirectly, more than 50% of the
total voting power of the fully diluted Voting Stock of the surviving
corporation immediately following such transaction and (2) no "person" or
"group", other than the Company, any employee benefit plan of the Company or any
Subsidiary, or Permitted Persons, beneficially owns, directly or indirectly, 35%
or more of the total voting power of the fully diluted Voting Stock of the
surviving corporation immediately following such transaction, or (iv) the
Company sells, conveys, transfers or leases, directly or indirectly, all or
substantially all of its assets to any Person other than a Wholly-Owned
Consolidated Subsidiary.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline with respect to the Notes.
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"Consolidated Net Tangible Assets" means, as of the date of any
determination thereof, the total amount of all assets of the Company and its
Consolidated Subsidiaries (less depreciation, depletion and other properly
deductible valuation reserves) after deducting Intangibles.
"Consolidated Subsidiary" means any Subsidiary of the Company or of any
Consolidated Subsidiary which is consolidated with the Company for financial
reporting purposes in accordance with GAAP.
"GAAP" means United States generally accepted accounting principles as in
effect as of the date of determination, unless otherwise stated.
"indebtedness for money borrowed", when used with respect to the Company or
any Subsidiary, means any obligation of, or any obligation guaranteed by, the
Company or any Subsidiary for the repayment of borrowed money, whether or not
evidenced by bonds, debentures, notes or other written instruments, and any
deferred obligation of, or any such obligation guaranteed by, the Company for
the payment of the purchase price of property or assets.
"Intellectual Properties" means all material patents, patent applications,
copyrights, copyright applications, trade secrets, trade names and trademarks,
technologies, methods, processes or other proprietary properties or information
which are used by the Company and its Consolidated Subsidiaries in the conduct
of their business and are either owned by them or are used, employed or
practiced by them under valid and existing licenses, grants, "shop rights", or
other rights.
"Intangibles" means all Intellectual Properties and all goodwill, patents,
trade names, trademarks, copyrights, franchises, experimental expense,
organization expense, unamortized debt discount and expense, deferred assets
(other than prepaid insurance, prepaid taxes, prepaid advertising, prepaid
licensing and other similar expenses prepaid in the ordinary course of
business), amounts invested in or advanced to or equity in the Company's
Subsidiaries other than Consolidated Subsidiaries less any writedowns thereof,
the excess of cost of shares acquired over book value of related assets, any
increase in the value of a fixed asset arising from a reappraisal, revaluation
or write-up thereof, and such other assets as are properly classified as
"intangible assets" in accordance with GAAP.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's Investors Service, Inc. (or any successor to the
rating agency business thereof), BBB- (or the equivalent) by Standard & Poor's
Rating Group (or any successor to the rating agency business thereof), and BBB-
(or the equivalent) by Duff & Phelps Credit Rating Co. (or any successor to the
rating agency business thereof).
"Issue Date" means the date of issuance of the Notes under the Supplemental
Indenture and the Debt Securities Indenture.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
bankers' liens, setoffs and similar arrangements, leases and other title
exceptions and encumbrances (including, with respect to stock, stockholder
agreements, voting trust agreements, buy-back agreements and all similar
arrangements) affecting property. For the purposes hereunder, the Company or a
Consolidated Subsidiary shall be deemed to be the owner of any property which it
has acquired or holds subject to a conditional sale agreement, Capitalized Lease
or other arrangement pursuant to which title to the property has been retained
by or vested in some other person for security purposes and such retention or
vesting shall constitute a Lien.
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"Permitted Persons" means (i) Edward J. Shoen, Mark V. Shoen, James P.
Shoen, Paul F. Shoen, Sophia M. Shoen (and during the Plan Consummation Period
only, Samuel W. Shoen, Michael L. Shoen, Cecilia Shoen Hanlon, and Katrina Shoen
Carlson) and the spouse and lineal descendants of each such individual, the
spouses of each such lineal descendants and the lineal descendants of such
spouses, (ii) any trusts for the primary benefit of, the executor or
administrator of the estate of, or other legal representative of, any of the
individuals referred to in the foregoing clause (i), and (iii) any corporation
with respect to which all the Voting Stock thereof is, directly or indirectly,
owned by any of the individuals referred to in the preceding clause (i).
"Plan Consummation Period" means the period beginning on the Issue Date and
ending on the date of purchase by the Company (directly or indirectly) of Common
Stock of the Company held by Samuel W. Shoen, Michael L. Shoen, Cecilia Shoen
Hanlon, and Katrina Shoen Carlson or any corporation with respect to which all
the Voting Stock thereof is, directly or indirectly, owned by any of the
foregoing individuals.
"Priority Debt" means (i) indebtedness for money borrowed of any
Consolidated Subsidiary, except indebtedness for money borrowed issued to and
held by the Company or a Wholly-Owned Consolidated Subsidiary, and (but without
duplication) (ii) Secured Indebtedness.
"Rating Agencies" means Standard & Poor's Rating Group, Duff & Phelps
Credit Rating Co., and Moody's Investors Service, Inc. or any successor to the
respective rating agency businesses thereof.
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of the Company to effect a Change of Control.
"Rating Decline" means, with the respect to the Notes, the occurrence of
the following on, or within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by the Company to effect a
Change of Control (which period shall be extended so long as the rating of such
Notes is under publicly announced consideration for possible downgrade by any of
the Rating Agencies): (a) in the event the Notes were assigned an Investment
Grade Rating by at least two of the three Rating Agencies on the Rating Date,
the rating of the Notes by both Standard & Poor's Rating Group and Moody's
Investors Service, Inc. shall decrease below an Investment Grade Rating; or (b)
in the event the Notes were rated below an Investment Grade Rating by at least
two of the three Rating Agencies on the Rating Date, the rating of the Notes by
both Standard & Poor's Rating Group and Moody's Investors Service, Inc. shall
decrease by one or more gradations (including gradations within rating
categories as well as between rating categories).
"Rentals" means and includes, as of the date of any determination thereof,
all fixed payments (including as such all payments which the lessee is obligated
to make to the lessor on termination of the lease or surrender of the property)
payable by the Company or a Consolidated Subsidiary, as lessee or sublessee
under a lease of real or personal property, but shall be exclusive of any
amounts required to be paid by the Company or a Consolidated Subsidiary (whether
or not designated as rents or additional rents) on account of maintenance,
repairs, insurance, taxes and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of the minimum rents,
if any, required to be paid by the lessee regardless of sales volume or gross
revenues.
"Secured Indebtedness" means any indebtedness for money borrowed, whether
of the Company or any Consolidated Subsidiary, secured by any Lien on any
property of the Company or any Consolidated Subsidiary.
"Subsidiary" means a person more than 50% of the outstanding Voting Stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries, or by the Company and one or more other Subsidiaries.
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"Voting Stock" of a person means all classes of Capital Stock of such
person then outstanding and normally entitled to vote in the election of
directors (or persons performing similar functions) or to direct the business
and affairs of the issuer of such Capital Stock in the absence of contingencies.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the outstanding Capital Stock of which (except for directors' qualifying
shares to the extent required by applicable law) is owned by the Company and/or
its Wholly-Owned Consolidated Subsidiaries.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
dated May 1, 1996, between the Company and the Underwriters (the "Underwriting
Agreement"), the Company has agreed to sell to each of the Underwriters, and
each of the Underwriters has severally agreed to purchase from the Company, the
principal amount of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
----------- ---------------
<S> <C>
Salomon Brothers Inc....................................... $ 87,500,000
Lehman Brothers Inc. ...................................... 58,333,000
Citicorp Securities, Inc. ................................. 29,167,000
--------------
Total............................................ $ 175,000,000
=============
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the Notes
offered hereby if any of the Notes are purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at such price
less a concession not in excess of .375% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of .250% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price and such concession
may be changed.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments the Underwriters may be required to make in
respect thereof.
The Notes will not have an established trading market when issued. The
Company has been advised by the Underwriters that they intend to make a market
in the Notes, but the Underwriters are not obligated to do so and may
discontinue making a market in the Notes at any time without notice. The Company
currently has no intention to list the Notes on any securities exchange, and
there can be no assurance given as to the development or liquidity of a trading
market for the Notes.
In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking activities with the Company
and its affiliates. Citibank, N.A., an affiliate of Citicorp Securities, Inc.,
is a lender to the Company and is the Trustee for the Notes.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Lionel,
Sawyer & Collins, Las Vegas, Nevada, in reliance with respect to matters of law
of the State of New York upon Milbank, Tweed, Hadley & McCloy, New York, New
York and for the Underwriters by Milbank, Tweed, Hadley & McCloy, New York, New
York, in reliance with respect to matters of the law of the State of Nevada upon
Lionel, Sawyer & Collins, Las Vegas, Nevada.
S-17
<PAGE> 18
PROSPECTUS
$500,000,000
A M E R C O
COMMON STOCK
SERIES B COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
CONVERTIBLE DEBT SECURITIES
WARRANTS
LOGO
AMERCO (the "Company"), a holding company for U-Haul International, Inc.,
Ponderosa Holdings, Inc., Amerco Real Estate Company, and other companies, may
issue and sell from time to time together or separately, (i) shares of its
Common Stock, par value $0.25 per share ("Common Stock"); (ii) shares of its
Series B Common Stock, par value $0.25 per share ("Series B Common Stock");
(iii) shares of its Preferred Stock ("Preferred Stock"); (iv) its debt
securities ("Debt Securities"); (v) its convertible debt securities
("Convertible Debt Securities"), which may be senior debt securities
("Convertible Senior Debt Securities") or subordinated debt securities
("Convertible Subordinated Debt Securities"), consisting of debentures, notes
and/or other evidences of indebtedness representing unsecured obligations of the
Company convertible into other securities of the Company; and (vi) warrants to
acquire Common Stock or Series B Common Stock of the Company ("Warrants"), in
amounts, at prices, and on terms to be determined at the time of offering. The
Common Stock, Series B Common Stock, Preferred Stock, Debt Securities,
Convertible Debt Securities, and Warrants shall be collectively referred to as
the "Securities". The Securities offered pursuant to this Prospectus maybe
issued in one or more series or issuances and will be limited to $500,000,000
aggregate public offering price and exercise price.
The specific terms of the particular Securities in respect of which this
Prospectus is being delivered ("Offered Securities") will be set forth in a
supplement to this Prospectus ("Prospectus Supplement") which will be delivered
together with this Prospectus, including, where applicable, in the case of
Preferred Stock, Debt Securities or Convertible Debt Securities, the specific
designation, aggregate principal amount, denomination, maturity, premium, if
any, rate (which may be fixed or variable), time and method of calculating
payments of interest, if any, place or places where principal, premium, if any,
and interest, if any, on such Preferred Stock, Debt Securities, or Convertible
Debt Securities will be payable, any terms of redemption at the option of the
Company, any sinking fund provisions, terms for conversion into Common Stock or
Series B Common Stock of the Company, the initial public offering price for
Preferred Stock, Debt Securities or Convertible Debt Securities or conversion
into Common Stock or Series B Common Stock of the Company, the initial public
offering price and other special terms and, in the case of any Warrants, the
specific designation, aggregate number, duration, initial public offering price,
exercise price, detachability of any Warrants, the amount of Common Stock or
Series B Common Stock of the Company for which such Warrants are exercisable,
the terms of any mandatory or optional call, or other special terms, together
with any other terms in connection with the offering and sale of the Offered
Securities. This Prospectus, together with the Prospectus Supplement relating to
any Warrants that have been issued, may also be delivered in connection with the
issuance of any Common Stock or Series B Common Stock of the Company for which
such Warrants are exercised.
The Company's Common Stock is listed on Nasdaq National Market ("Nasdaq")
under the symbol "AMOO." The Company's Series A 8 1/2% Preferred Stock is listed
on the New York Stock Exchange under the symbol "AO/A." Any Securities offered
may be listed, subject to notice of issuance, on Nasdaq or a national securities
exchange.
On April 23, 1996, the last reported sale price of the Common Stock through
Nasdaq was $21.75 per share.
The Securities may be sold (i) through underwriting syndicates represented
by managing underwriters or by underwriters without a syndicate; (ii) through
agents designated from time to time; or (iii) directly. The names of any
underwriters or agents of the Company involved in the sale of the Securities in
respect of which this Prospectus is being delivered, any applicable commissions
or discounts, and the net proceeds to the Company from such sale are set forth
in the Prospectus Supplement.
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 jurisdictions
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 A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
ON PAGES 5-7.
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 APRIL 24, 1996.
<PAGE> 19
------------------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
------------------------
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 listed 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.
In addition, Summary Quarterly Financial Reports for the Company are
available at the following Web site: http://www.uhaul.com.
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 (as amended), September 30 (as amended), and December 31,
1995 (as amended), the Reports by Issuer of Securities Quoted on Nasdaq on Form
10-C filed with the Commission on October 25, 1995 and February 15, 1996, and
the Current Report on Form 8-K filed with the Commission on May 5, 1995 are
incorporated herein by reference.
All reports filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be made a part hereof from
their respective dates of filing.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will cause to be furnished without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any documents described above,
other than certain exhibits to such documents. Requests should be addressed to:
AMERCO, Investor Relations, 1325 Airmotive Way, Suite 100, Reno, Nevada 89502;
telephone: (702) 688-6300.
2
<PAGE> 20
COMPANY SUMMARY
The Company is the holding company for its principal subsidiary, U-Haul
International, Inc. ("U-Haul"). The Company's U-Haul rental operations
represented 84.4%, 85.2%, and 85.1% of the Company's total revenue for the nine
months ended December 31, 1995, fiscal year ended March 31, 1995, and fiscal
year ended March 31, 1994, respectively. The Company is also a holding company
for 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.
U-Haul U-Move Operations. 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 13,000 independent dealers
throughout the United States and Canada. The Company believes it has more moving
equipment rental locations than its two largest competitors combined. U-Haul's
rental equipment fleet consists of approximately 84,000 trucks and approximately
102,000 trailers. The Company, as part of its fleet renewal program, purchased
approximately 78,000 new trucks between March 1987 and December 1995 and reduced
the overall average age of its truck fleet from approximately eleven years at
March 1987 to approximately five years at December 1995. Since 1990, U-Haul has
replaced approximately 59% of its trailer fleet with new, more aerodynamically
designed trailers better suited to the low height profile of many newly
manufactured automobiles. Additionally, U-Haul sells related products (such as
boxes, tape and packaging materials) and rents various kinds of equipment (such
as floor polishing and carpet cleaning equipment).
U-Haul Self-Storage Rental Operations. U-Haul entered the self-storage
business in 1974 and offers for rent more than 17.9 million square feet of
self-storage space through approximately 800 Company-owned or managed storage
locations. The Company believes it is the second largest self-storage operator
(in terms of square feet) in the industry. The Company believes its self-storage
operations are complementary to its do-it-yourself moving business. All of its
self-storage space is located at or near a U-Haul Center or an independent
dealer.
Ponderosa. 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").
For financial statement presentation, the Company's insurance subsidiaries
report on a calendar year basis while the Company reports on a fiscal year
basis.
Oxford primarily reinsures life, health, and annuity type insurance
products and administers the Company's self-insured employee health plan.
Approximately 7.2% of Oxford's premium revenue results from business with the
Company. Oxford's revenues represented 3.6%, 3.1%, and 2.8% of the Company's
total revenue for the nine months ended December 31, 1995, fiscal year ended
March 31, 1995, and fiscal year ended March 31, 1994, respectively.
Approximately 99% of Oxford's invested assets are in investment grade (NAIC-2 or
greater) fixed income securities. Oxford is rated "A-VII" by A.M. Best.
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. RWIC's principal strategy is to capitalize
on its knowledge of insurance products aimed at the moving and rental markets.
Approximately 40% of RWIC's written premiums result from U-Haul and
U-Haul-affiliated underwriting activities. RWIC's revenues represented 12.0%,
11.7%, and 12.1% of the Company's total revenue for the nine months ended
December 31, 1995, fiscal year ended March 31, 1995, and fiscal year ended March
31, 1994, respectively. Approximately 95.5% of RWIC's invested assets are in
investment grade (NAIC-2 or greater) fixed income securities. RWIC is rated
"A+-VIII" by A.M. Best.
AREC. AREC owns and actively manages most of the Company's real estate
assets, including the Company's U-Haul Center locations. In addition to its
U-Haul operations, AREC actively seeks to lease or dispose of the Company's
surplus properties.
3
<PAGE> 21
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. For more information on the Company, see "Business."
The following chart represents the corporate structure of the major
operating subsidiaries of the Company.
LOGO
4
<PAGE> 22
RISK FACTORS
THE FOLLOWING MATTERS, INCLUDING THOSE MENTIONED ELSEWHERE, SHOULD BE
CONSIDERED CAREFULLY BY A PROSPECTIVE INVESTOR IN EVALUATING A PURCHASE OF THE
SECURITIES.
COMPANY STOCK REPURCHASE
As discussed in "Shoen Litigation," the Company will repurchase 12,426,836
shares of its Common Stock on or before October 1, 1996 in partial satisfaction
of a judgment arising out of a lawsuit brought by certain significant
shareholders of the Company against certain of its current and former directors.
The Company has previously repurchased 5,828,140 shares of Common Stock from
other plaintiffs in the lawsuit in partial satisfaction of their claims. After
completing all of these repurchases, the Company will have acquired
approximately 47.3% of its outstanding Common Stock. The Company is not a
defendant in this action.
The Company will acquire the remaining shares of Common Stock and will
satisfy the remainder of the judgment in full with the payment of approximately
$315.2 million, plus interest, if awarded. The Company is currently evaluating
alternative methods for funding this repurchase. The Company has not decided
which sources of cash will be used. The Company intends to raise approximately
$200 million through the issuance of capital stock of the Company (dividend
paying preferred stock, Series B Common Stock, Common Stock, or a combination of
the foregoing) in order to comply with its credit agreements. The Company has
also identified approximately $150 million of surplus or non-essential assets,
including, but not limited to, surplus real estate and mortgage notes, all or a
portion of which may be sold to raise the balance of the cash needed. There can
be no assurance, however, that the Company will be able to issue such capital
stock or sell such assets on terms desirable to the Company or that the Company
will not have to borrow under its credit agreements or issue additional debt to
fund a portion of this repurchase of Common Stock.
Because the Company has not yet determined the sources of cash to satisfy
the judgment, the Company is unable to determine the impact the repurchase will
have on the Company's prospective financial condition, results of operations,
cash flows, or capital expenditure plans. However, as a result of funding the
repurchase, the Company may incur additional costs in the future in the form of
dividends on any dividend paying capital stock issued to fund the Plan and/or
interest on borrowed funds. Furthermore, following the repurchase, and without
giving effect to any capital stock which may be issued as described above, the
Company's outstanding Common Stock will be reduced by 12,426,836 shares, in
addition to the 5,828,140 shares already repurchased from the plaintiffs.
Furthermore, in the event the fair value of the consideration paid by the
Company to the plaintiffs is in excess of the fair value of the stock
repurchased by the Company, the Company will be required to record an expense
equal to the difference. Based upon the uncertainties surrounding the
repurchase, the amount of such expense, if any, is not estimable as of the date
of this Prospectus. No such expense was recorded for the transactions with the
plaintiffs consummated prior to December 31, 1995, as the fair value of the
consideration paid by the Company was less than the fair value of the stock
repurchased by the Company. No provision has been made in the Company's
financial statements for any payments made or to be made to the plaintiffs after
December 31, 1995 and the Company has not yet determined the accounting
treatment for such transactions. For the reasons set forth above, the repurchase
could have the effect of reducing the Company's net income.
In addition, the Company plans to deduct for income tax purposes
approximately $324.3 million of the payments made or to be made by the Company
to the plaintiffs, which will reduce the Company's income tax liability. While
the Company believes that such income tax deductions are appropriate, there can
be no assurance that any such deductions ultimately will be allowed in full.
Accordingly, for tax and other reasons, the repurchase could result in material
changes in the Company's financial condition, results of operations, and
earnings per common share. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Shoen Litigation" and "Shoen
Litigation."
DEPENDENCE UPON KEY PERSONNEL
The success and growth of the Company since 1987 has been dependent upon
the performance of its senior management team, the loss of whose services could
have an adverse effect on the Company. There is no
5
<PAGE> 23
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 collectively hold over 28% of the Company's common stock.
ENVIRONMENTAL MATTERS
The Company has since fiscal 1989 managed a testing and removal program
that will result in the removal of all but approximately 100 of its underground
storage tanks ("USTs") by the year 2000. Under this program, the Company budgets
$5 million annually for UST testing, removal and remediation and has removed a
total of 2,124 USTs in fiscal years 1990 through 1995 at a total cost of
approximately $22.0 million. At December 31, 1995, the Company owned properties
containing approximately 850 USTs. The USTs are used to store various petroleum
products, including gasoline, fuel oil, and waste oil and a majority of USTs
have a capacity of less than 6,000 gallons. In addition, the Company has been
named a "potentially responsible party" with respect to the disposal of
hazardous wastes at fourteen federal and two state superfund sites. To date, the
Company has entered into settlements for nine of the federal superfund sites for
de minimus amounts. See "Business -- Environmental Matters."
SEASONALITY
The Company's U-Haul rental operations are seasonal and proportionally more
of the Company's revenues and net earnings from its rental operations 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.
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."
ABILITY TO ISSUE SERIAL COMMON STOCK AND PREFERRED STOCK
The Board of Directors has the authority to issue up to 50,000,000 shares
of preferred stock and up to 150,000,000 shares of serial common stock and to
fix the rights, preferences, privileges, and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of Common Stock and Series B Common Stock may be
subject to, and may be adversely affected by, the rights of the holders of any
serial common stock and preferred stock that may be issued in the future. The
issuance of serial common stock and preferred stock, while providing desired
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring, or preventing a change in control of the Company.
Furthermore, holders of such serial common stock or preferred stock may have
other rights, including economic rights senior to the Common Stock and Series B
Common Stock, and, as a result, the issuance thereof could have a material
adverse effect on the market value of the Common Stock and Series B Common
Stock.
DIVIDENDS
Certain of the Company's credit agreements contain restrictions on the
Company's ability to pay dividends and distributions on and to repurchase or
otherwise acquire its capital stock. There can be no assurance that the Company
will be able to pay dividends on any capital stock offered hereby in compliance
6
<PAGE> 24
with such restrictions. See "Description of Common Stock -- Dividends" and
"Description of Preferred Stock -- Dividends."
LIMITED PRIOR MARKET
There has been no public market for any of the Company's securities other
than the Company's Series A 8 1/2% Preferred Stock which is trading on the New
York Stock Exchange under the symbol "AO/A" and a small percentage of the
Company's Common Stock which is trading on Nasdaq under the symbol "AMOO". There
is currently no established market for any Series B Common Stock, Preferred
Stock, Debt Securities, Convertible Debt Securities or Warrants that may be
offered pursuant to this Prospectus. Although the Company may apply to have the
Securities offered hereby listed on a national securities exchange or approved
for quotation on Nasdaq, there can be no assurance that an active trading market
will develop or be maintained following such offering. The absence of any
trading market for any of the Securities may have an adverse effect on the
liquidity of such Securities.
USE OF PROCEEDS
The use of proceeds for a particular offering of Securities will be set
forth in the Prospectus Supplement relating to such offering.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
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, 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 nine months ended December 31, 1995 may not be
indicative of the ratio to be expected for fiscal 1996 because, among other
reasons, the Company's U-Haul rental operations are seasonal and proportionally
more of its earnings are generated in the first and second quarters of each
fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
- ------------ ----------------------------------------
1995 1995 1994 1993 1992 1991
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
2.28 1.99 1.67 1.45 1.21 N/A
</TABLE>
7
<PAGE> 25
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 nine months ended December 31,
1995 and 1994 has been derived from the Company's unaudited quarterly report on
Form 10-Q for the quarter ended December 31, 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 also "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Other" and "Shoen
Litigation" in the accompanying Prospectus. The summaries for the nine months
ended December 31, 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 nine months
ended December 31, 1995 may not be indicative of the results to be expected for
fiscal 1996 because, among other reasons, the Company's U-Haul rental operations
are seasonal and proportionally more of its revenue and net earnings are
generated in the first and second quarters of each fiscal year.
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------------- -----------------------
1995 1994 1993 1992 1991 1995(1) 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 $ 858,894 $ 835,124
Premiums and net investment income..... 177,733 162,151 139,465 126,756 126,620 150,334 141,587
---------- ---------- ---------- ---------- ---------- --------- ----------
1,240,863 1,134,855 1,040,911 971,884 986,664 1,009,228 976,711
---------- ---------- ---------- ---------- ---------- --------- ----------
Operating expense, advertising expense,
and cost of sales.................... 783,933 735,841 697,700 661,229 668,149 659,616 585,332
Benefits, losses and amortization of
deferred acquisition costs........... 144,303 130,168 115,969 99,091 126,626 125,549 116,884
Depreciation........................... 151,409 133,485 110,105 109,641 114,589 79,049 112,631
Interest expense....................... 67,762 68,859 67,958 76,189 80,815 52,684 50,871
---------- ---------- ---------- ---------- ---------- --------- ----------
1,147,407 1,068,353 991,732 946,150 990,179 916,898 865,718
---------- ---------- ---------- ---------- ---------- --------- ----------
Pretax earnings (loss) from
operations........................... 93,456 66,502 49,179 25,734 (3,515) 92,330 110,993
Income tax expense..................... (33,424) (19,853) (17,270) (4,940) (6,354) (34,120) (39,602)
---------- ---------- ---------- ---------- ---------- --------- ----------
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) 58,210 71,391
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) $ 58,210 $ 71,391
========== ========== ========== ========== ========== ========== ==========
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle per common share(2)........ $ 1.23 $ 1.06 $ .83 $ .53 $ (.25) $ 1.32 $ 1.67
Net earnings (loss) per common
share(2)............................. 1.23 .89 .83 .53 (.25) 1.32 1.67
Weighted average common shares
outstanding(3)....................... 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080 36,796,961 37,025,575
Cash dividends declared:
Preferred Stock...................... $ 12,964 $ 4,753 $ -- $ -- $ -- $ 9,723 $ 9,723
Common Stock......................... -- 3,147 1,994 -- 1,176 -- --
Ratios:
Ratio of earnings to fixed
charges(4)......................... 1.99 1.67 1.45 1.21 --(4) 2.28 2.61
Ratio of EBITDA to Interest(5)....... 4.80 4.13 3.61 2.97 2.55 4.51 5.63
MARCH 31, DECEMBER 31,
-------------------------------------------------------------- -----------------------
1995 1994 1993 1992 1991 1995(4) 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 $1,260,933 $1,262,853
Total assets........................... 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977 2,748,795 2,537,422
Notes and loans payable................ 881,222 723,764 697,121 733,322 804,826 890,633 827,592
Stockholders' equity................... 686,784 651,787 479,958 451,888 435,180 695,174 705,577
</TABLE>
- ---------------
(1) Reflects the adoption of Statement of Position 93-7, "Reporting on
Advertising Costs."
(2) For the fiscal years ended March 31, 1995 and 1994, and for the nine months
ended December 31, 1995 and 1994, earnings (loss) and net earnings per
common share were computed after giving effect to the dividends on the
Company's Series A 8 1/2% preferred stock.
(3) Reflects the adoption of Statement of Position 93-6, "Employer's Accounting
for Employee Stock Ownership Plans."
(4) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of pretax earnings from operations plus total fixed charges
excluding interest capitalized during the period and "fixed charges"
consists of interest expense, capitalized interest, amortization of debt
expense and discounts and one-third of the Company's annual rental expense
(which the Company believes is a reasonable approximation of the interest
factor of such rentals). For the year ended March 31, 1991, pretax earnings
were not sufficient to cover fixed charges by an amount of $4.2 million.
(5) For purposes of computing the ratio of EBITDA to Interest, "EBITDA" consists
of net earnings (loss) before interest, taxes, depreciation, and
amortization. EBITDA is not intended to represent cash flow or any other
measure of performance in accordance with generally accepted accounting
principles. EBITDA is included herein because certain investors find it to
be a useful tool in understanding cash flow generated from operations that
is available for debt service, taxes and capital expenditures.
8
<PAGE> 26
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.
RESULTS OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 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 nine months ended December 31, 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 U-Haul rental operations are
seasonal and proportionally more of the Company's revenues and net 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>
NINE MONTHS ENDED DECEMBER 31, 1995
Revenues:
Outside............................... $ 852,303 $ 36,319 $120,606 $ -- $1,009,228
Intersegment.......................... (656) 1,074 9,580 (9,998) --
---------- -------- -------- --------- ----------
Total revenues................. $ 851,647 $ 37,393 $130,186 $ (9,998) $1,009,228
========== ======== ======== ========= ==========
Operating profit...................... $ 117,966 $ 10,069 $ 16,323 $ 656 $ 145,014
========== ======== ======== =========
Interest expense...................... 52,684
----------
Pretax earnings from operations....... $ 92,330
==========
Identifiable assets at December 31.... $1,867,323 $ 582,043 $608,536 $ (309,107) $2,748,795
========== ======== ======== ========= ==========
NINE MONTHS ENDED DECEMBER 31, 1994
Revenues:
Outside............................... $ 831,723 $ 29,972 $115,016 $ -- $ 976,711
Intersegment.......................... (41) 1,134 14,899 (15,992) --
---------- -------- -------- --------- ----------
Total revenues................. $ 831,682 $ 31,106 $129,915 $ (15,992) $ 976,711
========== ======== ======== ========= ==========
Operating profit...................... $ 139,041 $ 8,016 $ 14,766 $ 41 $ 161,864
========== ======== ======== =========
Interest expense...................... 50,871
----------
Pretax earnings from operations....... $ 110,993
==========
Identifiable assets at December 31.... $1,792,189 $ 452,699 $566,930 $ (274,396) $2,537,422
========== ======== ======== ========= ==========
</TABLE>
RESULTS OF OPERATIONS
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
9
<PAGE> 27
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>
NINE MONTHS ENDED DECEMBER 31, 1995 VERSUS NINE MONTHS ENDED DECEMBER 31, 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 $14.8 million, approximately
2.1%, to $715.5 million in the first nine months of fiscal 1996. The increase in
the first nine 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 $15.8 million to $721.8 million,
as compared to $706.0 million in the first nine months of fiscal 1995. Moving
related rental revenues benefited from transactional growth (volume) within the
rental fleet. Revenues from the rental of self-storage facilities were
positively impacted by additional rentable square footage. Other revenues
decreased in the aggregate by $1.0 million.
Net sales revenues were $136.7 million in the first nine months of fiscal
1996, which represents an increase of approximately 4.2% from the first nine
months of fiscal 1995 net sales of $131.1 million. Revenue growth from the sale
of moving support items (i.e. boxes, etc.), hitches, and propane resulted in a
$6.6 million increase during the nine month period, which was offset by a $1.0
million decrease in revenue from gasoline
10
<PAGE> 28
sales consistent with the Company's ongoing efforts to remove underground
storage tanks and gradually discontinue gasoline sales.
Cost of sales was $81.9 million in the first nine months of fiscal 1996,
which represents an increase of approximately 12.8% from $72.6 million for the
same period in fiscal 1995. This increase in cost of sales reflects a $5.0
million increase in material costs from the sale of moving support items,
hitches, and propane reflecting higher sales levels and a $4.4 million increase
in allowances for inventory shrinkage and other inventory adjustments.
Operating expenses increased to $541.0 million in the first nine months of
fiscal 1996 from $485.7 million in the first nine months of fiscal 1995, an
increase of approximately 11.4%. The change from the prior year primarily
reflects a $37.3 million increase in rental equipment maintenance costs which
reflects rental fleet expansion and transactional growth and an $11.6 million
increase in personnel costs due to the increase in rental, sales and repair
activity. All other operating expense categories increased in the aggregate by
$6.4 million, approximately 4.1%, to $162.2 million.
Advertising expense increased to $31.8 million in the first nine months of
fiscal 1996 from $21.7 million in the first nine months of fiscal 1995. The
increase primarily reflects a one-time expense of $8.7 million recognized during
the first quarter of fiscal 1996, due to the adoption of Statement of Position
93-7 which requires immediate recognition of advertising costs not qualifying as
direct-response.
Depreciation expense for the first nine months of fiscal 1996 was $79.0
million, as compared to $112.6 million during the same period of the prior year.
During the third quarter of fiscal 1996, based on experience the Company
increased the estimated salvage value of certain rental trucks. The effect of
the change in estimate reduced depreciation expense for the nine months ended
December 31, 1995 by $35.7 million.
OXFORD -- LIFE INSURANCE
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $13.8 million for the nine months ended September 30, 1995, or 71.5% of
total premiums for that period. This represents an increase of $0.6 million, or
4.5% 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
$5.5 million for the nine months ended September 30, 1995, an increase of $1.3
million from 1994. 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 nine months
ended September 30, 1995 accounted for approximately 7.5% of premiums. Other
direct lines, including the credit insurance business, accounted for
approximately 21.0% of Oxford's premiums for the nine months ended September 30,
1995.
Net investment income before intercompany eliminations was $12.1 million
and $11.1 million for the nine months September 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 $4.4
million and $1.2 million for the nine months ended September 30, 1995 and 1994,
respectively. Oxford had $1.5 million and $1.4 million of other income for the
nine month period ended September 30, 1995 and 1994, respectively.
Benefits and expenses incurred were $27.3 million for the nine months ended
September 30, 1995, an increase of 18.2% over 1994. Comparable benefits and
expenses incurred for 1994 were $23.1 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 $2.1
million, or approximately 26.3%, in 1995 to $10.1 million, primarily due to an
increase in gains on the disposition of fixed maturity investments that was
partially offset by the amortization of deferred acquisition costs.
11
<PAGE> 29
RWIC -- PROPERTY AND CASUALTY
RWIC gross premium writings for the nine months ended September 30, 1995
were $138.7 million as compared to $141.4 million in the first nine months of
1994. The rental industry market accounts for a significant share of total
premiums, approximately 44.4% and 43.3% in the first nine 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 in this area decreased during the first nine months of 1995 to $42.7
million, or 30.8% of total gross premiums, from comparable 1994 figures of $54.1
million, or 38.3% 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 16.1%
of total gross written premiums in the first nine months of 1995 compared to
15.2% in the first nine months of 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 8.0% of the total gross written
premium during the first nine months of 1995.
Net earned premiums increased $0.4 million, or 0.4%, to $107.1 million for
the nine months ended September 30, 1995, compared with premiums of $106.7
million for the nine months ended September 30, 1994. The slight increase is due
to the direct business expansion discussed above.
Underwriting expenses incurred were $113.9 million for the nine months
ended September 30, 1995, a decrease of $1.2 million or 1.0% over 1994.
Comparable underwriting expenses incurred for the same period in 1994 were
$115.1 million. The decrease is due to a reduction in acquisition expenses,
which is the result of lower commission rates on start up programs. This
decrease was partially offset by an increase in administrative expenses and
taxes related to higher concentration in states with higher premium tax rates.
Net investment income was $22.1 million for the nine months ended September
30, 1995, an increase of 0.9% over 1994 net investment income of $21.9 million.
The marginal increase is the result of the shift in types of securities held in
the portfolio.
RWIC completed the first nine months ended September 30, 1995 with income
before tax expense of $16.3 million as compared to $14.8 million for the
comparable period ended September 30, 1994. This represents an increase of $1.5
million, or 10.1% over 1994. This increase is due mainly to timing differences
related to run-off and start up programs.
INTEREST EXPENSE
Interest expense increased by $1.8 million to $52.7 million for the nine
months ended December 31, 1995, as compared to $50.9 million for the nine months
ended December 31, 1994. The increase was attributable to higher average debt
levels outstanding.
CONSOLIDATED GROUP
As a result of the foregoing, pretax earnings of $92.3 million were
realized in the nine months ended December 31, 1995, as compared to $111.0
million for the same period in 1994. After providing for income taxes, net
earnings for the nine months ended December 31, 1995 were $58.2 million, as
compared to $71.4 million for the same period of the prior year.
FISCAL YEAR ENDED MARCH 31, 1995 VERSUS FISCAL YEAR ENDED MARCH 31, 1994
U-HAUL OPERATIONS
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $78.2 million, approximately
9.7%, to $887.6 million in fiscal 1995. The increase from fiscal 1994 is
primarily attributable to a $68.6 million increase in net revenues from the
rental of moving related equipment. Moving related revenues benefited from
transactional (volume) growth within the truck and trailer fleets. Revenues from
the rental of self-storage facilities increased by $9.7 million to $80.2 million
12
<PAGE> 30
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 increase in cost of sales reflects increased
material costs from the sale of moving support sale items and propane, which can
be primarily attributed to higher sales levels. The increase was offset by 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. Improved margins
on hitch sales also offset the increased cost of sales.
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.
13
<PAGE> 31
RWIC -- PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December 31, 1994 were
$179.2 million as compared to $175.1 million in 1993. This represents an
increase of $4.1 million, or 2.3%. As in prior years, the rental industry market
accounts for a significant share of total premiums, approximately 42.8% and
36.6% in 1994 and 1993, respectively. These writings include U-Haul customers,
fleetowners and U-Haul as well as other rental industry insureds with similar
characteristics. Growth is also occurring in selected general agency lines.
These premiums accounted for approximately 15.1% of gross written premiums for
1994, compared to 12.9% in 1993. RWIC continues underwriting professional
reinsurance via broker markets, and premiums in this area decreased in 1994 to
$58.3 million, or 32.5% of total gross premiums, from comparable 1993 figures of
$70.2 million, or 40.1% of total premiums.
Net earned premiums increased $8.0 million, or 6.38% to $133.4 million for
the year ended December 31, 1994, compared with premiums of $125.4 million for
the year ended December 31, 1993. The premium increase was primarily due to
planned increased writings in the rental industry and general agency lines.
Underwriting expenses incurred were $142.1 million for the twelve months
ended December 31, 1994, an increase of $5.6 million, or 4.1% over 1993.
Comparable underwriting expenses incurred for 1993 were $136.5 million. The
increase in underwriting expenses is due to the larger premium volume being
written in 1994, which increased acquisition costs and commensurate reserves.
The ratio of underwriting expenses to net earned premiums decreased from 1.09 in
1993 to 1.07 in 1994. This improvement is primarily attributable to improved
loss experience combined with continued market rate strength which affects the
Company's assumed reinsurance area.
Net investment income was $29.0 million for the year ended December 31,
1994, an increase of 5.8% over 1993 net investment income of $27.4 million. The
increase is due to an increased asset base generated from larger premium volume.
RWIC completed 1994 with income before taxes before intercompany
eliminations of $23.2 million as compared to $19.9 million for the comparable
period ended December 1993. This represents an increase of $3.3 million or 16.6%
over 1993. Improved underwriting results in the Company's assumed reinsurance
area was offset by declines in its workers' compensation and rental industry
liability lines.
INTEREST EXPENSE
Interest expense decreased by $1.0 million to $67.8 million in fiscal 1995,
as compared to $68.8 million in fiscal 1994. While average debt levels
outstanding increased, the decrease in interest expense reflects a reduction in
the average cost of funds.
RESULTS OF OPERATIONS -- CONSOLIDATED GROUP
As a result of the foregoing, pre-tax earnings of $93.5 million were
realized in fiscal 1995 as compared to $66.5 million in fiscal 1994. After
providing for income taxes, net earnings for fiscal 1995 were $60.0 million as
compared to $40.2 million for the same period of the prior year. The
consolidated results for the prior year reflect a cumulative effect adjustment
resulting from the adoption of Statement of Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
extraordinary costs associated with early extinguishment of debt.
FISCAL YEAR ENDED MARCH 31, 1994 VERSUS FISCAL YEAR ENDED MARCH 31, 1993
U-HAUL OPERATIONS
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $63.3 million, approximately
8.5%, to $809.4 million in fiscal 1994. The increase from fiscal 1993 is
primarily attributable to a $52.2 million increase in net revenues from the
rental of moving related equipment, which benefited from transactional (volume)
growth reflecting higher utilization and rental fleet expansion. Revenues from
the rental of self-storage facilities increased by $6.6 million to $70.5 million
in
14
<PAGE> 32
fiscal 1994, an increase of approximately 10.3%. Storage revenues were
positively impacted by additional rentable square footage, higher average
occupancy levels, and higher average rental rates. All other revenue categories
increased in the aggregate by $8.7 million during fiscal 1994 which primarily
reflects increases in gains on note sales of approximately $5.0 million and
interest income.
Net sales revenues were $156.0 million in fiscal 1994, which represented an
increase of approximately 7.2% from fiscal 1993 net sales of $145.5 million.
Revenue from the sale of hitches, moving support items (i.e., boxes, etc.), and
propane increased $10.7 million during fiscal 1994.
Cost of sales was $92.2 million in fiscal 1994, which represented a
decrease of approximately 1.0% from fiscal 1993. The reduction in fiscal 1994
reflects a combination of the absence of recreational vehicle sales, reduced
levels of outside repairs and a reduction in inventory adjustments which fully
offset increased material costs corresponding to the increase in hitch, moving
support and propane sales.
Operating expenses increased to $633.6 million in fiscal 1994 from $599.8
million in fiscal 1993, an increase of approximately 5.6%. The change from the
prior year reflects increases in almost all major expense categories with the
exception of lease expense for equipment. Rental equipment maintenance costs
increased by $27.4 million reflecting fleet expansion, higher utilization, a
marginal increase in the age of the fleet and increased emphasis on maximizing
rental equipment available to rent by reducing downtime. Lease expense for
equipment declined from $117.6 million in fiscal 1993 to $82.9 million in fiscal
1994, a decrease of approximately 29.5%, reflecting lease terminations, lease
restructuring and lower finance costs on new leases 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.
15
<PAGE> 33
RWIC -- PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December 31, 1993 were
$175.1 million, compared to $155.2 million in 1992, an increase of approximately
12.8%. The rental industry market accounted for a significant share of these
premiums, approximately 37% and 40% in 1993 and 1992, respectively. These
writings include U-Haul customers, fleetowners and U-Haul as well as other
rental industry insureds with similar characteristics. Selected general agency
lines, principally commercial multiple peril, surety and excess workers'
compensation and casualty accounted for 8.1%, 3.2% and 5.4%, respectively, of
gross premium writings in 1993, compared to approximately 15.4%, 2.8% and 11.9%,
respectively, in 1992. RWIC also underwrites reinsurance via broker markets, and
gross premiums in this area increased from $51.5 million in 1992 to $70.2
million in 1993 due to favorable market conditions.
Net earned premiums increased $24.3 million, approximately 24%, to $125.4
million for the year ended December 31, 1993. This compares with net earned
premiums of $101.1 million for the year ended December 31, 1992. The premium
increase was primarily due to increased writings in the reinsurance area, along
with growth in the excess workers' compensation line of RWIC's general agency
business. These planned increases are due to strong rates and reduced capacity
in the reinsurance market and increased marketing emphasis on the long standing
presence in the excess workers' compensation market.
Underwriting expenses incurred were $135.6 million for the year ended
December 31, 1993, an increase of $17.8 million, approximately 15.1%, over 1992.
Comparable underwriting expenses incurred for 1992 were $117.8 million. Higher
underwriting expenses are due to larger premium volumes being written in 1993
which 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, a higher proportion of fixed rate debt, and a lengthening of
maturities offset by lower cost of funds.
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT
During the first and third quarters of fiscal 1994, the Company
extinguished $25.2 million of its medium-term notes originally due in fiscal
1995 through 2000. The weighted average rate of the notes purchased was 9.34%.
The purchase resulted in an extraordinary charge of $1.9 million, net of $1.0
million of tax benefit.
During the fourth quarter of fiscal 1994, the Company terminated swaps with
a notional value of $77.0 million originally due in fiscal 1995. The
terminations resulted in an extraordinary charge of $1.5 million, net of $0.8
million of tax benefit.
RESULTS OF OPERATIONS -- CONSOLIDATED GROUP
As a result of the foregoing, pre-tax earnings of $66.5 million were
realized in fiscal 1994 as compared to $49.2 million in fiscal 1993. After
providing for income taxes, extraordinary costs associated with the early
16
<PAGE> 34
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.
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the eleven
quarters in the period beginning April 1, 1993 and ending December 31, 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 U-Haul rental operations are seasonal and proportionally more of the
Company's revenues and net earnings from its U-Haul rental operations 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.
JUNE 30, 30, DEC. 31,
1995(3) 1995(3) 1995(3)
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Total revenues..................................... $330,509 $371,267 $307,452
Net earnings (loss)................................ 15,177 35,332 7,701
Net earnings (loss) per common share(1)(2)......... .31 .85 .13
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------
SEPT. MARCH
JUNE 30, 30, DEC. 31, 31,
1994 1994 1994 1995
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total revenues..................................... $322,333 $359,520 $294,858 $260,282
Net earnings (loss)................................ 29,413 40,071 1,907 (11,359)
Net earnings (loss) per common share(1)(2)......... .71 1.00 (.04) (.44)
QUARTER ENDED
--------------------------------------------
SEPT. MARCH
JUNE 30, 30, DEC. 31, 31,
1993 1993 1993 1994
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenues..................................... $291,348 $324,968 $267,448 $251,091
Net earnings (loss)................................ 17,359 30,601 1,799 (9,575)
Net earnings (loss) per common share(1)............ .45 .79 (.02) (.33)
</TABLE>
- ---------------
(1) For the quarters ended December 31, 1993, March 31, June 30, September 30,
December 31, 1994, March 31, June 30, September 30, and December 31, 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."
(3) Reflects the adoption of Statement of Position 93-7 "Reporting on
Advertising Costs."
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 December 31, 1995, net property, plant and
equipment represented approximately 67.5% of total U-Haul assets and
approximately 45.9% of consolidated assets. In the first nine months of fiscal
1996, capital expenditures were $207.5 million, as compared to $322.1 million in
the first nine 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 financing.
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<PAGE> 35
Cash flows from operations were $135.6 million in the first nine months of
fiscal 1996, as compared to $170.7 million in the first nine months of fiscal
1995. The decrease of $35.1 million is primarily due to a reduction in operating
margin as discussed in the Results of Operations for the nine months ended
December 31, 1995.
OXFORD -- LIFE INSURANCE
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary uses of cash are
operating costs and benefit payments to policyholders. Matching the investment
portfolio to the cash flow demands of the types of insurance being written is an
important consideration. Benefit and claim statistics are continually monitored
to provide projections of future cash requirements.
Cash provided (used) by operating activities was ($2.6) million and $14.4
million for the nine months ended September 30, 1995 and 1994, respectively.
Cash flows from financing activities of new annuity reinsurance agreements were
approximately $116.0 million for the nine months ended September 30, 1995. Cash
flows from new annuity reinsurance agreements increase investment contract
deposits as well as the purchase of fixed maturities. 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 September 30, 1995 and 1994,
short-term investments amounted to $12.3 million and $9.5 million, respectively.
Management believes that the overall sources of liquidity will continue to meet
foreseeable cash needs.
Stockholder's equity of Oxford, increased to $101.1 million in 1995 from
$87.9 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. Statutory surplus that can be
distributed as dividends without prior regulatory approval is $6,825,701. 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 $16.9 million and $14.2 million
for the nine months ended September 30, 1995 and September 30, 1994,
respectively. The change is due to increased unearned premium reserves, funds
withheld and net income, offset by a decrease in other receivables and a smaller
increase in loss reserves than that of the comparable period in 1994.
RWIC's short-term investment portfolio was $7.4 million at September 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 95.9% 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 97.0% of total liabilities.
Stockholder's equity increased 8.5% from $168.1 million at December 31,
1994 to $182.4 million at September 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
dividends during the nine months ended September 30, 1995.
18
<PAGE> 36
CONSOLIDATED GROUP
At December 31, 1995, total notes and loans payable outstanding was $890.6
million as compared to $881.2 million at March 31, 1995, and $827.6 million at
December 31, 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.
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 December 31, 1995, the
Company had $890.6 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $292.0 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 December 31, 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. 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.
SHOEN LITIGATION
A judgment has been entered in the Shoen Litigation against five of the
Company's current directors and one former director in the amount of
approximately $461.8 million plus statutory post-judgment interest. 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. The five current
directors (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. Those
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 same funding and treatment of the plaintiffs' claims resulting from
the judgment in the Shoen Litigation. The plans of reorganization, as amended
and restated on February 29, 1996 were confirmed by the bankruptcy court on
March 15, 1996. The plans, as confirmed, shall collectively be referred to as
the "Plan".
On October 18, 1995, the Company repurchased 3,343,076 shares of Common
Stock held by Maran, Inc., a Nevada corporation ("Maran"), in exchange for
approximately $22.7 million and entered into a Settlement Agreement with Mary
Anna Shoen Eaton ("Shoen Eaton") whereby in exchange for approximately $41.4
million, Shoen Eaton released the Director-Defendants and the Company from any
liability relating to Shoen Litigation. 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 was satisfied.
19
<PAGE> 37
Pursuant to the judgment in the Shoen Litigation, on January 30, 1996, the
Company acquired 833,420 shares of Common Stock held by L.S.S., Inc. ("L.S.S.")
in exchange for approximately $5.7 million and funded damages to L.S. Shoen of
approximately $15.4 million. The Company also funded a total of approximately
$2.1 million of statutory post-judgment interest on the above amounts. In
addition, on February 7, 1996, the Company acquired 1,651,644 shares of Common
Stock held by Thermar, Inc. ("Thermar") by tendering approximately $41.8
million. The Company also tendered to Thermar approximately $4.1 million of
statutory post-judgment interest on such amount. As a result of the foregoing
transactions, the balance of the judgment has been reduced to approximately
$315.2 million, plus interest claimed by the plaintiff.
With respect to the remaining plaintiffs in the Shoen Litigation, the Plan
provides for the payment by the Company of approximately $84.5 million in
exchange for 12,426,836 shares of Common Stock held by four of the plaintiffs
and for the payment by the Company of approximately $230.7 million to certain of
the plaintiffs as damages.
On January 26, 1996, the bankruptcy court issued, and on March 4, 1996
amended, an interlocutory Memorandum Decision Re: Plan Confirmation which
provided, among other things, that the plaintiffs are entitled to statutory
post-judgment interest at the rate of 10% per year. As of the date hereof, total
accrued interest on the outstanding balance of the judgment is approximately
$37.0 million and is accruing at the rate of approximately $86,000 per day.
Notwithstanding this interlocutory ruling, the Company and the Director-
Defendants believe that the payment of post-petition interest remains an
unresolved dispute at the bankruptcy court level. If the dispute regarding
post-petition date interest is decided adversely to the Director-Defendants and
the Company, they intend to appeal any such decision. Pending the final
resolution of the post-petition date interest dispute, the Company intends to
deposit either cash, or in appropriate circumstances, an irrevocable letter of
credit into an escrow account to secure payment of the post-petition date
interest if the dispute is ultimately decided adversely to the
Director-Defendants and the Company. The amount of the escrow deposit would be
in such case equal to the accrued interest to the date funds are deposited into
escrow.
On March 15, 1996, the bankruptcy court issued a Confirmation Order in each
Director-Defendant's Chapter 11 case. This order provided that the effective
date for the Plan (i.e. the date on which the Company will pay the plaintiffs an
aggregate of approximately $315.2 million and the plaintiffs will surrender the
Common Stock) will be no later than October 1, 1996 (absent compelling
circumstances justifying an extension of that date).
As of the date hereof, the Company has not determined which sources of cash
will be used to fund the Plan. However, in order to comply with the Company's
credit agreements, approximately $200 million of the amounts to be paid to the
plaintiffs will have to be raised by the sale of the Company's capital stock.
Such capital stock may consist of dividend paying preferred stock, Series B
Common Stock, Common Stock, or a combination of the foregoing. In addition, the
Company has identified approximately $150 million of surplus or non-essential
assets, including, but not limited to, surplus real estate and mortgage notes,
which may be sold to raise the cash needed to fund the Plan.
Because the Company has not yet determined the sources of cash to fund the
Plan, the Company is unable to determine with certainty the impact the Plan will
have on the Company's prospective financial condition, results of operations,
cash flows, or capital expenditure plans. However, as a result of funding the
Plan, the Company may incur additional costs in the future in the form of
dividends on any dividend paying stock issued to fund the Plan and/or interest
on borrowed funds. Furthermore, following consummation of the Plan, and without
giving effect to any capital stock which may be issued to fund the Plan, the
Company's outstanding Common Stock will be reduced by 12,426,836 shares, in
addition to the 3,343,076 shares repurchased from Maran on October 18, 1995, the
833,420 shares repurchased from L.S.S. on January 30, 1996, and the 1,651,644
shares repurchased from Thermar on February 7, 1996.
Other uncertainties remain about the Plan, including the tax treatment of
the payments made and to be made by the Company pursuant to the Plan.
Specifically, the Company plans to deduct for income tax purposes approximately
$324.3 million of the payments made or to be made by the Company to the
plaintiffs, which will reduce the Company's income tax liability. While the
Company believes that such income tax
20
<PAGE> 38
deductions are appropriate, there can be no assurance that any such deductions
ultimately will be allowed in full. Accordingly, for tax and other reasons, the
Plan could result in material changes in the Company's financial condition,
results of operations, and earnings per common share.
Furthermore, in the event the fair value of the consideration paid by the
Company to the plaintiffs is in excess of the fair value of the stock
repurchased by the Company, the Company will be required to record an expense
equal to that difference. Based upon the uncertainties surrounding the funding
of the Plan, the amount of such expense, if any, is not estimable as of the date
of this Prospectus. No such expense was recorded for the Maran transaction, as
the fair value of the consideration paid by the Company was less than the fair
value of the stock repurchased by the Company. The Company has not yet
determined the accounting treatment for any transaction other than the
Maran/Shoen Eaton transaction. Furthermore, no provision has been made in the
Company's financial statements for any payments to be made to the plaintiffs,
other than the payments discussed above made to Maran and Shoen Eaton. For the
reasons set forth above, the Plan could have the effect of reducing the
Company's net income. See "Shoen Litigation."
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. 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. 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" ("SOP 93-7"),
was issued by the Accounting Standards Executive Committee in December 1993.
This statement of position provides guidance on financial reporting on
advertising costs in financial statements. The statement of position requires
reporting advertising costs as expenses when incurred or when the advertising
first takes place, reporting the costs of direct-response advertising, and
amortizing (over the estimated period of benefit) the costs of direct-response
advertising reported as assets. The Company had been recording yellow page
directory costs as deferred assets and amortizing the costs over the duration of
each listing. The majority of listings last one year. The Company adopted this
statement effective April 1, 1995 recognizing additional advertising expense of
$8,647,000 upon implementation. This adoption had the effect of reducing net
income by $5,474,000 ($0.14 per share).
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.
21
<PAGE> 39
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 December 31, 1995, the Company's
distribution network included approximately 1,100 U-Haul Centers and
approximately 13,000 independent dealers.
In March 1974, in conjunction with the acquisition and construction of
U-Haul Centers, the Company entered the self-storage business. As of December
31, 1995, such self-storage facilities were located at or near approximately 75%
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 $40.7 million for total proceeds of approximately $81.8
million.
In 1990, the Company reorganized its operations into separate legal
entities, each with its own operating, financial, and investment strategies. The
reorganization separated the Company into three parts: U-Haul rental operations,
insurance, and real estate. The purpose of the reorganization was to increase
management accountability and to allow the allocation of capital based on
defined performance measurements.
BUSINESS STRATEGY
U-HAUL OPERATIONS
The Company's present business strategy remains focused on the
do-it-yourself moving customer. The objective of this strategy is to offer, in
an integrated manner over a diverse geographical area, a wide range of products
and services to the do-it-yourself moving customer.
Integrated Approach to Moving. Through its "Moving Made Easier(R)"
program, the Company strives to offer its customers a high quality, reliable,
and convenient fleet of trucks and trailers at reasonable prices while
simultaneously offering other related products and services, including moving
accessories, self-storage facilities, and other items often desired by the
do-it-yourself mover. The rental trucks purchased in the fleet renewal program
have been designed with the do-it-yourself customer in mind to include features
such as low decks, air conditioning, power steering, automatic transmissions,
soft suspensions, AM/FM cassette stereo
22
<PAGE> 40
systems, and over-the-cab storage. The Company has introduced certain insurance
products, including "Safemove(R)" and "Safestor(R)", to provide the
do-it-yourself mover with certain moving-related insurance coverage. In
addition, the Company provides rental customers the option of storing their
possessions at either their points of departure or destination.
Wide Geographic Distribution. The Company believes that customer access,
in terms of truck or trailer availability and proximity of rental locations, is
critical to its success. Since 1987, the Company has more than doubled the
number of U-Haul rental locations, with a net addition of over 7,500 independent
dealers.
High Quality Fleet. To effectively service the U-Haul customer at these
additional rental locations with equipment commensurate with the Company's
commitment to product excellence, the Company, as part of the fleet renewal
program, purchased approximately 78,000 new trucks between March 1987 and
December 1995 and reduced the overall average age of its truck fleet from
approximately 11 years at March 1987 to approximately five years at December
1995. During this period, approximately 63,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 59% of its trailer fleet with
new, more aerodynamically designed trailers better suited to the low height
profile of many newly manufactured automobiles. Given the mechanical simplicity
of a trailer relative to a truck and a trailer's longer useful life, the Company
expects to replace trailers only as necessary.
Network Management System. Beginning in 1983, the Company implemented a
point-of-sale computer system for all of its Company-owned locations. The system
was designed primarily to handle the Company's reservations, traffic, and
reporting of rental transactions. The Company believes that the implementation
of the system has been a significant factor in allowing the Company to increase
its fleet utilization. Since the initial implementation, the Company has added
several additional enhancements to the system, including full budgeting and
financial reporting systems.
INSURANCE OPERATIONS
Oxford'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
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<PAGE> 41
another city. Typically, the number of in-town(R) rental transactions in any
given year is substantially greater than the number of one-way rental
transactions. However, total revenues generated by one-way transactions in any
given year typically exceed total revenues from in-town(R) rental transactions.
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 December 31, 1995, U-Haul's rental equipment fleet consisted of
approximately 84,000 trucks and approximately 102,000 trailers. Rental trucks
are offered in five sizes and range in size from the ten-foot "Mini-Mover(R)" to
the twenty-six-foot "Super-Mover(R)". In addition, U-Haul offers pick-up trucks
and cargo vans at many of its locations. Trailers range between six feet and
twelve feet in length and are offered in both open and closed box
configurations.
DISTRIBUTION NETWORK
The Company's U-Haul products and services are marketed across the United
States and Canada through, as of December 31, 1995, approximately 1,100
Company-operated U-Haul Centers and approximately 13,000 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
24
<PAGE> 42
customers on a regular basis. In addition, the area field managers recruit new
independent dealers for expansion or replacement purposes. U-Haul has instituted
performance compensation programs that focus on accomplishment and reward strong
performers.
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 800 Company-owned or managed storage locations in the
United States and Canada, the Company offers for rent more than 17.9 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 December 31, 1995, the Company's non-seasonal
workforce consisted of approximately 12,600 employees comprised of approximately
39% part-time and 61% full-time employees. During the summer months, the Company
increases its workforce by approximately 800 employees and the percentage of
25
<PAGE> 43
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 the Company. 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.
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<PAGE> 44
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.
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<PAGE> 45
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------------------
1984 1985 1986 1987 1988 1989
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Reserve for Unpaid
Loss and Loss
Adjustment Expenses:......... $ 90,315 $123,342 $146,391 $168,688 $199,380 $207,939
Paid (Cumulative) as of:
One year later............ 24,602 41,170 54,627 49,681 59,111 50,992
Two years later........... 50,628 77,697 92,748 91,597 89,850 87,850
Three years later......... 70,719 105,160 124,278 110,834 114,979 116,043
Four years later.......... 84,936 126,734 137,744 129,261 133,466 132,703
Five years later.......... 95,583 133,421 151,354 142,618 145,864 142,159
Six years later........... 98,018 142,909 161,447 152,579 153,705
Seven years later......... 102,805 151,379 169,601 158,531
Eight years later......... 109,055 158,728 173,666
Nine years later.......... 114,334 162,082
Ten years later........... 117,465
Reserve Reestimated as of:
One year later........... 101,097 138,287 167,211 187,663 200,888 206,701
Two years later.......... 107,111 147,968 192,272 190,715 202,687 206,219
Three years later........ 115,746 168,096 192,670 194,280 203,343 199,925
Four years later......... 119,977 168,040 199,576 195,917 199,304 198,986
Five years later......... 119,513 175,283 201,303 195,203 200,050 197,890
Six years later.......... 122,791 178,232 202,020 196,176 198,001
Seven years later........ 125,863 182,257 202,984 196,770
Eight years later........ 128,815 184,266 202,654
Nine years later......... 132,207 187,247
Ten years later.......... 136,854
Initial Reserve in
Excess of (Less than)
Reestimated Reserve:
Amount (Cumulative)........ $(46,539) $(63,905) $(56,263) $(28,082) $ 1,379 $ 10,049
</TABLE>
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------------------
1990 1991 1992 1993 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserve for Unpaid
Loss and Loss
Adjustment Expenses:....... $226,324 $236,019 $238,762 $314,482 $329,741
Paid (Cumulative) as of:
One year later.......... 55,128 65,532 83,923 70,382
Two years later......... 97,014 105,432 123,310
Three years later....... 120,994 126,390
Four years later........ 133,338
Five years later........
Six years later.........
Seven years later.......
Eight years later.......
Nine years later........
Ten years later.........
Reserve Reestimated as of:
One year later.......... 229,447 231,779 251,450 321,058
Two years later......... 221,450 224,783 254,532
Three years later....... 211,988 223,403
Four years later........ 207,642
Five years later........
Six years later.........
Seven years later.......
Eight years later.......
Nine years later........
Ten years later.........
Initial Reserve in
Excess of (Less than)
Reestimated Reserve:
Amount (Cumulative)....... $ 18,682 $ 12,616 $(15,770) $ (6,576)
</TABLE>
The operating results of the property and casualty insurance industry,
including RWIC, are subject to significant fluctuations due to numerous factors,
including premium rate competition, catastrophic and unpredictable events
(including man-made and natural disasters), general economic and social
conditions, interest rates, investment returns, changes in tax laws, regulatory
developments, and the ability to accurately estimate liabilities for unpaid
losses and loss expenses.
INVESTMENTS
Oxford's and RWIC's investments must comply with the insurance laws of the
State of Arizona where the companies are domiciled. These laws prescribe the
type, quality, and concentration of investments that may be made. In general,
these laws permit investments in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate mortgages, and real
estate, within specified limits and subject to certain qualifications. Moreover,
in order to be considered an acceptable reinsurer by cedents and intermediaries,
a reinsurer must offer financial security. The quality and liquidity of invested
assets are important considerations in determining such security.
The investment philosophies of Oxford and RWIC emphasize protection of
principal through the purchase of investment grade fixed income securities.
Approximately 99.0% of Oxford's portfolio and 95.5% of RWIC's portfolio consist
of investment grade securities. The maturity distributions are designed to
provide sufficient liquidity to meet future cash needs.
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<PAGE> 46
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".
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<PAGE> 47
ENVIRONMENTAL MATTERS
UNDERGROUND STORAGE TANKS
The Company owns properties that, as of December 31, 1995, contained a
total of approximately 850 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 $22.0 million for removal and remediation of
2,124 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 USTs 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 fourteen federal superfund
hazardous waste sites located in eleven states. Under applicable laws and
regulations, the Company could be held jointly and severally liable for the
costs to clean-up these sites. To date, the Company has entered into 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 fourteen 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 fourteen 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, along with approximately 100 other
companies and individuals. 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.
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<PAGE> 48
In addition, the Company has been named by the State of Washington as a PLP
along with 300 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 twelve 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.
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, instituted
August 2, 1988 (the "Shoen
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<PAGE> 49
Litigation"). 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, 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 same funding and
treatment of the plaintiffs' claims resulting from the judgment in the Shoen
Litigation. The plans of reorganization, as amended and restated on February 29,
1996 were confirmed by the bankruptcy court on March 15, 1996. The plans as
confirmed, shall collectively be referred to as the "Plan".
On April 25, 1995, the Director-Defendants filed an action in the
bankruptcy court seeking injunctive relief to prevent the Company from
conducting its 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. On June 8, 1995, the
bankruptcy court issued a memorandum decision and an order enjoining the Company
from holding its 1994 Annual Meeting of Stockholders (which was delayed as a
result of litigation initiated by Paul F. Shoen) or any subsequent annual
meeting of stockholders until the court enters an order confirming or denying
confirmation of the Plan or until further order of the court. As of the date of
this Prospectus, the Company has not scheduled the 1994, 1995, or 1996 Annual
Meetings of Stockholders. However, the Company anticipates that such meetings
will occur as soon as practicable after the consummation of 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
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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.
On September 19, 1995, the Director-Defendants entered into a Stock
Purchase Agreement with one of the plaintiffs in the Shoen Litigation, Maran,
Inc., a Nevada corporation ("Maran"), contingent upon the approval of the
bankruptcy court. All of Maran's voting stock is held by Mary Anna Shoen Eaton
("Shoen Eaton"), who is also a plaintiff in the Shoen Litigation. 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 repurchased 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 the approval of the bankruptcy
court, 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
was satisfied.
Pursuant to the judgment in the Shoen Litigation, on January 30, 1996, the
Company acquired 833,420 shares of Common Stock held by L.S.S., Inc. ("L.S.S.")
in exchange for approximately $5.7 million and funded damages to L.S. Shoen of
approximately $15.4 million. The Company also funded a total of approximately
$2.1 million of statutory post-judgment interest on the above amounts. In
addition, on February 7, 1996, the Company acquired 1,651,644 shares of Common
Stock held by Thermar, Inc. ("Thermar") by tendering approximately $41.8
million. The Company also tendered to Thermar approximately $4.1 million of
statutory post-judgment interest on such amount. As a result of the foregoing
transactions, the balance of the judgment has been reduced to approximately
$315.2 million, plus interest claimed by the plaintiffs.
With respect to the remaining plaintiffs in the Shoen Litigation, the Plan
provides for the payment by the Company of approximately $84.5 million in
exchange for 12,426,836 shares of Common Stock held by four of the plaintiffs
and for the payment by the Company of approximately $230.7 million to certain of
the plaintiffs as damages.
On January 26, 1996, the bankruptcy court issued, and on March 4, 1996
amended, an interlocutory Memorandum Decision Re: Plan Confirmation which
provided, among other things, that the plaintiffs are entitled to statutory
post-judgment interest at the rate of 10% per year. As of the date hereof, total
accrued interest on the outstanding balance of the judgment is approximately
$37.0 million and is accruing at the rate of approximately $86,000 per day.
Notwithstanding this interlocutory ruling, the Company and the Director-
Defendants believe that the payment of post-petition date interest (i.e.,
interest accruing on the judgment from and after the February 21, 1995 filing
date of the Director-Defendants' Chapter 11 cases) remains an unresolved dispute
at the bankruptcy court level. In this regard, on March 20, 1996 and after
confirmation of the Plan (as discussed below), the bankruptcy court issued a
ruling that a briefing schedule and hearing date regarding post-petition date
interest and the computation thereof would be issued in the future. Those
reserved
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issues do not affect the finality of the bankruptcy court's order confirming the
Plan ("Confirmation Order") in each Director-Defendant's Chapter 11 case. If the
dispute regarding post-petition date interest is decided adversely to the
Director-Defendants and the Company, they intend to appeal any such decision.
Pending the final resolution of the post-petition date interest dispute
(including all appeals by either side), the Company intends to deposit either
cash or, in appropriate circumstances, an irrevocable letter of credit into an
escrow account to secure payment of the post-petition date interest if the
dispute is ultimately decided adversely to the Director-Defendants and the
Company. The amount of the escrow deposit would be in such case equal to the
accrued interest to the date funds are deposited into escrow. As provided in the
Plan, the escrow deposit, plus interest thereon, will remain until all aspects
of the post-petition date interest dispute have been finally decided, including
dischargeability litigation which the plaintiffs filed against the
Director-Defendants in the bankruptcy court as an alternative means of trying to
collect post-petition date interest. The dischargeability litigation has not
been set for trial and is likely to await the outcome of other aspects of the
post-petition date interest dispute.
On March 15, 1996, the bankruptcy court issued a Confirmation Order in each
Director-Defendant's Chapter 11 case. This order provided that the effective
date for the Plan (i.e. the date on which the Company will pay the plaintiffs an
aggregate of approximately $315.2 million and the plaintiffs will surrender the
Common Stock) will be no later than October 1, 1996 (absent compelling
circumstances justifying an extension of that date).
As of the date hereof, the Company has not determined which sources of cash
will be used to fund the Plan. However, in order to comply with the Company's
credit agreements, approximately $200 million of the amounts to be paid to the
plaintiffs will have to be raised by the sale of the Company's capital stock.
Such capital stock may consist of dividend paying preferred stock, Series B
Common Stock, Common Stock, or a combination of the foregoing. In addition, the
Company has identified approximately $150 million of surplus or non-essential
assets, including, but not limited to, surplus real estate and mortgage notes,
which may be sold to raise the cash needed to fund the Plan.
Because the Company has not yet determined the sources of cash to fund the
Plan, the Company is unable to determine with certainty the impact the Plan will
have on the Company's prospective financial condition, results of operations,
cash flows, or capital expenditure plans. However, as a result of funding the
Plan, the Company may incur additional costs in the future in the form of
dividends on any dividend paying stock issued to fund the Plan and/or interest
on borrowed funds. Furthermore, following consummation of the Plan, and without
giving effect to any capital stock which may be issued to fund the Plan, the
Company's outstanding Common Stock will be reduced by 12,426,836 shares, in
addition to the 3,343,076 shares repurchased from Maran on October 18, 1995, the
833,420 shares repurchased from L.S.S. on January 30, 1996, and the 1,651,644
shares repurchased from Thermar on February 7, 1996.
Other uncertainties remain about the Plan, including the tax treatment of
the payments made and to be made by the Company pursuant to the Plan.
Specifically, the Company plans to deduct for income tax purposes approximately
$324.3 million of the payments made or to be made by the Company to the
plaintiffs, which will reduce the Company's income tax liability. While the
Company believes that such income tax deductions are appropriate, there can be
no assurance that any such deductions ultimately will be allowed in full.
Accordingly, for tax and other reasons, the Plan could result in material
changes in the Company's financial condition, results of operations, and
earnings per common share.
Furthermore, in the event the fair value of the consideration paid by the
Company to the plaintiffs is in excess of the fair value of the stock
repurchased by the Company, the Company will be required to record an expense
equal to that difference. Based upon the uncertainties surrounding the funding
of the Plan the amount of such expense, if any, is not estimable as of the date
of this Prospectus. No such expense was recorded for the Maran transaction, as
the fair value of the consideration paid by the Company was less than the fair
value of the stock repurchased by the Company. The Company has not yet
determined the accounting treatment for any transaction other than the
Maran/Shoen Eaton transaction. Furthermore, no provision has been made in the
Company's financial statements for any payments to be made to the plaintiffs,
other than the payments
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discussed above made to Maran and Shoen Eaton. For the reasons set forth above,
the Plan could have the effect of reducing the Company's net income.
DESCRIPTION OF COMMON STOCK
The Company's Restated Articles of Incorporation authorize the issuance of
150,000,000 shares of Common Stock with a par value of $0.25 per share,
150,000,000 shares of serial common stock, and 50,000,000 shares of preferred
stock. The Company's Board of Directors has the authority to fix the voting
powers, designations, preferences, privileges, limitations, restrictions, and
relative rights of the serial common stock and the preferred stock without any
further vote or action by the stockholders. The rights of the holders of the
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of any serial common stock or preferred stock that is currently
outstanding or that may be issued in the future. The issuance of serial common
stock or preferred stock could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company, thereby delaying, deferring, or preventing a change in control of the
Company. Furthermore, holders of such serial common stock or preferred stock may
have other rights, including economic rights senior to the Common Stock.
As of the date of this Prospectus, there are 27,028,428 issued and
outstanding shares of the Company's Common Stock and 5,762,495 issued and
outstanding shares of Series A Common Stock. All of the Series A Common Stock is
held by James P. Shoen, a Vice-President and director of the Company, and Edward
J. Shoen, Chairman of the Board and President of the Company. The Series A
Common Stock is not convertible into Common Stock but votes together as a single
class with the Common Stock on all matters.
The summary of terms of the Company's Common Stock and Series A Common
Stock contained in this Prospectus 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 Company's By-Laws, which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
DIVIDENDS
Holders of shares of the common stock are entitled to receive dividends
payable when, if, and as declared by the Board of Directors out of funds legally
available therefor. The Company does not have a formal dividend policy. The
Company's Board of Directors periodically considers the advisability of
declaring and paying dividends in light of existing circumstances. The holders
of the Series A 8 1/2% Preferred Stock are entitled to receive cumulative
dividends prior to and in preference to the holders of common stock at a fixed
annual rate.
The Company is restricted in the amount of dividends that it may issue or
pay pursuant to covenants contained in its credit agreements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Credit Agreements." At the date
of this Prospectus, the most restrictive of such covenants provides that the
Company may pay cash dividends on its capital stock only in an amount not
exceeding, in the aggregate, computed on a cumulative basis, the sum of (i)
$15.0 million and (ii) 50% of consolidated net income computed on a cumulative
basis for the entire period subsequent to March 31, 1993 (or if such
consolidated net income is a deficit figure, then minus 100% of such deficit),
less dividends paid after such date. As of December 31, 1995, the amount
available for the payment of cash dividends, as calculated above, was $63.6
million.
VOTING
Each share of Common Stock and Series A Common Stock entitles the holder to
one vote in the election of directors and other corporate matters. The Company's
Board of Directors is classified into four classes. Voting rights are
non-cumulative.
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RIGHT OF FIRST REFUSAL
The Company's By-Laws provide for a right of first refusal in favor of the
Company with respect to all of the Company's Common Stock and Series A Common
Stock except for any such common stock sold, transferred, or otherwise disposed
of by the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Trust or any such common stock sold in a bona fide underwritten public offering
or in a bona fide public distribution pursuant to Rule 144 under the Securities
Act.
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is Chemical
Mellon Shareholder Services, L.L.C.
DESCRIPTION OF SERIES B COMMON STOCK
The rights, privileges, and preferences of the Series B Common Stock will
be identical to those of Common Stock and the Series A Common Stock except that
the Series B Common Stock will not be subject to any right of first refusal and
the holders of Series B Common Stock will have limited or no voting rights. The
voting rights, if any, of holders of Series B Common Stock will be described in
the applicable Prospectus Supplement. If holders of Series B Common Stock are
entitled to vote, they shall vote together as a single class with the holders of
Common Stock and Series A Common Stock.
DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Company's preferred stock (the "Preferred Stock") to which any Prospectus
Supplement may relate. The particular terms of any series of Preferred Stock
will be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of the Company's Preferred Stock contained in this
Prospectus 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 each series of the
Preferred Stock (the "Certificate of Designation"), which will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus is a part at or prior to the time of issuance of such series of
Preferred Stock.
Subject to limitations prescribed by law, the Board of Directors is
authorized at any time to issue one or more series of preferred stock; to
determine the par value, if any, of any such series, to determine the
designations for any such series by number, letter, or title that shall
distinguish such series from any other series; and to determine the number of
shares in any such series (including a determination that such series shall
consist of a single share).
The Board of Directors is also authorized to determine, for each series of
preferred stock, and the Prospectus Supplement will set forth with respect to
each series: (i) whether the holders thereof shall be entitled to cumulative,
noncumulative, or partially cumulative dividends and, with respect to shares
entitled to dividends, the dividend rate or rates, including, without
limitation, the methods and procedures for determining such rate or rates, and
any other terms and conditions relating to such dividends; (ii) whether the
holders thereof shall be entitled to voting rights and, if so, the terms and
conditions for the exercise thereof; (iii) whether and, if so, to what extent
and upon what terms and conditions, the holders thereof shall be entitled to
rights upon the liquidation of, or upon any distribution of the assets of, the
Company; (iv) whether, and, if so, upon what terms and conditions, such shares
shall be convertible into, or exchangeable for, other securities or property;
(v) whether, and, if so, upon what terms and conditions, such shares shall be
redeemable; (vi) whether the shares shall be subject to any sinking fund
provided for the purchase or redemption of such shares and, if so, the terms of
such fund; and (vii) whether the holders thereof shall be entitled to other
preferences or rights, and, if so, the qualifications, limitations, or
restrictions of such preferences or rights.
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As of the date hereof, the Company has no outstanding preferred stock other
than 6,100,000 shares of Series A 8 1/2% Preferred Stock, issued October 21,
1993 (the "Series A Preferred Stock"), with a liquidation preference of $25 per
share. The Series A Preferred Stock is not convertible into, or exchangeable
for, shares of any other class or classes of stock of the Company. Holders of
shares of the Series A Preferred Stock are entitled to receive dividends at a
fixed annual rate of $2.125 per share. Such dividends are cumulative and are
payable quarterly. The Series A Preferred Stock is not redeemable prior to
December 1, 2000. On and after that date, the Company, at its option, may redeem
shares of the Series A Preferred Stock, at any time or from time to time, at a
redemption price of $25 per share, plus accrued and unpaid dividends thereon to
the date of redemption. The Series A Preferred Stock is not entitled to any
sinking fund.
DIVIDENDS
Holders of shares of Preferred Stock will be entitled to receive, when, as,
and if declared by the Board of Directors out of funds of the Company legally
available therefor, cash dividends payable at such dates and at such rates per
share per annum as set forth in the applicable Prospectus Supplement. The
Prospectus Supplement will also state applicable record dates regarding the
payment of dividends. Except as set forth below, no dividends will be declared
or paid or set apart for payment on any series of Preferred Stock unless full
dividends for all series of Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon the Preferred Stock, dividends
declared (if any) on the Preferred Stock will be declared pro-rata so that the
amount of dividends declared per share on each series of Preferred Stock will in
all cases bear to each other series the same ratio that (x) accrued dividends
(including any accumulation with respect to unpaid dividends for prior dividend
periods, if dividends for such series are cumulative) for the then-current
dividend period per share for each respective series of Preferred Stock bear to
(y) aggregate accrued dividends for the then-current dividend period (including
all accumulations with respect to unpaid dividends for prior periods for all
series that are cumulative) for all outstanding shares of Preferred Stock.
All Certificates of Designation will provide, unless all dividends on the
Preferred Stock shall have been paid in full, that (i) no dividend will be
declared and paid or declared and a sum sufficient thereof set apart for payment
(other than a dividend in the Company's common stock or in any other class
ranking junior to the Preferred Stock as to dividends and liquidation
preferences) or other distribution declared or made upon the shares of the
Company's common stock or upon any other class ranking junior to the Preferred
Stock as to dividends or liquidation preferences and (ii) no shares of the
Company's common stock or class of stock ranking junior to the Preferred Stock
as to dividends or liquidation preferences may be redeemed, purchased, or
otherwise acquired by the Company except by conversion into or exchange for
shares of the capital stock of the Company ranking junior to the Preferred Stock
as to dividends and liquidation preferences.
The Company is restricted in the amount of dividends that it may issue or
pay pursuant to covenants contained in its credit agreements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Credit Agreements." At the date
of this Prospectus, the most restrictive of such covenants provides that the
Company may pay cash dividends on its capital stock only in an amount not
exceeding, in the aggregate computed on a cumulative basis, the sum of (i) $15.0
million and (ii) 50% of consolidated net income computed on a cumulative basis
for the entire period subsequent to March 31, 1993 (or if such consolidated net
income is a deficit figure, then minus 100% of such deficit), less dividends
paid after such date. As of December 31, 1995, the amount available for the
payment of cash dividends, as calculated above, was $63.6 million. For
additional information, see the applicable Prospectus Supplement.
CONVERTIBILITY
Any series of Preferred Stock may be convertible into, or exchangeable for
Common Stock or Series B Common Stock. Whether any series of Preferred Stock is
convertible into, or exchangeable for, Common
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Stock or Series B Common Stock, and the terms of any such conversion or exchange
will be set forth in the related Prospectus Supplement.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the related Prospectus Supplement. Unless
otherwise provided in the related Prospectus Supplement, while there is an
arrearage in the payment of dividends on any series of Preferred Stock, no
shares of that series may be redeemed (unless all outstanding shares of that
series are simultaneously redeemed) and the Company may not purchase or
otherwise acquire any shares of that series, except that such restriction will
not prevent the purchase or acquisition of shares of that series of Preferred
Stock pursuant to a purchase or exchange offer made on the same terms to all
holders of that series.
LIQUIDATION
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of the Company, holders of any series of Preferred Stock will be entitled to
receive the liquidation preference per share specified in the related Prospectus
Supplement and Certificate of Designation, if any, in each case together with
any applicable accrued and unpaid dividends and before any distribution to
holders of the Company's common stock or any class of stock ranking junior to
the Preferred Stock as to dividends and liquidation preferences. In the event
there are insufficient assets to pay such liquidation preferences for all
classes of Preferred Stock in full, all Certificates of Designation will provide
that the remaining assets will be allocated ratably among all series of
Preferred Stock based upon the aggregate liquidation preference for all
outstanding shares for each such series. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of shares of
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company unless otherwise provided in the related
Prospectus Supplement and Certificate of Designation, and the remaining assets
of the Company will be distributable exclusively among the holders of the
Company's common stock and any class of stock ranking junior to the Preferred
Stock as to dividends and liquidation preferences, according to their respective
interests. The Board of Directors of the Company may not authorize the issuance
of any new series of preferred stock with a liquidation preference and/or other
rights senior to the Preferred Stock offered hereby without the consent of
two-thirds of the holders of the Preferred Stock offered hereby.
VOTING
The holders of any series of Preferred Stock will have the voting rights,
if any, set forth in the related Prospectus Supplement.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. Shares of Preferred Stock redeemed or otherwise
reacquired by the Company will, in the discretion of the Board of Directors, be
held in treasury or will resume the status of authorized and unissued shares of
Preferred Stock undesignated as to series, and, in either case, will be
available for subsequent issuance. There are no restrictions on repurchase or
redemption of the Preferred Stock while there is any arrearage on sinking fund
installments, except as may be set forth in a Prospectus Supplement. The
liquidation preference is not indicative of the price at which the Preferred
Stock will trade on or after the date of issuance. Payment of dividends on and
redemptions of any series of Preferred Stock may be restricted by loan
agreements, indentures, and other transactions entered into by the Company.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers, or relative, participating, optional, or other special rights
except as set forth above or in the related Prospectus Supplement and
Certificate of Designation, the Articles of Incorporation, or as otherwise
required by law.
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TRANSFER AGENT
The transfer agent and registrar for each series of Preferred Stock will be
described in the related Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The following is a description of certain general terms of the Debt
Securities to which any Prospectus Supplement may relate. The particular terms
of the Debt Securities offered by any Prospectus Supplement (the "Offered Debt
Securities") and the extent, if any, to which such general provisions may apply
to the Debt Securities so offered will be described in the Prospectus Supplement
relating to such Offered Debt Securities.
The Offered Debt Securities are to be issued under an indenture (for
purposes of this section, the "Indenture"), between the Company and Citibank,
N.A., as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture, including the
definitions therein of certain terms. Wherever particular provisions or defined
terms of the Indenture are referred to, such provisions or defined terms are
incorporated herein by reference. Certain defined terms in the Indenture are
capitalized herein.
GENERAL
The Debt Securities will be unsecured obligations of the Company.
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and provides that Debt Securities may be issued thereunder
from time to time in one or more series.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms, where applicable, of the Offered Debt
Securities: (1) the title of the Offered Debt Securities; (2) any limit on the
aggregate principal amount of the Offered Debt Securities; (3) the Person to
whom any interest on any Offered Debt Security will be payable, if other than
the Person in whose name such Offered Debt Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest; (4) the date or dates on which the Offered Debt Securities
will mature; (5) the rate or rates (which may be fixed or variable) at which the
Offered Debt Securities will bear interest, if any, and the date or dates from
which such interest will accrue; (6) the dates on which such interest, if any,
will be payable and the Regular Record Dates for such Interest Payment Dates;
(7) the place or places where the principal of (and premium, if any) and
interest on the Offered Debt Securities shall be payable, where any Offered Debt
Securities may be surrendered for registration of transfer or exchange and where
notices to or demand upon the Company may be delivered; (8) the period or
periods within which, the price or prices at which, and the terms and conditions
upon which, the Offered Debt Securities may be redeemed in whole or in part, at
the option of the Company; (9) the obligation, if any, of the Company to redeem
or purchase such Offered Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof and the period or
periods within which, the price or prices at which, and the terms and conditions
upon which, such Offered Debt Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligation; (10) the denominations in which
such Offered Debt Securities will be issuable, if other than denominations of
$1,000 and any integral multiples thereof; (11) the portion of the principal
amount of the Offered Debt Securities, if other than the entire principal amount
thereof, payable upon acceleration of maturity thereof; (12) the right of the
Company to defease the Offered Debt Securities or certain restrictive covenants
and certain Events of Default under the Indenture; (13) the currency or
currencies in which payment of principal and premium, if any, and interest on
the Offered Debt Securities will be payable, if other than United States
dollars; (14) if the principal of (and premium, if any) or interest, if any, on
such Offered Debt Securities is to be payable, at the election of the Company or
a Holder thereof, in a currency or currencies other than that in which such
Offered Debt Securities are stated to be payable, the currency or currencies in
which payment of the principal of (and premium, if any) or interest, if any, on
such Offered Debt Securities as to which such
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election is made will be payable and the period or periods within which, and the
terms and conditions upon which, such election may be made; (15) any index used
to determine the amount of payments of principal of and premium, if any, and
interest, if any, on the Offered Debt Securities; (16) if the Offered Debt
Securities will be issuable only in the form of a Global Security as described
under "Book-Entry Debt Securities," the Depository or its nominee with respect
to the Offered Debt Securities, and the circumstances under which the Global
Security may be registered for transfer or exchange in the name of a Person
other than the Depository or its nominee; (17) any additional Events of Default;
and (18) any other terms of the Offered Debt Securities.
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, principal of and premium, if any, and interest, if any, on the
Debt Securities will be payable, and the Debt Securities will be exchangeable
and transfers thereof will be registrable, at the office of the Trustee at its
Corporate Trust Office, 120 Wall Street, 13th Floor, New York, New York 10043,
Attention: Corporate Trust Administration, provided that, at the option of the
Company, payment of interest may be made by: (1) wire transfer on the date of
payment in immediately available federal funds or next day funds to an account
specified by written notice to the Trustee from any Holder of Debt Securities;
(2) any similar manner that such Holder may designate in writing to the Trustee;
or (3) by check mailed to the address of the Person entitled thereto as it
appears in the Security Register. Any payment of principal and premium, if any,
and interest, if any, required to be made on an Interest Payment Date,
Redemption Date, or at Maturity that is not a Business Day need not be made on
such day, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date, Redemption Date, or at
Maturity, as the case may be, and no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date, or Maturity.
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, the Debt Securities will be issued only in fully registered
form, without coupons, in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any transfer or exchange of Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other government charge payable in connection therewith.
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from their
stated principal amount. In addition, under proposed Treasury Regulations, it is
possible that Debt Securities that are offered and sold at their stated
principal amount would, under certain circumstances, be treated as issued at an
original issue discount for federal income tax purposes, and special rules may
apply to Debt Securities and Warrants that are considered to be issued as
"investment units." Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities (or
other Debt Securities treated as issued at an original issue discount) and to
"investment units" will be described in the Prospectus Supplement relating
thereto. "Original Issue Discount Security" means any security that provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof upon the occurrence of an
Event of Default and the continuation thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depository or its nominee
identified in the Prospectus Supplement relating to the Offered Debt Securities.
In such a case, one or more Global Securities will be issued in a denomination
or aggregate denominations equal to the portion of the aggregate principal
amount of Outstanding Debt Securities of the series to be represented by such
Global Security or Securities. Unless and until it is exchanged in whole or in
part for Debt Securities in definitive registered form, a Global Security may
not be registered for transfer or exchange except as a whole by the Depository
for such Global Security to a nominee of such Depository and except in the
circumstances described in the Prospectus Supplement relating to the Offered
Debt Securities.
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COVENANTS
The particular restrictive covenants, if any, relating to any series of
Debt Securities will be described in the Prospectus Supplement relating to such
series. If any such covenants are described, the Prospectus Supplement will also
state whether the "covenant defeasance" provisions described below will apply.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of or premium, if
any, on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure to deposit any sinking fund payment, when due, in respect of any
Debt Security of that series; (d) failure to perform any other covenant or
warranty of the Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of Debt Securities
other than that series), continued for 60 days after written notice as provided
in the Indenture; (e) certain events in bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to Debt
Securities of that series.
If an Event of Default specified in clause (e) above occurs and is
continuing with respect to Debt Securities, then the principal amount of the
Outstanding Debt Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. If an Event
of Default (other than one specified in clause (e) in the immediately preceding
paragraph) with respect to Outstanding Debt Securities of any series shall occur
and be continuing, either the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all the Debt Securities of that series
to be due and payable immediately by written notice to the Company (and to the
Trustee if given by the Holders). At any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on acceleration has been obtained, the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
For information as to waiver of defaults, see "Modification and Waiver" below.
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities that are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture at
the request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for
indemnification of the Trustee, the Holders of a majority in principal amount of
the Outstanding Debt Securities of any series will have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series.
The Company will furnish to the Trustee annually a certificate as to
compliance by the Company with all terms, provisions, and conditions of the
Indenture.
DEFEASANCE
The Prospectus Supplement will state if any defeasance provision will apply
to the Offered Debt Securities.
DEFEASANCE AND DISCHARGE
The Indenture provides that, if applicable, the Company will be discharged
from any and all obligations in respect of the Debt Securities of any series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace stolen, lost, or mutilated Debt Securities
of such series,
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to maintain paying agencies and to hold monies for payment in trust) upon the
irrevocable deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations (as defined), which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of and premium, if any, and each installment of
interest on the Debt Securities of such series on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Debt Securities
of such series. Such a trust may only be established if, among other things, the
Company has delivered to the Trustee an Opinion of Counsel (who may be an
employee of or counsel for the Company) to the effect that Holders of the Debt
Securities of such series will not recognize income, gain, or loss for federal
income tax purposes as a result of such deposit, defeasance, and discharge and
will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit, defeasance,
and discharge had not occurred.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture provides with respect to the Debt Securities of any series,
to the extent provided for in the Prospectus Supplement, that the Company may
omit to comply with certain restrictive covenants provided for in the Prospectus
Supplement and, to the extent provided in the Prospectus Supplement, that
violations of certain restrictive covenants provided for in the Prospectus
Supplement shall not be deemed to be an Event of Default under the Indenture and
the Debt Securities of such series, upon the deposit with the Trustee, in trust,
of money and/or U.S. Government Obligations (as defined) which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of and
premium, if any, and each installment of interest on the Debt Securities of such
series on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Debt Securities of such series. The obligations of the
Company under the Indenture and the Debt Securities of such series other than
with respect to the covenants referred to above and the Events of Default other
than the Event of Default referred to above shall remain in full force and
effect. Such a trust may only be established if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel (who may be an employee of or
counsel for the Company) to the effect that the Holders of the Debt Securities
of such series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
In the event the Company exercises its option to omit compliance with
certain covenants of the Indenture with respect to the Debt Securities of any
series as described above and the Debt Securities of such series are declared
due and payable because of the occurrence of any Event of Default other than the
Event of Default described in clause (d) under "Events of Default," the amount
of money and U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Debt Securities of such series at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Debt Securities of such series at the time of the acceleration resulting from
such Event of Default. However, the Company shall remain liable for such
payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Debt Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, or the premium, if any, or interest, if any, on any
Debt Security, (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof, (d) change the place
or currency of payment of principal of, or premium, if any, or interest,
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if any, on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, or (f)
reduce the percentage in principal amount of Outstanding Debt Securities of any
series, the consent of the Holders of which is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. The Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
may on behalf of the Holders of all Debt Securities of that series waive any
past default under the Indenture with respect to that series, except a default
in the payment of the principal of or premium, if any, or interest on any Debt
Security of that series or in respect of a provision that under the Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of that series affected.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Company, without the consent of any Holders of Outstanding Debt
Securities, may consolidate or merge with or into, or transfer or lease its
assets as an entirety to, any Person, provided that (i) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or that acquires or leases the assets of the Company substantially as an
entirety is organized and existing under the laws of any United States
jurisdiction and expressly assumes the Company's obligations on the Debt
Securities and under the Indenture, (ii) after giving effect to such transaction
no Event of Default, and no event that, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing
(provided that a transaction will only be deemed to be in violation of this
condition (ii) as to any series of Debt Securities as to which such Event of
Default or such event shall have occurred and be continuing), and (iii) certain
other conditions are met.
DESCRIPTION OF CONVERTIBLE DEBT SECURITIES
The Convertible Senior Debt Securities are to be issued under an Indenture
(the "Convertible Senior Indenture"), between the Company and the Trustee. The
Convertible Subordinated Debt Securities are to be issued under an Indenture
(the "Convertible Subordinated Indenture"), between the Company and the Trustee.
The Convertible Senior Indenture and the Convertible Subordinated Indenture are
referred to in this section individually as an "Indenture" and collectively as
the "Indentures." A copy of the form of each Indenture is filed as an exhibit to
the Registration Statement.
The statements herein relating to the Convertible Debt Securities and the
Indentures are summaries and reference is made to the detailed provisions of the
Indentures, including the definitions therein of certain terms capitalized in
this Prospectus. Where no distinction is made between the Convertible Senior
Debt Securities and the Convertible Subordinated Debt Securities or between the
Convertible Senior Indenture and the Convertible Subordinated Indenture, such
summaries refer to any Convertible Debt Securities and either Indenture.
Whenever particular defined terms of the Indentures are referred to herein or in
a Prospectus Supplement, such defined terms are incorporated herein or therein
by reference.
GENERAL
The Indentures do not limit the aggregate principal amount of Convertible
Debt Securities which may be issued thereunder and provide that Convertible Debt
Securities may be issued from time to time in one or more series. The
Convertible Senior Debt Securities will be unsecured and unsubordinated
obligations of the Company and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company. The Convertible Subordinated
Debt Securities will be unsecured obligations of the Company and, as set forth
below under "Subordination of Convertible Subordinated Debt Securities", will be
subordinated in right of payment to all Senior Indebtedness.
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Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Convertible Debt
Securities being offered thereby, including: (1) the specific designation of
such Convertible Debt Securities; (2) any limit upon the aggregate principal
amount of such Convertible Debt Securities; (3) the date or dates on which the
principal of such Convertible Debt Securities will mature or the method of
determining such date or dates; (4) the rate or rates (which may be fixed or
variable) at which such Convertible Debt Securities will bear interest, if any,
or the method of calculating such rate or rates; (5) the date or dates from
which interest, if any, will accrue or the method by which such date or dates
will be determined; (6) the date or dates on which interest, if any, will be
payable and the record date or dates therefor; (7) the place or places where
principal of, premium, if any, and interest, if any, on such Convertible Debt
Securities will be payable; (8) the period or periods within which, the price or
prices at which, the currency or currencies (including currency units) in which,
and the terms and conditions upon which, such Convertible Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (9) the obligation,
if any, of the Company to redeem or purchase such Convertible Debt Securities
pursuant to any sinking fund or analogous provisions, upon the happening of a
specified event or at the option of a holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions upon
which, such Convertible Debt Securities shall be redeemed or purchased, in whole
or in part, pursuant to such obligations; (10) the denominations in which such
Convertible Debt Securities are authorized to be issued; (11) the terms and
conditions upon which conversion will be effected, including the conversion
price, the conversion period, and other conversion provisions in addition to or
in lieu of those described below; (12) the currency or currency units for which
Convertible Debt Securities may be purchased or in which Convertible Debt
Securities may be denominated and/or the currency or currency units in which
principal of, premium, if any, and/or interest, if any, on such Convertible Debt
Securities will be payable or redeemable and whether the Company or the holders
of any such Convertible Debt Securities may elect to receive payments in respect
of such Convertible Debt Securities in a currency or currency units other than
that in which such Convertible Debt Securities are stated to be payable or
redeemable; (13) if other than the principal amount thereof, the portion of the
principal amount of such Convertible Debt Securities which will be payable upon
declaration of the acceleration of the maturity thereof or the method by which
such portion shall be determined; (14) the person to whom any interest on any
such Convertible Debt Security shall be payable if other than the person in
whose name such Convertible Debt Security is registered on the applicable record
date; (15) any addition to, or modification or deletion of, any Event of Default
or any covenant of the Company specified in the Indenture with respect to such
Convertible Debt Securities; (16) the application, if any, of such means of
defeasance or covenant defeasance as may be specified for such Convertible Debt
Securities; (17) whether such Convertible Debt Securities are to be issued in
whole or in part in the form of one or more temporary or permanent global
securities and, if so, the identity of the depositary for such global security
or securities; (18) any index used to determine the amount of payments of
principal of (and premium, if any) and interest, if any, on such Convertible
Debt Securities; (19) under what circumstances, if any, the Company will pay
additional amounts on the Convertible Debt Securities held by a Person who is
not a U.S. Person in respect of taxes or similar charges withheld or deducted;
(20) if other than the Trustee, the identity of the registrar and any Paying
Agent; (21) any terms which may be related to warrants issued by the Company in
connection with Convertible Debt Securities; (22) the designation of any
Exchange Rate Agent; (23) if other than as provided in the Convertible
Subordinated Indenture, the terms and conditions under which the Convertible
Subordinated Debt Securities will be subordinated to the Senior Indebtedness of
the Company; and (24) any other special terms pertaining to such Convertible
Debt Securities. Unless otherwise specified in the applicable Prospectus
Supplement, the Convertible Debt Securities will not be listed on any securities
exchange.
Unless otherwise specified in the applicable Prospectus Supplement,
Convertible Debt Securities will be issued in fully registered form without
coupons. Where Convertible Debt Securities of any series are issued in bearer
form, the special restrictions and considerations, including special offering
restrictions and special Federal income tax considerations, applicable to any
such Convertible Debt Securities and to payment on and transfer and exchange of
such Convertible Debt Securities will be described in the applicable Prospectus
Supplement. Bearer Convertible Debt Securities will be transferable by delivery.
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Convertible Debt Securities may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain Federal income tax
consequences and special considerations applicable to any such Convertible Debt
Securities will be described in the applicable Prospectus Supplement.
DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Registered Securities will be issuable in denominations of $1,000 and
integral multiples of $1,000, and Bearer Securities will be issuable in the
denomination of $5,000 or, in each case, in such other denominations and
currencies as may be in the terms of the Convertible Debt Securities of any
particular series. Unless otherwise provided in the applicable Prospectus
Supplement, payments in respect of the Convertible Debt Securities will be made,
subject to any applicable laws and regulations, in the designated currency at
the office or agency of the Company maintained for that purpose as the Company
may designate from time to time, except that, at the option of the Company,
interest payments, if any, on Convertible Debt Securities in registered form may
be made (i) by checks mailed by the Trustee to the holders of Convertible Debt
Securities entitled thereto at their registered addresses or (ii) by wire
transfer to an account maintained by the Person entitled thereto as a specified
in the Register. Unless otherwise indicated in an applicable Prospectus
Supplement, payment of any installment of interest on Convertible Debt
Securities in registered form will be made to the Person in whose name such
Convertible Debt Security is registered at the close of business on the regular
record date for such interest.
Payment in respect of Convertible Debt Securities in bearer form will be
payable in the currency and in the manner designated in the applicable
Prospectus Supplement, subject to any applicable laws and regulations, at such
paying agencies outside the United States as the Company may appoint from time
to time. The paying agents outside the United States, if any, initially
appointed by the Company for a series of Convertible Debt Securities will be
named in the applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any paying
agents, except that, if Convertible Debt Securities of a series are issuable as
Registered Securities, the Company will be required to maintain at least one
paying agent in each Place of Payment for such series and, if Convertible Debt
Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain a Paying Agent in a Place of Payment outside the United
States where Convertible Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment. The Company
will have the right to require a holder of any Convertible Debt Security, in
connection with the payment of the principal of (and premium, if any) and
interest, if any, on such Convertible Debt Security, to certify information to
the Company or, in the absence of such certification, the Company will be
entitled to rely on any legal presumption to enable the Company to determine its
duties and liabilities, if any, to deduct or withhold taxes, assessments or
governmental charges from such payment.
Unless otherwise provided in the applicable Prospectus Supplement,
Convertible Debt Securities in registered form will be transferable or
exchangeable at the agency of the Company maintained for such purpose as
designated by the Company from time to time. Convertible Debt Securities may be
transferred or exchanged without service charge, other than any tax or
governmental charge imposed in connection therewith.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Convertible Debt Securities
of any series during a period beginning at the opening of business 15 days
before any selection of Convertible Debt Securities of that series to be
redeemed and ending at the close of business on (A) if Convertible Debt
Securities of the series are issuable only as Registered Securities, the day of
mailing of the relevant notice of redemption and (B) if Convertible Debt
Securities of the series are issuable as Bearer Securities, the day of the first
publication of the relevant notice of redemption or, if Convertible Debt
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Securities, or portion thereof,
called for redemption or otherwise surrendered for repayment, except the
unredeemed or unrepaid portion of any Registered Security being redeemed or
repaid in part; or
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(iii) exchange any Bearer Security called for redemption, except to exchange
such Bearer Security for a Registered Security of that series and like tenor
which is immediately surrendered for redemption.
CONVERSION RIGHTS
The terms on which Convertible Debt Securities of any series are
convertible into Common Stock or Series B Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms shall include provisions as
to the conversion price and any adjustments thereto, the determination of
holders entitled to exercise conversion, whether conversion is mandatory, at the
option of the holder, or at the option of the Company, and may include
provisions in which the amount of Common Stock or Series B Common Stock of the
Company to be received by the holders of Convertible Debt Securities would be
calculated according to the market price of such other securities of the Company
as of a time stated in the Prospectus Supplement.
SUBORDINATION OF CONVERTIBLE SUBORDINATED DEBT SECURITIES
The obligation of the Company to make payment on account of the principal
of, and premium, if any, and interest on the Convertible Subordinated Debt
Securities will be subordinated and junior in right of payment, as set forth in
the Convertible Subordinated Indenture, to the prior payment in full of all
Senior Indebtedness. Notwithstanding the foregoing, payment from the money or
the proceeds of U.S. Government Obligations held in any defeasance trust
described under "Defeasance" below is not subordinate to any Senior Indebtedness
or subject to the restrictions described herein.
"Senior Indebtedness" means all Indebtedness of the Company (other than the
Convertible Subordinated Debt Securities) unless such indebtedness, by its terms
or the terms of the instrument creating or evidencing it, is subordinate in
right of payment to or pari passu with the Convertible Subordinated Debt
Securities; provided, however, that Senior Indebtedness does not include (x) any
Indebtedness, guarantee or other obligation of the Company that is subordinate
or junior in any respect to any other Indebtedness of the Company or (y) any
Indebtedness of the Company to any of its Subsidiaries. "Indebtedness", when
used with respect to the Company, means, without duplication, the principal of,
and premium, if any, and accrued and unpaid interest (including post-petition
interest, whether or not available as a claim in bankruptcy) on, (i)
indebtedness of the Company for money borrowed, (ii) indebtedness guarantees by
the Company of indebtedness for money borrowed by any other person, (iii)
indebtedness of the Company evidenced by notes, debentures, bonds or other
instruments of indebtedness for payment of which the Company is responsible or
liable, (iv) obligations for the reimbursement of any obligor on any letter of
credit, bankers' acceptance or similar credit transaction, (v) obligations under
interest rate and currency swaps, caps, collars, options, forward or spot
contracts or similar arrangements or with respect to foreign currency hedges,
(vi) commitment and other bank financing fees under contractual obligations
associated with bank debt, (vii) any indebtedness representing the deferred and
unpaid purchase price of any property or business, and (viii) all deferrals,
renewals, extensions and refundings of any such indebtedness or obligations,
provided, however, that Indebtedness shall not include amounts owed to trade
creditors in the ordinary course of business, nonrecourse indebtedness secured
by real property located outside the United States or operating lease rental
payments in the ordinary course of business.
No payment on account of principal of, or premium, if any, or interest on,
the Convertible Subordinated Debt Securities or deposit pursuant to the
provisions described under "Defeasance" below may be made if (i) any Senior
Indebtedness is not paid when due (following the expiration of any applicable
grace period) or (ii) any other default on Senior Indebtedness occurs and the
maturity of any Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (a) such failure to pay or acceleration relates to such
Senior Indebtedness in an aggregate amount equal to or less than $20 million,
(b) the default has been cured or waived or has ceased to exist, (c) such
acceleration has been rescinded, or (d) such Senior Indebtedness has been paid
in full. A failure to make any payment with respect to the Convertible
Subordinated Debt Securities as a result of the foregoing provisions will not
limit the right of the Holders of the Convertible Subordinated Debt Securities
to accelerate the maturity thereof as a result of such payment default.
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Upon any distribution of the assets of the Company upon any dissolution,
total or partial liquidation or reorganization of or similar proceeding relating
to the Company, the holders of Senior Indebtedness will be entitled to receive
payment in full before the Holders of the Convertible Subordinated Debt
Securities are entitled to receive any payment. By reason of such subordination,
in the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness or of other unsubordinated Indebtedness of the Company may recover
more, ratably, than the Holders of the Convertible Subordinated Debt Securities.
CONSOLIDATION, MERGER OR SALE
The Indentures provide that the Company may merge or consolidate with or
into any other corporation or sell, convey, transfer, lease or otherwise dispose
of all or substantially all of its assets to any Person, if (i) (a) in the case
of a merger or consolidation, the Company is the surviving corporation or (b) in
the case of a merger or consolidation where the Company is not the surviving
corporation and in the case of such a sale, conveyance, transfer or other
disposition, the resulting, successor, or acquiring Person is a corporation
organized and existing under the laws of the United States of America or a State
thereof or the District of Columbia and such corporation expressly assumes by
supplemental indenture all the obligations of the Company under the Convertible
Debt Securities and any coupons appertaining thereto and under the Indentures,
(ii) immediately after giving effect to such merger or consolidation, or such
sale, conveyance, transfer, lease or other disposition (including, without
limitation, any Indebtedness directly or indirectly incurred or anticipated to
be incurred in connection with or in respect of such transaction), no Default or
Event of Default shall have occurred and be continuing and (iii) certain other
conditions are met. In the event a successor corporation assumes the obligations
of the Company, such successor corporation shall succeed to and be substituted
for the Company under the Indentures and under the Convertible Debt Securities
and any coupons appertaining thereto and all obligations of the Company shall
terminate.
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Events of Default with respect to Convertible Debt Securities of any series
issued thereunder are defined in the Indentures as being: default for thirty
days in payment of any interest on any Convertible Debt Security of that series
or any coupon appertaining thereto or any additional amount payable with respect
to Convertible Debt Securities of such series as specified in the applicable
Prospectus Supplement when due; default in payment of principal, premium, if
any, or on redemption or otherwise, or in the making of a mandatory sinking fund
payment of any Convertible Debt Securities of that series when due; default for
sixty days after notice to the Company by the Trustee for such series, or by the
holders of 25% in aggregate principal amount of the Convertible Debt Securities
of such series then outstanding, in the performance of any other agreement
applicable to the Convertible Debt Securities of that series, in the Indentures
or in any supplemental indenture or board resolution referred to therein under
which the Convertible Debt Securities of that series may have been issued; and
certain events of bankruptcy, insolvency or reorganization of the Company. Any
other Events of Default applicable to a specified series of Convertible Debt
Securities will be described in the applicable Prospectus Supplement. An Event
of Default with respect to a particular series of Convertible Debt Securities
will not necessarily be an Event of Default with respect to any other series of
Convertible Debt Securities.
The Indentures provide that, if an Event of Default specified therein
occurs with respect to the Convertible Debt Securities of any series issued
thereunder and is continuing, the Trustee for such series or the holders of 25%
in aggregate principal amount of all of the outstanding Convertible Debt
Securities of that series, by written notice to the Company (and to the Trustee
for such series, if notice is given by such holders of Convertible Debt
Securities), may declare the principal (or, if the Convertible Debt Securities
of that series are original issue discount Convertible Debt Securities or
indexed Convertible Debt Securities, such portion of the principal amount
specified in the applicable Prospectus Supplement) of all the Convertible Debt
Securities of that series to be due and payable.
The Indentures provide that the Trustee for any series of Convertible Debt
Securities shall, within ninety days after the occurrence of a Default known to
it with respect to Convertible Debt Securities of that series, give to the
holder of the Convertible Debt Securities of that series notice of all such
uncured Defaults; provided, that such notice shall not be given until 60 days
after the occurrence of a Default with respect to
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<PAGE> 65
Convertible Debt Securities of that series involving a failure to perform a
covenant other than the obligation to pay principal, premium, if any, or
interest or make a mandatory sinking fund payment; and provided, further, that,
except in the case of default in payment on the Convertible Debt Securities of
that series, the Trustee may withhold the notice if and so long as a committee
of its Responsible Officers (as defined therein) in good faith determines that
withholding such notice is in the interest of the holders of the Convertible
Debt Securities of that series. "Default" means any event which is, or, after
notice or passage of time or both, would be, an Event of Default.
The Indentures provide that the Trustee will be under no obligation to
exercise any of its rights or powers under such Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. Subject to such provisions for indemnification of
the Trustee, the Indentures provide that the holders of not less than a majority
in aggregate principal amount of the Convertible Debt Securities of each series
affected (with each such series voting as a class) may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
for such series, or exercising any trust or power conferred on such Trustee.
The Indentures include a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of the applicable Indenture.
The holders of not less than a majority in aggregate principal amount of
any series of Convertible Debt Securities by notice to the Trustee for such
series may waive, on behalf of the holders of all Convertible Debt Securities of
such series, any past Default or Event of Default with respect to that series
and its consequences, and may rescind and annul a declaration of acceleration
with respect to that series (unless a judgment or decree based on such
acceleration has been obtained and entered), except a Default or Event of
Default in the payment of the principal of, premium, if any, or interest, if
any, on any Convertible Debt Security (and any acceleration resulting therefrom)
and certain other defaults.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Company and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Convertible Debt Securities in order (i) to evidence the
succession of another corporation to the Company and the assumption of the
covenants of the Company by a successor; (ii) to add to the covenants of the
Company or surrender any right or power of the Company; (iii) to add additional
Events of Default with respect to any series; (iv) to add or change any
provisions to such extent as necessary to permit or facilitate the issuance of
Convertible Debt Securities in bearer form or in global form; (v) under certain
circumstances to add to, change or eliminate any provision affecting Convertible
Debt Securities not yet issued; (vi) to secure the Convertible Debt Securities;
(vii) to establish the form or terms of Convertible Debt Securities; (viii) to
evidence and provide for successor Trustees; (ix) if allowed without penalty
under applicable laws and regulations, to permit payment in respect of
Convertible Debt Securities in bearer form in the United States; (x) to correct
or supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under the Indentures, provided that such
action does not adversely affect the interests of any holder of Convertible Debt
Securities of any series issued under such Indentures in any material respect;
or (xi) to cure any ambiguity or correct any mistake.
The Indentures also contain provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Convertible Debt Securities of each series affected by
such supplemental indenture, to execute supplemental indentures adding any
provisions to or changing or eliminating any of the provisions of the Indentures
or any supplemental indenture or modifying the rights of the holders of
Convertible Debt Securities of such series, except that no such supplemental
indenture may, without the consent of the holder of each Convertible Debt
Security so affected, (i) change the time for payment of principal or interest
on any Convertible Debt Security; (ii) reduce the principal of, or any
installment of principal of, or interest on any Convertible Debt Security; (iii)
reduce the amount of premium, if any, payable upon the redemption of any
Convertible Debt Security; (iv) reduce the amount of principal payable upon
acceleration of the maturity of an Original Issue Discount Convertible Debt
Security;
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<PAGE> 66
(v) change the coin or currency in which any Convertible Debt Security or any
premium or interest thereon is payable; (vi) impair the right to institute suit
for the enforcement of any payment on or with respect to any Convertible Debt
Security; (vii) modify the provisions of the Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders; (viii)
reduce the percentage in principal amount of the outstanding Convertible Debt
Securities of any series the consent of whose holders is required for
modification or amendment of the Indentures or for waiver of compliance with
certain provisions of the Indentures or for waiver of certain defaults; (ix)
change the obligation of the Company to maintain an office or agency in the
places and for the purposes specified in the Indentures; or (x) modify any of
the foregoing provisions.
DEFEASANCE
If indicated in the applicable Prospectus Supplement, the Company may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Convertible Debt Securities of or within any series (except as
described below) ("defeasance") or (ii) to be released from its obligations with
respect to certain covenants applicable to the Convertible Debt Securities of or
within any series ("covenant defeasance"), upon the deposit with the Trustee for
such series (or other qualifying trustee), in trust for such purpose, of money
and/or Government Obligations which through the payment of principal and
interest in accordance with their terms will provide money in the amount
sufficient to pay the principal of and any premium or interest on such
Convertible Debt Securities to Maturity or redemption, as the case may be, and
any mandatory sinking fund or analogous payments thereon. Upon the occurrence of
a defeasance, the Company will be deemed to have paid and discharged the entire
indebtedness represented by such Convertible Debt Securities and any coupons
appertaining thereto and to have satisfied all of its other obligations under
such Convertible Debt Securities and any coupons appertaining thereto (except
for (i) the right of holders of such Convertible Debt Securities to receive,
solely from the trust funds deposited to defease such Convertible Debt
Securities, payments in respect of the principal of, premium, if any, and
interest, if any, on such Convertible Debt Securities or any coupons
appertaining thereto when such payments are due and (ii) certain other
obligations as provided in the Indentures). Upon the occurrence of a covenant
defeasance, the Company will be released only from its obligations to comply
with certain covenants contained in the Indentures relating to such Convertible
Debt Securities, will continue to be obligated in all other respects under such
Convertible Debt Securities and will continue to be contingently liable with
respect to the payment of principal, interest, if any, and premium, if any, with
respect to such Convertible Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement and
except as described below, the conditions to both defeasance and covenant
defeasance are as follows: (i) such defeasance or covenant defeasance must not
result in a breach or violation of, or constitute a Default or Event of Default
under, the Indentures, or result in a breach or violation of, or constitute a
default under, any other material agreement or instrument of the Company; (ii)
certain bankruptcy related Defaults or Events of Default with respect to the
Company must not have occurred and be continuing during the period commencing on
the date of the deposit of the trust funds to defease such Convertible Debt
Securities and ending on the 91st day after such date; (iii) the Company must
deliver to the Trustee an Opinion of Counsel to the effect that the holders of
such Convertible Debt Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to Federal income tax on the same amounts and in
the same manner and at all the same times as would have been the case if such
defeasance or covenant defeasance had not occurred (such Opinion of Counsel, in
the case of defeasance, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable Federal income tax law occurring after
the date of the Indentures); (iv) the Company must deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel with respect to compliance with
the conditions precedent to such defeasance or covenant defeasance and with
respect to certain registration requirements under the Investment Company Act of
1940, as amended; and (v) any additional conditions to such defeasance or
covenant defeasance which may be imposed on the Company pursuant to the
Indentures. The Indentures require that a nationally recognized firm of
independent public accountants deliver to the Trustee a written certification as
to the sufficiency of the trust funds deposited for the defeasance or covenant
defeasance of such Convertible Debt Securities. The Indentures do not provide
the holders of such Convertible Debt Securities with recourse against such firm.
If indicated in the applicable Prospectus Supplement, in addition to obligations
of the United States or an
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<PAGE> 67
agency or instrumentality thereof, Government Obligations may include
obligations of the government or an agency or instrumentality of the government
issuing the currency in which Convertible Debt Securities of such series are
payable. As described above, in the event of a covenant defeasance, the Company
remains contingently liable with respect to the payment of principal, interest,
if any, and premium, if any, with respect to the Convertible Debt Securities.
The Company may exercise its defeasance option with respect to such
Convertible Debt Securities notwithstanding its prior exercise of its covenant
defeasance option. If the Company exercises its defeasance option, payment of
such Convertible Debt Securities may not be accelerated because of a Default or
an Event of Default. If the Company exercises its covenant defeasance option,
payment of such Convertible Debt Securities may not be accelerated by reason of
a Default or an Event of Default with respect to the covenants to which such
covenant defeasance is applicable. However, if such acceleration were to occur,
the realizable value at the acceleration date of the money and Government
Obligations in the defeasance trust could be less than the principal and
interest then due on such Convertible Debt Securities, in that the required
deposit in the defeasance trust is based upon scheduled cash flow rather than
market value, which will vary depending upon interest rates and other factors.
The applicable Prospectus Supplement may further describe the provisions,
if any, applicable to defeasance or covenant defeasance with respect to the
Convertible Debt Securities of a particular series.
THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indentures.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Common Stock or Series B
Common Stock of the Company. Warrants may be issued together with or separately
from any such securities of the Company and, if issued together with any of such
securities, may be attached to or separate from such securities. The Warrants
are to be issued under one or more separate Warrant Agreements (a "Warrant
Agreement") to be entered into between the Company and a Warrant Agent, all as
set forth in the Prospectus Supplement relating to the particular issue of
Warrants. The Warrant Agent will act solely as an agent of the Company in
connection with the Warrants and will not assume any obligation or relationship
of agency or trust for or with any holders of Warrants or beneficial owners of
Warrants. The statements herein relating to the Warrants and the Warrant
Agreements are summaries and reference is made to the detailed provisions of the
Warrant Agreements. A form of Warrant Agreement will be filed as an exhibit to
or incorporated by reference in the Registration Statement.
GENERAL
If Warrants are offered, reference is made to the applicable Prospectus
Supplement for a description of the specific terms of the Warrants being offered
thereby, including (i) the specific designation and aggregate number of such
Warrants, (ii) the offering price and the currency or composite currencies for
which Warrants may be purchased, (iii) the designation and aggregate amount of
Common Stock or Series B Common Stock of the Company purchasable upon exercise
of the Warrants, (iv) if applicable, the designation and terms of the securities
with which the Warrants are issued and the number of Warrants issued with the
minimum denomination or number of shares of each such security, (v) if
applicable, the date on and after which the Warrants and the related securities
will be separately transferable, (vi) the amount of Common Stock or Series B
Common Stock of the Company purchasable upon exercise of one Warrant and the
price or the manner of determining the price and currency or composite
currencies or other consideration for which any such securities may be purchased
upon such exercise, (vii) the date on which the right to exercise the Warrants
shall commence and the date on which such right shall expire (the "Expiration
Date"), (viii) the terms of any mandatory or optional redemption by the Company,
(ix) certain Federal income tax consequences, (x) whether the certificates for
Warrants will be issued in registered or unregistered form, and
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(xi) any other special terms pertaining to such Warrants. Unless otherwise
specified in the applicable Prospectus Supplement, the Warrants will not be
listed on any securities exchange.
Warrant certificates may be exchanged for new Warrant certificates of
different denominations, may (if in registered form) be presented for
registration of transfer and exchange and may be exercised at an office or
agency of the Warrant Agent maintained for that purpose (the "Warrant Agent
Office"). No service charge will be made for any transfer or exchange of Warrant
certificates, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. Prior to
the exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of any securities purchasable upon such exercise.
The Warrant Agent will act solely as an agent of the Company in connection
with the Warrants and will not assume any obligation or relationship of agency
or trust for or with any holders of Warrants or beneficial owners of Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase such amount of other
securities of the Company at such exercise price, for such consideration and
during such period or periods as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the Warrants. Warrants
may be exercised at any time during such period up to 5:00 P.M. New York City
time on the Expiration Date set forth in the Prospectus Supplement relating to
such Warrants. After the close of business on the Expiration Date (or such later
date to which such Expiration Date may be extended by the Company), unexercised
Warrants will become void.
Warrants may be exercised by delivery to the Warrant Agent of payment as
provided in the applicable Prospectus Supplement of the amount required to
purchase the Common Stock or Series B Common Stock of the Company purchasable
upon such exercise together with certain information set forth on the reverse
side of the Warrant certificate. Unless otherwise provided in the applicable
Prospectus Supplement, upon receipt of such payment and the Warrant certificate
properly completed and duly executed at the Warrant Agent Office or any other
office or agency indicated in the applicable Prospectus Supplement, the Company
will, as soon as practicable, issue and deliver the Common Stock or Series B
Common Stock of the Company purchasable upon such exercise. If fewer than all of
the Warrants represented by such Warrant certificate are exercised, a new
Warrant certificate will be issued for the amount of unexercised Warrants.
MODIFICATION OF WARRANT AGREEMENTS
The Warrant Agreements contain a provision permitting the Company and the
Warrant Agent, without the consent of any Warrantholder, to supplement or amend
the Warrant Agreement in order to cure any ambiguity, and to correct or
supplement any provision contained therein which may be defective or
inconsistent with any other provisions or to make other provisions in regard to
matters or questions arising thereunder which the Company and the Warrant Agent
may deem necessary or desirable and which do not adversely affect the interests
of the Warrantholders.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors or other persons
directly or through one or more dealers or agents. Any such underwriter, dealer
or agent involved in the offer and sale of the Offered Securities will be named
in an applicable Prospectus Supplement.
The Offered Securities may be sold at a fixed price or prices, which may be
changed, or at prices related to prevailing market prices or at negotiated
prices. The Company also may offer and sell the Offered Securities to one or
more persons in privately negotiated transactions or in open market
transactions. The newly issued Offered Securities in such cases may be offered
pursuant to this Prospectus and the applicable Prospectus Supplement by such
persons, acting as principal for their own accounts, at market prices prevailing
at the time of sale, at prices otherwise negotiated, or at fixed prices. Dealer
trading may take place in certain of the
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Offered Securities, including Offered Securities not listed on any securities
exchange. The Company also may, from time to time, authorize underwriters acting
as the Company's agents to offer and sell the Offered Securities upon the terms
and conditions as shall be set forth in any Prospectus Supplement. In connection
with the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and also may receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions (which may be changed from time to time) from the purchasers for
whom they may act as agent.
If a dealer is used directly by the Company in the sale of Offered
Securities in respect of which this Prospectus is delivered, the Company will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered Securities to the public at varying prices to be determined
by such dealer at the time of resale. Any such dealer and the terms of any such
sale will be set forth in the Prospectus Supplement relating thereto.
Offered Securities may be offered and sold through agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Offered Securities in respect of which this Prospectus is delivered will be
named in, and any commissions payable by the Company to such agent will be set
forth in, the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto. Except as
set forth in the applicable Prospectus Supplement, no director, officer or
employee of the Company will solicit or receive a commission in connection with
direct sales by the Company of the Offered Securities, although such persons may
respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with any such direct sales.
Any underwriting compensation paid by the Company to underwriters, dealers
or agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, the Company and its subsidiaries in the ordinary course of
business.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Debt Securities or Convertible Debt Securities from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of Debt Securities or Convertible Debt
Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject, and (ii) if the Debt Securities or Convertible Debt
Securities are being sold to underwriters, the Company shall have sold to such
underwriters Debt Securities or Convertible Debt Securities not covered by
Contracts. A commission
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indicated in the applicable Prospectus Supplement will be granted to
underwriters and agents soliciting purchases of Offered Securities pursuant to
Contracts accepted by the Company. Agents and underwriters will have no
responsibility in respect of the delivery or performance of Contracts.
The Offered Securities may or may not be listed on a national securities
exchange or approved for quotation on Nasdaq. If an underwriter or underwriters
are utilized in the sale of any Offered Securities, the applicable Prospectus
Supplement will contain a statement as to the intention, if any, of such
underwriters at the date of such Prospectus Supplement to make a market in the
Offered Securities. No assurances can be given that there will be a market for
the Offered Securities.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered will be set forth in the applicable
Prospectus Supplement. Securities issuable upon exercise of Warrants will be
issued upon payment of the exercise price and otherwise in accordance with the
relevant terms applicable to such Warrants and described in the relevant
Prospectus Supplement.
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. Certain legal matters in connection with this offering will
be passed upon for the Underwriters by the counsel named in the applicable
Prospectus Supplement.
EXPERTS
The consolidated financial statements of the Company as of March 31, 1995
and 1994 and for each of the years in the three-year period ended March 31, 1995
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1995 have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
upon the authority of said firm as experts in auditing and accounting.
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NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY OF THE UNDERWRITERS, OR ANY OTHER PERSON. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING 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 SUPPLEMENT
The Company.......................... S-3
Recent Developments.................. S-4
Use of Proceeds...................... S-4
Ratio of Earnings to Fixed Charges... S-4
Capitalization....................... S-5
Selected Consolidated Financial
Data............................... S-6
Description of Notes................. S-7
Underwriting......................... S-17
Legal Matters........................ S-17
PROSPECTUS
Available Information................ 2
Information Incorporated by
Reference.......................... 2
Company Summary...................... 3
Risk Factors......................... 5
Use of Proceeds...................... 7
Ratio of Earnings to Combined Fixed
Charges............................ 7
Selected Consolidated Financial
Data............................... 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 9
Business............................. 22
Shoen Litigation..................... 31
Description of Common Stock.......... 35
Description of Series B Common
Stock.............................. 36
Description of Preferred Stock....... 36
Description of Debt Securities....... 39
Description of Convertible Debt
Securities......................... 43
Description of Warrants.............. 50
Plan of Distribution................. 51
Legal Opinions....................... 53
Experts.............................. 53
</TABLE>
$175,000,000
AMERCO
7.85% SENIOR NOTES DUE 2003
LOGO
SALOMON BROTHERS INC
LEHMAN BROTHERS
CITICORP SECURITIES, INC.
PROSPECTUS SUPPLEMENT
DATED MAY 1, 1996
<PAGE> 72
APPENDIX A
DESCRIPTION OF GRAPHIC MATERIAL
<TABLE>
<S> <C> <C>
1. Location: Outside Front and Back Covers of Prospectus Supplement, Cover of Base
Prospectus
Item:
Company Logo
Description:
Registered Logo U-Haul International, Inc.
2. Location:
Page 4 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>
