<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
_______________________________________________________________________
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
20,364,087 shares of AMERCO Common Stock, $0.25 par value were
outstanding at November 6, 1996.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par
value, were outstanding at November 6, 1996. U-Haul
International, Inc. meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this
form with the reduced disclosure format.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
a) Consolidated Balance Sheets as of September 30, 1996,
March 31, 1996 and September 30, 1995................ 4
b) Consolidated Statements of Earnings for the Six
Months ended September 30, 1996 and 1995............. 6
c) Consolidated Statements of Changes in Stockholders'
Equity for the Six Months ended September 30, 1996
and 1995............................................. 7
d) Consolidated Statements of Earnings for the
Quarters ended September 30, 1996 and 1995........... 9
e) Consolidated Statements of Cash Flows for the
Six Months ended September 30, 1996 and 1995......... 10
f) Notes to Consolidated Financial Statements -
September 30, 1996, March 31, 1996 and
September 30, 1995................................... 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................ 28
Item 6. Exhibits and Reports on Form 8-K......................... 29
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INTENTIONALLY BLANK
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
September 30, March 31, September 30,
ASSETS 1996 1996 1995
----------------------------------
(unaudited) (audited) (unaudited)
(in thousands)
Cash and cash equivalents $ 32,380 31,168 33,283
Receivables 311,480 340,564 338,489
Inventories 54,718 45,891 51,402
Prepaid expenses 11,060 16,415 12,693
Investments, fixed maturities 879,699 879,702 800,481
Investments, other 162,697 126,587 139,713
Deferred policy acquisition costs 56,171 49,995 51,304
Other assets 56,508 20,941 18,725
---------------------------------
Property, plant and equipment, at
cost:
Land 214,853 212,593 210,928
Buildings and improvements 800,760 769,380 738,535
Furniture and equipment 191,826 188,734 184,189
Rental trailers and other rental
equipment 150,388 256,411 258,264
Rental trucks 950,209 968,131 933,013
General rental items 22,290 24,197 49,581
---------------------------------
2,330,326 2,419,446 2,374,510
Less accumulated depreciation 1,077,193 1,102,731 1,131,339
---------------------------------
Total property, plant and
equipment 1,253,133 1,316,715 1,243,171
---------------------------------
$ 2,817,846 2,827,978 2,689,261
================================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
September 30, March 31, September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996 1995
---------------------------------------
(unaudited) (audited) (unaudited)
(in thousands)
Liabilities:
Accounts payable and accrued
liabilities $ 153,732 151,754 150,198
Notes and loans 940,282 998,220 796,738
Policy benefits and losses, claims
and loss expenses payable 485,932 483,561 475,220
Liabilities from premium deposits 435,789 410,787 374,407
Cash overdraft 22,740 32,159 23,450
Other policyholders' funds and
liabilities 31,711 25,713 25,843
Deferred income 36,694 2,926 9,533
Deferred income taxes 57,936 73,310 92,008
----------------------------------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized; 6,100,000 shares
issued without par value and
outstanding as of September 30, 1996,
March 31, 1996 and September 30, 1995 - - -
Series B preferred stock, with no par
value, 100,000 shares authorized;
100,000 shares issued and
outstanding as of September 30, 1996,
none issued and outstanding as of
March 31, 1996 and September 30, 1995 - - -
Serial common stock, with or
without par value, 150,000,000
shares authorized, none issued
and outstanding - - -
Series A common stock of $0.25 par
value, 10,000,000 shares authorized,
5,762,495 shares issued as of
September 30, 1996, March 31, 1996,
and September 30, 1995 1,441 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized,
34,237,505 shares issued as of
September 30, 1996, March 31, 1996,
and September 30, 1995 8,559 8,559 8,559
Additional paid-in capital 264,378 165,756 165,675
Foreign currency translation (12,451) (11,877) (10,609)
Unrealized gain(loss) on investments 315 11,097 6,771
Retained earnings 680,279 609,019 605,616
---------------------------------
942,521 783,995 777,453
Less:
Cost of common shares in treasury,
(15,599,609 shares as of September 30,
1996, 7,209,077 shares as of March 31,
1996, 1,380,937 shares as of
September 30, 1995) 266,315 111,118 11,457
Unearned employee stock
ownership plan shares 23,176 23,329 24,132
---------------------------------
Total stockholders' equity 653,030 649,548 741,864
Contingent liabilities and commitments
---------------------------------
$ 2,817,846 2,827,978 2,689,261
=================================
<PAGE> 6
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Six Months ended September 30,
(Unaudited)
1996 1995
---------------------
(in thousands except
per share data)
Revenues
Rental and other revenue $ 555,055 504,429
Net sales 107,192 102,675
Premiums 72,749 71,385
Net investment income 25,140 23,287
---------------------
Total revenues 760,136 701,776
Costs and expenses
Operating expense 406,130 353,185
Advertising expense (see note 9) 16,014 24,061
Cost of sales 62,639 58,001
Benefits and losses 66,716 68,099
Amortization of deferred acquisition
costs 8,057 7,799
Depreciation 38,719 76,275
Interest expense 35,282 35,554
---------------------
Total costs and expenses 633,557 622,974
Pretax earnings from operations 126,579 78,802
Income tax expense (46,833) (28,293)
---------------------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 79,746 50,509
Extraordinary loss on early
extinguishment of debt, net (2,004) -
---------------------
Net earnings $ 77,742 50,509
=====================
Earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 2.43 1.16
Extraordinary loss on early
extinguishment of debt, net (.07) -
---------------------
Net earnings $ 2.36 1.16
=====================
Weighted average common shares outstanding 29,845,247 37,931,825
=====================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 7
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Six Months ended September 30,
(Unaudited)
1996 1995
-------------------
(in thousands)
Series A common stock of $0.25 par value:
10,000,000 shares authorized, 5,762,495
shares issued as of September 30, 1996,
March 31, 1996 and September 30, 1995
Beginning and end of period $ 1,441 1,441
------------------
Common stock of $0.25 par value:
150,000,000 shares authorized, 34,237,505
shares issued as of September 30, 1996,
March 31, 1996 and September 30, 1995
Beginning and end of period 8,559 8,559
-------------------
Additional paid-in capital:
Beginning of period 165,756 165,675
Issuance of preferred stock 98,622 -
-------------------
End of period 264,378 165,675
-------------------
Foreign currency translation:
Beginning of period (11,877) (12,435)
Change during period (574) 1,826
-------------------
End of period (12,451) (10,609)
-------------------
Unrealized gain (loss) on investments:
Beginning of period 11,097 (6,483)
Change during period (10,782) 13,254
-------------------
End of period 315 6,771
-------------------
Retained earnings:
Beginning of period 609,019 561,589
Net earnings 77,742 50,509
Dividends paid to stockholders:
Preferred stock: ($1.06 per share
for 1996 and 1995, respectively) (6,482) (6,482)
-------------------
End of period 680,279 605,616
-------------------
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 8
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Six Months ended September 30,
(Unaudited)
1996 1995
-------------------
(in thousands)
Less Treasury stock:
Beginning of period 111,118 10,461
Net increase (8,390,532 shares in 1996
and 45,000 shares in 1995) 155,197 996
-----------------
End of period 266,315 11,457
-----------------
Less Unearned employee stock ownership
plan shares:
Beginning of period 23,329 14,953
Increase in loan - 3,168
Proceeds from loan (153) (137)
-----------------
End of period 23,176 24,132
-----------------
Total stockholders' equity $ 653,030 741,864
=================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended September 30,
(Unaudited)
1996 1995
-----------------------
(in thousands except
per share data)
Revenues
Rental and other revenue $ 295,483 269,118
Net sales 51,213 49,559
Premiums 41,594 40,683
Net investment income 12,138 11,907
-----------------------
Total revenues 400,428 371,267
Costs and expenses
Operating expense 215,351 178,939
Advertising expense (see note 9) 7,868 7,192
Cost of sales 31,058 29,042
Benefits and losses 43,458 40,858
Amortization of deferred acquisition
costs 4,035 4,871
Depreciation 19,940 38,582
Interest expense 16,426 16,722
-----------------------
Total costs and expenses 338,136 316,206
Pretax earnings from operations 62,292 55,061
Income tax expense (22,551) (19,729)
-----------------------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 39,741 35,332
Extraordinary loss on early
extinguishment of debt, net (2,004) -
-----------------------
Net earnings $ 37,737 35,332
=======================
Earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 1.32 .85
Extraordinary loss on early
extinguishment of debt, net (.07) -
-----------------------
Net earnings $ 1.22 .85
=======================
Weighted average common shares outstanding 27,675,192 37,905,225
=======================
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months ended September 30,
(Unaudited)
1996 1995
--------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 77,742 50,509
Depreciation and amortization 48,582 84,339
Provision for losses on accounts
receivable 1,841 2,819
Net (gain) loss on sale of real and
personal property (6,980) 581
Gain (loss) on sale of investments 50 (2,970)
Changes in policy liabilities and
accruals 6,887 1,146
Additions to deferred policy
acquisition costs (10,469) (11,954)
Net change in other operating assets
and liabilities (16,337) 27,389
--------------------
Net cash provided by operating activities 101,316 151,859
--------------------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (134,247) (143,082)
Fixed maturities (90,891) (162,081)
Real estate (767) (5,629)
Mortgage loans (8,944) (7,384)
Proceeds from sale of investments:
Property, plant and equipment 200,785 97,030
Fixed maturities 68,895 89,348
Real estate 389 570
Mortgage loans 12,943 17,573
Changes in other investments (40,510) 1,186
--------------------
Net cash provided (used) by investing
activities 7,653 (112,469)
--------------------
Cash flows from financing activities:
Net change in short-term borrowings (177,500) (163,500)
Proceeds from notes 337,500 140,184
Debt issuance costs (4,125) (636)
Loan to leveraged Employee Stock
Ownership Plan - (3,168)
Proceeds from leveraged Employee Stock
Ownership Plan 153 137
Principal payments on notes (217,938) (61,168)
Issuance of preferred stock 98,622 -
Net change in cash overdraft (9,419) (7,913)
Dividends paid (6,482) (6,482)
Treasury stock acquisitions (155,197) (996)
Investment contract deposits 54,554 101,667
Investment contract withdrawals (27,925) (39,518)
--------------------
Net cash used by
financing activities (107,757) (41,393)
--------------------
Increase (decrease)in cash and
cash equivalents 1,212 (2,003)
Cash and cash equivalents at
beginning of period 31,168 35,286
--------------------
Cash and cash equivalents at
end of period $ 32,380 33,283
--------------------
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996, March 31, 1996 and September 30, 1995
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION
AMERCO, a Nevada corporation (the Company), is the holding
company for U-Haul International, Inc. (U-Haul), Ponderosa
Holdings, Inc. (Ponderosa), and Amerco Real Estate Company (AREC).
The consolidated financial statements include the accounts of
the parent corporation, AMERCO, and its subsidiaries, all of which
are wholly-owned. All material intercompany accounts and
transactions of AMERCO and its subsidiaries have been eliminated.
The consolidated balance sheets as of September 30, 1996 and
1995, and the related consolidated statements of earnings, changes
in stockholders' equity and cash flows for the six months ended
September 30, 1996 and 1995 are unaudited; in the opinion of
management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments
consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The operating results and financial position of AMERCO's
consolidated insurance operations are determined on a one quarter
lag. There were no effects related to intervening events which
would significantly affect consolidated financial position or
results of operations for the financial statements presented
herein.
Based on an in-depth market analysis, the Company increased
the estimated salvage value of certain rental trucks during the
third and fourth quarters of fiscal year ended March 31, 1996.
The financial statements and notes are presented as permitted
by Form 10-Q and do not contain certain information included in the
Company's annual financial statements and notes.
Earnings per share are computed based on the weighted average
number of shares outstanding, excluding shares of the employee
stock ownership plan that have not been committed to be released.
Net income is reduced for preferred dividends for purposes of the
calculation.
Certain reclassifications have been made to the financial
statements for the six months ended September 30, 1995 to conform with
the current year's presentation.
<PAGE> 12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities
is as follows (in thousands, except for par value):
June 30, 1996 Par Value Gross Gross Estimated
- -----------------
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
U.S. treasury
securities
and government
obligations $ 17,805 $ 17,713 1,163 - 18,876
U.S. government
agency mortgage
backed securities $ 57,843 57,434 520 (2,497) 55,457
Obligations of
states and
political
subdivisions $ 33,100 32,838 1,110 (227) 33,721
Corporate
securities $ 186,971 191,427 2,422 (3,614) 190,235
Mortgage-backed
securities $ 98,349 96,577 1,215 (2,912) 94,880
Redeemable preferred
stocks 221 6,471 251 (184) 6,538
----------------------------------------
402,460 6,681 (9,434) 399,707
----------------------------------------
June 30, 1996 Par Value Gross Gross Estimated
- ---------------
Consolidated or number Amortized unrealized unrealized market
Available-for-Sale of shares cost gains losses value
-----------------------------------------------------
U.S. treasury
securities and
government
obligations $ 11,685 11,780 905 - 12,685
U.S. government
agency mortgage
backed securities $ 26,252 25,736 143 (389) 25,490
States,
municipalities
and political
subdivisions $ 7,100 7,023 485 (34) 7,474
Corporate
securities $ 340,024 345,964 5,163 (6,798) 344,329
Mortgage-backed
securities $ 85,947 85,338 912 (1,595) 84,655
Redeemable preferred
stocks 106 2,596 22 (12) 2,606
----------------------------------------
478,437 7,630 (8,828) 477,239
----------------------------------------
Total $ 880,897 14,311 (18,262) 876,946
========================================
<PAGE> 13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA
HOLDINGS, INC. AND ITS SUBSIDIARIES
A summary consolidated balance sheet (unaudited) for Ponderosa
Holdings, Inc. and its subsidiaries is presented below:
September 30,
1996 1995
----------------------
(in thousands)
Investments - fixed maturities $ 879,699 800,481
Other investments 98,910 117,972
Receivables 150,100 151,546
Deferred policy acquisition costs 56,171 51,304
Due from affiliate 36,947 22,603
Deferred federal income taxes 7,865 4,671
Other assets 14,977 8,067
----------------------
Total assets $ 1,244,669 1,156,644
======================
Policy liabilities and accruals $ 411,865 409,521
Unearned premiums 74,266 65,699
Premium deposits 435,789 374,407
Other policyholders' funds and
liabilities 32,706 28,263
----------------------
Total liabilities 954,626 877,890
Stockholder's equity 290,043 278,754
----------------------
Total liabilities and
stockholder's equity $ 1,244,669 1,156,644
======================
A summarized consolidated income statement (unaudited) for
Ponderosa Holdings, Inc. and its subsidiaries is presented below:
Six months ended September 30,
1996 1995
----------------------
(in thousands)
Premiums $ 79,056 76,442
Net investment income 24,542 23,395
Other income 1,178 4,592
---------------------
Total revenue 104,776 104,429
Benefits and losses 66,716 68,099
Amortization of deferred policy
acquisition costs 8,057 7,799
Other expenses 14,712 12,121
---------------------
Income from operations 15,291 16,410
Federal income tax expense (4,934) (4,617)
---------------------
Net income $ 10,357 11,793
=====================
The Company has engaged an investment banking firm to explore
various alternatives with regard to Oxford, its life insurance
subsidiary. Such alternatives may include strategic alliances with
other insurance companies or Oxford's possible sale.
<PAGE> 14
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
4. NOTES AND LOANS
On July 18, 1996, the Company extinguished debt of
approximately $76,250,000 by irrevocably placing cash into a trust
of U.S. Treasury securities to be used to satisfy scheduled
payments of principal and interest.
In August 1996, the Company extinguished $86,400,000 of its
long-term notes originally due in fiscal 1997 through fiscal 1999.
The above transactions resulted in an extraordinary loss of
$2,004,000 net of tax of $1,233,000 ($0.07 per share).
5. STOCKHOLDERS' EQUITY
On July 19, 1996, pursuant to the judgment in the Shoen
Litigation, the Company paid CEMAR, Inc. (Cemar) approximately
$15,857,000 to repurchase 2,331,984 shares of Common Stock held by
Cemar. On the same date the Company paid damages to Cecilia M.
Hanlon of approximately $43,139,000 and statutory post-judgment pre-
petition interest on the above amounts of approximately $129,000.
On August 6, 1996, the Company funded approximately $8,283,000 of
post-petition date interest by depositing the same into an escrow
account pending the outcome of a dispute involving the entitlement
of the plaintiffs in the Shoen Litigation to post-petition date
interest. The Common Stock held by Cemar was transferred into the
Company treasury. Cecilia M. Hanlon, the sole voting stockholder
of Cemar, is the sister of Edward J., Mark V., and James P. Shoen,
who are major stockholders and directors of the Company.
On August 30, 1996, the Company issued 100,000 shares of its
Series B Preferred Stock with no par value for $100,000,000.
Dividends are cumulative with the rate being reset quarterly and
have priority as to dividends over the Company's common stock. The
Series B Preferred will be convertible, in certain events, at the
holder's option, into either shares of the Company's Series B
Common Stock, $0.25 par value or all of the outstanding shares
of Picacho Peak Investment Co., a subsidiary of AMERCO.
On September 6, 1996, pursuant to the judgment in the Shoen
Litigation, the Company paid Katabasis International, Inc.
(Katabasis) approximately $27,485,000 to repurchase 4,041,924
shares of Common Stock held by Katabasis. The Company also paid
damages to Samuel W. Shoen of approximately $74,771,000 and
statutory post-judgment pre-petition interest on the above amounts
of approximately $224,000. The Company also funded approximately
$15,726,000 of post-petition date interest by depositing the same
into an escrow account pending the outcome of a dispute involving
the entitlement of the plaintiffs in the Shoen Litigation to post-
petition date interest. The Common Stock held by Katabasis was
transferred into the Company treasury. Samuel W. Shoen, the sole
voting stockholder of Katabasis, is the brother of Edward J., Mark
V., and James P. Shoen, who are major stockholders and directors of
the Company.
<PAGE> 15
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
5. STOCKHOLDERS' EQUITY, continued
On September 20, 1996, pursuant to the judgment in the Shoen
Litigation, the Company paid Kattydid, Inc. (Kattydid)
approximately $8,719,000 to repurchase 1,282,248 shares of Common
Stock held by Kattydid. The Company paid damages to Katrina (Shoen)
Carlson of approximately $37,305,000 and statutory post-judgment
pre-petition interest on the above amounts of approximately
$112,000. The Company also paid Katrina (Shoen) Carlson
approximately $4,994,000 to repurchase 734,376 shares of Common
Stock held by her and funded approximately $8,041,000 of post-
petition date interest by depositing the same into an escrow
account pending the outcome of a dispute involving the entitlement
of the plaintiffs in the Shoen Litigation to post-petition date
interest. The Common Stock held by Kattydid and Katrina (Shoen)
Carlson was transferred into the Company treasury. Katrina (Shoen)
Carlson, the sole voting stockholder of Kattydid, is the sister of
Edward J., Mark V., and James P. Shoen, who are major stockholders
and directors of the Company.
On October 1, 1996, pursuant to the judgment in the Shoen
Litigation, the Company paid Mickl, Inc. (Mickl) approximately
$27,444,000 to repurchase 4,035,924 shares of Common Stock held by
Mickl. On the same date the Company paid net damages to Michael L.
Shoen of approximately $73,158,000 and statutory post-judgment pre-
petition interest on the above amounts of approximately $224,000.
On the same date, the Company paid Michael L. Shoen approximately
$3,000 to repurchase 380 shares of Common Stock held by him and
funded approximately $16,184,000 of post-petition date interest by
depositing the same into an escrow account pending the outcome of a
dispute involving the entitlement of the plaintiffs in the Shoen
Litigation to post-petition date interest. The Common Stock held by
Mickl and Michael L. Shoen was transferred into the Company
treasury. Michael L. Shoen, the sole voting stockholder of Mickl,
is the brother of Edward J., Mark V., and James P. Shoen, who are
major stockholders and directors of the Company. See Part II. Item 1.
Legal Proceedings for more information on the Shoen Litigation.
On October 14, 1996, the Company paid an additional $15,000,000
to L.S. Shoen in settlement of all outstanding disputes.
6. CONTINGENT LIABILITIES AND COMMITMENTS
During the six months ended September 30, 1996, U-Haul Leasing
& Sales Co., a wholly-owned subsidiary of U-Haul International,
Inc., entered into ten transactions, whereby the Company sold
rental trucks or trailers and subsequently leased them back.
AMERCO has guaranteed $13,512,000 of residual values at September
30, 1996 on the rental trucks and trailers at the end of the lease
term. U-Haul entered into one transaction, whereby the Company
sold rental trailers and subsequently leased them back. Also, U-
Haul entered into three transactions, whereby the Company sold and
subsequently leased back computer equipment. Following are the
lease commitments for the leases executed during the six months
ended September 30, 1996, which have a term of more than one year
(in thousands):
Year ended Lease
March 31, Commitments
------------------------
1997 $ 17,331
1998 24,135
1999 24,135
2000 24,135
2001 23,153
Thereafter 112,690
-------
$ 225,579
=======
<PAGE> 16
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
6. CONTINGENT LIABILITIES AND COMMITMENTS, continued
In the normal course of business, the Company is a defendant
in a number of suits and claims. The Company is also a party to
several administrative proceedings arising from state and local
provisions that regulate the removal and/or clean-up of underground
fuel storage tanks. It is the opinion of management that none of
such suits, claims, or proceedings involving the Company,
individually or in the aggregate are expected to result in a
material loss.
7. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories and
accounts payable and accrued liabilities net of other operating and
investing activities follows:
Six months ended September 30,
1996 1995
--------------------
(in thousands)
Receivables $ 22,396 (35,299)
=====================
Inventories $ (8,827) (1,065)
=====================
Accounts payable and
accrued liabilities $ 1,779 22,585
=====================
Income taxes paid in cash amounted to $1,694,000 and $143,000
for the quarters ended September 30, 1996 and 1995, respectively.
Interest paid in cash amounted to $36,173,000 and $36,755,000
for the quarters ended September 30, 1996 and 1995, respectively.
8. RELATED PARTIES
During the six months ended September 30, 1996, a subsidiary
of the Company received principal payments of $84,001,000, interest
payments of $3,839,000 and management fees of $745,000 from Three
SAC Self-Storage Corporation (Three SAC). Three SAC's voting common
stock is owned by SAC Holding Corporation (SAC Holding) and the non-
voting preferred stock is owned by SAC Non-Business Trust. The
voting common stock of SAC Holding is held by Mark V. Shoen, a
major stockholder, director and officer of the Company. Three SAC
properties are currently managed by the Company pursuant to a
management agreement, under which the Company receives a management
fee equal to 6% of the gross receipts from the properties. The
management fee percentage is consistent with the fee received by
the Company for other properties managed by the Company.
On June 27, 1996, a subsidiary of the Company sold Three SAC
notes of $86,000,000 to an outside party.
As of September 30, 1996, a subsidiary of the Company funded
the purchase of seventeen properties, with one additional property
funded subsequent to the quarter end, by Four SAC Self-Storage
Corporation (Four SAC) for an amount of approximately $15,487,000.
Four SAC is owned by SAC Holding. The voting common stock of SAC
Holding is held by Mark V. Shoen, a major stockholder, director,
and officer of the Company. Four SAC acquired three of the
properties from a subsidiary of the Company at a purchase price
equal to the Company's acquisition cost plus capitalized costs.
Such properties are currently managed by the Company for which the
Company will receive a management fee equal to 6% of the gross
receipts from the properties. The management fee percentage is
consistent with the fee received by the Company for other
properties managed by the Company.
<PAGE> 17
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
9. NEW ACCOUNTING STANDARDS
On April 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 - Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of.
Effective for fiscal years beginning after December 15, 1995 the
standard establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. The
adoption of this statement had no impact on the financial condition
or results of operations of the Company.
On April 1, 1995, the Company implemented Statement of
Position 93-7, "Reporting on Advertising Costs", issued by the
Accounting Standards Executive Committee in December 1993. This
statement of position provides guidance on financial reporting on
advertising costs in annual financial statements. Upon
implementation, the Company recognized additional advertising
expense of $8,647,000 for advertising costs not qualifying as
direct-response. The adoption had the effect of reducing net
income by $5,474,000 ($0.15 per share) for the six months ended
September 30, 1995.
Other pronouncements issued by the Financial Standards Board
with future effective dates are either not applicable or not
material to the consolidated financial statements of the Company.
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table shows industry segment data from the Company's
three industry segments: rental operations, life insurance and
property and casualty insurance, for the six months ended September 30,
1996 and 1995. Rental operations is composed of the operations of
U-Haul and Amerco Real Estate Company. Life insurance is composed of
the operations of Oxford Life Insurance Company (Oxford). Property and
casualty insurance is composed of the operations of Republic Western
Insurance Company (RWIC). The Company's results of operations have
historically fluctuated from quarter to quarter. In particular, the
Company's U-Haul rental operations are seasonal and proportionately
more of the Company's revenues and net earnings are generated in the
first and second quarters each fiscal year (April through September).
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------
(in thousands)
Six months ended
September 30, 1996
Revenues:
Outside $ 661,958 23,740 74,438 - 760,136
Intersegment - 782 5,843 (6,625) -
-------------------------------------------------------
Total revenues 661,958 24,522 80,281 (6,625) 760,136
=======================================================
Operating profit $ 146,570 5,590 9,701 - 161,861
===========================================
Interest expense 35,282
--------
Pretax earnings
from operations $ 126,579
========
Identifiable assets $1,908,032 621,686 622,983 (334,855) 2,817,846
=======================================================
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------
(in thousands)
Six months ended
September 30, 1995
Revenues:
Outside $ 602,687 24,265 74,824 - 701,776
Intersegment (270) 708 4,662 (5,100) -
-------------------------------------------------------
Total revenues 602,417 24,973 79,486 (5,100) 701 776
=======================================================
Operating profit $ 97,676 6,838 9,572 270 114,356
==========================================
Interest expense 35,554
--------
Pretax earnings
from operations $ 78,802
========
Identifiable assets $1,845,370 563,138 593,506 (312,753) 2,689,261
=======================================================
<PAGE> 19
SIX MONTHS ENDED SEPTEMBER 30, 1996 VERSUS SIX MONTHS ENDED
SEPTEMBER 30, 1995
U-Haul
U-Haul revenues consist of (i) total rental and other revenue
and (ii) net sales. Total rental and other revenue increased by
$54.0 million, approximately 10.8%, to $554.2 million in the first
six months of fiscal 1997. The increase reflects higher net
revenues from the rental of moving related equipment and
self-storage facilities which increased $27.3 million due to growth
(volume) in truck rental transactions, additional rentable square
footage, and an increase in management fees from storage facilities
managed for others. Other revenue increased $26.7 million.
Contributing to the increase is the recognition of increased net
gains on the sale of real and personal property of $7.6 million
over the comparable period for fiscal 1996.
Net sales revenues were $107.2 million in the first six months
of fiscal 1997, which represents an increase of approximately 4.4%
from the first six months of fiscal 1996 net sales of $102.7
million. Revenue growth from the sale of moving support items,
hitches, and propane resulted in a $5.0 million increase during the
six months, which was partially offset by a decrease in gasoline
sales consistent with the Company's ongoing efforts to remove
underground storage tanks and gradually discontinue gasoline sales.
Cost of sales was $62.6 million in the first six months of
fiscal 1997, which represents an increase of approximately 8.0%
from $58.0 million for the same period in fiscal 1996. This
increase in cost of sales reflects higher material costs from the
sale of moving support items, hitches and propane which can be
primarily attributed to higher sales levels and increased allowance
for inventory shrinkage.
Operating expenses increased to $398.0 million in the first
six months of fiscal 1997 from $346.460.7 million in the first six
months of fiscal 1996, an increase of15.6 approximately 14.97%.
Rental equipment maintenance costs increased $20.7 million due to
an increase in fleet size and transaction levels. Personnel expense
increased $13.7 million due to higher levels of business
activity. All other operating expense categories increased in the
aggregate by $17.2 million compared to the prior year.
Advertising expense decreased to $16.0 million in the first
six months of fiscal 1997 from $24.1 million in the first six
months of fiscal 1996. The decrease primarily reflects a one-time
expense of $8.7 million recognized during the first six months 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 six months of fiscal 1997
was $38.7 million, as compared to $76.3 million during the same
period of the prior year. During the third and fourth quarters of
fiscal 1996, based on the Company's in-depth market analysis, the
Company increased the estimated salvage value of certain rental
trucks.
Oxford - Life Insurance
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $10.6 million for the six months ended June 30,
1996, or 74.1% of total premiums for that period. This represents
an increase of $1.7 million over the same period in 1995 or an
increase of 19.1%. Reinsurance premiums are primarily from term
life insurance, deferred annuity contracts that have matured, and
credit insurance business. Increases in premiums are primarily from
the anticipated increase in annuitizations as a result of the
maturing of deferred annuities and from additional production in
the credit life and credit accident and health business.
Premiums from Oxford's direct lines before intercompany
eliminations were $3.7 million for the six months ended June 30,
1996, a decrease of $0.3 million. This decrease 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 six months
ended June 30, 1996 accounted for approximately 7.5% of premiums.
Other direct lines, including the credit insurance business,
accounted for approximately 18.4% of Oxford's premiums for the six
months ended June 30, 1996.
<PAGE> 20
Net investment income before intercompany eliminations was
$9.4 million and $8.0 million for the six month periods ended June
30, 1996 and 1995, respectively. This increase is primarily due to
increases in deposit funds from additional production and
increasing margins on the interest sensitive business.
Other income is comprised of gains(losses) on the disposition
of investments and income on the surrender of deferred annuity
products. Gains(losses) on the disposition of investments were
($0.4) million and $2.9 million for the six months ended June 30,
1996 and 1995, respectively. Oxford had $1.2 million and $1.0
million of surrender charge income, for the six month period ended
June 30, 1996 and 1995, respectively.
Benefits and expenses incurred were $18.9 million for the six
months ended June 30, 1996, an increase of 4.4% from 1995.
Comparable benefits and expenses incurred for 1995 were $18.1
million. This increase is primarily due to the increase in
annuitizations discussed above.
Operating profit before intercompany eliminations decreased by
$1.2 million, or approximately 17.6%, in 1996 to $5.6 million,
primarily due to a decrease in gains on the disposition of fixed
maturity investments.
RWIC - Property and Casualty
RWIC gross premium writings for the six months ended June 30,
1996 were $89.4 million as compared to $81.4 million in the first
six months of 1995. This represents an increase of $8.0 million,
or 9.8%. As in prior years, the rental industry market accounts
for a significant share of total premiums, approximately 46.0% and
41.5% in the first six months of 1996 and 1995, 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 increased
during the first six months of 1996 to $28.8 million, or 32.2% of
total gross premiums, from comparable 1995 figures of $27.9
million, or 34.3% of total premiums. Premium writings in selected
general agency lines are expected to remain consistent with prior
years. Premiums from selected general agency lines accounted for
13.5% of written premiums in the first six months of 1996 as
compared to 16.9% in the first six months of 1995. RWIC continued
its direct multiple peril coverage of various commercial properties
and businesses in 1996. These premiums accounted for 8.2% of the
total gross written premium during first six months of 1996, as
compared to 6.3% for the first six months of 1995.
Net earned premiums increased $1.3 million, or 2.1%, to $64.8
million for the six months ended June 30, 1996, compared with
premiums of $63.5 million for the six months ended June 30, 1995.
The premium increase was primarily due to improved processing.
Underwriting expenses incurred were $70.6 million for the six
months ended June 30, 1996, an increase of $0.7 million, or 1.0%
over 1995. Comparable underwriting expenses incurred for the first
six months of 1995 were $69.9 million. The increase is attributed
to increased commission expense offset by decreased loss and loss
adjusting expenses. The increased commission expense resulted from
a smaller adjustment to realize a margin on a canceled general
agency program, combined with increased acquisition expense on
assumed treaty reinsurance business. The reduction in loss and
loss adjusting expenses occurred in the rental industry liability
and assumed treaty reinsurance lines.
Net investment income was $15.2 million for the six months
ended June 30, 1996, a decrease of 0.7% from the six months ended
June 30, 1995 net investment income of $15.3 million.
RWIC completed the first six months of 1996 with income before
tax expense of $9.7 million as compared to $9.6 million for the
comparable period ended June 30, 1995. This represents an increase
of $0.1 million, or 1.0% over 1995. Increased premium earnings
were offset by increased underwriting expenses to produce this
minimal change.
Interest Expense
Interest expense decreased to $35.3 million for the six months
ended September 30, 1996, as compared to $35.6 million for the six
months ended September 30, 1995.
<PAGE> 21
Extraordinary Loss on Extinguishment of Debt
During the second quarter of fiscal 1997, the Company
extinguished debt of approximately $76.3 million by irrevocably
placing cash into a trust of U.S. Treasury securities to be used to
satisfy scheduled payments of principal and interest. The Company
also extinguished $86.4 million of its long-term notes originally
due in fiscal 1997 through fiscal 1999. These transactions resulted
in an extraordinary loss of $2.0 million net of tax of $1.2 million
($0.07 per share).
Consolidated Group
As a result of the foregoing, pretax earnings of $126.6
million were realized during the six months ended September 30,
1996, as compared to $78.8 million for the same period in 1995.
After providing for income taxes and extraordinary loss on the
extinguishment of debt, net earnings for the six months ended
September 30, 1996 were $77.7 million, as compared to $50.5
million for the same period of the prior year.
<PAGE> 22
QUARTERLY RESULTS
The following table presents unaudited quarterly results for
the ten quarters in the period beginning April 1, 1994 and ending
September 30, 1996. 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
incorporated herein by reference. 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 (in thousands except for per share data).
Quarter Ended
--------------------------
Jun 30, Sep 30,
1996 1996
--------------------------
Total revenues $ 359,708 400,428
Net earnings (loss) 40,005 37,737
Weighted average common
shares outstanding (4) 32,015,301 27,675,192
Net earnings (loss)
per common share (1) (5) 1.15 1.22
Quarter Ended
------------------------------------------------
Jun 30, Sep 30, Dec 31, Mar 31,
1995 1995 1995 1996
------------------------------------------------
Total revenues $ 330,509 371,267 307,452 285,195
Net earnings (loss) (2) (3) 15,177 35,332 7,701 2,184
Weighted average common
shares outstanding (4) 37,958,426 37,905,225 36,796,961 32,554,458
Net earnings (loss)
per common share (1) 0.31 0.85 0.13 (0.04)
Quarter Ended
------------------------------------------------
Jun 30, Sep 30, Dec 31, Mar 31,
1994 1994 1994 1995
------------------------------------------------
Total revenues $ 322,333 359,520 294,858 259,521
Net earnings (loss) 29,413 40,071 1,907 (11,359)
Weighted average common
shares outstanding 37,107,536 37,053,707 37,025,575 38,072,543
Net earnings (loss)
per common share (1) 0.71 1.00 (0.04) (0.44)
________________
(1)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 93-7, "Reporting
on Advertising Costs."
(3)Reflects the change in estimated salvage value during the third
and fourth quarters of fiscal 1996.
(4)Reflects the acquisition of treasury shares acquired pursuant
to the Shoen Litigation as discussed in Part II. - Item 1.
Legal Proceedings.
(5)During second quarter fiscal 1997, the Company extinguished $76.3
million of debt and $86.4 million of its long-term notes originally
due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary
charge of $2.0 million, net of a $1.2 million tax benefit.
<PAGE> 23
QUARTER ENDED SEPTEMBER 30, 1996 VERSUS QUARTER ENDED SEPTEMBER 30,
1995
U-Haul
U-Haul revenues consist of (i) total rental and other revenue
and (ii) net sales. Total rental and other revenue increased by
$28.2 million, approximately 10.6%, to $294.5 million in the second
quarter of fiscal 1997. The increase reflects higher net revenues
from the rental of moving related equipment and self-storage
facilities which increased by $12.2 million due to growth (volume)
in truck rental transactions, additional rentable square footage,
and an increase in management fees from storage facilities managed
for others. Other revenue accounted for the remaining increase,
including increased net gains on the sale of real and personal
property.
Net sales revenues were $51.2 million in the second quarter of
fiscal 1997, which represents an increase of approximately 3.3%
from the second quarter of fiscal 1996 net sales of $49.6 million.
Increased sales of moving support items, hitches, and propane
resulted in revenue growth of $2.1 million during the quarter.
Cost of sales was $31.1 million in the second quarter of
fiscal 1997, which represents an increase of approximately 6.9%
from $29.0 million for the same period in fiscal 1996. This
increase in cost of sales reflects higher allowances for inventory
shrinkage and higher material costs from the sale of hitches and
propane which can be primarily attributed to higher sales levels.
Operating expenses increased to $214.7 million in the second
quarter of fiscal 1997 from $177.960.7 million in the second
quarter of fiscal 1996, an increase of15.6 approximately 20.77%.
Rental equipment maintenance costs increased $7.0 million due to an
increase in fleet size and transaction levels. New leasing
activities increased lease expense by $5.5 million. Higher levels
of business activity increased personnel expense by approximately
$9.3 million. All other operating expense categories increased in
the aggregate by $15.0 million compared to the prior year.
Advertising expense increased to $7.9 million in the second
quarter of fiscal 1997 from $7.2 million in the second quarter of
fiscal 1996.
Depreciation expense for the quarter was $19.9 million, as
compared to $38.6 million during the same period of the prior year.
During the third and fourth quarters of fiscal 1996, based on the
Company's in-depth market analysis, the Company increased the
estimated salvage value of certain rental trucks.
Oxford - Life Insurance
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $5.4 million for the quarter ended June 30, 1996,
or 75.0% of total premiums for that period. This represents an
increase of $0.5 million over the same period in 1995 or an
increase of 10.2%. Reinsurance premiums are primarily from term
life insurance, deferred annuity contracts that have matured, and
credit insurance business. Increases in premiums are primarily from
the anticipated increase in annuitizations as a result of the
maturing of deferred annuities and from additional production in
the credit life and credit accident and health business.
Premiums from Oxford's direct lines before intercompany
eliminations were $1.8 million for the quarter ended June 30, 1996,
a decrease of $0.2 million. This decrease in direct premium is
primarily attributable to the credit insurance business. Oxford's
direct business related to group life and disability coverage
issued to employees of the Company for the quarter ended June 30,
1996 accounted for approximately 7.2% of premiums. Other direct
lines, including the credit insurance business, accounted for
approximately 17.8% of Oxford's premiums for the quarter ended June
30, 1996.
<PAGE> 24
Net investment income before intercompany eliminations was
$4.5 million and $4.2 million for the quarters ended June 30, 1996
and 1995, respectively. This increase is primarily due to
increases in deposit funds from additional production and
increasing margins on the interest sensitive business.
Other income is comprised of gains on the disposition of
investments and income on the surrender of deferred annuity
products. Gains on the disposition of investments were $0.2
million and $2.8 million for the quarters ended June 31, 1996 and
1995, respectively. Oxford had $0.6 million and $0.5 million of
surrender charge income for the quarters ended June 30, 1996 and
1995, respectively.
Benefits and expenses incurred were $9.9 million for the
quarter ended June 30, 1996, a decrease of 2.0% from 1995.
Comparable benefits and expenses incurred for 1995 were $10.1
million. This decrease is primarily due to a decrease in the
amortization of deferred acquisition costs primarily as a result of
the decrease in realized capital gains on the disposition of fixed
maturities partially offset by the increase in annuitizations
discussed above.
Operating profit before intercompany eliminations decreased by
$1.6 million, or approximately 38.1%, in 1996 to $2.6 million,
primarily due to the decrease in gains on the disposition of fixed
maturity investments.
RWIC - Property and Casualty
RWIC gross premium writings for the quarter ended June 30,
1996 were $41.4 million as compared to $45.2 million in the second
quarter of 1995. The rental industry market accounts for a
significant share of total premiums, approximately 66.9% and 60.1%
in the second quarters of 1996 and 1995, respectively. These
writings include U-Haul customers, fleetowners and U-Haul as well
as other rental industry insureds with similar characteristics.
RWIC continues underwriting professional reinsurance via broker
markets. Premiums in this area decreased during the second quarter
of 1996 to $4.7 million, or 11.4% of total gross premiums, from
comparable 1995 figures of $7.7 million, or 17.1% of total
premiums. Premium writings in selected general agency lines are
expected to remain consistent with prior years. Premiums from
selected general agency lines accounted for 12.1% share of written
premiums in 1996 as compared to 16.5% share in 1995. RWIC
continued its direct multiple peril coverage of various commercial
properties and businesses in 1996. These premiums accounted for
9.5% of total gross written premium during second quarter 1996, as
compared to 6.3% in 1995. This increase is the result of improved
policy processing.
Net earned premiums remained at $39.5 million for the quarter
ended June 30, 1996, consistent with the same amount of premium for
the quarter ended June 30, 1995.
Underwriting expenses incurred were $43.6 million for the
quarter ended June 30, 1996, an increase of $1.2 million, or 2.8%
over 1995. Comparable underwriting expenses incurred for the
second quarter of 1995 were $42.4 million. The increase resulted
from a smaller adjustment to realize a margin on a canceled general
agency program and an increase in acquisition expense on assumed
treaty reinsurance business.
Net investment income was $7.4 million for the quarter ended
June 30, 1996, a decrease of 3.9% over 1995 net investment income
of $7.7 million. The decrease is due to lower cash flow from
operations and a 1995 timing adjustment in mortgage interest
earned.
RWIC completed the second quarter of 1996 with income before
tax expense of $3.7 million as compared to $4.5 million for the
comparable period ended June 30, 1995. This represents a decrease
of $0.8 million, or 17.8% under 1995. The decrease resulted from
the combination of increased underwriting expenses and decreased
investment income, offset by realized gains and other income.
Interest Expense
Interest expense decreased to $16.4 million for the quarter
ended September 30, 1996, as compared to $16.7 million for the
quarter ended September 30, 1995.
Extraordinary Loss on Extinguishment of Debt
During the second quarter of fiscal year 1997, the Company
extinguished debt of approximately $76.3 million by irrevocably
placing cash into a trust of U.S. Treasury securities to be used to
satisfy scheduled payments of principal and interest. The Company
also extinguished $86.4 million of its long-term notes originally
due in fiscal 1997 through fiscal 1999. These transactions resulted
in an extraordinary loss of $2.0 million net of tax of $1.2 million
($0.07 per share).
<PAGE> 25
Consolidated Group
As a result of the foregoing, pretax earnings of $62.3 million
were realized during the quarter ended September 30, 1996, as
compared to $55.1 million for the same period in 1995. After
providing for income taxes and extraordinary loss on the
extinguishment of debt, net earnings for quarter ended September
30, 1996 were $37.7 million, as compared to $35.3 million for the
same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
U-Haul
To meet the needs of its customers, U-Haul must maintain a
large inventory of fixed asset rental items. At September 30,
1996, net property, plant and equipment represented approximately
65.7% of total U-Haul assets and approximately 44.5% of
consolidated assets. During the first six months of fiscal 1997,
capital expenditures were $134.2 million, as compared to $143.1
million during the first six months of fiscal 1996, reflecting
expansion of the rental truck fleet, and real property
acquisitions. These acquisitions were funded with internally
generated funds from operations, operating leases, equity
placement, and debt financings.
Cash flows from operations were $104.5 million during the
first six months of fiscal 1997, as compared to $146.6 million
during the first six months of fiscal 1996. The decrease of $42.1
million is primarily due to an increase in other assets offset
by increased earnings and the sale of mortgage note receivables.
Cash flows from investing activities were affected by the sale and
subsequent leaseback of rental trailers for net proceeds of $97.4
million.
Oxford - Life Insurance
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary
uses of cash are operating costs and benefit payments to
policyholders. Matching the investment portfolio to the cash flow
demands of the types of insurance being written is an important
consideration. Benefit and claim statistics are continually
monitored to provide projections of future cash requirements.
Cash provided by operating activities were $9.3 million and
$5.1 million for the six months ended June 30, 1996 and 1995,
respectively. Cash flows from financing activities were $22.7
million and $62.1 million for the six months ended June 30, 1996
and 1995, respectively. Cash flows from deferred annuity sales
increase investment contract deposits which are a component of
financing activities, as well as the purchase of fixed maturities
which are a component of investing activities. In addition to cash
flows from operating and financing activities, a substantial amount
of liquid funds is available through Oxford's short-term portfolio.
At June 30, 1996 and 1995, short-term investments amounted to $9.5
million and $18.0 million, respectively. Management believes that
the overall sources of liquidity will continue to meet foreseeable
cash needs.
Stockholder's equity of Oxford decreased to $97.3 million in
1996 from $99.6 million in 1995. During the six months ended June
30, 1996, Oxford paid dividends to Ponderosa of $3.9 million.
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 $7,080,000. 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 decreased $12.5 million
during the six months ended June 30, 1996, as compared to an
increase of $0.1 million for the comparable period of 1995. The
change is due to temporary increases in accounts receivable and due
from affiliates.
RWIC's short-term investment portfolio was $4.5 million at
June 30, 1996. This level of liquid assets is adequate to meet
periodic needs as well as any near term shortfall. 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.
<PAGE> 26
RWIC maintains a diversified investment portfolio.
Approximately 96.6% 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 94.9% of total
liabilities.
Stockholder's equity increased 2.4% from $188.2 million at
December 31, 1995 to $192.7 million at June 30, 1996. RWIC
considers current stockholder's equity to be adequate to support
future growth and absorb unforeseen risk events. RWIC does not use
debt or equity issues to increase capital and therefore has no
exposure to capital market conditions. RWIC paid no stockholder's
dividends during the six months ended June 30, 1996, however it did
declare a $6.7 million dividend to Ponderosa.
Consolidated Group
At September 30, 1996, total notes and loans payable
outstanding was $940.3 million as compared to $998.2 million at
March 31, 1996, and $796.7 million at September 30, 1995.
During each of the fiscal years ending March 31, 1997, 1998,
and 1999, U-Haul estimates gross capital expenditures will average
approximately $290 million as a result of the expansion of the
rental truck 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 $390 million. Management estimates that U-Haul will
fund approximately 75% 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, lease fundings, and equity
offerings.
On August 30, 1996, the Company issued 100,000 shares of its
Series B Preferred Stock with no par value for $100 million.
Dividends are cumulative with the rate being reset quarterly and
have priority as to dividends over the Company's common stock. The
Series B Preferred will be convertible, in certain events, at the
holder's option, into either shares of the Company's Series B
Common Stock, $0.25 par value or all of the outstanding shares of
Picacho Peak Investment Co., a subsidiary of AMERCO.
On October 1, 1996, the Company paid the last portion of a
total of approximately $448.1 million to the plaintiffs (non-
management members of the Shoen family and their affiliates) in a
long-standing legal dispute involving the Shoen family and related
to control of the Company. As a result, the plaintiffs were
required to transfer all of their 18,254,976 shares of Common Stock
to the Company. The Company plans to deduct for income tax
purposes approximately $324.0 million of the payments made 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 such deductions
ultimately will be allowed in full.
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. Consistent with its
strategic plan, the Company has engaged an investment banking firm
to explore various alternatives with regard to Oxford, its life
insurance subsidiary. Such alternatives may include strategic
alliances with other insurance companies or Oxford's possible sale.
<PAGE> 27
Credit Agreements
The Company's operations are funded by various credit and
financing arrangements, including unsecured long-term borrowings,
unsecured medium-term notes, and revolving lines of credit with
domestic and foreign banks. Principally to finance its fleet of
trucks and trailers, the Company routinely enters into sale and
leaseback transactions. As of September 30, 1996, the Company had
$940.3 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $382.0
million.
In May 1996, the Company issued $175.0 million of 7.85% Senior
Notes Due May 15, 2003. The Company has applied and will continue
to apply the net proceeds from the sale of the notes to pay down,
at maturity, a portion of the Company's long-term debt.
Certain of the Company's credit agreements contain restrictive
financial and other covenants, including, among others, covenants
with respect to incurring additional indebtedness, maintaining
certain financial ratios, and placing certain additional liens on
its properties and assets. At September 30, 1996, the Company was
in compliance with these covenants.
The Company is restricted 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.
<PAGE> 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
As disclosed in the Company's Form 10-K for the year ended
March 31, 1996, 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 (the Director-Defendants), filed
for protection under Chapter 11 of the federal bankruptcy laws on
February 21, 1995, as a result of the judgment entered on that date
in the action entitled Samuel W. Shoen, M.D., et al. v. Edward J.
-------------------------------------------
Shoen, et al., No. CV88-20139 (the Shoen Litigation). The Director-
- -------------
Defendants, in cooperation with the Company, filed separate plans
of reorganization, all of which proposed the same funding and
treatment of the plaintiffs' claims resulting from the judgment in
the Shoen Litigation. The plans of reorganization are collectively
referred to as the "Plan." The Plan was confirmed by the
bankruptcy court on March 15, 1996.
Pursuant to the Plan, the Company, prior to July 1, 1996, paid
a total of approximately $133.2 million to six of the plaintiffs to
repurchase a total of 5,828,140 shares of Common Stock and satisfy
the damages judgment in the Shoen Litigation with respect to those
plaintiffs. In addition, on July 19, 1996, the Company paid Cemar,
Inc. (Cemar) approximately $15.9 million to repurchase 2,331,984
shares of Common Stock held by Cemar. On the same date, the
Company paid damages of approximately $43.1 million and statutory
post-judgment, pre-petition date interest of $129,000 to Cecilia M.
Hanlon. On August 6, 1996, the Company funded approximately $8.3
million of post-petition date interest by depositing such amount
into an escrow account (the Escrow Account) pending the outcome of
a dispute involving the entitlement of the plaintiffs in the Shoen
Litigation to post-petition date interest (discussed below). The
Common Stock held by Cemar was transferred into the Company
treasury. In addition, on September 6, 1996, the Company paid
Katabasis International, Inc. (Katabasis) approximately $27.5
million to repurchase 4,041,924 shares of Common Stock held by
Katabasis. On the same date, the Company paid damages of
approximately $74.8 million and statutory post-judgment, pre-
petition date interest of $224,000 to Samuel W. Shoen. The Company
also funded approximately $15.7 million of post-petition date
interest into the Escrow Account. On September 20, 1996, the
Company paid Kattydid, Inc. (Kattydid) approximately $8.7 million
to repurchase 1,282,248 shares of Common Stock held by Kattydid and
paid Katrina (Shoen) Carlson approximately $5.0 million to
repurchase 734,376 shares of Common Stock held by her. On the same
date, the Company paid damages of approximately $37.3 million and
statutory post-judgment, pre-petition date interest of $112,000 to
Katrina Shoen Carlson. The Company also funded approximately $8.0
million of post-petition date interest into the Escrow Account.
Finally, on October 1, 1996, the Company paid MICKL, Inc. (MICKL)
approximately $27.4 million to repurchase 4,035,924 shares of
Common Stock held by MICKL and paid Michael L. Shoen $3,000 to
repurchase 380 shares of Common Stock held by him. On the same
date, the Company paid damages of approximately $73.2 million and
statutory post-judgment, pre-petition date interest of $224,000 to
Michael L. Shoen. The Company also funded approximately $16.2
million of post-petition date interest into the Escrow Account. As
a result of the foregoing transactions, the balance of the judgment
in the Shoen Litigation has been satisfied in full. On October 1,
1996, the Director-Defendants emerged from bankruptcy upon the
filing of a Notice with the bankruptcy court that the effective
date of the reorganized debtors' confirmed Plans has occurred and
that the confirmed Plans have been performed and are substantially
consummated.
As of the date hereof, an issue remains regarding whether or
not the plaintiffs are entitled to statutory post-judgment interest
at the rate of ten percent (10%) per year from February 21, 1995
(the date the Director-Defendants filed for protection under
Chapter 11) until the judgment was satisfied. On July 19, 1996,
the bankruptcy court ruled that the plaintiffs are entitled to such
interest. The Director-Defendants and the Company have appealed
the court's decision. As discussed above, the Company has
deposited approximately $48.2 million into the Escrow Account to
secure payment of the disputed interest, pending the final
resolution of this issue (including all appeals by either side).
If the interest issue is decided adversely to the Company and the
Director-Defendants, the amount deposited into escrow will be
transferred to the plaintiffs. The ultimate outcome of this issue
will not have the effect of increasing or decreasing the Company's
net income, but could reduce shareholders' equity.
In addition, L.S. Shoen, one of the plaintiffs in the Shoen
Litigation, entered into a Settlement, Mutual Release of All Claims
and Confidentiality Agreement, dated as of October 15, 1996 (the
Settlement Agreement) with the Company resolving the lawsuit in the
District Court of Clark County, Nevada entitled L.S. Shoen v. AMERCO,
Case No. A277938, instituted June 7, 1989. A Notice of Dismissal has
been filed with the court by the parties, but an order dismissing the case
has not been signed by the judge. This settlement resolves a long-standing
dispute between the Company and L.S. Shoen regarding L.S. Shoen's entitlement
to compensation pursuant to an alleged lifetime employment contract.
Pursuant to the Settlement Agreement, the Company paid L.S. Shoen
$15.0 million.
<PAGE> 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
2.1 Order Confirming Plan (1)
2.2 Second Amended and Restated Debtor's Plan of
Reorganization Proposed by Edward J. Shoen (1)
3.1 Restated Articles of Incorporation (2)
3.2 Restated By-Laws of AMERCO as of August 27, 1996
4.1 Certificate of Designations, Preferences and
Rights of Series B Preferred Stock
4.2 Certificate of Designations, Preferences and
Rights of Series B Common Stock
10.1 Series B Preferred Stock Purchase Agreement, dated
as of August 30, 1996
10.2 Side Agreement, dated as of October 29, 1996
27 Financial Data Schedule
b. Reports on Form 8-K.
A report on Form 8-K was filed on September 6, 1996 in
connection with the Company's issuance of up to an
aggregate of $600,000,000 of Medium-Term Notes.
_____________________________________
(1) Incorporated by reference to the Company's Registration
Statement on Form S-3, Registration No. 333-1195.
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, file no. 0-7862.
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERCO
___________________________________
(Registrant)
Dated: November 6, 1996 By: /S/ GARY B. HORTON
___________________________________
Gary B. Horton, Treasurer
(Principal Financial Officer)
