<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
___________ __________________________________ __________________
<S> <C> <C>
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X]
No [ ].
32,909,729 shares of AMERCO Common Stock, $0.25 par value and 5,754,334
shares of AMERCO Series A common stock, $0.25 par value were
outstanding at August 12, 1994.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par
value, were outstanding at August 12, 1994.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
a) Consolidated Balance Sheets as of June 30, 1994,
March 31, 1994 and June 30, 1993................... 4
b) Consolidated Statements of Earnings for the
Quarters Ended June 30, 1994 and 1993.............. 6
c) Consolidated Statements of Changes in Stockholders'
Equity for the Quarters ended June 30, 1994
and 1993........................................... 7
d) Consolidated Statements of Cash Flows for the
Quarters Ended June 30, 1994 and 1993.............. 8
e) Notes to Consolidated Financial Statements -
June 30, 1994, March 31, 1994 and June 30, 1993.... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 20
<PAGE> 3
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INTENTIONALLY BLANK
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
June 30, March 31, June 30,
ASSETS 1994 1994 1993
------ ----------- ----------- -----------
(unaudited) (audited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Cash $ 19,617 18,442 15,459
Receivables 208,833 204,814 92,735
Inventories 41,920 49,012 48,240
Prepaid expenses 24,307 24,503 25,093
Investments, fixed maturities 718,438 719,605 667,013
Investments, other 94,392 84,738 121,479
Deferred policy acquisition costs 48,917 47,846 49,353
Other assets 30,283 21,246 26,127
--------- --------- ---------
Property, plant and equipment, at
cost:
Land 200,720 186,210 180,074
Buildings and improvements 693,041 676,297 621,747
Furniture and equipment 166,268 163,495 159,711
Rental trailers and other rental
equipment 218,445 212,187 207,848
Rental trucks 863,982 820,395 753,522
General rental items 55,186 57,421 59,580
--------- --------- ---------
2,197,642 2,116,005 1,982,482
Less accumulated depreciation 972,968 941,769 858,941
--------- --------- ---------
Total property, plant and
equipment 1,224,674 1,174,236 1,123,541
--------- --------- ---------
$ 2,411,381 2,344,442 2,169,040
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
June 30, March 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1994 1993
------------------------------------ ----------- ----------- -----------
(unaudited) (audited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Liabilities:
Accounts payable and accrued
liabilities $ 158,920 124,062 138,003
Notes and loans 725,565 723,764 766,946
Policy liabilities and accruals 449,986 439,266 330,019
Liabilities from premium deposits 308,408 312,708 321,025
Cash overdraft 14,569 26,559 59,976
Other policyholders' funds and
liabilities 6,617 9,592 13,429
Deferred income 8,714 5,913 5,524
Deferred income taxes 64,799 50,791 38,660
--------- --------- ---------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized; 6,100,000
issued without par value and
outstanding as of June 30, 1994
and March 31, 1994, none issued
or outstanding as of June 30, 1993 - - -
Serial common stock, with or with-
out par value, 150,000,000 shares
authorized - - -
Series A common stock of $.25 par
value, authorized 10,000,000 shares,
issued 5,754,334 shares as of June
30, 1994 and March 31, 1994, none
as of June 30, 1993 1,438 1,438 -
Common stock of $.25 par value,
authorized 150,000,000 shares,
issued 34,245,666 shares as of
June 30, 1994 and March 31, 1994
and 40,000,000 as of June 30, 1993 8,562 8,562 10,000
Additional paid-in capital 165,651 165,651 19,331
Foreign currency translation (11,461) (11,152) (7,102)
Retained earnings 540,325 515,200 499,522
--------- --------- ---------
704,515 679,699 521,751
Less:
Cost of common shares in treasury,
(1,335,937 shares as of June
30, 1994 and March 31, 1994 and
June 30, 1993) 10,461 10,461 10,461
Loan to leveraged employee stock
ownership plan 20,251 17,451 15,832
--------- --------- ---------
Total stockholders' equity 673,803 651,787 495,458
Contingent liabilities and commitments
--------- --------- ---------
$ 2,411,381 2,344,442 2,169,040
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 6
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended June 30,
(Unaudited)
<CAPTION>
1994 1993
---------- ----------
(in thousands except
per share data)
<S> <C> <C>
Revenues
Rental and other revenue $ 230,207 208,042
Net sales 51,302 47,642
Premiums 31,559 24,640
Net investment income 10,510 11,024
---------- ----------
Total revenues 323,578 291,348
Costs and expenses
Operating expense 166,786 158,865
Cost of sales 27,550 29,273
Benefits and losses 26,412 23,941
Amortization of deferred acquisition
costs 3,084 2,153
Depreciation 37,282 30,140
Interest expense 16,638 17,338
---------- ----------
Total costs and expenses 277,752 261,710
Pretax earnings from operations 45,826 29,638
Income tax expense (16,413) (8,775)
---------- ----------
Earnings from operations before
cumulative effect of change in
accounting principle 29,413 20,863
Cumulative effect of a change in
accounting principle - (3,504)
--------- ----------
Net earnings $ 29,413 17,359
========== ==========
Earnings per common share:
Earnings from operations before
cumulative effect of change in
accounting principle $ .71 .56
Cumulative effect of a change in
accounting principle - (.09)
---------- ----------
Net earnings $ .71 .47
========== ==========
Weighted average common shares outstanding 37,107,536 37,158,211
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 7
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Quarters ended June 30,
(Unaudited)
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Series A common stock of $.25 par
value: Authorized 10,000,000 shares,
issued 5,754,334 in 1994, none in 1993
Beginning and end of quarter $ 1,438 -
------- -------
Common stock of $.25 par value:
Authorized 150,000,000 shares in 1994
and 1993, 34,245,666 issued in 1994,
40,000,000 issued in 1993
Beginning and end of quarter 8,562 10,000
------- -------
Additional paid-in capital:
Beginning and end of quarter 165,651 19,331
------- -------
Foreign currency translation:
Beginning of quarter (11,152) (6,122)
Change during quarter (309) (980)
------- -------
End of quarter (11,461) (7,102)
------- -------
Retained earnings:
Beginning of quarter 515,200 482,163
Net earnings 29,413 17,359
Dividends paid to stockholders:
Preferred stock: ($.53 per share 1994) (3,241) -
Change in net unrealized gain
on investments (1,047) -
------- -------
End of quarter 540,325 499,522
------- -------
Treasury stock:
Beginning and end of quarter 10,461 10,461
------- -------
Loan to leveraged employee stock
ownership plan:
Beginning of quarter 17,451 14,953
Increase in loan 2,919 1,000
Proceeds from loan (119) (121)
------- -------
End of quarter 20,251 15,832
------- -------
Total stockholders' equity $ 673,803 495,458
======= =======
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 8
<TABLE>
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended June 30,
(Unaudited)
<CAPTION>
1994 1993
------- -------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 29,413 17,359
Depreciation and amortization 41,489 32,622
Provision for losses on accounts
receivable 736 108
Net gain on sale of real and personal
property (131) (1,324)
(Gain) loss on sale of investments 30 (411)
Cumulative effect of a change in
accounting principle - 5,006
Changes in policy liabilities and
accruals 11,766 (6,819)
Additions to deferred policy
acquisition costs (4,155) (5,790)
Net change in other operating assets
and liabilities 43,182 22,333
------- -------
Net cash provided by operating activities 122,330 63,084
------- -------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (144,794) (226,844)
Fixed maturities (31,098) (70,438)
Real estate (8) -
Mortgage loans (5,504) -
Proceeds from sale of investments:
Property, plant and equipment 58,868 64,657
Fixed maturities 30,756 51,305
Real estate 220 324
Mortgage loans 1,442 2,600
Changes in other investments (10,507) 5,345
------- -------
Net cash used by investing activities (100,625) (173,051)
------- -------
Cash flows from financing activities:
Net change in short-term borrowings 46,250 (4,000)
Proceeds from notes - 95,000
Loan to leveraged employee stock
ownership plan (2,919) (1,000)
Proceeds from leveraged employee stock
ownership plan 119 121
Principal payments on notes (44,449) (21,175)
Net change in cash overdraft (11,990) 35,125
Dividends paid (3,241) -
Investment contract deposits 6,966 8,758
Investment contract withdrawals (11,266) (8,694)
------- -------
Net cash provided (used) by financing
activities (20,530) 104,135
------- -------
Increase (decrease) in cash 1,175 (5,832)
Cash at beginning of quarter 18,442 21,291
------- -------
Cash at end of quarter $ 19,617 15,459
======= =======
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE> 9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1994, March 31, 1994 and June 30, 1993
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
corporation, AMERCO, and its subsidiaries, all of which are wholly-owned.
All material intercompany accounts and transactions of AMERCO and its
subsidiaries (herein called the "Company" or the "consolidated group") have
been eliminated. The consolidated balance sheets as of June 30, 1994 and
1993, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for the quarters ended June 30, 1994
and 1993 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 financial statements and notes are presented as permitted by Form 10-Q
and do not contain 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, not including ESOP shares that have not been committed
to release. Net income is reduced for preferred dividends.
Certain reclassifications have been made to the financial statements for the
quarter ended June 30, 1993 to conform with the current year's
presentation.
<PAGE> 10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1994, March 31, 1994 and June 30, 1993
(Unaudited)
2. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES
<TABLE>
A summary consolidated balance sheet (unaudited) for Ponderosa Holdings, Inc.
and its subsidiaries is presented below:
<CAPTION>
March 31,
1994 1993
--------- -------
(in thousands)
<S> <C> <C>
Investments - fixed maturities $ 718,438 667,013
Other investments 94,392 121,479
Receivables 132,944 37,409
Deferred policy acquisition costs 48,917 49,353
Due from affiliate 9,125 1,083
Deferred federal income taxes 8,195 8,123
Other assets 14,892 11,050
--------- -------
Total assets $ 1,026,903 895,510
========= =======
Policy liabilities and accruals $ 385,539 292,801
Unearned premiums 64,292 37,636
Premium deposits 308,408 321,025
Other policyholders' funds and
liabilities 11,543 13,266
--------- -------
Total liabilities 769,782 664,728
Stockholder's equity 257,121 230,782
--------- -------
Total liabilities and
stockholder's equity $ 1,026,903 895,510
========= =======
</TABLE>
<PAGE> 11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Financial Statements, Continued
(Unaudited)
2. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA HOLDINGS, INC.
AND ITS SUBSIDIARIES, continued
<TABLE>
A summarized consolidated income statement (unaudited) for Ponderosa
Holdings, Inc. and its subsidiaries is presented below:
<CAPTION>
Three Months ended March 31,
1994 1993
------ ------
(in thousands)
<S> <C> <C>
Premiums $ 34,352 26,875
Net investment income 10,554 11,067
Other income 1,267 1,745
------ ------
Total revenue 46,173 39,687
Benefits and losses 26,412 23,941
Amortization of deferred policy
acquisition costs 3,084 2,153
Other expenses 7,801 5,671
------ ------
Income from operations 8,876 7,922
Federal income tax expense (2,742) (2,267)
------ ------
Earnings from operations before
change in accounting principle 6,134 5,655
Cumulative effect of a change in
accounting principle - (85)
------ ------
Net income $ 6,134 5,570
====== ======
</TABLE>
3. CONTINGENT LIABILITIES AND COMMITMENTS
AMERCO and/or its subsidiaries are defendants in a number of suits and claims
incident to the type of business conducted. It is the opinion of
management that none of the suits or claims involving AMERCO and/or its
subsidiaries is expected to result in any material loss and, accordingly,
no provision has been made in the accompanying financial statements.
<PAGE> 12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Financial Statements, Continued
(Unaudited)
4. SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
The (increase) decrease in receivables, inventories and accounts payable and
accrued liabilities net of other operating and investing activities
follows:
<CAPTION>
Three Months ended June 30,
1994 1993
------ ------
(in thousands)
<S> <C> <C>
Receivables $ (14,042) (28,320)
====== ======
Inventories $ 7,092 3,197
====== ======
Accounts payable and
accrued liabilities $ 39,141 24,350
====== ======
</TABLE>
Cash paid for income taxes amounted to $224,000 and $200,000 for 1994 and
1993, respectively.
Interest paid in cash amounted to $20,569,000 and $23,466,000 for 1994 and
1993, respectively.
5. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 112 - Employers' Accounting
for Postemployment Benefits.
Issued in November 1992, this statement applies to employers who provide
certain benefits to former or inactive employees after employment but
before retirement. It requires that the cost of such benefits be
recognized over the service period of employees as these benefits vest or
accumulate. The provisions of this statement must be adopted for fiscal
years beginning after December 15, 1993. The impact of adoption of this
statement will not be material.
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 has not completed
an evaluation of the effect of this standard.
<PAGE> 13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Financial Statements, Continued
(Unaudited)
5. NEW ACCOUNTING STANDARDS, continued
Statement of Financial Accounting Standards No. 115 - Accounting for Certain
Investments in Debt and Equity Securities.
Effective December 31, 1993, RWIC adopted SFAS 115. This statement requires
classification of debt securities into one of the following three
categories based on management's intention with regard to such securities:
held-to-maturity, available-for-sale and trading. Securities classified
as held-to-maturity are recorded at cost adjusted for the amortization of
premiums or accretion of discounts while those classified as available-for-
sale are recorded at fair value with unrealized gains or losses reported
on a net basis as a separate component of stockholders' equity.
Securities classified as trading, if any, are recorded at fair value with
unrealized gains or losses reported on a net basis in income. RWIC does
not currently maintain a trading portfolio. U-Haul and Oxford will adopt
this statement in fiscal 1995. An evaluation of this statement has not
been completed by U-Haul or Oxford.
Statement of Position 93-7, "Reporting on Advertising Costs", was issued by
the Accounting Standards Executive Committee in December 1993. This
statement of position provides guidance on financial reporting on
advertising costs in annual financial statements. The statement of
position requires reporting advertising costs as expenses when incurred or
when the advertising takes place, reporting the costs of direct-response
advertising, and amortizing the amount of direct-response advertising
reported as assets. This statement of position is effective for financial
statements for years beginning after June 15, 1994. The Company currently
matches certain advertising costs with revenue generated in future periods,
and at June 30, 1994, $9.1 million in advertising costs are deferred and
included in prepaid expenses. The Company has completed an evaluation of
the effect of this statement of position but has not determined the timing
of adoption.
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS:
The following table shows industry segment data from the Company's three
industry segments, rental operations, life insurance, and property and
casualty insurance, for the quarters ended June 30, 1994 and 1993. Rental
operations is composed of the operations of U-Haul and AMERCO Real Estate
Company. Life insurance is composed of the operations of Oxford. Property
and casualty insurance is composed of the operations of Republic Western
Insurance Company (RWIC).
<TABLE>
<CAPTION>
Adjust-
Rental Life Property/ ments and
Opera- Insur- Casualty Elimina- Consoli-
tions ance Insurance tions dated
------ ------ --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
1994
Revenues:
Outside $ 280,389 8,112 35,077 - 323,578
Inter-
segment - 372 2,627 (2,999) -
------- ----- ------ ----- -------
Total
revenue 280,389 8,484 37,704 (2,999) 323,578
======= ===== ====== ===== =======
Operating
profit 53,588 1,875 7,001 - 62,464
======= ===== ====== =====
Interest
expense 16,638
-------
Pretax
earnings
from
operations 45,826
=======
1993
Revenues:
Outside $ 254,099 7,523 29,726 - 291,348
Inter-
segment - (114) 2,564 (2,450) -
------- ----- ------ ----- -------
Total
revenue 254,099 7,409 32,290 (2,450) 291,348
======= ===== ====== ===== =======
Operating
profit 39,054 2,550 5,372 - 46,976
======= ===== ====== =====
Interest
expense 17,338
-------
Pretax
earnings
from
operations 29,638
=======
</TABLE>
<PAGE> 15
U-Haul
U-Haul revenues consist of (i) total rental and other revenue and (ii)
net sales. Total rental and other revenue increased by $22.6 million,
approximately 11.0%, to $229.1 million in the first quarter of fiscal 1995. The
increase in fiscal 1995 is primarily attributable to a $23.4 million increase in
net revenues from the rental of moving related equipment, which benefited from
transactional growth reflecting higher utilization and rental fleet expansion.
Revenues from the rental of self-storage facilities increased by $2.1 million to
$18.8 million in fiscal 1995, an increase of approximately 12.6%. Storage
revenues were positively impacted by additional rentable square footage, higher
average occupancy levels, and higher average rental rates.
Net sales were $51.3 million in the first quarter of fiscal 1995,
which represented an increase of approximately 7.8% from fiscal 1994 net sales
of $47.6 million. Revenue growth from the sale of hitches, moving support items
(i.e. boxes, etc.), and propane resulted in a $4.2 million increase during the
quarter, which was offset by a $.4 million decrease in gasoline sales.
Cost of sales was $27.6 million in the first quarter of fiscal 1995,
which represented a decrease of approximately 5.8% from $29.3 million in fiscal
1994. The reduction in fiscal 1994 reflects a combination of the absence of
recreational vehicle sales, reduced levels of outside repair and a reduction in
inventory adjustments which fully offset increased material costs corresponding
to the increase in hitch, moving support and propane sales.
Operating expenses increased to $162.0 million in the first quarter of
fiscal 1995 from $155.6 million in the first quarter of fiscal 1994, an increase
of approximately 4.1%. The change from the prior year primarily reflects higher
rental equipment maintenance costs. Efforts to reduce downtime, an increase in
fleet size and higher transaction levels are primarily responsible for the
increase. Lease expense declined by $12.5 million to $15.2 million reflecting
lease terminations, lease restructuring, and lower finance costs on new leases
originated during the past 15 months. All other operating expense categories
increased in the aggregate by $8.9 million to $96.3 million.
Depreciation expense for the three month period was $37.3 million, as
compared to $30.1 million in the same period of the prior year, reflecting an
increase in fleet size, the acquisition of trucks that were previously leased
and real property acquisitions.
Oxford Life Insurance Company
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $3.8 million for the quarter ended March 31, 1994, an increase
of $.5 million, approximately 15.2% over 1993 and accounted for 89.5% of
Oxford's premiums in 1994. These premiums are primarily from term life
insurance and single and flexible premium deferred annuities. Increases in
premiums are primarily from the anticipated increase in annuitizations as a
result of the maturing of deferred annuities.
<PAGE> 16
Premiums from Oxford's direct lines before intercompany eliminations
were $.4 million in 1994, an increase of $.5 million from 1993. Oxford's direct
lines are principally related to the underwriting of group life and disability
income. Insurance on the lives of the employees of AMERCO and its subsidiary
companies accounted for approximately 10.4% of Oxford's premiums in 1994. Other
direct lines accounted for approximately .1% of Oxford's premiums in 1994.
Net investment income before intercompany eliminations was $3.6
million and $3.4 million for the period ended March 31, 1994 and 1993,
respectively. Gains on the disposition of fixed maturity investments were $.2
million and $.3 million. Oxford had $.5 million of other income for both
quarters ended March 31, 1994 and 1993.
Benefits and expenses incurred were $6.6 million for the quarter ended
March 31, 1994, an increase of 34.7% over 1993. Comparable benefits and expenses
incurred for 1993 were $4.9 million. This increase is primarily due to the
increase in reserve caused by the increase in annuitizations discussed above and
an increase in the amortization of deferred acquisition costs.
Operating profit after intercompany eliminations decreased by $.6
million, or approximately 24%, in 1994 to $1.9 million, primarily due to an
increase in the amortization of deferred acquisition costs.
RWIC - Property and Casualty
RWIC gross premium writings continues to grow in the first quarter of
1994 to $47.7 million, compared to $34.1 million in 1993, an increase of
approximately 39.9%. The rental industry market accounted for a significant
share of these premiums, approximately 19.7% and 22.6% 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. RWIC
continues underwriting reinsurance via broker markets, and premiums in this area
increased to $29.1 million or 61.0% of the total premium in fiscal 1994 from
$10.8 million or 31.6% of the total premium in fiscal 1993.
Net earned premiums increased $6.4 million, approximately 27%, to
$30.1 million for the first quarter of fiscal 1994. This compares with net
earned premiums of $23.7 million for fiscal 1993. The premium increase was
primarily due to increased writings in the reinsurance area.
Underwriting expenses incurred were $30.7 million for the first
quarter of 1994, an increase of $3.8 million, approximately 14.1% over fiscal
1993. Comparable underwriting expenses incurred for 1993 were $26.9 million.
Higher underwriting expenses are due to larger premium volumes being written in
1994 which increased acquisition costs and commensurate reserves.
Net investment income was $6.9 million for the first quarter of fiscal
1994, a decrease of approximately 10.4%, as compared to 1993 net investment
income of $7.7 million. The decrease is attributable to a combination of funds
invested at lower rates and maturities and calls on bonds during 1993.
<PAGE> 17
RWIC completed the first quarter of 1994 with net after tax income of
$4.9 million as compared to $4.3 million for the comparable period ended March
1993. This represents an increase of $.6 million, or 14.0% over first quarter
1993. The increase is due to better underwriting results.
Interest Expense
Interest expense declined by $.7 million to $16.6 million for the
quarter ended June 30, 1994, as compared to $17.3 million for the quarter ended
June 30, 1993. This decrease primarily reflects a reduction in the costs of
funds.
Consolidated Group
As a result of the foregoing, pretax earnings of $45.8 million were
realized in the three months ended June 30, 1994, as compared to $29.9 million
for the same period in 1993. After providing for income taxes and cumulative
effect of change in accounting principle, net earnings for the three months
ended June 30, 1994 were $29.4 million, as compared to $17.4 million for the
same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES:
U-Haul
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. At June 30, 1994, net property, plant
and equipment represented approximately 73.8% of total U-Haul assets and
approximately 50.8% of consolidated assets. In the first quarter of fiscal
1995, capital expenditures were $144.8 million, as compared to $226.8 million in
the first quarter of fiscal 1994, these expenditures reflect expansion of the
rental truck fleet, purchase of trucks previously leased, and real property
acquisitions. The capital needs required to fund these acquisitions were funded
with internally generated funds from operations, debt, and lease financings.
Cash flows from operations was $113.2 million in the first quarter of
fiscal 1995, as compared to $61.6 million in the first quarter of fiscal 1994.
The increase results from an increase in net earnings, depreciation and
amortization and net change in other operating assets and liabilities,
specifically receivables, accounts payable and accrued liabilities, and deferred
credits.
At June 30, 1994, total notes and loans payable outstanding was $725.6
million as compared to $723.8 million at March 31, 1994, $766.9 million at June
30, 1993.
During each of the fiscal years ending March 31, 1995, 1996, and 1997,
U-Haul estimates gross capital expenditures will average approximately $360
million as a result of the expansion of the rental truck fleet and self-storage
segment. This level of capital expenditures, combined with an average of
approximately $100 million in annual long-term debt maturities during this same
<PAGE> 18
period, are expected to create annual average funding needs of approximately
$460 million. Management estimates that U-Haul will fund approximately 55% of
these requirements with internally generated funds, including proceeds from the
disposition of older trucks and other asset sales. The remainder of the
required capital expenditures are expected to be financed through existing
credit facilities, new debt placements, lease fundings, and equity offerings.
Oxford Life Insurance Company
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 (used) provided by operations and financing was ($3.5) million
and $3.0 million for the three month period ended March 31, 1994. Cash provided
by operations and financing for the same period ended March 31, 1993 was $3.0
million. During 1994 and 1993 there were no cash flows from new reinsurance
agreements. In addition to cash flow from operations and financing activities,
a substantial amount of liquid funds is available through Oxford's short-term
portfolio. At March 31, 1994 and 1993, short-term investments amounted to $18.5
million and $9.8 million, respectively. Management believes that the overall
sources of liquidity will continue to meet foreseeable cash needs.
Stockholder's equity of Oxford, excluding investment in RWIC,
decreased to $88.2 million in 1994 from $92.5 million in 1993. In May 1993,
Oxford paid dividends of $10.0 million to Ponderosa.
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 $600,000. In
addition, the amount of dividends that 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 approval of the Insurance Commissioner. Statutory
surplus that can be distributed as dividends is $17,076,000 at March 31, 1993.
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
RWIC's short-term investment portfolio was $6.6 million at March 31,
1994. This level of liquid assets, combined with budgeted cash flow, is
believed by management to be adequate to meet periodic needs. The structure of
the long-term portfolio is designed to match future cash needs. Through capital
and operating budgets, RWIC seeks to schedule cash needs in accordance with
investment and underwriting proceeds. RWIC does not have plans for any near-
term large capital outlays.
<PAGE> 19
RWIC maintains a diversified investment portfolio, primarily in bonds
at varying maturity levels. Approximately 98.2% 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 98.7% of total liabilities.
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 the historical experience of RWIC, supplemented by insurance industry
historical experience. Unpaid loss adjustment expenses are based on historical
ratios of loss adjustment expenses paid to losses paid. Unpaid loss and loss
expenses are not discounted.
Shareholder equity increased 2.3% from $165.1 million at December 31,
1993 to $168.9 million at March 31, 1994. RWIC considers current shareholders'
equity to be adequate to support future growth and absorb unforseen risk events.
RWIC does not use debt or equity issues to increase capital and therefore has no
exposure to capital market conditions. During the first quarter of 1994, RWIC
paid no shareholder dividends.
Credit Agreements
The Company's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured medium-term
notes, and revolving lines of credit with domestic and foreign banks.
Principally to finance its fleet of trucks and trailers, the Company routinely
enters into sale and leaseback transactions. As of June 30, 1994, the Company
had $725.5 million in total notes and loans payable outstanding and unutilized
lines of credit of approximately $37.5 million.
Certain of the Company's credit agreements contain restrictive
financial and other covenants, including, among others, covenants with respect
to incurring additional indebtedness, maintaining certain financial ratios, and
placing certain additional liens on its properties and assets. At June 30,
1994, the Company was in compliance with these covenants. In addition, these
credit agreements contain provisions that could result in a required prepayment
upon a "change in control" of the Company.
Under certain of the Company's credit agreements, a "change in
control" is deemed to occur if (a) any transfer of any shares of any class of
capital stock results in the Company's ESOP and members of the Shoen family
owning in the aggregate less than the amount of capital stock as may be
necessary to enable them to cast in excess of 50% of the votes for the election
of directors of the Company or (b) during any period for two consecutive years,
persons who at the beginning of such period constituted the Board of Directors
of the Company (including any director approved by a vote of not less than 66
2/3% of such board) cease for any reason to constitute greater than 50% of the
then acting Board.
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
None
b. Reports on Form 8-K.
No reports on Form 8-K were filed for the three months ended June
30, 1994.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
U-Haul International, Inc.
___________________________________
(Registrant)
Dated: August 12, 1994 By: /S/ DONALD W. MURNEY
___________________________________
Donald W. Murney, Treasurer
(Principal Financial Officer)