<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1996
REGISTRATION NO. 333-15485
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AMERCO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEVADA 88-0106815
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
------------------------
1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY V. KLINEFELTER, ESQ.
GENERAL COUNSEL
AMERCO
1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
JON S. COHEN ARNOLD B. PEINADO, III GROVER T. WICKERSHAM
SNELL & WILMER L.L.P. MILBANK, TWEED, HADLEY & MCCLOY 430 CAMBRIDGE AVENUE, SUITE 100
ONE ARIZONA CENTER ONE CHASE MANHATTAN PLAZA PALO ALTO, CALIFORNIA 94306
PHOENIX, ARIZONA 85004-0001 NEW YORK, NEW YORK 10005 (415) 323-6400
(602) 382-6247 (212) 530-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion
December 10, 1996
PROSPECTUS
<TABLE>
<S> <C>
2,750,000 SHARES
AMERCO
COMMON STOCK LOGO
</TABLE>
($.25 PAR VALUE)
Of the 2,750,000 shares of Common Stock, par value $.25 per share (the "Common
Stock") offered hereby, 2,250,000 shares are being offered by AMERCO (the
"Company") and an aggregate of 500,000 shares are being offered by Paul F. Shoen
and Sophia M. Shoen (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders.
The Company's Common Stock is quoted on Nasdaq National Market ("Nasdaq") under
the symbol "UHAL." The last reported sale price of the Common Stock on Nasdaq on
December 6, 1996, was $43 1/2 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
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</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting estimated offering expenses of $280,000, which will be
payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 337,500 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ , and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named herein
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject any orders in whole or in part. It is expected that
delivery of the certificates representing the shares will be made against
payment therefor at the office of Lehman Brothers Inc., New York, New York or
through the facilities of the Depository Trust Company on or about December ,
1996.
------------------------------
JOINT BOOK-RUNNING MANAGERS
(IN ALPHABETICAL ORDER)
LEHMAN BROTHERS SALOMON BROTHERS INC
The date of this Prospectus is December , 1996.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND SELLING GROUP MEMBERS, IF
ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE
COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE
EXCHANGE ACT. SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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.
2
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Citicorp 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. In addition, the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy, and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission.
The Company has filed with the Commission a registration statement (the
"Registration Statement") with respect to the Common Stock 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
Common Stock 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 (the "Series A 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 may be accessed electronically by means of the
Company's home page on the Internet at: 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, 1996, the Quarterly Reports of the Company on Form 10-Q for the
quarters ended June 30 and September 30, 1996, and the Current Reports of the
Company on Form 8-K filed with the Commission on May 6, 1996 and September 19,
1996 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 and all of the information
that has been incorporated by reference in this Prospectus, other than certain
exhibits to such documents. Requests should be addressed to: AMERCO, Investor
Relations, at AMERCO's principal executive offices located at 1325 Airmotive
Way, Suite 100, Reno, Nevada 89502; telephone: (702) 688-6300.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Unless otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. See "Underwriting."
THE COMPANY
GENERAL
The Company is the holding company for its principal subsidiary, U-Haul
International, Inc. ("U-Haul"). The Company's U-Haul rental operations
represented 83.9%, 85.1%, and 85.0% of the Company's total revenue for the years
ended March 31, 1996, 1995, and 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 indicates, the term "Company" includes the Company and all of its
subsidiaries.
U-Haul U-Move Operations. Founded in 1945, U-Haul is primarily engaged,
through its 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 1,077 Company-owned
U-Haul Centers and approximately 13,500 independent dealers throughout the
United States and Canada. The Company believes that it has more moving equipment
rental locations than its two largest competitors combined. U-Haul's rental
equipment fleet consists of approximately 87,000 trucks, approximately 88,000
trailers, and approximately 15,000 tow dollies. 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 18.9 million square feet of
self-storage space through approximately 900 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 one or more U-Haul Centers or
independent U-Haul dealers.
Ponderosa. Ponderosa serves as the holding company for the Company's
insurance businesses. Ponderosa's two principal subsidiaries are Republic
Western Insurance Company ("RWIC") and Oxford Life Insurance Company ("Oxford").
For financial statement presentation, the Company's insurance subsidiaries
report on a calendar year basis while the Company reports on the basis of a
fiscal year ending on March 31.
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 39% of RWIC's written premiums relate to insurance underwriting
activities involving U-Haul and its affiliates. Approximately 98% 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.
Oxford primarily reinsures life, health, and annuity insurance products and
administers the Company's self-insured employee health plan. Approximately 7.2%
of Oxford's premium revenues are from business with the Company. Approximately
97% 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. Consistent with
its strategic plan, the Company has engaged an investment banking firm to
explore various alternatives with regard to Oxford. Such alternatives may
include strategic alliances with other insurance companies or Oxford's possible
sale.
4
<PAGE> 6
AREC. AREC owns and actively manages a majority 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.
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. 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 approximately $1.3
billion in fiscal 1996.
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 related products and services, including moving
accessories, self-storage facilities, and other items often desired by the
do-it-yourself mover. The rental trucks purchased in the fleet renewal program
have been designed with the do-it-yourself customer in mind to include features
such as low decks, air conditioning, power steering, automatic transmissions,
soft suspensions, AM/FM cassette stereo systems, and over-the-cab storage. The
Company has introduced certain insurance products, including "Safemove(R)" and
"Safestor(R)", to provide the do-it-yourself mover with certain moving-related
insurance coverage. In addition, the Company's self-storage facilities provide
many 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 8,000 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 84,000 new trucks between March 1987 and
September 1996 and reduced the overall average age of its truck fleet from
approximately 11 years at March 1987 to approximately five years at September
1996. During this period, approximately 66,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 66% 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, as well as a trailer's longer useful life, the
Company expects to replace trailers only as necessary.
INSURANCE OPERATIONS
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 insureds other than U-Haul and its customers. In addition, RWIC
plans to expand its involvement in specialized areas by offering commercial
multi-peril and excess workers' compensation.
5
<PAGE> 7
RECENT DEVELOPMENTS
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 (the "Shoen Litigation").
As a result, the plaintiffs were required to transfer all of their 18,254,976
shares of Common Stock to the Company which represented 47.3% of its outstanding
Common Stock (prior to giving effect to the issuance of the Common Stock offered
hereby). The long-standing legal dispute has required an increased amount of
management's time in the past two years, which will no longer be required going
forward.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,250,000 shares
Common Stock offered by the Selling
Stockholders........................................ 500,000 shares
Total Common Stock offered hereby................... 2,750,000 shares
Common Stock to be outstanding after the
Offering(1)......................................... 22,614,087 shares
Use of proceeds....................................... Capital expenditures, working
capital, and general corporate
purposes to be determined from
time to time.
Nasdaq symbol......................................... UHAL
</TABLE>
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(1) Including 5,762,495 shares of Series A Common Stock. The Common Stock and
the Series A Common Stock are collectively referred to as "Common Stock".
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial information, insofar as it
relates to each of the fiscal years ended March 31, 1996, 1995, 1994, 1993, and
1992, 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, 1996, which is
incorporated by reference herein. The summary financial information related to
the six months ended September 30, 1996 and 1995 has been derived from the
Company's unaudited quarterly report on Form 10-Q for the quarter ended
September 30, 1996, which is incorporated by reference herein. Oxford and RWIC
have been consolidated on the basis of fiscal years ended December 31. The
summaries for the six months ended September 30, 1996 and 1995 are unaudited;
however, in the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. The results of
operations for the six months ended September 30, 1996 may not be indicative of
the results to be expected for fiscal 1997 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 (April through September).
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1996(1) 1995 1994 1993 1992 1996 1995(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Rental, net sales and other
revenue........................... $1,094,185 $1,058,499 $ 967,743 $ 900,863 $ 845,128 $ 662,247 $ 607,104
Premiums and net investment
income............................ 200,238 177,733 162,151 139,465 126,756 97,889 94,672
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,294,423 1,236,232 1,129,894 1,040,328 971,884 760,136 701,776
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating expense, advertising
expense, and cost of sales........ 880,429 779,302 730,880 697,117 661,229 484,783 435,247
Benefits, losses and amortization of
deferred acquisition costs........ 168,363 144,303 130,168 115,969 99,091 74,773 75,898
Depreciation(2)..................... 81,847 151,409 133,485 110,105 109,641 38,719 76,275
Interest expense.................... 67,558 67,762 68,859 67,958 76,189 35,282 35,554
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,198,197 1,142,776 1,063,392 991,149 946,150 633,557 622,974
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pretax earnings from operations..... 96,226 93,456 66,502 49,179 25,734 126,579 78,802
Income tax expense.................. (35,832) (33,424) (19,853) (17,270) (4,940) (46,833) (28,293)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings from operations before
extraordinary loss on early
extinguishment of debt and
cumulative effect of change in
accounting principle.............. 60,394 60,032 46,649 31,909 20,794 79,746 50,509
Extraordinary loss on early
extinguishment of debt(3)......... -- -- (3,370) -- -- (2,004) --
Cumulative effect of change in
accounting principle(4)........... -- -- (3,095) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings........................ $ 60,394 $ 60,032 $ 40,184 $ 31,909 $ 20,794 $ 77,742 $ 50,509
========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Net earnings per share.............. $ 1.33 $ 1.23 $ 0.89 $ 0.83 $ 0.53 $ 2.36 $ 1.16
Weighted average common shares
outstanding(5).................... 35,736,335 38,190,552 38,664,063 38,664,063 38,880,069 29,845,247 37,931,825
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
AS
ACTUAL ADJUSTED(6)
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total property, plant and equipment, net........................................................ $1,253,133 $1,253,133
Total assets.................................................................................... 2,817,846 2,834,030
Notes and loans payable......................................................................... 940,282 965,328
Stockholders' equity............................................................................ 653,030 671,844
</TABLE>
- ---------------
(1) Reflects the adoption of Statement of Position 93-7, "Reporting on
Advertising Costs."
(2) Reflects the change in estimated salvage value during the third and fourth
quarters of the fiscal year ended March 31, 1996. The effect of the change
increased net income for fiscal 1996 by $44.4 million ($1.24 per share).
(3) During 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. During fiscal 1994, the Company extinguished $25.2
million of its medium-term notes originally due in fiscal 1995 through 2000.
This resulted in an extraordinary charge of $1.9 million, net of $1.0
million of tax benefit. The Company also 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 a $0.8 million
tax benefit.
(4) Reflects the adoption of Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other than Pensions."
(5) Reflects the acquisition of treasury shares acquired pursuant to the Shoen
Litigation.
(6) Adjusted to give effect to the repurchase of 4,036,304 shares of Common
Stock on October 1, 1996 pursuant to the Shoen Litigation and to give effect
to the sale of 2,250,000 shares of Common Stock offered by the Company
hereby assuming an offering price of $43 1/2 per share, based solely on the
closing price for the Common Stock trading on Nasdaq on December 6, 1996
(after deduction of underwriting discounts and estimated offering expenses).
7
<PAGE> 9
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS
INCLUDING THOSE SET FORTH IN THE FOLLOWING "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING MATTERS, INCLUDING THOSE MENTIONED ELSEWHERE, SHOULD
BE CONSIDERED CAREFULLY BY A PROSPECTIVE INVESTOR IN EVALUATING A PURCHASE OF
THE COMMON STOCK OFFERED HEREBY.
DIVIDENDS
The holders of the Series A Preferred Stock and the holder of the Series B
Preferred Stock are entitled to receive cumulative dividends prior to, and in
preference to, the holders of Common Stock. The Company has not paid dividends
on its Common Stock since 1993 and the Company has no current plan to pay
dividends on its Common Stock in the future. See "Dividends."
LIMITED PRIOR MARKET
The Company's Series A Preferred Stock is trading on the New York Stock
Exchange under the symbol "AO/A" and the Company's Common Stock is trading on
Nasdaq under the symbol "UHAL". The average daily trading volume of the Common
Stock for the past fifty-two weeks has been only 25,504 shares. There can be no
assurance that an active trading market for the Common Stock will develop or be
maintained following the offering. The absence of an active trading market for
the Common Stock may have an adverse effect on the liquidity or market value of
the Common Stock.
MANAGEMENT'S DISCRETION AS TO USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of the Common
Stock offered by it for capital expenditures, working capital, and general
corporate purposes to be determined from time to time. Consequently, the Board
of Directors and management of the Company will have broad discretion in
allocating the net proceeds of this offering. See "Use of Proceeds."
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 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, as a result, the issuance thereof could
have a material adverse effect on the market value of the Common Stock. See
"Description of Capital Stock."
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 (which affect, among other things, results of insurance
operations) and other events that are beyond the control of the Company.
8
<PAGE> 10
CONTROL BY CERTAIN EXISTING STOCKHOLDERS
Edward J. Shoen, Chairman of the Board and President of the Company, Mark
V. Shoen, a Director of the Company, and James P. Shoen, Vice President and a
Director of the Company, own 9,205,476 shares (approximately 40.7% upon
completion of this offering) of the Company's outstanding Common Stock. In
addition, Edward J. Shoen, Mark V. Shoen, James P. Shoen, the Selling
Stockholders, and others are parties to a stockholder agreement covering
15,666,292 shares (approximately 69.3%) of the Company's outstanding Common
Stock after giving effect to the sale of the Common Stock offered hereby.
Subject to certain limitations, Edward J. Shoen, Mark V. Shoen, and James P.
Shoen have the ability, if they so agree, to direct the voting of all of the
stock subject to the stockholder agreement. Accordingly, Edward J. Shoen, Mark
V. Shoen, and James P. Shoen will be in a position to continue to influence the
election of the members of the Board of Directors and decisions requiring
stockholder approval. See "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 22,614,087 shares
of Common Stock outstanding, including the 2,750,000 shares of Common Stock
offered hereby and 2,278,480 shares of Common Stock which were trading on Nasdaq
prior to this offering. The shares of Common Stock sold in this offering and the
shares of Common Stock which were trading on Nasdaq prior to this offering will
be freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act") unless held by an
"affiliate" of the Company, as that term is defined under Rule 144 of the
Securities Act, which shares will be subject to the resale limitations of Rule
144. The Selling Stockholders are entitled to registration rights with respect
to the 3,711,330 shares of Common Stock held by them. Currently, 591,950 shares
are eligible for sale subject to the resale limitations of Rule 144 under the
Securities Act, not including the 16,166,292 shares of Common Stock held
pursuant to the Stockholder Agreement described in "Principal and Selling
Stockholders" and the 1,336,076 shares of Common Stock held by the ESOP Trust
and allocated to ESOP participants. Each employee of the Company, upon severance
of employment, has the option of receiving the number of shares of Common Stock
allocated to his or her ESOP account or selling their stock to the ESOP Trust.
Such shares may be sold on Nasdaq following distribution from the ESOP. While
the Company does not expect any shares of Common Stock held pursuant to the
Stockholder Agreement (other than the shares of Common Stock held by the Selling
Stockholders) to be sold to the public pursuant to Rule 144 or otherwise, there
can be no assurance that such shares will not be sold to the public. No
prediction can be made as to the effect, if any, that the availability of
additional shares of Common Stock for sale will have on the market price of the
Common Stock. The sale of a substantial number of newly issued shares by the
Company or of shares held by the existing stockholders, whether pursuant to a
subsequent public offering or otherwise, or the perception that such sales could
occur, could adversely affect the market price for the Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities. See "Shares Eligible for Future Sale" and
"Underwriting."
ENVIRONMENTAL MATTERS
The Company has since fiscal 1989 managed a testing and removal program
that is expected to result in the removal of all but approximately 100 of its
underground storage tanks ("USTs") by the year 2000. Under this program, the
Company has budgeted $7 million for UST testing, removal and remediation in
fiscal 1997 and has removed a total of 2,314 USTs from April 1, 1989 through
September 30, 1996 at a total cost of approximately $28.2 million. At September
30, 1996, the Company owned properties containing approximately 660 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. See "Business -- Environmental Matters."
9
<PAGE> 11
USE OF PROCEEDS
The primary purpose of the offering is to increase the Company's equity in
order to improve the likelihood that its existing debt ratings will be
maintained. The net proceeds to the Company from the sale of the 2,250,000
shares of Common Stock offered by the Company are estimated to be $92.0 million
($105.8 million if the Underwriters' over-allotment option is exercised in
full), assuming an offering price of $43 1/2 per share (based solely on the
closing price for the Common Stock traded on Nasdaq on December 6, 1996) and
after deducting the estimated underwriting discount and offering expenses. The
Company intends to use the proceeds from the sale of the Common Stock for
capital expenditures, working capital, and general corporate purposes to be
determined from time to time. Pending such uses, the net proceeds may be used to
reduce the balance outstanding under two of the Company's revolving credit
facilities. The revolving credit facilities mature on July 12, 1997 and July 12,
1999 and bear interest at a floating rate (currently 5.75% and 5.80% per annum).
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been traded on Nasdaq since the initial
public offering of the Company's Common Stock on November 3, 1994. The following
table sets forth the high and low sale prices of the Company's Common Stock as
reported by Nasdaq for the periods indicated. The last sale price of the Common
Stock on December 6, 1996 was $43 1/2 per share.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1995
Third Quarter (November 3, 1994-December 31, 1994)................ $18 $15 3/4
Fourth Quarter.................................................... 22 1/2 17 1/2
FISCAL YEAR ENDED MARCH 31, 1996
First Quarter..................................................... 23 3/4 19 1/2
Second Quarter.................................................... 19 3/4 14 3/4
Third Quarter..................................................... 21 16 1/2
Fourth Quarter.................................................... 25 1/2 17
FISCAL YEAR ENDING MARCH 31, 1997
First Quarter..................................................... 28 1/4 19 1/2
Second Quarter.................................................... 43 1/4 21 1/2
Third Quarter (through December 6, 1996).......................... 49 1/4 34
</TABLE>
DIVIDENDS
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 Company has not paid any
dividends to common stockholders since August 3, 1993 and the Company has no
current plan to pay dividends to common stockholders in the future. The holders
of the Series A Preferred Stock and the holder of the Series B Preferred Stock
are entitled to receive cumulative dividends prior to, and in preference to, the
holders of Common Stock.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at (i) September 30, 1996; (ii) September 30, 1996 after giving effect
to the repurchase of 4,036,304 shares of Common Stock on October 1, 1996
pursuant to the Shoen Litigation (the "October 1, 1996 repurchase"); and (iii)
September 30, 1996 after giving effect to the October 1, 1996 repurchase and as
adjusted to reflect the sale by the Company of 2,250,000 shares of Common Stock
pursuant to this offering, the receipt by the Company of the estimated net
proceeds thereof (at an assumed public offering price of $43 1/2 per share,
which is based solely on the closing price for the Common Stock trading on
Nasdaq on December 6, 1996) and after deducting the estimated underwriting
discount and offering expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------
PROFORMA,
ACTUAL AS ADJUSTED AS ADJUSTED
-------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt.................. $ 33,553 $ 33,553 $ 33,553
Notes Payable......................................... 80,500 177,513 85,546
Long-Term Debt........................................ 826,229 846,229 846,229
-------- --------
Total Notes and Loans....................... $940,282 $ 1,057,295 $ 965,328
======== ========
Stockholders' equity:
Serial preferred stock, with or without par value,
50,000,000 shares authorized..................... $ -- $ -- $ --
Series A Preferred Stock, no par value, 6,100,000
shares authorized, issued, and outstanding..... -- -- --
Series B Preferred Stock, no par value, 100,000
shares authorized, issued, and outstanding..... -- -- --
Serial common stock, with or without par value,
150,000,000 shares authorized.................... -- -- --
Series A Common Stock of $0.25 par value,
10,000,000 shares authorized, 5,762,495 shares
issued and outstanding......................... 1,441 1,441 1,441
Series B Common Stock of $0.25 par value,
10,000,000 shares authorized, no shares issued
and outstanding................................ -- -- --
Common Stock of $0.25 par value, 150,000,000 shares
authorized, 34,237,505 shares issued, 20,364,087
shares outstanding, 22,614,087 outstanding as
adjusted......................................... 8,559 8,559 9,122
Additional paid in capital.......................... 264,378 264,378 355,782
Foreign currency translation, unrealized gain (loss)
on investments, and retained earnings............ 668,143 668,143 668,143
Less:
Cost of common shares in treasury................ 266,315 339,468 339,468
Unearned employee stock ownership plan shares.... 23,176 23,176 23,176
-------- --------
Total Stockholders' Equity: ................ $653,030 $ 579,877 $ 671,844
======== ========
</TABLE>
11
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial information, insofar as it relates to each
of the fiscal years ended March 31, 1996, 1995, 1994, 1993, and 1992, 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, 1996, which is incorporated by reference herein.
The selected financial information related to the six months ended September 30,
1996 and 1995 has been derived from the Company's unaudited quarterly report on
Form 10-Q for the quarter ended September 30, 1996, which is incorporated by
reference herein. Oxford and RWIC have been consolidated on the basis of fiscal
years ended December 31. The summaries for the six months ended September 30,
1996 and 1995 are unaudited; however, in the opinion of management, all
adjustments necessary for a fair presentation of such financial information have
been included. The results of operations for the six months ended September 30,
1996 may not be indicative of the results to be expected for fiscal 1997
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 (April through September).
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------------------- -------------------------
1996(1) 1995 1994 1993 1992 1996 1995(1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Rental, net sales and other
revenue....................... $ 1,094,185 $ 1,058,499 $ 967,743 $ 900,863 $ 845,128 $ 662,247 $ 607,104
Premiums and net investment
income........................ 200,238 177,733 162,151 139,465 126,756 97,889 94,672
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,294,423 1,236,232 1,129,894 1,040,328 971,884 760,136 701,776
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating expense, advertising
expense, and cost of sales.... 880,429 779,302 730,880 697,117 661,229 484,783 435,247
Benefits, losses and
amortization of deferred
acquisition costs............. 168,363 144,303 130,168 115,969 99,091 74,773 75,898
Depreciation(2)................. 81,847 151,409 133,485 110,105 109,641 38,719 76,275
Interest expense................ 67,558 67,762 68,859 67,958 76,189 35,282 35,554
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,198,197 1,142,776 1,063,392 991,149 946,150 633,557 622,974
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pretax earnings from
operations.................... 96,226 93,456 66,502 49,179 25,734 126,579 78,802
Income tax expense.............. (35,832) (33,424) (19,853) (17,270) (4,940) (46,833) (28,293)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings from operations before
extraordinary loss on early
extinguishment of debt and
cumulative effect of change in
accounting principle.......... 60,394 60,032 46,649 31,909 20,794 79,746 50,509
Extraordinary loss on early
extinguishment of debt(3)..... -- -- (3,370) -- -- (2,004) --
Cumulative effect of change in
accounting principle(4)....... -- -- (3,095) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings.................... $ 60,394 $ 60,032 $ 40,184 $ 31,909 $ 20,794 $ 77,742 $ 50,509
========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Net earnings per share.......... $ 1.33 $ 1.23 $ 0.89 $ 0.83 $ 0.53 $ 2.36 $ 1.16
Weighted average common shares
outstanding(5)................ 35,736,335 38,190,552 38,664,063 38,664,063 38,880,069 29,845,247 37,931,825
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
MARCH 31, -----------------------
-------------------------------------------------------------- AS
1996 1995 1994 1993 1992 ACTUAL ADJUSTED(6)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total property, plant and equipment,
net.................................. $1,316,715 $1,274,246 $1,174,236 $ 989,603 $ 987,095 $1,253,133 $1,253,133
Total assets........................... 2,827,978 2,605,989 2,344,442 2,024,023 1,979,324 2,817,846 2,834,030
Notes and loans payable................ 998,220 881,222 723,764 697,121 733,322 940,282 965,328
Stockholders' equity................... 649,548 686,784 651,787 479,958 451,888 653,030 671,844
</TABLE>
- ---------------
(1) Reflects the adoption of Statement of Position 93-7, "Reporting on
Advertising Costs." The effect of the change increased net income for fiscal
1996 by $44.4 million ($1.24 per share).
(2) Reflects the change in estimated salvage value during the third and fourth
quarters of the fiscal year ended March 31, 1996.
(3) During 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. During fiscal 1994, the Company extinguished $25.2
million of its medium-term notes originally due in fiscal 1995 through 2000.
This resulted in an extraordinary charge of $1.9 million, net of $1.0
million of tax benefit. The Company also 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 a $0.8 million
tax benefit.
(4) Reflects the adoption of Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other than Pensions."
(5) Reflects the acquisition of treasury shares acquired pursuant to the Shoen
Litigation.
(6) Adjusted to give effect to the repurchase of 4,036,304 shares of Common
Stock on October 1, 1996 pursuant to the Shoen Litigation and to give effect
to the sale of 2,250,000 shares of Common Stock offered by the Company
hereby assuming an offering price of $43 1/2 per share, based solely on the
closing price for the Common Stock trading on Nasdaq on December 6, 1996
(after deduction of underwriting discounts and estimated offering expenses).
12
<PAGE> 14
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 1995, 1994, and 1993 corresponds to the
Company's fiscal years 1996, 1995, and 1994, respectively. In addition, with
respect to the Company's insurance subsidiaries, any reference to the six months
ended September 30, 1996 and 1995 corresponds to the six months ended June 30,
1996 and 1995, respectively. There have been no events related to such
subsidiaries between January 1 and March 31 of 1996, 1995, or 1994, or between
July 1 and September 30, 1996 and 1995, that would materially affect the
Company's consolidated financial position or results of operations as of and for
the fiscal years ended March 31, 1996, 1995, and 1994, respectively or the six
months ended September 30, 1996 and 1995, respectively.
The following management's discussion and analysis should be read in
conjunction with Notes 1, 19, and 20 of Notes to Audited Consolidated Financial
Statements, which discuss the principles of consolidation, summarized
consolidated financial information, and industry segment and geographic area
data, respectively. In consolidation, all intersegment premiums are eliminated
and the benefits, losses, and expenses are retained by the insurance companies.
13
<PAGE> 15
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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 AREC. Life insurance is
composed of the operations of Oxford. Property and casualty insurance is
composed of the operations of RWIC. The Company's results of operations have
historically fluctuated from quarter to quarter. In particular, the Company's
U-Haul rental operations are seasonal and proportionately more of the Company's
revenues and net earnings are generated in the first and second quarters each
fiscal year (April through September).
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
----------- --------- --------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Six months ended September 30,
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
=========== ======= ======== ========== ==========
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
=========== ======= ======== ========== ==========
</TABLE>
14
<PAGE> 16
FISCAL YEARS ENDED MARCH 31, 1996, 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 fiscal years ended March 31, 1996, 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.
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
----------- --------- --------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Revenues:
Outside......................... $ 1,085,711 $ 49,103 $ 159,609 $ -- $ 1,294,423
Intersegment.................... (656) 1,281 12,763 (13,388) --
----------- ------- -------- ---------- ----------
Total revenues............... $ 1,085,055 $ 50,384 $ 172,372 $ (13,388) $ 1,294,423
=========== ======= ======== ========== ==========
Operating profit.................. $ 129,092 $ 12,600 $ 21,436 $ 656 $ 163,784
=========== ======= ======== ==========
Interest expense.................. 67,558
----------
Pretax earnings from operations... $ 96,226
==========
Identifiable assets............... $ 1,921,105 $ 599,713 $ 619,454 $ (312,294) $ 2,827,978
=========== ======= ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
----------- --------- --------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995
Revenues:
Outside......................... $ 1,052,243 $ 39,347 $ 144,642 $ -- $ 1,236,232
Intersegment.................... (42) 1,444 20,657 (22,059) --
----------- ------- -------- ---------- ----------
Total revenues............... $ 1,052,201 $ 40,791 $ 165,299 $ (22,059) $ 1,236,232
=========== ======= ======== ========== ==========
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
=========== ======= ======== ========== ==========
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
----------- --------- --------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1994
Revenues:
Outside......................... $ 960,878 $ 31,357 $ 137,659 $ -- $ 1,129,894
Intersegment.................... (357) 2,834 18,862 (21,339) --
----------- ------- -------- ---------- ----------
Total revenues............... $ 960,521 $ 34,191 $ 156,521 $ (21,339) $ 1,129,894
=========== ======= ======== ========== ==========
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
=========== ======= ======== ========== ==========
</TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 1996 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1995
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 $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 $346.4 million in the first six months of fiscal 1996, an
increase of approximately 14.9%. 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 $8.6 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.
16
<PAGE> 18
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.
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
17
<PAGE> 19
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.
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).
RESULTS OF OPERATIONS -- 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.
FISCAL YEAR ENDED MARCH 31, 1996 VERSUS FISCAL YEAR ENDED MARCH 31, 1995
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 $29.2 million, approximately
3.3%, to $912.1 million during fiscal 1996. The increase in 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 $33.9 million to $919.1 million, as compared to $885.2 million for fiscal
1995. In excess of 53% of the rental revenue growth was realized during the
fourth quarter of fiscal 1996. 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 an increase in same store
rents realized per rentable square foot, higher management fees derived from
storage facilities managed for others and additional rentable square footage.
Other revenues decreased in the aggregate by $4.7 million.
Net sales revenues were $173.8 million for fiscal 1996, which represents an
increase of approximately 2.1% from fiscal 1995 net sales of $170.2 million.
Revenue growth from the sale of moving support items (i.e., boxes, etc.),
hitches, and propane resulted in a $9.1 million increase during the year, which
was offset by a $1.2 million decrease in revenue from gasoline sales consistent
with the Company's ongoing efforts to remove underground storage tanks and
gradually discontinue gasoline sales. Other sales decreased by $5.2 million due
to the sale of discontinued repair parts during the fourth quarter of fiscal
1995.
18
<PAGE> 20
Cost of sales was $108.7 million for fiscal 1996, which represents an
increase of approximately 16.2% from $93.5 million for fiscal 1995. This
increase in cost of sales reflects a $7.0 million increase in material costs
from the sale of moving support items, hitches, and propane as a result of
higher sales levels and an $8.1 million increase in allowances for inventory
shrinkage and other inventory adjustments.
Operating expenses increased to $726.5 million during fiscal 1996 from
$649.9 million during fiscal 1995, an increase of approximately 11.8%. The
change from the prior year primarily reflects a $53.6 million increase in rental
equipment maintenance costs related to rental fleet expansion and transactional
growth and an $18.1 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 $4.9 million, approximately 2.3%, to $214.1
million.
Advertising expense increased to $38.9 million during fiscal 1996 from
$29.1 million for fiscal 1995. The increase primarily reflects a one-time
expense of $8.6 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 fiscal 1996 was $81.8 million, as compared to
$151.4 million for fiscal year 1995. 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. The effect of
the change in estimate reduced depreciation expense for fiscal 1996 by $71.4
million ($35.7 million during the third quarter, $26.6 million during the fourth
quarter for the fourth quarter change and $9.1 million during the fourth quarter
for the third quarter change). The effect of the change increased net income for
fiscal year 1996 by $44.4 million.
OXFORD -- LIFE INSURANCE
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $19.4 million for the year ended December 31, 1995, an increase of $2.0
million or approximately 11.5% over 1994 and accounted for 71.8% of Oxford's
premiums in 1995. These premiums are primarily from term life insurance and
deferred annuity contracts that have matured. 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
$7.6 million in 1995, an increase of $1.4 million or 22.6% from the prior year.
This increase in direct premium is primarily attributable to the credit life and
credit accident and health business ($5.6 million in premium). Oxford's direct
business related to group life and disability coverage issued to employees of
the Company accounted for approximately 7.2% of premiums for the year ended
December 31, 1995. Other direct lines, including the credit business, accounted
for approximately 21.0% of Oxford's premiums in 1995.
Net investment income before intercompany eliminations was $16.5 million
and $14.1 million for the years ended December 31, 1995 and 1994, respectively.
This increase is due to increasing margins on the interest sensitive business.
Gains on the disposition of fixed maturity investments were $3.5 million and
$1.3 million for 1995 and 1994, respectively. Oxford reported $2.0 million and
$1.9 million of other income for 1995 and 1994, respectively.
Benefits and expenses incurred were $37.8 million for the year ended
December 31, 1995, an increase of 21.9% over 1994. Comparable benefits and
expenses incurred for 1994 were $31.0 million. This increase is primarily due to
disability, credit life and credit disability benefits incurred and an increase
in the amortization of deferred acquisition costs, primarily as a result of the
increase in realized capital gains on the disposition of fixed maturities.
Operating profit before intercompany eliminations increased by $2.9
million, or approximately 29.9%, in 1995 to $12.6 million, primarily due to the
increasing margins on the interest sensitive business and gains on the
disposition of fixed maturity investments, which were partially offset by the
increase in the amortization of deferred acquisition costs.
19
<PAGE> 21
RWIC -- PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December 31, 1995 were
$174.2 million as compared to $179.2 million in 1994. As in prior years, the
rental industry market accounts for a significant share of total premiums,
approximately 45.2% and 42.8% in 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 in
1995 to $50.1 million, or 28.7% of total gross premiums, from comparable 1994
figures of $58.3 million, or 32.5% of total premiums. This decrease can be
primarily attributed to RWIC electing not to renew several treaties because of
inadequate pricing or terms. Also contributing to the decrease was the
discontinuation of a significant fronting arrangement. Premium writings in
selected general agency lines were 16.3% of total gross written premiums in 1995
as compared to a 15.1% in 1994. RWIC expanded its direct business in 1995 to
include multiple peril coverage for a variety of commercial properties and
businesses. These premiums accounted for 9.1% of the total gross written premium
during the year ended December 31, 1995.
Net earned premiums increased $7.4 million, or 5.6%, to $140.8 million for
the year ended December 31, 1995, compared with premiums of $133.4 million for
the year ended December 31, 1994. This increase was primarily due to increased
earnings on the assumed treaty reinsurance business and the expanded commercial
coverage discussed above, offset by decreased premiums on canceled agent
programs and rental industry liability lines.
Underwriting expenses incurred were $150.9 million for the twelve months
ended December 31, 1995, an increase of $8.8 million or 6.2% over 1994. The
increase occurred in incurred loss and loss adjusting expense, offset by
decreased commissions expense. The change in incurred loss and loss adjusting
expense resulted from increases on general agency, rental industry liability and
assumed treaty reinsurance, partially offset by improved underwriting results in
other programs. The decrease in commission expense resulted from an adjustment
made to realize a margin on a canceled general agency program. The ratio of
underwriting expenses to net earned premium remained the same, 1.07, in both
1995 and 1994.
Net investment income was $29.9 million for the year ended December 31,
1995, an increase of 3.1% over 1994 net investment income of $29.0 million. The
increase is the result of favorable interest rates along with a larger portfolio
due to growth in business.
Income before tax expense was $21.4 million as compared to $23.2 million
for the comparable period ended December 1994. This represents a decrease of
$1.8 million, or 7.8% over 1994. Increased premium earnings and investment
income were offset by a disproportionate increase in underwriting expenses as
discussed above.
INTEREST EXPENSE
Interest expense decreased by $0.2 million to $67.6 million in fiscal 1996,
as compared to $67.8 million in fiscal 1995. Despite average debt levels
increasing, interest expense declined reflecting a reduction in the average cost
of funds.
RESULTS OF OPERATIONS -- CONSOLIDATED GROUP
As a result of the foregoing, pre-tax earnings of $96.2 million were
realized in fiscal 1996 as compared to $93.5 million in fiscal 1995. After
providing for income taxes, net earnings for fiscal 1996 were $60.4 million as
compared to $60.0 million for the same period of the prior year.
20
<PAGE> 22
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 growth (volume) within the truck and trailer fleets. Revenues from
the rental of self-storage facilities increased by $9.7 million to $80.2 million
in fiscal 1995, an increase of approximately 13.8%. Storage revenues continue to
be positively impacted by additional rentable square footage and higher average
rental rates. Other revenue categories decreased in the aggregate by $0.1
million, with declines in general rental item revenues and other miscellaneous
revenues, offset by increases in interest income and gains on the sale of
property, plant and equipment.
Net sales were $170.2 million in fiscal 1995 which represents an increase
of approximately 9.1% from fiscal 1994 net sales of $156.0 million. Revenue
growth from moving support sale items (i.e., boxes, etc.), hitches and propane
resulted in an $11.2 million increase, offset by a $1.9 million decrease in
revenue from gasoline sales consistent with the Company's ongoing efforts to
remove underground storage tanks and gradually discontinue gasoline sales.
Cost of sales was $93.5 million in fiscal 1995, as compared to $92.2
million in fiscal 1994. The 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 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 $649.9 million in fiscal 1995 from $602.3
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 accounted for
approximately 7.2% of premiums for the year ended December 31, 1994. Other
direct lines, including the credit business, accounted for approximately 19.0%
of Oxford's premiums in 1994.
21
<PAGE> 23
Net investment income before intercompany eliminations was $14.1 million
and $12.6 million for the years ended December 31, 1994 and 1993, respectively.
This increase is due to increasing margins on the interest sensitive business.
Gains on the disposition of fixed maturity investments were $1.3 million and
$2.1 million for 1994 and 1993, respectively. Oxford had $1.9 million and $1.8
million of other income for 1994 and 1993, respectively.
Benefits and expenses incurred were $31.0 million for the year ended
December 31, 1994, an increase of 27.0% over 1993. Comparable benefits and
expenses incurred for 1993 were $24.4 million. This increase is primarily due to
the increase in reserves caused by the increase in annuitizations discussed
above.
Operating profit before intercompany eliminations decreased by $0.1
million, or approximately 1.0%, in 1994 to $9.7 million, primarily due to the
decrease in gains on sale of fixed maturity investments. Such decrease was
partially offset by the increasing margins on the interest sensitive business.
RWIC -- PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December 31, 1994 were
$179.2 million as compared to $175.1 million in 1993. This represents an
increase of $4.1 million, or 2.3%. As in prior years, the rental industry market
accounts for a significant share of total premiums, approximately 42.8% and
36.6% in 1994 and 1993, respectively. These writings include U-Haul customers,
fleetowners and U-Haul as well as other rental industry insureds with similar
characteristics. Growth is also occurring in selected general agency lines.
These premiums accounted for approximately 15.1% of gross written premiums for
1994, compared to 12.9% in 1993. RWIC continues underwriting professional
reinsurance via broker markets, and premiums in this area decreased in 1994 to
$58.3 million, or 32.5% of total gross premiums, from comparable 1993 figures of
$70.2 million, or 40.1% of total premiums.
Net earned premiums increased $8.0 million, or 6.38% to $133.4 million for
the year ended December 31, 1994, compared with premiums of $125.4 million for
the year ended December 31, 1993. The premium increase was primarily due to
planned increased writings in the rental industry and general agency lines.
Underwriting expenses incurred were $142.1 million for the twelve months
ended December 31, 1994, an increase of $5.6 million, or 4.1% over 1993.
Comparable underwriting expenses incurred for 1993 were $136.5 million. The
increase in underwriting expenses is due to the larger premium volume being
written in 1994, which increased acquisition costs and commensurate reserves.
The ratio of underwriting expenses to net earned premiums decreased from 1.09 in
1993 to 1.07 in 1994. This improvement is primarily attributable to 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.
22
<PAGE> 24
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 $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.
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 included or 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).
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------
JUNE 30, SEPT. 30,
1996 1996
------------ ------------
<S> <C> <C>
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)(4)(5)................. 1.15 1.22
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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)(4).................... 0.31 0.85 0.13 (0.04)
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1994 1994 1994 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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)
</TABLE>
- ---------------
(1) Net earnings (loss) per common share amounts were computed after giving
effect to the dividend on the Company's Series A Preferred Stock.
(2) Reflects the adoption of Statement of Position 93-7 "Reporting on
Advertising Costs" in the first quarter of fiscal 1996.
(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.
(5) During 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.
LIQUIDITY AND CAPITAL RESOURCES
U-HAUL OPERATIONS
To meet the needs of its customers, U-Haul must maintain a large inventory
of fixed asset rental items. At September 30, 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-
24
<PAGE> 26
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.
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
25
<PAGE> 27
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 in the Shoen Litigation 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.
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.
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
26
<PAGE> 28
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 adoption of this statement had no impact on the
financial condition or results of operations of the Company.
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation," was issued by the Financial Accounting Standards
Board in October 1995. This standard is effective for transactions entered into
in fiscal years that begin after December 15, 1995, and establishes a fair
value-based method of accounting for stock options and other equity instruments.
Under the fair value-based method of accounting, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period. For stock options, fair value is determined using an
option-pricing model that takes into account as of the grant date, the exercise
price and expected life of the option, the current price of the underlying stock
and its expected volatility, the expected dividends on the stock and the
risk-free interest rate for the expected term of the option. The Company has a
stock option plan, but to date no stock options have been granted. The adoption
of this statement is not expected to have a material effect on the Company's
financial statements.
Statement of Position 93-7, "Reporting on Advertising Costs", was issued by
the Accounting Standards Executive Committee in December 1993. This statement of
position provides guidance on financial reporting on advertising costs in annual
financial statements. The statement of position requires reporting advertising
costs as expenses when incurred or when the advertising 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 $8.6 million upon
implementation. The adoption had the effect of reducing net income by $5.5
million ($0.15 per share) for the fiscal year ended March 31, 1996.
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.
27
<PAGE> 29
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 basis through independent dealers (at that time principally
independent gasoline service stations). Since 1974, the Company has developed a
network of Company-owned rental centers ("U-Haul Centers") through which U-Haul
rents its trucks and trailers and provides a number of other related products
and services and has expanded the number and geographic diversity of its
independent dealers. At September 30, 1996, the Company's distribution network
included approximately 1,077 U-Haul Centers and approximately 13,500 independent
dealers.
In March 1974, in conjunction with the acquisition and construction of
U-Haul Centers, the Company entered the self-storage business. As of September
30, 1996, approximately 81% of the Company's U-Haul Centers were located at or
near U-Haul self-storage locations. 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 was 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 $44.5 million for total proceeds of approximately $96.3
million.
In 1990, the Company reorganized its operations into separate legal
entities, each with its own operating, financial, and investment strategies. The
reorganization separated the Company into three parts: U-Haul rental operations,
insurance, and real estate. The purpose of the reorganization was to increase
management accountability and to allow the allocation of capital based on
defined performance measurements.
BUSINESS STRATEGY
U-HAUL OPERATIONS
The Company's present business strategy remains focused on the
do-it-yourself moving customer. The objective of this strategy is to offer, in
an integrated manner over a diverse geographical area, a wide range of products
and services to the do-it-yourself moving customer.
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 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
28
<PAGE> 30
in the fleet renewal program have been designed with the do-it-yourself customer
in mind to include features such as low decks, air conditioning, power steering,
automatic transmissions, soft suspensions, AM/FM cassette stereo systems, and
over-the-cab storage. The Company has introduced certain insurance products,
including "Safemove(R)" and "Safestor(R)", to provide the do-it-yourself mover
with certain moving-related insurance coverage. In addition, the Company's
self-storage facilities provide many 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 8,000 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 84,000 new trucks between March 1987 and
September 1996 and reduced the overall average age of its truck fleet from
approximately 11 years at March 1987 to approximately five years at September
1996. During this period, approximately 66,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 66% 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 as well as a trailer's longer useful life, the
Company expects to replace trailers only as necessary.
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 which offer
similar products and are in need of additional capital, either as a result of
rapid growth or regulatory demands, or are interested in divesting non-core
business lines. Consistent with its strategic plan, the Company has engaged an
investment banking firm to explore various alternatives with regard to Oxford.
Such alternatives may include strategic alliances with other insurance companies
or Oxford's possible sale.
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 insureds other than U-Haul and its customers. In addition, RWIC
plans to expand its involvement in specialized areas by offering commercial
multi-peril and excess workers' compensation.
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. Other occasional use customers provide the
remaining rental revenue. Moving rentals include: (i) in-town rentals, where the
equipment is returned to the originating U-Haul Center or independent dealer and
(ii) one-way rentals, where the equipment is returned to a U-Haul Center or
independent dealer in another city. Typically, the number of in-town(R) rental
transactions is substantially greater than the number
29
<PAGE> 31
of one-way rental transactions. However, total revenues generated by one-way
transactions typically exceed total revenues from in-town 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
sell and install hitches, 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
proportionally more transactions and revenues generated in the spring and summer
months than during the balance of the year. The Company attributes this
seasonality to the preference of do-it-yourself movers to move during this time.
Also, consistent with do-it-yourself mover preferences, the number of rental
transactions tends to be higher on weekends than on weekdays.
RENTAL EQUIPMENT FLEET
As of September 30, 1996, U-Haul's rental equipment fleet consisted of
approximately 87,000 trucks, approximately 88,000 trailers, and approximately
15,000 tow dollies. 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 1,077 Company-owned U-Haul Centers and approximately
13,500 independent dealers as of September 30, 1996. 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. 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 canceled 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 with 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 ten 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
30
<PAGE> 32
securing more customers on a regular basis. In addition, the area field managers
recruit new independent dealers for expansion or replacement purposes. U-Haul
has instituted performance compensation programs that focus on accomplishment
and reward strong performers.
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 others and is expanding its ownership of self-storage facilities. The
Company also provides financing and management services for independent
self-storage businesses.
Through approximately 900 Company-owned or managed storage locations in the
United States and Canada, the Company offers for rent more than 18.9 million
square feet of self-storage space as of September 30, 1996. The Company's
self-storage facility locations range in size from 1,000 to 149,000 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 the storage of household goods. The
majority of customers renting storage rooms are in the process of a move. Even
with an increase of over 25,000 new and acquired storage rooms during fiscal
1996, average occupancy remained high, with rates in the mid-80% range, with
very little seasonal variation. During fiscal 1996 and fiscal 1995, delinquent
rentals as a percentage of total storage rentals were approximately 6% in each
year. The Company considers this rate 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 seven 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 and one-way
markets. These competitors include Ryder Consumer Truck Rentals, 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.
31
<PAGE> 33
EMPLOYEES
For the period ended September 30, 1996, the Company's non-seasonal
workforce consisted of approximately 13,200 employees comprised of approximately
39% part-time and 61% full-time employees. During the summer months, the Company
increases its workforce by approximately 1,750 employees and the percentage of
part-time employees increases to approximately 42% 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 20.8% of Oxford's premium revenues for the year ended
December 31, 1995. 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, 1995, approximately 7.2% of Oxford's premium revenues resulted from
business with the Company. In addition, direct premium revenue 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 71.8%
of Oxford's premium revenues for the year ended December 31, 1995, 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, 1995, approximately 39% of
RWIC's written premiums relate to insurance underwriting activities involving
U-Haul and its affiliates. 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 of reinsurers and estimates of incurred but unreported losses which
are based on RWIC's experience and 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 available.
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> 34
Activity in the liability for unpaid claims and claim adjustment expenses
is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1............................ $329,741 $314,482 $320,509
Less reinsurance recoverable.................. 74,663 76,111 81,747
-------- -------- --------
Net balance at January 1........................ 255,078 238,371 238,762
Incurred related to:
Current year.................................. 114,110 102,782 91,044
Prior years................................... 8,292 6,576 12,688
-------- -------- --------
Total incurred.................................. 122,402 109,358 103,732
Paid related to:
Current year.................................. 22,576 22,269 20,200
Prior years................................... 86,796 70,382 83,923
-------- -------- --------
Total paid...................................... 109,372 92,651 104,123
Net balance at December 31...................... 268,108 255,078 238,371
Plus reinsurance recoverable.................. 73,873 74,663 76,111
-------- -------- --------
Balance at December 31.......................... $341,981 $329,741 $314,482
======== ======== ========
</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 $26.7 million and $26.5 million in 1995 and 1994, respectively)
increased by $8.3 million and $6.6 million in 1995 and 1994, 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
adjustment 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 revised estimates of the
original recorded reserve as of the end of successive years. The last section
compares the latest revised estimated reserve amount to the reserve amount as
originally established. This last section is cumulative and should not be
summed.
33
<PAGE> 35
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------
1985 1986 1987 1988 1989
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Adjustment Expenses: ............ $123,342 $146,391 $168,688 $199,380 $207,939
Paid (Cumulative) as of:
One year later................ 41,170 54,627 49,681 59,111 50,992
Two years later............... 77,697 92,748 91,597 89,850 87,850
Three years later............. 105,160 124,278 110,834 114,979 116,043
Four years later.............. 126,734 137,744 129,261 133,466 132,703
Five years later.............. 133,421 151,354 142,618 145,864 142,159
Six years later............... 142,909 161,447 152,579 153,705 151,227
Seven years later............. 151,379 169,601 158,531 161,498
Eight years later............. 158,728 173,666 165,021
Nine years later.............. 162,082 178,101
Ten years later............... 165,923
Reserve Reestimated as of:
One year later................ 138,287 167,211 187,663 200,888 206,701
Two years later............... 147,968 192,272 190,715 202,687 206,219
Three years later............. 168,096 192,670 194,280 203,343 199,925
Four years later.............. 168,040 199,576 195,917 199,304 198,986
Five years later.............. 175,283 201,303 195,203 200,050 197,890
Six years later............... 178,232 202,020 196,176 198,001 194,601
Seven years later............. 182,257 202,984 196,770 197,112
Eight years later............. 184,266 202,654 196,072
Nine years later.............. 187,247 203,285
Ten years later............... 188,301
Initial Reserve in Excess of
(Less than) Reestimated
Reserve:
Amount (Cumulative).............. $(64,959) $(56,894) $(27,384) $ 2,268 $ 13,338
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Adjustment Expenses: ............ $226,324 $236,019 $238,762 $314,482 $329,741 $341,981
Paid (Cumulative) as of:
One year later................ 55,128 65,532 83,923 70,382 86,796
Two years later............... 97,014 105,432 123,310 115,467
Three years later............. 120,994 126,390 153,030
Four years later.............. 133,338 143,433
Five years later.............. 144,764
Six years later...............
Seven years later.............
Eight years later.............
Nine years later..............
Ten years later...............
Reserve Reestimated as of:
One year later................ 229,447 231,779 251,450 321,058 338,033
Two years later............... 221,450 224,783 254,532 323,368
Three years later............. 211,998 223,403 253,844
Four years later.............. 207,642 214,854
Five years later.............. 200,629
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).............. $ 25,695 $ 21,165 $(15,082) $ (8,886) $ (8,292)
</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 adjustment 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 97% of Oxford's portfolio and 98% of RWIC's portfolio consist of
investment grade (NAIC-2 or greater) fixed income securities. The maturity
distributions are designed to provide sufficient liquidity to meet future cash
needs.
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<PAGE> 36
REINSURANCE
The Company's insurance operations assume and cede insurance from and to
other insurers and members of various reinsurance pools and associations.
Reinsurance arrangements are utilized to provide greater diversification of risk
and to minimize exposure on large risks. However, the original insurer remains
liable should the assuming insurer not be able to meet its obligations under the
reinsurance agreements.
REGULATION
The Company's insurance subsidiaries are subject to considerable regulation
and supervision in the states in which they transact business. The purpose of
such regulation and supervision is primarily to provide safeguards for
policyholders. As a result of federal legislation, the primary regulation of the
insurance industry is performed by the states. State regulation extends to such
matters as licensing companies; restricting the types or quality of investments;
regulating capital and surplus and actuarial reserve maintenance; setting
solvency standards; requiring triennial financial examinations, market conduct
surveys, and the filing of reports on financial condition; licensing agents;
regulating aspects of the insurance companies' relationship with 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 constitutes 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.
Oxford and RWIC have adopted the NAIC minimum risk-based capitalization
requirements for insurance companies. As of December 31, 1995, Oxford and RWIC
are 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. AREC is also responsible for managing any environmental risks
associated with the Company's real estate. In addition to the U-Haul operations,
AREC actively seeks to lease or dispose of surplus properties.
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<PAGE> 37
ENVIRONMENTAL MATTERS
UNDERGROUND STORAGE TANKS
The Company owns properties that, as of September 30, 1996, contained
approximately 660 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.
From April 1, 1989 through September 30, 1996, the Company incurred expenditures
totaling approximately $28.2 million for removal and remediation of 2,341 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 1996 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 began its current program emphasizing removal
of all but approximately 100 USTs by the year 2000. The USTs expected to remain
at the year 2000 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 has budgeted $7.0 million
for fiscal 1997 for UST testing, removal, and remediation. Removal and
remediation costs are capitalized to the extent these costs improve the safety
or efficiency of the properties or are incurred in preparing the properties for
sale.
FEDERAL SUPERFUND SITES
The Company has been named as a "potentially responsible party" (PRP) with
respect to the disposal of hazardous wastes at 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. Currently, 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 cleanup, 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 cleanup 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
A subsidiary of U-Haul owns one property located within two different state
hazardous waste sites in the State of Washington. The property is located in
Yakima, Washington and 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
subsidiary, U-Haul Co. of Inland Northwest (Inland Northwest), 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. Inland Northwest, 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 Inland Northwest regarding the
volume and nature of wastes present, Inland Northwest is unable to reasonably
assess the potential investigation and cleanup costs, but the costs could be
substantial. Although Inland Northwest has entered into an agreement with such
other companies and persons under which Inland Northwest has assumed
responsibility for 20% of the costs to investigate the site, no agreement among
the parties with respect to cleanup costs has been entered into at the date
hereof.
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<PAGE> 38
In addition, Inland Northwest 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. Inland Northwest has been notified that
the Yakima Railroad Site involves potential groundwater contamination in an area
of approximately two square miles. Inland Northwest has contested its
designation as a PLP at this site, but, at the date hereof, no formal ruling has
been issued in this matter.
In February 1992, the State of Washington issued an enforcement order to
Inland Northwest and eight other parties requiring an interim remedial action
and the provision of bottled water to households that obtain drinking water from
wells within the Yakima Railroad Site. Without conceding any liability, Inland
Northwest and several of the other PLPs have implemented the bottled water
program. Over the past four years, Inland Northwest has incurred an average
annual expense of $720 for 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 300 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 Inland Northwest regarding the volume and
nature of wastes present, Inland Northwest 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 Inland Northwest and any other PLP as a joint and several
liability. At the date of this report, 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
Subsidiaries of the Company own twelve facilities that manufacture and
assemble various components of the Company's equipment. In addition, the
subsidiaries own 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.
AREC currently leases approximately 200 properties to various businesses.
AREC 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
allocation of liability with respect to environmental conditions at the leased
properties.
37
<PAGE> 39
MANAGEMENT
The directors and executive officers of the Company and their ages as of
December 1, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ------------------------------------- --- --------------------------------------------
<S> <C> <C>
Edward J. Shoen...................... 47 Chairman of the Board and President
Mark V. Shoen........................ 45 Director
James P. Shoen....................... 37 Vice President and Director
William E. Carty..................... 69 Director
Aubrey K. Johnson.................... 74 Director
John M. Dodds........................ 60 Director
Richard J. Herrera................... 42 Director
Charles J. Bayer..................... 56 Director
Gary B. Horton....................... 53 Treasurer
Gary V. Klinefelter.................. 48 Secretary and General Counsel
John A. Lorentz...................... 69 Assistant Secretary
Rocky D. Wardrip..................... 39 Assistant Treasurer
George R. Olds....................... 54 Assistant Secretary
</TABLE>
Edward J. Shoen has served as Director and Chairman of the Board since
December 1986 and as President since June 1987. Mr. Shoen has been associated
with the Company since May 1971.
Mark V. Shoen has served as a Director since April 1990. He served from
December 1990 to September 1994 as Executive Vice President of Product for
U-Haul. He has served as President, Phoenix Operation, from September 1994 to
present.
James P. Shoen, a Director since December 1986 and Vice President since May
1989, has been associated with the Company since July 1976. He has served from
April 1990 to present as Executive Vice President of U-Haul.
William E. Carty, a Director since May 1987, has been associated with the
Company since 1946. He has served in various executive positions in all areas of
the Company. He served most recently as Product Director. Mr. Carty retired from
the Company in December 1987.
Aubrey K. Johnson was a Director of the Company from 1987 until 1991. From
1991 until his re-election to the Board in August 1993, he served as a
consultant and advisor to various organizations and individuals.
John M. Dodds, a Director since September 1987, has been associated with
the Company since 1963. He served in regional field operations until December
1986, and served in national field operations until May 1994. Mr. Dodds retired
from the Company in May 1994.
Richard J. Herrera, a Director since September 1991, has been associated
with the Company since April 1988.
Charles J. Bayer, a Director since September 1990, has been associated with
the Company since 1967. He has served in various executive positions and has
served as President of Amerco Real Estate Company since September 1990.
Gary B. Horton has served as Treasurer since 1982. His previous positions
include Treasurer of U-Haul. He has been associated with the Company since
October 1969. In November, 1995, Mr. Horton was involved in a traffic accident
that resulted in a fatality. As a result of the accident, Mr. Horton pled guilty
to aggravated assault. On December 6, 1996, Mr. Horton was given a suspended
sentence and placed on three years probation. The Company does not believe the
terms of Mr. Horton's probation will interfere in any way with his ability to
perform his duties for the Company.
Gary V. Klinefelter, Secretary since July 1988, is licensed as an attorney
in Arizona and has served as General Counsel of the Company since June 1988.
38
<PAGE> 40
John A. Lorentz, Assistant Secretary since July 1988, is licensed as an
attorney in Oregon and has been associated with the Company since September
1953. His previous positions include Secretary of AMERCO and U-Haul.
Rocky D. Wardrip, Assistant Treasurer since September 1990, has been
associated with the Company since 1978 in various capacities within accounting
and treasury operations.
George R. Olds, Assistant Secretary since February 1993, has been
associated with the Company since 1975 as a member of the U-Haul legal
department specializing in taxation.
Edward J., Mark V. and James P. Shoen are brothers. William E. Carty is the
uncle of Edward J. and Mark V. Shoen.
BOARD OF DIRECTORS
The Company has four classes of directors, which are elected for staggered
terms of four years. The terms of each class are scheduled to expire at the
annual meeting of stockholders for 1994 (Class IV), 1995 (Class I), 1996 (Class
II), and 1997 (Class III). Edward J. Shoen and Mark V. Shoen are Class IV
directors, Aubrey K. Johnson and Richard J. Herrerra are Class I directors,
William E. Carty and Charles J. Bayer are Class II directors, and James P. Shoen
and John M. Dodds are Class III directors. Each director holds office until the
meeting for the year in which his or her term expires or his or her successor is
duly elected and qualified, or until his or her death, resignation, retirement,
disqualification, or removal, if earlier.
ANNUAL MEETINGS OF STOCKHOLDERS
The 1994 annual meeting of the Company's stockholders was delayed as a
result of litigation initiated by Paul F. Shoen in July 1994. The 1994 annual
meeting as well as the 1995 and 1996 annual meetings were subsequently delayed
by court order in connection with the Shoen Litigation. Effective October 1,
1996, the Company is no longer subject to any restriction on its ability to hold
annual meetings of stockholders. Accordingly, the Company expects to hold a
combined annual meeting of stockholders for 1994, 1995, and 1996 and to elect
Class IV, Class I, and Class II directors on January 17, 1997. As part of the
settlement of the litigation initiated by Paul F. Shoen, the Company agreed to
place him on management's slate of directors for the 1994 Annual Meeting of
Stockholders.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an audit committee, a compensation
committee, and an executive finance committee. The audit committee is charged
with reviewing the performance and independence of the Company's independent
accounting firm. Its members are William E. Carty and Aubrey K. Johnson. The
compensation committee is comprised of Charles J. Bayer, William E. Carty, and
Aubrey K. Johnson. The executive finance committee is responsible for
supervising the financial affairs of the Company and has the authority to give
final approval for the borrowing of funds on behalf of the Company without
further action or approval of the Board of Directors. The executive finance
committee is comprised of Edward J. Shoen, Aubrey K. Johnson, and Charles J.
Bayer.
39
<PAGE> 41
PRINCIPAL AND SELLING STOCKHOLDERS
The following table provides information, as of December 1, 1996, and as
adjusted to reflect the sale of shares of Common Stock pursuant to this
offering, as to the beneficial ownership of Common Stock of (i) each director of
the Company, (ii) all executive officers and directors of the Company as a
group, and (iii) those persons who beneficially own more than five percent (5%)
of the Company's Common Stock (including the Selling Stockholders). The
following table assumes no exercise of the Underwriters' over-allotment option.
<TABLE>
<CAPTION>
PRIOR TO THE OFFERING FOLLOWING THE OFFERING
---------------------------------- NUMBER OF -----------------------------------
SHARES OF COMMON SHARES SHARES OF COMMON
STOCK BENEFICIALLY PERCENTAGE OF BEING STOCK BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OF OWNER OWNED COMMON STOCK OFFERED OWNED COMMON STOCK
- ----------------------------------- ------------------ ------------- --------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Edward J. Shoen 16,166,292(1) 79.39 0 15,666,292 69.28
Chairman of the Board and
President
2727 N. Central Ave.
Phoenix, AZ 85004
Mark V. Shoen 16,166,292(1) 79.39 0 15,666,292 69.28
Director
2727 N. Central Ave.
Phoenix, AZ 85004
James P. Shoen 16,166,292(1) 79.39 0 15,666,292 69.28
Director and Vice President
1325 Airmotive Way
Suite 100
Reno, NV 89502
Paul F. Shoen 16,166,292(1) 79.39 300,000 15,666,292 69.28
P.O. Box 524
Glenbrook, NV 89413
Sophia M. Shoen 16,166,292(1) 79.39 200,000 15,666,292 69.28
5104 N. 32nd Street
Phoenix, AZ 85018
Irrevocable Trust 16,166,292(1) 79.39 0 15,666,292 69.28
between Edward J. Shoen
and Oxford Life Insurance
Company,
as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,166,292(1) 79.39 0 15,666,292 69.28
between Mark V. Shoen
and Oxford Life Insurance
Company,
as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,166,292(1) 79.39 0 15,666,292 69.28
between James P. Shoen
and Oxford Life Insurance
Company,
as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,166,292(1) 79.39 0 15,666,292 69.28
between Paul F. Shoen
and Oxford Life Insurance
Company,
as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
PRIOR TO THE OFFERING NUMBER OF FOLLOWING THE OFFERING
SHARES OF COMMON SHARES SHARES OF COMMON
STOCK BENEFICIALLY PERCENTAGE OF BEING STOCK BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OF OWNER OWNED COMMON STOCK OFFERED OWNED COMMON STOCK
---------- ----- ----
<S> <C> <C> <C> <C> <C>
Irrevocable Trust 16,166,292(1) 79.39 0 15,666,292 69.28
between Sophia M. Shoen
and Oxford Life Insurance
Company,
as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
The ESOP Trust(2) 16,166,292(1) 79.39 0 15,666,292 69.28
2727 N. Central Ave.
Phoenix, AZ 85004
John M. Dodds 0 0 0 0 0
Director
2727 N. Central Ave.
Phoenix, AZ 85004
William E. Carty 0 0 0 0 0
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Charles J. Bayer 1,325 * 0 1,325 *
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Richard J. Herrera 981 * 0 981 *
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Aubrey K. Johnson 0 0 0 0 0
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Executive Officers and 16,179,538(3) 79.45 0 15,679,538 69.34
Directors as a group (16
persons)(3)(4)
</TABLE>
- ---------------
* The percentage beneficially owned is less than one percent.
(1) This number includes beneficial ownership of shares attributed to a
stockholder agreement dated as of May 1, 1992, as amended (the "Stockholder
Agreement") and includes shares directly owned by Edward J. Shoen
(3,483,681); Mark V. Shoen (3,442,981); James P. Shoen (2,278,814); Paul F.
Shoen (2,188,558); Sophia M. Shoen (1,522,772); an Irrevocable Trust
between Mark V. Shoen and Oxford, as Trustee (527,604); an Irrevocable
Trust between James P. Shoen and Oxford, as Trustee (337,426); an
Irrevocable Trust between Paul F. Shoen and Oxford, as Trustee (71,976); an
Irrevocable Trust between Sophia M. Shoen and Oxford, as Trustee (108,891);
an Irrevocable Trust between Edward J. Shoen and Oxford, as Trustee
(559,443); and the ESOP Trust (1,644,146) (collectively the "Stockholder
Group"). The shares listed as held by the ESOP Trust include only the
unallocated Common Stock and the Common Stock allocated to the accounts of
Edward J. Shoen (2,771.59), Mark V. Shoen (2,496.99), James P. Shoen
(2,465.92), Paul F. Shoen (779.33), and Sophia M. Shoen (196.87). These
shares are not included in the number of shares directly owned by Edward J.
Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, and Sophia M. Shoen,
as referenced in the first sentence of this footnote 1. The Stockholder
Agreement restricts the disposition of shares of Common Stock to certain
types of permitted dispositions. James P. Shoen, whose address is listed
above, is the appointed attorney and authorized to vote the shares as
agreed upon by the stockholders holding a majority of the shares subject to
the Stockholder Agreement. As of the date hereof, Edward J. Shoen, Mark V.
Shoen, and James P. Shoen, each of whom is a director of the Company,
collectively hold a majority of the shares subject
41
<PAGE> 43
to the Stockholder Agreement and, therefore, have the ability, if they so
agree, to control the vote of the Common Stock that is subject to the
Stockholder Agreement. The Stockholder Agreement will expire on March 5,
1999 unless earlier terminated (i) by the consent of stockholders holding
more than 60% of the shares held under the Stockholder Agreement, (ii) upon
the effective date of certain mergers or consolidations involving the
Company, or (iii) at the respective election of Paul F. Shoen or Sophia M.
Shoen, upon the Company's failure to effect the registration of securities
held by them. The Selling Stockholders have informed the Company that they
believe the Stockholder Agreement has been terminated as a result of the
Company's alleged failure to effect in a timely manner the registration of
Common Stock held by Sophia M. Shoen in 1994. See footnote 2 below for
information about the ESOP Trust and the ESOP Trustee's ability to vote the
Common Stock held in the ESOP Trust.
(2) The complete name of the ESOP Trust is the ESOP Trust Fund for the AMERCO
Employee Savings, Profit Sharing and Employee Stock Ownership Trust. The
ESOP Trustee, which consists of three individuals without a past or present
employment history or business relationship with the Company, is appointed
by the Company's Board of Directors. Under the ESOP, each participant (or
such participant's beneficiary) in the ESOP directs the ESOP Trustee with
respect to the voting of all Common Stock allocated to the participant's
account. All shares in the ESOP Trust not allocated to participants
continue to be voted by the ESOP Trustee, subject to the Stockholder
Agreement. As of November 1, 1996, of the 2,971,511 shares of Common Stock
held by the ESOP Trust, 1,336,076 shares were allocated to participants and
1,635,435 shares remained unallocated. Of the 1,336,076 allocated shares,
approximately 8,711 shares are allocated to members of the Stockholder
Group, which shares are voted in accordance with the terms of the
Stockholder Agreement. Further, additional shares of Common Stock not
presently allocated to participants' accounts in the ESOP Trust will be
allocated as certain debt obligations of the ESOP Trust are repaid,
resulting in a reduction in the number of common shares subject to the
Stockholder Agreement.
(3) The 16,179,538 shares include the shares beneficially owned by directors and
executive officers as a result of the Stockholder Agreement discussed in
footnote 1 above. Beneficial ownership of the shares of current officers
and directors, without giving effect to the Stockholder Agreement is
9,218,722 shares, or approximately 45.27% of the outstanding shares of
Common Stock as of December 1, 1996.
(4) The executive officers and directors as a group beneficially own 27,872
shares (0.46%) of the Company's Series A Preferred Stock. Edward J. Shoen,
Mark V. Shoen, and William E. Carty beneficially own 12,600 shares (0.21%),
7,700 shares (0.13%) and 6,000 shares (0.10%), respectively.
The Company has agreed to place Paul F. Shoen on management's slate of
directors for the 1994 Annual Meeting of Stockholders which was delayed as a
result of litigation initiated by Paul F. Shoen and as a result of the Shoen
Litigation. For information on certain transactions between the Selling
Stockholders and the Company see Item 13. "Certain Relationships and Related
Transactions" in the Company's Annual Report on Form 10-K for the year ended
March 31, 1996.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Restated Articles of Incorporation (the "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
42
<PAGE> 44
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.
COMMON STOCK
As of the date of this Prospectus, there are 14,601,592 issued and
outstanding shares of the Company's Common Stock, $0.25 par value per share, and
5,762,495 issued and outstanding shares of Series A Common Stock, $0.25 par
value per share. 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. No shares of Series B Common Stock are outstanding. The Series B
Common Stock is identical to the Common Stock and Series A Common Stock, except
holders of Series B Common Stock are entitled to 1/10 of one vote per share. In
addition, the right of first refusal contained in the Company's By-Laws does not
apply to the Series B Common Stock.
The summary of terms of the Company's Common Stock, Series A Common Stock,
and Series B 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 Articles of Incorporation, the Company's By-Laws (the "By-Laws"), and the
Certificates of Designation, Preferences and Rights for Series A Common Stock
and Series B Common Stock which are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
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 Preferred Stock and the holder of the Series B Preferred Stock
are entitled to receive cumulative dividends prior to and in preference to the
holders of Common Stock at a fixed annual rate.
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. Each share of
Series B Common Stock entitles the holder to 1/10 of one vote per share 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.
Right of First Refusal. The 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. The right of first refusal does not apply to
the Series B Common Stock.
Transfer Agent. The transfer agent and registrar for the Common Stock is
ChaseMellon Shareholder Services, L.L.C.
PREFERRED STOCK
As of the date of this Prospectus, there are 6,100,000 issued and
outstanding shares of the Company's Series A Preferred Stock, no par value and
100,000 issued and outstanding shares of the Company's Series B Preferred Stock,
no par value.
The summary of the terms of the Company's Series A Preferred Stock and
Series B Preferred Stock contained in the Prospectus does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of
the Articles of Incorporation, the By-Laws, the Certificate of Designation,
Preferences and Rights for Series A Preferred Stock, and the Certificate of
Designation, Preferences and Rights for
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<PAGE> 45
Series B Preferred Stock, which are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
Series A -- General. The Series A Preferred Stock is not convertible into,
or exchangeable for, shares of any other class or classes of stock of the
Company. The Series A Preferred Stock has priority as to dividends over the
Company's Common Stock and any other series or class of the Company's stock that
ranks junior as to dividends to the Series A Preferred Stock, including the
Series B Preferred Stock.
Series A -- Dividends. 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 from the date of original issue and are payable,
when and as declared by the Board of Directors out of funds legally available
therefor, quarterly for each of the quarters ending February, May, August, and
November of each year, payable in arrears on the first business day that is not
a legal holiday of each succeeding March, June, September, and December,
respectively. Each such dividend is distributed to holders of record of the
Series A Preferred Stock as they appear on the books of the registrar maintained
for such purpose at the close of business on the record date. The record date
will not exceed 15 days preceding the payment date.
Dividends on the Series A Preferred Stock accrue regardless of whether
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared. Accrued but unpaid dividends on the Series A
Preferred Stock accumulate as of the dividend payment date on which they first
become payable, but no interest, or sum of money in lieu of interest, is payable
in respect of any dividend payment or payments on the Series A Preferred Stock
that may be in arrears. Dividends payable on the Series A Preferred Stock for
any period less than a quarterly dividend period are computed on the basis of a
360-day year consisting of twelve 30-day months.
Except as set forth below, no dividends may be declared or paid or set
apart for payment on any shares of any class or classes of stock of the Company
or any series thereof ranking, as to dividends, on a parity with or junior to
the Series A Preferred Stock for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for such payment on the Series A
Preferred Stock for all dividend periods terminating on or prior to the date of
payment of such dividend. When dividends are not so paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Stock and any shares of any class or classes of stock or series
thereof ranking on a parity as to dividends with the Series A Preferred Stock,
all dividends declared (if any) on the Series A Preferred Stock and any other
shares of such class or classes or series thereof ranking on a parity as to
dividends with the Series A Preferred Stock will be declared pro-rata so that
the amount of dividends declared per share on the Series A Preferred Stock and
such other shares will in all cases bear to each other the same ratio that
accrued dividends per share on the Series A Preferred Stock and such other
shares bear to each other.
The Certificate of Designation for the Series A Preferred Stock provides,
unless all dividends on the Series A Preferred Stock shall have been paid in
full, that (i) no dividend will be declared and paid or declared and a sum
sufficient therefor set apart for payment or other distribution declared or made
upon the shares of the Company's Common Stock or upon any other class ranking
junior to or on a parity with the Series A Preferred Stock as to dividends or
liquidations preferences and (ii) no shares of the Company's Common Stock or
class of stock ranking junior to or on a parity with the Series A Preferred
Stock as to dividends or liquidation preferences may be redeemed, purchased, or
otherwise acquired by the Company or any subsidiary thereof except by conversion
into or exchange for shares of the capital stock of the Company ranking junior
to the Series A Preferred Stock as to dividends and liquidation preferences.
Series A -- Redemption. The Series A Preferred Stock is not redeemable
prior to December 1, 2000. On or after that date, the Company, at its option
upon not less than 30 nor more than 60 days' notice, may redeem shares of the
Series A Preferred Stock, at any time or from time to time, at a redemption
price of $25.00 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.
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<PAGE> 46
Series A -- Voting. Except as described below, the holders of the Series A
Preferred Stock do not have any voting rights. If, however, at any time the
Company shall have failed to declare and pay in full dividends for six quarterly
periods, whether consecutive or not, on the Series A Preferred Stock, and all
such preferred dividends remain unpaid, the holders of the Series A Preferred
Stock voting together as a class with all other series of Preferred Stock then
entitled to vote on such election of directors, will be entitled to elect two
directors until the full dividends accumulated on all outstanding shares of such
series shall have been declared and paid in full. In addition, the affirmative
vote of the holders of at least two-thirds of the outstanding shares of each
series of Preferred Stock, voting together as a class, is required to authorize
any amendment, alteration, or repeal of the Articles of Incorporation or any
Certificate of Amendment that would adversely affect the powers, preferences, or
special rights of the Preferred Stock, including authorizing any class of stock
with superior dividend and/or liquidation preferences.
Series A -- Liquidation Preference. Upon any dissolution, liquidation, or
winding up of the affairs of the Company, whether voluntary or involuntary,
after payment or provision for payment has been made for the debts and other
liabilities of the Company and payment or provision for payment has been made on
all amounts required to be paid in respect of any senior class or classes of
Preferred Stock, the holders of the Series A Preferred Stock will be entitled,
subject to certain exceptions, to receive the amount of $25.00 per share, plus
accrued and unpaid dividends thereon to the date of final distribution.
Although Nevada law gives the Board of Directors of the Company broad power
to limit or deny voting rights, even if voting rights are denied by action of
the Board of Directors, the Nevada General Corporation Law allows holders of
non-voting shares to vote in circumstances where a major decision made by the
directors could adversely impact their class. Thus, if any proposed action would
alter or change any preference or any relative or other right given to any class
or series of outstanding shares, the action must be approved by the vote, in
addition to the affirmative vote otherwise required, of the holders representing
a majority of the voting power of each class or series affected by the action,
regardless of limitations or restrictions on the voting power thereof. In
addition, if any acquisition of voting rights by an acquiring person will result
in any change of the kind described in Nevada Revised Statutes 78.390, the
holders of a majority of each class or series effected must approve the
acquisition. Similarly, separate voting by a class of stockholders is required
on a plan of merger if the plan contains a provision that, if contained in a
proposed amendment to the Company's Articles of Incorporation, would entitle the
stockholders to vote as a class on a proposed amendment.
Series B -- General. The Series B Preferred Stock consists of 100,000
shares. The Series B Preferred Stock has priority as to dividends over the
Company's Common Stock and any other series or class of the Company's stock
ranking junior as to dividends to the Series B Preferred Stock.
Series B -- Dividends. Holders of shares of the Series B Preferred Stock
are entitled to receive dividends at a floating rate which is reset quarterly.
Such dividends are cumulative from the date of original issue and are payable
when and as declared by the Board of Directors out of funds legally available
therefor. The Certificate of Designation for the Series B Preferred Stock
provides that no dividends whatever shall be paid or declared, nor shall any
distribution be made on the Company's Common Stock or on any other class ranking
junior to the Series B Preferred Stock, other than a dividend or distribution
payable in such shares, nor shall the Company or any subsidiary of the Company
purchase, redeem, or otherwise acquire for a consideration any such junior
shares, unless full cumulative dividends have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for such payment, on the Series B Preferred Stock.
Series B -- Conversion. Upon each of the following to occur from time to
time (i) August 31, 1997, and for ten business days thereafter; (ii) the first
day of each fiscal quarter of the Company occurring after August 31, 1997, and
for ten business days after the first day of such fiscal quarter; (iii) the
expiration of ten days after the occurrence of an Event of Noncompliance (as
defined in the Certificate of Designation for Series B Preferred Stock), and at
any time thereafter; (iv) any dividends on the Series B Preferred Stock becoming
in arrears, and at any time thereafter; (v) the Company no longer holding more
than fifty percent (50%) of the outstanding stock and assets of any of
Ponderosa, Oxford, or RWIC, and
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<PAGE> 47
at any time thereafter; or (vi) the Company or any of its subsidiaries
completing an offering of equity securities of at least $125 million prior to
March 1, 1997, and at any time thereafter, then all of the Series B Preferred
Stock is convertible, at the option of the holder, into either (a) 4,000,000
shares of Series B Common Stock, subject to adjustment; or (b) all of the shares
of capital stock of Picacho Peak Investment Co., a subsidiary of the Company.
Notwithstanding the foregoing, the holder of the Series B Preferred Stock has
agreed that it will not convert the Series B Preferred Stock into all of the
outstanding capital stock of Picacho Peak Investment Co. pursuant to the
provisions of (i) or (ii) above. Furthermore, the Company has agreed to permit
the conversion of the Series B Preferred Stock into the Series B Common Stock on
May 1, 1997 and for 10 business days thereafter and on the first day of each
fiscal quarter of the Company occurring after May 1, 1997, and for 10 business
days thereafter.
Series B -- Redemption. If the holder exercises its conversion rights
pursuant to the preceding paragraph, then instead of effecting the conversion,
the Company may elect to redeem all (but not less than all) of the Series B
Preferred Stock then outstanding. Upon any redemption of the Series B Preferred
Stock, the Company shall pay out of funds legally available therefor in cash a
sum equal to $100 million, subject to adjustment, all accrued but unpaid
dividends, and certain other payments, costs, fees, and expenses. The Series B
Preferred Stock is not otherwise redeemable by the Company.
Series B -- Voting. Except as described below, the holders of Series B
Preferred Stock do not have voting rights. Although Nevada law gives the Board
of Directors of the Company broad power to limit or deny voting rights, even if
voting rights are denied by action of the Board of Directors, the Nevada General
Corporation Law allows holders of non-voting shares to vote in circumstances
where a major decision made by the directors could adversely impact their class.
Thus, if any proposed action would alter or change any preference or any
relative or other right given to any class or series of outstanding shares, the
action must be approved by the vote, in addition to the vote otherwise required,
of the holders representing a majority of the voting power of each class or
series affected by the action, regardless of limitations or restrictions on the
voting power thereof. In addition, if any acquisition of voting rights by an
acquiring person will result in a change of the kind described in Nevada Revised
Statutes 78.390, the holders of a majority of each class or series affected must
approve the acquisition. Similarly, separate voting by a class of stockholders
is required on a plan of merger if the plan contains a provision that, if
contained in a proposed amendment to the Company's articles of incorporation,
would entitle all stockholders to vote as a class on a proposed amendment.
In addition, the written consent of the holder of the Series B Preferred
Stock is necessary for authorizing, affecting, or validating the amendment,
alteration, or repeal of any of the provisions of the Articles of Incorporation
of the Company or of any certificate amendatory thereof of supplemental thereto
(including any certificate of amendment or any similar document relating to any
series of preferred stock) that would adversely affect the powers, preferences,
or special rights of the Series B Preferred Stock, including the creation or
authorization of any class of shares on a parity with or senior to the Series B
Preferred Stock. Any amendment or any resolution or action of the Board of
Directors that would create or issue any series of shares junior to the Series B
Preferred Stock out of the authorized shares of preferred stock, or that would
authorize, create, or issue any other shares junior to the Series B Preferred
Stock (whether or not already authorized), shall not be considered to affect
adversely the powers, preferences, or special rights of the outstanding shares
of the Series B Preferred Stock.
Series B -- Liquidation Preference. Upon any liquidation, dissolution, or
winding up of the Company, whether voluntary or involuntary, before any amount
shall be paid to the holders of any shares junior to the Series B Preferred
Stock, the holder of the Series B Preferred Stock shall be paid first out of the
assets of the Company available for distribution to holders of its capital stock
an amount equal to $100 million, subject to adjustment, plus all accrued but
unpaid dividends. If, upon the occurrence of a liquidation, dissolution, or
winding up, the assets and funds thus distributed to the holder of the Series B
Preferred Stock shall be insufficient to permit the payment to the holder of its
full liquidation preferences, then the entire assets and funds of the Company
legally available for distribution to the holders of capital stock (other than
the Series A Preferred Stock) shall be distributed ratably to the holder of the
Series B Preferred Stock and the holders of any shares ranking on a parity with
the Series B Preferred Stock.
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<PAGE> 48
CERTAIN PROVISIONS THAT MAY LIMIT CHANGES IN CONTROL
Certain provisions summarized below may have the effect of limiting or
delaying a change in control of the Company.
The Articles of Incorporation provide for the Board of Directors to be
divided into four classes of directors serving staggered four-year terms. As a
result, approximately one-fourth of the Board of Directors will be elected each
year. Moreover, under the Nevada General Corporation Law, an affirmative vote of
holders of two-thirds of the then outstanding stock entitled to vote is required
to remove a director. This provision, when coupled with the provision of the
Articles of Incorporation authorizing only the Board of Directors to fill vacant
directorships, may hinder the removal of incumbent directors by stockholders
entitled to vote and the simultaneous election of new directors by such
stockholders to fill the vacancies created by such removal.
Moreover, (i) the By-Laws grant the Company a right of first refusal
exercisable in connection with certain sales of outstanding shares of the
Company's Common Stock, (ii) the Articles of Incorporation require holders of
two-thirds of the then outstanding shares of Common Stock to amend certain
provisions of the Articles of Incorporation, to amend the By-Laws, and to
approve certain transactions with, among others, holders of five percent of any
class of voting stock of the Company, (iii) the Articles of Incorporation
prohibit stockholder action by written consent, and (iv) certain of the
Company's credit agreements contain provisions that could require the prepayment
of all monies outstanding thereunder upon a "change in control."
In addition, the Board of Directors has adopted a stockholder rights plan.
Pursuant to the plan, holders of the Common Stock of the Company have rights
that entitle such holders to purchase from the Company one one-hundredth of a
share of the Company's unauthorized and unissued Series C Preferred Stock at an
exercise price of $15,000 per share (the price per share and the exercise price
are subject to adjustment). The rights become exercisable if any person or group
of affiliated or associated persons becomes the beneficial owner of fifty
percent or more of the Company's Common Stock without approval of a majority of
the disinterested members of the Board of Directors; such person being defined
as an "acquiring person." Upon the occurrence of an Affiliate Merger or
Triggering Event (certain transactions defined in the plan involving an
acquiring person), each right entitles its holder to purchase, for the exercise
price, that number of shares of Common Stock of the Company having a value equal
to twice the exercise price. Upon the occurrence of a Business Combination (as
defined in the plan), each right entitles its holder to purchase, for the
exercise price, that number of shares of Common Stock of the acquiring or
surviving company having a value equal to twice the exercise price. The rights
will expire on July 29, 1998, unless earlier redeemed by the Company pursuant to
authorization by a majority of the disinterested board.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of a substantial amount of Common Stock in the public market
could adversely affect market prices for the Common Stock. Upon the closing of
the offering, there will be 16,851,592 shares of Common Stock and 5,762,495
shares of Series A Common Stock outstanding. The shares of Common Stock sold in
the offering as well as 2,278,480 shares of Common Stock currently trading on
Nasdaq will be freely tradeable without restriction or further registration of
the Securities Act, unless held by an "affiliate" of the Company as that term is
defined in the Securities Act, which shares will be subject to the resale
limitation of Rule 144. Currently, 591,950 restricted shares of Common Stock are
eligible for sale pursuant to Rule 144, subject to the holding period and other
limitations described below, not including the 16,166,292 shares of Common Stock
held pursuant to the Stockholder Agreement described in "Principal and Selling
Stockholders" and the 1,336,076 shares of Common Stock held by the ESOP Trust
and allocated to ESOP participants. Each employee of the Company, upon severance
of employment, has the option of receiving the number of shares of Common Stock
allocated to his or her ESOP account or selling the stock to the ESOP Trust.
Such shares may be sold on Nasdaq following distribution from the ESOP. In
general, under Rule 144 as currently in effect, a stockholder (or stockholders
whose shares are aggregated) who has beneficially owned shares constituting
"restricted securities" (generally defined
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<PAGE> 49
as securities acquired from the Company or an affiliate of the Company in a
non-public transaction) for at least two years, is entitled to sell within any
three-month period the number of shares that does not exceed the greater of one
percent of the outstanding Common Stock or the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the date in which
notice of such sale is filed pursuant to Rule 144. Sales under Rule 144 are also
subject to certain provisions regarding the manner of sale, notice requirements
and the availability of current public information about the Company. A
stockholder (or stockholders whose shares are aggregated) who is not an
affiliate of the Company for at least 90 days prior to a proposed transaction
and who has beneficially owned "restricted securities" for at least three years
is entitled to sell such shares under Rule 144 without regard to the volume
limitations described above.
The Company, Edward J. Shoen, and James P. Shoen (the holders of all of the
Series A Common Stock of the Company) and Mark V. Shoen (holder of 3,442,981
shares of the Common Stock) have agreed that they will not, without the prior
written consent of Lehman Brothers Inc. and Salomon Brothers Inc on behalf of
the Underwriters, sell or otherwise dispose of any shares of Common Stock for a
period of 120 days after date hereof. In addition, the Company has been informed
by Edward J. Shoen, James P. Shoen and Mark V. Shoen that they have no intention
of selling any Common Stock in the near future. While the Company does not
expect any shares of Common Stock held pursuant to the Stockholder Agreement
(other than the shares of Common Stock held by the Selling Stockholders) to be
sold to the public pursuant to Rule 144 or otherwise, there can be no assurance
that such shares will not be sold to the public. See "Principal and Selling
Stockholders."
REGISTRATION RIGHTS
"Demand" registration rights are available for a total of 3,711,330 shares
of Common Stock held by the Selling Stockholders (including the 500,000 shares
offered hereby) under (i) a Share Repurchase and Registration Rights Agreement
dated as of March 1, 1992 among the Company, Paul F. Shoen and Pafran, Inc. and
(ii) a Share Repurchase and Registration Rights Agreement dated as of May 1,
1992 among the Company, Sophia M. Shoen and Sophmar, Inc. In general, such
stockholders, subject to certain limitations, may request registration of their
shares at the Company's expense.
The Company has also granted certain registration rights for the
registration of the Company's Series B Common Stock following any conversion of
the Company's Series B Preferred Stock. In addition, the Company has granted
registration rights with respect to an aggregate of 6,000,000 shares of Common
Stock held by Edward J. Shoen, James P. Shoen and Mark V. Shoen which have been
pledged to NationsBank Corporation. The Company has no obligation to register
such shares of Common Stock held by Edward J. Shoen, James P. Shoen, or Mark V.
Shoen unless NationsBank forecloses on the pledge.
CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
In general, a "Non-U.S. Holder" is any holder other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of any
state, or (iii) an estate or trust, the income of which is includable in gross
income for United States federal income tax purposes regardless of its source.
This discussion is based on current law only. This discussion does not
address aspects of United States federal taxation other than income and estate
taxation and does not address all aspects of income and estate taxation, nor
does it consider any specific facts or circumstances that may apply to a
particular Non-U.S. Holder. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL,
AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF HOLDING AND DISPOSING
OF SHARES OF COMMON STOCK.
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<PAGE> 50
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States on at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to U.S. federal tax as if they were U.S. citizens.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate (or a lower rate prescribed by an
applicable tax treaty) unless the dividends are either (i) effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States, or (ii) if certain income tax treaties apply, attributable to a
permanent establishment in the United States maintained by the Non-U.S. Holder.
Dividends effectively connected with such a United States trade or business or
attributable to such a United States permanent establishment generally will not
be subject to United States withholding tax (if the Non-U.S. Holder files
certain forms, including Internal Revenue Service Form 4224, with the payor of
the dividend) and generally will be subject to United States federal income tax
on a net income basis, in the same manner as if the Non-U.S. Holder were a
resident of the United States. A Non-U.S. Holder that is a corporation may be
subject to an additional branch profits tax at a rate of 30% (or such lower rate
as may be specified by an applicable treaty) on the actual or deemed
repatriation from the United States of its "effectively connected earnings and
profits," subject to certain adjustments. To determine the applicability of a
tax treaty providing for a lower rate of withholding, dividends paid to an
address in a foreign country are presumed under the current interpretation of
existing Treasury Regulations to be paid to a resident of that country absent
knowledge to the contrary. However, proposed Treasury Regulations issued April
15, 1996, if finalized, would eliminate this presumption with respect to
payments made after December 31, 1997. These proposed Treasury Regulations also
would require Non-U.S. Holders to provide the withholding agent with a
beneficial owner withholding certificate to obtain the benefit of any applicable
tax treaty providing for a lower rate of withholding tax on dividends. The
beneficial owner withholding certificate would contain the Non-U.S. Holders'
name, permanent residence address and taxpayer identification number ("TIN"),
certified by the Internal Revenue Service (the "Service"). The Service would
certify the TIN based on a certificate of residence issued by the competent
authority of the treaty country of which a Non-U.S. Holder claims to be a
resident or on certain documentary evidence establishing residence in the treaty
country. A Non-U.S. Holder that is eligible for a reduced rate of U.S.
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Service.
SALE OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares of
Common Stock unless (i) the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States or,
alternatively, if certain tax treaties apply, attributable to a permanent
establishment in the United States maintained by the Non-U.S. Holder (and in
either such case, the United States branch profits tax may also apply upon
actual or deemed repatriation of the gain if the Non-U.S. Holder is a
corporation); (ii) in the case of a Non-U.S. Holder who is a nonresident alien
individual and holds shares of Common Stock as a capital asset, such individual
is present in the United States for 183 days or more in the taxable year of
disposition, and either (a) such individual has a "tax home" (as defined for
United States federal income tax purposes) in the United States (unless the gain
from the disposition is attributable to an office or other fixed place of
business maintained by such Non-U.S. Holder in a foreign country and such gain
has been subject to a foreign income tax equal to at least 10% of the gain
derived from such disposition), or (b) the gain is attributable to an office or
other fixed place of business maintained by such individual in the United
States; (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of United States tax law applicable to certain United States expatriates whose
loss of United States citizenship had as one
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<PAGE> 51
of its principal purposes the avoidance of United States taxes; or (iv) the
Company is or has been a United States real property holding corporation (a
"USRPHC") for United States federal income tax purposes (which the Company does
not believe that it is or is likely to become) at any time within the shorter of
the five-year period preceding such disposition or such Non-U.S. Holder's
holding period. If the Company were or were to become a USRPHC, gains realized
upon a disposition of Common Stock by a Non-U.S. Holder which did not directly
or indirectly own more than 5% of the Common Stock during the shorter of the
periods described above generally would not be subject to United States federal
income tax, provided that the Common Stock is "regularly traded" on an
established securities market.
ESTATE TAX
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax purposes)
of the United States at the time of death will be includable in the individual's
gross estate for United States federal estate tax purposes (unless an applicable
estate tax treaty provides otherwise), and therefore may be subject to United
States federal estate tax.
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to, and the tax withheld with respect to, each
Non-U.S. Holder. These reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
this information also may be made available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the
Non-U.S. Holder resides or is established.
United States backup withholding (which generally is imposed at the rate of
31% on certain payments to persons that fail to furnish the information required
under the United States information reporting requirements) and information
reporting generally will not apply to dividends paid on Common Stock to a
Non-U.S. Holder at an address outside the United States.
If the proceeds of the disposition of Common Stock by a Non-U.S. Holder are
paid over, by or through a United States office of a broker, the payment is
subject to information reporting and to backup withholding unless the disposing
holder certifies as to its name, address and status as a Non-U.S. Holder under
penalties of perjury or otherwise establishes an exemption. Generally, United
States information reporting and backup withholding will not apply to a payment
of disposition proceeds if the payment is made outside the United States through
a non-U.S. office of a non-U.S. broker. However, United States information
reporting requirements (but not backup withholding) will apply to a payment of
disposition proceeds outside the United States if (a) the payment is made
through a non-U.S. office of a broker that is (i) a United States person for
United States federal income tax purposes, (ii) a "controlled foreign
corporation" for United States federal income tax purposes or (iii) a foreign
person 50% or more of whose gross income from certain periods is effectively
connected with a United States trade or business, and (b) the broker fails to
maintain documentary evidence in its files that the holder is a Non-U.S. Holder
or certain conditions are not met.
Backup withholding is not a tax in and of itself, but rather a collection
method. Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be refunded or credited against the Non-U.S. Holder's
United States federal income tax liability, if any, provided that the required
information is furnished to the Service.
These backup withholding tax and information reporting rules are currently
under review by the United States Treasury Department and proposed Treasury
Regulations issued on April 15, 1996, would modify certain of such rules
generally with respect to payments made after December 31, 1997. Accordingly,
the application of such rules to the Common Stock could be changed.
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<PAGE> 52
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the Company, the Selling Stockholders and the Underwriters (the
"Underwriting Agreement"), the Company and the Selling Stockholders have
severally agreed to sell to each of the Underwriters named below (the
"Underwriters"), for whom Lehman Brothers Inc. and Salomon Brothers Inc are
acting as representatives (the "Representatives"), and each of the Underwriters
has severally agreed to purchase from the Company and the Selling Stockholders,
the number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc........................................
Salomon Brothers Inc.......................................
----------
Total.................................................... 2,750,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than those subject to the
over-allotment option described below) if any such shares are purchased. In the
event of a default by any Underwriter, the Underwriting Agreement provides that,
in certain circumstances, the purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have been advised by the
Representatives that the several Underwriters propose initially to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain other dealers. After the public offering, the public offering price
and such concessions may be changed.
The Company has granted the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to an additional 337,500
shares of Common Stock at the initial price to the public set forth on the cover
page of this Prospectus, solely to cover over-allotments. To the extent that the
Underwriters exercise such option, in whole or in part, each Underwriter will
have a firm commitment, subject to certain conditions, to purchase the same
proportion of the option shares as the number of shares of Common Stock to be
purchased by such Underwriters in the above table bears to the total number of
shares of Common Stock offered by the Underwriters hereby.
The Underwriting Agreement provides that the Company and the Selling
Stockholders, jointly and severally, will indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company, Edward J. Shoen, Mark V. Shoen, and James P. Shoen have each
agreed with the Underwriters that they will not offer, sell or contract to sell,
or otherwise dispose of, directly or indirectly,
51
<PAGE> 53
or announce an offering of, any shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock for a period of
120 days from the date of this Prospectus, without the prior written consent of
the Representatives, except issuances and sales of Common Stock issued pursuant
to any employee stock ownership plan in effect on the date the Underwriting
Agreement is executed.
The Underwriters and selling group members (if any) that currently act as
market makers for the Common Stock may engage in "passive market making" in the
Common Stock on Nasdaq in accordance with Rule 10b-6A under the Exchange Act.
Rule 10b-6A permits, upon the satisfaction of certain conditions, underwriters
and selling group members participating in a distribution that are also Nasdaq
market makers in the security being distributed to engage in limited market
making transactions during the period when Rule 10b-6 under the Exchange Act
would otherwise prohibit such activity. Rule 10b-6A prohibits underwriters and
selling group members engaged in passive market making generally from entering a
bid or effecting a purchase at a price that exceeds the highest bid for those
securities displayed on Nasdaq by a market maker that is not participating in
the distribution. Under Rule 10b-6A, each underwriter or selling group member
engaged in passive market making is subject to a daily net purchase limitation
equal to 30% of such entity's average daily trading volume during the two full
consecutive calendar months immediately preceding the date of the filing of the
registration statement under the Securities Act pertaining to the security to be
distributed. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock 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 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 and for the Selling
Stockholders by Grover T. Wickersham, P.C., 430 Cambridge Avenue, Suite 100,
Palo Alto, California 94306. The Grover T. Wickersham, P.C. Profit Sharing Plan
and Grover T. Wickersham, in the aggregate, own 15,000 shares of the Company's
Common Stock.
EXPERTS
The consolidated financial statements of the Company as of March 31, 1996
and 1995 and for each of the three years in the period ended March 31, 1996
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
52
<PAGE> 54
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
REPORT:
Report of Independent Accountants................................................... F-2
AUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets -- March 31, 1996 and 1995.............................. F-3
Consolidated Statements of Earnings -- Years ended March 31, 1996, 1995 and 1994.... F-4
Consolidated Statements of Changes in Stockholders' Equity -- Years ended March 31,
1996, 1995 and 1994.............................................................. F-5
Consolidated Statements of Cash Flows -- Years ended March 31, 1996, 1995 and
1994............................................................................. F-6
Notes to Consolidated Financial Statements.......................................... F-7
SCHEDULES
Condensed Financial Information of Registrant -- Schedule I......................... F-45
Supplemental Information (for Property -- Casualty Insurance
Underwriters) -- Schedule V...................................................... F-49
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1996, March 31, 1996 and September
30, 1995......................................................................... F-50
Consolidated Statements of Earnings for the Six Months ended September 30, 1996 and
1995............................................................................. F-52
Consolidated Statements of Changes in Stockholders' Equity for the Six Months ended
September 30, 1996 and 1995...................................................... F-53
Consolidated Statements of Earnings for the Quarters ended September 30, 1996 and
1995............................................................................. F-55
Consolidated Statements of Cash Flows for the Six Months ended September 30, 1996
and 1995......................................................................... F-56
Notes to Consolidated Financial Statements.......................................... F-57
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of AMERCO
In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of AMERCO and its subsidiaries at March 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for advertising costs in fiscal 1996.
As discussed in Note 11 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits in fiscal 1994.
PRICE WATERHOUSE LLP
Phoenix, Arizona
June 25, 1996
F-2
<PAGE> 56
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
Cash and cash equivalents................................................ $ 31,168 $ 35,286
Receivables.............................................................. 340,564 311,752
Inventories.............................................................. 45,891 50,337
Prepaid expenses......................................................... 16,415 25,933
Investments, fixed maturities............................................ 879,702 705,428
Investments, other....................................................... 126,587 135,220
Deferred policy acquisition costs........................................ 49,995 49,244
Other assets............................................................. 20,941 18,543
---------- ----------
Property, plant and equipment, at cost:
Land................................................................... 212,593 214,033
Buildings and improvements............................................. 769,380 735,624
Furniture and equipment................................................ 188,734 179,016
Rental trailers and other rental equipment............................. 256,411 245,892
Rental trucks.......................................................... 968,131 913,641
General rental items................................................... 24,197 51,890
---------- ----------
2,419,446 2,340,096
Less accumulated depreciation.......................................... 1,102,731 1,065,850
---------- ----------
Total property, plant and equipment.................................. 1,316,715 1,274,246
---------- ----------
$ 2,827,978 $ 2,605,989
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities............................... $ 151,754 $ 127,613
Notes and loans........................................................ 998,220 881,222
Policy benefits and losses, claims and loss expenses payable........... 483,561 475,187
Liabilities from premium deposits...................................... 410,787 304,979
Cash overdraft......................................................... 32,159 31,363
Other policyholders' funds and liabilities............................. 25,713 20,378
Deferred income........................................................ 2,926 7,426
Deferred income taxes.................................................. 73,310 71,037
---------- ----------
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 March 31, 1996 and 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 in 1996 and 1995............................. 1,441 1,441
Common stock of $0.25 par value, 150,000,000 shares authorized,
34,237,505 shares issued in 1996 and 1995............................ 8,559 8,559
Additional paid-in capital............................................. 165,756 165,675
Foreign currency translation adjustment................................ (11,877) (12,435)
Unrealized gain (loss) on investments.................................. 11,097 (6,483)
Retained earnings...................................................... 609,019 561,589
---------- ----------
783,995 718,346
Less:
Cost of common shares in treasury (7,209,077 and 1,335,937 shares as of
March 31, 1996 and 1995, respectively)............................... 111,118 10,461
Unearned employee stock ownership plan shares.......................... 23,329 21,101
---------- ----------
Total stockholders' equity........................................... 649,548 686,784
Contingent liabilities and commitments
---------- ----------
$ 2,827,978 $ 2,605,989
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 57
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Rental and other revenue.......................... $ 920,379 $ 888,295 $ 811,705
Net sales......................................... 173,806 170,204 156,038
Premiums.......................................... 154,249 135,648 123,344
Net investment income............................. 45,989 42,085 38,807
---------- ---------- ----------
Total revenues................................. 1,294,423 1,236,232 1,129,894
Costs and expenses
Operating expense................................. 732,841 656,693 612,409
Advertising expense............................... 38,926 29,124 26,292
Cost of sales..................................... 108,662 93,485 92,179
Benefits and losses............................... 151,232 133,407 120,825
Amortization of deferred acquisition costs........ 17,131 10,896 9,343
Depreciation...................................... 81,847 151,409 133,485
Interest expense.................................. 67,558 67,762 68,859
---------- ---------- ----------
Total costs and expenses....................... 1,198,197 1,142,776 1,063,392
Pretax earnings from operations..................... 96,226 93,456 66,502
Income tax expense.................................. (35,832) (33,424) (19,853)
---------- ---------- ----------
Earnings from operations before extraordinary loss
on early extinguishment of debt and cumulative
effect of change in accounting principle.......... 60,394 60,032 46,649
Extraordinary loss on early extinguishment of debt,
net............................................... -- -- (3,370)
Cumulative effect of change in accounting principle,
net............................................... -- -- (3,095)
---------- ---------- ----------
Net earnings................................... $ 60,394 $ 60,032 $ 40,184
========== ========== ==========
Earnings per common share:
Earnings from operations before extraordinary loss
on early extinguishment of debt and cumulative
effect of change in accounting principle....... $1.33 $1.23 $1.06
Extraordinary loss on early extinguishment of
debt, net...................................... -- -- (.09)
Cumulative effect of change in accounting
principle, net................................. -- -- (.08)
---------- ---------- ----------
Net earnings................................... $1.33 $1.23 $.89
========== ========== ==========
Weighted average common shares outstanding.......... 35,736,335 38,190,552 38,664,063
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 58
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Series A common stock of $0.25 par value:
10,000,000 shares authorized, 5,762,495 shares
issued in 1996 and 1995, 5,754,334 in 1994
Beginning of year.................................. $ 1,441 $ 1,438 $ --
Exchange for Series A common stock.............. -- 871 1,438
Exchange for common stock....................... -- (868) --
--------- --------- ---------
End of year........................................ 1,441 1,441 1,438
--------- --------- ---------
Common stock of $0.25 par value: 150,000,000 shares
authorized in 1996, 1995 and 1994, 34,237,505
shares issued in 1996 and 1995, 34,245,666 in 1994
Beginning of year.................................. 8,559 8,562 10,000
Exchange for Series A common stock.............. -- (871) (1,438)
Exchange for common stock....................... -- 868 --
--------- --------- ---------
End of year........................................ 8,559 8,559 8,562
--------- --------- ---------
Additional paid-in capital:
Beginning of year.................................. 165,675 165,651 19,331
Issuance of preferred stock..................... -- -- 146,320
Issuance of common shares under leveraged
employee stock ownership plan................. 81 24 --
--------- --------- ---------
End of year........................................ 165,756 165,675 165,651
--------- --------- ---------
Foreign currency translation:
Beginning of year.................................. (12,435) (11,152) (6,122)
Change during year.............................. 558 (1,283) (5,030)
--------- --------- ---------
End of year........................................ (11,877) (12,435) (11,152)
--------- --------- ---------
Unrealized gains (losses) on investments:
Beginning of year.................................. (6,483) 679 --
Change during year.............................. 17,580 (7,162) 679
--------- --------- ---------
End of year........................................ 11,097 (6,483) 679
--------- --------- ---------
Retained earnings:
Beginning of year.................................. 561,589 514,521 482,163
Net earnings.................................... 60,394 60,032 40,184
Dividends paid to stockholders:
Preferred stock: ($2.13, $2.13 and $0.78 per
share for 1996, 1995 and 1994,
respectively)................................. (12,964) (12,964) (4,753)
Common stock: ($0.08 per share for 1994)........ -- -- (3,147)
Tax benefits related to leveraged employee stock
ownership plan dividends...................... -- -- 74
--------- --------- ---------
End of year........................................ 609,019 561,589 514,521
--------- --------- ---------
Less Treasury stock:
Beginning of year.................................. 10,461 10,461 10,461
Net increase (5,873,140 shares in 1996)......... 100,657 -- --
--------- --------- ---------
End of period...................................... 111,118 10,461 10,461
--------- --------- ---------
Less Unearned employee stock ownership plan shares:
Beginning of year.................................. 21,101 17,451 14,953
Increase in loan................................ 4,576 5,672 4,335
Proceeds from loan.............................. (2,348) (2,022) (1,837)
--------- --------- ---------
End of year........................................ 23,329 21,101 17,451
--------- --------- ---------
Total stockholders' equity........................... $ 649,548 $ 686,784 $ 651,787
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 59
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $ 60,394 $ 60,032 $ 40,184
Depreciation and amortization...................... 102,427 163,890 148,740
Provision for losses on accounts receivable........ 4,492 4,958 1,938
Net (gain) loss on sale of real and personal
property........................................ 2,142 (3,390) (2,114)
Gain on sale of investments........................ (5,172) (868) (4,195)
Cumulative effect of change in accounting
principle....................................... -- -- 3,095
Changes in policy liabilities and accruals......... 20,010 32,489 13,330
Additions to deferred policy acquisition costs..... (21,507) (12,119) (7,440)
Net change in other operating assets and
liabilities..................................... (10,882) (22,848) 9,312
---------- ---------- ----------
Net cash provided by operating activities............ 151,904 222,144 202,850
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment................... (291,057) (434,992) (530,520)
Fixed maturities................................ (332,155) (186,000) (280,345)
Real estate..................................... (8,127) (11,576) (176)
Mortgage loans.................................. (10,560) (107,571) (64,467)
Proceeds from sales of investments:
Property, plant and equipment................... 165,490 185,098 214,543
Fixed maturities................................ 190,846 192,428 211,437
Real estate..................................... 2,749 927 1,552
Mortgage loans.................................. 29,447 18,535 81,619
Changes in other investments....................... 9,169 (12,327) 8,539
---------- ---------- ----------
Net cash used by investing activities................ (244,198) (355,478) (357,818)
Cash flows from financing activities:
Net change in short-term borrowings................ 84,500 178,750 21,750
Proceeds from notes................................ 140,141 68,845 186,000
Debt issuance costs................................ (1,663) (1,422) (531)
Loan to leveraged Employee Stock Ownership Plan.... (4,576) (5,672) (4,335)
Proceeds from leveraged Employee Stock Ownership
Plan............................................ 2,348 2,022 1,837
Principal payments on notes........................ (107,643) (90,137) (181,107)
Issuance of preferred stock........................ -- -- 146,320
Extraordinary loss on early extinguishment of
debt............................................ -- -- (3,370)
Net change in cash overdraft....................... 796 4,804 1,708
Dividends paid..................................... (12,964) (12,964) (7,900)
Treasury stock acquisitions........................ (100,657) -- --
Investment contract deposits....................... 163,423 65,386 31,932
Investment contract withdrawals.................... (75,529) (59,434) (40,185)
---------- ---------- ----------
Net cash provided by financing activities............ 88,176 150,178 152,119
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents..... (4,118) 16,844 (2,849)
Cash and cash equivalents at beginning of year....... 35,286 18,442 21,291
---------- ---------- ----------
Cash and cash equivalents at end of year............. $ 31,168 $ 35,286 $ 18,442
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 60
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
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). All references to a fiscal year refer to the
Company's fiscal year ended March 31 of that year. See Note 20 of Notes to
Consolidated Financial Statements for financial information regarding the
Company's three primary industry segments, which are represented by U-Haul and
Ponderosa's two principal subsidiaries.
Principles of Consolidation
The consolidated financial statements include the accounts of the parent
corporation, AMERCO, and its subsidiaries, all of which are wholly-owned. All
material intercompany accounts and transactions of AMERCO and its subsidiaries
have been eliminated.
The operating results and financial position of AMERCO's consolidated
insurance operations are determined as of December 31 of each year. There were
no effects related to intervening events between January 1 and March 31 of 1996,
1995 or 1994, that would materially affect the consolidated financial position
or results of operations for the financial statements presented herein. See Note
19 of Notes to Consolidated Financial Statements for additional information
regarding the subsidiary.
Description of Business
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
registered tradename U-Haul(R) through an extensive and geographically diverse
distribution network throughout the United States and Canada. Additionally,
U-Haul sells related products (such as boxes, tapes and packaging materials) and
rents various kinds of equipment (such as floor polishing and carpet cleaning
equipment). In addition, U-Haul offers for rent self-storage space through
Company-owned or managed locations.
Ponderosa serves as the holding company for the Company's insurance
businesses. Ponderosa's two principal subsidiaries are Oxford Life Insurance
Company (Oxford) and Republic Western Insurance Company (RWIC). Oxford and RWIC
have been consolidated on the basis of calendar years ended December 31.
Accordingly, all references to the years 1995, 1994, and 1993 corresponds to the
Company's fiscal years 1996, 1995, and 1994, respectively. Oxford primarily
reinsures life, health, and annuity type insurance products and administers the
Company's self-insured employee health plan. RWIC originates and reinsures
property and casualty type insurance products for various market participants,
including independent third parties, the Company's customers, and the Company.
RWIC's principal strategy is to capitalize on its knowledge of insurance
products aimed at the moving and rental markets.
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.
Foreign Currency
The consolidated financial statements include the accounts of U-Haul Co.
(Canada) Ltd., a subsidiary of AMERCO.
F-7
<PAGE> 61
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Assets and liabilities, denominated in currencies other than U.S. dollars,
are translated to U.S. dollars at the exchange rate as of the balance sheet
date. Income and expense amounts are translated at the average exchange rate
during the fiscal year.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers liquid investments with an original maturity of three
months or less to be cash equivalents.
Receivables
Accounts receivable of Ponderosa include premiums and agents' balances due,
net of commissions payable, and amounts due from ceding reinsurers. Accounts
receivable of Ponderosa are reduced by amounts considered by management to be
uncollectible. Accounts receivable of the Company's rental subsidiaries
principally include trade accounts receivable and mortgage and other notes
receivable. Accounts receivable are reduced by amounts considered by management
to be uncollectible based on historical collection loss experience and a review
of the current status of existing receivables by the Company's rental
subsidiaries.
Inventories
Inventories are primarily valued at the lower of cost (last-in first-out)
(LIFO) or market.
Investments
Fixed maturity investments classified as held-to-maturity are recorded at
cost adjusted for the amortization of premiums or accretion of discounts while
those classified as available-for-sale are recorded at fair value with
unrealized gains or losses reported on a net basis as a separate component of
stockholders' equity. The Company does not maintain a trading portfolio.
Mortgage loans on real estate are carried at unpaid balances, net of allowance
for possible losses and any unamortized premium or discount. Real estate is
carried at cost less accumulated depreciation. Policy loans are carried at their
unpaid balance. Impaired securities are written down to fair value which becomes
the new cost basis. Fair values for investments are based on quoted market
prices or dealer quotes.
Short-term investments consist of other securities scheduled to mature
within one year of their acquisition date. See Note 4 of Notes to Consolidated
Financial Statements.
Interest on bonds and mortgage loans is recognized when earned. Dividends
on common and redeemable preferred stocks are recognized on ex-dividend dates.
Realized gains and losses on the sale of investments are recognized at the trade
date and included in net income using the specific identification method.
F-8
<PAGE> 62
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Deferred Policy Acquisition Costs
Commissions and other costs incurred in acquiring traditional life
insurance, interest sensitive annuity policies, accident and health insurance
and property-casualty insurance which vary with and are primarily related to the
production of new business, have been deferred.
Traditional life, certain annuity and accident and health acquisition costs
are amortized over the premium paying period of the related policies in
proportion to the ratio of annual premium income to expected total premium
income. Such expected premium income is estimated using assumptions as to
mortality and withdrawals consistent with those used in calculating the policy
benefit reserves.
Credit and health acquisitions costs are deferred and amortized over the
term of the contracts in relation to premiums earned.
Acquisition costs for annuity policies are being amortized over the lives
of the policies in relation to the present value of estimated gross profits from
surrender charges and investment, mortality and expense margins.
Property-casualty acquisition costs are amortized over the related contract
period which generally does not exceed one year.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and are depreciated on
the straight-line and accelerated methods over the estimated useful lives of the
assets. Maintenance and repairs are charged to operating expenses as incurred.
Major overhaul costs of rental equipment, principally trucks, are amortized over
the estimated period benefited. Renewals and betterments are capitalized. Gains
and losses on dispositions of property, plant and equipment are included in
other revenue as realized. Interest costs incurred as part of the initial
construction of assets are capitalized. Interest expense of $1,807,000,
$1,727,000 and $595,000 was capitalized in the years ended 1996, 1995 and 1994,
respectively.
Based on an in-depth market analysis, the Company increased the estimated
salvage value of certain rental trucks. The effect of the change increased net
income for the year ended March 31, 1996 by $44,373,000 ($1.24 per share).
Certain recoverable environmental costs related to the removal of
underground storage tanks or related contamination are capitalized and
depreciated over the estimated useful lives of the properties. The capitalized
costs improve the safety or efficiency of the property as compared to when the
property was originally acquired or are incurred in preparing the property for
sale.
At March 31, 1996, the book value of the Company's real estate that is no
longer necessary for use in the Company's current operations, and available for
sale/lease, was approximately $27,585,000. Such surplus real estate is carried
at cost, less accumulated depreciation, which is less than or approximate to net
realizable value.
Financial Instruments
The Company enters into interest rate swap agreements to reduce its
interest rate exposure; the Company does not use them for trading purposes.
Amounts to be paid or received under the agreements are accrued. Although the
Company is exposed to credit loss for the interest rate differential in the
event of nonperformance by the counterparties to the agreements, it does not
anticipate nonperformance by the counterparties.
F-9
<PAGE> 63
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
At March 31, 1996, interest rate swap agreements with an aggregate notional
amount of $168,000,000 were outstanding. Management estimates that at March 31,
1996 and 1995, the Company would be required to pay $9,000,000 and $6,000,000,
respectively, to terminate the agreements. Such amounts were determined from
current treasury rates combined with swap spreads on agreements outstanding.
The Company has mortgage loans receivable which potentially expose the
Company to credit risk. The portfolio of notes is principally collateralized by
mini-warehouse storage facilities and other residential and commercial
properties. The Company has not experienced losses related to the notes from
individual notes or groups of notes in any particular industry or geographic
area. The estimated fair values were determined using the discounted cash flow
method, using interest rates currently offered for similar loans to borrowers
with similar credit ratings.
Summary of mortgage loans receivable:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Book value................................................ $ 154,736 $ 135,424
======== ========
Estimated fair value...................................... $ 157,867 $ 140,062
======== ========
</TABLE>
Other financial instruments that are subject to fair value disclosure
requirements are carried in the financial statements at amounts that approximate
fair value.
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of temporary cash investments and trade
receivables. The Company places its temporary cash investments with financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers and their dispersion across many
different industries and geographic areas.
Policy Benefits Reserves, Unpaid Losses and Loss Expenses
Liabilities for policy benefits payable on traditional life and certain
annuity policies are established in amounts adequate to meet estimated future
obligations on policies in force. These liabilities are computed using the net
level premium method and include mortality and withdrawal assumptions which are
based upon recognized actuarial tables and contain margins for adverse
deviation. At December 31, 1995, interest assumptions used to compute policy
benefits payable range from 2.5% to 12.8%.
With respect to annuity policies accounted for as investment contracts, the
liability for investment contract deposits consists of policy account balances
that accrue to the benefit of the policyholders, excluding surrender charges.
Fair value of investment contract deposits at December 31, 1995 is $380,774,000.
Liabilities for accident and health and other policy claims and benefits
payable represent estimates of payments to be made on insurance claims for
reported losses and estimates of losses incurred but not yet reported. These
estimates are based on past claims experience and consider current claim trends
as well as social and economic conditions.
With respect to property-casualty, the liability for unpaid losses is based
on the estimated ultimate cost of settling claims reported prior to the end of
the accounting period, estimates received from ceding reinsurers and estimates
for unreported losses based on RWIC's historical experience supplemented by
F-10
<PAGE> 64
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
insurance industry historical experience. The liability for unpaid loss
adjustment expenses is based on historical ratios of loss adjustment expenses
paid to losses paid. Amounts recoverable from reinsurers on unpaid losses are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Adjustments to the liability for unpaid losses and loss
expenses as well as amounts recoverable from reinsurers on unpaid losses are
charged or credited to expense in periods in which they are made.
Rental and Other Revenue
The Company recognizes its share of rental revenue on the accrual basis
pursuant to contractual arrangements between AMERCO, fleet owners, rental
dealers and customers. See Note 8 of Notes to Consolidated Financial Statements
for further discussion.
Premium Revenue
Accident and health, credit life and health, and property-casualty gross
premiums are earned on a pro rata basis over the term of the related contracts.
Traditional life and annuity premiums are recognized as revenue when due from
policyholders. Revenue for annuity policies accounted for as investment
contracts consist of margins and surrender charges that have been assessed
against policy account balances during the period. The portion of premiums not
earned at the end of the period is recorded as unearned premiums.
Reinsurance
Reinsurance premiums, commissions, and expense reimbursements related to
reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income. Assets and liabilities relating to reinsured contracts are
reported gross of the effects of reinsurance. See also "Policy Benefits
Reserves, Unpaid Losses and Loss Expenses" above.
Income Taxes
In addition to charging income for taxes paid or payable, the provision for
income taxes reflects deferred income taxes resulting from changes in temporary
differences between the tax bases of assets and liabilities and their reported
amounts in the financial statements. The effect on deferred income taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date.
The Company files a consolidated federal income tax return with its
insurance subsidiaries.
New Accounting Standards
Statement of Financial Accounting Standards No. 114 -- Accounting by
Creditors for Impairment of a Loan. Effective for years beginning after December
15, 1994, the standard requires that an impaired loan's fair value be measured
and compared to the recorded investment in the loan. If the fair value of the
loan is less than the recorded investment in the loan, a valuation allowance is
established. The Company adopted this statement in the first quarter of fiscal
1996, with no material impact on its financial condition or results of
operations.
Statement of Financial Accounting Standards No. 121 -- Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Effective for fiscal years beginning after December 15, 1995, the standard
establishes accounting standards for the impairment of long-lived
F-11
<PAGE> 65
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
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 does not expect a material impact on its future financial condition
or results of operations due to implementation of the statement.
Statement of Financial Accounting Standards No. 123 -- Accounting for
Stock-Based Compensation. Effective for transactions entered into in fiscal
years that begin after December 15, 1995, the standard establishes a fair
value-based method of accounting for stock options and other equity instruments.
Under the fair value-based method of accounting, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period. For stock options, fair value is determined using an
option-pricing model that takes into account as of the grant date, the exercise
price and expected life of the option, the current price of the underlying stock
and its expected volatility, the expected dividends on the stock and the
risk-free interest rate for the expected term of the option. The Company has a
stock option plan, but to date no stock options have been granted. The adoption
of this statement is not expected to have a material effect on the Company's
financial statements.
Statement of Position 93-7, "Reporting on Advertising Costs", was issued by
the Accounting Standards Executive Committee in December 1993. This statement of
position provides guidance on financial reporting on advertising costs in annual
financial statements. The statement of position requires reporting advertising
costs as expenses when incurred or when the advertising 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. The adoption had the effect of reducing net income by $5,474,000
($0.15 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.
Earnings per Share
Earnings per common share are computed based on the weighted average number
of shares outstanding, excluding shares of the employee stock ownership plan
that have not been committed to be released. Net income is reduced for preferred
dividends. See Note 6 of Notes to Consolidated Financial Statements for further
discussion.
Financial Statement Presentation
Certain reclassifications have been made to the financial statements for
the years ended 1995 and 1994 to conform with the current year's presentation.
F-12
<PAGE> 66
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
2. RECEIVABLES
A summary of receivables follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts receivable................................. $ 16,885 $ 12,527
Mortgage and note receivables, net of discount............ 54,802 78,499
Note receivable and accrued interest from Three SAC....... 105,327 65,255
Premiums and agents' balances in course of collection..... 38,345 33,150
Reinsurance recoverable................................... 83,261 84,270
Accrued investment income................................. 15,243 13,377
Independent dealer receivable............................. 11,189 8,749
Other receivables......................................... 18,800 20,564
-------- --------
343,852 316,391
Less allowance for doubtful accounts...................... 3,288 4,639
-------- --------
$ 340,564 $ 311,752
======== ========
</TABLE>
During fiscal 1996, a subsidiary of the Company received principal payments
of $1,214,000, interest payments of $5,905,000 and management fees of $943,000
from SAC Self-Storage Corporation (SAC). Mark V. Shoen, a major stockholder,
director and officer of the Company owned all of the issued and outstanding
voting common stock of SAC. SAC Non-Business Trust holds the non-voting common
stock. During fiscal 1995, a subsidiary of the Company made a loan to SAC in the
total principal amount of $54,671,000 for the purchase of 44 self-storage
properties by SAC. Of the 44 SAC properties, SAC acquired 24 from the Company or
its subsidiaries at a purchase price equal to the Company's acquisition cost
plus capitalized costs. Such properties are currently being managed by the
Company pursuant to a management agreement, under which the Company receives a
management fee equal to 6% of the gross receipts from the properties. The
management fee percentage is consistent with the fee received by the Company for
other properties managed by the Company. The SAC loan consists of a senior note
and a junior note with outstanding balances at March 31, 1996 of $44,286,000 and
$9,170,000, respectively, bearing interest rates of 8.25% and 13.0%,
respectively. The largest aggregate amount outstanding during the year was
$54,671,000.
During fiscal 1996, a subsidiary of the Company received principal payments
of $591,000, interest payments of $2,546,000 and management fees of $170,000
from TWO SAC Self-Storage Corporation (TWO SAC). Mark V. Shoen, a major
stockholder, director and officer of the Company owned all of the issued and
outstanding voting common stock of TWO SAC. SAC Non-Business Trust holds the
non-voting common stock. During fiscal 1996 and 1995, a subsidiary of the
Company funded a loan to TWO SAC in the total principal amount of $51,168,000
for the purchase of 38 self-storage properties. Of the 38 TWO SAC properties,
TWO SAC acquired 27 from the Company or its subsidiaries at a purchase price
equal to the Company's acquisition cost plus capitalized costs. Such 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. The TWO SAC
Loan consists of a senior note and a junior note with outstanding balances at
March 31, 1996
F-13
<PAGE> 67
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
of $43,532,000 and $7,637,000, respectively, bearing interest rates of 8.25% and
13.0%, respectively. The largest aggregate amount outstanding during the year
was $51,168,000.
On March 5, 1996, SAC and TWO SAC merged to form a new corporation, 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. Subsequent to year end, a subsidiary of the Company received principal
payments of $348,000, interest payments of $1,544,000 and management fees of
$492,000 from Three SAC.
The SAC Non-Business Trust dated as of May 24, 1995 with IBJ Schroder Bank
& Trust Company as Trustee, owns all of the issued and outstanding non-voting
preferred stock of Three SAC. Three SAC is capitalized with a contribution of
184,000 shares of Mark V. Shoen's AMERCO common stock. Three SAC has indicated
to the Company that it intends, after reserving sufficient funds for expenses
and other reasonable amounts, to distribute any remaining Three SAC funds to the
SAC Non-Business Trust. The SAC Non-Business Trust is required to distribute
funds to its Beneficiary, which must be a non-profit entity benefiting the
college age children of the Company's employees. At present, the Beneficiary is
the U-Haul Scholarship Foundation, which exists to award scholarships to the
children of the Company's qualifying employees. All scholarships will be awarded
on behalf of the U-Haul Scholarship Foundation by an independent panel of
educators.
Subsequent to year end, a subsidiary of the Company funded the purchase of
five properties by Four SAC Self-Storage Corporation (Four SAC) for an amount of
approximately $5,630,000. 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 one property 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.
Management believes that the foregoing transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions.
3. INVENTORIES
A summary of inventory components follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Trailers and truck parts and accessories.................... $ 23,609 $ 31,636
Moving aids and promotional items........................... 9,488 7,127
Hitches and towing components............................... 12,756 11,516
Other....................................................... 38 58
------- -------
$ 45,891 $ 50,337
======= =======
</TABLE>
Certain general and administrative expenses are allocated to ending
inventories. Such costs remaining in inventory at fiscal years ended 1996, 1995
and 1994 are estimated at $6,773,000, $6,848,000 and $7,679,000, respectively.
For the fiscal years ended March 31, 1996, 1995 and 1994,
F-14
<PAGE> 68
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
aggregate general and administrative costs were $427,234,000, $377,471,000 and
$430,209,000, respectively.
LIFO inventories, which represent approximately 97% and 98% of total
inventories at March 31, 1996 and 1995, respectively, would have been $4,166,000
and $3,657,000 greater at March 31, 1996 and 1995, respectively, if the
consolidated group had used the FIFO method.
4. INVESTMENTS
Major categories of net investment income consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities................................ $ 59,992 $ 53,236 $ 52,903
Real estate..................................... 727 223 142
Policy loans.................................... 554 604 609
Mortgage loans.................................. 7,887 5,338 4,669
Short-term, amounts held by ceding reinsurers,
net and other investments..................... 1,601 2,064 874
------- ------- -------
Investment income............................... 70,761 61,465 59,197
Less investment expenses........................ 24,772 19,380 20,390
------- ------- -------
Net investment income........................... $ 45,989 $ 42,085 $ 38,807
======= ======= =======
</TABLE>
A comparison of amortized cost to estimated fair value for fixed maturities
is as follows:
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
OF SHARES COST GAINS LOSSES VALUE
--------- --------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consolidated Held-to-Maturity
U.S. treasury securities and
government obligations.......... $ 18,355 $ 18,271 $ 2,108 $ (1) $ 20,378
U.S. government agency
mortgage-backed securities...... $ 60,376 59,912 1,348 (2,211) 59,049
Obligations of states and
political subdivisions.......... $ 34,300 33,983 1,742 (34) 35,691
Corporate securities.............. $ 192,334 197,475 6,102 (675) 202,902
Mortgage-backed securities........ $ 110,561 108,827 2,884 (1,013) 110,698
Redeemable preferred stocks....... 170 5,210 470 (4) 5,676
-------- ------- -------- --------
423,678 14,654 (3,938) 434,394
-------- ------- -------- --------
</TABLE>
F-15
<PAGE> 69
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
PAR VALUE COST GAINS LOSSES VALUE
--------- --------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consolidated Available-for-Sale
U.S. treasury securities and government
obligations............................. $ 11,685 $ 11,789 $ 1,572 $ -- $ 13,361
U.S. government agency mortgage-backed
securities.............................. $ 20,711 20,713 637 (39) 21,311
States, municipalities and political
subdivisions............................ $ 10,400 10,581 660 (151) 11,090
Corporate securities...................... $ 319,611 324,804 14,595 (610) 338,789
Mortgage-backed securities................ $ 68,857 68,289 3,465 (281) 71,473
-------- ------- -------- --------
436,176 20,929 (1,081) 456,024
-------- ------- -------- --------
Total................................ $ 859,854 $ 35,583 $ (5,019) $ 890,418
======== ======= ======== ========
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR VALUE GROSS GROSS ESTIMATED
OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
OF SHARES COST GAINS LOSSES VALUE
--------- --------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consolidated Held-to-Maturity
U.S. treasury securities and government
obligations............................. $ 28,157 $ 26,986 $ 415 $ (407) $ 26,994
U.S. government agency mortgage-backed
securities.............................. $ 52,394 52,081 207 (6,414) 45,874
Obligations of states and political
subdivisions............................ $ 32,285 31,941 1,822 (359) 33,404
Corporate securities...................... $ 223,825 231,873 898 (6,108) 226,663
Mortgage-backed securities................ $ 110,785 107,150 382 (9,371) 98,161
Redeemable preferred stocks............... 35 2,093 266 -- 2,359
-------- ------- -------- --------
452,124 3,990 (22,659) 433,455
-------- ------- -------- --------
</TABLE>
F-16
<PAGE> 70
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
DECEMBER 31, 1994
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
PAR VALUE COST GAINS LOSSES VALUE
--------- --------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consolidated Available-for-Sale
U.S. treasury securities and government
obligations............................. $ 9,685 $ 9,801 $ 430 $ (32) $ 10,199
U.S. government agency mortgage-backed
securities.............................. $ 8,982 8,868 602 (84) 9,386
States, municipalities and political
subdivisions............................ $ 3,325 3,610 -- (47) 3,563
Foreign government securities............. $ 2,500 2,534 28 (17) 2,545
Corporate securities...................... $ 210,184 211,495 864 (8,419) 203,940
Mortgage-backed securities................ $ 26,699 26,528 126 (2,983) 23,671
-------- ------ -------- --------
262,836 2,050 (11,582) 253,304
-------- ------ -------- --------
Total................................ $ 714,960 $ 6,040 $ (34,241) $ 686,759
======== ====== ======== ========
</TABLE>
Fixed maturities fair value are based on publicly quoted market prices at
the close of trading December 31, 1995 or December 31, 1994, as appropriate.
The amortized cost and estimated market value of debt securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
DECEMBER 31, 1995
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Consolidated Held-to-Maturity
Due in one year or less................................... $ 24,214 $ 24,539
Due after one year through five years..................... 90,889 93,853
Due after five years through ten years.................... 120,876 124,950
After ten years........................................... 13,750 15,629
-------- --------
249,729 258,971
Mortgage-backed securities................................ 168,739 169,747
Redeemable preferred stock................................ 5,210 5,676
-------- --------
423,678 434,394
-------- --------
</TABLE>
F-17
<PAGE> 71
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
DECEMBER 31, 1995
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Consolidated Available-for-sale
Due in one year or less........................................... 14,692 14,812
Due after one year through five years............................. 136,290 140,347
Due after five years through ten years............................ 159,537 168,771
After ten years................................................... 36,655 39,310
-------- --------
347,174 363,240
Mortgage-backed securities........................................ 89,002 92,784
-------- --------
436,176 456,024
-------- --------
Total........................................................ $ 859,854 $ 890,418
======== ========
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Consolidated Held-to-Maturity
Due in one year or less........................................... $ 27,181 $ 27,037
Due after one year through five years............................. 155,096 155,296
Due after five years through ten years............................ 90,897 87,159
After ten years................................................... 17,626 17,569
-------- --------
290,800 287,061
Mortgage-backed securities........................................ 159,231 144,035
Redeemable preferred stock........................................ 2,093 2,359
-------- --------
452,124 433,455
-------- --------
</TABLE>
DECEMBER 31, 1994
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Consolidated Available-for-sale
Due in one year or less........................................... 12,609 12,596
Due after one year through five years............................. 80,128 78,286
Due after five years through ten years............................ 129,496 123,999
After ten years................................................... 5,207 5,366
-------- --------
227,440 220,247
Mortgage-backed securities........................................ 35,396 33,057
-------- --------
262,836 253,304
-------- --------
Total........................................................ $ 714,960 $ 686,759
======== ========
</TABLE>
F-18
<PAGE> 72
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Proceeds from sales of investments in debt securities during 1995 and 1994
were $101,565,000 and $71,242,000, respectively. Gross gains of $4,498,000 and
$1,447,000 and gross losses of $419,000 and $332,000 were realized on those
sales during 1995 and 1994, respectively. Proceeds from maturities and early
redemptions of investments in debt securities during 1995 and 1994 were
$86,612,000 and $117,233,000. Gross gains of $257,000 and $633,000 and gross
losses of $471,000 and $510,000 were realized on these securities during 1995
and 1994, respectively.
At December 31, 1995 and 1994 fixed maturities include bonds with an
amortized cost of $18,015,000 and $16,775,000, respectively, on deposit with
insurance regulatory authorities to meet statutory requirements.
Investments, other consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term investments.................................... $ 17,671 $ 26,841
Mortgage loans............................................ 73,152 79,498
Real estate, foreclosed properties........................ 19,591 11,464
U.S. government security mutual fund...................... 5,883 5,883
Policy loans.............................................. 9,372 10,095
Other..................................................... 918 1,439
-------- --------
$ 126,587 $ 135,220
======== ========
</TABLE>
Real estate held for investment, net of accumulated depreciation of
$325,000 in 1995 and $357,000 in 1994, is comprised of land, buildings and
building improvements. Depreciation on buildings is computed using the
straight-line method. The general range of useful lives for buildings is 15 to
40 years. Depreciation on building improvements is computed utilizing the
straight-line method or an accelerated method over the range of useful lives of
10 to 15 years.
At December 31, 1995 and 1994, mortgage notes held by Ponderosa with a book
value of $73,152,000 and $79,498,000, respectively, were outstanding. The
estimated fair value of the notes at December 31, 1995 and 1994 was $81,924,000
and $86,132,000, respectively. The estimated fair values were determined using
the discounted cash flow method, using interest rates currently offered for
similar loans to borrowers with similar credit ratings. Ponderosa's investment
in mortgage loans, included as a component of investments, are reported net of
allowance for possible losses of $525,000 in both 1995 and 1994.
Short-term investments consists primarily of fixed maturities with a
maturity of less than one year from acquisition date. Mortgage loans,
representing first lien mortgages held by the insurance subsidiaries, are
carried at unpaid balances, less allowance for possible losses any unamortized
premium or discount. Real estate obtained through foreclosures and held for sale
is carried at the lower of cost or net realizable value. U.S. government
securities mutual fund is carried at cost which approximates market. Policy
loans are carried at their unpaid balance.
F-19
<PAGE> 73
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
5. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings..................................... $ 73,000 $ 33,500
Notes payable to banks under revolving lines of credit,
unsecured 5.61% to 6.18% interest rates,................ 338,000 293,000
Medium-term notes payable, unsecured 8.55% to 11.50%
interest rates, due through 2000........................ 95,050 169,270
Notes payable to insurance companies, unsecured 5.89% to
10.27% interest rates, due through 2006................. 339,000 270,000
Notes payable to banks, unsecured 4.69% to 7.54% interest
rates, due through 2001................................. 84,100 111,700
Notes and Mortgages payable, secured 6.10% to 10.00%
interest rates, due through 2016........................ 68,984 3,660
Other notes payable, unsecured 9.50% interest rate, due
through 2005............................................ 86 92
-------- --------
$ 998,220 $ 881,222
======== ========
</TABLE>
Notes and mortgages payable are secured by land and buildings at various
locations which carry a net book value of $85,663,000 at March 31, 1996.
Revolving credit loans (long-term) are available from participating banks
under an agreement which provides for a total credit line of $365,000,000
through the expiration date of the revolving term of June 1, 1998. The Company
may elect to borrow under the credit agreement in the form of Eurodollar
borrowings or domestic dollar borrowings. Depending on the form of borrowing
elected, interest will be based on the prime rate, the certificate of deposit
rate, the federal funds effective rate or the interbank offering rate and in
addition, margin interest rates will be charged. Loans may also be at a fixed
rate based upon the discretion of the borrower and lender. At March 31, 1996,
the weighted average interest rate on borrowings outstanding was 5.73%.
F-20
<PAGE> 74
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Facility fees, which are based upon the amount of credit line, aggregated
$977,000 and $901,000 for 1996 and 1995, respectively. As of March 31, 1996,
loans outstanding under the revolving credit line totaled $338,000,000.
Management intends to refinance the borrowings on a long-term basis by either
replacing them with long-term obligations, renewing or extending them.
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
A summary of revolving credit activity
follows:
Weighted average interest rate
during the year............................ 6.20% 5.62% 3.62%
at year end................................ 5.73% 6.48% 3.93%
Maximum amount outstanding during the year... $ 343,000 $ 293,000 $ 159,750
Average amount outstanding during the year... $ 281,750 $ 191,146 $ 67,354
A summary of notes payable follows:
Weighted average interest rate:
during the year............................ 6.26% 5.25% 3.80%
at year end................................ 5.93% 6.44% 4.04%
Maximum amount outstanding during the year... $ 73,000 $ 135,000 $ 50,000
Average amount outstanding during the year... $ 37,583 $ 46,604 $ 11,380
</TABLE>
AMERCO has committed lines of credit with various banks totaling
$550,000,000 and uncommitted lines of credit of $62,575,000 at March 31, 1996.
The Company has executed interest rate swap agreements (SWAPS) to
potentially mitigate the impact of changes in interest rates on its floating
rate debt. These agreements effectively change the Company's interest rate
exposure on $168,000,000 of floating rate notes to a weighted average fixed rate
of 7.51%. The SWAP's mature at the time the related notes mature. During the
year a SWAP with a notional value of $25,000,000 matured. Incremental interest
expense associated with SWAP activity was $2,959,000, $7,092,000, and
$11,989,000 during 1996, 1995 and 1994, respectively.
Certain of the Company's credit agreements contain restrictive financial
and other covenants, including, among others, covenants with respect to
incurring additional indebtedness, maintaining certain financial ratios, and
placing certain additional liens on its properties and assets. At March 31,
1996, the Company was in compliance with these covenants.
In May 1996, the Company issued $175,000,000 of 7.85% Senior Notes Due May
15, 2003. The Company intends 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.
F-21
<PAGE> 75
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
The annual maturities of long-term debt for the next five years, (if the
revolving credit lines are outstanding to maturity) adjusted for the transaction
referred to in the immediately preceding paragraph, are presented in the table
below:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------------
1997 1998 1999 2000 2001
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgages................ $ 292 $ 507 $ 432 $ 195 $ 276
Medium-Term and Other
Notes.................. 66,807 14,258 11,009 3,010 11
Insurance Placements..... 63,833 45,762 50,762 19,429 24,429
Bank Placements.......... 21,600 1,600 40,900 24,818 24,818
Revolving Credit......... -- -- 163,000 -- --
-------- -------- -------- -------- --------
$ 152,532 $ 62,127 $ 266,103 $ 47,452 $ 49,534
======== ======== ======== ======== ========
</TABLE>
6. STOCKHOLDERS' EQUITY
In October 1992, the stockholders approved an amendment to the Company's
Articles of Incorporation to increase the authorized capital stock of the
Company to a total of 350,000,000 shares from 65,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock. The increased capital stock consists of
150,000,000 shares of Common Stock, 150,000,000 shares of Serial Common Stock
and 50,000,000 shares of Preferred Stock. The Board of Directors (the Board) may
authorize the Serial Common Stock to be issued in such series and on such terms
as the Board shall determine. The amendment also clarifies the voting rights of
the Preferred Stock and allows the issuance of Preferred Stock with or without
par value.
In October 1993, the Company issued 6,100,000 shares of 8.5% cumulative, no
par, non-voting preferred stock. The preferred stock is not convertible into, or
exchangeable for, shares of any other class or classes of stock of the Company.
Dividends are payable quarterly in arrears and have priority as to dividends
over the Company's common stock. The preferred stock is not redeemable prior to
December 1, 2000. On or after December 1, 2000, the Company, at its option, may
redeem all or part of the preferred stock, for cash at $25.00 per share plus
accrued and unpaid dividends to the redemption date.
On February 1, 1994, the Company entered into Exchange Agreements with Mark
V. Shoen and James P. Shoen. Pursuant to the exchange agreements, in exchange
for 3,475,520 and 2,278,814 shares of common stock owned by Mark V. Shoen and
James P. Shoen, Mark V. Shoen and James P. Shoen received 3,475,520 and
2,278,814 shares of Series A common stock, respectively. The common stock and
the Series A common stock possess identical rights and privileges.
On April 13, 1994, the Company and Edward J. Shoen entered into an
Agreement in Principle pursuant to which the Company agreed to acquire all of
the outstanding capital stock of EJOS, Inc., all of which stock was held by
Edward J. Shoen and a certain irrevocable trust established by Edward J. Shoen,
in exchange for the same number of shares of the Company's common stock as were
held by EJOS, Inc. In exchange for EJOS, Inc.'s capital stock, Edward J. Shoen
and the irrevocable trust established by Edward J. Shoen received 3,483,681 and
559,443 shares of the Company's common stock, respectively. The exchange
described above was effected in accordance with the terms of an Agreement and
Plan of Exchange of Shares of EJOS, Inc. and AMERCO, dated May 18, 1994, among
EJOS, Inc., the Company, Edward J. Shoen, and the irrevocable trust established
by Edward J. Shoen. Edward J. Shoen is a major stockholder, Chairman of the
Board, and President of the Company.
F-22
<PAGE> 76
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
On August 24, 1994, the Company entered into an Exchange Agreement with
Edward J. Shoen, the Company's Chairman of the Board and President. Pursuant to
the exchange agreement, in exchange for 3,483,681 shares of common stock owned
by Edward J. Shoen, Edward J. Shoen received 3,483,681 shares of Series A common
stock. The common stock and the Series A common stock possess identical rights
and privileges.
On November 28, 1994, the Company entered into an Exchange Agreement with
Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the
exchange agreement, in exchange for 3,475,520 shares of Series A common stock
owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of common stock.
The common stock and the Series A common stock possess identical rights and
privileges.
On May 31, 1995, the Company purchased 45,000 shares of the Company's
Common Stock from Paul F. Shoen, a major stockholder of the Company, for
$996,000 or $22.125 per share. The transaction was effected on Nasdaq. Paul F.
Shoen is the brother of Edward J., Mark V., and James P. Shoen, who are major
stockholders and directors of the Company.
On October 18, 1995, pursuant to a judgment in the Shoen Litigation, the
Company repurchased 3,343,076 shares of Common Stock held by Maran, Inc. in
exchange for approximately $22,733,000 and entered into a Settlement Agreement
with Mary Anna Shoen Eaton (Shoen Eaton) whereby in exchange for approximately
$41,352,000, Shoen Eaton released the Director-Defendants and the Company from
any liability relating to the Shoen Litigation. Shoen Eaton owns all the voting
stock of Maran, Inc. and is the sister of Edward J., Mark V., and James P.
Shoen, who are major stockholders and directors of the Company.
On January 30, 1996, pursuant to a judgment in the Shoen Litigation, the
Company repurchased 833,420 shares of Common Stock held by L.S.S., Inc. (L.S.S.)
in exchange for approximately $5,667,000 and funded damages to L.S. Shoen of
approximately $15,433,000. The Company also funded a total of approximately
$2,018,000 of statutory post-judgment interest on the above amounts. L.S. Shoen
owns all the voting stock of L.S.S. and is the father of Edward J., Mark V., and
James P. Shoen, who are major stockholders and directors of the Company.
On February 7, 1996, pursuant to a judgment in the Shoen Litigation, the
Company repurchased 1,651,644 shares of Common Stock held by Thermar, Inc.
(Thermar) by paying approximately $41,785,000, including damages. The Company
also paid to Thermar approximately $4,110,000 of statutory post-judgment
interest on such amount. Thermar's major stockholder, Theresa M. Romero, is the
sister of Edward J., Mark V., and James P. Shoen, who are major stockholders and
directors of the Company.
The above treasury share transactions were recorded net of tax of
$34,938,000.
F-23
<PAGE> 77
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
7. INCOME TAXES
The components of the consolidated expense for income taxes applicable to
operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................... $ -- $ 12,629 $ 2,112
State........................................ 637 1,038 185
Deferred:
Federal...................................... 33,790 19,678 16,365
State 1,405 79 1,191
-------- -------- --------
$ 35,832 $ 33,424 $ 19,853
======== ======== ========
</TABLE>
Deferred tax liabilities (assets) are comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Accelerated depreciation of:
property, plant and equipment................ $ 184,402 $ 155,756 $ 145,391
Benefit of tax NOL and credit carryforwards.... (89,798) (64,076) (74,905)
Rental equipment overhaul costs amortized...... 169 419 751
Deferred inventory adjustments................. (2,581) (103) (1,177)
Deferred acquisition costs..................... 17,137 15,720 15,361
Deferred gain from intercompany transactions... 1,141 459 (894)
Bad debt expense............................... (334) (1,935) (1,635)
Accrued expense on future dealer benefits...... (4,356) (3,451) (3,347)
Accrued vacation and sick-pay.................. (1,663) (1,338) (1,182)
Customer deposit liability..................... (3,790) (2,884) (2,375)
Deferred revenue from sale/leaseback........... (150) (437) (1,357)
Accrued retirement expense..................... (2,494) (2,279) (1,755)
Policy benefits and losses, claims and loss
expenses payable............................. (26,600) (24,671) (24,022)
Other.......................................... (2,344) (2,455) (283)
-------- -------- --------
Total........................................ $ 68,739 $ 68,725 $ 48,571
======== ======== ========
</TABLE>
F-24
<PAGE> 78
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance comprised of:
Deferred tax assets.......................... $ 4,571 $ 2,312 $ 2,220
Deferred tax liability....................... 73,310 71,037 50,791
------- ------- -------
Net deferred taxes............................. $ 68,739 $ 68,725 $ 48,571
======= ======= =======
</TABLE>
Actual tax expense reported on earnings from operations differs from the
"expected" tax expense amount (computed by applying the United States federal
corporate tax rate of 35% in 1996, 1995 and 1994) as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense..................... $ 33,679 $ 32,696 $ 23,276
Increases (reductions) in taxes resulting from:
Tax-exempt interest income........................ (714) (1,243) (1,525)
Dividends received deduction...................... -- (62) (101)
Net reinsurance effect............................ -- 120 120
Canadian subsidiary income tax (expense) benefit
unrealized..................................... (1,235) (1,078) (204)
True-up of prior year estimated current tax....... 2,112 1,030 (1,327)
Federal tax benefit of state and local taxes...... (223) (391) (482)
Other............................................. 1,576 1,235 (1,280)
------- ------- -------
Actual federal tax expense..................... 35,195 32,307 18,477
State and local income tax expense................ 637 1,117 1,376
------- ------- -------
Actual tax expense of operations............... $ 35,832 $ 33,424 $ 19,853
======= ======= =======
</TABLE>
Under the provisions of the Tax Reform Act of 1984 (the Act), the balance
in Oxford's account designated "Policyholders' Surplus Account" is frozen at its
December 31, 1983 balance of $19,251,000. Federal income taxes (Phase III) will
be payable thereon at applicable current rates if amounts in this account are
distributed to the stockholder or to the extent the account exceeds a prescribed
maximum. Oxford did not incur a Phase III liability for the years ended December
31, 1995, 1994 and 1993.
The Internal Revenue Service has examined AMERCO's income tax returns for
the years ended 1990 and 1991. All agreed issues have been provided for in the
financial statements including the application of such adjustments to open
years. The tax effect of the unagreed issues will not have a material impact on
the financial statements.
At year-end 1996 AMERCO and RWIC have non-life net operating loss
carryforwards available to offset taxable income in future years of $181,779,000
for tax purposes. These carryforwards expire in 2003 through 2011. AMERCO has
alternative minimum tax credit carry forwards of $15,214,000 which do not have
an expiration date, but may only be utilized in years in which regular tax
exceeds alternative minimum tax. The use of certain carryforwards may be limited
or prohibited if a reorganization or other change in corporate ownership were to
occur.
F-25
<PAGE> 79
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Provision for federal income taxes has not been made for the difference
between the Company's book and tax bases of its investment in Ponderosa, since
the Company believes such difference to be permanent in duration.
During 1994, Oxford dividended their investment in RWIC common stock to
Ponderosa at its book value. As a result of such dividend, a deferred
intercompany gain arose due to the difference between the book value and fair
value of such common stock. However, such gain can only be triggered if certain
events occur. To date, no events have occurred which would trigger such gain
recognition. No deferred taxes have been provided in the accompanying
consolidated financial statements as management believes that no events have
occurred to trigger such gain.
8. TRANSACTIONS WITH FLEET OWNERS AND OTHER RENTAL EQUIPMENT OWNERS
Fleet Owners (independent rental equipment owners) own approximately 15% of
all U-Haul rental trailers, .03% of all U-Haul rental trucks and certain other
rental equipment. There are over 5,300 fleet owners, including certain officers,
directors, employees and stockholders of the Company. All rental equipment is
operated under contract with U-Haul, a wholly-owned subsidiary of AMERCO,
whereby U-Haul administers the operations and marketing of such equipment and in
return receives a percentage of rental fees paid by customers. AMERCO guarantees
performance of these contracts. Based on the terms of various contracts, rental
fees are distributed to the subsidiaries of AMERCO (for services as operators),
to the fleet owners (including certain subsidiaries and related parties of
AMERCO) and to Rental Dealers (including Company-operated U-Haul Centers).
The Company owns over 99% of all general rental items and the remainder of
the rental equipment is consigned to AMERCO and its consolidated subsidiaries.
The equipment is operated under various contracts with subsidiaries of AMERCO,
whereby the consolidated group administers the operations and marketing of the
equipment. In return the investors receive a percentage of the rental fees paid
by customers.
Oxford reinsures short-term accidental death and medical insurance risks
for customers who rent vehicles owned by the Company and fleet owners. Premiums
earned were $1,600,000, $1,556,000 and $1,428,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
RWIC insures and reinsures general liability, auto liability, and workers'
compensation coverage for member companies of the consolidated group. Premiums
earned by RWIC on these policies were $12,669,000, $20,575,000 and $18,798,000
during the years ended December 31, 1995, 1994 and 1993, respectively, and were
eliminated in consolidation.
RWIC insures and reinsures certain risks of U-Haul customers and
independent fleet owners. Premiums earned on these policies were $43,400,000,
$39,300,000 and $32,800,000 during the years ended December 31, 1995, 1994 and
1993, respectively.
9. DEALER FINANCIAL SECURITY PLAN
In September 1984, the Company adopted an unfunded dealer financial
security plan (the Security Plan) for its independent dealers and their key
employees who elected to enroll in the plan. Subsequent to the initial
enrollment in the Security Plan, the Company suspended the plan to additional
enrollees. Under the Security Plan, deductions are made from dealer commissions
in return for future benefits including death, disability and retirement
benefits. These benefits are paid directly from the general assets of the
Company. Life insurance is carried on each Security Plan participant in favor of
the Company to indirectly fund future benefit payments. Total deductions
withheld from commissions were
F-26
<PAGE> 80
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
$142,000, $466,000 and $613,000 for the years ended 1996, 1995, and 1994
respectively. Total insurance premium expense amounted to $1,264,000, $1,294,000
and $1,304,000 for the years ended 1996, 1995 and 1994 respectively. Benefits
paid under the Security Plan for the years ended 1996, 1995 and 1994 were not
material.
10. EMPLOYEE BENEFIT PLANS
AMERCO and its subsidiaries participate in the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership Plan (the Plan) which is designed to
provide all eligible employees with savings for their retirement and to acquire
a proprietary interest in the Company.
The Plan has three separate features: a profit sharing feature (the Profit
Sharing Plan) under which the Employer may make contributions on behalf of
participants; a savings feature (the Savings Plan) which allows participants to
defer income under Section 401(k) of the Internal Revenue Code of 1986; and an
employee stock ownership feature (the ESOP) under which the Company may make
contributions of AMERCO common stock or cash to acquire such stock on behalf of
participants. Generally, employees of the Company are eligible to participate in
the Plan upon completion of a one year service requirement.
At its discretion, profits of such amounts as determined by the Board of
Directors (which shall not exceed the amounts that are deductible under the
Internal Revenue Code) may be contributed to the Profit Sharing Plan at the end
of each Plan year to a designated trustee and administered and applied in
accordance with the terms of the trust agreement. The Company did not contribute
to the Profit Sharing Plan during the years ended 1996, 1995 and 1994.
Under the Savings Plan, an employee may make pre-tax contributions of up to
eighteen percent of base salary. Participants are immediately vested in all
contributions plus actual earnings thereon.
The ESOP is designed to enable eligible employees to acquire a proprietary
interest in the Company. The Company may, in its sole and absolute discretion,
elect to contribute to the trust fund amounts to be used by the ESOP trustee to
purchase shares of the $0.25 par value common stock of the Company and/or the
Company may contribute stock directly to the trust fund.
To fund the ESOP trust (ESOT), the Company borrowed $16,000,000 repayable
over ten years in annual installments of $1,600,000 beginning December 1989.
Proceeds of this borrowing were loaned to the ESOT on the same terms and are
used by the ESOT to purchase shares of AMERCO common stock. Interest payments
under this agreement were $309,000, $313,000, and $253,000 for 1996, 1995 and
1994, respectively. As of March 31, 1996, $4,100,000 is outstanding under this
agreement.
To fund additional purchases of the Company stock, in May 1990 the ESOT
borrowed $1,172,000 from the Company repayable over ten years under a stock
pledge agreement. The interest rate is based upon the average interest rate paid
by the Company. Interest payments under this agreement were $59,000, $72,000,
and $90,000 for 1996, 1995 and 1994, respectively. As of March 31, 1996,
$586,000 is outstanding under this agreement.
During fiscal year 1991, the Company executed an additional stock pledge
agreement with the ESOT to make loans available in an aggregate principal amount
equal to $10,000,000 over a five year commitment period. In April 1994 the ESOT
modified the 1991 agreement to increase the commitment from $10,000,000 to
$20,000,000 and extend the commitment period an additional five years.
Borrowings under the agreement are repaid based upon a twenty year amortization
period. Interest is based upon the average rate paid by AMERCO under all
promissory notes, commercial paper and other evidences of indebtedness issued by
AMERCO and outstanding as of the date the rate is to be
F-27
<PAGE> 81
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
calculated. Under this agreement, $18,643,000 is outstanding at March 31, 1996.
Interest payments under this agreement were $1,131,000, $745,000, and $474,000
for 1996, 1995 and 1994, respectively.
Shares are released from collateral and allocated to active employees based
on the proportion of debt service paid in the plan year. Contributions to the
ESOT charged to expense were $2,904,000, $2,571,000, and $2,269,000 for the
years ended 1996, 1995 and 1994, respectively.
Effective April 1, 1994, the Company adopted Statement of Position 93-6
"Employers' Accounting for Employee Stock Ownership Plans" for shares purchased
subsequent to December 31, 1992. Accordingly, the shares pledged as collateral
are reported as unearned ESOP shares in the statement of financial position. As
shares purchased after December 31, 1992 are released from collateral, the
Company reports compensation expense equal to the current market price of the
shares, and the shares become outstanding for earnings-per-share computations.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of
debt and accrued interest.
Shares purchased prior to December 31, 1992 are not accounted for under the
above guidance. Dividends are recorded as a reduction of retained earnings,
shares are considered outstanding for earnings-per-share calculations, and
compensation expense is based upon debt service.
The ESOP shares as of March 31 were as follows:
<TABLE>
<CAPTION>
SHARES ISSUED
SHARES ISSUED PRIOR SUBSEQUENT TO
TO DECEMBER, 1992 DECEMBER, 1992
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Allocated shares......................... 1,367 1,233 43 13
Shares committed to be released.......... -- -- 11 8
Unreleased shares........................ 980 1,211 783 594
------ ------- ------- -------
Total ESOP shares........................ 2,347 2,444 837 615
====== ======= ======= =======
Fair value of unreleased shares.......... $ 9,499 $ 11,408 $ 18,988 $ 12,697
====== ======= ======= =======
</TABLE>
For purposes of this schedule, fair value of unreleased shares issued prior
to December 31, 1992 is defined as the historical cost of such shares. Fair
value of unreleased shares issued subsequent to December 31, 1992 is defined as
the March 31 trading value of such shares for 1996 and 1995. Management
considers the actual fair value of the shares to be in excess of their trading
value. See also Note 17.
Oxford insures various group life and group disability insurance plans
covering employees of the consolidated group. Premiums earned were $2,138,000,
$1,896,000, and $1,325,000 during the years ended December 31, 1995, 1994 and
1993, respectively and were eliminated in consolidation.
11. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides medical and life insurance benefits to retired
employees and eligible dependents over age 65 if the employee meets specified
age and service requirements.
The Company uses the accrual method of accounting for postretirement
benefits. Prior to 1994, the Company recognized these costs, which were not
material, as claims were incurred. Upon adoption of SFAS 106, the Company
elected to immediately recognize the cumulative effect of the change in
F-28
<PAGE> 82
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
accounting for postretirement benefits of $5.0 million ($3.1 million net of
income tax benefit) which represents the accumulated postretirement benefit
obligation (APBO) existing at April 1, 1993. In addition, the impact of the
change in ongoing operations is an increase in expense of approximately
$632,000, $592,000 and $1,087,000 in 1996, 1995 and 1994, respectively. The
Company continues to fund medical and life insurance benefit costs as claims are
incurred.
The components of net periodic postretirement benefit cost for 1996, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the period....... $ 346 $ 360 $ 325
Interest cost on APBO.................................... 422 382 405
Other components......................................... (81) -- --
---- ---- ----
Net periodic postretirement benefit cost................. $ 687 $ 742 $ 730
==== ==== ====
</TABLE>
The 1996 and 1995 postretirement benefit liability included the following
components:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of postretirement benefit
obligation:
Retirees.................................................. $ (2,010) $ (1,638)
Eligible active plan participants......................... (344) (341)
Other active plan participants............................ (3,597) (3,105)
-------- --------
Accumulated postretirement benefit obligation............... (5,951) (5,084)
Unrecognized net gain....................................... (1,366) (1,601)
-------- --------
$ (7,317) $ (6,685)
======== ========
</TABLE>
The discount rate assumptions in computing the information above were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Accumulated postretirement benefit obligation............ 7.00% 8.50% 7.75%
</TABLE>
The year-to-year fluctuations in the discount rate assumptions primarily
reflect changes in U.S. interest rates. The discount rate represents the
expected yield on a portfolio of high-grade (AA-AAA rated or equivalent)
fixed-income investments with cash flow streams sufficient to satisfy benefit
obligations under the plans when due.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8.50% in 1996, declining annually to an
ultimate rate of 4.20% in 2010. The assumed health care cost trend rate reflects
a $20,000 maximum lifetime benefit included in the Company's plan.
If the health care cost trend rate assumptions were increased by 1.0%, the
APBO as of March 31, 1996 would be increased by approximately $979,000. The
effect of this change on the sum of the service cost and interest cost
components of net periodic postretirement benefit cost for 1996 would be an
increase of approximately $157,000.
Postemployment benefits provided by the Company are not material.
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
12. REINSURANCE
The Company assumes and cedes reinsurance on both a coinsurance and risk
premium basis. The Company obtains reinsurance for that portion of risks
exceeding retention limits. The maximum amount of life insurance retained on any
one life is $100,000.
The Company also reinsures a wide range of property-casualty risks with
third parties and insures general and auto liability, multiple peril and
worker's compensation coverage for the consolidated group, independent fleet
owners and customers as a direct writer and as a reinsurer through third party
companies.
To the extent that a reinsurer is unable to meet its obligation under the
related reinsurance agreements, the Company would remain liable for the unpaid
losses and loss expenses. Pursuant to certain of these agreements, the Company
holds letters of credit in the amount of $9,800,000 from reinsurers. The Company
has issued letters of credit totaling approximately $2,100,000 in favor of
certain ceding companies.
RWIC is a reinsurer of municipal bond insurance through an agreement with
MBIA, Inc. Premiums generated through this agreement are recognized on a pro
rata basis over the contract coverage period. Unearned premiums on this coverage
approximated $4,800,000 and $4,400,000 as of December 31, 1995 and 1994,
respectively. RWIC's share of case loss reserves related to this coverage is
approximately $42,000 at December 31, 1995. RWIC's aggregate exposure for Class
1 municipal bond insurance was $797,600,000 as of December 31, 1995.
A summary of reinsurance transactions by business segment follows:
<TABLE>
<CAPTION>
PERCENTAGE
CEDED ASSUMED OF AMOUNT
DIRECT TO OTHER FROM OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
-------- --------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED 1995
Life insurance in force..... $ 35,257 $ 481 $ 2,586,485 $ 2,621,261 99%
======= ======= ========== ==========
Premiums earned:
Life...................... $ 2,078 17 8,414 10,475 80%
Accident and health....... 4,877 183 2,574 7,268 35%
Annuity................... -- -- 8,453 8,453 100%
Property casualty......... 91,373 33,031 69,711 128,053 54%
------- ------- ---------- ----------
Total................ $ 98,328 $ 33,231 $ 89,152 $ 154,249
======= ======= ========== ==========
</TABLE>
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
PERCENTAGE
CEDED ASSUMED OF AMOUNT
DIRECT TO OTHER FROM OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
-------- --------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED 1994
Life insurance in force..... $ 32,046 $ 500 $ 2,729,372 $ 2,760,918 99%
======= ======= ======= ========
Premiums earned:
Life...................... $ 1,601 16 8,149 9,734 84%
Accident and health....... 3,980 198 1,513 5,295 29%
Annuity................... 61 -- 7,696 7,757 99%
Property casualty......... 86,869 40,871 66,864 112,862 59%
------- ------- ------- --------
Total................. $ 92,511 $ 41,085 $ 84,222 $ 135,648
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE
CEDED ASSUMED OF AMOUNT
DIRECT TO OTHER FROM OTHER NET ASSUMED TO
AMOUNT COMPANIES COMPANIES AMOUNT NET
-------- --------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED 1993
Life insurance in force..... $ 19,860 $ 524 $ 2,979,714 $ 2,999,050 99%
Premiums earned:
Life...................... $ 53 16 8,876 8,913 99%
Accident and health....... 1,120 209 1,455 2,366 61%
Annuity................... -- -- 5,419 5,419 100%
Property casualty......... 81,676 45,122 70,092 106,646 66%
------- ------- ------- --------
Total................. $ 82,849 $ 45,347 $ 85,842 $ 123,344
======= ======= ======= ========
</TABLE>
13. CONTINGENT LIABILITIES AND COMMITMENTS
The Company occupies certain facilities and uses certain equipment under
operating lease commitments with terms expiring through 2079. Lease expense was
$69,097,000, $66,487,000 and $84,359,000 for the years ended 1996, 1995 and
1994, respectively. During the year ended March 31, 1996, U-Haul Leasing & Sales
Co., a wholly-owned subsidiary of U-Haul, entered into twelve transactions, and
has subsequently entered into three additional transactions, whereby the Company
sold rental trucks and subsequently leased them back. AMERCO has guaranteed
$38,650,000 of residual values at March 31, 1996 and an additional $3,600,000 of
residual values subsequent to March 31, 1996 on these assets at the end of the
respective lease terms. Certain leases contain renewal and fair market value
purchase options as well as mileage and other restrictions similar to covenants
disclosed in Note 5 of Notes to Consolidated Financial Statements for notes
payable and loan agreements. Also, subsequent to year end, U-Haul entered into
one lease transaction, whereby the Company sold and subsequently leased back
computer equipment.
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Following are the lease commitments for leases having terms of more than
one year (in thousands):
<TABLE>
<CAPTION>
YEAR END 1996
-----------------------------
PROPERTY, PLANT ADDITIONS
AND OTHER RENTAL SUBSEQUENT TO
YEAR ENDED EQUIPMENT TRUCKS YEAR END TOTAL
------------------------------- --------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
1997........................... $ 2,115 $ 64,592 $ 4,059 $ 70,766
1998........................... 1,571 64,592 5,004 71,167
1999........................... 1,325 64,592 5,004 70,921
2000........................... 495 64,592 5,005 70,092
2001........................... 457 48,639 4,353 53,449
Thereafter..................... 3,700 31,480 9,002 44,182
------ -------- ------- --------
$ 9,663 $ 338,487 $ 32,427 $ 380,577
====== ======== ======= ========
</TABLE>
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 cleanup of underground fuel storage tanks. It is the opinion of
management that none of such suits, claims, or proceedings involving the
Company, individually or in the aggregate, are expected to result in a material
loss. Also see Notes 12 and 14 of Notes to Consolidated Financial Statements.
14. LEGAL PROCEEDINGS
A judgment was entered on February 21, 1995, 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 Litigation) against 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 against Paul F. Shoen, who is a former
director. 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 in AMERCO to the defendants upon the satisfaction of the judgment. The
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
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
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 originally
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. On June
21, 1996, the bankruptcy court issued an order enjoining the annual meetings
until consummation of the Plan. 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 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 had retained unexpired appeal rights
with respect to the Shoen Litigation. If the Director-Defendants exercised such
appeal rights, the damage award may have increased and the Company may have been
exposed to increased liability to the Director-Defendants under existing
indemnity agreements.
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.
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
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). All of Maran's voting stock was held by Mary
Anna Shoen Eaton (Shoen Eaton), who was 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, 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 paid 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 paying Thermar 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.
As of the date hereof, an issue remains whether or not the plaintiffs are
entitled to statutory post-judgment interest at the rate of 10% per year. As of
June 24, 1996, total accrued interest on the outstanding balance of the judgment
is approximately $42.2 million and is accruing at the rate of approximately
$86,000 per day. Briefing regarding post-petition date interest and the
computation thereof was completed June 21, 1996. A July 19, 1996 hearing date
has been set by the bankruptcy court. Those reserved 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
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<PAGE> 88
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
been set for trial and is likely to await the outcome of the 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 yet determined all of the
sources of cash which will be used to fund the Plan. 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 will be sold to
raise a portion of the cash needed to fund the Plan. In order to comply with
certain covenants in the Company's current credit agreements following the
repurchase of the remaining plaintiffs' stock, it may be necessary to increase
stockholders' equity by issuing capital stock. Such capital stock may consist of
dividend paying preferred stock, Series B Common Stock, Common Stock, or a
combination of the foregoing.
Because the Company has not determined all of 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 as part of the
Plan funding, the Company's outstanding Common Stock would 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
hereof. No such expense was recorded for book purposes related to the
Maran/Shoen Eaton, L.S.S. and Thermar transactions. The Company has not yet
determined the accounting treatment for any transaction other than the
Maran/Shoen Eaton, L.S.S. and Thermar transactions. Furthermore, no provision
has been made in the Company's financial statements for any payments to be made
to the plaintiffs. For the reasons set forth above, the Plan could have the
effect of reducing the Company's net income.
15. PREFERRED STOCK PURCHASE RIGHTS
In July 1988, the Company's Board of Directors adopted a stockholder-rights
plan, and such rights were distributed as a dividend at the rate of one right
for each outstanding share of the Company's common stock to the holders of
record of common shares on July 29, 1988. As a result of the 400-for-1
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<PAGE> 89
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
common stock split that occurred on October 1, 1990, each outstanding share of
common stock currently has one four-hundredth of a right associated with it.
When exercisable, each right will entitle its holder to purchase from the
Company one one-hundredth of a share of the new Series C Preferred Stock of the
Company at a price of $15,000. AMERCO has reserved 5,000 shares of authorized
but unissued preferred stock for the Series C Preferred Stock authorized in this
stockholder-rights plan. The rights will become exercisable if a person or group
of affiliated or associated persons acquire or obtain the right to acquire
beneficial ownership of 50% or more of the common stock without approval of a
majority of the Board of Directors of the Company. The majority approval must be
made by members of the Board who were members as of July 25, 1988 (Disinterested
Directors) or subsequent members elected to the Board if such persons are
recommended or approved by a majority of the Disinterested Directors. The rights
will expire on July 29, 1998 unless earlier redeemed by the Company pursuant to
authorization by a majority of the Disinterested Directors.
In the event the Company is acquired in a merger or other business
combination transaction after the rights become exercisable, provision shall be
made so that each holder of a right shall have the right to receive, upon
exercise thereof and payment of the exercise price, that number of common shares
of such corporation which at the time of such transaction would have a market or
book value of two times the exercise price of the right. If the Company is the
surviving company, each holder would have the right to receive, upon payment of
the exercise price, common shares with a market or book value of two times the
exercise price.
16. STOCK OPTION PLAN
In October 1992, the stockholders approved a ten year incentive plan
entitled the AMERCO Stock Option and Incentive Plan (the Plan) for officers and
key employees of the Company.
Under the Plan, Incentive Stock Options (ISOs), Non-qualified Stock
Options, Stock Appreciation Rights (SAR), Restricted Stock Dividend Equivalents
and Performance Shares may be awarded. The aggregate numbers of shares of stock
subject to award under the Plan may not exceed 3,000,000. The stock subject to
the Plan is AMERCO Common Stock unless prior to the date the first award is made
under the Plan, a Committee of at least two Board members determines, in its
discretion, to utilize another class of the Company's stock.
The Plan provides for the granting of ISOs as defined under the Internal
Revenue Code and Non-qualified Stock Options under such terms and conditions as
the Committee determines in its discretion. The ISOs may be granted at prices
not less than one-hundred percent of the fair market value at the date of grant
with a term not exceeding ten years.
The Plan provides for the granting of SARs subject to certain conditions
and limitations to holders of options under the Plan. SARs permit the optionee
to surrender an exercisable option for an amount equal to the excess of the
market price of the common stock over the option price when the right is
exercised.
Under the Restricted Stock feature of the Plan, a specified number of
common shares may be granted subject to certain restrictions. Restriction
violations during a specified period result in forfeiture of the stock. The
Committee may, in its discretion, impose any restrictions on a Restricted Stock
award.
The Plan authorizes the Committee to grant Dividend Equivalents in
connection with options. Dividend Equivalents are rights to receive additional
shares of Company stock at the time of exercise of the option to which such
Dividend Equivalents apply.
Under the Plan, Performance Share units may be granted. Each unit is deemed
to be the equivalent of one share of Company stock and such units are credited
to a Performance Share account. The value of
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
the units at the time of award or payment is the fair market value of an
equivalent number of shares of stock. At the end of the award period, payment
may be made subject to certain predetermined criteria and restrictions.
To date, no stock options or awards have been granted.
17. RELATED PARTY TRANSACTIONS
AMERCO and Consolidated Subsidiaries have related party transactions with
certain major stockholders, directors and officers of the consolidated group as
disclosed in Notes 2, 6, 8, 14, 19 and 20 of Notes to Consolidated Financial
Statements.
During the years ended 1996, 1995 and 1994, a subsidiary of AMERCO
purchased $3,122,000, $3,417,000 and $2,607,000, respectively, of printing from
a company wherein an officer is a major stockholder, director and officer of
AMERCO.
During the year ended 1996, a subsidiary of AMERCO purchased $1,558,000 of
computer components from a company wherein a major stockholder was the family
trust of a major stockholder, director and officer of AMERCO. There were no
purchases from the Company during the years ended 1995 and 1994.
Pursuant to a Share Repurchase and Registration Rights Agreement, dated May
1, 1992, among Sophia M. Shoen, Sophmar, Inc., and the Company, Sophia M. Shoen
had the right to require the Company to repurchase, with certain limitations, up
to $3,000,000 of Common Stock owned by her. The Sophia Shoen Registration Rights
Agreement provides that the Company's obligations to repurchase any shares from
Sophia M. Shoen may be satisfied if such shares are purchased by the ESOP Trust.
Pursuant to the Sophia Shoen Registration Rights Agreement, on June 30, 1994,
Sophia M. Shoen sold 88,235 shares of Common Stock to the ESOP Trust at the then
appraised value of $17.00 per share, for an aggregate sales price of
approximately $1,500,000. In addition, Sophia M. Shoen, subject to certain
limitations and restrictions, may also elect under the Sophia Shoen Registration
Rights Agreement to cause the Company to effect a registration under the
Securities Act of 1933, as amended, and applicable state securities laws of
shares of Common Stock held by her. Sophia M. Shoen sold 575,000 shares of
Common Stock to the public in late 1994 pursuant to her registration rights.
Sophia M. Shoen is a major stockholder and is the sister of Edward J., Mark V.,
and James P. Shoen, who are major stockholders and directors of the Company.
Pursuant to a Management Consulting Agreement, dated as of May 1, 1992,
Sophia M. Shoen agreed to provide environmental and other consulting services to
the Company. In consideration for these services, the Company agreed to pay
Sophia M. Shoen a yearly fee of $100,000. The Management Consulting Agreement
terminated May 1, 1995.
In April 1994, William E. Carty sold 46.5% of 90.88 acres of land to the
Company for cash in the amount of $4,000,000. An independent opinion of value
was used to determine the Company's offer to purchase and the purchase was
completed below the amount so determined. Additionally, in fiscal 1995, the
Company sold approximately 158 acres of land to William E. Carty for cash in the
amount of $1,324,000. The sales price was greater than an independent opinion of
value obtained by the Company prior to the sale. William E. Carty is a director
of the Company.
Pursuant to a Share Repurchase and Registration Rights Agreement, dated as
of March 1, 1992, among Paul F. Shoen, Pafran, Inc., and the Company, Paul F.
Shoen had the right to require the Company to repurchase, with certain
limitations, up to $3,000,000 of Common Stock owned by him. The Paul Shoen
Registration Rights Agreement provides that the Company's obligation to
repurchase any shares
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AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
from Paul F. Shoen shall be satisfied if such shares are purchased by the ESOP
Trust. Pursuant to the Paul Shoen Registration Rights Agreement, (i) on June 30,
1994, Paul F. Shoen sold 58,825 shares of Common Stock to the ESOP Trust at the
then appraised value of $17.00 per share for an aggregate sales price of
approximately $1,000,000 and (ii) on January 17, 1995, Paul F. Shoen sold 50,632
shares of Common Stock to the ESOP Trust at the most recent closing price for
the Common Stock trading on Nasdaq of $19.75 per share for an aggregate sales
price of approximately $1,000,000. In addition, Paul F. Shoen, subject to
certain limitations and restrictions, may also elect under the Paul Shoen
Registration Rights Agreement to cause the Company to effect a registration
under the Securities Act of 1933, as amended, and applicable state securities
laws of shares of Common Stock held by him. Paul F. Shoen sold 500,000 shares of
Common Stock to the public in March of 1995 pursuant to his registration rights.
Paul F. Shoen is a major stockholder of the Company.
On February 9, 1995, Paul F. Shoen executed a settlement agreement with the
Company whereby Paul F. Shoen agreed to the dismissal of certain claims he had
asserted in an arbitration proceeding and in an action in the United States
District Court for the District of Nevada. In exchange for Paul F. Shoen's
agreement to dismiss such claims, the Company agreed, among other things, to
work in good faith toward appointing independent trustees for the ESOP and to
place Paul F. Shoen on the management's slate of directors for the 1994 Annual
Meeting of Stockholders. In addition, the settlement agreement provides for the
Company to pay Paul F. Shoen $925,000 and for the Company to receive a full
release of all claims by Paul F. Shoen through the settlement date, including
but not limited to, claims for reimbursement of attorneys fees related to all
matters to which Paul F. Shoen is or was a party. The terms of the settlement
will not result in a material adverse effect of the Company's financial
condition or results of operations.
Pursuant to a Management Consulting Agreement, dated as of March 5, 1992,
Paul F. Shoen agreed to provide management consulting services to the Company on
matters relating to the Company's business and the organization and management
of the Company. In consideration for these services, the Company has agreed to
pay Paul F. Shoen a yearly fee of $200,000. A total of $100,000 was paid for the
year ended March 31, 1995. The Management Consulting Agreement terminated on
March 1, 1995.
On December 18, 1995, the Company reimbursed Paul F. Shoen $1,500,000 for a
payment made to the plaintiffs in partial satisfaction of the judgment in the
Shoen Litigation. Paul F. Shoen is a major stockholder and the brother of Edward
J., Mark V. and James P. Shoen, who are major stockholders and directors of the
Company.
Management believes that these transactions were consummated on terms
equivalent to those that prevail in arm's-length transactions.
18. SUPPLEMENTAL CASH FLOW INFORMATION
The (increase) decrease in receivables, inventories and accounts payable
and accrued liabilities net of other operating and investing activities follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Receivables.................................. $ (45,734) $ (57,645) $ (19,945)
======== ======== ========
Inventories.................................. $ 4,446 $ (1,325) $ 2,425
======== ======== ========
Accounts payable and accrued liabilities..... $ 24,137 $ 3,549 $ 11,538
======== ======== ========
</TABLE>
F-38
<PAGE> 92
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Income taxes paid in cash amounted to $540,000, $9,465,000, and $3,275,000
for 1996, 1995 and 1994, respectively. Interest paid in cash amounted to
$71,561,000, $67,191,000, and $71,448,000 for 1996, 1995 and 1994, respectively.
19. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES
A summary consolidated balance sheet for Ponderosa Holdings, Inc. and its
subsidiaries is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Investments -- fixed maturities........................ $ 879,702 $ 705,428
Other investments...................................... 106,966 116,151
Receivables............................................ 155,384 136,527
Deferred policy acquisition costs...................... 49,995 49,244
Due from affiliate..................................... 15,215 15,165
Deferred federal income taxes.......................... 2,713 12,090
Other assets........................................... 9,194 25,007
---------- ----------
Total assets......................................... $ 1,219,169 $ 1,059,612
========== ==========
Policy liabilities and accruals........................ $ 419,187 $ 411,249
Unearned premiums...................................... 64,379 63,938
Premium deposits....................................... 410,787 304,979
Other policyholders' funds and liabilities............. 30,448 25,739
---------- ----------
Total liabilities.................................... 924,801 805,905
Stockholder's equity................................... 294,368 253,707
---------- ----------
Total liabilities and stockholder's equity........ $ 1,219,169 $ 1,059,612
========== ==========
</TABLE>
F-39
<PAGE> 93
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
A summarized consolidated income statement for Ponderosa Holdings, Inc. and
subsidiaries is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Premiums................................................ $ 167,825 $ 156,963 $ 142,347
Net investment income................................... 46,424 43,096 40,019
Other income............................................ 8,453 5,958 7,447
--------- --------- ---------
Total revenue......................................... 222,702 206,017 189,813
Benefits and losses..................................... 151,232 133,407 120,825
Amortization of deferred policy acquisition costs....... 17,131 10,896 9,343
Other expenses.......................................... 20,303 28,816 29,834
--------- --------- ---------
Income from operations................................ 34,036 32,898 29,811
Federal income tax expense.............................. (10,955) (9,460) (8,723)
--------- --------- ---------
Earnings from operations before change in accounting
principle............................................. 23,081 23,438 21,088
Cumulative effect of a change in accounting principle... -- -- (93)
--------- --------- ---------
Net income.............................................. $ 23,081 $ 23,438 $ 20,995
========= ========= =========
</TABLE>
Applicable laws and regulations of the State of Arizona require maintenance
of minimum capital determined in accordance with statutory accounting practices
in the amount of $400,000 for Oxford and $1,000,000 for RWIC. In addition, the
amount of dividends which can be paid to shareholders by insurance companies
domiciled in the State of Arizona is limited. Any dividend in excess of the
limit requires prior regulatory approval. Statutory surplus which can be
distributed as dividends is $21,728,000 at December 31, 1995.
The consolidated audited statutory net income for the years ended December
31, 1995, 1994 and 1993 was $21,112,000, $20,858,000, and $20,644,000,
respectively; audited statutory capital and surplus was $225,780,000 and
$205,699,000 at December 31, 1995 and 1994, respectively.
20. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Industry Segment Data -- AMERCO's three industry segments are Rental
operations, Life insurance and Property/Casualty insurance. Rental operations is
composed of the operations of U-Haul International, Inc., which is engaged in
the rental of various kinds of equipment and sales of related products and
services. Life insurance is composed of the operations of Oxford Life Insurance
Company which operates in various life, accident and health and annuity lines.
Property/Casualty insurance is composed of the operations of Republic Western
Insurance Company which operates in various property and casualty lines.
F-40
<PAGE> 94
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
Information concerning operations by industry segment follows:
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Revenues:
Outside..................... $ 1,085,711 $ 49,103 $ 159,609 $ -- $ 1,294,423
Intersegment................ (656) 1,281 12,763 (13,388) --
---------- -------- -------- --------- ----------
Total revenue............... $ 1,085,055 50,384 172,372 (13,388) 1,294,423
========== ======== ======== ========= ==========
Pretax operating profit....... $ 129,092 12,600 21,436 656 163,784
========== ======== ======== =========
Interest expense.............. 67,558
----------
Pretax earnings from
operations.................. $ 96,226
==========
Identifiable assets........... $ 1,921,105 $ 599,713 $ 619,454 $ (312,294) $ 2,827,978
========== ======== ======== ========= ==========
Depreciation/amortization..... $ 83,734 $ 7,517 $ 11,176 $ -- $ 102,427
========== ======== ======== ========= ==========
Capital expenditures.......... $ 291,057 $ -- $ -- $ -- $ 291,057
========== ======== ======== ========= ==========
1995
Revenues:
Outside..................... $ 1,052,243 $ 39,347 $ 144,642 $ -- $ 1,236,232
Intersegment................ (42) 1,444 20,657 (22,059) --
---------- -------- -------- --------- ----------
Total revenue............... $ 1,052,201 $ 40,791 $ 165,299 $ (22,059) $ 1,236,232
========== ======== ======== ========= ==========
Pretax operating profit....... $ 128,278 $ 9,824 $ 23,074 $ 42 $ 161,218
========== ======== ======== =========
Interest expense.............. 67,762
----------
Pretax earnings from
operations.................. $ 93,456
==========
Identifiable assets........... $ 1,827,995 $ 479,778 $ 579,821 $ (281,605) $ 2,605,989
========== ======== ======== ========= ==========
Depreciation/amortization..... $ 150,187 $ 4,790 $ 8,913 $ -- $ 163,890
========== ======== ======== ========= ==========
Capital expenditures.......... $ 434,992 $ -- $ -- $ -- $ 434,992
========== ======== ======== ========= ==========
</TABLE>
F-41
<PAGE> 95
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
PROPERTY/ ADJUSTMENTS
RENTAL LIFE CASUALTY AND
OPERATIONS INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
---------- -------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1994 REVENUES:
Outside..................... $ 960,878 $ 31,357 $ 137,659 $ -- $ 1,129,894
Intersegment................ (357) 2,834 18,862 (21,339) --
---------- -------- -------- --------- ----------
Total revenue............... $ 960,521 $ 34,191 $ 156,521 $ (21,339) $ 1,129,894
========== ======== ======== ========= ==========
Pretax operating profit....... $ 106,248 $ 9,106 $ 20,705 $ (698) 135,361
========== ======== ======== =========
Interest expense.............. 68,859
----------
Pretax earnings from
operations.................. $ 66,502
----------
Identifiable assets........... $ 1,593,044 $ 461,464 $ 550,795 $ (260,861) $ 2,344,442
========== ======== ======== ========= ==========
Depreciation/amortization..... $ 137,220 $ 4,277 $ 7,243 $ -- $ 148,740
========== ======== ======== ========= ==========
Capital expenditures.......... $ 530,520 $ -- $ -- $ -- $ 530,520
========== ======== ======== ========= ==========
</TABLE>
GEOGRAPHIC AREA DATA --
<TABLE>
<CAPTION>
UNITED STATES CANADA CONSOLIDATED
------------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
1996
Revenues......................................... $ 1,265,820 $ 28,603 $ 1,294,423
Pretax earnings from operations.................. $ 92,699 $ 3,527 $ 96,226
Identifiable assets.............................. $ 2,781,717 $ 46,261 $ 2,827,978
1995
Revenues......................................... $ 1,207,878 $ 28,354 $ 1,236,232
Pretax earnings from operations.................. $ 90,378 $ 3,078 $ 93,456
Identifiable assets.............................. $ 2,552,564 $ 53,425 $ 2,605,989
1994
Revenues......................................... $ 1,102,062 $ 27,832 $ 1,129,894
Pretax earnings from operations.................. $ 65,919 $ 583 $ 66,502
Identifiable assets.............................. $ 2,298,948 $ 45,494 $ 2,344,442
</TABLE>
21. SUBSEQUENT EVENTS
On May 7, 1996, the Company declared a cash dividend of $3,241,000 ($.53125
per preferred share) to preferred stockholders of record as of May 17, 1996.
See Notes 2, 5, 13 and 14 of Notes to Consolidated Financial Statements for
other subsequent event disclosures.
22. SUBSEQUENT EVENTS -- UNAUDITED
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
F-42
<PAGE> 96
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
due in fiscal 1997 through fiscal 1999. These transactions resulted in an
extraordinary loss of $2,004,000, net of tax of $1,233,000 ($0.07 per share).
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 6, 1996, the Company declared a cash dividend of $3,241,000
($0.53125 per preferred share) to preferred stockholders of record as of August
16, 1996.
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.
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
F-43
<PAGE> 97
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
MARCH 31, 1996, 1995 AND 1994
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.
On October 14, 1996, the Company paid an additional $15,000,000 to L.S.
Shoen in settlement of all outstanding disputes.
F-44
<PAGE> 98
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
BALANCE SHEETS
MARCH 31,
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................... $ 5,487 $ 5,967
Investment in subsidiaries..................................... 613,607 527,050
Due from unconsolidated subsidiaries........................... 1,073,819 1,077,014
Other assets................................................... 8,420 6,042
--------- ---------
$ 1,701,333 $ 1,616,073
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and loans................................................ $ 929,236 $ 811,562
Other liabilities.............................................. 103,906 103,029
--------- ---------
Stockholders' equity:
Preferred stock................................................ -- --
Common stock................................................... 10,000 10,000
Additional paid-in capital..................................... 165,756 165,675
Foreign currency translation................................... (11,877) (12,435)
Net unrealized gain (loss) on investments...................... 11,097 (6,483)
Retained earnings:
Beginning of year........................................... 561,589 514,521
Net earnings................................................ 60,394 60,032
Dividends paid.............................................. (12,964) (12,964)
--------- ---------
609,019 561,589
Less:
Cost of common shares in treasury........................... 111,118 10,461
Unearned employee stock ownership plan shares............... 4,686 6,403
--------- ---------
Total stockholders' equity................................ 668,191 701,482
--------- ---------
$ 1,701,333 $ 1,616,073
========= =========
</TABLE>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-45
<PAGE> 99
SCHEDULE I, CONTINUED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Net interest income from subsidiaries.............. $ 63,133 $ 66,050 $ 68,327
Other revenue...................................... 751 465 753
--------- --------- ---------
Total revenues................................... 63,884 66,515 69,080
--------- --------- ---------
EXPENSES
Interest expense................................... 63,133 66,050 68,327
Other expenses..................................... 14,107 11,515 9,565
--------- --------- ---------
Total expenses..................................... 77,240 77,565 77,892
--------- --------- ---------
Operating loss..................................... (13,356) (11,050) (8,812)
Equity in earnings of unconsolidated
subsidiaries..................................... 107,540 102,583 71,659
Income tax expense................................. (33,790) (31,501) (19,293)
Extraordinary loss on early extinguishment of debt,
net.............................................. -- -- (3,370)
--------- --------- ---------
Net earnings..................................... $ 60,394 $ 60,032 $ 40,184
========= ========= =========
Earnings per common share........................ $ 1.33 $ 1.23 $ .89
========= ========= =========
Weighted average common shares outstanding....... 35,736,335 38,190,552 38,664,063
========= ========= =========
</TABLE>
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-46
<PAGE> 100
SCHEDULE I, CONTINUED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings......................................... $ 60,394 $ 60,032 $ 40,184
Amortization, net.................................. 34 545 850
Equity in earnings of subsidiaries................. 69,075 67,139 49,288
Increase (decrease) in amounts due from
unconsolidated subsidiaries..................... 3,195 (91,475) (197,093)
Net change in operating assets and liabilities..... (156,406) (100,642) (53,341)
Other, net......................................... 18,485 (8,194) (3,945)
--------- --------- ---------
Net cash used by operating activities................ (5,223) (72,595) (164,057)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short term borrowings.................. 84,500 178,750 21,750
Proceeds from notes.................................. 140,000 -- 186,000
Proceeds from Leveraged Employee Stock Ownership
Plan............................................... 1,717 1,717 1,717
Principal payments on notes.......................... (106,826) (89,706) (179,905)
Debt Issuance Costs.................................. (1,027) (319) (531)
Issuance of preferred stock.......................... -- -- 146,320
Dividends paid....................................... (12,964) (12,964) (7,900)
Treasury Stock purchase.............................. (100,657) -- --
Extraordinary loss on early extinguishment of debt... -- -- (3,370)
--------- --------- ---------
Net cash provided by financing activities............ 4,743 77,478 164,081
--------- --------- ---------
Increase (decrease) in cash.......................... (480) 4,883 24
Cash and cash equivalents at beginning of year....... 5,967 1,084 1,060
--------- --------- ---------
Cash and cash equivalents at end of year............. $ 5,487 $ 5,967 $ 1,084
========= ========= =========
</TABLE>
Income taxes paid in cash amounted to $285,000, $8,794,000, and $3,025,000
for 1996, 1995 and 1994, respectively. Interest paid in cash amounted to
$67,150,000, $65,840,000 and $81,115,000 for 1996, 1995 and 1994, respectively.
See accompanying notes to condensed financial information and notes to
consolidated financial statements incorporated herein by reference.
F-47
<PAGE> 101
SCHEDULE I, CONTINUED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AMERCO
NOTES TO CONDENSED FINANCIAL INFORMATION
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the
holding company for U-Haul International, Inc., Ponderosa Holdings, Inc. and
Amerco Real Estate Company. The financial statements of the Registrant should be
read in conjunction with the Consolidated Financial Statements and notes thereto
included in this Form 10-K.
The Company is included in a consolidated Federal income tax return with
all of its U.S. subsidiaries. Accordingly, the provision for income taxes has
been calculated for Federal income taxes of the Registrant and subsidiaries
included in the consolidated return of the Registrant. State taxes for all
subsidiaries are allocated to the respective subsidiaries.
The financial statements include only the accounts of the Registrant (a
Nevada corporation), which include certain of the corporate operations of
AMERCO. The debt and related interest expense of the Registrant have been
allocated to the consolidated subsidiaries. The intercompany interest income and
expenses are eliminated in the consolidated financial statements.
2. GUARANTEES
AMERCO has guaranteed performance of fleet owner contract obligations of
U-Haul International, Inc., a wholly-owned subsidiary, and residual values on
certain long-term leases. See Notes 8 and 13 of Notes to Consolidated Financial
Statements.
3. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
<TABLE>
<CAPTION>
YEAR END
------------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Medium-term notes payable 8.55% to 11.50% interest rates,
due through 2000........................................ $ 95,050 $ 169,270
Note payable to insurance companies 5.89% to 10.27%
interest rates, due through 2006........................ 339,000 270,000
Notes payable to banks 4.69% to 7.54% interest rates, due
through 2001............................................ 84,100 45,700
Other notes payable 9.50% interest rate, due through
2005.................................................... 86 92
Unsecured notes payable to banks under revolving lines of
credit 5.61% to 6.18% interest rates.................... 338,000 293,000
Other short-term promissory notes......................... 73,000 33,500
--------- ---------
$ 929,236 $ 811,562
========= =========
</TABLE>
For additional information, see Note 5 of Notes to Consolidated Financial
Statements.
F-48
<PAGE> 102
SCHEDULE V
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION (FOR PROPERTY-CASUALTY INSURANCE UNDERWRITERS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
CLAIMS
AND
CLAIM
ADJUSTMENT
EXPENSES
INCURRED
RESERVES FOR RELATED
DEFERRED UNPAID CLAIMS TO
POLICY AND CLAIM DISCOUNT NET --------
ACQUISITION ADJUSTMENT IF ANY, UNEARNED NET EARNED INVESTMENT CURRENT
YEAR AFFILIATION WITH REGISTRANT COSTS EXPENSES DEDUCTED PREMIUMS PREMIUMS(1) INCOME YEAR
- ---- ------------------------------ ----------- ------------- --------- -------- ----------- ---------- --------
(IN THOUSANDS)
<C> <S> <C> <C> <C> <C> <C> <C> <C>
96 Consolidated property --
casualty entity............. $ 9,858 341,981 N/A 64,379 128,083 29,906 114,110
95 Consolidated property --
casualty entity............. 8,973 329,741 N/A 63,938 112,862 29,026 102,782
94 Consolidated property --
casualty entity............. 6,644 314,482 N/A 58,842 105,801 27,446 91,044
<CAPTION>
PAID CLAIMS
AMORTIZATION OF AND CLAIM NET
PRIOR DEFERRED POLICY ADJUSTMENT PREMIUMS
YEAR AFFILIATION WITH REGISTRANT YEAR ACQUISITION COSTS EXPENSES WRITTEN(2)
- ---- ----------------------------- ------ ----------------- ----------- ----------
(IN THOUSANDS)
<C> <S> <C> <C> <C> <C>
96 Consolidated property --
casualty entity............. 8,292 8,973 109,372 125,789
95 Consolidated property --
casualty entity............. 6,576 6,644 92,651 119,952
94 Consolidated property --
casualty entity............. 12,688 5,377 104,123 113,672
</TABLE>
- ---------------
(1) The earned premiums are reported net of intersegment transactions. Earned
premiums eliminated in consolidation amount to $12,669,000, $20,575,000 and
$18,798,000 for the years ended 1996, 1995 and 1994, respectively.
(2) The premiums written are reported net of intersegment transactions. Premiums
written eliminated in consolidation amount to $14,206,000, $19,407,000 and
$18,335,000 for the years ended 1996, 1995 and 1994, respectively.
F-49
<PAGE> 103
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1996 1996 1995
------------- ---------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
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
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-50
<PAGE> 104
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- CONTINUED
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1996 1996 1995
------------- ---------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
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
========== ========== ==========
</TABLE>
F-51
<PAGE> 105
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE> 106
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
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
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE> 107
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
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 21,101
Increase in loan................................................... -- 3,168
Proceeds from loan................................................. (153) (137)
-------- --------
End of period...................................................... 23,176 24,132
-------- --------
Total stockholders' equity................................. $653,030 $741,864
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE> 108
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
(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....................................... $ 1.29 .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
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE> 109
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-56
<PAGE> 110
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.
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is as follows
(in thousands, except for par value):
<TABLE>
<CAPTION>
JUNE 30, 1996 PAR VALUE GROSS GROSS ESTIMATED
CONSOLIDATED OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
HELD-TO-MATURITY OF SHARES COST GAINS LOSSES VALUE
- --------------------------------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
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
-------- ------- -------- --------
</TABLE>
F-57
<PAGE> 111
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1996, MARCH 31, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1996 PAR VALUE GROSS GROSS ESTIMATED
CONSOLIDATED OR NUMBER AMORTIZED UNREALIZED UNREALIZED MARKET
AVAILABLE-FOR-SALE OF SHARES COST GAINS LOSSES VALUE
- --------------------------------------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
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
======== ======= ======== ========
</TABLE>
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC. AND
ITS SUBSIDIARIES
A summary consolidated balance sheet (unaudited) for Ponderosa Holdings,
Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
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
========== ==========
</TABLE>
F-58
<PAGE> 112
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1996, MARCH 31, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
A summarized consolidated income statement (unaudited) for Ponderosa
Holdings, Inc. and its subsidiaries is presented below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
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
======== ========
</TABLE>
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.
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
F-59
<PAGE> 113
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1996, MARCH 31, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
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 prepetition 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.
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
F-60
<PAGE> 114
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1996, MARCH 31, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
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):
<TABLE>
<CAPTION>
YEAR ENDED LEASE
MARCH 31, COMMITMENTS
--------------------------------------------------------------- -----------
<S> <C>
1997......................................................... $ 17,331
1998......................................................... 24,135
1999......................................................... 24,135
2000......................................................... 24,135
2001......................................................... 23,153
Thereafter..................................................... 112,690
--------
$ 225,579
========
</TABLE>
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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
Receivables................................................... $22,396 $(35,299)
======= ========
Inventories................................................... (8,827) (1,065)
======= ========
Accounts payable and accrued liabilities...................... $ 1,779 $ 22,585
======= ========
</TABLE>
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
F-61
<PAGE> 115
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 30, 1996, MARCH 31, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
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.
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.
F-62
<PAGE> 116
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY UNDERWRITER OR AGENT, OR ANY OTHER
PERSON. THIS PROSPECTUS DOES 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 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>
Available Information................. 3
Information Incorporated by
Reference........................... 3
Prospectus Summary.................... 4
Risk Factors.......................... 8
Use of Proceeds....................... 10
Price Range of Common Stock........... 10
Dividends............................. 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 28
Management............................ 38
Principal and Selling Stockholders.... 40
Description of Capital Stock.......... 42
Shares Eligible for Future Sale....... 47
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 48
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Index to Financial Statements......... F-1
</TABLE>
2,750,000 SHARES
AMERCO
COMMON STOCK
($.25 PAR VALUE)
[LOGO]
JOINT BOOK-RUNNING MANAGERS
- -----------------------------------
LEHMAN BROTHERS
SALOMON BROTHERS INC
PROSPECTUS
Dated December , 1996
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $ 32,396
Nasdaq National Market fee............................................... 17,500
Blue Sky fees and expenses, including legal fees......................... 5,000*
Printing and Engraving Expenses.......................................... 60,000*
Legal Fees and Expenses.................................................. 100,000*
Accounting Fees and Expenses............................................. 50,000*
Other Expenses........................................................... 15,104*
--------
Total.......................................................... $280,000*
=========
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law requires the Company to indemnify
officers and directors for any expenses incurred by any officer or director in
connection with any actions or proceedings, whether civil, criminal,
administrative, or investigative, brought against such officer or director
because of his or her status as an officer or director, to the extent that the
director or officer has been successful on the merits or otherwise in defense of
the action or proceeding. The Nevada General Corporation Law permits a
corporation to indemnify an officer or director, even in the absence of an
agreement to do so, for expenses incurred in connection with any action or
proceeding if such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by independent legal
counsel in a written opinion authorized by a majority vote of a quorum of
directors consisting of disinterested directors, or by independent legal counsel
in a written opinion if a quorum of disinterested directors cannot be obtained.
The Company's Restated Articles of Incorporation eliminate personal liability of
directors and officers, to the Company or its stockholders, for damages for
breach of their fiduciary duties as directors or officers, except for liability
(i) for acts or omissions that involve intentional misconduct, fraud, or a
knowing violation of law, or (ii) for the unlawful payment of dividends. In
addition, the Company's By-Laws provide that the Company shall indemnify, to the
fullest extent authorized or permitted by law, any person made, or threatened to
be made, a defendant in any threatened, pending, or completed action, suit, or
proceeding by reason of the fact that he or she was a director or officer of the
Company. The Company has also executed Indemnification Agreements that provide
that certain of the Company's directors and officers shall be indemnified and
held harmless by the Company to the fullest extent permitted by applicable law
or the Restated Articles of Incorporation or By-Laws of the Company. The Company
has established a trust fund with Harris Trust and Savings Bank as trustee in
order to fund its obligations under the Indemnification Agreements. The Company
has agreed to maintain a minimum balance in the trust fund of $1,000,000. The
Nevada General Corporation Law prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law may permit an
officer or director to apply to the court for approval of indemnification even
if the officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law. The Nevada General Corporation Law
also provides that indemnification of directors is not permitted for the
unlawful payment of distributions, except for those directors registering their
dissent to the payment of the distribution.
II-1
<PAGE> 118
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement
2.1 Order Confirming Plan(1)
2.2 Second Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J.
Shoen(1)
4.1 Restated Articles of Incorporation(2)
4.2 Restated By-Laws of AMERCO dated August 27, 1996(3)
4.3 Certificate of Designations, Preferences and Rights of Series A Preferred Stock(4)
4.4 Certificate of Designations, Preferences and Rights of Series A Common Stock+
4.5 Certificate of Designations, Preferences and Rights of Series B Preferred Stock
(3)
4.6 Certificate of Designations, Preferences and Rights of Series B Common Stock(3)
5 Opinion re Legality+
23.1 Consent of Independent Accountants
23.2 Consent of Lionel, Sawyer & Collins (included in Exhibit 5)
24 Power of Attorney (included on signature page of Registration Statement)
28 Information from Reports Furnished to State Insurance Regulatory Authorities(5)
</TABLE>
- ---------------
+ Previously filed.
(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.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 0-7862.
(4) Incorporated by reference to the Company's Current Report on Form 8-K, filed
October 15, 1993, File No. 0-7862.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1996, File No. 0-7862.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each such filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15
II-2
<PAGE> 119
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 1 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Phoenix, State of
Arizona, on the 9th day of December, 1996.
AMERCO
By: /s/ EDWARD J. SHOEN
-----------------------------------
Edward J. Shoen
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------- -----------------
<C> <S> <C>
/s/ EDWARD J. SHOEN Chairman of the Board and December 9, 1996
- ------------------------------------------ President (Principal
Edward J. Shoen executive officer)
* Treasurer (Principal December 9, 1996
- ------------------------------------------ financial and accounting
Gary B. Horton officer)
* Director December 9, 1996
- ------------------------------------------
Mark V. Shoen
* Director December 9, 1996
- ------------------------------------------
James P. Shoen
* Director December 9, 1996
- ------------------------------------------
William E. Carty
* Director December 9, 1996
- ------------------------------------------
John M. Dodds
* Director December 9, 1996
- ------------------------------------------
Charles J. Bayer
* Director December 9, 1996
- ------------------------------------------
Richard J. Herrera
* Director December 9, 1996
- ------------------------------------------
Aubrey K. Johnson
By: /s/ EDWARD J. SHOEN
- ------------------------------------------
*Edward J. Shoen
(Attorney-in-fact)
</TABLE>
II-4
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
- -------- ----------------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
2.1 Order Confirming Plan(1)
2.2 Second Amended and Restated Debtor's Plan of Reorganization Proposed
by Edward J. Shoen(1)
4.1 Restated Articles of Incorporation(2)
4.2 Restated By-Laws of AMERCO dated August 27, 1996(3)
4.3 Certificate of Designations, Preferences and Rights of Series A
Preferred Stock(4)
4.4 Certificate of Designations, Preferences and Rights of Series A Common
Stock+
4.5 Certificate of Designations, Preferences and Rights of Series B
Preferred Stock (3)
4.6 Certificate of Designations, Preferences and Rights of Series B Common
Stock(3)
5 Opinion re Legality+
23.1 Consent of Independent Accountants
23.2 Consent of Lionel, Sawyer & Collins (included in Exhibit 5)
24 Power of Attorney (included on signature page of Registration
Statement)
28 Information from Reports Furnished to State Insurance Regulatory
Authorities(5)
</TABLE>
- ---------------
+ Previously filed.
(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.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 0-7862.
(4) Incorporated by reference to the Company's Current Report on Form 8-K, filed
October 15, 1993, File No. 0-7862.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 31, 1996, File No. 0-7862.
<PAGE> 122
APPENDIX A
DESCRIPTION OF GRAPHIC MATERIAL
<TABLE>
<S> <C> <C>
1. Location: Outside Front and Back Covers of Prospectus
Item:
Company Logo
Description:
Registered Logo U-Haul International, Inc.
2. Location:
Inside Front Cover of Prospectus
Item:
Photographs
Description:
The following photographs appear on the inside front cover of the
Prospectus: (i) photograph with the Company's U-Haul(R) logo in the upper
left hand corner of seven of the Company's rental trucks; (ii) photograph
of a Company rental truck towing a car across a bridge; (iii) photograph
of an area fieldman looking out through the door window of a U-Haul
customer service rig with the words "Customer Service" appearing on the
door; (iv) photograph of a man and a woman holding a child inside one of
the Company's U-Haul Centers; and (v) photograph of three of the Company's
rental trucks and two rental trailers parked in a U-Haul Center parking
lot.
3. Location:
Inside Back Cover of Prospectus
Item:
Photographs
Description:
The following photographs appear on the inside back cover of the
Prospectus: (i) photograph of several of the Company's rental trucks and
trailers bearing the Company's logo U-HAUL(R) parked on the premises of a
U-Haul rental location with a large sign reading "AMERICAN SELF STORAGE
U-HAUL CENTER" and a caption at the bottom right hand corner of the
photograph with the Company's logo "U-HAUL"; (ii) photograph of a Company
employee holding a U-Haul pen in his right hand and a clipboard in his
left hand while standing in a parking lot at the Company's Technical
Center in Tempe, Arizona, surrounded by rental trailers bearing the
Company's U-Haul(R) logo; (iii) photograph of a man and a woman standing
on a sidewalk in front of a home, next to a Company rental truck parked on
the street bearing the Company's logo U-HAUL(R) next to two U-Haul boxes
and a U-Haul hand-truck; (iv) photograph of a large Company rental truck
bearing the Company's logo U-HAUL(R); (v) photograph of a Company rental
truck (bearing the image of the Statue of Liberty) towing an auto
transport, which is carrying a car; and (vii) photograph of a U-Haul
Center with a sign in front reading "U-HAUL MOVING & STORAGE", a rental
truck, and two rental trailers parked at the U-Haul Center.
</TABLE>
<PAGE> 1
2,750,000 Shares
AMERCO
COMMON STOCK
UNDERWRITING AGREEMENT
December __, 1996
Lehman Brothers Inc.
Salomon Brothers Inc
As Representatives of the several
Underwriters named in Schedule I
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
AMERCO, a Nevada corporation (the "Company"), proposes and Paul F.
Shoen and Sophia M. Shoen, stockholders of the Company (the "Selling
Stockholders"), propose to sell an aggregate of 2,750,000 shares (the "Firm
Stock") of the Company's Common Stock, par value $.25 per share (the "Common
Stock"). Of the 2,750,000 shares of the Firm Stock, 2,250,000 are being sold by
the Company and 500,000 by the Selling Stockholders. In addition, the Company
proposes to grant to the Underwriters named in Schedule I hereto (the
"Underwriters") an option to purchase up to an additional 337,500 shares of the
Common Stock on the terms and for the purposes set forth in Section 3 (the
"Option Stock"). The Firm Stock and the Option Stock, if purchased, are
hereinafter collectively called the "Stock." This is to confirm the agreement
concerning the purchase of the Stock from the Company and the Selling
Stockholders by the Underwriters.
1. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to each Underwriter as of the date of this
Agreement and as of each Delivery Date (defined herein) as follows:
<PAGE> 2
2
(a) A registration statement on Form S-3 (File No. 333-15485)
with respect to the Stock has (i) been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities Act. If
any post-effective amendment to such registration statement has been
filed with the Commission prior to any Delivery Date, the most recent
such amendment has been declared effective by the Commission. Copies of
such registration statement and any amendments thereto have been
delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters.
As used in this Agreement, "Effective Time" means the
date and the time as of which such registration statement, or the most
recent post-effective amendment thereto, if any, was declared effective
by the Commission; "Effective Date" means the date of the Effective
Time; "Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules and Regulations; "Registration
Statement" means such registration statement, as amended at the
Effective Time, including any documents incorporated by reference
therein at such time and all information contained in the final
prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations in accordance with Section 6(a) hereof and deemed
to be a part of the registration statement as of the Effective Time
pursuant to paragraph (b) of Rule 430A of the Rules and Regulations;
and "Prospectus" means such final prospectus, as first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations. Reference made herein to any Preliminary Prospectus or
to the Prospectus, shall be deemed to refer to and include any
documents incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Securities Act ("Incorporated Documents"), as of the date
of such Preliminary Prospectus or the Prospectus, as the case may be;
and any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of such Preliminary
Prospectus or the Prospectus, as the case may be, and incorporated by
reference in such Preliminary Prospectus or the Prospectus, as the case
may be; and any reference to any amendment to the Registration
Statement shall be deemed to include any report of the Company filed
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act after the Effective Time that is incorporated by reference in the
Registration Statement. For purposes of this Agreement, all references
to the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement to any of the foregoing shall
be deemed to include the copy filed with the Commission pursuant to its
Electronic Data Gathering Analysis and Retrieval system ("EDGAR"). The
Commission has not issued any order preventing or suspending the use of
any Preliminary Prospectus. The Commission has not issued any order
suspending the effectiveness of the Registration Statement, and no stop
order has been issued or threatened by the Commission.
(b) The Registration Statement conformed, on the Effective
Date or (with respect to Incorporated Documents or any Rule 462(b)
Registration Statement) on the date of filing thereof
<PAGE> 3
3
with the Commission, in all material respects, to the requirements of
the Securities Act and the Rules and Regulations, and the Registration
Statement on the Effective Date did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
the Prospectus conformed, as of the date hereof and each Delivery Date
(as defined below), in all material respects, to the requirements of
the Securities Act and the Rules and Regulations, and the Prospectus as
of the date hereof and each Delivery Date did not include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that
no representation or warranty is made as to information contained in or
omitted from any Preliminary Prospectus, the Registration Statement or
the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or
on behalf of any Underwriter specifically for inclusion therein (which
information shall be as set forth in Section 10(c)); the documents
incorporated by reference in the Prospectus, when they became effective
or were filed with the Commission, as the case may be, conformed in all
material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and did not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and any further documents so
filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with Commission, as the case
may be, will conform in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder and will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) Price Waterhouse LLP, whose report is included in the
Prospectus, are independent certified public accountants as required by
the Securities Act. The financial statements and schedules (including
the related notes and supporting schedules) included or incorporated by
reference in the Registration Statement and the Prospectus present
fairly the financial condition, results of operations and changes in
financial condition of the entities purported to be shown thereby at
the dates and for the periods indicated and have been prepared in
accordance with generally accepted accounting principles.
(d) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation and is in good
standing under the laws of the jurisdiction of its organization, with
full power and authority (corporate and other) to own or lease its
properties and conduct its business as described in the Prospectus and
is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or
the location of the properties owned or leased by it make such
qualification necessary, except where the failure so to qualify would
not have a material adverse effect on the condition (financial or
other), stockholders' equity, results of operations, assets, business
or prospects of the Company and its subsidiaries taken as a whole; and
none of the subsidiaries of the Company, other than any so identified
in Schedule II to this Agreement, is a "Significant Subsidiary," as
such term is defined in Rule 405 of the Rules and Regulations under the
Securities Act.
<PAGE> 4
4
(e) The Company has an authorized capitalization as set forth
in the Prospectus, all of the issued shares of capital stock of the
Company, including the Stock to be sold by the Selling Stockholders to
the Underwriters hereunder, have been duly and validly authorized and
issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; and all of the issued
shares of capital stock of each Significant Subsidiary of the Company
have been duly and validly authorized and issued and are fully paid,
non-assessable (except for the shares of capital stock of Oxford Life
Insurance Company and Republic Western Insurance Company that are
further assessable to the extent of their respective par values in
accordance with Article 14, Section 10 of the Constitution of the State
of Arizona) and are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims.
(f) The unissued shares of the Stock to be issued and sold by
the Company to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued, fully paid and
non-assessable and not subject to any rights of first refusal or other
restrictions on transfer, and the Stock will conform to the description
thereof contained in the Prospectus; none of the outstanding shares of
capital stock, including the Stock to be sold by the Selling
Stockholders to the Underwriters hereunder, was issued in violation of
any preemptive or other similar rights of any securityholder of the
Company which have not been waived.
(g) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company and is enforceable against the Company in
accordance with its terms.
(h) Except as described in or contemplated by the Prospectus,
there has not been any material adverse change in, or adverse
development that materially affects, the condition (financial or
other), stockholders' equity, results of operations, assets, business
or prospects of the Company and its subsidiaries taken as a whole, from
the date as of which information is given in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is, or
with the giving of notice or lapse of time or both would be, in
violation of or in default under its respective articles or certificate
of incorporation or by-laws, or any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them is bound, or
to which any of their properties is subject, where such violation or
default would have a material adverse effect on the condition
(financial or other), stockholders' equity, results of operations,
assets, business or prospects of the Company and its subsidiaries taken
as a whole. The execution and delivery, fulfillment and consummation of
the transactions contemplated by this Agreement will not conflict with
or constitute a breach of, or a default (with the passage of time or
the giving of notice or otherwise) under, or result in the imposition
of a lien on any properties of the Company or any of its subsidiaries,
or an acceleration of indebtedness pursuant to, the articles or
certificate of incorporation or by-laws of the Company or any of its
subsidiaries, or any bond, debenture, note or any other evidence of
indebtedness of any indenture, mortgage, deed of trust or other
material agreement or instrument to which the
<PAGE> 5
5
Company or any of its subsidiaries is a party or by which it or any of
them is bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject, or any law, rule, administrative
regulation, order or decree of any court or any governmental agency or
body having jurisdiction over the Company, any of its subsidiaries or
any of their respective properties. Except for the orders of the
Commission declaring the Registration Statement effective under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and permits and similar authorizations required under the
securities or "Blue Sky" laws of certain jurisdictions, no consent,
approval, authorization or order of any court, governmental agency or
body or financial institution is required in connection with the
transactions contemplated by this Agreement.
(j) Except as described in the Prospectus, the Company has not
sold or issued any shares of capital stock or issued any options on
convertible securities that give the holder thereof the right to
acquire any shares of Common Stock, during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act other
than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement, any Preliminary Prospectus and
the Prospectus, and prior to each Delivery Date, neither the Company
nor any of its subsidiaries has incurred or will have incurred any
liabilities or obligations for borrowed money, direct or contingent,
declared or paid any dividend on its capital stock or entered into any
transactions not in the ordinary course of business which would have a
material adverse effect on the condition (financial or other),
stockholders' equity, results of operations, assets, business or
prospects of the Company and its subsidiaries taken as a whole.
(l) The Company and each of its subsidiaries owns, or has
valid rights to use in the manner currently used or proposed to be
used, all items of real and personal property which are material and
which they reasonably believe are necessary to the business of the
Company and its subsidiaries taken as a whole (including without
limitation all U-Haul Centers, manufacturing facilities, assembly
facilities and service centers described or referred to in the
Prospectus), free and clear of all liens, encumbrances and claims which
may materially interfere with the use thereof or have a material
adverse effect on the condition (financial or other), stockholders'
equity, results of operations, assets, business or prospects of the
Company and its subsidiaries taken as a whole.
(m) Except as described in the Prospectus, the Company and
each of its subsidiaries carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries.
(n) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company or any of
its subsidiaries is a party or to which any property of the Company or
any of its subsidiaries is subject or which is pending or, to the
knowledge
<PAGE> 6
6
of the Company, contemplated against the Company or any of its
subsidiaries which might result in any material adverse change in the
condition (financial or other), stockholders' equity, results of
operations, assets, business or prospects of the Company and its
subsidiaries taken as a whole; and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(o) Neither the Company nor any of its subsidiaries is in
violation of any law, ordinance, governmental rule or regulation or
court decree to which it may be subject that might have a material
adverse effect on the condition (financial or other), stockholders'
equity, results of operations, assets, business or prospects of the
Company and its subsidiaries taken as a whole.
(p) All licenses, permits or registrations required for the
business of the Company and each of its subsidiaries, as presently
conducted and proposed to be conducted, under any federal, state or
local laws, regulations or ordinances (including those related to
consumer protection, protection of the environment and regulation of
franchising) have been obtained or made, other than any such licenses,
permits or registrations, the failure of which to be obtained or made,
either individually or in the aggregate, would not have a material
adverse effect on the condition (financial or other), stockholders'
equity, results of operations, assets, business or prospects of the
Company and its subsidiaries taken as a whole, and each of the Company
and its subsidiaries is in compliance with all such licenses, permits
or registrations.
(q) Except as disclosed in the Prospectus, the Company and its
subsidiaries comply in all material respects with all Environmental
Laws (as defined below), except to the extent that failure to comply
with such Environmental Laws could not have a material adverse effect
on the condition (financial or other), stockholders' equity, results of
operations, assets, business or prospects of the Company and its
subsidiaries taken as a whole. Except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries is the subject of any
pending or threatened federal, state or local investigation evaluating
whether any remedial action by the Company or any of its subsidiaries
is needed to respond to a release of any Hazardous Materials (as
defined below) into the environment, resulting from the Company's or
any of its subsidiaries' business properties or assets or is in
contravention of any Environmental Law that could have a material
adverse effect on the condition (financial or other), stockholders'
equity, results of operations, assets, business or prospects of the
Company and its subsidiaries taken as a whole. Except as disclosed in
the Prospectus, neither the Company nor any of its subsidiaries has
received any notice or claim, nor are there pending or threatened
lawsuits against them, with respect to violations of any Environmental
Law or in connection with any release of any Hazardous Material into
the environment that, in the aggregate, if the subject of any
unfavorable decision, ruling or finding, could have a material adverse
effect on the condition (financial or other), stockholders' equity,
results of operations, assets, business or prospects of the Company and
its subsidiaries taken as a whole. As used herein, "Environmental Laws"
means any federal, state or local law, regulation, permit, rule or
order of any governmental authority, administrative body or court
applicable to the Company's or any of its subsidiaries' business
operations or the ownership or possession of any of their properties or
assets relating to environmental matters, and "Hazardous Materials"
means those substances that are regulated by or form the basis of
liability under any Environmental Laws.
<PAGE> 7
7
(r) Except as described in the Prospectus and set forth on
Schedule III to this Agreement, there are no contracts, agreements or
understandings between the Company and any person granting such person
the right (A) to require the Company to file the Registration Statement
or any other registration statement under the Securities Act (other
than a registration statement on Form S-8) with respect to any
securities of the Company owned or to be owned by such person or (ii)
to require the Company to include such securities owned or to be owned
by such person among the securities registered pursuant to the
Registration Statement or any other registration statement filed by the
Company under the Securities Act.
(s) There are no contracts or other documents that are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or (with
regard to documents required to be filed as exhibits) filed as exhibits
to the Registration Statement or incorporated therein by reference as
permitted by the Rules and Regulations.
(t) No relationship, direct or indirect, exists between or
among the Company, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company, on the other hand,
which is required to be described in the Prospectus and which is not so
described.
(u) The Company is not required to be registered, and is not
regulated, as an "investment company" as such term is defined under the
United States Investment Company Act of 1940, as amended, and the rules
and regulations thereunder (collectively, the "Investment Company
Act").
(v) The Company is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba.
2. Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder severally represents and warrants to each
Underwriter as of the date of this Agreement and as of the First Delivery Date
(as defined herein) as follows:
(a) The Selling Stockholder has, and immediately prior to the
First Delivery Date the Selling Stockholder will have, good and valid
title to the shares of Stock to be sold by the Selling Stockholder
hereunder on such date, free and clear of all liens, encumbrances,
equities or claims, and full right, power and authority to sell,
assign, transfer and deliver such shares to be sold by the Selling
Stockholder hereunder; and, upon delivery of such shares and payment
therefor pursuant hereto, good and valid title to such shares, free and
clear of all liens, encumbrances, equities or claims, will pass to the
several Underwriters.
(b) The Selling Stockholder has placed in custody under a
custody agreement (the "Custody Agreement") with ChaseMellon
Shareholder Services, L.L.C., as custodian (the "Custodian"), for
delivery under this Agreement, certificates in negotiable form (with
signature guaranteed by a commercial bank or trust company having an
office or correspondent in the United States or a member firm of the
New York or American Stock Exchanges) representing the shares of Stock
to be sold by the Selling Stockholder hereunder.
<PAGE> 8
8
(c) The Selling Stockholder has duly and irrevocably executed
and delivered a power of attorney (the "Power of Attorney") appointing
the Custodian and one or more other persons, as attorneys-in-fact, with
full power of substitution, and with full authority (exercisable by any
one or more of them) to execute and deliver this Agreement and to take
such other action as may be necessary or desirable to carry out the
provisions hereof on behalf of the Selling Stockholder.
(d) The Selling Stockholder has full right, power and
authority to enter into this Agreement, the Custody Agreement and the
Power of Attorney; the execution, delivery and performance of this
Agreement, the Custody Agreement and the Power of Attorney by the
Selling Stockholder constitutes the valid and binding agreement of such
Selling Stockholder and is enforceable against such Selling Stockholder
in accordance with its terms, and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the
Selling Stockholder is subject, nor will such actions result in any
violation of any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Selling
Stockholder or the property or assets of the Selling Stockholder; and,
except for the registration of the Stock under the Securities Act and
such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and such
permits and similar authorizations as may be required under the
securities or "Blue Sky" laws of certain jurisdictions in connection
with the purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Custody
Agreement or the Power of Attorney by the Selling Stockholder and the
consummation by the Selling Stockholder of the transactions
contemplated hereby and thereby.
(e) The Registration Statement on the Effective Date did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent that such statements or
omissions were made in reliance upon and in conformity with information
furnished or confirmed in writing to the Company by the Selling
Stockholders expressly for use in the Registration Statement or the
Prospectus or any amendments or supplements thereto (such information
herein the "Selling Stockholder Information"). Without having
undertaken to determine independently the accuracy or completeness of
either the representations and warranties of the Company contained in
Section 1 hereof or the information (other than Selling Stockholder
Information) contained in the Registration Statement, including the
Prospectus (and any amendment or supplement thereto), the Selling
Stockholder (A) does not have any actual knowledge that the
representations and warranties of the Company contained in Section 1
hereof are not true and correct; and (B) is familiar with the
Registration Statement and does not have any actual knowledge that the
Registration Statement contains any untrue statements of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; except that
the foregoing shall not apply to statements in or omissions from any
such document (A) made in reliance upon, and in
<PAGE> 9
9
conformity with, written information furnished to the Company by the
Underwriters specifically for use in the preparation thereof or (B) to
the extent, if any, such statements or omissions are inconsistent with
Selling Stockholder Information.
(f) The Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 1
hereof are not materially true and correct, is familiar with the
Registration Statement and the Prospectus and has no knowledge of any
material fact, condition or information not disclosed in the
Registration Statement, as of the effective date, or the Prospectus, as
of the date thereof and the Delivery Date, which has adversely affected
or may adversely affect the business of the Company and is not prompted
to sell shares of Common Stock by any information concerning the
Company which is not set forth in the Registration Statement and the
Prospectus.
(g) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the shares of the Stock.
(h) Neither the Selling Stockholder, nor any of such Selling
Stockholder's affiliates (as defined in Rule 2720(b) of the NASD
Conduct Rules), directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, or has other association with, any member firm of the
National Association of Securities Dealers, Inc. (the "NASD").
3. Purchase of the Stock by the Underwriters. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 2,250,000 shares of
the Firm Stock and each of Paul F. Shoen and Sophia M. Shoen hereby agrees to
sell 300,000 shares and 200,000 shares, respectively, of the Firm Stock,
severally and not jointly, to the several Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase the number of shares
of the Firm Stock set opposite that Underwriter's name in Schedule I hereto.
Each Underwriter shall be obligated to purchase from the Company, and from each
Selling Stockholder, that number of shares of the Firm Stock which represents
the same proportion of the number of shares of the Firm Stock to be sold by the
Company, and by each Selling Stockholder, as the number of shares of the Firm
Stock set forth opposite the name of such Underwriter in Schedule I represents
of the total number of shares of the Firm Stock to be purchased by all of the
Underwriters pursuant to this Agreement. The respective purchase obligations of
the Underwriters with respect to the Firm Stock shall be rounded among the
Underwriters to avoid fractional shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option
to purchase up to 337,500 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 5 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set opposite the name of such Underwriters in
Schedule I hereto. The respective purchase obligations of each Underwriter with
respect to the Option Stock shall be adjusted by the
<PAGE> 10
10
Representatives so that no Underwriter shall be obligated to purchase Option
Stock other than in 100 share amounts. The price of both the Firm Stock and any
Option Stock shall be $___ per share.
The Company and the Selling Stockholders shall not be
obligated to deliver any of the Stock to be delivered on the First Delivery Date
or the Second Delivery Date (as hereinafter defined), as the case may be, except
upon payment for all the Stock to be purchased on such Delivery Date as provided
herein.
4. Offering of Stock by the Underwriters.
Upon authorization by the Representatives of the release of
the Firm Stock, the several Underwriters propose to offer the Firm Stock for
sale upon the terms and conditions set forth in the Prospectus.
5. Delivery of and Payment for the Stock. Delivery of and
payment for the Firm Stock shall be made at the office of Milbank, Tweed, Hadley
& McCloy, at 10:00 A.M., New York City time, on the third full business day
following the date of this Agreement or at such other date or place as shall be
determined by agreement between the Representatives and the Company. This date
and time are sometimes referred to as the "First Delivery Date." On the First
Delivery Date, the Company and the Selling Stockholders shall deliver or cause
to be delivered certificates representing the Firm Stock to the Representatives
for the account of each Underwriter against payment to or upon the order of the
Company and the Selling Stockholders of the purchase price by wire transfer in
immediately available funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock
shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking and
packaging of the certificates for the Firm Stock, the Company and the Selling
Stockholders shall make the certificates representing the Firm Stock available
for inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of
this Agreement the option granted in Section 3 may be exercised in whole or in
part, at any time and from time to time, upon written notice being given to the
Company by the Representatives. Such notice shall set forth the aggregate number
of shares of Option Stock as to which the option is being exercised, the names
in which the shares of Option Stock are to be registered, the denominations in
which the shares of Option Stock are to be issued and the date and time, as
determined by the Representatives, when the shares of Option Stock are to be
delivered; provided, however, that this date and time shall not be earlier than
the First Delivery Date nor earlier than the second business day after the date
on which the option shall have been exercised nor later than the fifth business
day after the date on which the option shall have been exercised. The date and
time the shares of Option Stock are delivered are sometimes referred to as the
"Second Delivery Date" and the First Delivery Date and the Second Delivery Date
are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Stock shall be made at
the place specified in the first sentence of the first paragraph of this Section
5 (or at such other place as shall be determined
<PAGE> 11
11
by agreement between the Representatives and the Company) at 10:00 A.M., New
York City time, on the Second Delivery Date. On the Second Delivery Date, the
Company shall deliver or cause to be delivered the certificates representing the
Option Stock to the Representatives for the account of each Underwriter against
payment to or upon the order of the Company of the purchase price by wire
transfer in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
Option Stock shall be registered in such names and in such denominations as the
Representatives shall request in the aforesaid written notice. For the purpose
of expediting the checking and packaging of the certificates for the Option
Stock, the Company shall make the certificates representing the Option Stock
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the Second
Delivery Date.
6. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus (i) pursuant to Rule 424(b)
within the time period prescribed by the Rules and Regulations; to make
no further amendment or any supplement to the Registration Statement or
to the Prospectus prior to each Delivery Date except as permitted
herein; to notify the Representatives, promptly after it receives
notice, of the time when the Registration Statement or any amendment
thereto becomes effective or promptly after the filing of any
supplement or amendment to the Prospectus (other than any Incorporated
Document or any amendment or supplement relating to an offering of
securities other than the Stock) and to furnish the Representatives
with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a Prospectus is required in connection with the
offering of Stock; to notify the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose,
or of any request by the Commission for the amending or supplementing
of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus or suspending any such qualification, to use promptly
its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission and each amendment
thereto filed with the Commission, including in each case all consents
and exhibits filed therewith;
(c) To furnish promptly to each of the Representatives copies
of the Registration Statement, including all exhibits thereto, any
Preliminary Prospectus, the Prospectus and all amendments and
supplements to such documents (including the Incorporated Documents),
in each case as soon as available and in such quantities as are
reasonably requested;
<PAGE> 12
12
(d) As soon as practicable, but not later than 18 months after
the Effective Date, to make generally available to its security holders
and to the Representatives an earnings statement of the Company and its
subsidiaries conforming with the requirements of Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158),
covering a period of at least 12 months beginning on the first day of
the first fiscal quarter of the Company commencing after the later of
(i) the effective date of the Registration Statement, (ii) the
effective date of the most recent post-effective amendment to the
Registration Statement to become effective prior to the date of such
acceptance and (iii) the date of the Company's most recent Annual
Report on Form 10-K filed with the Commission;
(e) For a period of five years following the Effective Date,
to furnish to the Representatives copies of all materials furnished by
the Company to its securityholders and all public reports and all
reports and financial statements furnished by the Company to the
principal national securities exchanges upon which the securities of
the Company may be listed pursuant to requirements of or agreements
with such exchanges or to the Commission pursuant to the Exchange Act
or the applicable rules and regulations of the Commission thereunder;
(f) Promptly to take such action as the Representatives
reasonably may request to qualify the Stock for offering and sale under
the securities laws of such jurisdictions as the Representatives may
request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Stock; provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject;
(g) For a period of 120 days from the date of the Prospectus,
not to, directly or indirectly, offer for sale, sell or otherwise
dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition by any person at
any time in the future, of) any shares of common stock of the Company
or any securities convertible into or exercisable or exchangeable for
shares of common stock of the Company (other than the Stock and shares
issued pursuant to employee benefit plans, qualified stock option plans
or other employee compensation plans existing on the date hereof), or
sell or grant options, rights or warrants with respect to any shares of
common stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of common stock of the Company
(other than the grant of options pursuant to option plans existing on
the date hereof), or enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of shares of the
common stock of the Company, without the prior consent of the
Representatives;
(h) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus;
(i) Prior to the Effective Date, to apply for the listing or
inclusion of the Stock on the Nasdaq National Market System and to use
its best efforts to complete such listing, subject only to official
notice of issuance, prior to the First Delivery Date;
<PAGE> 13
13
(j) If it commences engaging in business with the government
of Cuba or with any person or affiliate located in Cuba after the date
the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported
in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any material
way, to provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department;
(k) To notify the Underwriters promptly of any downgrading in
the rating accorded any debt securities of the Company prior to each
Delivery Date, or any proposal to downgrade the rating of any debt
securities of the Company, by any "nationally recognized statistical
rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Rules and Regulations under the
Securities Act, or any public announcement that any such organization
has under surveillance or review, with possible negative implications,
its rating of any of the Company's debt securities promptly after the
Company learns of such downgrading, proposal to downgrade or public
announcement; and
(l) To take such steps as shall be necessary to ensure that
neither the Company nor any subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company
Act.
7. Further Agreements of the Selling Stockholder. Each Selling
Stockholder agrees:
(a) That the Stock to be sold by such Selling Stockholder
hereunder, which is represented by the certificates held in custody for such
Selling Stockholder, is subject to the interest of the Underwriters and the
other Selling Stockholders thereunder, that the arrangements made by such
Selling Stockholder are to that extent irrevocable, and that the obligations of
such Selling Stockholder hereunder shall not be terminated by any act of such
Selling Stockholder, by operation of law, by the death or incapacity of any
individual Selling Stockholder or by the occurrence of any other event.
(b) To promptly notify the Representatives of any change in
the veracity of any information contained in the Preliminary Prospectus,
Registration Statement or Prospectus regarding such Selling Stockholder.
(c) To deliver to the Representatives prior to the First
Delivery Date a properly completed and executed United States Treasury
Department Form W-9.
8. Expenses. The Company shall pay or cause to be paid (A) all
expenses (including any associated taxes) incurred in connection with the
authorization, issuance, sale and delivery of the Stock sold by the Company to
the Underwriters, (B) all fees and expenses (including, without limitation, fees
and expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters except as set forth in clauses (C) and
(D) below or as otherwise agreed to by the Company) in connection with the
preparation, printing, filing, delivery and shipping of any Preliminary
Prospectus, the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), the Prospectus and any
amendments or supplements thereto and any documents incorporated by reference
into any of the foregoing and the printing, delivery and shipping
<PAGE> 14
14
of this Agreement and other underwriting documents, including, but not limited
to, any required questionnaires, Powers of Attorney, Blue Sky Memoranda,
Agreements Among Underwriters, the Custody Agreement, the Power of Attorney,
Selected Dealer Agreements and any legal investment survey, (C) all filing fees
and fees and disbursements and expenses of counsel to the Underwriters incurred
in connection with the qualification of the Securities under state securities
laws as provided in Section 6(f) hereof, (D) the filing fee of the National
Association of Securities Dealers, Inc., if any, and fees and disbursements and
expenses of counsel to the Underwriters in connection with any application to,
and any review of the offering of the Stock conducted by, the National
Association of Securities Dealers, Inc., including the preparation of materials
therefor, (E) any applicable listing or other fees, (F) the cost and charges of
any transfer agent or registrar and (G) all other costs and expenses incident to
the performance of its obligations hereunder for which provision is not
otherwise made in this Section . It is understood, however, that, except as
provided in this Section 8, each of the Underwriters shall pay all of its own
costs and expenses, including the fees of its counsel (except as set forth in
clauses (C) and (D) above or as otherwise agreed to by the Company) and any
advertising expenses incurred in connection with any offers it may make and that
neither the Underwriters nor the Company shall have any responsibility for costs
and expenses of the Selling Stockholders except as may be set forth in any
pre-existing written agreement. If the sale of the Stock provided for herein is
not consummated because any condition to the obligations of the Underwriters set
forth in Section 9 hereof is not satisfied, because of any termination pursuant
to Section 12 hereof or because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of a default by any of the Underwriters as described
in Section 11 hereof, the Company will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Stock, including in connection with
any investigation or preparation made by them in respect of the marketing of the
Stock or in contemplation of the performance by them of their obligations
hereunder.
9. Conditions of the Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
and the Selling Stockholders contained herein, to the accuracy of the statements
of the Company's officers made in any certificate furnished pursuant to the
provisions of this Agreement, to the performance by the Company and the Selling
Stockholders of its obligations under this Agreement and to each of the
following additional terms and conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the Rules and Regulations and in accordance with
Section 6(a); no stop order suspending the effectiveness of the
Registration Statement or any part thereof nor any order directed to
any document incorporated by reference in any Prospectus shall have
been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or any Prospectus or otherwise shall have been complied with.
No order suspending the sale of the Stock in any jurisdiction
designated by the Representatives pursuant to Section 6(f) shall have
been issued, and no proceeding for that purpose shall have been
initiated or threatened.
<PAGE> 15
15
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration
Statement or any Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of counsel
for the Underwriters, is material or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Custody
Agreement, the Power of Attorney, the Stock, any Preliminary
Prospectus, the Registration Statement and the Prospectus, and all
other legal matters relating to this Agreement, and the transactions
contemplated hereby and thereby, shall be satisfactory in all material
respects to counsel for the Underwriters, and the Company and the
Selling Stockholders shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass
upon such matters.
(d) The Company shall have furnished to the Representatives
the opinion, addressed to the Underwriters, of Snell & Wilmer L.L.P.,
counsel for the Company, dated as of each Delivery Date, to the effect
that:
(i) each of the Company, Oxford Life Insurance Company,
an Arizona corporation, and Republic Western Insurance
Company, an Arizona corporation, has been duly incorporated
and is validly existing as a corporation in good standing
under the laws of the State of Nevada or the State of Arizona,
as the case may be, with full corporate power and authority to
own or lease its properties and conduct its business as
described in the Prospectus and to carry out the transactions
contemplated hereunder, and each of Amerco Real Estate
Company, a Nevada corporation, and U-Haul International, Inc.,
a Nevada corporation, is duly qualified to do business as a
foreign corporation and is in good standing under the laws of
the State of Arizona;
(ii) the Company has an authorized capitalization as set
forth in the Prospectus and all the issued shares of capital
stock of the Company (including the shares of Stock being
delivered on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the
Prospectus, and all of the issued shares of capital stock of
each Significant Subsidiary of the Company have been duly and
validly authorized and issued are fully paid and
non-assessable (except for the shares of capital stock of
Oxford Life Insurance Company and Republic Western Insurance
Company that are further assessable to the extent of their
respective par values in accordance with Article 14, Section
10 of the Constitution of the State of Arizona) and, to the
best of such counsel's knowledge after due inquiry, are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(iii) there are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Stock being offered hereunder
by the Company, and no rights of first refusal affecting such
Stock, pursuant
<PAGE> 16
16
to the Company's articles of incorporation or by-laws or any
agreement or other instrument known to such counsel;
(iv) to the best knowledge of such counsel, there is no
franchise, contract or other document of a character required
to be described in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or to be filed as an
exhibit, which is not described or filed as required or
incorporated therein by reference as permitted by the Rules
and Regulations; and the statements included or incorporated
in the Prospectus describing any legal proceedings or material
contracts or agreements relating to the Company fairly
summarize such matters;
(v) the Registration Statement has become effective under
the Securities Act; any required filing of any Preliminary
Prospectus and the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened, and the
Registration Statement and the Prospectus (other than with
respect to financial statements and other financial and
statistical information, as to which such counsel need express
no opinion) comply as to form in all material respects with
the applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations of the Commission
thereunder; and the documents incorporated by reference in the
Prospectus and any further amendment or supplement to any such
incorporated document made by the Company prior to such
Delivery Date (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder;and such counsel has
no reason to believe that at the Effective Date the
Registration Statement (other than with respect to financial
statements and other financial and statistical information, as
to which such counsel need express no opinion) contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus (other than with respect to financial statements
and other financial and statistical information, as to which
such counsel need express no opinion) at its date and at such
Delivery Date included or includes any untrue statement of a
material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(vi) this Agreement has been duly authorized, executed
and delivered by the Company;
(vii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except
such as have been obtained under the Securities Act and such
as may be required under the Blue Sky laws of any jurisdiction
in connection with the purchase
<PAGE> 17
17
and distribution of the Stock by the Underwriters and such
other approvals (specified in such opinion) as have been
obtained;
(viii) the Stock conforms in all material respects to
the description thereof contained in the Prospectus;
(ix) the issue and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions
contemplated hereby will not (a) conflict with the articles of
incorporation or by-laws of the Company or any of its
Significant Subsidiaries or (b) result in a breach or
violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which the Company or any of its Significant
Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Significant
Subsidiaries is subject, nor will such actions result in any
violation of any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
Significant Subsidiaries or any of their properties or assets,
except (with regard to clause (b)) for such breaches,
violations, or defaults as would not have a material adverse
effect on the condition (financial or other), results of
operations, assets, business, or prospects of the Company and
its Subsidiaries taken as a whole.
(x) to the best of such counsel's knowledge, except as
described in the Prospectus and set forth on Schedule III to
this Agreement, there are no contracts, agreements or
understandings between the Company and any person granting
such person the right (A) to require the Company to file the
Registration Statement or any other registration statement
under the Securities Act (other than a registration statement
on Form S-8) with respect to any securities of the Company
owned or to be owned by such person or (ii) to require the
Company to include such securities owned or to be owned by
such person among the securities registered pursuant to the
Registration Statement or any other registration statement
filed by the Company under the Securities Act; and
(xi) the Company is not, and is not directly or
indirectly controlled by, or acting on behalf of any person or
entity which is, an "investment company" within the meaning of
the Investment Company Act.
In rendering such opinion, such counsel may rely, (A)
as to matters involving the application of laws of any jurisdiction
other than the State of Arizona, the State of Nevada or the United
States, to the extent deemed proper and specified in such opinion, upon
the opinion of other counsel of good standing believed to be reliable
and who are satisfactory to counsel for the Underwriters, (B) as to
matters involving the application of the laws of the State of Nevada,
upon the opinion delivered pursuant to Section 9(e) and, (C) as to
matters of fact, to the extent deemed proper, on certificates of
responsible officers of the Company and public officials. Such counsel
may assume, for the purposes of such opinion and without investigation,
<PAGE> 18
18
that the substantive laws of the State of New York do not materially
differ from the substantive laws of the State of Arizona, and such
counsel need express no opinion as to the laws of New York or their
applicability to the matters covered by such opinion. References to the
Prospectus in this paragraph (d) include any supplements thereto at
each Delivery Date.
(e) The Representatives shall have received on each Delivery
Date an opinion, addressed to Snell & Wilmer L.L.P. and the
Representatives, of Lionel, Sawyer & Collins, counsel for the Company,
dated such Delivery Date, to the effect that:
(i) each of the Company, Amerco Real Estate Company, a
Nevada corporation, U-Haul International, Inc., a Nevada
corporation, Ponderosa Holdings, Inc., a Nevada corporation,
and U-Haul Leasing and Sales Co., a Nevada corporation (each,
a "Nevada Subsidiary" and, collectively, the "Nevada
Subsidiaries"), has been duly organized and is validly
existing as a corporation and is in good standing under the
laws of the State of Nevada, with full power and authority to
own or lease its properties and conduct its business as
described in the Prospectus and to carry out the transactions
contemplated hereunder and in the Prospectus;
(ii) the Company has an authorized capitalization as set
forth in the Prospectus and all the issued shares of capital
stock of the Company (including the shares of Stock being
delivered on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus
in all material respects, and all of the issued shares of
capital stock of each Nevada Subsidiary have been duly and
validly authorized and issued are fully paid and
non-assessable and, to the best of such counsel's knowledge
after due inquiry, are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities
or claims;
(iii) there are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Stock, and no rights of first
refusal affecting the Stock, pursuant to the Company's
charter, articles or certificate of incorporation or by-laws
or any agreement or other instrument known to such counsel;
(iv) no consent, approval, authorization or order of any
court or governmental agency or body of the State of Nevada is
required for the consummation of the transactions contemplated
herein, except such as have been obtained under the Securities
Act and such as may be required under the Blue Sky laws of any
jurisdiction in connection with the purchase and distribution
of the Stock by the Underwriters and such other approvals
(specified in such opinion) as have been obtained; and
(v) neither the issuance and sale of the Stock nor the
consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation of or
constitute a default under any law or the articles or
certificate of incorporation or by-laws of the Company or any
of the Nevada Subsidiaries or any bond, debenture, note or any
other evidence of indebtedness of any indenture, mortgage,
deed of trust or other material agreement or instrument known
to
<PAGE> 19
19
such counsel and to which the Company or any of the Nevada
Subsidiaries is a party or bound or any judgment, order or
decree known to such counsel to be applicable to the Company
or any of the Nevada Subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the Nevada
Subsidiaries.
As used therein, the phrase "known to counsel" means
to such counsel's Actual Knowledge as Actual Knowledge is defined in
the Legal Opinion Accord of the ABA Section of Business Law (1991).
Such counsel need express no opinion as to laws other than the laws of
the State of Nevada and the federal laws of the United States of
America.
Such counsel may further assume information as to
certain contacts between the jurisdictions of New York and the
transactions contemplated herein, including the following:
(a) substantial negotiations relating to such
transactions have taken place in the State of New York,
(b) the Company is executing and delivering the Stock
in New York to raise proceeds for capital expenditures, working capital
and for certain other lawful and authorized ends, and
(c) the Representatives, as well as the external
counsel representing the Underwriters in connection with such
transactions, have their principal offices in the State of New York,
and negotiations in connection with such transactions have taken place
in certain of their offices, including such offices in New York.
In rendering such opinion, such counsel may rely, (A)
as to matters involving the application of laws of any jurisdiction
other than the State of Nevada or the United States, to the extent
deemed proper and specified in such opinion, upon the opinion of other
counsel of good standing believed to be reliable and who are
satisfactory to counsel for the Underwriters, (B) as to matters
involving the laws of the State of Arizona, upon the opinion delivered
pursuant to Section 5(d), and (C) as to matters of fact, to the extent
deemed proper, on certificates of responsible officers of the Company
and public officials. References to the Prospectus in this paragraph
(e) include any supplements thereto at each Delivery Date.
(f) The Representatives shall have received on the First
Delivery Date an opinion, addressed to the Representatives, of Grover
T. Wickersham, P.C., counsel for the Selling Shareholders, dated the
First Delivery Date, to the effect that:
(i) each Selling Stockholder has full right, power and
authority to enter into this Agreement, the Custody Agreement
and the Power of Attorney; the execution, delivery and
performance of this Agreement, the Custody Agreement and the
Power of Attorney by such Selling Stockholder and the
consummation by such Selling Stockholder of the transactions
contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or
<PAGE> 20
20
instrument known to such counsel to which such Selling
Stockholder is a party or by which such Selling Stockholder is
bound or to which any of the property or assets of such
Selling Stockholder is subject, nor will such actions result
in any violation of any statute or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over such Selling
Stockholder or the property or assets of such Selling
Stockholder; and, except for the registration of the Stock
under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be
required under the Exchange Act, permits and similar
authorizations required under the Blue Sky laws of certain
jurisdictions in connection with the purchase and distribution
of the Stock by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the
Custody Agreement or the Power of Attorney by such Selling
Stockholder and the consummation by such Selling Stockholder
of the transactions contemplated hereby and thereby;
(ii) this Agreement has been duly executed and delivered
by or on behalf of such Selling Stockholder;
(iii) a Custody Agreement and a Power of Attorney have been
duly executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling
Stockholder, enforceable in accordance with their respective
terms;
(iv) immediately prior to the First Delivery Date, such
Selling Stockholder had good and valid title to the shares of
Stock to be sold by such Selling Stockholder under this
Agreement, free and clear of all liens, encumbrances, equities
or claims, and full right, power and authority to sell,
assign, transfer and deliver such shares to be sold by such
Selling Stockholder hereunder; and upon delivery of such
shares and payment therefor pursuant to this Agreement, good
and valid title to such shares, free and clear of all liens,
encumbrances, equities or claims will pass to the several
Underwriters; and
(v) there are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Stock being offered hereunder
by the Selling Stockholders, and no rights of first refusal
affecting such Stock, pursuant to the Company's articles of
incorporation or by-laws or any agreement or other instrument
known to such counsel.
In rendering such opinion, such counsel may
(i) state that their opinion is limited to matters governed by
the Federal laws of the United States of America and the laws
of the State of California and (ii) in rendering the opinion
in Section 9(f)(iv) above, rely upon a certificate of such
Selling Stockholder in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on
the shares of Stock sold by such Selling Stockholder, provided
that such counsel shall furnish copies thereof to the
Representatives and state that they believe that both the
Underwriters and they are justified in relying upon such
certificate. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the
Underwriters and dated the
<PAGE> 21
21
First Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted
as counsel to such Selling Stockholder on a regular basis and
has acted as counsel to such Selling Stockholder in connection
with the preparation of the Registration Statement, and (y)
based on the foregoing, no facts have come to the attention of
such counsel which lead them to believe that the Registration
Statement, as of the Effective Date, contained any untrue
statement of a material fact relating to such Selling
Stockholder or omitted to state such a material fact required
to be stated therein or necessary in order to make the
statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact relating to
such Selling Stockholder or omits to state such a material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing
opinion and statement may be qualified by a statement to the
effect that such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration
Statement or the Prospectus.
(g) The Representatives shall have received on each Delivery
Date an opinion, addressed to the Representatives, of Gary V.
Klinefelter, Secretary and General Counsel of the Company, dated the as
of each Delivery Date, to the effect that:
(i) each of the Company and its subsidiaries has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it
is chartered or organized, with full power and authority to
own or lease its properties and conduct its business as
described in the Prospectus and to carry out the transactions
contemplated hereunder, and is duly qualified to do business
as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification
wherein it owns or leases material properties or conducts
material business;
(ii) all the outstanding shares of capital stock of each
subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable (except for the shares of
capital stock of Oxford Life Insurance Company and Republic
Western Insurance Company that are further assessable to the
extent of their respective par values in accordance with
Article 14, Section 10 of the Constitution of the State of
Arizona), and, except as otherwise set forth in the Prospectus
and, except for the shares of capital stock of Picacho Peak
Investment Co., all outstanding shares of capital stock of the
subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any
perfected security interest or any other security interests,
claims, liens or encumbrances;
(iii) there is no pending or threatened action, suit or
proceeding before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its
subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in
the Prospectus, and there is no franchise, contract or other
document of a character required to be described in any
Preliminary
<PAGE> 22
22
Prospectus, the Registration Statement or Prospectus, or to be
filed as an exhibit, which is not described or filed as
required; and the statements included or incorporated in the
Prospectus describing any legal proceedings or material
contracts or agreements relating to the Company fairly
summarize such matters;
(iv) neither the execution and delivery of this Agreement
or the issuance and sale of the Stock nor the consummation of
any other of the transactions herein contemplated, nor the
fulfillment of the terms hereof, will conflict with, result in
a breach or violation of or constitute a default under any law
or the articles or certificate of incorporation or by-laws of
the Company or any of its subsidiaries or any bond, debenture,
note or any other evidence of indebtedness of any indenture,
mortgage, deed of trust or other material agreement or
instrument and to which the Company or any of its subsidiaries
is a party or bound or any judgment, order or decree to be
applicable to the Company or any of its subsidiaries of any
court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over the Company or any
of its subsidiaries; and
(v) to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued, no proceedings for that purpose have been
instituted or threatened and the Registration Statement and
the Prospectus (other than the financial statements and other
financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form
in all material respects with the applicable requirements of
the Securities Act, the Exchange Act and the rules and
regulations of the Commission thereunder; and such counsel has
no reason to believe that at the Effective Date the
Registration Statement (other than the financial statements
and other financial and statistical information contained
therein, as to which such counsel need express no opinion)
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus (other than the financial statements and
other financial and statistical information contained therein,
as to which such counsel need express no opinion) at its date
and at such Delivery Date included or includes any untrue
statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(vi) the Company and each of its subsidiaries owns, or
has valid rights to use in the manner currently used or
proposed to be used to all real and personal property which
are material, in each case free and clear of all liens,
encumbrances and claims which may materially interfere with
the use thereof or have a material adverse effect on the
condition (financial or other), stockholders' equity, results
of operations, assets, business or prospects of the Company
and its subsidiaries;
(vii) to the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property or
assets of the
<PAGE> 23
23
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, might have a material adverse effect on the
consolidated financial position, stockholders' equity, results
of operations, business or prospects of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(h) The Representatives shall have received from Milbank,
Tweed, Hadley & McCloy, counsel for the Underwriters, such opinion or
opinions, dated such Delivery Date, with respect to the issuance and
sale of the Stock, the Registration Statement, the Prospectus and other
related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(i) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated each Delivery Date, to the effect that the signers of
such certificate have carefully examined the Preliminary Prospectus,
the Registration Statement, the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct on and as of such Delivery
Date with the same effect as if made on such Delivery Date and
the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at
or prior to such Delivery Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for
that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
in the condition (financial or other) stockholders' equity,
results of operations, assets, business or prospects of the
Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(k) On the date hereof, the Company shall have furnished, and
on each Delivery Date, the Company shall furnish, a letter addressed to
the Representatives, in form and substance satisfactory to the
Representatives, from Price Waterhouse LLP, independent public
accountants, containing the statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information relating to the Company contained or incorporated by
reference into the Registration Statement and the Prospectus.
(l) Subsequent to dates as of which information is given in
the Registration Statement (exclusive of any amendment thereof) and the
Prospectus (exclusive of any supplement thereto),
<PAGE> 24
24
there shall not have been (i) any change in the capital stock or
long-term debt of the Company and its subsidiaries, taken as a whole,
or (ii) any change in or affecting the condition (financial or other),
stockholders' equity, results of operations, assets, business or
prospects of the Company and its subsidiaries, taken as a whole, which
in any case referred to in clause (i) or (ii) above, in the judgment of
the Representatives, materially impairs the investment quality of the
Stock.
(m) Prior to such time, none of the following shall have
occurred: (i) trading in the Company's Common Stock shall have been
suspended by the Commission or the National Association of Securities
Dealers Automated Quotation National Market System or any other
national exchange on which such securities may be listed or trading in
the Company's Series A 8 1/2% Preferred Stock shall have been suspended
by the Commission or the New York Stock Exchange or any other national
exchange on which such securities may be listed, or trading in
securities generally on the New York Stock Exchange or the National
Association of Securities Dealers Automated Quotation National Market
System shall have been suspended or limited or minimum prices shall
have been established on either such Exchange or Market System, (ii) a
banking moratorium shall have been declared either by Federal or New
York State authorities, (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crises or (iv) any
material adverse change in the existing financial, political or
economic conditions in the United States, including any effect of
international conditions on the financial markets in the United States,
the effect of which is to make it, in the judgment of the
Representatives, impractical or inadvisable to proceed with the
solicitation of offers to purchase the Stock or the purchase of the
Stock from the Company, as the case may be.
(n) Prior to such time, there shall not have been any decrease
in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act) or any notice given
of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the direction
of the possible change.
(o) Prior to each Delivery Date, the Company shall have
furnished to the Representatives such further information, certificates
and documents as the Representatives may reasonably request.
(p) At the date of this Agreement, the Representatives shall
have received a lock-up agreement substantially in the form of Exhibit
A hereto signed by Edward J. Shoen, Mark V.
Shoen and James P. Shoen.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance satisfactory to
counsel for the Representatives.
10. Indemnification and Contribution.
<PAGE> 25
25
(a) The Company shall indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock), to which
that Underwriter, director, officer, employee, agent or controlling
person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of,
or is based upon (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or
supplement thereto or (B) in any blue sky application or other document
prepared or executed by the Company (or based upon any written
information furnished by the Company) specifically for the purpose of
qualifying any or all of the Stock under the securities laws of any
state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii)
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Stock or the offering contemplated
hereby, and which is included as part of or referred to in any loss,
claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall
not be liable under this clause (iii) to the extent that it is
determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct)
and shall reimburse each Underwriter, the directors, officers,
employees and agents of each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by that
Underwriter, director, officer, employee, agent or controlling person
in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any such amendment or supplement or in any Blue Sky
Application in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for
inclusion therein (which information shall be determined as set forth
in Section 10(c)); and provided, further, that as to any Preliminary
Prospectus or supplement thereto this indemnity agreement shall not
inure to the benefit of any Underwriter, the directors, officers,
employees and agents of each Underwriter or any person controlling that
Underwriter on account of any loss, claim, damage, liability or action
arising from the sale of Stock to any person by that Underwriter if
that Underwriter failed to send or give a copy of the Prospectus, as
the same may be amended or supplemented, to that person within the time
required by the Securities Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Prospectus or supplement
thereto was corrected in that Prospectus, unless such failure resulted
from non-compliance by the Company with Section 6(c). For purposes of
the second proviso to the immediately preceding sentence, the term
Prospectus shall not be deemed to include the documents incorporated by
reference
<PAGE> 26
26
therein, and no Underwriter shall be obligated to send or give any
supplement or amendment to any document incorporated by reference in a
Preliminary Prospectus or supplement thereto or the Prospectus to any
person other than a person to whom such Underwriter has delivered such
incorporated documents in response to a written request therefor. The
foregoing indemnity agreement is in addition to any liability which the
Company may otherwise have to any Underwriter or to any controlling
director, officer, employee, agent or person of that Underwriter.
(b) The Selling Stockholders, jointly and severally, shall
indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter, and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
Stock), to which that Underwriter, director, officer, employee, agent
or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (ii) the omission or alleged
omission to state therein, any material fact required to be stated
therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act or any alleged act or failure to act by
any Underwriter in connection with, or relating in any manner to, the
Stock or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i) or (ii)
above (provided that the Selling Stockholders shall not be liable under
this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter
through its gross negligence or willful misconduct), but in each case
only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance on and
in conformity with Selling Stockholder Information, and shall reimburse
each Underwriter, the directors, officers, employees and agents of each
Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by that Underwriter, director, officer and
employee, agent or controlling person in connection with investigating
or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
however, that the Selling Stockholders shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or
in any such amendment or supplement or in any Blue Sky Application in
reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein
(which information shall be determined as set forth in Section 10(c))
and provided, further, that as to any Preliminary Prospectus or
supplement thereto this indemnity agreement shall not inure to the
benefit of any Underwriter, the directors, officers, employees and
agents of each Underwriter or any person controlling that Underwriter
on account of any loss, claim, damage, liability or action arising from
the sale of Stock to any person by that Underwriter if that Underwriter
failed to send or
<PAGE> 27
27
give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Securities
Act, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus or supplement thereto was corrected in that
Prospectus. For purposes of the second proviso to the immediately
preceding sentence, the term Prospectus shall not be deemed to include
the documents incorporated by reference therein, and no Underwriter
shall be obligated to send or give any supplement or amendment to any
document incorporated by reference in a Preliminary Prospectus or
supplement thereto or the Prospectus to any person other than a person
to whom such Underwriter has delivered such incorporated documents in
response to a written request therefor. Notwithstanding the provisions
of this Section 10(b), the Selling Stockholders' aggregate liability
under this Section 10(b) shall be limited to an amount equal to the
total net proceeds from the sale of the Stock (before deducting
expenses) received by the Selling Stockholders pursuant to this
Agreement. The foregoing indemnity agreement is in addition to any
liability which the Selling Stockholder may otherwise have to any
Underwriter or any director, officer, employee, agent or controlling
person of that Underwriter.
(c) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors
(including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company),
each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the
Securities Act, and each Selling Stockholder from and against any loss,
claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer,
controlling person or Selling Stockholder may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement or a material fact contained (A)
in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (B) in any Blue
Sky Application or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to
the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or the
Selling Stockholders through the Representatives by or on behalf of
that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer, controlling
person or Selling Stockholder for any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person or Selling Stockholder in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are incurred.
The foregoing indemnity agreement is in addition to any liability which
any Underwriter may otherwise have to the Company or any such director,
officer, controlling person or Selling Stockholder. The Underwriters
severally confirm and the Company and the Selling Stockholders
acknowledge that the statements with respect to the public offering of
the Stock by the Underwriters set forth on the cover page of, the
legends on the inside front cover page of and the information contained
under the caption "Underwriting" in, the Prospectus constitute the only
information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion
in the Preliminary Prospectus, the Registration Statement and the
Prospectus.
<PAGE> 28
28
(d) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, if
a claim in respect thereof is to be made against the indemnifying party
under this Section 10 the indemnified party shall notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 10 except to the extent it has been materially prejudiced
by such failure and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 10. If
any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that
it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim
or action, the indemnifying party shall not be liable to the
indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that the Representatives shall have the right to employ
counsel to represent jointly the Representatives and those other
Underwriters and their respective directors, officers, agents and
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters
against the Company or any Selling Stockholder under this Section 10,
if, in the reasonable judgment of the Representatives, there are legal
defenses available to them which are different from or in addition to
those available to such indemnifying party (it being understood that
the Company and Selling Stockholders shall not, in connection with any
one such claim or action or separate but substantially similar or
related claims or actions in the same jurisdiction arising out of the
same allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (other than
local counsel which shall be engaged only for purposes of appearing
with such counsel in such jurisdictions in which such firm of attorneys
is not licensed to practice)), and in that event the fees and expenses
of such separate counsel shall be paid by the Company and the Selling
Stockholder. An indemnifying party will not, without the prior written
consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim,
action, suit or proceeding and an indemnifying party shall not be
liable for any settlement of any claim or action effected without its
written consent (which consent shall not be unreasonably withheld).
(e) If the indemnification provided for in this Section 10
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section 10(a), 10(b) or 10(c) in respect of
any loss, claim, damage or liability, or any action in respect thereof,
referred to therein (other than by reason of the failure to give
notice, as provided in the first section of Section 10(d)), then each
indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified
party as a
<PAGE> 29
29
result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders
on the one hand and the Underwriters on the other from the offering of
the Stock or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company and the Selling Stockholders
on the one hand and the Underwriters on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Selling Stockholders on the one hand and any Underwriters on
the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the sale of the Stock
(before deducting expenses) received by the Company and the Selling
Stockholders on the one hand, and the total commissions received by the
Underwriter with respect to such offering. The relative fault shall be
determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company and
Selling Stockholders or any Underwriter, the intent of the parties and
their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section 10(e) were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to in this Section 10(e). The amount paid or
payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this
Section 10(e) shall be deemed to include, for purposes of this Section
10(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section
10(e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which Stock
underwritten by it through such Underwriter and distributed to the
public was offered to the public exceeds the amount of any damages
which such Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each Underwriter's obligation to contribute as
provided in this Section 10(e) are several and not joint.
11. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule I
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule I hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock which the
<PAGE> 30
30
defaulting Underwriter or Underwriters agreed but failed to purchase on such
date exceeds 9.09% of the total number of shares of the Stock to be purchased on
such Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 3.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Stock to be purchased
on such Delivery Date. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Stock) shall terminate without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholders, except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Sections 8. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule I hereto who, pursuant to
this Section 11, purchases Firm Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company and the Selling
Stockholders for damages caused by its default. If other underwriters are
obligated or agree to purchase the Stock of a defaulting or withdrawing
Underwriter, either the Representatives, the Company or the Selling Stockholders
may postpone the Delivery Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Underwriters may be necessary in the Registration Statement, the Prospectus
or in any other document or arrangement.
12. Termination. This Agreement may be terminated for any
reason at any time by the Company or any Underwriter upon the giving of one
day's written notice of such termination to the other parties hereto; provided,
however, if such terminating party is an Underwriter, such termination shall be
effective only with respect to such terminating party. In addition, the Company
may terminate this Agreement in accordance with the preceding sentence with
respect to any one or more of the Underwriters without terminating this
Agreement with respect to all of the Underwriters. If, at the time of a
termination, an offer to purchase any of the Stock has been accepted by the
Company but the time of delivery to the purchaser has not occurred, the
provisions of this Agreement shall remain in effect until such Stock is
delivered. The agreements contained in Section 6(e), 6(g), 7(a), 8 and 10 and
the representations and warranties of the Company in Section 1 and the
representations and warranties of the Selling Stockholders in Section 2 shall
survive the delivery of the Stock and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
13. Notices. Except as otherwise provided herein, all notices
and other communications provided pursuant to the terms of the Agreement shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication, which shall be confirmed.
All communication is effective only upon receipt. Notices to the Underwriters
shall be directed to them as follows:
<PAGE> 31
31
Lehman Brothers, Inc.
Three World Financial Center
[9th Floor]
New York, New York 10285
Attention: Syndicate Department
Telephone: (212) []
Telecopier: (212) 526-6588
Salomon Brothers Inc
Seven World Trade Center
[32nd Floor]
New York, New York 10048
Attention: [ ]
Telephone: (212) [ ]
Telecopier: (212) [ ]
Notices to the Company shall be directed to it as follows:
AMERCO
1325 Airmotive Way
Suite 100
Reno, Nevada 89502-3239
Telephone: (702) 688-6300
Telecopier: (702) 688-6338
14. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters and the
Company, the Selling Stockholders and their respective successors and assigns.
This Agreement is for the sole benefit of only those persons, except that (A)
the representations, warranties, indemnities and agreements of the Company and
the Selling Stockholders contained in this Agreement also shall be deemed to be
for the benefit of the directors, officers, employees and agents of any
Underwriter and the person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Securities Act and (B) the indemnity
agreement of the Underwriter contained in Section 10(c) shall be deemed to be
for the benefit of directors of the Company, officers of the Company who have
signed the Registration Statement, any person controlling the Company within the
meaning of Section 15 of the Securities Act and any agent of the Selling
Stockholders and their respective successors and assigns. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 14, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained in this
Agreement.
15. Certain Definitions. The word "subsidiary" has the meaning
set forth in Rule 405 of the Rules and Regulations under the Securities Act.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York (without giving effect to the
principles of choice of law).
<PAGE> 32
32
17. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
18. Headings. The headings used in this Agreement are inserted
for convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of this Agreement in the space provided for that
purpose below.
Very truly yours,
AMERCO
By:___________________________
Name: Gary V. Klinefelter
Title: Secretary
THE SELLING STOCKHOLDERS:
------------------------------
Paul F. Shoen
------------------------------
Sophia M. Shoen
CONFIRMED AND ACCEPTED, as
of the date first above
written for itself and as
Representative of the
several Underwriters named
in Schedule I hereto:
LEHMAN BROTHERS, INC.
By:___________________________
Name:
Title:
SALOMON BROTHERS INC
<PAGE> 33
33
By:___________________________
Name:
Title:
<PAGE> 34
Schedule I
Number of
Underwriters Shares
------------ ---------
Lehman Brothers Inc.
Salomon Brothers Inc
---------------
Total
<PAGE> 35
Schedule II
List of Significant Subsidiaries
pursuant to Section 1(d)
U-Haul International, Inc. - a Nevada Corporation
Amerco Real Estate Company - a Nevada Corporation
Oxford Life Insurance Company - an Arizona Corporation
Republic Western Insurance Company - an Arizona Corporation
<PAGE> 36
Schedule III
List of Agreements to Register
Securities pursuant to Section 1(r)
1. Share Repurchase and Registration Rights Agreement, dated as of March
1, 1992, among AMERCO, Paul F. Shoen and PAFRAN, INC.
2. Share Repurchase and Registration Rights Agreement, dated as of May 1,
1992, among AMERCO, Sophia M. Shoen and SOPHMAR, INC.
3. Preferred Stock Purchase Agreement, dated August 30, 1996, between
AMERCO and Blue Ridge Investments, L.L.C.
4. Registration Rights Agreement, dated as of August 30, 1996, between
AMERCO and NationsBank Corporation.
<PAGE> 37
Exhibit A
[Form of lock-up from other stockholders
pursuant to Section 9(p)]
Lehman Brothers Inc.
Salomon Brothers Inc
As Representatives of the several
Underwriters named in Schedule I
to the Underwriting Agreement
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Re: Proposed Public Offering by AMERCO
Dear Sirs:
The undersigned, a stockholder and director of AMERCO, a Nevada
corporation (the "Company"), understands that Lehman Brothers Inc. and Salomon
Brothers Inc (the "Representatives") propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with the Company and the Selling
Stockholders referred to therein providing for the public offering of shares
(the "Securities") of the Company's Common Stock, par value $.25 per share (the
"Common Stock"). For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Underwriting Agreement that, during a period of
120 days from the date of the Prospectus, the undersigned will not, directly or
indirectly, offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition by any person at any time in the future, of) any shares of
common stock of the Company or any securities convertible into or exercisable or
exchangeable for shares of common stock of the Company, or sell or grant
options, rights or warrants with respect to any shares of common stock of the
Company or any securities convertible into or exercisable or exchangeable for
shares of common stock of the Company, or enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of shares of the common stock
of the Company, without the prior consent of the Representatives.
Very truly yours,
Signature: ___________________
Print Name: __________________
<PAGE> 38
AMERCO
CUSTODY AGREEMENT
THIS AGREEMENT, dated as of December __, 1996, among AMERCO, a
Nevada corporation (the "Company"), the undersigned stockholders of the Company
(the "Selling Stockholders") and ChaseMellon Shareholder Services, L.L.C., a
Delaware limited liability company, as custodian (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (File No.
333-15485) on Form S-3 (the "Registration Statement") in connection with the
proposed offer and sale to the public of shares of its Common Stock, par value
$.25 per share (the "Common Stock"), to be offered and sold by the Company and
by and on behalf of the Selling Stockholders (the "Public Offering"); and
WHEREAS, to induce Lehman Brothers Inc. and Salomon Brothers
Inc, the representatives (the "Representatives") of the several underwriters of
the Public Offering (the "Underwriters"), to enter into the Underwriting
Agreement referred to in Section 3 hereof, and to assure the Underwriters that
the shares of Common Stock to be offered by the Selling Stockholders in
accordance with its previous request to the Underwriters will be delivered to
the Representatives at the closing of the Public Offering and to provide for the
orderly processing of the Registration Statement and sale of such shares of
Common Stock, it is necessary and in the best interests of the Selling
Stockholders and the Company to enter into the following agreement;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements hereinafter set forth and other good and valuable
consideration the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. Appointment of Custodian. The Custodian is hereby appointed
to act and to hold and dispose of the shares of the Selling Stockholders' Common
Stock to be offered and sold under the terms of the Registration Statement
pursuant to the instructions of the Selling Stockholders or an attorney-in-fact
for the Selling Stockholders (each, an "Attorney-in-Fact") appointed by the
Selling Stockholders pursuant to a power of attorney executed by the Selling
Stockholders and attached hereto as Appendix I (the "Power of Attorney"), all in
accordance with the terms and conditions of this Agreement.
2. Deposit of Shares. On or prior to the execution of this
Agreement, the Selling Stockholders shall have deposited with the Custodian
certificates in negotiable form representing the number of shares of Common
Stock set forth opposite such Selling Stockholders' name on Exhibit A hereto
(the "Deposit Stock"), registered in its name (or the names of its nominee if
properly identified) and duly endorsed in blank for transfer by separate stock
power, the signatures thereto being guaranteed by a commercial bank or trust
company having an office or correspondent in the United States or a member firm
of the New York Stock or American Stock Exchanges. The stock certificates and
the separate endorsed stock powers shall have been delivered to the Custodian at
the address set forth in Section 10 hereof for deposit with the Custodian. Upon
the reasonable request of the Custodian, the Selling Stockholders agree to
furnish any other documentation which the transfer agent of the Company may
request in order to assure the sale and transfer of the Deposit Stock.
<PAGE> 39
- 2 -
The Deposit Stock represented by the certificates so deposited
with the Custodian by the Selling Stockholders are subject to the interests
hereunder of the Underwriters; provided, however, that until payment by the
Underwriters of the purchase price for the Deposit Stock, the Selling
Stockholders shall remain the owner of the Deposit Stock and shall have the
right to vote the Deposit Stock and to receive all dividends and distributions
therefrom; the arrangements for the custody and delivery of such certificates
made by the Selling Stockholders hereunder are not subject to termination by any
acts of the Selling Stockholders, or by operation of law, whether by the death
or incapacity of such Selling Stockholders or the occurrence of any other event,
except as provided in Section 4 hereof; and if any such death, incapacity or any
other such event shall occur before the delivery of the Deposit Stock hereunder,
the Custodian is nevertheless fully authorized and directed to deliver
certificates for the Deposit Stock in accordance with the terms and conditions
of this Agreement and the Underwriting Agreement (as defined below) as if such
death, incapacity or other event had not occurred, regardless of whether or not
the Custodian shall have received notice of such death, incapacity or other
event.
3. Underwriting Agreement. The Selling Stockholders
acknowledge receipt of a draft of an underwriting agreement among the Company,
the Selling Stockholders and the Underwriters relating to the offering of shares
of Common Stock and the purchase thereof by the Underwriters, a copy of which is
attached hereto as Appendix II. The definitive underwriting agreement, to be in
substantially the form of such draft (the "Underwriting Agreement"), will set
forth the terms and conditions of the sale and purchase of said shares and
provide for the rights and responsibilities, and the representations,
warranties, covenants and indemnities, which will be expected of the Selling
Stockholders in connection therewith. It is understood that the Underwriting
Agreement will be executed by the Representatives, the Company, and by either
the Selling Stockholders or by an Attorney-in-Fact on behalf of the Selling
Stockholders, effective after the Registration Statement becomes effective with
the Securities and Exchange Commission (the "Commission"), at which time the
price to be paid to the Selling Stockholders by the Underwriters for the Common
Stock being offered will be inserted in the Underwriting Agreement; provided,
however, the public offering price at which the Deposit Stock is sold shall be
subject to the limitations set forth in Paragraph l(a) of the Power of Attorney.
The Selling Stockholders hereby approve the draft of the Underwriting Agreement
attached hereto as Appendix II, together with any and all such changes thereto
as are approved by any Attorney-in-Fact; provided, however, that no such changes
represent for the undersigned any material adverse change from the provisions of
Appendix II hereto.
4. Custodian to Act on Direction of Attorneys-in-Fact. The
Attorneys-in-Fact, and each of them, have been authorized pursuant to the Power
of Attorney to execute and deliver the Underwriting Agreement on behalf of the
Selling Stockholders who have executed such Power of Attorney and to direct at
the First Delivery Date referred to in the Underwriting Agreement the release of
all of the Deposit Stock to the Underwriters pursuant to the terms of the
Underwriting Agreement. The Custodian is hereby authorized and directed to
deliver the Deposit Stock pursuant to instructions from the Underwriters at the
First Delivery Date upon receipt of (a) a wire transfer of immediately available
funds, in an amount sufficient to pay the Selling Stockholders the aggregate
purchase price for the Deposit Stock purchased on the First Delivery Date less
transfer taxes, if any, and (b) instructions from either the Selling
Stockholders or their Attorney-in-Fact so to release such shares. The Custodian
shall have no liability whatsoever for releasing the Deposit Stock to the
<PAGE> 40
- 3 -
Underwriters in accordance with the provisions of the foregoing sentence;
provided, that the foregoing shall not affect or in any way limit the
indemnification or other provisions contemplated by the Underwriting Agreement.
If the Underwriting Agreement shall not be entered into and the transactions
contemplated thereby consummated prior to January 31, 1997 (or such later date
as shall be agreed to by the parties hereto), then the Custodian is to return to
the Selling Stockholders all of the Deposit Stock held by the Custodian for the
Selling Stockholders at the address set forth on the signature page hereto, and
shall destroy all stock powers relating thereto delivered to it pursuant to
Section 2 hereof. Upon the mailing of all or a portion of the Deposit Stock to
the Selling Stockholders in accordance with this Section 4, the Custodian shall
have no further responsibility hereunder.
5. Representations and Warranties of Selling Stockholders.
Each Selling Stockholder severally represents and warrants to the Company and
each Underwriter as follows:
(a) The representations and warranties to be set forth in
Section 2 of the Underwriting Agreement (in substantially the form attached
hereto) are true and correct;
(b) This Agreement has been duly authorized, executed and
delivered by the Selling Stockholder and constitutes a legal and binding
obligation of the Selling Stockholder, enforceable in accordance with its terms;
(c) The Selling Stockholder has full legal right, capacity,
power and authority to execute this Agreement, to enter into the Underwriting
Agreement and to sell, transfer, assign and deliver the Deposit Stock to be sold
by the Selling Stockholder in accordance with the Underwriting Agreement and
valid and marketable title to such Deposit Stock will be passed to the
Underwriters pursuant to the Underwriting Agreement;
(d) The information concerning the Selling Stockholder which
will be in the preliminary prospectus, the Registration Statement, the final
prospectus and any amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may be, conform in all
material respects to the requirements of the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be therein or necessary to make statements therein not misleading;
and
(e) The attention of the Selling Stockholder has been directed
to the rules of the Commission which prohibit Selling Stockholders from bidding
for or purchasing any shares of the Common Stock, or attempting to induce anyone
else to bid for or purchase any such shares, or taking any other action which
might tend to stabilize or raise the price of the shares of Common Stock, until
the distribution of Common Stock pursuant to the Registration Statement has been
completed; the Selling Stockholder has not taken and will not take, directly or
indirectly, any action which would violate the foregoing rules.
Each Selling Stockholder hereby further represents and
warrants that the foregoing representations and warranties will be true and
correct on the date the Underwriting Agreement is executed and at the First
Delivery Date referred to in the Underwriting Agreement. The Selling
<PAGE> 41
- 4 -
Stockholders will immediately notify the Attorneys-in-Fact, the Company and the
Underwriters of the occurrence of any event which shall cause the
representations, warranties and agreements contained herein not to be true and
correct during the period of the Public Offering of the Common Stock.
For purposes of rendering an opinion pursuant to the
Underwriting Agreement, Grover T. Wickersham, P.C. may rely on the
representations and warranties of the Selling Stockholders set forth herein and
in the Underwriting Agreement as if said representations and warranties had been
set forth in a separate certificate addressed to said counsel at and as of the
Delivery Date; and for purposes of delivering any certificate on behalf of the
Selling Stockholders which may be required in connection with the delivery of
the Deposit Stock, pursuant to the Underwriting Agreement, the Attorneys-in-Fact
may rely on the representations and warranties of the Selling Stockholders set
forth herein and in the Underwriting Agreement as if said representations and
warranties had been set forth in a separate certificate directed to the
Attorneys-in-Fact at the Delivery Date.
6. Payment to Selling Stockholders.
(a) The Selling Stockholders hereby direct the Custodian to
receive payment for such Selling Stockholders' shares of Deposit Stock, such
payment to be made by the representatives of the several Underwriters by wire
transfer of immediately available funds for the purchase price of the Deposit
Stock upon delivery of the appropriate number of shares of Deposit Stock, all in
accordance with the terms and conditions of the Underwriting Agreement and
Section 4 hereof.
(b) Upon receipt of such payment from the Representatives by
the Custodian, the Custodian shall promptly forward to the Selling Stockholders
to the account(s) designated in writing by the Selling Stockholders such wire
transferred funds for the purchase price of such Selling Stockholders' Deposit
Stock as set forth in the Underwriting Agreement.
7. Return of Common Stock. In the event the Deposit Stock is
not sold pursuant to the Underwriting Agreement because of the limitations set
forth in Section 3 of this Agreement, then the Custodian shall promptly return
the Deposit Stock to the Selling Stockholders at the addresses set forth on the
signature page hereto. Upon the mailing of all or a portion of the Deposit Stock
to the Selling Stockholders in accordance with this Section 7, the Custodian
shall have no further responsibility hereunder.
8. Extent of Duties and Obligations of Custodian. In all
respects, the duties and obligations of the Custodian shall be determined solely
by the express provisions of this Agreement, and the Custodian shall not be
liable for any act or failure to act on its part hereunder except for gross
negligence or willful misconduct, and shall be fully protected, as against the
Selling Stockholders, in any such action as the Custodian may take hereunder in
reliance on advice of accountants, attorneys or other independent experts
selected by it (which may include attorneys employed by the Custodian or outside
counsel). No implied covenants or obligations shall be read into this Agreement
against the Custodian. None of the provisions contained in this Agreement shall
require the Custodian to expend or risk its own funds or otherwise incur
personal financial
<PAGE> 42
- 5 -
liability in the performance of any of its duties, or in the exercise of any of
its rights or powers, hereunder.
Nothing in this Agreement, expressed or implied, shall give or
be construed to give any person, firm or corporation, other than the parties
hereto, the Underwriters, the Attorneys-in-Fact, Grover T. Wickersham, P.C., the
Selling Stockholders, such other counsel who may render an opinion on behalf of
such Selling Stockholders and Milbank, Tweed, Hadley & McCloy, as counsel to the
Underwriters, any legal or equitable right, remedy or claim under or in respect
to this Agreement or under or in respect of any covenant, condition or provision
herein contained.
Notwithstanding anything in this Section 9 to the contrary,
the foregoing shall not affect or in any way limit the indemnification or other
provisions contemplated by the Underwriting Agreement.
9. Effective Date of Agreement. This Agreement shall become
effective with respect to the Selling Stockholders upon receipt of a copy of
this Agreement, duly executed by the Selling Stockholders, by the Custodian at
the following address:
[ ]
[ ]
[ ]
[ ]
10. Definitions. The words "it" and "its" shall be construed
where appropriate, to be singular or plural, or masculine, feminine or neuter.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York (without giving effect to the
principles of choice of law).
12. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
13. Successors. This Agreement shall be binding upon the
parties and their heirs, legal representatives, distributees, successors and
assigns.
<PAGE> 43
- 6 -
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
AMERCO
By:
-------------------------------------
Name: Gary V. Klinefelter
Title: Secretary
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Custodian
By:
-------------------------------------
SELLING STOCKHOLDERS:
- ---------------------------------
Name: Paul F. Shoen
Address: P.O. Box 524
Glenbrook, NV 89413
- ---------------------------------
Name: Sophia M. Shoen
Address: 5104 N. 32nd Street
Phoenix, AZ 85018
<PAGE> 44
Exhibit A
<TABLE>
<CAPTION>
Number of
Shares of
Selling Stockholders Common Stock
-------------------- ------------
<S> <C>
1. Paul F. Shoen 300,000
2. Sophia M. Shoen 200,000
-------
Total 500,000
=======
</TABLE>
<PAGE> 45
Appendix I
AMERCO
Public Offering of Common Stock
Irrevocable Power of Attorney of Selling Stockholder
[ ]
[ ]
[ ]
[ ]
The undersigned stockholder of AMERCO, a Nevada corporation
(the "Company"), understands that it is contemplated that the undersigned
stockholder of the Company (the "Selling Stockholder"), will sell shares of
Common Stock, par value $.25 per share (the "Common Stock"), of the Company to
certain underwriters to be named in the underwriting agreement (referred to
below), represented by Lehman Brothers Inc. and Salomon Brothers Inc, the
representatives (the "Representatives") of the several underwriters (the
"Underwriters"), which Underwriters propose to offer and sell such shares to the
public. The undersigned also understands that, in connection with such offer and
sale, the Company has filed a Registration Statement (File No. 333-15485) (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") to register the shares to be offered under the Securities Act of
1933, as amended.
Concurrently with the execution and delivery of this Power of
Attorney, the undersigned is also executing and delivering a Custody Agreement
(the "Custody Agreement") pursuant to which certificates for the number of
shares of Common Stock to be sold by the undersigned as set forth at the end of
this instrument are being deposited with ChaseMellon Shareholder Services,
L.L.C., as custodian (the "Custodian").
Capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Custody Agreement.
1. In connection with the foregoing, the undersigned hereby
irrevocably constitutes and appoints the Custodian, Grover T. Wickersham and
Debra K. Weiner as attorneys-in-fact (individually, an "Attorney" and
collectively, the "Attorneys") of the undersigned, each with full power and
authority to act together or alone, including full power of substitution, in the
name of and for and on behalf of the undersigned with respect to all matters
arising in connection with the sale of Common Stock in connection with the
Registration Statement by the undersigned except as specifically limited herein,
including, but not limited to, the power and authority to take any and all of
the following actions:
(a) to sell, assign and transfer to the Underwriters pursuant
to the Underwriting Agreement (defined below) the number of shares of
Common Stock of the Company to be sold to the Underwriters specified
below and represented by the certificates deposited by the undersigned
with the Custodian pursuant to the Custody Agreement, at a purchase
price per share to be paid by the Underwriters, as determined by
negotiation between the Company and the Representatives;
(b) for the purpose of effecting such sale, to make, execute,
deliver and perform the undersigned's obligations under the
Underwriting Agreement substantially in the form of
<PAGE> 46
- 2 -
the agreement filed as Appendix II to the Custody Agreement (such
agreement, in the form in which executed, being herein called the
"Underwriting Agreement") receipt of a copy of which is hereby
acknowledged, among the Company, the Selling Stockholders and the
Underwriters, containing such additions to or changes in the terms,
provisions and conditions thereof, as the Attorney in his or her sole
discretion shall determine, including, subject to the limitation set
forth in paragraph 1(a) hereof, the purchase price per share to be paid
by the Underwriters and including any additions to or changes in the
terms, provisions and conditions thereof relating to the Public
Offering of such shares by the Underwriters;
(c) to give such orders and instructions to the Custodian and
the transfer agent for the Common Stock as the Attorneys, or any one of
them, in their or in his or her sole discretion shall determine, with
respect to (i) the transfer on the books of the Company of the shares
of Common Stock of the Company to be sold by the undersigned to the
Underwriters in order to effect such sale including giving the name in
which new certificates for such shares are to be issued and the
denominations thereof, (ii) the delivery to or for the account of the
Underwriters of certificates for such shares against receipt by the
Custodian of the purchase price to be paid therefor and (iii) the
remittance to the undersigned of new certificates representing that
number of shares of Common Stock, if any, that is in excess of the
number of shares sold by the undersigned to the Underwriters relating
to the Public Offering contemplated in the Registration Statement;
(d) to retain legal counsel in connection with any and all
matters referred to herein;
(e) to execute and deliver any amendment to the Custody
Agreement; provided, however, that no such amendment shall increase the
number of shares of Common Stock to be sold by the undersigned above
the number of shares of Common Stock specified below to be sold to
Underwriters;
(f) to endorse (in blank or otherwise) on behalf of the
undersigned the certificate or certificates representing the shares of
Common Stock to be sold by the undersigned, or a stock power or powers
attached to such certificate or certificates;
(g) to make, acknowledge, verify and file on behalf of the
undersigned applications, consents to service of process and such other
documents, undertakings or reports as may be required by law with state
commissioners or officers administering state securities laws; and
(h) to make, exchange, acknowledge and deliver all such other
contracts, powers of attorney, orders, receipts, notices, requests,
instructions, certificates, letters and other writings, including
communications to the Commission, and amendments to the Underwriting
Agreement and in general to do all things and to take all actions, that
the Attorneys, or any one of them, in their or his or her sole
discretion may consider necessary or proper in connection with or to
carry out the aforesaid sale of shares of Common Stock to the
Underwriters and the Public Offering thereof in connection with the
Registration Statement, as fully as could the undersigned if
personally present and acting.
<PAGE> 47
- 3 -
2. This Power of Attorney and all authority conferred hereby
are granted and conferred subject to the interests of the Underwriters and in
consideration of those interests, and for the purpose of completing the
transactions contemplated by the Underwriting Agreement and this Power of
Attorney; this Power of Attorney and all authority conferred hereby shall be
irrevocable and shall not be terminated by the undersigned or by operation of
law, whether by the death or incapacity of the undersigned, or by the occurrence
of any other event. If any event described in the preceding sentence shall occur
before the delivery of the shares of Common Stock to be sold by the undersigned
under the Underwriting Agreement, certificates for such shares of Common Stock
shall be delivered by or on behalf of the undersigned in accordance with the
terms and conditions of the Underwriting Agreement and the Custody Agreement,
and all other actions required to be taken under the Underwriting Agreement and
the Custody Agreement shall be taken, and action taken by the Attorneys, or any
one of them, pursuant to this Power of Attorney shall be as valid as if such
event had not occurred, whether or not the Custodian or the Attorneys, or any
one of them, shall have received notice of such event.
Notwithstanding the foregoing, if the Underwriting Agreement
shall not be entered into and the transactions contemplated thereby consummated
prior to January 31, 1997 (or such later date as shall be agreed to by the
undersigned), then from and after such date, this Power of Attorney shall be
terminated; subject, however, to all lawful action done or performed by the
Attorneys, or any one of them, pursuant to this Power of Attorney prior to such
date.
3. The undersigned ratifies all that the Attorneys, or any
one of them, shall do pursuant to paragraphs 1 and 2 of this Power of Attorney.
4. The Attorneys shall be entitled to act and rely upon any
statement, request, notice or instructions respecting this Power of Attorney
given to the Attorneys by the undersigned; provided, however, that the Attorneys
shall not be entitled to act on any statement or notice to the Attorneys with
respect to a Delivery Date under the Underwriting Agreement, or with respect to
the termination of the Underwriting Agreement, or advising that the Underwriting
Agreement has not been executed and delivered, unless such statement or notice
shall have been confirmed in writing to the Attorneys by the Representatives.
5. In acting hereunder, the Attorneys may rely on the
representations, warranties and agreements of the undersigned made in the
Custody Agreement.
6. The undersigned hereby agrees to indemnify and hold
harmless the Attorneys against any and all expenses, losses, claims, damages or
liabilities, joint or several, to which they may become subject insofar as such
expenses, losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any action taken or omitted to be taken by said
Attorney pursuant hereto, except if such expenses, losses, claims, damages or
liabilities shall result from the gross negligence or willful misconduct of said
Attorney. It is understood that the Attorneys (acting in that capacity alone)
shall serve without compensation.
7. This Power of Attorney shall be governed by and construed
in accordance with the laws of New York (without regard to principles of choice
of law).
<PAGE> 48
- 4 -
Date: December __, 1996
Number of Shares
of Common Stock to Be _____________________________
Sold to Underwriters: Signature
_________ Shares Signature Guaranteed by:
___________________________________
Authorized Signature
By
(Note: The signature must be
guaranteed by a commercial bank or
trust company having an office or
correspondent in the United States
or by a member firm of the New York
or American Stock Exchanges)
<PAGE> 49
Appendix II
(Underwriting Agreement)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated June 25, 1996 relating
to the financial statements of AMERCO, which appears in such Prospectus. We
also consent to the application of such report to the Financial Statement
Schedules for the three years ended March 31, 1996 listed under Item 14(a) of
AMERCO's Annual Report on Form 10-K for the year ended March 31, 1996 when such
schedules are read in conjunction with the financial statements referred to in
our report. The audits referred to in such report also included these Financial
Statement Schedules. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
December 9, 1996
Phoenix, Arizona
