<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
_______________________________________________________________________
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
22,614,087 shares of AMERCO Common Stock, $0.25 par value were
outstanding at August 19, 1997.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par
value, were outstanding at August 19, 1997. U-Haul
International, Inc. meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this
form with the reduced disclosure format.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
a) Consolidated Balance Sheets as of June 30, 1997,
March 31, 1997 and June 30, 1996................... 4
b) Consolidated Statements of Earnings for the
Quarters ended June 30, 1997 and 1996.............. 6
c) Consolidated Statements of Changes in Stockholders'
Equity for the Quarters ended June 30, 1997
and 1996........................................... 7
d) Consolidated Statements of Cash Flows for the
Quarters ended June 30, 1997 and 1996.............. 9
f) Notes to Consolidated Financial Statements -
June 30, 1997, March 31, 1997 and
June 30, 1996...................................... 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................... 23
Item 6. Exhibits and Reports on Form 8-K....................... 23
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INTENTIONALLY BLANK
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
June 30, March 31, June 30,
ASSETS 1997 1997 1996
-----------------------------------
(unaudited) (audited) (unaudited)
(in thousands)
Cash and cash equivalents $ 33,178 41,752 39,972
Receivables 242,214 238,523 267,287
Inventories 62,926 65,794 51,447
Prepaid expenses 19,775 17,264 14,591
Investments, fixed maturities 850,667 859,694 884,049
Investments, other 150,262 127,306 128,434
Deferred policy acquisition costs 50,924 48,598 54,726
Other assets 73,594 72,997 19,550
----------------------------------
Property, plant and equipment, at
cost:
Land 210,995 209,803 213,936
Buildings and improvements 819,770 814,744 784,478
Furniture and equipment 201,911 199,126 190,182
Rental trailers and other rental
equipment 152,783 148,807 145,811
Rental trucks 1,051,231 947,911 965,133
General rental items 21,590 21,600 22,574
----------------------------------
2,458,280 2,341,991 2,322,114
Less accumulated depreciation 1,106,084 1,094,925 1,072,298
----------------------------------
Total property, plant and
equipment 1,352,196 1,247,066 1,249,816
----------------------------------
$ 2,835,736 2,718,994 2,709,872
===================================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
June 30, March 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997 1996
------------------------------------
(unaudited) (audited) (unaudited)
(in thousands)
Liabilities:
Accounts payable and accrued
liabilities $ 137,309 131,099 179,378
Notes and loans 1,035,340 983,550 756,098
Policy benefits and losses, claims
and loss expenses payable 468,568 469,134 497,461
Liabilities from premium deposits 429,984 433,397 422,514
Cash overdraft 47,942 23,606 22,709
Other policyholders' funds and
liabilities 31,896 30,966 30,510
Deferred income 36,317 35,247 33,262
Deferred income taxes 28,000 9,675 89,983
----------------------------------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized -
Series A preferred stock, with no
par value, 6,100,000 shares issued
and outstanding as of June 30, 1997,
March 31, 1997 and June 30, 1996 - - -
Series B preferred stock, with no
par value, 100,000 shares issued
and outstanding as of June 30, 1997,
March 31, 1997 and none issued and
outstanding as of June 30, 1996 - - -
Serial common stock, with or
without par value, 150,000,000
shares authorized -
Series A common stock of $0.25 par
value, 10,000,000 shares authorized,
5,762,495 shares issued as of
June 30, 1997, March 31, 1997,
and June 30, 1996 1,441 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized,
36,487,505 shares issued as of June 30,
1997 and March 31, 1997, and 34,237,505
shares issued as of June 30, 1996 9,122 9,122 8,559
Additional paid-in capital 337,933 337,933 165,756
Foreign currency translation adjustment (14,365) (14,133) (12,372)
Unrealized gain(loss) on investments (1,432) 4,411 3,084
Retained earnings 667,976 644,009 645,783
----------------------------------
1,000,675 982,783 812,251
Less:
Cost of common shares in treasury,
(19,635,913 shares as of June 30,
1997 and March 31, 1997, 7,209,077
shares as of June 30, 1996) 359,723 359,723 111,118
Unearned employee stock
ownership plan shares 20,572 20,740 23,176
----------------------------------
Total stockholders' equity 620,380 602,320 677,957
Contingent liabilities and commitments
----------------------------------
$ 2,835,736 2,718,994 2,709,872
==================================
<PAGE> 6
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended June 30,
(Unaudited)
1997 1996
------------------------
(in thousands except
per share data)
Revenues
Rental and other revenue $ 272,485 260,495
Net sales 56,719 55,979
Premiums 35,465 31,155
Net investment income 11,588 13,002
-----------------------
Total revenues 376,257 360,631
Costs and expenses
Operating expense 225,003 210,733
Cost of sales 31,397 31,581
Benefits and losses 35,099 23,258
Amortization of deferred acquisition
costs 3,460 4,022
Depreciation 20,490 18,779
Interest expense, net of interest
income of $3,478 and $10,883 in
1997 and 1996, respectively 16,688 7,971
-----------------------
Total costs and expenses 332,137 296,344
Pretax earnings from operations 44,120 64,287
Income tax expense (14,922) (24,282)
-----------------------
Net earnings $ 29,1982 40,005
=======================
Earnings per common share:
Net earnings $ 1.09 1.15
=======================
Weighted average common shares outstanding 21,879,156 32,015,301
=======================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 7
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Quarters ended June 30,
(Unaudited)
1997 1996
-------------------
(in thousands)
Series A common stock of $0.25 par value:
10,000,000 shares authorized, 5,762,495
shares issued as of June 30, 1997,
March 31, 1997 and June 30, 1996
Beginning and end of period $ 1,441 1,441
-------------------
Common stock of $0.25 par value:
150,000,000 shares authorized, 36,487,505
shares issued as of June 30, 1997 and
March 31, 1997, and 34,237,505 shares
issued as of June 30, 1996
Beginning and end of period 9,122 8,559
-------------------
Additional paid-in capital:
Beginning and end of period 337,933 165,756
-------------------
Foreign currency translation:
Beginning of period (14,133) (11,877)
Change during period (232) (495)
-------------------
End of period (14,365 (12,372)
-------------------
Unrealized gain (loss) on investments:
Beginning of period 4,411 11,097
Change during period (5,843) (8,013)
-------------------
End of period (1,432) 3,084
-------------------
Retained earnings:
Beginning of period 644,009 609,019
Net earnings 29,198 40,005
Dividends paid to stockholders:
Preferred stock Series A($0.53 per share) (3,241) (3,241)
Preferred stock Series B($19.90 per share) (1,990) -
-------------------
End of period $ 667,976 645,783
-------------------
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 8
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Quarters ended June 30,
(Unaudited)
1997 1996
--------------------
(in thousands)
Less Treasury stock:
Beginning and end of period 359,723 111,118
-------------------
Less Unearned employee stock ownership
plan shares:
Beginning of period 20,740 23,329
Increase in loan 1 -
Proceeds from loan (169) (153)
-------------------
End of period 20,572 23,176
-------------------
Total stockholders' equity $ 620,380 677,957
===================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended June 30,
(Unaudited)
1997 1996
--------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 29,198 40,005
Depreciation and amortization 25,435 25,180
Provision for losses on accounts
receivable 1,120 869
Net (gain) loss on sale of real and
personal property 89 500
Gain on sale of investments 75 (207)
Changes in policy liabilities and
accruals 7,870 10,976
Additions to deferred policy
acquisition costs (3,545) (6,385)
Net change in other operating assets
and liabilities 19,815 126,755
--------------------
Net cash provided by operating activities 80,057 197,693
--------------------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (210,431) (61,686)
Fixed maturities (39,134) (51,483)
Private equity investment (24,500) -
Preferred Stock (979) -
Real estate - 353
Mortgage loans (6,036) (1,800)
Proceeds from sale of investments:
Property, plant and equipment 82,937 137,031
Fixed maturities 39,757 31,955
Real estate 138 335
Mortgage loans 6,809 5,366
Changes in other investments 1,497 (4,634)
--------------------
Net cash provided (used) by investing
activities (149,942) 55,437
--------------------
Cash flows from financing activities:
Net change in short-term borrowings 76,000 (391,000)
Proceeds from notes - 175,000
Debt issuance costs (439) (2,146)
Loan to leveraged Employee Stock
Ownership Plan (1) -
Repayments from leveraged Employee Stock
Ownership Plan 169 153
Principal payments on notes (24,210) (26,122)
Net change in cash overdraft 24,336 (9,450)
Preferred stock dividends paid (5,231) (3,241)
Investment contract deposits 4,818 25,891
Investment contract withdrawals (14,131) (13,411)
--------------------
Net cash provided (used) by
financing activities 61,311 (244,326)
--------------------
Increase (decrease)in cash and
cash equivalents (8,574) 8,804
Cash and cash equivalents at
beginning of period 41,752 31,168
--------------------
Cash and cash equivalents at
end of period $ 33,178 39,972
====================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997, March 31, 1997 and June 30, 1996
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AMERCO, a Nevada corporation (the Company), is the holding
company for U-Haul International, Inc. (U-Haul), Amerco Real Estate
Company (AREC), Republic Western Insurance Company (RWIC) and Oxford
Life Insurance Company (Oxford).
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 consolidated balance sheets as of June 30, 1997 and 1996, and
the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for the quarters ended June 30,
1997 and 1996 are unaudited; in the opinion of management, all
adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily
indicative of results for a full year.
The operating results and financial position of AMERCO's
consolidated insurance operations are determined on a one quarter lag.
There were no effects related to intervening events which would
significantly affect consolidated financial position or results of
operations for the financial statements presented herein.
The financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the
Company's annual financial statements and notes.
Earnings per share are computed by dividing net earnings after
deduction of preferred stock dividends by the weighted average number
of common shares outstanding, excluding shares of the employee stock
ownership plan that have not been committed to be released. Preferred
dividends include undeclared or unpaid dividends of the Company.
Certain reclassifications have been made to the financial
statements for the quarter ended June 30, 1996 to conform with the
current year's presentation.
<PAGE> 11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is
as follows:
March 31, 1997
- ------------------- 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 $ 16,630 $ 16,514 848 (43) 17,319
U.S. government
agency mortgage-
backed securities $ 48,547 48,276 287 (2,180) 46,383
Obligations of
states and
political
subdivisions $ 30,130 29,928 869 (130) 30,667
Corporate
securities $ 167,680 171,734 2,092 (3,345) 170,481
Mortgage-backed
securities $ 111,284 109,827 900 (2,646) 108,081
Redeemable preferred
stocks 1,168 32,712 318 (436) 32,594
----------------------------------------
408,991 5,314 (8,780) 405,525
----------------------------------------
March 31, 1997
- ----------------- 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 11,766 701 - 12,467
U.S. government
agency mortgage-
backed securities $ 28,423 27,934 139 (502) 27,571
States,
municipalities
and political
subdivisions $ 11,900 12,079 431 (160) 12,350
Corporate
securities $ 299,605 302,960 3,760 (5,465) 301,255
Mortgage-backed
securities $ 77,094 76,565 849 (1,238) 76,176
Preferred
stock $ 476 11,794 127 (64) 11,857
----------------------------------------
443,098 6,007 (7,429) 441,676
----------------------------------------
Total $ 852,089 11,321 (16,209) 847,201
----------------------------------------
In February 1997, the Company, through its insurance
subsidiaries, invested in the equity of a limited partnership in a
Texas-based self-storage corporation. RWIC invested $13,500,000 in
exchange for a 27.3% limited partnership and Oxford invested
$11,000,000 in exchange for a 22.2% limited partnership. U-Haul is a
50% owner of a corporation which is a general partner in the Texas-
based self-storage corporation. The Company has a $10,000,000 note
receivable from the corporation.
<PAGE> 12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE
SUBSIDIARIES
A summary consolidated balance sheet for RWIC is presented
below:
March 31,
---------------------
1997 1996
---------------------
(in thousands)
Investments - fixed maturities $ 411,652 413,669
Other investments 22,122 14,330
Receivables 114,790 155,611
Deferred policy acquisition costs 9,778 11,682
Due from affiliate 22,352 12,415
Deferred federal income taxes 14,751 17,119
Other assets 9,095 7,989
-------------------
Total assets $ 604,540 632,815
===================
Policy liabilities and accruals $ 336,969 343,223
Unearned premiums 48,823 79,218
Other policyholders' funds and liabilities 25,721 20,018
-------------------
Total liabilities 411,513 442,459
Stockholder's equity 193,027 190,356
-------------------
Total liabilities and
stockholder's equity $ 604,540 632,815
===================
A summarized consolidated income statement for RWIC is presented
below:
Quarter ended March 31,
-----------------------
1997 1996
-----------------------
(in thousands)
Premiums $ 34,482 25,238
Net investment income 7,282 7,737
Other income 55 (52)
---------------------
Total revenue 41,819 32,923
Benefits and losses 29,438 17,824
Amortization of deferred policy
acquisition costs 2,155 2,464
Other expenses 5,203 6,640
---------------------
Income from operations 5,023 5,995
Federal income tax expense (1,550) (1,886)
---------------------
Net income $ 3,473 4,109
=====================
<PAGE> 13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE
SUBSIDIARIES, continued
A summary consolidated balance sheet for Oxford is presented
below:
March 31,
---------------------
1997 1996
---------------------
(in thousands)
Investments - fixed maturities $ 439,015 470,380
Other investments 105,911 89,679
Receivables 12,349 14,733
Deferred policy acquisition costs 41,146 43,044
Due from affiliate 507 291
Other assets 2,928 2,347
-------------------
Total assets $ 601,856 620,474
===================
Policy liabilities and accruals $ 82,776 75,025
Premium deposits 429,984 422,514
Other policyholders' funds and liabilities 6,587 14,213
Deferred taxes 8,856 10,588
-------------------
Total liabilities 528,203 522,340
Stockholder's equity 73,653 98,134
-------------------
Total liabilities and
stockholder's equity $ 601,856 620,474
===================
A summarized consolidated income statement for Oxford is
presented below:
Quarter ended March 31,
-----------------------
1997 1996
-----------------------
(in thousands)
Premiums $ 5,943 7,089
Net investment income 4,433 4,882
Other income 41 (541)
--------------------
Total revenue 10,417 11,430
Benefits and losses 5,661 5,434
Amortization of deferred policy
acquisition costs 1,305 1,558
Other expenses 1,400 1,483
--------------------
Income from operations 2,051 2,955
Federal income tax expense (604) (1,028)
--------------------
Net income $ 1,447 1,927
====================
<PAGE> 14
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
4. CONTINGENT LIABILITIES AND COMMITMENTS
During the three months ended June 30, 1997, a subsidiary of U-
Haul entered into eleven transactions, and has subsequently entered
into three additional transactions, whereby the Company sold rental
trucks and subsequently leased back. The Company has guaranteed
$14,857,000 of residual values and an additional $5,346,000 subsequent
to June 30, 1997 for these assets at the end of the respective lease
terms. U-Haul also subsequently entered into one transaction, whereby
the Company sold and subsequently leased back computer equipment.
Following are the lease commitments for the leases executed during the
three months ended June 30, 1997, and subsequently which have a term
of more than one year (in thousands):
Net activity
Year ended Lease subsequent to
March 31, Commitments quarter end Total
---------------------------------------------------------
1998 $ (6,209) 1,097 (5,112)
1999 (8,167) 1,558 (6,609)
2000 (8,167) 1,558 (6,609)
2001 (1,257) 2,565 1,308
2002 5,405 2,876 8,281
Thereafter 21,952 7,986 29,938
------------------------------------
$ 3,557 17,640 21,197
====================================
During the three months ended June 30, 1997, the Company has
reduced future lease commitments by $68,000,000 and subsequently
$8,432,000 through early termination of certain leases. Residual
value guarantees were also reduced by $11,402,000 and $1,527,000 in
connection with the terminations.
In the normal course of business, the Company is a defendant in
a number of suits and claims. The Company is also a party to several
administrative proceedings arising from state and local provisions
that regulate the removal and/or clean-up of underground fuel storage
tanks. It is the opinion of management that none of such suits,
claims or proceedings involving the Company, individually or in the
aggregate are expected to result in a material loss.
5. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories and accounts
payable and accrued liabilities net of other operating and investing
activities follows:
Quarters ended June 30,
1997 1996
---------------------
(in thousands)
Receivables $ (9,049) 74,020
=====================
Inventories $ 2,868 (5,556)
=====================
Accounts payable and
accrued liabilities $ 6,744 28,728
=====================
Income taxes paid in cash amounted to none and $53,000 for the
quarters ended June 30, 1997 and 1996, respectively.
Interest paid in cash amounted to $17,395,000 and $18,080,000 for
the quarters ended June 30, 1997 and 1996, respectively.
<PAGE> 15
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
6. EARNINGS PER SHARE
Earnings per share are computed based on the weighted average
number of shares outstanding for the year and quarterly periods,
excluding shares of the employee stock ownership plan that have not
been committed to be released. Preferred dividends include undeclared
or unpaid dividends of the Company. Net income is reduced for
preferred dividends for purposes of the calculation.
The following table reflects the calculation of the earnings per
share (in thousands except per share data):
Quarters ended June 30,
1997 1996
-----------------------
Earnings from operations $ 29,198 40,005
Less dividends
on preferred shares 5,255 3,241
-----------------------
Net earnings for per
share calculation $ 23,943 36,764
=======================
Earnings per common share $ 1.09 1.15
========================
Weighted average common
shares outstanding 21,879,156 32,015,301
=========================
7. RELATED PARTIES
During the quarter ended June 30, 1997, a subsidiary held various
senior and junior notes with SAC Holding corporation and its
subsidiaries (SAC Holdings). The voting common stock of SAC Holdings
is held by Mark. V. Shoen, a major stockholder of the Company.
The Company's subsidiary received principal payments of $911,000
and interest payments of $1,263,000 from SAC Holdings during the
quarter.
The Company currently manages the properties owned by SAC
Holdings pursuant to a management agreement, under which the Company
receives a management fee equal to 6% of the gross receipts from the
properties. The Company received management fees of $434,000 during
the quarter ended June 30, 1997. The management fee percentage is
consistent with the fees received by the Company for other properties
managed by the Company.
8. NEW ACCOUNTING STANDARDS
On April 1, 1995, the Company implemented Statement of Position
93-7, "Reporting on Advertising Costs", issued by the Accounting
Standards Executive Committee in December 1993. This statement of
position provides guidance on financial reporting on advertising costs
in annual financial statements. The Company is currently reviewing
its implementation procedures.
Other pronouncements issued by the Financial Standards Board with
future effective dates are either not applicable or not material to
the consolidated financial statements of the Company.
<PAGE> 16
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
9. SUBSEQUENT EVENTS
On July 7, 1997, the Company executed an agreement with Sophia
Shoen whereby the Company paid $1,250,000 to Sophia Shoen to settle an
arbitration proceeding entitled JAMS-ENDISPUTE Link No. 940517195 and
--------------
to terminate a Share Repurchase and Registration Right Agreement.
Sophia Shoen is a major stockholder and the sister of Edward J., James P.,
and Paul F. Shoen, who are major stockholders and directors of the Company.
In July 1997, the Company extinguished $76,000,000 of its long-
term notes originally due in fiscal 1999 through fiscal 2002. The
above transactions resulted in an extraordinary loss of $4,134,000,
net of tax of $2,275,000 ($0.19 per share).
On August 5, 1997, the Company declared a cash dividend of
$3,241,000 ($0.53125 per preferred share) to preferred stockholders of
record as of August 15, 1997.
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table shows industry segment data from the Company's
three primary industry segments: Moving and Storage Operations,
Property/Casualty Insurance and Life Insurance. Moving and Storage
Operations is composed of the operations of U-Haul, which consists of
the rental of trucks, automobile-type trailers and self-storage space
and sales of related products and services and AREC. Property/Casualty
Insurance is composed of the operations of RWIC, which operates in
various property and casualty lines. Life insurance is composed of the
operations of Oxford, which operates in various life, accident and
health and annuity lines. The Company's U-Haul Moving and Storage
Operations are seasonal and proportionately more of the Company's
revenues and net earnings are generated in the first and second
quarters each fiscal year (April through September).
Moving and Property/ Adjustments
Storage Casualty Life and
Operations Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------
(in thousands)
Quarter ended
June 30, 1997
Revenues:
Outside $ 329,202 37,140 9,915 - 376,257
Intersegment - 4,679 502 (5,181) -
----------------------------------------------------------
Total revenues 329,202 41,819 10,417 (5,181) 376,257
==========================================================
Operating profit $ 53,734 5,023 2,051 - 60,808
===========================================
Interest expense 16,688
------
Pretax earnings
from operations $ 44,120
======
Identifiable assets $1,933,630 604,540 601,856 (304,290) 2,835,736
==========================================================
Moving and Property/ Adjustments
Storage Casualty Life and
Operations Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------
(in thousands)
Quarter ended
June 30, 1996
Revenues:
Outside $ 317,609 31,983 11,039 - 360,631
Intersegment - 940 391 (1,331) -
----------------------------------------------------------
Total revenues 317,609 32,923 11,430 (1,331) 360 631
==========================================================
Operating profit $ 63,308 5,995 2,955 - 72,258
===========================================
Interest expense 7,971
-------
Pretax earnings
from operations $ 64,287
=======
Identifiable assets $1,774,805 632,815 620,474 (318,222) 2,709,872
==========================================================
<PAGE> 18
QUARTER ENDED JUNE 30, 1997 VERSUS QUARTER ENDED JUNE 30, 1996
Moving and Storage Operations
Revenues consist of rental revenues and net sales.
Total rental revenue increased by $11.3 million, 4.3%, to $272.6
million during the first quarter of fiscal 1998. The increase was
primarily due to increased fleet activity.
Net sales revenues were $56.7 million in the first quarter of
fiscal 1998, which represents a 1.3% increase from the first quarter
of fiscal 1997 net sales of $56.0 million. Revenue realized from the
sale of moving support items (i.e. boxes, etc.) and propane was $1.7
million higher for the first quarter of fiscal 1998. These gains
were partially offset by a $0.5 million decrease in gasoline sales and
a $0.5 million decrease in outside repair income.
Cost of sales was $31.4 million for the first quarter of fiscal
1998, as compared to $31.6 million for the same period in fiscal 1997.
Higher material costs for hitches were offset by a reduction in moving
support sales item costs and a reduction in gasoline costs related to
decreased gasoline sales.
Operating expenses increased to $223.6 million in the first
quarter of fiscal 1998 from $203.9 million in the first quarter of
fiscal 1997, an increase of 9.6%. During the first quarter of
fiscal 1998, leasing activity increased $5.3 million and personnel
costs increased $3.5 million in conjunction with higher rental and
sales activity. Increased insurance costs of $2.7 million were due to
increased cost of risk and an increase in the rental fleet.
Maintenance and utility costs of the operating facilities increased by
$1.5 million. All other operating expenses increased in the aggregate
by $6.7 million.
Depreciation expense for the first quarter of fiscal 1998 was
$20.5 million, as compared to $18.8 million during the same period of
the prior year. In accordance with Company policy, $11.9 million of
betterments related to rental trucks were capitalized.
Property and Casualty
RWIC's gross premium writings for the quarter ended March 31,
1997 were $33.1 million, as compared to $48.1 million for the quarter
ended March 31, 1996. This represents a decrease of $15.0 million, or
31.2%. As in prior periods, the rental industry market accounts for a
significant share of total premiums, approximately 38.1% and 27.7% in
the first quarter 1997 and 1996, respectively. These writings include
U-Haul customers, fleetowners and U-Haul as well as other rental
industry insureds with similar characteristics. RWIC continues
underwriting professional reinsurance via broker markets. Premiums
in this area decreased during first quarter 1997 to $14.7 million or
44.5% of total gross premiums, from comparable 1996 figures of $24.1
million or 50.2% of total premium. This decrease can be primarily
attributed to a written premium accrual procedural change. At March
31, 1997 only premiums due in the present period are accrued while at
March 31, 1996, premiums due in future accounting periods were
accrued. Premium writings in selected general agency lines were 17.4%
of total gross written premiums in the quarter ended March 31, 1997 as
compared to 22.1% in the same period of 1996. This decrease resulted
from the cancellation of a general agency agreement in November 1996.
RWIC continues its direct multiple peril coverage of various
commercial properties and businesses in 1997. These premiums
accounted for 13.3% of the total gross written premiums for the
quarter ended March 31, 1997 as compared to 7.1% for the same period
in 1996. The increase is the result of planned business expansion.
Net earned premiums increased $9.2 million, or 36.6%, to $34.5
million for the quarter ended March 31, 1997, compared with premiums
of $25.2 million for the quarter ended March 31, 1996. The premium
increase was primarily due to planned business expansion in the rental
industry and direct multiple peril markets, offset by decreases in
assumed treaty reinsurance and general agency lines. As mentioned
previously, the assumed treaty reinsurance decrease is a result of the
change in accrual procedure which eliminated future premiums and the
decrease in general agency lines resulted from the cancellation of a
general agency agreement.
Underwriting expenses incurred were $38.3 million for the quarter
ended March 31, 1997, an increase of $9.4 million, or 32.5% over 1996.
Comparable underwriting expenses incurred for the first quarter of
1996 were $28.9 million. The increase is attributed to increased
commission expense and losses incurred. Losses incurred increased in
the rental industry, general agency lines, and assumed treaty
reinsurance segments, but were partially offset by a decrease in the
direct multiple peril markets.
<PAGE> 19
Net investment income was $7.3 million for the quarter ended
March 31, 1997, a decrease of 5.8% over 1996 net investment income of
$7.7 million. The decrease is due to a planned restructuring of the
portfolio.
RWIC completed the first quarter of 1997 with income before tax
expense of $5.0 million as compared to $6.0 million for the comparable
period ended March 31, 1996. This represents a decrease of $1.0
million, or 16.2% over 1996. Increased premium earnings were offset
by increased underwriting expenses and decreased investment income
discussed above.
Life Insurance
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $3.9 million for the quarter ended March 31, 1997, a
decrease of $1.3 million, or 25.0% over the same period in 1996 and
accounted for 66.1% of Oxford's premiums for the period. These
premiums are primarily from term life insurance and deferred annuity
contracts that have matured. Decreases in premiums are primarily from
these matured reinsurance contracts.
Premiums from Oxford's direct lines before intercompany
eliminations were $2.0 million for the quarter ended March 31, 1996,
an increase of $0.1 million (5.3%) from the same period during 1996.
This increase in direct premium is primarily attributable to the
Company's disability and group life business ($0.6 million in
premium). Oxford's direct business related to group life and
disability coverage issued to employees of the Company for the quarter
ended March 31, 1996 accounted for 10.2% of premiums. Other direct
lines, including credit life and health business, accounted for 23.7%
of Oxford's premiums for the quarter ended March 31, 1997
Net investment income before intercompany eliminations was $4.4
million and $4.9 million for the quarters ended March 31, 1997 and
1996 respectively. This decrease is due to a lower asset base
resulting from the dividend paid to the Company during December 1996.
Gains (losses) on the disposition of fixed maturity investments were
immaterial for the quarter ended March 31, 1997 and $(0.5) million for
the quarter ended March 31, 1996.
Benefits and expenses incurred were $8.4 million for the quarter
ended March 31, 1997, a decrease of 0.1% over 1996. Comparable
benefits and expenses incurred for the same quarter in 1996 were $8.5
million. This decrease is primarily due to a decrease in the reserves
and amortization of deferred acquisition costs, partially offset by
increases in death benefits.
Operating profit before tax and intercompany eliminations
decreased by $0.9 million, or approximately 30.0%, in the first
quarter of 1997 to $2.1 million, primarily due to the decrease in
premium income and a lower asset base attributable to the dividend
paid to the Company during December 1996, partially offset by a
decrease in benefits and expenses.
Interest Expense
Interest expense was relatively stable at $20.2 million for the
quarter ended June 30, 1997, as compared to $18.9 million for the
quarter ended June 30, 1996. Higher average debt levels outstanding
during the current quarter attributed to the increase.
The decline in interest income reflects a reduced level of
interest income for mortgage loans on storage properties sold at the
end of first quarter of fiscal 1997.
Consolidated Group
As a result of the foregoing, pretax earnings of $44.1
million were realized in the quarter ended June 30, 1997, as compared
to $64.3 million for the same period in 1996. After providing for
income taxes, net earnings for the quarter ended June 30, 1997 were
$29.2 million, as compared to $40.0 million for the same period of the
prior year.
<PAGE> 20
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the
nine quarters in the period beginning April 1, 1995 and ending June
30, 1997. 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
1997
---------------
Total revenues $ 376,257
Net earnings (loss) 29,198
Weighted average common
shares outstanding 21,879,156
Net earnings (loss)
per common share (1) 1.09
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1996 1996 1996 1997
----------------------------------------------
Total revenues $ 360,631 417,223 320,583 308,105
Earnings from operations
before extraordinary loss
on early extinguishment
of debt (3) - 39,741 (9,538) -
Net earnings (loss) 40,005 37,737 (9,853) (16,024)
Weighted average common
shares outstanding (2) 32,015,301 27,675,192 20,359,873 21,868,241
Earnings from operations
before extraordinary loss
on early extinguishment
of debt per common share (3) - 1.29 (0.72) -
Net earnings (loss) per
common share (1) (2) (3) 1.15 1.22 (0.74) (0.97)
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1995 1995 1995 1996
----------------------------------------------
Total revenues $ 340,359 389,861 313,063 298,656
Net earnings (loss) 15,177 35,332 7,701 2,184
Weighted average common
shares outstanding (2) 37,958,426 37,931,825 36,796,961 32,554,458
Net earnings (loss) per
common share (1) (2) 0.31 0.85 0.13 (0.04)
________________
(1)Net earnings (loss) per common share amounts were computed after
giving effect to the dividends on the Company's Preferred Stock.
(2)Reflects the acquisition of treasury shares acquired pursuant to
the Shoen Litigation as discussed in Note 14 of the Consolidated
Financial Statements in Item 8 of the Company's Form 10-K for the
year ended March 31, 1997.
(3)During second quarter of fiscal year 1997, the company
extinguished $76.3 million of debt and $86.2 million of its long-
term notes originally due in fiscal 1997 through fiscal 1999.
This resulted in an extraordinary loss of $2.3 million, net of tax
of $2.4 million ($0.09 per share).
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
Moving and Storage Operations
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. At June 30, 1997, net
property, plant and equipment represented approximately 70.1% of total
U-Haul assets and approximately 47.7% of consolidated assets. In the
first quarter of fiscal 1998, capital expenditures were $210.4
million, as compared to $61.7 million in the first quarter of fiscal
1997, reflecting expansion of the rental truck fleet, and real
property acquisitions. These acquisitions were funded with internally
generated funds from operations and debt financings.
Cash flows from operations were $67.5 million in the first
quarter of fiscal 1998, as compared to $193.7 million in the first
quarter of fiscal 1997. The decrease results from the sale of
mortgage note receivables for proceeds of $83.5 million for the
quarter ended June 30, 1996, along with decreased deferred tax and
decreased earnings.
Property and Casualty
Cash flows from operating activities were $1.5 million and $(0.2)
million for the quarters ended March 31, 1997 and 1996, respectively.
This change is due to decreased paid losses recoverable, accounts
receivable, and due from affiliates, as well as a smaller loss and
expense reserve increase and unearned premium decrease than that for
the quarter ended March 31, 1996.
RWIC's short-term investment portfolio was $1.6 million at March
31, 1997. This level of liquid assets, combined with budgeted cash
flow, is adequate to meet periodic needs as well as any near term
shortfall. The balances reflect funds in transition from maturity
proceeds to long-term investments. The structure of the long-term
portfolio is designed to match future liability cash needs. Capital
and operating budgets allow RWIC to schedule cash needs in accordance
with investment and underwriting proceeds.
RWIC maintains a diversified securities investment portfolio,
primarily in bonds at varying maturity levels with 94.9% of the fixed-
income securities portfolio consisting of investment grade securities.
The maturity distribution is designed to provide sufficient liquidity
to meet future cash needs. Current liquidity remains strong, with
RWIC having 5.4% more invested assets than total liabilities.
Stockholder's equity increased 0.4% from $192.3 million at
December 31, 1996 to $193.0 million at March 31, 1997. 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.
Life Insurance
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary uses
of cash are operating costs and benefit payments to policyholders.
Matching the investment portfolio to the cash flow demands of the
types of insurance being written is an important consideration.
Benefit and claim statistics are continually monitored to provide
projections of future cash requirements.
Cash provided by operating activities were $11.0 million and $4.1
million for the quarters ended March 31, 1997 and 1996, respectively.
Cash flows provided (used) by financing activities were $(9.3) million
and $12.5 million for the quarters ended March 31, 1997 and 1996,
respectively. Cash flows from financing activities result from
deferred annuity sales and annuitizations, which have the effect of
increasing and decreasing cash flows, respectively. In addition to
cash flow from operating and financing activities, a substantial
amount of liquid funds is available through Oxford's short-term
portfolio. At March 31, 1997 and 1996, short-term investments
amounted to $6.5 million and $12.0 million, respectively. Management
believes that the overall sources of liquidity will continue to meet
foreseeable cash needs.
Stockholder's equity of Oxford decreased to $73.7 million in 1997
from $96.1 million in 1996 as a result of a dividend paid to the
Company during December 1996.
<PAGE> 22
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 Oxford, such amount is $0.6 million. In addition, the
amount of dividends that can be paid to stockholders by insurance
companies domiciled in the State of Arizona is limited. Any dividend
in excess of the limit requires prior regulatory approval. Statutory
surplus that can be distributed as dividends without prior regulatory
approval is zero at March 31, 1997. These restrictions are not
expected to have a material adverse effect on the ability of the
Company to meet its cash obligations.
Consolidated Group
During each of the fiscal years ending March 31, 1998, 1999, and
2000, U-Haul estimates gross capital expenditures will average
approximately $250-$300 million as a result of the expansion of the
rental truck fleet and self-storage locations. This level of capital
expenditures, combined with an average of approximately $75.0 million
in annual long-term debt maturities during this same period, are
expected to create annual average funding needs of approximately $325-
375 million. Management estimates that U-Haul will fund between 75%
and 88% of these requirements with internally generated funds,
including proceeds from the disposition of older trucks and other
asset sales. The remainder of the anticipated capital expenditures
are expected to be financed through existing credit facilities, new
debt placements, lease fundings, and equity offerings.
Credit Agreements
The Company's operations are funded by various credit and
financing arrangements, including unsecured long-term borrowings,
unsecured medium-term notes, and revolving lines of credit with
domestic and foreign banks. Principally to finance its fleet of
trucks and trailers, the Company routinely enters into sale and
leaseback transactions. As of June 30, 1997, the Company had $1,035.3
million in total notes and loans payable outstanding, as compared with
$983.6 million at March 31, 1997, and $756.1 million at June 30, 1996.
Unutilized committed lines of credit are $260.0 million at June 30,
1997.
Certain of the Company's credit agreements contain restrictive
financial and other covenants, including, among others, covenants with
respect to incurring additional indebtedness, maintaining certain
financial ratios, and placing certain additional liens on its
properties and assets. At June 30, 1997, the Company was in
compliance with these covenants.
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 a subsidiary of the Company
to repurchase such preferred stock at the option of such holders or
upon the occurrence of any event or events without the consent of its
lenders.
<PAGE> 23
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On July 7, 1997, Sophia M. Shoen, a major stockholder of the
Company, executed a settlement agreement with the Company resolving a
lawsuit in the Second Judicial District Court of the State of Nevada,
Case No. CV96-01628 arising out of an arbitration proceeding entitled
JAMS-ENDISPUTE Link No. 940517195. In the arbitration proceeding,
- --------------
Sophia Shoen alleged that the Company breached her Share Repurchase
and Registration Rights Agreement, dated as of May 1, 1992 (the Rights
Agreement), with the Company by failing to timely register the sale of
her shares of Common Stock which were sold to the public in November
1994. Pursuant to the settlement agreement, (i) the Company paid
Sophia M. Shoen $1.25 million, (ii) the Rights Agreement was
terminated, (iii) Sophia M. Shoen released the Company and others from
any liability relating to the foregoing proceedings and the Rights
Agreement, (iv) the Company released Sophia M. Shoen and others from
any liability relating to the foregoing proceedings and the Rights
Agreement and (v) the shares of Common Stock held by Sophia M. Shoen
were released from a stockholder agreement covering approximately 70%
of the Company's Common Stock
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
3.1 Restated Articles of Incorporation (1)
3.2 Restated By-Laws of AMERCO as of August 27, 1996 (2)
10.1 Settlement Agreement between AMERCO and Sophia Shoen
10.2 Amended and Restated Side Agreement, dated as of June 1, 1997
27 Financial Data Schedule
b. Reports on Form 8-K.
No report on Form 8-K was filed for the quarter ended June 30, 1997.
_____________________________________
(1) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, file no. 0-7862.
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996, file no. 0-7862.
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
U-Haul International, Inc.
___________________________________
(Registrant)
Dated: August 19, 1997 By: /S/ DONALD W. MURNEY
___________________________________
Donald W. Murney, Treasurer
(Principal Financial Officer)
<PAGE>
SETTLEMENT AGREEMENT
--------------------
THIS SETTLEMENT AGREEMENT ("Agreement") is made and entered
into as of April 24, 1997, by and between AMERCO, a Nevada
corporation ("AMERCO" or the "Company"), and Sophia M. Shoen
("Sophia").
RECITALS
--------
WHEREAS, Sophia previously initiated a private arbitration
against AMERCO, JAMS/ENDISPUTE Link No. 940517195 (the
"Arbitration"), alleging that AMERCO had breached that certain
Share Repurchase and Registration Rights Agreement dated as of
May 1, 1992 (the "Rights Agreement"); and
WHEREAS, Sophia previously initiated litigation against
AMERCO in the Second Judicial District Court of the State of
Nevada, Case No. CV 96-01628 (the "Nevada Action"), arising out
of the Arbitration; and
WHEREAS, AMERCO previously initiated an appeal to the Nevada
Supreme Court, Case No. 30110 (the "Nevada Appeal"), arising out
of the Nevada Action; and
WHEREAS, AMERCO has denied and continues to deny any
wrongful conduct on its part in connection with the Rights
Agreement, as asserted in the Arbitration and related court
proceedings referred to above; and
WHEREAS, the parties hereto desire to resolve all disputes
and claims currently existing between them in connection with the
Rights Agreement, the Arbitration, the Nevada Action and the
Nevada Appeal; and
<PAGE>
WHEREAS, by resolving such disputes, Sophia and Sophia's
employee, Margie Van Nort, will be spared the inconvenience and
expense of being called upon to be deposed, to testify and to
produce records or documents in response to subpoenas or other
discovery procedures.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, and intending to be legally bound, the
parties agree as follows:
AGREEMENT
---------
1. Payment. Upon execution of this Agreement and the
-------
stipulations of dismissal hereinafter referred to, by all
intended signatories to each, AMERCO shall pay Sophia the total
sum of One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00).
2. Dissolution of the Rights Agreement. Sophia and AMERCO
-----------------------------------
agree that the Rights Agreement and all rights, restrictions and
obligations thereunder are dissolved, canceled and terminated in
their entirety.
3. Release by Sophia of Claims Asserted In or Arising Out
------------------------------------------------------
of the Rights Agreement, the Arbitration, the Nevada Action or
- --------------------------------------------------------------
the Nevada Appeal. Sophia does hereby release and forever
- -----------------
discharge AMERCO and its past and present officers, directors,
attorneys, representatives, employees, affiliates, agents,
servants, insurers, predecessors in interest, successors, heirs,
executors, indemnitors and assigns, all of whom are recognized as
third-party beneficiaries to this Agreement, of and from any and
all manner of actions, causes of action, suits, claims, demands,
obligations, liability, damages, costs and expenses of any nature
whatsoever, known or unknown, anticipated or unanticipated,
<PAGE>
suspected or unsuspected, which Sophia had, now has or which may
hereafter accrue, upon or by reason of any matter, cause or thing
which was or could have been asserted in, which arises out of; or
which is related to the Rights Agreement, the Arbitration, the
Nevada Action and/or the Nevada Appeal.
4. Release by AMERCO of Claims Asserted In or Arising Out
------------------------------------------------------
of the Rights Agreement, the Arbitration, the Nevada Action or
- --------------------------------------------------------------
the Nevada Appeal. AMERCO does hereby release and forever
- -----------------
discharge Sophia and her attorneys, representatives, employees,
affiliates, agents, servants, insurers, predecessors in interest,
successors, heirs, executors, indemnitors and assigns, all of
whom are recognized as third-party beneficiaries to this
Agreement, of and from any and all manner of actions, causes of
action, suits, claims, demands, obligations, liability, damages,
costs and expenses of any nature whatsoever, known or unknown,
anticipated or unanticipated, suspected or unsuspected, which
AMERCO had, now has or which may hereafter accrue, upon or by
reason of any matter, cause or thing which was or could have been
asserted in, which arises out of, or which is related to the
Rights Agreement, the Arbitration, the Nevada Action and/or the
Nevada Appeal.
5. Dismissal of the Arbitration, the Nevada Action and the
-------------------------------------------------------
Nevada Appeal. The Arbitration, the Nevada Action and the Nevada
- -------------
Appeal shall each be dismissed with prejudice, each party to bear
its own costs and fees, all in accordance with the forms of
Stipulation for Dismissal attached hereto as Exhibits 1, 2, and
3, respectively, which each party shall cause its counsel to sign
and file with the appropriate court or arbitral body.
<PAGE>
6. Authority. Each party for itself; its heirs, personal
---------
representatives, successors and assigns, hereby represents and
warrants that it has the full capacity and authority to enter
into, execute, deliver and perform this Agreement, that such
execution, delivery and performance does not violate any
contractual or other obligation by which it is bound, and that
this Agreement constitutes an agreement binding upon, and
enforceable against, that party. Each person signing below on
behalf of an entity hereby personally guarantees that he/she has
the authority to sign this document on behalf of the entity for
which he/she is signing and that his/her signature legally binds
the entity to the terms hereof.
7. Circumstances of Negotiation. The parties to this
----------------------------
Agreement recognize and hereby acknowledge that the negotiations
leading up to this Agreement were conducted regularly and at
arms' length. The parties to this Agreement represent that
neither they nor the attorneys acting on their behalf, have made
any statement, representation, or promise regarding any fact
relied upon by any other party in entering into this Agreement,
and they have not relied upon any statement, representation, or
promise made by any other party, except for those statements,
representations, and promises contained in this Agreement. The
undersigned parties further represent and declare that they have
read this Agreement in its entirety, and that they fully
understand and voluntarily adopt as their own the representations
and statements made herein.
8. No Admission of Wrongdoing. The parties to this
--------------------------
Agreement, and each of them, understand and agree that this is a
compromise settlement of disputed claims
<PAGE>
and that the promises of this Agreement shall not be construed to
be an admission of any liability or obligation whatsoever by any
party to any other party or any other person whomsoever.
9. Entire Agreement. This Agreement is the entire
----------------
agreement between the parties hereto relating the subject matter
hereof and, as such, supersedes all prior oral and written
agreements or understandings between the parties regarding such
matters. This Agreement may not hereafter be modified except in a
writing signed by all parties hereto.
10. Counterparts. For the convenience of the parties, this
------------
Agreement may be executed by the parties in separate
counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts together constitute but
one and the same instrument. All signatures need not be on the
same counterpart.
11. Headings. All headings and titles for convenience only
--------
and neither limit, amplify or in any way modify the provisions of
the Agreement itself.
12. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and
their respective personal representatives, heirs and devisees.
This Agreement or any rights or obligations under it may not be
assigned by any party without the prior written consent of the
parties.
13. Governing Law. This Agreement is to be construed and
-------------
interpreted in
<PAGE>
accordance with the laws of the State of Arizona.
IN WITNESS WHEREOF the undersigned have executed this
Agreement as of the date set forth opposite their names below.
AMERCO, a Nevada corporation
Dated: July 7, 1997 By: /s/ Edward J. Shoen
--------------------- ----------------------------
Edward J. Shoen, President
Dated: July 7, 1997 /s/ Sophia M. Shoen
--------------------- ----------------------------
Sophia M. Shoen
<PAGE>
AMENDED AND RESTATED SIDE AGREEMENT
This Amended and Restated Side Agreement (the "Agreement")
is entered into as of June 1, 1997, by and among AMERCO, a Nevada
corporation ("AMERCO"), Blue Ridge Investments, L.L.C., a
Delaware limited liability company ("Blue Ridge"), and
NationsBank Corporation, a North Carolina corporation
("NationsBank").
WHEREAS, AMERCO and Blue Ridge have entered into that
certain Series B Preferred Stock Purchase Agreement dated as of
August 30, 1996 (the "Stock Purchase Agreement"), providing for
the purchase by Blue Ridge from AMERCO of shares of AMERCO's
Series B Preferred Stock, no par value (the "Series B
Preferred"), and certain other agreements and transactions on
August 30, 1996 and October 1, 1996 (the Stock Purchase Agreement
and such other agreements and transactions are collectively
referred to herein as the "Transaction"), as revised by that
certain Side Agreement dated as of October 29, 1996 (the "Side
Agreement") and letter agreements dated as of December 26, 1996
and March 25, 1997 (the "Letter Agreements");
WHEREAS, Blue Ridge (or any subsequent holder of the Series
B Preferred) has the right to convert, upon the occurrence of
certain events described in the Certificate of Designation of
Preferences and Rights of Series B Preferred Stock of AMERCO (the
"Certificate of Designation"), all of the Series B Preferred into
4,000,000 shares (subject to adjustment) of AMERCO's Series B
Common Stock or all of the shares of capital stock of Picacho
Peak Investments Co., a Nevada corporation ("Picacho");
WHEREAS, pursuant to the Certificate of Designation, Blue
Ridge (or any subsequent holder of the Series B Preferred) also
has the right to convert the Series B Preferred as described
above on August 31, 1997 and during the first ten business days
of each fiscal quarter beginning after August 31, 1997;
WHEREAS, the provisions of the Certificate of Designation
permitting conversion of the Series B Preferred into Picacho on
August 31, 1997 and during the first ten business days of each
fiscal quarter beginning after August 31, 1997 would result in an
adverse accounting treatment of the Transaction;
WHEREAS, AMERCO has advised Blue Ridge that Picacho desires
to make one or more loans (individually and collectively, the
"Loan") to AMERCO in the aggregate principal amount of
$50,000,000, which Loan requires the consent of Blue Ridge and
NationsBank;
WHEREAS, the parties desire to amend and restate the Side
Agreement for the purpose of continuing certain of the agreements
contained in the Side Agreement, amending certain other of the
agreements contained in the Side Agreement and adding additional
agreements to those contained in the Side Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
1. The Side Agreement and the Letter Agreements are
terminated and replaced in their entirety by this Agreement. All
capitalized terms used in this Agreement, unless otherwise
defined herein, shall have the same meaning as in Stock Purchase
Agreement.
2. Blue Ridge and NationsBank agree that, notwithstanding
the provisions of Section 3(a) of the Certificate of
Designation, neither party shall convert, pursuant to Section
3(a)(i) or Section 3(a)(ii) of the Certificate of Designation,
the Series B Preferred into any or all of the capital stock of
Picacho or into any shares of AMERCO's Series B Common Stock.
Nothing in this Agreement shall limit Blue Ridge's or
NationsBank's ability to convert the Series B Preferred under any
provision other than Section 3(a)(i) or Section 3(a)(ii) of the
Certificate of Designation.
3. AMERCO, Blue Ridge and NationsBank agree that, in
addition to the provisions of Section 3(a) of the Certificate of
Designation, Blue Ridge and NationsBank (or any subsequent holder
of the Series B Preferred) shall have the right to convert any or
all of the Series B Preferred into shares of AMERCO's Series B
Common Stock (a) on January 1, 1998 and for 10 Business Days
after January 1, 1998; (b) on July 1, 1998 and for 10 Business
Days after July 1, 1998; and (c) on December 1, 1998 and for 10
Business Days after December 1, 1998.
4. AMERCO, Blue Ridge and NationsBank agree that the
provisions of the Summary of Indicative Terms and Conditions,
attached to that certain letter from NationsBank of Texas, N.A.
to AMERCO dated July 16, 1996, creating any obligation of the
Arranger (as defined therein) to rebate any portion of its fees
are hereby deleted, voided and rendered unenforceable.
5. Blue Ridge and NationsBank agree that, as a condition
of any transfer of the Series B Preferred to a third party, such
third party shall agree to be bound by the terms of this
Agreement. Blue Ridge and NationsBank agree to the placement of
the following legend on the stock certificate representing the
Series B Preferred:
"The securities evidenced hereby are subject to the terms of
that certain Amended and Restated Side Agreement, dated as of
June 1, 1997, which limits the ability of the holder of the
securities to convert the securities."
6. AMERCO, Blue Ridge and NationsBank agree that Section
4.8 of the Stock Purchase Agreement is deleted and amended to
read in its entirety as follows:
4.8 Ownership and Operation of Picacho. The
--------------------------------------
Corporation will:
(a) at all times own all of the outstanding
shares, and all interest in the revenues, income, assets and
business, of Picacho (except in the event of a conversion of the
Series B Preferred into the shares of Picacho);
(b) cause Picacho to engage in no business or
operations and incur no liabilities or obligations except as
permitted by its Articles of Incorporation;
<PAGE>
(c) cause the Corporation at all times to have
sufficient funds legally available for redemption of all of the
Series B Preferred;
(d) cause Picacho at all times to invest all of
its assets with an investment manager satisfactory to the Holder,
provided that Picacho may loan to AMERCO from Picacho's assets up
to $50,000,000 in principal amount outstanding from time to time,
which amount is not required to be invested with an investment
manager satisfactory to the Holder during the period that it is
loaned to AMERCO;
(e) cause Picacho at all times to maintain a
stockholders' equity of at least the product of (i) the number of
shares of Series B Preferred outstanding and (ii) the Conversion
Value.
(f) cause Picacho to maintain its Articles of
Incorporation and Bylaws in effect as at June 1, 1997.
7. AMERCO, Blue Ridge and NationsBank agree that the
Letter Agreement dated as of August 30, 1996 between NationsBank
of Texas, N.A. and Picacho Peak Investments Co. is to be
terminated and replaced by a letter in substantially the form
attached to this Agreement as Exhibit A.
8. AMERCO agrees that:
(a) The changes in the Transaction effected by this
Agreement shall not be deemed a consent to the amendment of,
departure from or waiver of (i) any of the covenants in Section
4.8 of the Stock Purchase Agreement, except as specifically
stated in Section 6 of this Agreement; (ii) any other covenant or
condition in any Transaction Document; or (iii) any Event of
Noncompliance that otherwise may arise as a result of the Loan.
The failure to comply with any of the covenants or conditions
contained in any Transaction Document shall constitute an Event
of Noncompliance;
(b) Except as specifically set forth herein, all terms
and provisions of the Transaction Documents, all rights of Blue
Ridge and NationsBank and all obligations of AMERCO and Picacho
thereunder shall remain in full force and effect, are ratified
and confirmed in all respects, and shall continue to be legal,
valid, binding and enforceable in accordance with their terms;
(c) Before any Loan is made by Picacho to AMERCO,
AMERCO will provide Blue Ridge and NationsBank a certificate of
an authorized officer to the effect that:
(i) immediately before and upon making the
Loan, the representations and warranties made by AMERCO in
Section 2 of the Stock Purchase Agreement are and will continue
to be true and correct in all material respects at and as of the
date the Loan is made;
<PAGE>
(ii) immediately before and upon making the
Loan, all covenants, agreements, and conditions contained in the
Stock Purchase Agreement to be performed by AMERCO on or prior to
the date the Loan is made have been performed or complied with
and will continue to be performed or complied with in all
material respects; and
(iii) the making of the Loan has been duly
authorized by all necessary action on the part of AMERCO and
Picacho and does not and will not: (A) violate any provision of
law applicable to AMERCO or Picacho, the certificate of
incorporation or bylaws of AMERCO or Picacho or any order,
judgment, or decree of any court or agency of government binding
upon AMERCO or Picacho; (B) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of AMERCO or
Picacho; (C) result in or require the creation or imposition of
any material lien upon any of the properties or assets of AMERCO
or Picacho; or (D) require any approval or consent of any Person
under any material contractual obligation of AMERCO or Picacho
except for such approvals and consents which have been obtained.
(e) AMERCO will repay the Loan in full on or before
December 1, 1998 and Picacho will deliver the amounts received
from such repayment directly to NationsBank of Texas, N.A. for
investment in accordance with the Investment Letter attached as
Exhibit A to this Agreement, subject to conversion or redemption
of the Series B Preferred.
(d) The failure of AMERCO or Picacho to comply with
any of the covenants contained in this Agreement shall constitute
an Event of Noncompliance.
9. TO INDUCE BLUE RIDGE AND NATIONSBANK TO AGREE TO THE
TERMS OF THIS AGREEMENT, AMERCO REPRESENTS AND WARRANTS THAT AS
OF THE DATE OF ITS EXECUTION OF THIS AGREEMENT THERE ARE NO
CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS
OBLIGATION UNDER THE TRANSACTION DOCUMENTS AND IN ACCORDANCE
THEREWITH IT WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE
DATE OF ITS EXECUTION OF THIS AGREEMENT.
10. AMERCO also represents and warrants to Blue Ridge and
NationsBank that the following statements are true, correct and
complete:
(a) after giving effect to this Agreement, no Event of
Noncompliance has occurred and is continuing;
(b) after giving effect to this Agreement, the
representations and warranties set forth in the Transaction
Documents are true and correct in all material respects on and as
of the date hereof with the same effect as though made on and as
of such date except with respect to any representations and
warranties limited by their terms to a specific date; and
<PAGE>
(c) the execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the
part of AMERCO and does not and will not: (1) violate any
provision of law applicable to AMERCO or Picacho, the certificate
of incorporation or bylaws of AMERCO or Picacho or any order,
judgment, or decree of any court or agency of government binding
upon AMERCO or Picacho; (2) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of AMERCO or
Picacho; (3) result in or require the creation or imposition of
any material lien upon any of the properties or assets of AMERCO
or Picacho; or (4) require any approval or consent of any Person
under any material contractual obligation of AMERCO or Picacho
except for such approvals and consents which have been obtained.
11. Blue Ridge and NationsBank agree to execute and deliver
such further agreements and instruments, and take such further
action as may be requested by AMERCO to carry out the provisions
and purposes of this Agreement and to cause all subsequent
holders of the Series B Preferred to be bound by the terms of
this Agreement.
12. AMERCO agrees to pay (or cause to be paid) all costs
and expenses of Blue Ridge and NationsBank in connection with the
preparation, negotiation, execution, and delivery of this
Agreement and all other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this
Agreement, as provided in Section 9.1 of the Stock Purchase
Agreement. Concurrently with the execution of this Agreement,
AMERCO has paid to NationsBank of Texas, N.A. or its affiliate a
fee of $1,000,000
13. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS
WHETHER WRITTEN OR ORAL RELATING TO THE SUBJECT MATTER HEREOF,
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF
THE PARTIES HERETO.
14. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina
without regard to conflicts of law principles.
15. This Agreement may be executed in one or more
counterparts and in telecopied counterparts, each of which shall
be deemed an original but all of which together shall constitute
one and the same agreement.
<PAGE>
The foregoing Agreement is hereby executed as of the date
first above written.
AMERCO
By: /S/ GARY V. KLINEFELTER
----------------------------
Name: GARY V. KLINEFELTER
--------------------------
Title: SECRETARY
-------------------------
BLUE RIDGE INVESTMENTS, L.L.C.
By: /S/ GEORGE C. CARP
----------------------------
Name: GEORGE C. CARP
--------------------------
Title: VP FINANCE
-------------------------
NATIONSBANK CORPORATION
By: /S/ JOHN E. MACK
----------------------------
Name: JOHN E. MACK
--------------------------
Title: SR. VICE PRESIDENT, TREASURER
-------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 33,178
<SECURITIES> 0
<RECEIVABLES> 242,214<F1>
<ALLOWANCES> 0
<INVENTORY> 62,926
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,458,280
<DEPRECIATION> 1,106,084
<TOTAL-ASSETS> 2,835,736
<CURRENT-LIABILITIES> 0
<BONDS> 1,035,340
0
0
<COMMON> 10,563
<OTHER-SE> 609,817
<TOTAL-LIABILITY-AND-EQUITY> 2,835,736
<SALES> 56,719
<TOTAL-REVENUES> 376,257
<CGS> 31,397
<TOTAL-COSTS> 282,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,120
<INTEREST-EXPENSE> 16,688
<INCOME-PRETAX> 44,120
<INCOME-TAX> 14,922
<INCOME-CONTINUING> 29,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,198
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
<FN>
<F1>THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNT NET OF THEIR ALLOWANCES.
<F2>AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
</FN>
</TABLE>
