<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
--------------------------------
For the fiscal year ended March 31, 1996
----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
---------------------------------
For the transition period from ______________________ to _______________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Suite 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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
- ---------- -------------- ------------------------
AMERCO Series A 8 1/2% New York Stock Exchange
Preferred Stock
U-Haul International, Inc. None
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
---------- --------------
AMERCO Common
U-Haul International, Inc. None
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 .
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
32,790,923 shares of AMERCO Common Stock, $0.25 par value, were
outstanding at June 24, 1996. The aggregate market value of AMERCO Common
Stock held by non-affiliates (i.e., stock held by persons other than officers
and directors of AMERCO or those persons who are parties to the stockholder
agreement referenced in footnote 1 to the stock ownership Table in Part III,
Item 12 of this report) based on the latest closing price as of June 24, 1996
was $357,483,986. The aggregate market value was computed using the closing
price for the Common Stock trading on Nasdaq on June 24, 1996.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value,
were outstanding at June 24, 1996. None of these shares were held by non-
affiliates. U-Haul International, Inc. meets the conditions set forth in
General Instructions (J)(1)(a) and (b) of Form 10-K and is therefore filing
this Form with the reduced disclosure format.
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
ITEM 1. BUSINESS...................................... 3
A. THE COMPANY.............................. 3
B. HISTORY.................................. 4
C. BUSINESS STRATEGY........................ 4
D. U-HAUL OPERATIONS........................ 6
E. INSURANCE OPERATIONS..................... 8
F. AMERCO REAL ESTATE OPERATIONS............ 12
G. ENVIRONMENTAL MATTERS.................... 12
ITEM 2. PROPERTIES.................................... 14
ITEM 3. LEGAL PROCEEDINGS............................. 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 17
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............... 18
ITEM 6. SELECTED FINANCIAL DATA....................... 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.......................................... 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ................................... 35
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................... 36
ITEM 11. EXECUTIVE COMPENSATION........................ 39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 47
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K............ 50
<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY
AMERCO, a Nevada corporation (AMERCO or Company), is the
holding company for U-Haul International, Inc. (U-Haul), Ponderosa
Holdings, Inc. (Ponderosa), and Amerco Real Estate Company (AREC).
Throughout this Form 10-K, unless the context otherwise requires,
the term "Company" includes all of the Company's subsidiaries. The
Company's principal executive offices are located at 1325 Airmotive
Way, Suite 100, Reno, Nevada 89502-3239, and the telephone number
of the Company is (702) 688-6300. As used in this Form 10-K, 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 in Item 8 for financial information regarding
the Company's three primary industry segments, which are
represented by U-Haul (Rental Operations) and Ponderosa's two
principal subsidiaries (Life Insurance and Property/Casualty
Insurance).
U-HAUL MOVING OPERATIONS
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 <registered trademark> 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).
U-HAUL SELF-STORAGE RENTAL OPERATIONS
U-Haul entered the self-storage business in 1974 and offers
for rent more than 18.2 million square feet of self-storage space
through Company-owned or managed storage locations. The Company
believes its self-storage operations are complementary to its do-it-
yourself moving business.
PONDEROSA
Ponderosa serves as the holding company for the Company's
insurance businesses. Ponderosa's two principal subsidiaries are
Oxford Life Insurance Company (Oxford) and Republic Western
Insurance Company (RWIC). 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 and dental plans.
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
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.
<PAGE> 4
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 (round-trip) basis through
independent dealers (at that time principally independent gasoline
service stations). Since 1974, the Company has developed a network
of Company-owned rental centers (U-Haul Centers) through which
U-Haul rents its trucks and trailers and provides a number of other
related products and services and has expanded the number and
geographic diversity of its independent dealers. At March 31,
1996, the Company's distribution network included approximately
1,100 U-Haul Centers and approximately 13,800 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 March 31, 1996, approximately 72% 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 were completed in 1988 and
1992, respectively. The Company also eliminated various types of
rental equipment and closed certain warehouses and repair
facilities. The Company believes that its refocused business
strategy enabled U-Haul to generate higher revenues and to achieve
significant cost savings.
Since 1987, the Company has sold surplus real estate assets
with a book value of approximately $43.6 million for total proceeds
of approximately $87.9 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.
<PAGE> 5
Integrated Approach to Moving
Through its "Moving Made Easier" program, the Company strives
to offer its customers a high quality, reliable, and convenient
fleet of trucks and trailers at reasonable prices while
simultaneously offering other related products and services,
including moving accessories, self-storage facilities, and other
items often desired by the do-it-yourself mover. The rental trucks
purchased in the fleet renewal program have been designed with the
do-it-yourself customer in mind to include features such as low
decks, air conditioning, power steering, automatic transmissions,
soft suspensions, AM/FM cassette stereo systems, and over-the-cab
storage. The Company has introduced certain insurance products,
including "Safemove<registered trademark>" and "Safestor<registered
trademark>", to provide the do-it-yourselfmover with certain moving-related
insurance coverage. In addition,the Company provides rental customers the
option of storing their possessions at either their points of departure
or destination.
Wide Geographic Distribution
The Company believes that the 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 8,300 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 80,000 new trucks between
March 1987 and March 1996 and reduced the overall average age of
its truck fleet from approximately 11 years at March 1987 to
approximately five years at March 1996. During this period,
approximately 64,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 61% 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.
Network Management System
Beginning in 1983, the Company implemented a point-of-sale
computer system for all of its Company-owned locations. The system
was designed primarily to handle the Company's reservations,
traffic, and reporting of rental transactions. The Company
believes that the implementation of the system has been a
significant factor in allowing the Company to increase its fleet
utilization. On an ongoing basis, the Company is enhancing and
revising the system to include managerial tools, such as budgeting
and profit and loss reporting. The Company is also expanding the
system to include transaction reporting from independent dealers
and managed storage facilities.
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.
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.
<PAGE> 6
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 (round-trip) rentals, where the equipment is
returned to the originating U-Haul Center or independent dealer and
(ii) one-way rentals, where the equipment is returned to a U-Haul
Center or independent dealer in another city. Typically, the
number of in-town <registered trademark> rental transactions is substantially
greater than the number 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<registered trademark> " 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<registered trademark>", which provides moving
customers with a damage waiver, cargo protection, and medical
and life coverage, and (ii) "Safestor<registered trademark>", 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 March 31, 1996, U-Haul's rental equipment fleet
consisted of approximately 85,000 trucks and approximately 100,000
trailers. Rental trucks are offered in five sizes and range in
size from the ten-foot "Mini-Mover<registered trademark>" to the
twenty-six-foot "Super-Mover<registered trademark>". 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 approximately 1,100 Company-
owned U-Haul Centers and approximately 13,800 independent dealers
as of March 31, 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.
<PAGE> 7
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 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 800 Company-owned or managed storage
locations in the United States and Canada, the Company offers for
rent more than 18.2 million square feet of self-storage space. 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, 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 the truck
rental divisions of Ryder System, Penske Truck Leasing, and Budget
Rent-A-Car. Management believes that there are
<PAGE> 8
two distinct users of rental trucks: commercial users and do-it-
yourself users. As noted above, the Company focuses on the do-it-
yourself mover. The Company believes that the principal
competitive factors are price, convenience of rental locations, and
availability of quality rental equipment.
The self-storage industry is also highly competitive. The top
three national firms, including the Company, Public Storage and
Shurgard, only account for ten percent of total industry square
footage. Efficient management of occupancy and delinquency rates,
as well as price and convenience, are key competitive factors.
EMPLOYEES
For the period ended March 31, 1996, the Company's non-
seasonal workforce consisted of approximately 13,000 employees
comprised of approximately 39% part-time and 61% full-time
employees. During the summer months, the Company increases its
workforce by approximately 450 employees and the percentage of part-
time employees increases to approximately 43% of the total
workforce. The Company's employees are non-unionized, and
management believes that its relations with its employees are
satisfactory.
INSURANCE OPERATIONS
OXFORD - LIFE INSURANCE
Oxford underwrites life, health and annuity insurance, both as
a direct writer and as an assuming reinsurer. Oxford's direct
writings are primarily related to the underwriting of credit life
and accident and health business which accounted for 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 resulted from U-Haul and U-Haul-affiliated
underwriting activities. RWIC's direct underwriting is done
through home office underwriters and selected general agents. The
products provided include liability coverage for rental vehicle
lessees and storage rental properties, and coverage for commercial
multiple peril and excess workers' compensation. RWIC's assumed
reinsurance underwriting is done via broker markets and includes,
among other things, reinsurance of municipal bond insurance written
through MBIA, Inc.
<PAGE> 9
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.
Activity in the liability for unpaid claims and claim
adjustment expenses is summarized as follows:
1995 1994 1993
---------------------------
(in thousands)
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
===========================
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 page 10 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.
<PAGE> 10
<TABLE>
<CAPTION>
Unpaid Loss and Loss Adjustment Expenses
December 31
- -------------------------------------------------------------------------------------------------------------------------
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustment Expenses: $123,342 146,391 168,688 199,380 207,939 226,324 236,019 238,762 314,482 329,741 341,981
Paid (Cumulative)
as of:
One year later 41,170 54,627 49,681 59,111 50,992 55,128 65,532 83,923 70,382 86,796
Two years later 77,697 92,748 91,597 89,850 87,850 97,014 105,432 123,310 115,467
Three years later 105,160 124,278 110,834 114,979 116,043 120,994 126,390 153,030
Four years later 126,734 137,744 129,261 133,466 132,703 133,338 143,433
Five years later 133,421 151,354 142,618 145,864 142,159 144,764
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 138,287 167,211 187,663 200,888 206,701 229,447 231,779 251,450 321,058 338,033
Two years later 147,968 192,272 190,715 202,687 206,219 221,450 224,783 254,532 323,368
Three years later 168,096 192,670 194,280 203,343 199,925 211,998 223,403 253,844
Four years later 168,040 199,576 195,917 199,304 198,986 207,642 214,854
Five years later 175,283 201,303 195,203 200,050 197,890 200,629
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 25,695 21,165 (15,082) (8,886) (8,292)
</TABLE>
<PAGE> 11
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 securities. The maturity distributions are designed to
provide sufficient liquidity to meet future cash needs.
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.
<PAGE> 12
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.
ENVIRONMENTAL MATTERS
UNDERGROUND STORAGE TANKS
The Company owns properties that, as of March 31, 1996, contained
approximately 850 underground storage tanks (USTs). The USTs are used to
store various petroleum products, including gasoline, fuel oil, and waste
oil. The USTs are subject to various federal, state, and local laws and
regulations that require testing and removal of leaking USTs, and
remediation of polluted soils and groundwater under certain circumstances.
In addition, if leakage from USTs has migrated, the Company may be subject
to civil liability to third parties. In fiscal years 1990 through 1996,
the Company incurred expenditures totaling approximately $25.8 million for
removal and remediation of 2,127 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. The Company treats these costs as
capital costs. To the extent the costs improve the safety or efficiency of
the properties or are incurred in preparing the properties for sale, the
costs are capitalized.
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.
<PAGE> 13
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.
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.
<PAGE> 14
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.
ITEM 2. PROPERTIES
The Company and its subsidiaries own property, plant and equipment
that are utilized in the manufacture, repair and rental of U-Haul equipment
and that provide offices for the Company. See Note 13 of Notes to
Consolidated Financial Statements in Item 8 for information regarding the
leasing obligations of the Company and its subsidiaries, including those
under U-Haul TRAC leases. Such facilities exist throughout the United
States and Canada. The majority of land and buildings used by U-Haul is
owned in fee and is substantially unencumbered. In addition, U-Haul owns
certain real estate not currently used in its operations. U-Haul operates
approximately 1,100 U-Haul Centers, 12 manufacturing and assembly
facilities, and 23 repair facilities.
ITEM 3. LEGAL PROCEEDINGS
Shoen Litigation
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 defendants' rights to acquire the plaintiffs' stock may
present a corporate opportunity which the Company is entitled to exercise.
<PAGE> 15
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.
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
<PAGE> 16
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, including damages of approximately
$30.6 million. The Company also paid 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 regarding whether or not the
remaining 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). 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, if
necessary, 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. The amount of the escrow deposit would be
in such case equal to the accrued interest to the date funds are deposited
into escrow. As provided in the Plan, the escrow deposit, plus interest
thereon, will remain until all aspects of the post-petition date interest
dispute have been finally decided, including dischargeability litigation
which the plaintiffs filed against the Director-Defendants in the
bankruptcy court as an alternative means of trying to collect post-petition
date interest. The dischargeability litigation has not been set for trial
and is likely to await the outcome of 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 their 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
<PAGE> 17
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.
No provision has been made in the Company's financial statements for any
payments to be made to the plaintiffs in the future. For the reasons set
forth above, the Plan could have the effect of reducing the Company's net
income.
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. See "Item 1. Business-Environmental
Matters".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report, through the
solicitation of proxies or otherwise.
The 1994 annual meeting of stockholders was originally delayed on July
20, 1994 by the United States District Court for the District of Nevada.
On June 8, 1995, the United States Bankruptcy Court enjoined the Company
from holding its 1994 and 1995 Annual Meeting of Stockholders. In
addition, on June 21, 1996 the United States Bankruptcy Court enjoined the
Company from conducting its 1994, 1995 and 1996 Annual Meetings of
Stockholders until after the effective date of the Director-Defendants'
plans of reorganization. See "Item 3. Legal Proceedings". As of the date
of this Form 10-K, the Company has not scheduled the 1994, 1995 or 1996
Annual Meetings of Stockholders.
<PAGE> 18
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 24, 1996, there were approximately 7,600 holders of record
of the Company's common stock in comparison to approximately 1,500 as of
June 26, 1995.
Prior to November 1994, no established public trading market existed
for the Company's common stock. Since November 1994, the Company's common
stock has been quoted on Nasdaq National Market (Nasdaq) under the symbol
"AMOO". The following table sets forth the high and low closing prices of
the common stock of AMERCO trading on Nasdaq for the periods indicated.
For the Years Ended March 31,
---------------------------------------------
1996 1995
---------------------------------------------
High Low High Low
----------------- -----------------
First quarter 23 3/4 19 1/2 - -
Second quarter 19 3/4 14 3/4 - -
Third quarter 21 16 1/2 18 15 3/4
Fourth quarter 25 1/2 17 22 1/2 17 3/8
The Company has not declared any cash dividends to common stockholders
for the two most recent fiscal years.
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. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources-Credit Agreements", and Note 5
of Notes to Consolidated Financial Statements in Item 8 for a discussion of
certain contractual restrictions on the Company's ability to pay dividends.
See Note 19 of Notes to Consolidated Financial Statements in Item 8 for a
discussion of certain statutory restrictions on Ponderosa's ability to pay
dividends to the Company.
See Note 15 of Notes to Consolidated Financial Statements in Item 8
for a discussion of the Company's non-cash dividends. See Note 6 of Notes
to Consolidated Financial Statements in Item 8 for a discussion of changes
to common shares outstanding and per share amounts.
The common stock of U-Haul is wholly-owned by the Company. As a
result, no active trading market exists for the purchase and sale of such
common stock. No cash dividends were declared to the Company by U-Haul
during the two most recent fiscal years.
<PAGE> 19
<TABLE>
<CAPTION>
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA <F4>
For the Years Ended March 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------------------
(in thousands, except per share data and ratios)
<S> <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
Premiums and net investment income 200,238 177,733 162,151 139,465 126,756
---------- ---------- ---------- ---------- ----------
1,294,423 1,236,232 1,129,894 1,040,328 971,884
---------- ---------- ---------- ---------- ----------
Operating and advertising expense
and cost of sales <F5> 880,429 779,302 730,880 697,117 661,229
Benefits, losses and amortization of
deferred acquisition costs 168,363 144,303 130,168 115,969 99,091
Depreciation <F6> 81,847 151,409 133,485 110,105 109,641
Interest expense 67,558 67,762 68,859 67,958 76,189
---------- ---------- ---------- ---------- ----------
1,198,197 1,142,776 1,063,392 991,149 946,150
---------- ---------- ---------- ---------- ----------
Pretax earnings from operations 96,226 93,456 66,502 49,179 25,734
Income tax expense (35,832) (33,424) (19,853) (17,270) (4,940)
---------- ---------- ---------- ---------- ----------
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
Extraordinary loss on early
extinguishment of debt <F7> - - (3,370) - -
Cumulative effect of change in
accounting principle <F8> - - (3,095) - -
---------- ---------- ---------- ---------- ----------
Net earnings $ 60,394 60,032 40,184 31,909 20,794
========== ========== ========== ========== ==========
Earnings from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle per common share <F3> $ 1.33 1.23 1.06 .83 .53
Net earnings per common share <F3> 1.33 1.23 .89 .83 .53
Weighted average common shares
outstanding <F2> 35,736,335 38,190,552 38,664,063 38,664,063 38,880,069
Cash dividends declared:
Preferred stock 12,964 12,964 4,753 - -
Common stock - - 3,147 1,994 -
Ratio of earnings to fixed charges <F1> 1.89 1.87 1.64 1.45 1.21
<PAGE> 20
<CAPTION>
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA <F4>
For the Years Ended March 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------------
(in thousands)
<S> <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
Total assets 2,827,978 2,605,989 2,344,442 2,024,023 1,979,324
Notes and loans payable 998,220 881,222 723,764 697,121 733,322
Stockholders' equity 649,548 686,784 651,787 479,958 451,888
<FN>
<F1>
For purposes of computing the ratio of earnings to fixed charges, "earnings" consists of pretax earnings from
operations plus total fixed charges excluding interest capitalized during the period and "fixed charges" consists
of interest expense, preferred stock dividends, capitalized interest, amortization of debt expense and discounts
and one-third of the Company's annual rental expense (which the Company believes is a reasonable approximation of
the interest factor of such rentals).
<F2>
Reflects the adoption of Statement of Position 93-6, "Employer's Accounting for Employee Stock Ownership Plans."
<F3>
For the fiscal year ended March 31, 1996, 1995 and 1994, Earnings and net earnings per common share were computed
after giving effect to the dividends on the Company's Series A 8 1/2% preferred stock.
<F4>
See "Item 3. Legal Proceedings" and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Stockholder Litigation" for a discussion of material uncertainties.
<F5>
Reflects the adoption of Statement of Position 93-7 "Reporting on Advertising Costs" during the year ended
March 31, 1996.
<F6>
Reflects the change in estimated salvage value during the year ended March 31, 1996.
<F7>
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".
<F8>
Reflects the adoption of Statement of Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits other than Pensions".
</FN>
</TABLE>
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-K, including,
without limitation, the statements regarding the funding of the Plan
resulting from the Shoen Litigation contained in "Item 3. Legal Proceedings"
and Management's Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources" and the statements regarding
the Company's capital expenditure plans contained in "Liquidity and Capital
Resources", are forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Important factors that could cause actual results to differ
materially from the Company's expectations (Cautionary Statements) are
disclosed in this Form 10-K, including, without limitation, in connection
with the forward-looking statements included in this Form 10-K. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
GENERAL
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. There have been no events related to such subsidiaries
between January 1 and March 31 of 1996, 1995, or 1994 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.
The following management's discussion and analysis should be read in
conjunction with Notes 1, 19, and 20 of Notes to Consolidated Financial
Statements in Item 8, which discuss the principles of consolidation,
summarized consolidated financial information, and industry segment and
geographic area data, respectively. In consolidation, all intersegment
premiums are eliminated and the benefits, losses, and expenses are retained
by the insurance companies.
RESULTS OF OPERATIONS
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.
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
-------------------------------------------------------------
(in thousands)
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
==========================================================
<PAGE> 22
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------
(in thousands)
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
==========================================================
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
-------------------------------------------------------------
(in thousands)
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
=========================================================
<PAGE> 23
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.
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 $8.7 million recognized during the
first quarter of fiscal 1996, due to the adoption of Statement of
Position 93-7 which requires immediate recognition of advertising
costs not qualifying as direct-response.
Depreciation expense for 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).
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
<PAGE> 24
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.
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.
<PAGE> 25
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.
<PAGE> 26
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.
<PAGE> 27
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.
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.
<PAGE> 28
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.
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.
<PAGE> 29
QUARTERLY RESULTS
The following table presents unaudited quarterly results for
the eight quarters in the period beginning April 1, 1994 and ending
March 31, 1996. The Company believes that all necessary
adjustments have been included in the amounts stated below to
present fairly, and in accordance with generally accepted
accounting principles, the selected quarterly information when read
in conjunction with the consolidated financial statements
incorporated herein by reference. The Company's U-Haul rental
operations are seasonal and proportionally more of the Company's
revenues and net earnings from its U-Haul rental operations are
generated in the first and second quarters of each fiscal year
(April through September). The operating results for the periods
presented are not necessarily indicative of results for any future
period (in thousands except for per share data).
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1995 1995 1995 1996
----------------------------------------------
Total revenues $ 330,509 371,267 307,452 285,195
Net earnings (loss) <F3> <F4> 15,177 35,332 7,701 2,184
Weighted average common
shares outstanding <F2> <F5> 37,958,426 37,931,825 36,796,961 32,554,458
Net earnings (loss) per
common share <F1> <F2> 0.31 0.85 0.13 (0.04)
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1994 1994 1994 1995
----------------------------------------------
Total revenues $ 322,333 359,520 294,858 259,521
Net earnings (loss) 29,413 40,071 1,907 (11,359)
Weighted average common
shares outstanding <F2> 37,107,536 37,053,707 37,025,575 38,072,543
Net earnings (loss) per
common share <F1> <F2> 0.71 1.00 (0.04) (0.44)
- ---------------
<F1> Net earnings (loss) per common share amounts were computed
after giving effect to the dividend on the Company's Series A 8 1/2%
Preferred Stock.
<F2> Reflects the adoption of Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plan".
<F3> Reflects the adoption of Statement of Position 93-7 "Reporting
on Advertising Costs" in the first quarter of fiscal 1996.
<F4> Reflects the change in estimated salvage value during the
third and fourth quarters of fiscal 1996.
<F5> Reflects the acquisition of treasury shares acquired pursuant
to the Shoen Litigation as discussed in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Stockholder
Litigation".
<PAGE> 30
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 March 31, 1996,
net property, plant and equipment represented approximately 68.5%
of total U-Haul assets and approximately 46.6% of consolidated
assets. In fiscal 1996, capital expenditures were $291.1 million
as compared to $435.0 million in fiscal 1995, reflecting expansion
of the rental fleet in both periods, 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 operating activities were $111.7 million in
fiscal 1996, as compared to $178.0 million and $163.8 million in
fiscal 1995 and 1994, respectively. The decrease results from an
increase in operating expenses as discussed above.
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 was $9.0 million, $15.2
million and $18.0 million for the years ended December 31, 1995,
1994, and 1993, respectively. In 1995, cash flows from financing
activities were approximately $87.9 million. During 1994 and 1993,
cash flows provided/(used) by financing activities were $6.0
million and ($3.9) million, respectively. Cash flows from deferred
annuity sales increase investment contract deposits which are a
component of financing activities, as well as the purchase of fixed
maturities which are a component of investing activities. In
addition to cash flows from operating and financing activities, a
substantial amount of liquid funds is available through Oxford's
short-term portfolio. At December 31, 1995 and 1994, short-term
investments aggregated to $10.8 million and $11.7 million,
respectively. Management believes that the overall sources of
liquidity will continue to meet foreseeable cash needs.
Stockholder's equity of Oxford increased to $106.2 million in
1995 from $85.6 million in 1994. During 1994, Oxford paid cash
dividends of $4.9 million to Ponderosa.
Applicable laws and regulations of the State of Arizona
require the Company's insurance subsidiaries to maintain minimum
capital and surplus determined in accordance with statutory
accounting practices. With respect to Oxford, such amount is
$400,000. 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 regulatory approval. Statutory surplus which can be
distributed as dividends without regulatory approval is $6,572,000
at December 31, 1995. These restrictions are not expected to have
a material adverse effect on the ability of the Company to meet its
cash obligations.
RWIC - PROPERTY AND CASUALTY
Cash flows from operating activities were $31.0 million, $28.8
million and $15.7 million for the years ended December 31, 1995,
1994 and 1993, respectively. The change is due to increased funds
withheld, decreased paid losses recoverable and federal income
taxes payable, and a smaller increase in accounts receivable than
that for the year ended December 31, 1994. These increased cash
flows were offset by a smaller change in loss and unearned premium
reserves than that of the comparable period in 1994.
RWIC's short-term investment portfolio was $6.8 million at December
31, 1995. This level of liquid assets, combined with budgeted cash flow, is
<PAGE> 31
adequate to meet periodic needs. This balance also reflects funds
in transition from maturity proceeds to long-term investments. The
structure of the long-term portfolio is designed to match future
cash needs. Capital and operating budgets allow RWIC to accurately
schedule cash needs.
RWIC maintains a diversified investment portfolio, primarily
in bonds at varying maturity levels. Approximately 98% 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 total liabilities.
Stockholder's equity increased 12.0% from $168.1 million at
December 31, 1994 to $188.2 million at December 31, 1995. RWIC
considers current stockholder's equity to be adequate to support
future growth and absorb unforeseen risk events. RWIC does not use
debt or equity issues to increase capital and therefore has no
exposure to capital market conditions. RWIC paid no stockholder
dividends during 1995. However, RWIC did declare a $6.7 million
dividend during the first quarter of 1996.
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. With respect to RWIC, such amount is $1,000,000. 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.
CONSOLIDATED GROUP
At March 31, 1996, total notes and loans payable outstanding
was $998.2 million as compared to $881.2 million at March 31, 1995.
This increase resulted from the repurchase of certain common stock
pursuant to the Shoen Litigation. See "Item 3. Legal Proceedings".
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 required
capital expenditures are expected to be financed through existing
credit facilities, new debt placements, lease fundings and equity
offerings. Also, see "Item 3. Legal Proceedings" for a discussion
of additional funding requirements pursuant to the Shoen
Litigation.
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 March 31, 1996, the Company had
$998.2 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $155.0
million.
In May 1996, the Company issued $175.0 million 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.
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.
<PAGE> 32
The Company is also restricted in the amount of dividends that
it may pay pursuant to covenants contained in its credit
agreements. As of the date hereof, the most restrictive of such
covenants provides that the Company may pay cash dividends on its
capital stock only in an amount not exceeding, in the aggregate,
computed on a cumulative basis, the sum of (i) $15.0 million and
(ii) 50% of consolidated net income computed on a cumulative basis
for the entire period subsequent to March 31, 1993 (or if such
consolidated net income is a deficit figure, then minus 100% of
such deficit), less dividends paid after such date. As of March
31, 1996, the amount available for the payment of cash dividends,
as calculated above, was $61.5 million.
The Company is further 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 any 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.
STOCKHOLDER LITIGATION
As disclosed in "Item 3. Legal Proceedings," a judgment has
been entered in the Shoen Litigation against five of the Company's
current directors (the Director-Defendants) and one former director
in the amount of approximately $461.8 million, plus statutory post-
judgment interest. Pursuant to separate indemnification
agreements, the Company has agreed to indemnify the defendants the
fullest extent permitted by law or the Company's Articles of
Incorporation or By-Laws, for all expenses and damages incurred by
the defendants in this proceeding, subject to certain exceptions.
The Director-Defendants have filed for protection under Chapter 11
of the federal bankruptcy laws, resulting in the issuance of an
order automatically staying the execution of the judgment against
those defendants.
Those defendants, in cooperation with the Company, filed plans
of reorganization in the United States bankruptcy court for the
District of Arizona all of which propose the same funding and
treatment of the plaintiffs' claims resulting from the judgment in
the Shoen Litigation. The plans of reorganization, as amended and
restated on February 29, 1996, were confirmed by the bankruptcy
court on March 15, 1996. The plans, as confirmed, shall
collectively be referred to as the "Plan".
On October 18, 1995, the Company repurchased 3,343,076 shares
of Common Stock held by Maran, Inc. a Nevada corporation (Maran),
in exchange for approximately $22.7 million and entered into a
Settlement Agreement with Mary Anna Shoen Eaton (Shoen Eaton)
whereby in exchange for approximately $41.4 million, Shoen Eaton
released the Director-Defendants and the Company from any liability
relating to Shoen Litigation. As a result of the foregoing, and
after giving effect to the discount achieved through settlement,
approximately $84.6 million of the judgment in the Shoen Litigation
was satisfied.
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, including damages of
approximately $30.6 million. The Company also paid 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
<PAGE> 33
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 regarding whether or
not the remaining 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).
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, if necessary, 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. The amount of the escrow deposit would be
in such case equal to the accrued interest to the date funds are
deposited into escrow. As provided in the Plan, the escrow
deposit, plus interest thereon, will remain until all aspects of
the post-petition date interest dispute have been finally decided,
including dischargeability litigation which the plaintiffs filed
against the Director-Defendants in the bankruptcy court as an
alternative means of trying to collect post-petition date interest.
The dischargeability litigation has not been set for trial and is
likely to await the outcome of 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
their 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.
<PAGE> 34
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. No provision
has been made in the Company's financial statements for any
payments to be made to the plaintiffs in the future. For the
reasons set forth above, the Plan could have the effect of reducing
the Company's net income.
OTHER
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan", was issued by
the Financial Accounting Standards Board in May 1993. This
standard is effective for years beginning after December 15, 1994.
The standard requires that an impaired loan's fair value be
measured and compared to the recorded investment in the loan. If
the fair value of the loan is less than the recorded investment in
the loan, a valuation allowance is established. The Company
adopted this statement during the first quarter of fiscal 1996,
with no material impact on its financial condition or result of
operations.
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", was issued by the Financial
Accounting Standards Board in March 1995. This standard is
effective for fiscal years beginning after December 15, 1995, and
establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. This
Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of
the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, an impairment loss is
not recognized. Measurement of an impairment loss for long-lived
assets and identifiable intangibles that an entity expects to hold
and use should be based on the fair value of the asset. The
Company does not expect a material impact on its future financial
condition or results of operations due to implementation of the
statement.
<PAGE> 35
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).
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants and Consolidated
Financial Statements of the Company, including the notes to such
statements, are set forth on pages 53 through 99 and are hereby
incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT
ING AND FINANCIAL DISCLOSURE
The Registrants have had no disagreements with their
independent accountant in regard to accounting and financial
disclosure and have not changed their independent accountant during
the two most recent fiscal years.
<PAGE> 36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Directors and/or Executive Officers of the Registrants as of
June 24, 1996 were:
Name Age Office
---- --- ------
Edward J. Shoen 47 Chairman of the Board and
President of AMERCO and U-Haul
Mark V. Shoen 45 Director of AMERCO and U-Haul
James P. Shoen 36 Vice President of AMERCO;
Director of AMERCO and U-Haul
William E. Carty 69 Director of AMERCO and U-Haul
Aubrey K. Johnson 74 Director of AMERCO
John M. Dodds 59 Director of AMERCO and U-Haul
Richard J. Herrera 42 Director of AMERCO and U-Haul
Charles J. Bayer 56 Director of AMERCO
Gary B. Horton 52 Treasurer of AMERCO and
Assistant Treasurer of U-Haul
Gary V. Klinefelter 48 Secretary and General Counsel
of AMERCO and U-Haul
John A. Lorentz 69 Assistant Secretary of AMERCO and U-Haul
Rocky D. Wardrip 38 Assistant Treasurer of AMERCO
Harry B. DeShong, Jr. 47 Director of U-Haul
John C. Taylor 38 Director of U-Haul
Donald W. Murney 35 Treasurer of U-Haul
George R. Olds 54 Assistant Secretary of AMERCO and U-Haul
<PAGE> 37
Class I (Term expires at 1995 Meeting)
--------------------------------------
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.
Richard J. Herrera, a Director of AMERCO since September 1991
and of U-Haul since June 1990, has been associated with the Company
since April 1988. He is presently the Vice President of Marketing,
Retail Sales for U-Haul.
Class II (Term expires at 1996 Meeting)
---------------------------------------
William E. Carty, a Director of AMERCO since May 1987 and a
Director of U-Haul since June 1990, 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.
Charles J. Bayer, a Director of AMERCO 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.
Class III (Term expires at 1997 Meeting)
----------------------------------------
James P. Shoen, a Director of AMERCO since December 1986, Vice
President of AMERCO since May 1989 and Director of U-Haul since
June 1990, has been associated with the Company since July 1976.
He has served from April 1990 to present as Executive Vice
President of U-Haul.
John M. Dodds, a Director of AMERCO since September 1987, and
Director of U-Haul since June 1990, 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.
Class IV (Term expires at 1994 Meeting)
---------------------------------------
Edward J. Shoen has served as Director and Chairman of the
Board of AMERCO since December 1986, as President since June 1987,
as a Director of U-Haul since June 1990 and as the President of
U-Haul since March 1991. Mr. Shoen has been associated with the
Company since May 1971. Mr. Shoen has been an officer of Form
Builders, Inc. since 1981.
Mark V. Shoen has served as a Director of AMERCO since April
1990 and a Director of U-Haul since June 1990 and has served as
President of U-Haul from June 1990 to March 1991. He has 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.
Other Directors and Executive Officers
--------------------------------------
Gary B. Horton, has served as Treasurer of AMERCO since 1982
and serves as Assistant Treasurer of U-Haul. His previous
positions include Treasurer of U-Haul. He has been associated with
the Company since October 1969.
Gary V. Klinefelter, Secretary of AMERCO since July 1988, and
Secretary of U-Haul since June 1990, is licensed as an attorney in
Arizona and has served as General Counsel for AMERCO and U-Haul
since June 1988.
John A. Lorentz, Assistant Secretary of AMERCO since July 1988
and Assistant Secretary of U-Haul since June 1990, 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 of AMERCO since
September 1990, has been associated with the Company since 1978 in
various capacities within accounting and treasury operations. He
was previously Assistant Treasurer of U-Haul from 1988 to 1990.
Harry B. DeShong, Jr., Director of U-Haul since May 1992, has
been associated with the Company since June 1964. He has served as
Executive Vice President of U-Haul since November 1988. Mr.
DeShong previously held a number of responsible positions in the
Company's field management organization, including eight years as a
U-Haul Marketing Company President.
<PAGE> 38
John C. Taylor, Director of U-Haul since June 1990, has been
associated with the Company since 1981. He is presently an
Executive Vice President of U-Haul.
Donald W. Murney has been Treasurer of U-Haul since June 1990.
He was previously employed as the Senior Vice President and Chief
Financial Officer of Coury Financial Services.
George R. Olds, Assistant Secretary of AMERCO and U-Haul 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.
On February 21, 1995, Edward J. Shoen, James P. Shoen, William
E. Carty, John M. Dodds, and Aubrey K. Johnson filed for protection
under Chapter 11 of the federal bankruptcy laws in connection with
certain litigation as more fully described in Item 3.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers, directors, and owners of ten percent or
more of the Company's common stock to file ownership reports with
the Securities and Exchange Commission. Failure to do so can
result in substantial monetary penalties in addition to injunctive
remedies. Based upon the Company's non-receipt of Section 16
reports required to be furnished to the Company, the persons and
corporations listed below have failed to file reports required by
Section 16(a) for the fiscal year ended March 31, 1996:
L.S. Shoen Cecilia M. Hanlon
L.S.S. Inc. Cemar, Inc.
Michael L. Shoen Katrina M. Carlson
Mickl Inc. Kattydid, Inc.
Samuel W. Shoen Mary Anna Shoen-Eaton
Sawmill, Inc. Maran, Inc.
Theresa M. Romero Paul F. Shoen
Thermar, Inc. Sophia M. Shoen
Based on the stockholder agreements described in footnotes 1
and 2, pages 45 and 46, the foregoing persons and corporations,
during the relevant reporting period, beneficially own more than
ten percent of the Company's common stock.
To the best of the Company's knowledge, based solely on a
review of copies of Section 16 reports it has received, all filings
required of the Company's officers and directors are current and in
compliance with the Securities Exchange Act of 1934.
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the annual
compensation paid to the Company's chief executive officer and the
four other most highly compensated executive officers of the
Company during each of the last three fiscal years.
Summary Compensation Table
Annual Compensation
---------------------------------
All Other
Name and Principal Salary Bonus Compensation
Position Year ($) <F1> ($) ($)<F2>
- -----------------------------------------------------------------------
Edward J. Shoen 1996 572,939 - 8,231
Chairman of the
Board and President 1995 282,937 - 6,821
of AMERCO and U-Haul
1994 227,456 2,101,490 10,675
Mark V. Shoen 1996 325,255 - 8,231
Director of AMERCO
and U-Haul 1995 310,053 - 6,821
1994 258,031 - 9,586
James P. Shoen 1996 240,251 - 8,231
Vice President and
Director of AMERCO 1995 236,783 - 6,821
and Director of U-Haul
1994 241,877 - 9,227
Gary V. Klinefelter 1996 201,543 - 8,231
Secretary and General
Counsel of AMERCO and 1995 206,312 54,000 6,821
U-Haul
1994 210,005 50,000 10,448
Harry B. DeShong, Jr. 1996 170,116 - 5,927
Director of U-Haul
1995 176,141 19,000 5,651
1994 159,588 - 6,440
<F1> The annual fee for all services as a director is $26,400,
which is paid in equal monthly installments. The Company's regular
board meetings are held quarterly in May, August, November and
February. An annual meeting is held in the first month following
the annual meeting of stockholders.
<F2> Represents the value of common stock allocated under the
AMERCO Employee Savings, Profit Sharing and Employee Stock
Ownership Plan.
<PAGE> 40
REPORT ON EXECUTIVE COMPENSATION
While the Company established a Compensation Committee in
fiscal 1995 consisting of Charles J. Bayer, William E. Carty, and
Aubrey K. Johnson, the entire Board of Directors reviewed and
determined the amount of compensation paid to the Chairman of the
Board and President for fiscal 1996. The determination was
subjective and not subject to a specific criteria. Although the
Board of Directors had primary authority with respect to
compensation decisions for the Company's other executive officers
during fiscal 1996, the Chairman of the Board and President has
historically made these decisions with the counsel of individual
Board members, subject to the ability of the full Board to revise
or override these decisions. The Chairman of the Board and
President has advised the Board that the compensation levels for
the Company's executive officers during fiscal year 1996 did not
bear a specific relationship to the Company's performance. Rather,
executive compensation was set at levels designed to retain the
Company's executive officers and was based on subjective factors
such as his perception of each officer's performance and changes in
functional responsibility.
In addition to its involvement in executive compensation
matters as described above, the Board of Directors determines the
amount, if any, of the Company's contribution pursuant to the
AMERCO Employee Savings, Profit Sharing and Employee Stock
Ownership Plan.
The Company's stockholders approved a stock option plan at the
1992 Annual Meeting of Stockholders. The stock option plan is
designed to attract and retain employees upon whose judgment and
effort the Company's success is dependent. As of June 26, 1996, no
awards had been made under such plan.
Charles J. Bayer Aubrey K. Johnson
William E. Carty
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Charles J. Bayer,
William E. Carty, and Aubrey K. Johnson. Mr. Bayer is President of
Amerco Real Estate Company, one of the Company's subsidiaries. Mr.
Carty served in various executive positions in all areas of the
Company until his retirement in 1987.
In May 1990, William E. Carty sold 40,684 shares of the
Company's common stock to the ESOP Trust at the then-appraised
value of $10.00 per share. The ESOP Trust purchased the shares for
cash in the amount of $76,840 and a promissory note for $330,000.
The note is payable in six annual installments at an interest rate
of 9.6%. Performance on the note is guaranteed by the Company.
The Company has agreed to fund the plans of reorganization
filed by William E. Carty and Aubrey K. Johnson under Chapter 11 of
the federal bankruptcy laws, as discussed in "Item 3. Legal
Proceedings".
<PAGE> 41
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder
return on the Company's Common Stock for the period March 31, 1991
through March 31, 1996 with the cumulative total return on the Dow
Jones Composite Average and the Dow Jones Transportation Average.
The comparison assumes that $100 was invested on March 31, 1991 in
the Company's Common Stock and in each of the comparison indices.
Because no active trading market for the Company's Common Stock
existed prior to November 1994, the graph reflects the annual
Common Stock appraisals obtained in connection with the AMERCO
Employee Savings, Profit Sharing and Employee Stock Ownership Plan
for 1991 through 1994 and the closing price of the Common Stock
trading on Nasdaq on March 31, 1995 and 1996.
(The following descriptive data is supplied in accordance with
Rule 304(d) of Regulation S-T.)
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
AMERCO 100.00 117.39 168.48 184.78 232.34 263.59
Dow Jones
Transportation
Average 100.00 112.25 123.60 125.39 134.15 175.28
Dow Jones
Composite Average 100.00 124.72 141.51 147.38 147.43 193.97
<PAGE> 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
To the best of the Company's knowledge, the following table
lists, as of June 24, 1996, (i) the beneficial ownership of Common
Stock of each director and director nominee of the Company, of each
executive officer named in Item 11, of all directors and executive
officers of the Company as a group, and of those persons who
beneficially own more than five percent (5%)of the Company's common
stock; and (ii) the beneficial ownership of each director and
director nominee of the Company, of each executive officer named in
Item 11, and of all directors and executive officers of the Company
as a group, of the percentage of net payments made by the Company
during the 1996 fiscal year in respect of fleet-owner contracts
issued by U-Haul.
PERCENTAGE OF
SHARES OF NET FLEET
NAME AND COMMON STOCK PERCENTAGE OWNER
ADDRESS OF BENEFICIALLY OF COMMON CONTRACT
BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS
- ---------------- ------------ ----------- -------------
Edward J. Shoen<F5> 16,710,981<F1> 50.96 .009
Chairman of the
Board and President
2727 N. Central Ave.
Phoenix, AZ 85004
Mark V. Shoen<F5> 16,710,981<F1> 50.96 .011
Director
2727 N. Central Ave.
Phoenix, AZ 85004
James P. Shoen<F5> 16,710,981<F1> 50.96 .021
Director and
Vice President
1325 Airmotive Way
Suite 100
Reno, NV 89502
Paul F. Shoen 16,710,981<F1> 50.96 .007
P.O. Box 524
Glenbrook, NV 89413
Sophia M. Shoen 16,710,981<F1> 50.96 .019
5104 N. 32nd Street
Phoenix, AZ 85018
Irrevocable Trust 16,710,981<F1> 50.96 N/A
between Edward J. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
<PAGE> 43
PERCENTAGE OF
SHARES OF NET FLEET
NAME AND COMMON STOCK PERCENTAGE OWNER
ADDRESS OF BENEFICIALLY OF COMMON CONTRACT
BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS
- ---------------- ------------ ----------- -------------
Irrevocable Trust 16,710,981<F1> 50.96 N/A
between Mark V. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,710,981<F1> 50.96 N/A
between James P. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,710,981<F1> 50.96 N/A
between Paul F. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 16,710,981<F1> 50.96 N/A
between Sophia M. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
The ESOP Trust<F3> 16,710,981<F1> 50.96 N/A
2727 N. Central Ave.
Phoenix, AZ 85004
John M. Dodds 0 0 N/A
Director
2727 N. Central Ave.
Phoenix, AZ 85004
William E. Carty<F5> 0 0 .062
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Charles J. Bayer 1,325 ** .004
Director
2727 N. Central Ave.
Phoenix, AZ 85004
<PAGE> 44
PERCENTAGE OF
SHARES OF NET FLEET
NAME AND COMMON STOCK PERCENTAGE OWNER
ADDRESS OF BENEFICIALLY OF COMMON CONTRACT
BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS
- ---------------- ------------ ----------- -------------
Richard J. Herrera 981 ** N/A
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Aubrey K. Johnson 0 0 N/A
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Gary V. Klinefelter 2,320 ** N/A
Secretary and
General Counsel
2727 N. Central Ave.
Phoenix, AZ 85004
Harry DeShong 1,772 ** N/A
Director of U-Haul
2727 N. Central Ave.
Phoenix, AZ 85004
Samuel W. Shoen 12,426,836<F2> 37.90 .008
(Katabasis, Inc.)*
1253 Umatilla Street
Port Townsend, WA 98368
Michael L. Shoen 12,426,836<F2> 37.90 N/A
(Mickl, Inc.)*
8202 N.W. 16th Ave.
Vancouver, WA 98665
Cecilia M. Hanlon 12,426,836<F2> 37.90 .029
(Cemar, Inc.)*
1421 Ranier Falls Drive
Atlanta, GA 30329
Katrina M. Carlson 12,426,836<F2> 37.90 .057
(Kattydid, Inc.)*
837 15th Street #D
Santa Monica, CA 90404
Executive Officers and 16,724,227<F4> 51.00 N/A
Directors as a group
(16 persons)
<PAGE> 45
*This corporation is the record owner of the shares of Common
Stock beneficially owned by the named individual. To the best of
the Company's knowledge, the named individual has sole voting
control of the corporation that is the record owner of the Common
Stock.
**The percentage of the referenced class beneficially owned is
less than one percent.
<F1> 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 (3,475,520);
James P. Shoen (2,278,814); Paul F. Shoen (2,446,058); Sophia M.
Shoen (1,638,472); an Irrevocable Trust between Mark V. Shoen and
Oxford Life Insurance Company (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 (1,783,096) (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 of
this Form 10-K, 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 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 information about
the Stockholder Agreement contained in this footnote was obtained
from one or more Schedule 13D filings. See footnote 3 below for
information about the ESOP Trust and the ESOP Trustee's ability to
vote the Common Stock held in the ESOP Trust.
<F2> This number includes beneficial ownership of shares
attributed to a shareholders' agreement and includes shares
directly owned by Samuel W. Shoen/Katabasis, Inc. (4,041,924);
Michael L. Shoen/Mickl, Inc. (4,036,304); Cecilia M. Hanlon/Cemar,
Inc. (2,331,984); and Katrina M. Carlson/Kattydid, Inc.
(2,016,624). The agreement, dated as of September 14, 1991,
provides for the voting of the subject shares at the direction of a
majority of the shareholders (on the basis of one vote per
shareholder) party to the agreement. Michael L. Shoen, whose
address is listed above, has been granted a proxy to vote the
shares as agreed upon by a majority of the shareholders. Unless
earlier terminated by a majority of the shareholders, the agreement
will terminate on January 1, 2001. The information about the
shareholders' agreement contained in this footnote was obtained
from one or more Schedule 13D filings. Accordingly, the Company
assumes no responsibility for its accuracy.
<F3> 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 June 24, 1996, of the
3,184,237 shares of common stock held by the ESOP Trust, 1,409,852
shares were allocated to participants and 1,774,385 shares remained
unallocated. Of
<PAGE> 46
the 1,409,852 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 further reduction in the number of common shares subject to the
Stockholder Agreement.
<F4> The 16,724,227 shares include the shares beneficially
owned by directors and executive officers as a result of the
Stockholders Agreement discussed in footnote 1 above. Beneficial
ownership of the shares of current officers and directors, without
giving effect to Stockholder Agreement, discussed in Note 17 of
Notes to Consolidated Financial Statements is 10,683,468 shares, or
approximately 32.58% of the outstanding shares of Common Stock as
of June 24, 1996.
<F5> The executive officers and directors as a group
beneficially own 27,872 shares (0.46%) of the Company's Series A 8
1/2% 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.
<PAGE> 47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has agreed to fund the plans of reorganization
filed by Edward J. Shoen, James P. Shoen, William E. Carty, Aubrey
K. Johnson, and John M. Dodds under Chapter 11 of the federal
bankruptcy laws, as described in "Item 3. Legal Proceedings".
Edward J. Shoen and James P. Shoen are major stockholders,
directors, and officers of the Company. William E. Carty,
Aubrey K. Johnson, and John M. Dodds are directors of the Company.
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 is the brother of Edward J., Mark V.,
and James P. Shoen, who are major stockholders and directors of the
Company.
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.
On October 18, 1995, pursuant to the 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 of 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. See "Item 3. Legal Proceedings".
On January 30, 1996, pursuant to the 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. See "Item 3. Legal
Proceedings".
On February 7, 1996, pursuant to the 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. See "Item 3. Legal
Proceedings".
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. Sophia M. Shoen is a major stockholder of the Company and is
the sister of Edward, J., Mark V., and James P. Shoen, who are
major stockholders and directors of the Company.
During fiscal 1996, a tow dolly fleet owned by SAMLO, whose
partners include L.S., Samuel W., Michael L., Mark V., Jacqueline
Y., Paul F., James P., Sophia M., Bente B., and Esben L.B. Shoen,
Theresa M. Romero, Katrina M. Carlson, and Asia A. and Maxwell L.
Eaton, generated net operating revenues of $35,000. Mark V. and
James P. Shoen are major stockholders and directors of the Company.
L.S., Samuel W., Paul F., Sophia M., and Michael L. Shoen, Theresa
M. Romero and Katrina M. Carlson are or were major stockholders of
the Company during fiscal 1996.
During fiscal year 1996, U-Haul purchased $3,122,000 of
printing from Form Builders, Inc. Edward J. Shoen is an officer of
Form Builders, Inc. and Mark V. Shoen and his minor child are major
stockholders of Form Builders, Inc.
<PAGE> 48
During fiscal year 1996, U-Haul purchased $1,558,000 of
computer hardware from Computer Universe. James P. Shoen's family
trust was a stockholder of Computer Universe until June 1, 1996.
Pursuant to the conflict of interest policy of the Company, outside
legal counsel evaluated the Computer Universe transaction and
determined that it was fair to the Company.
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 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 nonvoting 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
<PAGE> 49
capitalized costs. Such properties are currently managed by the
Company under 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.
In May 1990, William E. Carty sold 40,684 shares of the
Company's common stock to the ESOP Trust at the then-appraised
value of $10.00 per share. The ESOP Trust purchased the shares for
cash in the amount of $76,840 and a promissory note for $330,000.
The note is payable in six annual installments at an interest rate
of 9.6%. Performance on the note is guaranteed by the Company.
William E. Carty is a director of the Company.
Management believes that the foregoing transactions were
consummated on terms equivalent to those that prevail in arm's-
length transactions.
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
Page No.
-------
1. Financial Statements
Report of Independent Accountants - AMERCO and
Consolidated Subsidiaries 53
Consolidated Balance Sheets -
March 31, 1996 and 1995 54
Consolidated Statements of Earnings -
Years ended March 31, 1996, 1995 and 1994 56
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 1996, 1995 and 1994 57
Consolidated Statements of Cash Flows - Years ended
March 31, 1996, 1995 and 1994 59
Notes to Consolidated Financial Statements -
March 31, 1996, 1995 and 1994 61
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 100
Notes to Summary of Earnings of Independent
Trailer Fleets 101
3. Financial Statement Schedules required to be filed
by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant --
Schedule I 103
Supplemental Information (for Property-Casualty
Insurance Underwriters) -- Schedule V 108
All other schedules are omitted as the required
information is not applicable or the information is presented in
the financial statements or related notes.
<PAGE> 51
3. Exhibits Filed
Exhibit No. Description
----------- -----------
2.1 Order Confirming Plan <F1>
2.2 Second Amended and Restated Debtor's Plan of
Reorganization Proposed by Edward J. Shoen <F1>
3.1 Restated Articles of Incorporation <F2>
3.2 Restated By-Laws of AMERCO as of
August 15, 1995 <F3>
4.1 Debt Securities Indenture <F1>
4.2 First Supplemental Indenture, Dated as
of May 6, 1996 <F4>
10.1 AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan <F5>
10.2 U-Haul Dealership Contract <F5>
10.3 Share Repurchase and Registration Rights
Agreement <F5>
10.4 Share Repurchase and Registration Rights
Agreement <F5>
10.5 ESOP Loan Credit Agreement <F6>
10.6 ESOP Loan Agreement <F6>
10.7 Trust Agreement for the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership <F6>
10.8 Amended Indemnification Agreement <F6>
10.9 Indemnification Trust Agreement <F6>
10.10 W.E. Carty Installment Sales Agreement <F6>
10.11 Promissory Notes between SAC Self-Storage Corporation
and a subsidiary of AMERCO <F7>
10.12 Promissory Notes between Two SAC Self-Storage Corporation
and a subsidiary of AMERCO <F3>
10.13 Management Agreement between SAC Self-Storage Corporation
and a subsidiary of AMERCO <F3>
10.14 Management Agreement between SAC Self-Storage Corporation
and a subsidiary of AMERCO <F3>
10.15 Settlement Agreement, dated September 19, 1995, among
Mary Anna Shoen Eaton, Maran, Inc., Edward J. Shoen,
James P. Shoen, Aubrey K. Johnson, John M. Dodds,
William E. Carty and AMERCO<F8>
10.16 Full and Final Release of All Claims, dated September 19,
1995, executed by Maran, Inc., Mary Anna Shoen Eaton and
Timothy Eaton <F8>
10.17 Full and Final Release of All Claims, dated September 19,
1995, executed by AMERCO, Edward J. Shoen, James P. Shoen,
Aubrey K. Johnson, John M. Dodds and William E.Carty <F8>
10.18 Stock Purchase Agreement, dated September 19,1995 among
Mary Anna Shoen Eaton, Maran, Inc., Edward J. Shoen,
James P. Shoen, Aubrey K. Johnson, John M. Dodds, and
William E. Carty <F8>
10.19 Agreement, dated October 17, 1995, among AMERCO, Edward J.
Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds,
and William E. Carty <F8>
10.20 Directors' Release, dated October 17, 1995, executed by
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds and William E. Carty in favor of AMERCO <F8>
10.21 AMERCO Release, dated October 17, 1995, executed by AMERCO in
favor of Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds and William E. Carty <F8>
10.22 Settlement Agreement with Paul F. Shoen <F9>
12 Statements re Computation of Ratios
21 Subsidiaries of AMERCO
27 Financial Data Schedule
P28 Information Furnished to State Insurance
Regulators <F10>
<PAGE> 52
3. Exhibits Filed
________________
<F1>Incorporated by reference to the Company's Registration
Statement on Form S-3, Registration no. 333-1195.
<F2>Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, file no. 0-
7862.
<F3>Incorporated by reference to the Company Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, file no.
0-7862.
<F4>Incorporated by reference to the Company's Report on Form 8-K,
dated
May 6, 1996.
<F5>Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1993, file no. 0-7862.
<F6>Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1990, file no. 0-7862.
<F7>Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994, file no. 0-
7862.
<F8>Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, file no. 0-
7862.
<F9>Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1995, file no. 0-7862.
<F10> Filed in paper under cover of Form S-E.
(b) No report on Form 8-K has been filed during the last quarter
of the period covered by this report.
<PAGE> 53
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 under Item 14(a)(1) and (3) on page 50 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.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Summary of Earnings of
Independent Trailer Fleets included on pages 100 through 102 of this
Form 10-K is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as
a whole.
PRICE WATERHOUSE LLP
Phoenix, Arizona
June 25, 1996
<PAGE> 54
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 1996 1995
-----------------------
(in thousands)
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
=======================
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 55
Liabilities and Stockholders' Equity 1996 1995
-----------------------
(in thousands)
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
=======================
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 56
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
1996 1995 1994
----------------------------------
(in thousands except per share data)
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
====================================
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 57
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
1996 1995 1994
---------------------------
(in thousands)
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
-----------------------------
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 58
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
1996 1995 1994
---------------------------
(in thousands)
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
=============================
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 59
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
1996 1995 1994
-----------------------------
(in thousands)
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)
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 60
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
1996 1995 1994
-----------------------------
(in thousands)
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
==============================
[FN]
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 61
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 (registered
trademark) 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.
<PAGE> 62
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
FOREIGN CURRENCY
The consolidated financial statements include the accounts of U-
Haul Co. (Canada) Ltd., a subsidiary of AMERCO.
Assets and liabilities, denominated in currencies other than U.S.
dollars, are translated to U.S. dollars at the exchange rate as of the
balance sheet date. Income and expense amounts are translated at the
average exchange rate during the fiscal year.
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 shareholders' 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.
<PAGE> 63
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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.
<PAGE> 64
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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.
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:
Year ended
--------------------
1996 1995
--------------------
(in thousands)
Book value $ 154,736 135,424
====================
Estimated fair value $ 157,867 140,062
====================
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.
<PAGE> 65
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 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.
<PAGE> 66
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
REINSURANCE
Reinsurance premiums, commissions, and expense reimbursements
related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the
terms of the reinsurance contracts. Premiums ceded to other companies
have been reported as a reduction of premium income. 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 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.
<PAGE> 67
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
NEW ACCOUNTING STANDARDS, continued
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.
<PAGE> 68
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
2. RECEIVABLES
A summary of receivables follows:
Year ended
--------------------
1996 1995
--------------------
(in thousands)
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
=====================
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 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.
<PAGE> 69
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
2. RECEIVABLES, continued
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:
Year ended
--------------------
1996 1995
--------------------
(in thousands)
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
====================
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, 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.
<PAGE> 70
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. INVESTMENTS
Major categories of net investment income consists of the
following:
December 31,
----------------------------
1995 1994 1993
----------------------------
(in thousands)
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
============================
A comparison of amortized cost to estimated fair value for fixed
maturities is as follows:
December 31, 1995 Par Value Gross Gross Estimated
- -----------------
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
(in thousands)
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
----------------------------------------
<PAGE> 71
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. INVESTMENTS, continued
December 31, 1995 Gross Gross Estimated
- -----------------
Consolidated Amortized unrealized unrealized market
Available-for-Sale Par Value cost gains losses value
------------------------------------------------------
(in thousands)
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
========================================
December 31, 1994 Par Value Gross Gross Estimated
- -----------------
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
(in thousands)
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
----------------------------------------
<PAGE> 72
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. INVESTMENTS, continued
December 31, 1994 Gross Gross Estimated
- -----------------
Consolidated Amortized unrealized unrealized market
Available-for-Sale Par Value cost gains losses value
------------------------------------------------------
(in thousands)
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
========================================
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 Amortized Estimated
- -----------------
Consolidated cost fair value
-------------------------
Held-to-Maturity (in thousands)
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
------------------------
<PAGE> 73
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. INVESTMENTS, continued
December 31, 1995 Amortized Estimated
- -----------------
Consolidated cost fair value
-------------------------
Available-for-sale (in thousands)
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
========================
December 31, 1994 Amortized Estimated
- -----------------
Consolidated cost fair value
-------------------------
Held-to-Maturity (in thousands)
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
------------------------
December 31, 1994 Amortized Estimated
- -----------------
Consolidated cost fair value
-------------------------
Available-for-sale (in thousands)
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
========================
<PAGE> 74
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. INVESTMENTS, continued
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:
Year ended
----------------------
1996 1995
----------------------
(in thousands)
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
=====================
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
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.
<PAGE> 75
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
Year ended
-------------------
1996 1995
-------------------
(in thousands)
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
===================
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%.
<PAGE> 76
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5. NOTES AND LOANS PAYABLE, continued
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.
Year ended
-----------------------------
1996 1995 1994
-----------------------------
(in thousands)
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
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.
<PAGE> 77
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5. NOTES AND LOANS PAYABLE, continued
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:
Year Ended
-----------------------------------------------
1997 1998 1999 2000 2001
-----------------------------------------------
(in thousands)
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
===============================================
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.
<PAGE> 78
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. STOCKHOLDERS' EQUITY, continued
On April 13, 1994, the Company and Edward J. Shoen entered into an
Agreement in Principle pursuant to which the Company agreed to acquire
all of the outstanding capital stock of EJOS, Inc., all of which stock
was held by Edward J. Shoen and a certain irrevocable trust established
by Edward J. Shoen, in exchange for the same number of shares of the
Company's common stock as were held by EJOS, Inc. In exchange for
EJOS, Inc.'s capital stock, Edward J. Shoen and the irrevocable trust
established by Edward J. Shoen received 3,483,681 and 559,443 shares of
the Company's common stock, respectively. The exchange described above
was effected in accordance with the terms of an Agreement and Plan of
Exchange of Shares of EJOS, Inc. and AMERCO, dated May 18, 1994, among
EJOS, Inc., the Company, Edward J. Shoen, and the irrevocable trust
established by Edward J. Shoen. Edward J. Shoen is a major
stockholder, Chairman of the Board, and President of the Company.
On August 24, 1994, the Company entered into an Exchange
Agreement with Edward J. Shoen, the Company's Chairman of the Board
and President. Pursuant to the exchange agreement, in exchange for
3,483,681 shares of common stock owned by Edward J. Shoen, Edward J.
Shoen received 3,483,681 shares of Series A common stock. The common
stock and the Series A common stock possess identical rights and
privileges.
On November 28, 1994, the Company entered into an Exchange
Agreement with Mark V. Shoen, a director and major stockholder of the
Company. Pursuant to the exchange agreement, in exchange for
3,475,520 shares of Series A common stock owned by Mark V. Shoen, Mark
V. Shoen received 3,475,520 shares of common stock. The common stock
and the Series A common stock possess identical rights and privileges.
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.
<PAGE> 79
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. INCOME TAXES
The components of the consolidated expense for income taxes
applicable to operations are as follows:
Year ended
-------------------------------
1996 1995 1994
-------------------------------
(in thousands)
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
==============================
Deferred tax liabilities (assets) are comprised as follows:
Year ended
-------------------------------
1996 1995 1994
-------------------------------
(in thousands)
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
===============================
<PAGE> 80
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. INCOME TAXES, continued
Year ended
-------------------------------
1996 1995 1994
-------------------------------
(in thousands)
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
===============================
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:
Year ended
-------------------------------
1996 1995 1994
-------------------------------
(in thousands)
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
==============================
<PAGE> 81
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. INCOME TAXES, continued
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.
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.
<PAGE> 82
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 $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.
<PAGE> 83
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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
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.
<PAGE> 84
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
10. EMPLOYEE BENEFIT PLANS, continued
Shares are released from collateral and allocated to active
employees based on the proportion of debt service paid in the plan
year. Contributions to the ESOT charged to expense were $2,904,000,
$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:
Shares issued Shares issued
prior to subsequent to
December, 1992 December, 1992
------------------------------------------
1996 1995 1996 1995
------------------------------------------
(in thousands) (in thousands)
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
==========================================
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.
<PAGE> 85
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
11. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides medical and life insurance benefits to
retired employees and eligible dependents over age 65 if the employee
meets specified age and service requirements.
The Company uses the accrual method of accounting for
postretirement benefits. Prior to 1994, the Company recognized these
costs, which were not material, as claims were incurred. Upon
adoption of SFAS 106, the Company elected to immediately recognize the
cumulative effect of the change in accounting for postretirement
benefits of $5.0 million ($3.1 million net of income tax benefit)
which represents the accumulated postretirement benefit obligation
(APBO) existing at April 1, 1993. In addition, the impact of the
change in ongoing operations is an increase in expense of
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:
1996 1995 1994
----------------------------
(in thousands)
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
============================
The 1996 and 1995 postretirement benefit liability included the
following components:
1996 1995
-----------------
(in thousands)
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)
=================
The discount rate assumptions in computing the information above
were as follows:
1996 1995 1994
-----------------------------
Accumulated postretirement benefit obligation 7.00% 8.50% 7.75%
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.
<PAGE> 86
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
11. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS, continued
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.
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:
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
----------------------------------------------------
(in thousands)
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
==========================================
<PAGE> 87
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
12. REINSURANCE, continued
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
----------------------------------------------------
(in thousands)
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
==========================================
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
----------------------------------------------------
(in thousands)
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
==========================================
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.
<PAGE> 88
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
13. CONTINGENT LIABILITIES AND COMMITMENTS, continued
Following are the lease commitments for leases having terms of
more than one year (in thousands):
Year end 1996 Additions
---------------------------
Property, plant Rental subsequent to
Year ended and other equipment Trucks year end Total
-------------------------------------------------------------------------
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
====================================================
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 defendants' rights
to acquire the plaintiffs' stock may present a corporate opportunity
which the Company is entitled to exercise.
<PAGE> 89
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
14. LEGAL PROCEEDINGS, continued
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.
<PAGE> 90
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
14. LEGAL PROCEEDINGS, continued
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 been set for trial and is
likely to await the outcome of the other aspects of the post-petition
date interest dispute.
<PAGE> 91
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
14. LEGAL PROCEEDINGS, continued
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.
<PAGE> 92
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
15. PREFERRED STOCK PURCHASE RIGHTS
In July 1988, the Company's Board of Directors adopted a
stockholder-rights plan, and such rights were distributed as a
dividend at the rate of one right for each outstanding share of the
Company's common stock to the holders of record of common shares on
July 29, 1988. As a result of the 400-for-1 common stock split that
occurred on October 1, 1990, each outstanding share of common stock
currently has one four-hundredth of a right associated with it. When
exercisable, each right will entitle its holder to purchase from the
Company one one-hundredth of a share of the new Series C Preferred
Stock of the Company at a price of $15,000. AMERCO has reserved 5,000
shares of authorized but unissued preferred stock for the Series C
Preferred Stock authorized in this stockholder-rights plan. The
rights will become exercisable if a person or group of affiliated or
associated persons acquire or obtain the right to acquire beneficial
ownership of 50% or more of the common stock without approval of a
majority of the Board of Directors of the Company. The majority
approval must be made by members of the Board who were members as of
July 25, 1988 (Disinterested Directors) or subsequent members elected
to the Board if such persons are recommended or approved by a majority
of the Disinterested Directors. The rights will expire on July 29,
1998 unless earlier redeemed by the Company pursuant to authorization
by a majority of the Disinterested Directors.
In the event the Company is acquired in a merger or other
business combination transaction after the rights become exercisable,
provision shall be made so that each holder of a right shall have the
right to receive, upon exercise thereof and payment of the exercise
price, that number of common shares of such corporation which at the
time of such transaction would have a market or book value of two
times the exercise price of the right. If the Company is the
surviving company, each holder would have the right to receive, upon
payment of the exercise price, common shares with a market or book
value of two times the exercise price.
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.
<PAGE> 93
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
16. STOCK OPTION PLAN, continued
Under the Plan, Performance Share units may be granted. Each
unit is deemed to be the equivalent of one share of Company stock and
such units are credited to a Performance Share account. The value of
the units at the time of award or payment is the fair market value of
an equivalent number of shares of stock. At the end of the award
period, payment may be made subject to certain predetermined criteria
and restrictions.
To date, no stock options 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.
<PAGE> 94
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
17. RELATED PARTY TRANSACTIONS, continued
Pursuant to a Share Repurchase and Registration Rights Agreement,
dated as of March 1, 1992, among Paul F. Shoen, Pafran, Inc., and the
Company, Paul F. Shoen had the right to require the Company to
repurchase, with certain limitations, up to $3,000,000 of Common Stock
owned by him. The Paul Shoen Registration Rights Agreement provides
that the Company's obligation to repurchase any shares from Paul F.
Shoen shall be satisfied if such shares are purchased by the ESOP
Trust. Pursuant to the Paul Shoen Registration Rights Agreement, (i)
on June 30, 1994, Paul F. Shoen sold 58,825 shares of Common Stock to
the ESOP Trust at the then appraised value of $17.00 per share for an
aggregate sales price of approximately $1,000,000 and (ii) on January
17, 1995, Paul F. Shoen sold 50,632 shares of Common Stock to the ESOP
Trust at the most recent closing price for the Common Stock trading on
Nasdaq of $19.75 per share for an aggregate sales price of
approximately $1,000,000. In addition, Paul F. Shoen, subject to
certain limitations and restrictions, may also elect under the Paul
Shoen Registration Rights Agreement to cause the Company to effect a
registration under the Securities Act of 1933, as amended, and
applicable state securities laws of shares of Common Stock held by him.
Paul F. Shoen sold 500,000 shares of Common Stock to the public in
March of 1995 pursuant to his registration rights. Paul F. Shoen is a
major stockholder of the Company.
On February 9, 1995, Paul F. Shoen executed a settlement
agreement with the Company whereby Paul F. Shoen agreed to the
dismissal of certain claims he had asserted in an arbitration
proceeding and in an action in the United States District Court for
the District of Nevada. In exchange for Paul F. Shoen's agreement to
dismiss such claims, the Company agreed, among other things, to work
in good faith toward appointing independent trustees for the ESOP and
to place Paul F. Shoen on the management's slate of directors for the
1994 Annual Meeting of Stockholders. In addition, the settlement
agreement provides for the Company to pay Paul F. Shoen $925,000 and
for the Company to receive a full release of all claims by Paul F.
Shoen through the settlement date, including but not limited to,
claims for reimbursement of attorneys fees related to all matters to
which Paul F. Shoen is or was a party. The terms of the settlement
will not result in a material adverse effect of the Company's
financial condition or results of operations.
Pursuant to a Management Consulting Agreement, dated as of March
5, 1992, Paul F. Shoen agreed to provide management consulting services
to the Company on matters relating to the Company's business and the
organization and management of the Company. In consideration for these
services, the Company has agreed to pay Paul F. Shoen a yearly fee of
$200,000. A total of $100,000 was paid for the year ended March 31,
1995. The Management Consulting Agreement terminated on March 1, 1995.
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.
<PAGE> 95
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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:
Year ended
---------------------------------------
1996 1995 1994
---------------------------------------
(in thousands)
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
=======================================
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:
December 31,
---------------------
1995 1994
---------------------
(in thousands)
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
=====================
<PAGE> 96
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
19. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF PONDEROSA
HOLDINGS, INC. AND ITS SUBSIDIARIES, continued
A summarized consolidated income statement for Ponderosa
Holdings, Inc. and subsidiaries is presented below:
Year ended December 31,
-----------------------------------
1995 1994 1993
-----------------------------------
(in thousands)
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
===================================
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.
<PAGE> 97
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
Information concerning operations by industry segment follows:
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
------------------------------------------------------------
(in thousands)
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
==========================================================
<PAGE> 98
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
20. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
------------------------------------------------------------
(in thousands)
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
==========================================================
Geographic Area Data - United States Canada Consolidated
---------------------------------------
(in thousands)
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
<PAGE> 99
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
<PAGE> 100
<TABLE>
SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
Additional Information
The following Summary of Earnings of Independent Trailer Fleets is presented for purposes of analysis and is
not a required part of the basic financial statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic financial statements by Price Waterhouse LLP, independent accountants, whose report
thereon appears elsewhere herein.
<CAPTION>
Years Ended March 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------------------
(in thousands except earnings per $100 of average investment)
<S> <C> <C> <C> <C> <C>
Earnings data (Note A) <F1>:
Fleet Owner income:
Credited to Fleet Owner gross
rental income $ 4,181 5,288 6,556 7,827 9,814
Credited to Distribution, Accident
and Canadian Duty Fund (Note D) <F4> 69 66 71 114 118
--------- ----- ----- ----- -----
Total Fleet Owner income 4,250 5,354 6,627 7,941 9,932
--------- ----- ----- ----- -----
Fleet Owner operation expenses:
Charged to Fleet Owner (Note C) <F3> 2,182 2,127 2,404 3,100 4,389
Charged to Distribution, Accident
and Canadian Duty Funds (Note D) <F4> 254 234 237 290 274
--------- ----- ----- ----- -----
Total Fleet Owner operation
expenses 2,436 2,361 2,641 3,390 4,663
--------- ----- ----- ----- -----
Fleet Owner earnings before
Distribution, Accident and
Canadian Duty Funds credit,
depreciation and income taxes 1,814 2,993 3,986 4,551 5,269
Distribution, Accident and Canadian
Duty Funds credit (Note D) <F4> 185 168 165 176 156
--------- ----- ----- ----- -----
Net Fleet Owner earnings before
depreciation and income taxes $ 1,999 3,161 4,151 4,727 5,425
========= ===== ===== ===== =====
Investment data (Note A) <F1>:
Amount at end of year $ 3,138 4,382 5,257 6,332 7,749
========= ===== ===== ===== =====
Average amount during year $ 3,701 4,820 5,668 6,976 8,911
========= ===== ===== ===== =====
Net Fleet Owner earnings before
depreciation and income taxes
per $100 of average investment
(Note B) <F2> $ 54.04 65.59 73.23 67.76 60.88
========= ===== ===== ===== =====
<FN>
The accompanying notes are an integral part of this Summary of Earnings of Independent Trailer Fleets.
<PAGE> 101
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
Additional Information
<F1>
(A) The accompanying Summary of Earnings of Independent Trailer Fleets includes the operations of trailers under the
brand name of "U-Haul" owned by Independent Fleet Owners. Earnings data represent the aggregate results of
operations before depreciation and taxes. Investment data represent the cost of trailers and investments before
accumulated depreciation.
Fleet Owner income is based on Independent Rental Dealer reports of rentals transacted through the day preceding
the last Monday of each month and received by U-Haul International, Inc. by the end of the month and Company-
Operated U-Haul Center reports of rentals transacted through the last day of each month. Payments to Fleet
Owners for trailers lost or retired from rental service as a result of damage by accident have not been reflected
in this summary because such payments do not relate to earnings before depreciation and income taxes but, rather,
investment (depreciation).
The investment data is based upon the cost of trailers to the Fleet Owners as reflected by sales records of
U-Haul's manufacturing facilities.
<F2>
(B) The summary of earnings data stated in terms of amount per $100 of average investment represents the aggregate
results of operations (earnings data) divided by the average amount of investment during the periods. The
average amount of investment is based upon a simple average of the month-end investment during each period.
Average earnings data is not necessarily representative of an individual Fleet Owner's earnings.
<F3>
(C) A summary of operations expenses charged directly to Independent Fleet Owners follows:
<CAPTION>
Year ended March 31,
---------------------------------------
1996 1995 1994 1993 1992
---------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Licenses $ 436 503 520 593 686
Public liability insurance 264 320 392 510 1,047
Repairs and maintenance 1,482 1,304 1,492 1,997 2,656
--------- ----- ----- ----- -----
$ 2,182 2,127 2,404 3,100 4,389
========= ===== ===== ===== =====
<F4>
(D) The Fleet Owners, Independent Rental Dealers, U-Haul International, Inc. and Subsidiary U-Haul Rental Companies
forego normal commissions on a portion of gross rental fees designated for transfer to the Distribution Fee Fund,
the Accident Fund, and the Canadian Duty Fund. Designated expenses, otherwise chargeable to Fleet Owners, are
paid from these Funds to the extent of the financial resources of the Funds. The amounts designated
"Distribution, Accident and Canadian Duty Funds credit" in the accompanying summary of earnings represent
Operator Contribution expenses borne by the Funds, which exceed Independent Fleetowner commissions foregone.
<PAGE> 102
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS, continued
Additional Information
(E) Commissions foregone for transfer to the Distribution, Accident and Canadian Duty Funds (net of fees in excess of
expenses incurred) follows:
<CAPTION>
Subsidiary Fleet Owners
-----------------------------------
U-Haul Subsidiary
Companies Companies Independent Total
--------------------------------------------------
(in thousands)
Year ended:
<S> <C> <C> <C> <C>
March 31, 1996 1,287 624 69 1,980
March 31, 1995 986 465 66 1,517
March 31, 1994 873 399 71 1,343
March 31, 1993 879 358 114 1,351
March 31, 1992 875 390 118 1,383
(F) A summary of Independent Fleet Owner expenses incurred by the Funds follows:
<CAPTION>
Year ended March 31,
-----------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Accident repairs $ 1,675 1,295 1,085 1,199 1,142
Distribution of trailers, paid from redistribution and
Canadian duty fees 0 0 0 0 37
------- ----- ----- ----- -----
Total Fleet Owner expenditures 1,675 1,295 1,085 1,199 1,179
Less portion allocated to fleets owned by subsidiary
companies 1,421 1,061 848 909 905
------- ----- ----- ----- -----
Total Independent Fleet Owner expenses paid
by funds 254 234 237 290 274
Add portion allocated to fleets owned by subsidiary
companies 1,421 1,061 848 909 905
Return of investment (accident reimbursement) 305 222 258 152 204
------- ----- ----- ----- -----
Total expenses incurred by Funds $ 1,980 1,517 1,343 1,351 1,383
======= ===== ===== ===== =====
</TABLE>
<PAGE> 103
Schedule I
Condensed Financial Information of Registrant
AMERCO
Balance Sheets
March 31,
1996 1995
----------------------
(in thousands)
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
======================
See accompanying notes to condensed financial information and
notes to consolidated financial statements incorporated herein by
reference.
<PAGE> 104
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Earnings
Years Ended March 31,
1996 1995 1994
------------------------------------
(in thousands except per share data)
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
====================================
See accompanying notes to condensed financial information and
notes to consolidated financial statements incorporated herein by
reference.
<PAGE> 105
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Cash Flows
Years Ended March 31,
1996 1995 1994
----------------------------------
(in thousands)
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
==================================
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.
<PAGE> 106
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.
<PAGE> 107
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Notes to Condensed Financial Information
March 31, 1996, 1995 and 1994
3. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
Year end
--------------------
1996 1995
--------------------
(in thousands)
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
====================
For additional information, see Note 5 of Notes to Consolidated
Financial Statements.
<PAGE> 108
<TABLE>
Schedule V
AMERCO AND CONSOLIDATED SUBSIDIARIES
Supplemental Information (For Property-Casualty Insurance Underwriters)
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Reserves Amorti-
for Unpaid zation Paid
Claims Claims and of Claims
Deferred and Claim Adjustment Deferred and
Policy Claim Net Net Expenses Incurred Policy Claim Net
Affiliation Acqui- Adjust- Discount Earned Invest- Related to Acqui- Adjust- Premiums
With sition ment if any, Unearned Premiums ment Current Prior sition ment Written
Year Registrant Costs Expenses Deducted Premiums <F1> Income Year Year Costs Expenses <F2>
---- ---------- ----- -------- -------- -------- -------- ------ ---- ---- ----- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <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 8,292 8,973 109,372 125,789
95 Consolidated
property -
casualty entity 8,973 329,741 N/A 63,938 112,862 29,026 102,782 6,576 6,644 92,651 119,952
94 Consolidated
property -
casualty entity 6,644 314,482 N/A 58,842 105,801 27,446 91,044 12,688 5,377 104,123 113,672
<FN>
<F1>
(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.
<F2>
(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.
</FN>
</TABLE>
<PAGE> 111
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /S/ EDWARD J. SHOEN
---------------------
Edward J. Shoen
President of U-Haul International, Inc.
Dated: June 25, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/S/ EDWARD J. SHOEN President of U-Haul June 25, 1996
- ------------------------ International, Inc.
Edward J. Shoen (Principal Executive
Officer)
/S/ DONALD W. MURNEY Principal Financial June 25, 1996
- ------------------------ and Accounting Officer
Donald W. Murney
/S/ JAMES P. SHOEN Director June 25, 1996
- ------------------------
James P. Shoen
/S/ HARRY B. DESHONG, JR. Director June 25, 1996
- -------------------------
Harry B. DeShong, Jr.
/S/ MARK V. SHOEN Director June 25, 1996
- ------------------------
Mark V. Shoen
/S/ RICHARD J. HERRERA Director June 25, 1996
- ------------------------
Richard J. Herrera
AMERCO and Consolidated Subsidiaries
Exhibit 12. Statement Re: Computation of Ratios
Year end
-------------------------------------
1996 1995 1994 1993 1992
-------------------------------------
Pretax earnings from operations 96.2 93.5 66.5 49.2 25.7
Plus: Interest expense 67.6 67.8 68.9 68.0 76.2
Preferred stock dividends 13.0 13.0 4.8 - -
Amortization of debt expense
and discounts .7 .8 1.1 1.6 1.5
A portion of rental expense
(1/3) 23.0 22.2 28.1 39.7 41.3
-------------------------------------
Subtotal (A) 200.5 197.3 169.4 158.5 144.7
-------------------------------------
Divided by:
Fixed charges:
Interest expense 67.6 67.8 68.9 68.0 76.2
Preferred stock dividends 13.0 13.0 4.8 - -
A portion of rental expense (1/3) 23.0 22.2 28.1 39.7 41.3
Interest capitalized during the
period 1.8 1.7 .6 .2 .2
Amortization of debt expense
and discounts .7 .8 1.1 1.6 1.5
-------------------------------------
Subtotal (B) 106.1 105.5 103.5 109.5 119.2
-------------------------------------
Ratio of earnings to fixed
charges (A)/(B) 1.89 1.87 1.64 1.45 1.21
=====================================
The Company believes that one-third of the Company's annual
rental expense is a reasonable approximation of the interest factor of
such rentals.
<PAGE>
Exhibit 21.
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
FISCAL YEAR ENDING MARCH 31, 1996
STATE OF
LEGAL NAME INCORPORATION
- --------------------------------------------------- -------------
AMERCO (Nevada) NV
Is the Parent Company of:
Amerco Real Estate Company NV
Parent Company of:
Amerco Real Estate Co of Texas, Inc. TX
Amerco Real Estate Company of Alabama AL
Nationwide Commercial Company AZ
Parent Company of:
Yonkers Property Corporation NY
Gibraltar Storage Corporation AL
One PAC Company NV
Two PAC Company NV
Three PAC Company NV
Four PAC Company NV
Five PAC Company NV
Six PAC Company NV
Seven PAC Company NV
Eight PAC Company NV
Nine PAC Company NV
Ten PAC Company NV
Eleven PAC Company NV
Twelve PAC Company NV
Japal, Inc. NV
M.V.S., Inc. NV
Pafran, Inc. NV
Sophmar, Inc. NV
EJOS, Inc. AZ
Ponderosa Holding, Inc. NV
Parent Company of:
Oxford Life Insurance Company AZ
Republic Western Insurance Company AZ
Parent Company of:
Republic Claims Service Company AZ
Republic Western Syndicate, Inc. NY
RWIC Investment, Inc. AZ
<PAGE>
Exhibit 21, continued.
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
FISCAL YEAR ENDING MARCH 31, 1996
STATE OF
LEGAL NAME INCORPORATION
- --------------------------------------------------- -------------
AMERCO (Nevada), continued NV
Is the Parent Company of:
U-Haul International, Inc. NV
Parent Company of:
U-Haul Business Consultants, Inc. AZ
U-Haul Leasing & Sales Company NV
U-Haul Self Storage NV
A & M Associates, Inc. AZ
U-Haul Company of Washington WA
U-Haul Company of Inland Northwest WA
U-Haul Company of Oregon OR
U-Haul Company of Hawaii, Inc. HI
U-Haul Company of California CA
U-Haul Company of Idaho, Inc. ID
U-Haul Company of Utah, Inc. UT
U-Haul Company of Colorado CO
U-Haul Company of Arizona AZ
U-Haul Company of New Mexico, Inc. NM
U-Haul Co. of North Dakota ND
U-Haul Co. of Vermont, Inc. VT
U-Haul Co. of South Dakota, Inc. SD
U-Haul Company of Minnesota MN
U-Haul Company of Nebraska NE
U-Haul Co. of Maine, Inc. ME
U-Haul Company of Kansas, Inc. KS
U-Haul Co. of Missouri MO
U-Haul Company of Oklahoma, Inc. OK
U-Haul Co. of Illinois, Inc. IL
U-Haul Company of Texas TX
U-Haul Company of Arkansas AR
U-Haul Co. of Louisiana LA
U-Haul Company of Mississippi MS
U-Haul Company of Wisconsin, Inc. WI
U-Haul Co. of Michigan MI
U-Haul Co. of Indiana, Inc IN
U-Haul Co. of Ohio OH
U-Haul Co. of Tennessee TN
U-Haul Co. of Kentucky KY
U-Haul Co. of Alabama AL
U-Haul Co. of Georgia GA
U-Haul Company of North Carolina NC
U-Haul Company of South Carolina, Inc. SC
U-Haul Co. of Florida FL
U-Haul Co. of New Hampshire NH
U-Haul Co. of Wyoming Inc. WY
U-Haul Co. of Iowa, Inc. IA
U-Haul Company of Connecticut CT
U-Haul Co. of District of Columbia, Inc. DC
U-Haul Company of Rhode Island RI
U-Haul Co of New York, Inc. NY
U-Haul Co. of Pennsylvania PA
U-Haul Co. of New Jersey, Inc. NJ
U-Haul Co. of Maryland, Inc. MD
U-Haul Company of West Virginia WV
U-Haul Co. of Virginia VA
U-Haul Company of Alaska AK
U-Haul Co. of Massachusetts, Inc. MA
<PAGE>
Exhibit 21, continued.
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
FISCAL YEAR ENDING MARCH 31, 1996
STATE OF
LEGAL NAME INCORPORATION
- --------------------------------------------------- -------------
AMERCO (Nevada), continued NV
Is the Parent Company of:
U-Haul International, Inc., continued NV
Parent Company of:
U-Haul Co. of Nevada, Inc. NV
U-Haul Company of Montana, Inc. MT
U-Haul Co. (Canada), Ltd. CANADA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 31,168
<SECURITIES> 0
<RECEIVABLES> 340,564<F1>
<ALLOWANCES> 0
<INVENTORY> 45,891
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,419,446
<DEPRECIATION> 1,102,731
<TOTAL-ASSETS> 2,827,978
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 998,220
0
0
<COMMON> 10,000
<OTHER-SE> 639,548
<TOTAL-LIABILITY-AND-EQUITY> 2,827,978
<SALES> 173,806
<TOTAL-REVENUES> 1,294,423
<CGS> 108,662
<TOTAL-COSTS> 1,017,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,492
<INTEREST-EXPENSE> 67,558
<INCOME-PRETAX> 96,226
<INCOME-TAX> 35,832
<INCOME-CONTINUING> 60,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,394
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
<FN>
<F1>THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNTS NET OF THEIR ALLOWANCES.
<F2>AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
</FN>
</TABLE>
