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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, 1995
------------------------------------------------------
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 Serial preferred stock, New York Stock Exchange
with or without par value
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. [ ]
38,619,063 shares of AMERCO Common Stock, $.25 par value, were outstanding
at June 26, 1995. 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 26, 1995 was $444,296,634.
The aggregate market value was computed using the closing price for the
Common Stock trading on Nasdaq on June 23, 1995.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value,
were outstanding at June 26, 1995. 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.
2
TABLE OF CONTENTS
PAGE NO.
ITEM 1. BUSINESS...................................... 3
A. THE COMPANY.............................. 3
B. HISTORY.................................. 3
C. BUSINESS STRATEGY........................ 4
D. U-HAUL OPERATIONS........................ 6
E. INSURANCE OPERATIONS..................... 9
F. AMERCO REAL ESTATE OPERATIONS............ 14
G. ENVIRONMENTAL MATTERS.................... 15
ITEM 2. PROPERTIES.................................... 17
ITEM 3. LEGAL PROCEEDINGS............................. 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 23
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............... 23
ITEM 6. SELECTED FINANCIAL DATA....................... 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.......................................... 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES................................... 42
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................... 42
ITEM 11. EXECUTIVE COMPENSATION........................ 46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 54
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K............ 58
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 (ARC).
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.
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 and services and rents
self-storage facilities and various kinds of equipment. AREC owns a
majority of the real estate used in connection with the foregoing
businesses.
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 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. Oxford and RWIC have been consolidated
on the basis of calendar years ended December 31. Accordingly, all
references to the years 1994, 1993, and 1992 corresponds to the
Company's fiscal years 1995, 1994, and 1993, respectively.
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, Oxford
and RWIC.
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,
1995, the Company's distribution network included over 1,000 U-Haul
Centers and over 13,200 independent dealers.
4
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, 1995, such self-storage
facilities were located at or near approximately 67% of the
Company's U-Haul Centers. 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 $39.2 million for total
proceeds of approximately $79.3 million.
In 1990, the Company reorganized its operations into
separate legal entities, each with its own operating, financial,
and investment strategies. The reorganization separated the
Company into three parts: U-Haul rental operations, insurance, and
real estate. The purpose of the reorganization was to increase
management accountability and to allow the allocation of capital
based on defined performance measurements.
BUSINESS STRATEGY
U-HAUL OPERATIONS
The Company's present business strategy remains focused
on the do-it-yourself moving customer. The objective of this
strategy is to offer, in an integrated manner over a diverse
geographical area, a wide range of products and services to the do-
it-yourself moving customer.
5
Through its "Moving Made Easier(REGISTERED TRADEMARK)"
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-yourself mover 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.
Since 1987, the Company has more than doubled the number
of U-Haul rental locations, with a net addition of over 7,700
independent dealers.
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 73,000 new
trucks between March 1987 and March 1995 and reduced the overall
average age of its truck fleet from approximately 11 years at March
1987 to approximately five years at March 1995. During this
period, approximately 62,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 55% 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 and a trailer's longer useful life, the Company expects
to replace trailers only as necessary.
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. Since the initial implementation, the Company has
added several additional enhancements to the system, including full
budgeting and financial reporting systems.
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 offering similar
type products who are desirous of additional capital either as a
result of rapid growth or regulatory demands or who are divesting
non-core business lines.
6
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 customers other than U-Haul. In
addition, RWIC plans to expand its involvement in specialized areas
by offering commercial multi-peril and excess workers' compensation
and by assuming reinsurance business.
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. The remaining
business comes from commercial/industrial customers. 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 in any given year is substantially greater than the
number of one-way rental transactions. However, total revenues
generated by one-way transactions in any given year 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 install hitches and 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.
7
The U-Haul truck and trailer rental business tends to be
seasonal with 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, 1995, U-Haul's rental equipment fleet
consisted of approximately 81,000 trucks and approximately 91,000
trailers. Rental trucks are offered in five sizes and range in
size from the ten-foot "Mini-Mover" to the
twenty-six-foot "Super-Mover". 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, as of March 31, 1995,
over 1,000 Company-owned U-Haul Centers and over 13,200 independent
dealers. 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 and offer those and related
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 cancelled upon thirty days' written
notice by either party.
In addition, the Company has sought to improve the
productivity of its rental locations by installing computerized
reservations and network management systems in each U-Haul Center
and 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 11
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.
8
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
other companies and is expanding its ownership of self-storage
facilities. The Company also provides financing and management
services for independent self-storage businesses.
Through approximately 700 Company-owned locations in the
United States and Canada, the Company offers for rent more than
15.0 million square feet of self-storage space. The Company's self-
storage facility locations range in size from 1,000 to 147,000
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 customers storing
household goods. The majority of customers renting storage rooms
are in the process of a move. Even with an increase of over 31,000
new and acquired storage rooms during fiscal 1995, average
occupancy remained high, ranging from mid-80% to low-90% with very
little seasonal variations. During fiscal 1995 and fiscal 1994,
delinquent rentals as a percentage of total storage rentals were
approximately 6% in each year, which rate the Company considers 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 eight 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.
9
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 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, 1995, the Company's non-
seasonal workforce consisted of approximately 12,000 employees
comprised of approximately 41% part-time and 59% full-time
employees. During the summer months, the Company increases its
workforce by approximately 400 employees and the percentage of part-
time employees increases to approximately 46% 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 18.6% of
Oxford's premium revenues for the year ended December 31, 1994.
Oxford's other direct lines are related to group life and
disability coverage issued to employees of AMERCO and its
subsidiaries. For the year ended December 31, 1994, approximately
7.2% of Oxford's premium revenues resulted from business with
AMERCO and its subsidiaries. In addition, direct premium includes
individual life insurance acquired from other insurers. Oxford
administers AMERCO's self-insured group health and dental plans.
Oxford's reinsurance assumed lines, which accounted for
approximately 73.8% of Oxford's premium revenues for the year ended
December 31, 1994, 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.
10
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, 1994,
approximately 40% 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.
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 received from ceding reinsurers
and estimates for incurred but unreported losses based on RWIC's
historical experience supplemented by 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 apparent. 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.
11
Activity in the liability for unpaid claims and claim
adjustment expenses is summarized as follows:
1994 1993 1992
--------------------------
(in thousands)
Balance at January 1 $ 314,482 320,509 325,453
Less reinsurance recoverable 76,111 81,747 89,434
------- ------- -------
Net balance at January 1 238,371 238,762 236,019
Incurred related to:
Current year 102,782 91,044 96,451
Prior years 6,576 12,688 (4,241)
------- ------- -------
Total incurred 109,358 103,732 92,210
Paid related to:
Current year 22,269 20,200 23,936
Prior years 70,382 83,923 65,531
------- ------- -------
Total paid 92,651 104,123 89,467
Net balance at December 31 255,078 238,371 238,762
Plus reinsurance recoverable 74,663 76,111 81,747
------- ------- -------
Balance at December 31 $ 329,741 314,482 320,509
======= ======= =======
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 $26.5 million and $24.3
million in 1994 and 1993, respectively) increased by $6.6 million
and $12.7 million in 1994 and 1993, 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 12 illustrates the change in unpaid
loss and loss 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 reestimates of the original recorded
reserve as of the end of successive years. The last section
compares the latest reestimated reserve amount to the reserve
amount as originally established. This last section is cumulative
and should not be summed.
12
Unpaid Loss and Loss Adjustment Expenses
December 31
----------------------------------------------------------------------------------------------
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in thousands)
Reserve for Unpaid
Loss and Loss
Adjustment Expenses: $ 90,315 123,342 146,391 168,688 199,380 207,939 226,324 236,019 238,762 314,482 329,741
- -------------------
Paid (Cumulative)
as of:
------------------
One year later 24,602 41,170 54,627 49,681 59,111 50,992 55,128 65,532 83,923 70,382
Two years later 50,628 77,697 92,748 91,597 89,850 87,850 97,014 105,432 123,310
Three years later 70,719 105,160 124,278 110,834 114,979 116,043 120,994 126,390
Four years later 84,936 126,734 137,744 129,261 133,466 132,703 133,338
Five years later 95,583 133,421 151,354 142,618 145,864 142,159
Six years later 98,018 142,909 161,447 152,579 153,705
Seven years later 102,805 151,379 169,601 158,531
Eight years later 109,055 158,728 173,666
Nine years later 114,334 162,082
Ten years later 117,465
Reserve Reestimated
as of:
- -------------------
One year later 101,097 138,287 167,211 187,663 200,888 206,701 229,447 231,779 251,450 321,058
Two years later 107,111 147,968 192,272 190,715 202,687 206,219 221,450 224,783 254,532
Three years later 115,746 168,096 192,670 194,280 203,343 199,925 211,988 223,403
Four years later 119,977 168,040 199,576 195,917 199,304 198,986 207,642
Five years later 119,513 175,283 201,303 195,203 200,050 197,890
Six years later 122,791 178,232 202,020 196,176 198,001
Seven years later 125,863 182,257 202,984 196,770
Eight years later 128,815 184,266 202,654
Nine years later 132,207 187,247
Ten years later 136,854
Initial Reserve
in Excess
of (Less than)
Reestimated Reserve:
-------------------
Amount (Cumulative) $(46,539) (63,905) (56,263) (28,082) 1,379 10,049 18,682 12,616 (15,770) (6,576)
13
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 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 99.0% of Oxford's portfolio and 95.5% 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, conduct market 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
14
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 might
constitute 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.
Beginning in 1993, the NAIC adopted and implemented minimum risk-
based capitalization requirements for life insurance companies, including
Oxford. As of the date of this report, Oxford is in compliance with these
requirements. The NAIC has adopted a model for establishing minimum risk-
based capitalization requirements for property and casualty insurance and
reinsurance companies in 1994. RWIC is 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. In addition to the U-Haul operations, AREC
actively seeks to lease or dispose of surplus properties. See "Business -
History".
15
ENVIRONMENTAL MATTERS
Underground Storage Tanks
The Company owns properties that, as of March 31, 1995, contained
a total of approximately 1,000 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 1995, the Company incurred expenditures totaling approximately
$21.0 million for removal and remediation of 1,709 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 1995 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 instituted a program to test its USTs
for leakage and to remove all but approximately 100 of the approximately
2,755 USTs then existing by the year 2000. The approximately 100 USTs
expected to remain at the conclusion of the Company's testing and removal
program 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 currently
budgets $5 million annually for UST testing, removal, and remediation. The
Company treats these costs as capital costs to the extent that they improve
the safety or efficiency of the associated properties as compared to when
the properties were originally acquired or if the costs are incurred in
preparing the properties for sale, but not in excess of the net realizable
value of such properties.
Federal Superfund Sites
The Company has been named as a "potentially responsible party"
(PRP) with respect to the disposal of hazardous wastes at ten
federal superfund hazardous waste sites located in ten 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 buyout agreement settlements for eight of the sites
for de minimis amounts and one site is under negotiation for settlement. One
of the sites has been disputed by the Company with no response for more than
five years. Based upon the information currently available to the Company
regarding these ten sites, the current anticipated magnitude of the clean-up,
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 clean-up at the ten superfund sites will not
have a material adverse effect on the Company's financial condition or
operating results.
16
Washington State Hazardous Waste Sites
The Company owns property within two state hazardous waste sites
in the State of Washington. The Company owns a parcel of property in
Yakima, Washington that 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 Company has been named by the State of Washington as a
"potentially liable party" (PLP) under state law with respect to this
site. The Company, 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 the Company regarding the
volume and nature of wastes present, the Company is unable to reasonably
assess the potential investigation and clean-up costs, but the costs could
be substantial. Although the Company has entered into an agreement with
such other companies and persons under which the Company has assumed
responsibility for 20% of the costs to investigate the site, no agreement
among the parties with respect to clean-up costs has been entered into at
the date of this Form 10-K.
In addition, the Company has been named by the State of
Washington as a PLP along with 12 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. The
Company has been notified that the Yakima Railroad Site involves potential
groundwater contamination in an area of approximately two square miles.
The Company has contested its designation as a PLP at this site, but, at
the date of this Form 10-K, no formal ruling has been issued in this
matter.
In February 1992, the State of Washington issued an enforcement
order to the Company and eight other parties requiring conduct of an
interim remedial action involving the provision of bottled water to
households that obtain drinking water from wells within the Yakima Railroad
Site. Without conceding any liability, the Company and several of the
other PLPs have implemented 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 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 the Company regarding the
volume and nature of wastes present, the Company 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 the Company and any other PLP as a joint and
several liability. At the date of this Form 10-K, 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.
17
Other
The Company owns eight facilities that manufacture and assemble
various components of the Company's equipment. In addition, the Company
owns 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.
The Company currently leases approximately 200 properties to
various businesses. The Company 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 allocations of
liability with respect to environmental conditions at the leased
properties.
Finally, it should be recognized that the Company's present and
past facilities have been in operation for many years and, over that time
in the course of those operations, some of the Company's facilities have
generated, used, stored, or disposed of substances or wastes that are or
might be considered hazardous. Therefore, it is possible that additional
environmental issues may arise in the future, the precise nature of which
the Company cannot now predict.
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 over 1,000 U-Haul Centers (approximately 700 of which rent
self-storage space), 8 manufacturing facilities, and 23 repair facilities.
18
ITEM 3. LEGAL PROCEEDINGS
Shoen Litigation
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 Paul F. Shoen, who is a former director are
defendants 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).
- ------
The Company was also a defendant in the action as originally filed, but the
Company was dismissed from the action on August 15, 1994. The plaintiffs,
who collectively hold 47.3% of the Company's common stock and who are all
members of a stockholder group that is currently opposed to existing
Company management have 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 voting 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 (that their stock has
little or no current value), the Court ruled that the plaintiffs elected as
their remedy in this lawsuit to transfer their shares of stock to the
defendants upon the satisfaction of the judgment. On October 7, 1994, the
jury determined that the defendants breached their fiduciary duties and such
breach diminished the value of the plaintiffs' stock. The jury also
determined the value of the plaintiffs' stock in 1988 to be $81.12 per
share or approximately $1.48 billion. On February 2, 1995, the judge in this
case granted the defendants' motion for remittitur or a new trial on the issue
of damages. The judge determined that the value of the plaintiffs' stock in
1988 was $25.30 per share or approximately $461.8 million. On February 13,
1995, the plaintiffs filed a statement accepting the remittitur. The jury
also awarded the plaintiffs $70 million in punitive damages against
Edward J. Shoen. The judge ruled that this punitive damage award was excessive
and granted Edward J. Shoen's motion for remittitur or a new trial on the issue
of punitive damages. The judge reduced the award of punitive damages against
Edward J. Shoen to $7 million. On February 13, 1995, the plaintiffs filed a
statement accepting the remittitur reducing the punitive damage to $7 million.
On February 21, 1995, judgment was entered against the defendants. On
March 23, 1995, Edward J. Shoen filed a notice of appeal with respect to
the award of punitive damages and the plaintiffs have subsequently
cross-appealed the judge's remittitur of the punitive damages.
19
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, if any, incurred by the defendants in this proceeding, subject to
certain exceptions. With respect to the defendants who have filed for
protection under the federal bankruptcy laws (as described below), the
extent of the Company's indemnification obligations may be an issue in the
bankruptcy proceedings. Before the Company will have any indemnification
obligations, the defendants must request indemnification from the Company
and a determination must be made under Nevada law as to the validity of the
indemnification claims. The defendants have not attempted to make demands
upon or prosecute their indemnification claims against the Company. The
Company reserves the right to contest the validity of any indemnification
claims made by the defendants. The extent of the Company's obligations
under the indemnification agreements, if any, cannot be reasonably
estimated. No provision has been made in the Company's consolidated
financial statements for any possible indemnification claims. If valid
indemnification claims are made, the Company believes that it can fulfill
any such indemnification obligations consistent with its existing credit
agreements, or in the alternative, the Company may seek the waiver or
amendment of certain of the provisions of one or more of its credit
agreements when the indemnification obligations are determined. The
Company believes, but no assurance can be given, that it can obtain any
necessary waivers or amendments.
Any attempted transfer of common stock from the plaintiffs to the
defendants will 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. In
addition, the defendants' rights to acquire the plaintiffs' stock may
present a corporate opportunity which the Company is entitled to exercise.
On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds, and William E. Carty (the Director-Defendants)
filed for protection under Chapter 11 of the federal bankruptcy laws,
resulting in the issuance of an order automatically staying the execution
of the judgment against those defendants. In late April 1995, the Director-
Defendants, in cooperation with the Company, filed plans of reorganization
in the United States Bankruptcy Court for the District of Arizona
(collectively, the Plan), all of which propose the same funding and
treatment of the plaintiffs' claims resulting from the judgment in the
Shoen Litigation.
Under the Plan, the Director-Defendants will transfer (or cause
to be transferred) to a trust (the Trust), property having a stipulated or
adjudicated value in excess of $461.8 million. Each of the plaintiffs would
receive a trust certificate representing an undivided, fractional beneficial
interest in the Trust. The property transferred to the Trust is expected to
consist of (i) approximately $300 million in Series B dividend paying
non-voting cumulative preferred stock issued by the Company or one of its
subsidiaries; (ii) a 1993 REMIC certificate held by the Company with a face
20
value of $11.5 million evidencing a pool of 61 commercial mortgage loans
which are secured by mortgages or deeds of trust on 60 self-storage
properties; (iii) mortgage loans with an aggregate principal balance of
approximately $109.9 million on property held by the Company, one or more of
its subsidiaries, or two corporations affiliated with the Company; and (iv)
real property held free and clear by the Company or its subsidiaries having
a total fair value of approximately $50 million. Upon the funding of the
Trust, the plaintiffs participating in the Trust will have their judgment
satisfied and will be obligated to transfer their shares of common stock to
the Company or its designee.
Alternatively, and in lieu of their respective proportionate
shares of the property to be transferred to the Trust, each of the
plaintiffs may elect to participate in a settlement and receive a
discounted cash payment in full satisfaction of his or her claim (the
Settlement). The Settlement provides for a cash fund of up to $350 million
to be paid by the Company to satisfy the claims of all plaintiffs electing
to participate in the Settlement. Any plaintiff electing to participate in
the Settlement will receive a pro rata distribution of such fund based on
the percentage of all of the plaintiffs' stock held by such plaintiff. Any
plaintiff so electing will not participate in or be entitled to any
interest in the Trust and the amount of property transferred to the Trust
will be correspondingly reduced. The Company plans to fund the Settlement
through its existing lines of credit, additional debt or equity issuances,
asset sales or a combination of the foregoing. The Company will determine
which financing source or sources to use to fund the Settlement based on,
among other things, market conditions as they exist from time to time and
the number of plaintiffs electing to participate in the Settlement. The
Company is unable to estimate the amount or cost of the financing, if any,
necessary to fund the Settlement. Upon receipt of the cash distribution
pursuant to the Settlement, the plaintiffs electing to participate in the
Settlement will be obligated to transfer their common stock to the Company
or its designee.
The Company expects the court to consider the Plan during 1995.
However, there is no assurance that the Plan will be confirmed by the
federal bankruptcy court or that the Plan as confirmed will operate as
described above. The Company's participation in the Plan is subject to
the approval of the Board of Directors. Because of the Plan's complexity
and the alternatives provided to the plaintiffs under the Plan, and because
the Plan has not yet been confirmed, the Company is unable to determine the
Plan's impact on the Company's financial condition, results of operations,
or capital expenditure plans. However, as a result of funding the Plan,
the Company is likely to incur additional costs in the future in the form of
dividends on preferred stock and/or interest on borrowed funds.
21
No provision has been made in the Company's financial statements
for any payments to be made to the plaintiffs or the Trust pursuant to the
Plan. In addition, in the event any consideration paid by the Company for
the plaintiffs' stock is in excess of the fair value of the stock received
by the Company, the Company will be required to record an expense equal to
that difference.
On April 25, 1995, the Director-Defendants filed an action in the
United States Bankruptcy Court for the District of Arizona entitled Edward
------
J. Shoen, et al. v. Leonard S. Shoen, et al., Case No. 95-1430-PHX-JMM,
- ------------------------------------------------
Adversary No. 95-284, seeking injunctive relief to prevent the Company from
conducting its 1994 and 1995 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. The
Director-Defendants alleged that despite the election by the plaintiffs to
transfer their common stock and thereby disengage themselves from Company
ownership, the plaintiffs have two members of their stockholder group
nominated to fill two director positions which are scheduled for election
at the 1994 annual meeting of stockholders. The Director-Defendants argued
that it is inappropriate to base the plaintiffs' right to vote at
stockholders meetings on their record ownership of common stock which is
the subject of the judgment in the Shoen Litigation. The Director-
Defendants further alleged that if the Company is not enjoined from holding
the 1994 and 1995 annual meetings until the Plan is confirmed and if the
plaintiffs are not enjoined from voting their common stock, the plaintiffs
are likely to elect up to half of the members of the Company's Board of
Directors before the end of 1995 because the plaintiffs currently control
more common stock than the stockholder group that supports existing Company
management. The election of Board of Director nominees supported by the
plaintiffs would be likely to disrupt the Company's ability to support and
fund the Plan. Such disruption, the Director-Defendants alleged, would
affect their ability to reorganize and would cause them substantial and
irreparable injury. On June 8, 1995 the court enjoined the Company from
conducting its 1994 and 1995 annual meetings of stockholders until an order
is entered confirming or denying confirmation of the Plan, or until further
order of the court.
Arbitration Proceedings
Sophia M. Shoen, Paul F. Shoen and the Company are parties to
separate Share Repurchase and Registration Rights Agreements which require
all disputes relating thereto to be resolved by arbitration. On April 8,
1994, Sophia M. Shoen and Paul F. Shoen commenced the dispute resolution
process. Private arbitration proceedings pursuant to these agreements were
convened on June 19, 1994. All of the claims asserted by Paul F. Shoen in
the arbitration have been dismissed pursuant to a settlement agreement
described in the following paragraph. In the arbitration, Sophia M. Shoen
asserted that the Company has breached its obligations to her by failing to
timely register the sale of her shares which were sold to the public in
November 1994 and by failing to remove the right of first refusal on all of
22
the Company's common stock. Sophia M. Shoen asserted that, as a
consequence of this alleged breach, she was entitled to give notice of
termination of a stockholder agreement among Edward J. Shoen, Mark V.
Shoen, James P. Shoen, Paul F. Shoen, Sophia M. Shoen, certain trusts for
the benefit of the foregoing, and the AMERCO Employee Savings, Profit
Sharing and Employee Stock Ownership Plan (the Stockholder Agreement). The
Company disagrees with the above assertions. Sophia M. Shoen gave such
notice of termination on July 11, 1994. The arbitration hearings concluded
on August 21, 1994. It is unknown when the arbitration panel will render a
decision. Mark V. Shoen, as a party to the Stockholder Agreement, has
filed a lawsuit against Sophia M. Shoen to which the Company is not a
party, seeking a declaratory judgment that the Stockholder Agreement has
not been terminated and remains in full force and effect.
The Company, the Company's Board of Directors, the AMERCO
Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the
ESOP), and the trustees of the ESOP were defendants in an action in the
United States District Court for the District of Nevada entitled Paul F.
--------
Shoen v. AMERCO, et al., No. CV-N-94-0475-ECR, instituted July 19, 1994 and
- -----------------------
dismissed February 10, 1995. On February 9, 1995, Paul F. Shoen executed a
settlement agreement with the Company and the other defendants resolving
all of his claims in this case and in the arbitration described in the
preceding paragraph. As part of the settlement, the Company agreed, among
other things, to select and appoint independent trustees for the ESOP and
to place Paul F. Shoen on management's slate of directors for the 1994
annual meeting of stockholders which was originally delayed by judicial
order at the request of Paul F. Shoen.
Securities Litigation
The Company, certain members of the Company's Board of Directors,
and others are defendants in actions currently pending in United States
District Court for the District of Nevada entitled Sidney Wisotzky and
---------------------
Dorothy Wisotzky, et al. v. Edward J. Shoen, et al., No. CV-N-94-771-HDM
- -----------------------------------------------------
(filed October 28, 1994), Evan Julber v. Edward J. Shoen, et al., No. CV-N-
--------------------------------------
94-00811-HDM (filed November 16, 1994), and Anne Markin v. Edward J. Shoen,
-------------------------------
et al., No. CV-N-94-00821-ECR (filed November 18, 1994). The plaintiffs in
- ------
these cases, who claim to have purchased the Company's Series A 8 1/2%
Preferred Stock, are seeking class action certification and are defining
the class as all persons who purchased or otherwise acquired the Series A
8 1/2% Preferred Stock of the Company from October 14, 1993 through October
18, 1994, inclusive, and who sustained damage as a result of such
purchases. The plaintiffs allege, among other things, that the defendants
violated the federal securities laws by inflating the price of the Series A
8 1/2% Preferred Stock via false and misleading statements, concealing
material adverse information, and taking other manipulative actions, and
that the Prospectus for the Series A 8 1/2% Preferred Stock, certain Form 10-K
and Form 10-Q filings made by the Company, and the Company's Notice and
Proxy Statement dated July 8, 1994 contained false and misleading
statements and omissions regarding the Shoen Litigation. In addition, the
Company and certain members of the Company's Board of Directors are
23
defendants in an action currently pending in United States District Court
for the District of Nevada entitled Bernard L. and Frieda Goldwasser, et
-------------------------------------
al. v. Edward J. Shoen, et al., No. CV-N-94-00810-ECR (filed November 16,
- -------------------------------
1994). The plaintiffs in this case allege derivatively on behalf of the
Company, that the defendants breached their fiduciary duties to the Company
and its stockholders by causing the Company to violate the federal
securities laws, by concealing the financial responsibility of the Company
for the claims asserted in the Shoen Litigation, by subjecting the Company
to adverse publicity, and by misusing their corporate control for personal
benefit. In addition, the plaintiffs are seeking equitable and/or
injunctive relief to prevent the defendants in this case from causing the
Company to indemnify the defendants in the Shoen Litigation against their
liability in that case. The plaintiffs in these cases are requesting
unspecified compensatory damages as well as attorneys' fees and costs. The
Company and the individual defendants deny the plaintiffs' allegations of
wrongdoing and intend to vigorously defend themselves in these actions.
The Company is a defendant in a number of suits and claims
incident to the types of business it conducts and 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. In addition, on June 8, 1995 the United States Bankruptcy Court
for the District of Arizona enjoined the Company from conducting its 1994
and 1995 annual meetings of stockholders until further order of the Court.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 26, 1995, there were 1,547 holders of record of the
Company's common stock in comparison to 161 as of June 24, 1994.
24
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 Year Ended
March 31, 1995 High Low
------------------ --------------
First quarter - -
Second quarter - -
Third quarter 18 15 3/4
Fourth quarter 22 1/2 17 3/8
Cash dividends declared to the Company's stockholders of record
for the two most recent fiscal years are as follows:
Date Cash Dividend per Common Share
---- ------------------------------
August 3, 1993 $ .0814
The Company does not have a formal dividend policy. The
Company's Board of Directors periodically considers the advisability of
declaring and paying dividends in light of existing circumstances. The
dividends paid during fiscal 1994 are not indicative of future dividends
and there is no assurance that dividends on common stock will be declared
in the future. See 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.
25
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA (4)
For the Years Ended March 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands, except per share data and ratios)
Summary of Operations:
Rental, net sales and other revenue $ 1,063,130 972,704 901,446 845,128 860,044
Premiums and net investment income 177,733 162,151 139,465 126,756 126,620
---------- ---------- ---------- ---------- ----------
1,240,863 1,134,855 1,040,911 971,884 986,664
---------- ---------- ---------- ---------- ----------
Operating expense and cost of sales 783,933 735,841 697,700 661,229 668,149
Benefits, losses and amortization of
deferred acquisition costs 144,303 130,168 115,969 99,091 126,626
Depreciation 151,409 133,485 110,105 109,641 114,589
Interest expense 67,762 68,859 67,958 76,189 80,815
---------- ---------- ---------- ---------- ----------
1,147,407 1,068,353 991,732 946,150 990,179
---------- ---------- ---------- ---------- ----------
Pretax earnings (loss) from operations 93,456 66,502 49,179 25,734 (3,515)
Income tax expense (33,424) (19,853) (17,270) (4,940) (6,354)
---------- ---------- ---------- ---------- ----------
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle 60,032 46,649 31,909 20,794 (9,869)
Extraordinary loss on early
extinguishment of debt - (3,370) - - -
Cumulative effect of change in
accounting principle - (3,095) - - -
---------- ---------- ---------- ---------- ----------
Net earnings (loss) $ 60,032 40,184 31,909 20,794 (9,869)
========== ========== ========== ========== ==========
Earnings (loss) from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle per common share (3) $ 1.23 1.06 .83 .53 (.25)
Net earnings (loss) per common share (3) 1.23 .89 .83 .53 (.25)
Weighted average common shares
outstanding (2) 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080
Cash dividends declared 12,964 7,900 1,994 - 1,176
Ratio of earnings to fixed charges (1) 1.87 1.64 1.45 1.21 -(1)
26
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA (4), continued
As of March 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
Balance Sheet Data:
Total property, plant and
equipment, net $ 1,274,246 1,174,236 989,603 987,095 1,040,342
Total assets 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977
Notes and loans payable 881,222 723,764 697,121 733,322 804,826
Stockholders' equity 686,784 651,787 479,958 451,888 435,180
(1) 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). For the year ended March 31, 1991, pretax earnings were
not sufficient to cover fixed charges by an amount of $4.2 million.
(2) Reflects the adoption of Statement of Position 93-6, "Employer's Accounting for Employee Stock Ownership Plans."
(3) For the fiscal year ended March 31, 1995 and 1994, Earnings (loss) and net earnings per common share were
computed after giving effect to the dividend on the Company's Series A 8 1/2% preferred stock.
(4) See "Item 3. Legal Proceedings" and "Item 7. Management Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - Credit Agreements" for a discussion of material
uncertainties.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For financial statement preparation, the Company's insurance
subsidiaries report on a calendar year basis while the Company reports on a
fiscal year basis ending March 31. Accordingly, with respect to the
Company's insurance subsidiaries, any reference to the years 1994, 1993,
and 1992 corresponds to the Company's fiscal years 1995, 1994, and 1993,
respectively. There have been no events related to such subsidiaries
between January 1 and March 31 of 1995, 1994, or 1993 that would materially
affect the Company's consolidated financial position or results of
operations as of and for the fiscal years ended March 31, 1995, 1994, and
1993, 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, 1995, 1994, and 1993
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, 1995,
1994, and 1993. 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)
1995
Revenues:
Outside $1,056,874 39,347 144,642 - 1,240,863
Intersegment (42) 1,444 20,657 (22,059) -
--------- ------- ------- -------- ---------
Total revenues $1,056,832 40,791 165,299 (22,059) 1,240,863
========= ======= ======= ======== =========
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
========= ======= ======= ======== =========
1994
Revenues:
Outside $ 965,839 31,357 137,659 - 1,134,855
Intersegment (357) 2,834 18,862 (21,339) -
--------- ------- ------- -------- ---------
Total revenues $ 965,482 34,191 156,521 (21,339) 1,134,855
========= ======= ======= ======== =========
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
========= ======= ======= ======== =========
28
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- --------- ------------ ------------
(in thousands)
1993
Revenues:
Outside $ 891,599 33,619 115,693 - 1,040,911
Intersegment - 2,630 18,402 (21,032) -
--------- ------- ------- -------- ---------
Total revenues $ 891,599 36,249 134,095 (21,032) 1,040,911
========= ======= ======= ======== =========
Operating profit $ 88,581 12,325 16,231 - 117,137
========= ======= ======= ========
Interest expense 67,958
---------
Pretax earnings from
operations 49,179
=========
Identifiable assets $1,377,386 472,669 422,079 (248,111) 2,024,023
========= ======= ======= ======== =========
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 (volume) growth 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 decrease in cost of
sales reflects a reduction in the provision for 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. The decrease is also
reflective of improved margins on hitch sales. Increased material
costs from the sale of moving support sale items and propane,
which can be primarily attributed to higher sales levels, partially
offset these decreases.
29
Operating expenses increased to $683.7 million in fiscal
1995 from $633.6 million in fiscal 1994, an increase of
approximately 7.9%. The change from the prior year reflects a
$36.9 million increase in rental equipment maintenance costs.
Efforts to minimize downtime, an increase in fleet size and higher
transaction levels are primarily responsible for the increase.
Lease expense declined by $17.9 million to $66.5 million reflecting
lease terminations, lease restructuring, and lower finance costs on
new leases originated during the past two years. All other
operating expense categories increased in the aggregate by $31.0
million, approximately 8.3%, to $402.5 million. These increases
are consistent with the growth in revenues.
Depreciation expense during fiscal 1995 was $151.4
million as compared to $133.5 million in the prior year, reflecting
the increase in fleet size and real property acquisitions.
OXFORD - LIFE INSURANCE
Premiums from Oxford's reinsurance lines before
intercompany eliminations were $17.4 million for the year ended
December 31, 1994, an increase of $1.6 million, approximately 10.1%
over 1993 and accounted for 73.8% of Oxford's premiums in 1994.
These premiums are primarily from term life insurance and matured
deferred annuity contracts. Increases in premiums are primarily
from the anticipated increase in annuitizations as a result of the
maturing of deferred annuities.
Premiums from Oxford's direct lines before intercompany
eliminations were $6.2 million in 1994, an increase of $4.2
million, or 210% from the prior year. This increase in direct
premium revenues is primarily attributable to Oxford's entrance
into the credit life and credit accident and health business ($4.4
million in premium revenues). Oxford's direct business related to
group life and disability coverage issued to employees of AMERCO
and its subsidiaries for the year ended December 31, 1994 accounted
for approximately 7.2% of premiums. 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.
30
Operating profit before intercompany eliminations
decreased by $0.1 million, or approximately 1.0%, in 1994 to $9.7
million, primarily due to the decrease in gains on sale of fixed
maturity investments. Such decrease was partially offset by the
increasing margins on the interest sensitive business.
RWIC - PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December
31, 1994 were $179.2 million as compared to $175.1 million in 1993.
This represents an increase of $4.1 million, or 2.3%. As in prior
years, the rental industry market accounts for a significant share
of total premiums, approximately 42.8% and 36.6% in 1994 and 1993,
respectively. These writings include U-Haul customers, fleetowners
and U-Haul as well as other rental industry insureds with similar
characteristics. Growth is also occurring in selected general
agency lines. These premiums accounted for approximately 15.1% of
gross written premiums for 1994, compared to 12.9% in 1993. RWIC
continues underwriting professional reinsurance via broker markets,
and premiums in this area decreased in 1994 to $58.3 million, or
32.5% of total gross premiums, from comparable 1993 figures of
$70.2 million, or 40.1% of total premiums.
Net earned premiums increased $8.0 million, or 6.38% to
$133.4 million for the year ended December 31, 1994, compared with
premiums of $125.4 million for the year ended December 31, 1993.
The premium increase was primarily due to planned increased
writings in the rental industry and general agency lines.
Underwriting expenses incurred were $142.1 million for
the twelve months ended December 31, 1994, an increase of $5.6
million, or 4.1% over 1993. Comparable underwriting expenses
incurred for 1993 were $136.5 million. The increase in
underwriting expenses is due to the larger premium volume being
written in 1994, which increased acquisition costs and commensurate
reserves. The ratio of underwriting expenses to net earned
premiums decreased from 1.09 in 1993 to 1.07 in 1994. This
improvement is primarily attributable to improved loss experience
combined with continued market rate strength which affects the
Company's assumed reinsurance area.
Net investment income was $29.0 million for the year
ended December 31, 1994, an increase of 5.8% over 1993 net
investment income of $27.4 million. The increase is due to an
increased asset base generated from larger premium volume.
RWIC completed 1994 with income before taxes before
intercompany eliminations of $23.2 million as compared to $19.9
million for the comparable period ended December 1993. This represents
an increase of $3.3 million or 16.6% over 1993. Improved underwriting
results in the Company's assumed reinsurance area was offset by declines
in its workers' compensation and rental industry liability lines.
31
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.
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.
FISCAL YEAR ENDED March 31, 1994 VERSUS FISCAL YEAR ENDED MARCH 31,
1993
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 $63.3 million, approximately 8.5%, to $809.4 million
in fiscal 1994. The increase from fiscal 1993 is primarily
attributable to a $52.2 million increase in net revenues from the
rental of moving related equipment, which benefited from
transactional (volume) growth reflecting higher utilization and
rental fleet expansion. Revenues from the rental of self-storage
facilities increased by $6.6 million to $70.5 million in fiscal
1994, an increase of approximately 10.3%. Storage revenues were
positively impacted by additional rentable square footage, higher
average occupancy levels, and higher average rental rates. All
other revenue categories increased in the aggregate by $8.7 million
during fiscal 1994 which primarily reflects increases in gains on
note sales of approximately $5.0 million and interest income.
Net sales revenues were $156.0 million in fiscal 1994,
which represented an increase of approximately 7.2% from fiscal
1993 net sales of $145.5 million. Revenue from the sale of
hitches, moving support items (i.e., boxes, etc.), and propane
increased $10.7 million during fiscal 1994.
Cost of sales was $92.2 million in fiscal 1994, which
represented a decrease of approximately 1.0% from fiscal 1993. The
reduction in fiscal 1994 reflects a combination of the absence of
recreational vehicle sales, reduced levels of outside repairs and a
reduction in inventory adjustments which fully offset increased
material costs corresponding to the increase in hitch, moving
support and propane sales.
32
Operating expenses increased to $633.6 million in fiscal
1994 from $599.8 million in fiscal 1993, an increase of
approximately 5.6%. The change from the prior year reflects
increases in almost all major expense categories with the exception
of lease expense for equipment. Rental equipment maintenance costs
increased by $27.4 million reflecting fleet expansion, higher
utilization, a marginal increase in the age of the fleet and
increased emphasis on maximizing rental equipment available to rent
by reducing downtime. Lease expense for equipment declined from
$117.6 million in fiscal 1993 to $82.9 million in fiscal 1994, a
decrease of approximately 29.5%, reflecting lease terminations,
lease restructuring and lower finance costs on new leases
originated during fiscal 1994. All other operating expense
categories increased in the aggregate by $41.1 million,
approximately 12.4%, to $373.0 million which is primarily
attributable to higher levels of rental and sales activity.
Depreciation expense during fiscal 1994 was $133.5
million as compared to $110.1 million in the prior year, reflecting
the addition of new trucks and trailers and the acquisition of
trucks that were previously leased.
OXFORD - LIFE INSURANCE
Premiums from Oxford's reinsurance lines before
intercompany eliminations were $15.8 million for the year ended
December 31, 1993, an increase of $0.9 million, approximately 6.0%
over 1992 and accounted for 88.7% of Oxford's premiums in 1993.
These premiums are primarily from term life insurance and single
and flexible premium deferred annuities. Increases in premiums are
primarily from the anticipated increase in annuitizations as a
result of the maturing of deferred annuities.
Premiums from Oxford's direct lines before intercompany
eliminations were $2.0 million in 1993, a decrease of $1.0 million
(33%) from the prior year. The decrease is primarily attributable
to an experience refund incurred on the Company's group life
insurance business. Oxford's direct lines are principally related
to the underwriting of group life and disability income. Insurance
on the lives of the employees of AMERCO and its subsidiary
companies accounted for approximately 6.3% of Oxford's premiums in
1993. Other direct lines accounted for approximately 5.0% of
Oxford's premiums in 1993.
Net investment income before intercompany eliminations
was $12.6 million and $11.5 million for the years ended December
31, 1993 and 1992, respectively. The increase was primarily due
to a decrease in interest credited to policyholders because of the
increase in annuitizations. Gains on the disposition of fixed
maturity investments were $2.1 million and $4.7 million for the
years ended December 31, 1993 and 1992, respectively. Oxford had
$1.8 million and $2.2 million of other income, for 1993 and 1992,
respectively.
33
Benefits and expenses incurred were $24.4 million for the
year ended December 31, 1993, an increase of 5.2% over 1992.
Comparable benefits and expenses incurred for 1992 were $23.2
million. This increase is primarily due to the increase in
annuitizations discussed above.
Operating profit before intercompany eliminations
decreased by $3.4 million, approximately 25.8%, in 1993 to $9.8
million, primarily due to the decrease in gains on fixed maturity
investments.
RWIC - PROPERTY AND CASUALTY
RWIC gross premium writings for the year ended December
31, 1993 were $175.1 million, compared to $155.2 million in 1992,
an increase of approximately 12.8%. The rental industry market
accounted for a significant share of these premiums, approximately
37% and 40% in 1993 and 1992, respectively. These writings include
U-Haul customers, fleetowners and U-Haul as well as other rental
industry insureds with similar characteristics. Selected general
agency lines, principally commercial multiple peril, surety and
excess workers' compensation and casualty accounted for 8.1%, 3.2%
and 5.4%, respectively, of gross premium writings in 1993, compared
to approximately 15.4%, 2.8% and 11.9%, respectively, in 1992.
RWIC also underwrites reinsurance via broker markets, and gross
premiums in this area increased from $51.5 million in 1992 to $70.2
million in 1993 due to favorable market conditions.
Net earned premiums increased $24.3 million,
approximately 24%, to $125.4 million for the year ended December
31, 1993. This compares with net earned premiums of $101.1 million
for the year ended December 31, 1992. The premium increase was
primarily due to increased writings in the reinsurance area, along
with growth in the excess workers' compensation line of RWIC's
general agency business. These planned increases are due to strong
rates and reduced capacity in the reinsurance market and increased
marketing emphasis on the long standing presence in the excess
workers' compensation market.
Underwriting expenses incurred were $135.6 million for
the year ended December 31, 1993, an increase of $17.8 million,
approximately 15.1%, over 1992. Comparable underwriting expenses
incurred for 1992 were $117.8 million. Higher underwriting
expenses are due to larger premium volumes being written in 1993
which increased acquisition costs and commensurate reserves. The
ratio of underwriting expenses to net premiums earned improved from
1.17 in 1992 to 1.08 in 1993. This improvement was primarily
attributable to improved loss experience in the Company's assumed
reinsurance area, including the lack of catastrophic losses such as
those related to Hurricane Andrew in 1992, as well as the
previously mentioned strength in rates.
34
Net investment income was $27.4 million in 1993, a
decrease of approximately 6.5%, as compared to 1992 net investment
income of $29.3 million. This decrease is due primarily to lower
rates available in the high quality fixed income market. RWIC's
net realized gain on the sale of investments was $2.1 million and
$0.7 million in 1993 and 1992, respectively, while other income
totaled $1.4 million and $2.9 million, respectively.
RWIC completed 1993 with income before tax expense
before intercompany eliminations of $19.9 million as compared to
$15.5 million for the comparable period ended December 1992.
This represents an increase of $4.4 million, or 28.4% over 1992.
The increase is due to a combination of better underwriting results
and unplanned gains on bond calls.
INTEREST EXPENSE
Interest expense was $68.8 million in fiscal 1994, as
compared to $68.0 million in fiscal 1993. The increase reflects
higher average levels of debt outstanding (See "Liquidity and
Capital Resources"), a higher proportion of fixed rate debt, and a
lengthening of maturities offset by lower cost of funds.
EXTRAORDINARY LOSS ON EXTINQUISHMENT 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 $66.5
million were realized in fiscal 1994 as compared to $49.2 million
in fiscal 1993. After providing for income taxes, extraordinary
costs associated with the early extinguishment of debt and the
cumulative effect of a change in accounting principle, net earnings
for fiscal 1994 were $40.2 million as compared to $31.9 million in
fiscal 1993.
35
QUARTERLY RESULTS
The following table presents unauditied quarterly results
for the eight quarters in the period beginning April 1, 1993 and
ending March 31, 1995. 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 results of
operations have historically fluctuated from period to period,
including on a quarterly basis. In particular, the Company's U-
Haul business is seasonal and a majority of the Company's revenues
and substantially all of its net earnings from its U-Haul business
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.
Quarter Ended
---------------------------------------------
June 30, Sept. 30, Dec. 31, March 31,
1994 1994 1994 1995
-------- --------- -------- ---------
(in thousands, except per share data)
Total revenues $323,578 $361,115 $295,888 $260,282
Net earnings (loss) 29,413 40,071 1,907 (11,359)
Net earnings (loss) per
common share (1)(2) .71 1.00 (.04) (.44)
Quarter Ended
---------------------------------------------
June 30, Sept. 30, Dec. 31, March 31,
1993 1993 1993 1994
-------- --------- -------- ---------
(in thousands, except per share data)
Total revenues $291,348 $324,968 $267,448 $251,091
Net earnings (loss) 17,359 30,601 1,799 (9,575)
Net earnings (loss) per
common share (1) .45 .79 (.02) (.33)
________________
(1)For the quarters ended December 31, 1993, March 31, June 30,
September 30, December 31, 1994 and March 31, 1995, net
earnings (loss) per common share amounts were computed after
giving effect to the dividend on the Company's Series A 8 1/2%
Preferred Stock.
(2)Reflects the adoption of Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plan."
36
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, 1995,
net property, plant and equipment represented approximately 69.7%
of total U-Haul assets and approximately 48.9% of consolidated
assets. In fiscal 1995, capital expenditures were $435.0 million
as compared to $530.5 million in fiscal 1994, reflecting expansion
of the rental fleet in both periods, purchase of trucks previously
leased, and increases in the available square footage in self-
storage operations. The capital needs required to fund these
acquisitions were funded with internally generated funds from
operations, debt, and equity financings.
Cash flows from operating activities were $176.6 million
in fiscal 1995, as compared to $163.8 million in fiscal 1994. The
increase results from an increase in net earnings and depreciation
and amortization.
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/(used) by operating activities were $28.9
million, $22.4 million, and $(2.1) million for the years ended
December 31, 1994, 1993, and 1992, respectively. In 1994, cash
flows from financing activities of new reinsurance agreements were
approximately $26.0 million. During 1993 and 1992, there were no
cash flows from financing activities related to new reinsurance
agreements. 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, 1994 and
1993, short-term investments amounted to $11.8 million and $8.4
million, respectively. Management believes that the overall
sources of liquidity will continue to meet foreseeable cash needs.
Stockholder's equity of Oxford, excluding investment in
RWIC (in prior years), decreased to $85.6 million in 1994 from
$86.9 million in 1993. During 1994, Oxford paid cash dividends of
$4.9 million to Ponderosa. Ponderosa now holds 100% of the common
stock of RWIC as a result of a property dividend made by Oxford on
June 30, 1994.
37
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 $400,000. In
addition, the amount of dividends that can be paid to stockholders
by insurance companies domiciled in the State of Arizona is
limited. Any dividend in excess of the limit requires prior
regulatory approval. As a result of the dividend of the RWIC
common stock on June 30, 1994, the State of Arizona must approve
future dividends made through June 30, 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 $28.8 million
and $15.7 million for the years ended December 31, 1994 and 1993,
respectively. The increase is primarily attributable to increased
premium writings.
RWIC's short-term investment portfolio was $7.5 million
at December 31, 1994. This level of liquid assets, combined with
budgeted cash flow, is 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 95.5%
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 95.7% of total liabilities.
Stockholder's equity increased 1.8% from $165.1 million
at December 31, 1993 to $168.1 million at December 31, 1994. 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 stockholder
dividends of $9.7 million during the third quarter of 1994.
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.
38
CONSOLIDATED GROUP
At March 31, 1995, total notes and loans payable
outstanding was $881.2 million as compared to $723.8 million at
March 31, 1994. This increase reflects the expansion in the rental
fleet and self-storage operation.
During each of the fiscal years ending March 31, 1996,
1997, and 1998, U-Haul estimates gross capital expenditures will
average approximately $350 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 $430 million. Management estimates that U-Haul will
fund approximately 60% 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, and equity offerings.
Also, see "Legal Proceedings" for discussion of potential
additional funding requirements.
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, 1995, the Company had
$881.2 million in total notes and loans payable outstanding and
unutilized committed lines of credit of approximately $257.0
million.
Certain of the Company's credit agreements contain
restrictive financial and other covenants, including, among others,
covenants with respect to incurring additional indebtedness,
maintaining certain financial ratios, and placing certain
additional liens on its properties and assets. These agreements
also contain other provisions, including a discussion of "change in
control." See "Legal Proceedings" as it relates to the Company's
credit agreements. In addition, these credit agreements contain
provisions that could result in a required prepayment upon a
"change in control" of the Company.
The Company is further restricted in the type and amount
of dividends and distributions that it may issue or pay, and 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.
39
STOCKHOLDER LITIGATION
As disclosed in "Legal Proceedings," a judgment has been
entered in the Shoen Litigation against five of the Company's
current directors and one former director. As a result of the
judgment, the plaintiffs in the action are required to transfer
their common stock to the defendants in exchange for approximately
$461.8 million. 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, if any,
incurred by the defendants in this proceeding, subject to certain
exceptions. The five director-defendants have filed for protection
under Chapter 11 of the federal bankruptcy laws and have filed, in
cooperation with the Company, plans of reorganization
(collectively, the Plan), all of which propose the same funding and
treatment of the plaintiffs' claims resulting from the judgment in
the Shoen Litigation.
Under the Plan, the Director-Defendants will transfer (or
cause to be transferred) to a trust (the Trust), property having a
stipulated or adjudicated value in excess of $461.8 million. Each
of the plaintiffs would receive a trust certificate representing an
undivided, fractional beneficial interest in the Trust. The
property transferred to the Trust is expected to consist of (i)
approximately $300 million in Series B dividend paying non-voting
cumulative preferred stock issued by the Company or one of its
subsidiaries; (ii) a 1993 REMIC certificate held by the Company with
a face value of $11.5 million evidencing a pool of 61 commercial
mortgage loans which are secured by mortgages or deeds of trust on 60
self-storage properties; (iii) mortgage loans with an aggregate
principal balance of approximately $109.9 million on property held by
the Company, one or more of its subsidiaries, or two corporations
affiliated with the Company; and (iv) real property held free and
clear by the Company or its subsidiaries having a total fair value
of approximately $50 million. Upon the funding of the Trust, the
plaintiffs participating in the Trust will have their judgment
satisfied and will be obligated to transfer their shares of common
stock to the Company or its designee.
Alternatively, and in lieu of their respective
proportionate shares of the property to be transferred to the
Trust, each of the plaintiffs may elect to participate in a
settlement and receive a discounted cash payment in full
satisfaction of his or her claim (the Settlement). The
Settlement provides for a cash fund of up to $350 million to be
paid by the Company to satisfy the claims of all plaintiffs
electing to participate in the Settlement. Any plaintiff electing
to participate in the Settlement will receive a pro rata
distribution of such fund based on the percentage of all of the
plaintiffs' stock held by such plaintiff. Any plaintiff so
electing will not participate in or be entitled to any interest in
the Trust and the amount of property transferred to the Trust will
be correspondingly reduced. The Company plans to fund the
Settlement through its existing lines of credit, additional debt or
equity issuances, asset sales or a combination of the foregoing.
The Company will determine which financing source or sources to use
40
to fund the Settlement based on, amoung other things, market
conditions as they exist from time to time and the number of
plaintiffs electing to participate in the Settlement. The Company
is unable to estimate the amount or cost of the financing, if any,
necessary to fund the Settlement. Upon receipt of the cash
distribution pursuant to the Settlement, the plaintiffs electing to
participate in the Settlement will be obligated to transfer their
common stock to the Company or its designee.
The Company expects the court to consider the Plan
during 1995. However, there is no assurance that the Plan
will be confirmed by the federal bankruptcy court or that the Plan
as confirmed will operate as described above. The Company's
participation in the Plan is subject to the approval of the Board of
Directors. Because of the Plan's complexity and the alternatives
provided to the plaintiffs under the Plan, and because the Plan has
not yet been confirmed, the Company is unable to determine the Plan's
impact on the Company's financial condition, results of operations,
or capital expenditure plans. However, as a result of funding the
Plan, the Company is likely to incur additional costs in the future
in the form of dividends on preferred stock and/or interest on
borrowed funds. See Item 3 - Legal Proceedings.
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 will
adopt this statement in the first quarter of fiscal 1996. The
Company believes that the adoption will have no material impact on
its financial condition or result of operations.
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
was issued by the Financial Accounting Standards Board in May 1993.
This standard requires classification of debt securities into one
of the following three categories based on management's intention
with regard to such securities: held-to-maturity, available-for-
sale and trading. Securities classified as held-to-maturity are
recorded at cost adjusted for the amortization of premiums or
accretion of discounts while those classified as available-for-sale
are recorded at fair value with unrealized gains or losses reported
on a net basis in a separate component of shareholders' equity.
Securities classified as trading are recorded at fair value with
unrealized gains or losses reported on a net basis in income. The
Company (excluding RWIC) adopted the standard effective fiscal
1995, except for RWIC which adopted the standard effective December
31, 1993. The net unrealized loss of approximately $6,483,000 is
reflected as a separate component of shareholders' equity. The
Company does not currently maintain a trading portfolio.
41
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 has not completed an evaluation of the effect of this
standard.
Statement of Position 93-7, "Reporting on Advertising
Costs", was issued by the Accounting Standards Executive Committee
in December 1993. This statement of position provides guidance on
financial reporting on advertising costs in annual financial
statements. The statement of position requires reporting
advertising costs as expenses when incurred or when the advertising
takes place, reporting the costs of direct-response advertising,
and amortizing the amount of direct-response advertising reported
as assets. This statement of position is effective for financial
statements for years beginning after June 15, 1994. The Company
currently matches certain advertising costs with revenue generated
in future periods. The Company will adopt this statement in the
first quarter of fiscal 1996. The Company believes that the
adoption will have no material impact on its financial condition or
results of operations.
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.
42
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 60 through 113, and are hereby
incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
The Registrants have had no disagreements with their
independent accountants in regard to accounting and financial
disclosure and have not changed their independent accountants in
the 24 months prior to date of filing.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Directors and/or Executive Officers of the Registrants as
of June 26, 1995 were:
Name Age Office
---- --- -----
Edward J. Shoen 46 Chairman of the Board and
President of AMERCO and U-Haul
Mark V. Shoen 44 Director of AMERCO and U-Haul
James P. Shoen 35 Vice President of AMERCO;
Director of AMERCO and U-Haul
William E. Carty 68 Director of AMERCO and U-Haul
Aubrey K. Johnson 73 Director of AMERCO
John M. Dodds 58 Director of AMERCO and U-Haul
Richard J. Herrera 41 Director of AMERCO and U-Haul
and Vice President of U-Haul
Charles J. Bayer 55 Director of AMERCO
Gary B. Horton 51 Treasurer of AMERCO and
Assistant Treasurer of U-Haul
Gary V. Klinefelter 47 Secretary and General Counsel of
AMERCO and U-Haul
John A. Lorentz 68 Assistant Secretary of AMERCO and
U-Haul
Rocky D. Wardrip 37 Assistant Treasurer of AMERCO
Harry B. DeShong, Jr. 46 Director and Executive Vice
President of U-Haul
John C. Taylor 37 Director and Executive Vice
President of U-Haul
Donald W. Murney 34 Treasurer of U-Haul
George R. Olds 53 Assistant Secretary of AMERCO and
U-Haul
43
Class I (Term expires at 1995 Meeting)
--------------------------------------
Aubrey K. Johnson, 73, 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. He also served
as Director of U-Haul from July 1988 until June 1990, Product
Director for U-Haul from January 1988 to August 1990, the Director
of Finance and Administration for the U-Haul Technical Center from
1986 to 1988, and the Manager of Repair and Maintenance of the
Company from 1984 to 1986.
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 was employed as a Center General Manager with U-Haul Co.
of San Francisco from 1981 to 1989. From March 1989 to March 1990,
he served as the Director of the U-Haul Technical Services Center.
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 is the founder and owner of
Space Age Paints. Mr. Shoen has been an officer of Form Builders
since 1981.
44
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. From June to
August 1987, he was Assistant to the President of AMERCO with
responsibilities relating to product. He served from August 1987
to December 1990 as President of A & M Associates, Inc., a wholly-
owned subsidiary of U-Haul. 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. Mr. Shoen was President of Form Builders, Inc., Mesa,
Arizona from August 1981 to December 1986.
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. He served U-Haul as Assistant General Counsel
from May 1978 until May 1980, and as General Counsel, Marketing,
from May 1980 until September 1985. From September 1985 to June
1988, he was in private practice.
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.
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 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.
45
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, 1995:
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 50 and 51, the foregoing persons and
corporations 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. However,
certain Form 5 filings required to be made by May 15, 1995 by
certain officers, directors, and stockholders of the Company were
not timely made. The forms required to be filed by Gary V.
Klinefelter, John A. Lorentz, George R. Olds, and Oxford Life
Insurance Company as Trustee for certain trusts established by
Edward J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, and
Sophia M. Shoen were not filed until May 23, 1995. The forms
required to be filed by Edward J. Shoen, Mark V. Shoen, Charles J.
Bayer, Richard J. Herrera, and Donald W. Murney were not filed
until May 24, 1995. The form required to be filed by Aubrey K.
Johnson was not filed until May 26, 1995. The form required to be
filed by the AMERCO Employee Savings, Profit Sharing and Employee
Stock Ownership Plan was not filed until May 30, 1995. The form
required to be filed by Rocky D. Wardrip was not filed until
May 31, 1995. The forms required to be filed by James P. Shoen,
Gary B. Horton, and Henry E. Martin were not filed until June 1,
1995. The forms required to be filed by John M. Dodds and W. E.
Carty were not filed until June 6, 1995.
46
In addition, certain Form 4 filings, made by the
following officers and/or directors of the Company, were not
timely: (i) a form required to be filed by Gary B. Horton by
November 10, 1994 was not filed until approximately November 17,
1994; (ii) two forms required to be filed by Edward J. Shoen by
November 10, 1994 were not filed until approximately November 23,
1994; (iii) a form required to be filed by Mark V. Shoen by
November 10, 1994 was not filed until approximately November 23,
1994; (iv) a form required to be filed by W.E. Carty by November
10, 1994 was not filed until November 29, 1994; and (v) a form
required to be filed by Donald W. Murney by November 10, 1994 was
not filed until November 29, 1994.
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 ($) ($) ($)(1)
- ---------------------------------------------------------------------
Edward J. Shoen 1995 250,004 - 6,821
Chairman of the
Board and President 1994 197,123 2,101,490 10,675
of AMERCO and U-Haul
1993 236,925 - 8,045
Mark V. Shoen 1995 277,120 - 6,821
Director of AMERCO
and U-Haul 1994 227,697 - 9,586
1993 203,851 - 7,166
James P. Shoen 1995 203,850 - 6,821
Vice President and
Director of AMERCO 1994 211,543 - 9,227
and U-Haul
1993 203,851 - 7,166
Gary V. Klinefelter 1995 206,312 54,000 6,821
Secretary and General
Counsel of AMERCO and 1994 210,005 50,000 10,448
U-Haul
1993 103,812 150,000 8,045
Harry B. DeShong, Jr. 1995 165,308 19,000 5,651
Executive Vice President
and Director of U-Haul 1994 148,754 - 6,440
1993 128,248 - 4,462
47
(1) Represents the value of common stock awarded under the
AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan.
The annual fee for all services as a director is $22,100,
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.
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 1995. 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 1995, 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 1995 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 Compensation Committee consists of Charles J. Bayer,
William E. Carty and Aubrey K. Johnson.
The Company's stockholders approved a stock option plan
at the 1992 Annual Meeting of Stockholders. The stock option and
incentive plan is designed to attract and retain employees upon
whose judgment and effort the Company's success is dependent. As
of June 26, 1995, 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.
48
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.
In April 1994, William E. Carty sold a 46.5% interest in
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.
Pursuant to plans of reorganization filed by William E.
Carty and Aubrey K. Johnson under Chapter 11 of the federal
bankruptcy laws, the Company will be funding the acquisition by it
or its designee of approximately 47.3% of the Company's outstanding
common stock currently beneficially held by Leonard S. Shoen,
Samuel W. Shoen, Michael L. Shoen, Mary Anna Shoen-Eaton, Theresa
M. Shoen, Cecilia M. Shoen-Hanlon, and Katrina M. Carlson. See
"Legal Proceedings" for additional information regarding these
bankruptcy proceedings.
PERFORMANCE GRAPH
The following graph compares the cumulative total
stockholder return on the Company's Common Stock for the period
March 31, 1990 through March 31, 1995 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, 1990 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 1990 through 1994 and the closing price of the
Common Stock trading on Nasdaq on March 31, 1995.
(The following descriptive data is supplied in accordance
with Rule 304(d) of Regulation S-T.)
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
AMERCO 100.00 92.00 108.00 155.00 170.00 213.75
Dow Jones
Transportation
Average 100.00 93.78 116.96 132.71 138.21 138.25
Dow Jones
Composite Average 100.00 102.26 114.79 126.40 128.23 137.19
49
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 26, 1995, (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 received
by such persons during the 1995 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, 17,199,585(1) 44.54 .011
Chairman of the
Board and President
2727 N. Central Ave.
Phoenix, AZ 85004
Mark V. Shoen, 17,199,585(1) 44.54 .013
Director
2727 N. Central Ave.
Phoenix, AZ 85004
James P. Shoen 17,199,585(1) 44.54 .024
Director and
Vice President
1325 Airmotive Way
Suite 100
Reno, NV 89502
Paul F. Shoen 17,199,585(1) 44.54 .008
P.O. Box 524
Glenbrook, NV 89413
Sophia M. Shoen 17,199,585(1) 44.54 .022
5104 N. 32nd Street
Phoenix, AZ 85018
Irrevocable Trust 17,199,585(1) 44.54 N/A
between Edward J. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
50
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 17,199,585(1) 44.54 N/A
between Mark V. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 17,199,585(1) 44.54 N/A
between James P. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 17,199,585(1) 44.54 N/A
between Paul F. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
Irrevocable Trust 17,199,585(1) 44.54 N/A
between Sophia M. Shoen
and Oxford Life Insurance
Company, as Trustee
2721 N. Central Ave.
Phoenix, AZ 85004
The ESOP Trust(3) 17,199,585(1) 44.54 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 0 0 .077
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Charles J. Bayer 1,050 ** .006
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Richard J. Herrera 776 ** N/A
Director
2727 N. Central Ave.
Phoenix, AZ 85004
51
PERCENTAGE OF
SHARES OF NET FLEET
NAME AND COMMON STOCK PERCENTAGE OWNER
ADDRESS OF BENEFICIALLY OF COMMON CONTRACT
BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS
- ---------------- ------------ ----------- -------------
Aubrey K. Johnson 0 0 N/A
Director
2727 N. Central Ave.
Phoenix, AZ 85004
Gary V. Klinefelter 1,981 ** N/A
Secretary and
General Counsel
2727 N. Central Ave.
Phoenix, AZ 85004
Harry DeShong 1,528 ** N/A
Executive Vice President
and Director of U-Haul
2727 N. Central Ave.
Phoenix, AZ 85004
Leonard S. Shoen 18,254,596(2) 47.27 .049
(L.S.S., Inc.)*
3079 Ocotillo Ct.
Las Vegas, NV 89121
Samuel W. Shoen 18,254,596(2) 47.27 .010
(Sawmill, Inc.)*
1253 Umatilla Street
Port Townsend, WA 98368
Michael L. Shoen 18,254,596(2) 47.27 N/A
(Mickl, Inc.)*
8202 N.W. 16th Ave.
Vancouver, WA 98665
Mary Anna 18,254,596(2) 47.27 .004
Shoen-Eaton
(Maran, Inc.)*
52 Spanish River Drive
Ocean Ridge, FL 33435
Theresa M. Romero 18,254,596(2) 47.27 .021
(Thermar, Inc.)*
7625 East Via Del Reposo
Scottsdale, AZ 85258
Cecilia M. Hanlon 18,254,596(2) 47.27 .034
(Cemar, Inc.)*
1421 Ranier Falls Drive
Atlanta, GA 30329
52
PERCENTAGE OF
SHARES OF NET FLEET
NAME AND COMMON STOCK PERCENTAGE OWNER
ADDRESS OF BENEFICIALLY OF COMMON CONTRACT
BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS
- ---------------- ------------ ----------- -------------
Katrina M. Carlson 18,254,596(2) 47.27 .070
(Kattydid, Inc.)*
837 15th Street #D
Santa Monica, CA 90404
Officers and Directors 17,207,177(4) 44.56 N/A
as a group (13 persons)
*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.
1.- This number includes beneficial ownership of shares
attributed to a stockholder agreement dated as of May 1, 1992, as
amended (the "Stockholder Agreement") and includes shares directly
owned by Edward J. Shoen (3,483,681); Mark V. Shoen (3,475,520);
James P. Shoen (2,278,814); Paul F. Shoen (2,782,058); 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 (1,935,700) (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 (2,432.17), Mark V. Shoen (2,157.57),
James P. Shoen (2,126.50), 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
53
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 described under "Certain
Relationships and Related Transactions" (pages 54 - 57) and under
"Legal Proceedings" (pages 18-23). 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.
2 - This number includes beneficial ownership of shares
attributed to a shareholders' agreement and includes shares
directly owned by Samuel W. Shoen/Sawmill, Inc. (4,041,924);
Michael L. Shoen/Mickl, Inc. (4,035,924); Mary Anna Shoen-
Eaton/Maran, Inc. (3,343,076); Cecilia M. Hanlon/Cemar, Inc.
(2,331,984); Katrina M. Carlson/Kattydid, Inc. (2,016,624); Theresa
M. Romero/Thermar, Inc. (1,651,644); and Leonard S. Shoen/L.S.S.,
Inc. (833,420). 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. Leonard S. Shoen, Michael L.
Shoen, and Theresa M. Romero, whose addresses are listed above,
have each 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.
3 - 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 26, 1995, of the
3,148,037 shares of common stock held by the ESOP Trust, 1,220,029
shares were allocated to participants and 1,928,008 shares remained
unallocated. Of the 1,220,029 allocated shares, approximately
7,692 shares are allocated to members of the Stockholder Group,
which shares are voted in accordance with the terms of the
Stockholder Agreement. Therefore, as of the date of this report,
the Stockholder Group controls approximately 44.54% of the Company's
outstanding common stock. 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.
4 - The 17,207,177 shares include the shares beneficially
owned by directors and 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
54
to Stockholder Agreement, discussed in Note 17 of Notes to Consolidated
Financial Statements is 10,676,796 shares, or approximately 27.7% of the
outstanding shares of Common Stock as of June 26, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to 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, the
Company may be financing the acquisition by it or its designee of
approximately 47.3% of the Company's outstanding Common Stock
currently beneficially held by Leonard S. Shoen, Samuel W. Shoen,
Michael L. Shoen, Mary Anna Shoen-Eaton, Theresa M. Romero, Cecilia
M. Hanlon, and Katrina M. Carlson. 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. See Item 3 - Legal Proceedings for
additional information regarding the bankruptcy proceedings.
During fiscal 1995, 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., Esben L.B.
Shoen, Theresa M. Romero, Katrina M. Carlson, and Asia A. and
Maxwell L. Eaton, generated net operating revenues of $53,000.
Mark V. and James P. Shoen are major stockholders and directors of
the Company. L.S., Samuel W., Paul F., Sophia M., Michael L.
Shoen, Theresa M. Romero and Katrina M. Carlson are major
stockholders of the Company.
Pursuant to a Share Repurchase and Registration Rights
Agreement, dated May 1, 1992 (the "Sophia Shoen Registration Rights
Agreement"), 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 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.
55
Pursuant to a Share Repurchase and Registration Rights
Agreement, dated as of March 1, 1992 (the "Paul Shoen Registration
Rights Agreement") 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.
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.
As disclosed in Item 3 - Legal Proceedings, on February
9, 1995, Paul F. Shoen executed a settlement agreement with the
Company and others 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 appoint
independent trustees for the ESOP and to place Paul F. Shoen on
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, subject to
certain exceptions, through the settlement date, including but not
limited to, claims for reimbursement of attorneys fees related to
certain 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. Paul F. Shoen is a major stockholder of the Company.
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
56
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 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.
During fiscal year 1995, U-Haul purchased $3,417,000 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.
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.
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. William E. Carty is a director of the Company.
During fiscal 1995, a subsidiary of the Company made a
loan to SAC Self-Storage Corporation (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 of $26,287,000.
All 24 of these properties were acquired by the Company or its
subsidiaries since June 1993. These 24 properties were sold to SAC
for an amount 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. For fiscal 1995, SAC incurred management fees to
the Company in the amount of $327,000. The SAC loan consists of
two notes, a senior note in the amount of $45,500,000 bearing
interest at the rate of 9% and a junior note in the amount of
$9,171,000 bearing interest at the rate of 13%. As of March 31,
1995, accrued interest on the senior note was $2,008,000 and
$385,000 on the junior note. Subsequent to March 31, 1995, senior
principal paid was $546,000, senior interest paid was $2,008,000
and junior interest paid was $133,000. Both the senior note and
57
the junior note are secured by senior and junior mortgages,
respectively, on all 44 properties. The SAC notes mature in 2004,
or on demand. The Company believes that the transactions with SAC
were consummated on terms equivalent to those that prevail in arms-
length transactions.
In addition, during fiscal 1995, a subsidiary of the
Company has been in the process of loaning TWO SAC Self-Storage
Corporation (TWO SAC) funds to purchase approximately four self-
storage properties. Subsequent to year end, the Company funded the
purchase of 14 additional properties by TWO SAC. As of March 31,
1995, $7,840,000 in principal was due from TWO SAC, while interest
of $351,000 has been accrued. No payment of principal or interest
will be made until the notes are finalized. Such properties are
currently or will be 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 will consist of two notes, a senior note bearing interest
at the rate of 9% and a junior note bearing interest at the rate of
13%. The TWO SAC notes will be secured by senior and junior
mortgages and are expected to mature in 2004 or 2005, or on demand.
TWO SAC anticipates acquiring approximately 28 properties from the
Company that had been acquired by the Company or its subsidiaries
since June 1993.
Mark V. Shoen, a major stockholder, director, and officer
of the Company, owns all of the issued and outstanding voting
common stock of SAC and TWO 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 common
stock of SAC and TWO SAC. Edward J. Shoen and James P. Shoen,
major stockholders, directors and officers of the Company, formerly
were directors and stockholders of SAC and TWO SAC. Edward J.
Shoen continues to serve as an officer of SAC and TWO SAC. Mark V.
Shoen has capitalized SAC and TWO SAC via a contribution of 92,000
shares of AMERCO common stock each to SAC and TWO SAC. Mark V.
Shoen has indicated to the Company that he intends, after reserving
sufficient funds for expenses and other reasonable amounts, to
distribute any remaining SAC and TWO 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 benefitting 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.
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.
Management believes that the foregoing transactions were
consummated on terms equivalent to those that prevail in
arm's-length transactions.
58
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. All Financial Statements
Report of Independent Accountants - AMERCO and
Consolidated Subsidiaries 60
Consolidated Balance Sheets -
March 31, 1994 and 1993 62
Consolidated Statements of Earnings -
Years ended March 31, 1994, 1993 and 1992 64
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 1994, 1993 and 1992 65
Consolidated Statements of Cash Flows - Years ended
March 31, 1994, 1993 and 1992 67
Notes to Consolidated Financial Statements -
March 31, 1994, 1993 and 1992 69
Summary of Earnings of Independent Trailer Fleets 114
Notes to Summary of Earnings of Independent
Trailer Fleets 115
2. Financial Statement Schedules required to be filed
by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant --
Schedule I 117
Amounts Receivable from Related Parties and Under-
writers, Promoters and Employees Other than Related
Parties -- Schedule II 122
Supplemental Information (for Property-Casualty
Insurance Underwriters) -- Schedule V 123
All other schedules are omitted as the required
information is not applicable or the information is presented in
the financial statements or related notes.
3. Exhibits Filed
Exhibit No. Description
----------- -----------
2 Disclosure Statement for Debtor's Plan of
Reorganization Proposed By Edward J. Shoen
3.1 Restated Articles of Incorporation (1)
3.2 Restated By-Laws of AMERCO as of
January 10, 1995 (2)
10.1 AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan (3)
10.2 U-Haul Dealership Contract (3)
59
3. Exhibits Filed, continued
Exhibit No. Description
10.3 Share Repurchase and Registration Rights
Agreement (3)
10.4 Share Repurchase and Registration Rights
Agreement (3)
10.5 Management Consulting Agreement (4)
10.6 Management Consulting Agreement (4)
10.7 ESOP Loan Credit Agreement (4)
10.8 ESOP Loan Agreement (4)
10.9 Trust Agreement for the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership (4)
10.10 Amended Indemnification Agreement (4)
10.11 Indemnification Trust Agreement (4)
10.12 W.E. Carty Installment Sales Agreement (4)
10.13 Exchange Agreement with Mark V. Shoen (5)
10.14 Exchange Agreement with James P. Shoen (5)
10.15 Exchange Agreement with Edward J. Shoen (5)
10.16 Exchange Agreement with Mark V. Shoen (2)
10.17 W.E. Carty Contract of Purchase and Sale of
Land (5)
10.18 Promissory Notes between SAC Self-Storage
Corporation and a subsidiary of AMERCO (6)
10.19 Settlement Agreement with Paul F. Shoen
12 Statements re Computation of Ratios
27 Financial Data Schedule
P28 Information Furnished to State Insurance
Regulators (7)
________________
(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 Quarterly Report on
Form 10-Q for the quarter ended December 31, 1994, file no. 0-7862.
(3) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1993, file no. 0-7862.
(4) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1990, file no. 0-7862.
(5) Incorporated by reference to the Company's Registration
Statement on Form S-2, Registration no. 33-54289.
(6) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994, file no. 0-7862.
(7) 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.
60
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of AMERCO
In our opinion, the consolidated financial statements and schedules
listed in the index appearing under Item 14(a)(1) and (2) on page 58
present fairly, in all material respects, the financial position of
AMERCO and its subsidiaries at March 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the
three years in the period ended March 31, 1995, 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 certain investments in
fiscal 1995. As discussed in Notes 1 and 11 to the consolidated
financial statements, the Company changed its method of accounting
for certain investments and postretirement benefits in fiscal 1994,
respectively.
As discussed in Note 14, certain current and former directors of the
Company have sought protection under federal bankruptcy laws as a
result of litigation brought by certain shareholders. Because of
existing indemnification agreements, the Company may be liable,
wholly or in part, for damages attributed to the defendants. In
addition, the Company may participate as the funding source for the
Plan of Reorganization filed by the defendants described further in
Note 14. The ultimate outcome of the litigation cannot be
determined at present. No provision for any liability that may
result from this matter has been made in the accompanying
consolidated financial statements.
61
Our audits were conducted 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 114 through
116 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.
/S/ PRICE WATERHOUSE LLP
Phoenix, Arizona
June 26, 1995
62
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 1995 1994
--------------------
(in thousands)
Cash and cash equivalents $ 35,286 18,442
Receivables 300,238 204,814
Inventories 50,337 49,012
Prepaid expenses 25,933 24,503
Investments, fixed maturities 705,428 719,605
Investments, other 135,220 84,738
Deferred policy acquisition costs 49,244 47,846
Other assets 30,057 21,246
--------- ---------
Property, plant and equipment, at cost:
Land 214,033 186,210
Buildings and improvements 735,624 676,297
Furniture and equipment 179,016 163,495
Rental trailers and other rental
equipment 245,892 212,187
Rental trucks 913,641 820,395
General rental items 51,890 57,421
--------- ---------
2,340,096 2,116,005
Less accumulated depreciation 1,065,850 941,769
--------- ---------
Total property, plant and equipment 1,274,246 1,174,236
--------- ---------
$ 2,605,989 2,344,442
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
63
Liabilities and Stockholders' Equity 1995 1994
--------------------
(in thousands)
Liabilities:
Accounts payable and accrued
liabilities $ 127,613 124,062
Notes and loans 881,222 723,764
Policy benefits and losses, claims
and loss expenses payable 475,187 439,266
Liabilities from premium deposits 304,979 312,708
Cash overdraft 31,363 26,559
Other policyholders' funds and
liabilities 20,378 9,592
Deferred income 7,426 5,913
Deferred income taxes 71,037 50,791
--------- ---------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized; 6,100,000 issued
without par value and outstanding
as of March 31, 1995 and 1994 - -
Serial common stock, with or without
par value, 150,000,000 shares
authorized - -
Series A common stock of $.25 par
value. Authorized 10,000,000
shares, issued 5,762,495 shares
in 1995, issued 5,754,334 shares
in 1994 1,441 1,438
Common stock of $.25 par value.
Authorized 150,000,000 shares,
issued 34,237,505 shares in 1995
and 34,245,666 shares in 1994 8,559 8,562
Additional paid-in capital 165,675 165,651
Foreign currency translation
adjustment (12,435) (11,152)
Unrealized gain (loss) on investments (6,483) 679
Retained earnings 561,589 514,521
--------- ---------
718,346 679,699
Less:
Cost of common shares in treasury
(1,335,937 shares as of March
31, 1995 and 1994) 10,461 10,461
Unearned employee stock
ownership plan shares 21,101 17,451
--------- ---------
Total stockholders' equity 686,784 651,787
Contingent liabilities and commitments --------- ---------
$ 2,605,989 2,344,442
========= =========
64
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
1995 1994 1993
----------------------------------
(in thousands except per share data)
Revenues
Rental and other revenue $ 892,926 816,666 755,932
Net sales 170,204 156,038 145,514
Premiums 135,648 123,344 98,825
Net investment income 42,085 38,807 40,640
---------- ---------- ----------
Total revenues 1,240,863 1,134,855 1,040,911
Costs and expenses
Operating expense 690,448 643,662 604,596
Cost of sales 93,485 92,179 93,104
Benefits and losses 133,407 120,825 106,617
Amortization of deferred
acquisition costs 10,896 9,343 9,352
Depreciation 151,409 133,485 110,105
Interest expense 67,762 68,859 67,958
---------- ---------- ----------
Total costs and
expenses 1,147,407 1,068,353 991,732
Pretax earnings
from operations 93,456 66,502 49,179
Income tax expense (33,424) (19,853) (17,270)
---------- ---------- ----------
Earnings from operations before
extraordinary loss on early
extinguishment of debt and
cumulative effect of change
in accounting principle 60,032 46,649 31,909
Extraordinary loss on early
extinguishment of debt, net - (3,370) -
Cumulative effect of change in
accounting principle, net - (3,095) -
---------- ---------- ----------
Net earnings $ 60,032 40,184 31,909
========== ========== ==========
Earnings per common share:
Earnings from operations
before extraordinary loss
on early extinguishment of
debt and cumulative effect
of change in accounting
principle $ 1.23 1.06 .83
Extraordinary loss on early
extinguishment of debt, net - (.09) -
Cumulative effect of change
in accounting principle, net - (.08) -
---------- ---------- ----------
Net earnings $ 1.23 .89 .83
========== ========== ==========
Weighted average common
shares outstanding 38,190,552 38,664,063 38,664,063
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
65
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
1995 1994 1993
------------------------
(in thousands)
Series A common stock of $.25 par
value: Authorized 10,000,000
shares,issued 5,762,495 in 1995,
5,754,334 in 1994, and none in 1993
Beginning of year $ 1,438 - -
Exchange for Series A common
stock 871 1,438 -
Exchange for common stock (868) - -
------- ------- -------
End of year 1,441 1,438 -
------- ------- -------
Common stock of $.25 par value:
Authorized 150,000,000 shares in
1995, 1994 and 1993, 34,237,505
issued in 1995, 34,245,666 in 1994
and 40,000,000 issued in 1993
Beginning of year 8,562 10,000 10,000
Exchange for Series A common
stock (871) (1,438) -
Exchange for common stock 868 - -
------- ------- -------
End of year 8,559 8,562 10,000
------- ------- -------
Additional paid-in capital:
Beginning of year 165,651 19,331 19,331
Issuance of preferred stock - 146,320 -
Issuance of common shares under
leveraged employee stock
ownership plan 24 - -
------- ------- -------
End of year 165,675 165,651 19,331
------- ------- -------
Foreign currency translation:
Beginning of year (11,152) (6,122) (3,551)
Change during year (1,283) (5,030) (2,571)
------- ------- -------
End of year (12,435) (11,152) (6,122)
------- ------- -------
Unrealized gains (losses) on
investments:
Beginning of year 679 - -
Change during year (7,162) 679 -
------- ------- -------
End of year (6,483) 679 -
------- ------- -------
The accompanying notes are an integral part of these consolidated
financial statements.
66
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity,
continued
Years ended March 31,
1995 1994 1993
------------------------
(in thousands)
Retained earnings:
Beginning of year 514,521 482,163 452,202
Net earnings 60,032 40,184 31,909
Dividends paid to stockholders:
Preferred stock: ($2.13 and $0.78
per share for 1995 and 1994,
respectively) (12,964) (4,753) -
Common stock: ($.08 and $.05 per
share for 1994 and 1993,
respectively) - (3,147) (1,994)
Tax benefits related to leveraged
employee stock ownership plan
dividends - 74 46
------- ------- -------
End of year 561,589 514,521 482,163
------- ------- -------
Treasury stock:
Beginning of year 10,461 10,461 10,461
Unearned employee stock
ownership plan shares:
Beginning of year 17,451 14,953 15,633
Increase in loan 5,672 4,335 1,120
Proceeds from loan (2,022) (1,837) (1,800)
------- ------- -------
End of year 21,101 17,451 14,953
------- ------- -------
Total stockholders' equity $ 686,784 651,787 479,958
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
67
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
1995 1994 1993
------------------------
(in thousands)
Cash flows from operating
activities:
Net earnings $ 60,032 40,184 31,909
Depreciation and amortization 163,890 148,740 128,530
Provision for losses on accounts
receivable 4,958 1,938 2,354
Net gain on sale of real and
personal property (3,390) (2,114) (2,428)
Gain on sale of investments (868) (4,195) (5,392)
Cumulative effect of change
in accounting principle - 3,095 -
Changes in policy liabilities
and accruals 38,401 13,330 22,637
Additions to deferred policy
acquisition costs (12,119) (7,440) (8,735)
Net change in other operating
assets and liabilities (16,501) 8,781 (6,063)
-------- -------- --------
Net cash provided by operating
activities 234,403 202,319 162,812
Cash flows from investing
activities:
Purchases of investments:
Property, plant and equipment (434,992) (530,520) (130,841)
Fixed maturities (186,000) (280,345) (276,946)
Real estate (11,576) (176) (529)
Mortgage loans (107,571) (64,467) (54,346)
Proceeds from sales of
investments:
Property, plant and equipment 185,098 214,543 20,656
Fixed maturities 192,428 211,437 251,808
Real estate 927 1,552 1,882
Mortgage loans 18,535 81,619 5,984
Changes in other investments (12,327) 8,539 37,475
-------- -------- --------
Net cash used by investing
activities (355,478) (357,818) (144,857)
The accompanying notes are an integral part of these consolidated
financial statements.
68
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
1995 1994 1993
------------------------
(in thousands)
Cash flows from financing
activities:
Net change in short-term notes
payable and commercial paper 178,750 21,750 2,975
Proceeds from notes 68,845 186,000 55,000
Loan to leveraged Employee Stock
Ownership Plan (5,672) (4,335) (1,120)
Proceeds from leveraged Employee
Stock Ownership Plan 2,022 1,837 1,800
Principal payments on notes (90,137) (181,107) (94,176)
Issuance of preferred stock - 146,320 -
Extraordinary loss on early
extinguishment of debt - (3,370) -
Net change in cash overdraft 4,804 1,708 5,307
Dividends paid (12,964) (7,900) (1,994)
Investment contract deposits 51,908 31,932 51,047
Investment contract withdrawals (59,637) (40,185) (27,889)
-------- -------- -------
Net cash provided (used) by
financing activities 137,919 152,650 (9,050)
-------- -------- -------
Increase (decrease) in cash
and cash equivalents 16,844 (2,849) 8,905
Cash and cash equivalents at
beginning of year 18,442 21,291 12,386
-------- -------- -------
Cash and cash equivalents at
end of year $ 35,286 18,442 21,291
======== ======== =======
The accompanying notes are an integral part of these consolidated
financial statements.
69
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements
include the accounts of the parent corporation, AMERCO, and its
subsidiaries, all of which are wholly-owned. All material
intercompany accounts and transactions of AMERCO and its
subsidiaries (herein called the "Company" or the "consolidated
group") have been eliminated.
The 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 1995, 1994 or 1993, 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 of AMERCO for
additional information regarding the subsidiary.
Description of Business: The consolidated group's principal line of
business is the rental of various kinds of equipment, principally
trucks, automobile-type trailers, auto transports and general
rental items, including floor care items, tools for home and garden
use, recreational equipment and accessories under the brand name U-
Haul and the sale of related products and services. In addition,
the consolidated group is engaged in the rental of self-storage
facilities for the storage of household goods and other forms of
personal property. Through Ponderosa Holdings, Inc., (Ponderosa),
which serves as the holding company for Oxford Life Insurance
Company (Oxford) and Republic Western Insurance Company (RWIC), the
Company operates in various life, annuity, group health and
property-casualty insurance products. A portion of the insurance
subsidiaries' business is conducted with members of the
consolidated group. Such transactions have been eliminated in
consolidation.
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.
Cash and Cash Equivalents: The Company considers liquid investments
with an original maturity of three months or less to be cash
equivalents.
70
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Accounts Receivable and Allowance for Doubtful Accounts: 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
to be uncollectible. Accounts receivable of the Company's rental
subsidiaries principally include trade accounts receivable and
mortgage and other notes receivable. An allowance for doubtful
accounts is provided 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 maturities are carried in accordance with
Statement of Financial Accounting Standards No. 115 (SFAS 115) as
described under "New Accounting Standards" later in this note.
Oxford adopted SFAS 115 effective January 1, 1994 and RWIC adopted
SFAS 115 effective December 31, 1993. In prior years, Oxford's
fixed maturities were carried at cost, adjusted for amortization of
premium or accretion of discount. AMERCO and its subsidiaries,
excluding Ponderosa, have no investments which are subject to SFAS
115. 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.
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 of AMERCO.
Interest on bonds is recognized when earned. Dividends on
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.
Deferred Policy Acquisition Costs: Commissions and other costs
incurred in acquiring traditional life insurance, interest
sensitive life and 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, annuity and group 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.
71
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
Credit life and health acquistion costs are deferred and amortized
over the term of the contracts in relation to premiums earned.
Acquisition costs for annuity policies are 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 benefitted.
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 $1,727,000, $595,000 and $159,000 was capitalized in the years
ended 1995, 1994 and 1993, respectively.
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, 1995, the book value of the Company's real estate
deemed to be surplus was approximately $27,466,000.
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 as interest rates change and are
recognized as incurred. 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, 1995, interest rate swap agreements with an aggregate
notional amount of $193,000,000 were outstanding. Management
estimates that at March 31, 1995 and 1994, the Company would be
required to pay $6,000,000 and $14,000,000, respectively, to terminate
the agreements. Such amounts were determined from current treasury
rates combined with swap spreads on agreements outstanding.
72
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
The Company has mortgage loans 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.
At March 31, 1995, mortgage notes with a book value of $135,424,000
were outstanding. The estimated fair value of the notes at March
31, 1995 was $138,862,000. The estimated fair values were
determined using discounted cash flow method, using interest rates
currently offered for similar loans to borrowers with similar credit
ratings. At March 31, 1994, mortgage notes with a book value
of $42,482,000 were outstanding. The estimated fair value at
March 31, 1994 was approximate to the book value. Other financial
instruments that are subject to fair value disclosure requirements
are carried in the financial statements at amounts that approximate
fair value.
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of temporary cash
investments and trade receivables. The Company places its
temporary cash investments with financial institutions and limits
the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers and their dispersion
across many different industries and geographic areas.
Policy Benefits and Losses, Claims and Loss Expenses Payable:
Liabilities for policy benefits payable on traditional life and
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, 1994, interest assumptions used to
compute policy benefits payable range from 2.5% to 12.8%.
With respect to interest sensitive life and annuity policies, the
liability for policy benefits and expenses payable consists of
policy account balances that accrue to the benefit of the
policyholders, excluding surrender charges.
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.
73
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
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: AMERCO 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 of AMERCO for
further discussion.
Premium Revenue: Accident and health, credit life and health, and
property-casualty gross premiums are recognized over the term of
the related contracts. Traditional life and annuity premiums are
recognized as revenue when due from policyholders. Revenue for
annuity policies consists of investment margins and surrender
charges that have been assessed against policy account balances
during the period.
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. See also "Policy Benefits and Losses, Claims
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.
74
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
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 will adopt this statement in the first
quarter of fiscal 1996. The Company believes that the adoption will
have no material impact on its financial condition or results of
operations.
Statement of Financial Accounting Standards No. 115 - Accounting for
Certain Investments in Debt and Equity Securities. Effective
January 1, 1994, U-Haul and Oxford adopted SFAS 115. RWIC adopted
SFAS 115 effective December 31, 1993. This statement requires
classification of debt securities into one of the following three
categories based on management's intention with regard to such
securities: held-to-maturity, available-for-sale and trading.
Securities classified as held-to-maturity are recorded at cost
adjusted for the amortization of premiums or accretion of discounts
while those classified as available-for-sale are recorded at fair
value with unrealized gains or losses reported on a net basis as a
separate component of stockholders' equity. Securities classified
as trading, if any, are recorded at fair value with unrealized gains
or losses reported on a net basis in income. The Company does not
currently maintain a trading portfolio.
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 has not
completed an evaluation of the effect of this standard.
75
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
New Accounting Standards, continued
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.
Statement of Position 93-7, "Reporting on Advertising Costs", was
issued by the Accounting Standards Executive Committee in December
1993. This statement of position provides guidance on financial
reporting on advertising costs in annual financial statements. The
statement of position requires reporting advertising costs as
expenses when incurred or when the advertising takes place,
reporting the costs of direct-response advertising, and amortizing
the amount of direct-response advertising reported as assets. This
statement of position is effective for financial statements for
years beginning after June 15, 1994. The Company currently matches
certain advertising costs with revenue generated in future periods.
The Company will adopt this statement in the first quarter of fiscal
1996. The Company believes that the adoption will have no material
impact on its financial condition or results of operations.
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.
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 of AMERCO for
further discussion.
Financial Statement Presentation: Certain reclassifications have
been made to the financial statements for the years ended 1994 and
1993 to conform with the current year's presentation.
76
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Receivables
A summary of receivables follows:
Year ended
-------------------
1995 1994
-------------------
(in thousands)
Trade accounts receivable $ 12,527 16,073
Mortgage and note receivables,
net of discount 78,499 45,288
Note receivable and accrued
interest from SAC and TWO SAC 65,255 -
Premiums and agents' balances
in course of collection 33,150 29,078
Reinsurance recoverable 84,270 81,760
Accrued investment income 13,377 13,565
Independent dealer receivable 8,749 6,870
Other receivables 9,050 14,189
------- -------
304,877 206,823
Less allowance for doubtful accounts (4,639) (2,009)
------- -------
$ 300,238 204,814
======= =======
During fiscal 1995, a subsidiary of the Company made a loan to SAC
Self-Storage Corporation (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 of $26,287,000. All 24 of these
properties were acquired by the Company or its subsidiaries since
June 1993. These 24 properties were sold to SAC for an amount 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. For fiscal
1995, SAC incurred management fees to the Company in the amount of
$327,000. The SAC loan consists of two notes, a senior note in the
amount of $45,500,000 bearing interest at the rate of 9% and a
junior note in the amount of $9,171,000 bearing interest at the rate
of 13%. As of March 31, 1995, accrued interest on the senior note
was $2,008,000 and $385,000 on the junior note. Subsequent to March
31, 1995, senior principal paid was $546,000, senior interest paid
was $2,008,000 and junior interest paid was $133,000. Both the
senior note and the junior note are secured by senior and junior
mortgages, respectively, on all 44 properties. The SAC notes mature
in 2004, or on demand. The Company believes that the transactions
with SAC were consummated on terms equivalent to those that prevail
in arms-length transactions.
77
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Receivables, continued
In addition, during fiscal 1995, a subsidiary of the Company has
been in the process of loaning TWO SAC Self-Storage Corporation (TWO
SAC) funds to purchase approximately four self-storage properties.
Subsequent to year end, the Company funded the purchase of 14
additional properties by TWO SAC. As of March 31, 1995, $7,840,000
in principal was due from TWO SAC, while interest of $351,000 has
been accrued. No payment of principal or interest will be made
until the notes are finalized. Such properties are currently or
will be 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 will consist of
two notes, a senior note bearing interest at the rate of 9% and a
junior note bearing interest at the rate of 13%. The TWO SAC notes
will be secured by senior and junior mortgages and are expected to
mature in 2004 or 2005, or on demand. TWO SAC anticipates acquiring
approximately 28 properties from the Company that had been acquired
by the Company or its subsidiaries since June 1993.
Mark V. Shoen, a major stockholder, director, and officer of the
Company, owns all of the issued and outstanding voting common stock
of SAC and TWO 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 stock of SAC and TWO SAC.
Edward J. Shoen and James P. Shoen, major stockholders,
directors and officers of the Company, formerly were directors and
stockholders of SAC and TWO SAC. Edward J. Shoen continues to serve
as an officer of SAC and TWO SAC. Mark V. Shoen has capitalized SAC
and TWO SAC via a contribution of 92,000 shares of AMERCO common
stock each to SAC and TWO SAC. Mark V. Shoen has indicated to the
Company that he intends, after reserving sufficient funds for
expenses and other reasonable amounts, to distribute any remaining
SAC and TWO 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 benefitting 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.
78
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Inventories
A summary of inventory components follows:
Year ended
-------------------
1995 1994
-------------------
(in thousands)
Trailers, truck and recreational
vehicle parts and accessories $ 31,636 31,684
Moving aids and promotional items 7,127 7,032
Hitches and towing components 11,516 10,236
Other 58 60
------- -------
$ 50,337 49,012
======= =======
Certain general and administrative expenses are allocated to ending
inventories. Such costs remaining in inventory at fiscal years
ended 1995, 1994 and 1993 are estimated at $6,848,000, $7,679,000
and $7,224,000, respectively. For the fiscal years ended March 31,
1995, 1994 and 1993, aggregate general and administrative costs were
$377,471,000, $430,209,000 and $467,390,000, respectively.
LIFO inventories, which represent approximately 98% of total
inventories at March 31, 1995 and 1994 would have been $3,657,000
and $3,591,000 greater at March 31, 1995 and 1994, respectively, if
the consolidated group had used the FIFO method.
(4) Investments
Major categories of net investment income consists of the following
(in thousands):
December 31,
--------------------------
1994 1993 1992
--------------------------
Fixed maturities $ 53,236 52,903 54,836
Real estate 223 142 235
Policy loans 604 609 566
Mortgage loans 5,338 4,669 5,751
Short-term, amounts held by
ceding reinsurers, net and
other investments 2,064 874 2,481
------ ------ -------
Investment income 61,465 59,197 63,869
Less investment expenses 19,380 20,390 23,229
------ ------ -------
Net investment income $ 42,085 38,807 40,640
====== ====== ======
A comparison of amortized cost to estimated fair value for fixed
maturities is as follows (in thousands):
79
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
December 31, 1994
- ----------------- Par Value Gross Gross Estimated
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
U.S. treasury
securities
and government
obligations $ 28,342 $ 28,254 229 523 27,960
U.S. government
agency mortgage
backed securities $ 52,394 52,081 207 6,414 45,874
Obligations of
states and
political
subdivisions $ 32,285 31,931 1,822 349 33,404
Corporate
securities $ 223,825 228,605 1,117 6,002 223,720
Mortgage-backed
securities $ 110,785 109,127 382 9,371 100,138
Redeemable preferred
stocks 35 2,126 233 - 2,359
------- ----- ------ -------
452,124 3,990 22,659 433,455
------- ----- ------ -------
December 31, 1994
- ----------------- Gross Gross Estimated
Consolidated Amortized unrealized unrealized market
Available-for-Sale Par Value cost gains losses value
------------------------------------------------------
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
======= ===== ====== =======
80
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
December 31, 1993
- ----------------- Gross Gross Estimated
OXFORD Amortized unrealized unrealized market
Par Value cost gains losses value
------------------------------------------------------
U.S. treasury
securities
and government
obligations $ 10,340 $ 9,395 949 - 10,344
U.S. government
agency mortgage
backed
securities $ 69,653 69,053 1,626 448 70,231
States,
municipalities
and political
subdivisions $ 1,000 1,003 28 - 1,031
Foreign government
securities $ 1,000 1,002 152 - 1,154
Corporate
securities $ 191,177 194,940 11,499 924 205,515
Mortgage-backed
securities $ 41,001 40,252 1,182 282 41,152
Public utility
securities $ 38,950 37,844 2,503 - 40,347
------- ----- ------ -------
Total $ 353,489 17,939 1,654 369,774
======= ===== ====== =======
December 31, 1993
- ----------------- Par Value Gross Gross Estimated
RWIC or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
U.S. treasury
securities and
government
obligations $ 38,213 $ 39,425 3,025 55 42,395
States,
municipalities
and political
subdivisions $ 43,625 43,154 4,345 334 47,165
Corporate
securities $ 195,350 202,401 8,444 1,577 209,268
Mortgage-backed
securities $ 36,085 36,140 488 368 36,260
Redeemable
preferred stock 2,300 2,300 400 - 2,700
------- ----- ------ -------
323,420 16,702 2,334 337,788
======= ===== ====== =======
81
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
December 31, 1993
- ----------------- Par Value Gross Gross Estimated
RWIC or number Amortized unrealized unrealized market
Available-for-Sale of shares cost gains losses value
------------------------------------------------------
U.S. treasury
securities and
government
obligations $ 6,000 6,125 1,175 - 7,300
States,
municipalities
and political
subdivisions $ 40 40 - 2 38
Corporate
securities $ 19,000 19,233 23 152 19,104
Mortgage-backed
securities $ 16,098 16,254 - - 16,254
------- ----- ------ -------
41,652 1,198 154 42,696
------- ----- ------ -------
Total $ 365,072 17,900 2,488 380,484
======= ====== ====== =======
Fixed maturities fair value are based on publicly quoted market
prices at the close of trading December 31, 1994 or December 31,
1993, 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, 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 89,559 86,131
After ten years 17,626 17,569
--------- ---------
289,462 286,033
Mortgage-backed securities 160,536 145,063
Redeemable preferred stock 2,126 2,359
--------- ---------
452,124 433,455
--------- ---------
82
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
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 127,496 122,268
After ten years 5,207 5,366
--------- ---------
225,440 218,516
Mortgage-backed securities 37,396 34,788
--------- ---------
262,836 253,304
--------- ---------
Total $ 714,960 686,759
========= =========
December 31, 1993
- ----------------- Amortized Estimated
OXFORD cost fair value
--------- ----------
(in thousands)
Due in one year or less $ 15,362 15,641
Due after one year through five years 118,343 125,274
Due after five years through ten years 108,693 115,402
After ten years 1,786 2,075
--------- ---------
244,184 258,392
Mortgage-backed securities 109,305 111,382
--------- ---------
Total $ 353,489 369,774
========= =========
December 31, 1993
- ----------------- Amortized Estimated
RWIC cost fair value
Held-to-Maturity --------- ----------
(in thousands)
Due in one year or less $ 35,997 32,090
Due after one year through five years 148,894 155,908
Due after five years through ten years 90,443 100,726
After ten years 9,646 10,104
--------- ---------
284,980 298,828
Mortgage-backed securities 36,140 36,260
Redeemable preferred stock 2,300 2,700
--------- ---------
323,420 337,788
--------- ---------
83
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, continued
December 31, 1993 Amortized Estimated
RWIC cost fair value
Available-for-sale --------- ----------
(in thousands)
Due after one year through five years 9,864 9,829
Due after five years through ten years 8,185 8,838
After ten years 7,349 7,775
--------- ---------
25,398 26,442
Mortgage-backed securities 16,254 16,254
--------- ---------
41,652 42,696
--------- ---------
Total $ 365,072 380,484
========= =========
Proceeds from sales of investments in debt securities during 1994
and 1993 were $71,242,000 and $25,409,000, respectively. Gross
gains of $1,447,000 and $1,665,000 and gross losses of $332,000 and
$91,000 were realized on those sales during 1994 and 1993,
respectively. Proceeds from maturities and early redemptions of
investments in debt securities during 1994 and 1993 were
$117,233,000 and $169,089,000. Gross gains of $633,000 and
$2,326,000 and gross losses of $510,000 and $254,000 were realized
on these securities during 1994 and 1993, respectively.
At December 31, 1994 and 1993 fixed maturities include bonds with
an amortized cost of $16,775,000 and $15,450,000, respectively, on
deposit with insurance regulatory authorities to meet statutory
requirements.
Real estate held for investment, net of accumulated depreciation of
$357,000 in 1994 and $329,000 in 1993, 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, 1994 and 1993, mortgage notes held by Ponderosa with
a book value of $79,498,000 and $48,395,000, respectively, were
outstanding. The estimated fair value of the notes at December 31,
1994 and 1993 was $86,132,000 and $50,297,000, respectively. The
estimated fair values were determined using 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 1994 and 1993.
84
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
----------------
1995 1994
----------------
(in thousands)
Short-term promissory notes $ 33,500 50,000
Notes payable to banks under
revolving lines of credit, unsecured
6.43% to 6.74% interest rates, 293,000 97,750
Medium-term notes payable, unsecured
8.50% to 11.50% interest
rates, due through 2000 169,270 198,870
Notes payable to insurance companies,
unsecured 5.89% to 10.27% interest
rates, due through 2010 336,000 281,000
Notes payable to banks, unsecured
5.375% to 5.67% interest
rates, due through 1999 45,700 94,800
Mortgages payable, secured
5.0% to 10.00% interest rates,
due through 2016 3,660 1,246
Other notes payable, unsecured
9.50% interest rate,
due through 2005 92 98
------- -------
$ 881,222 723,764
======= =======
Mortgages payable are secured by land and buildings at various
locations, which carry a net book value of $13,976,000 at year-end
1995.
Domestic/Eurodollar revolving credit loans 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, 1997. 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, 1995, the
weighted average interest rate on borrowings outstanding was 6.48%.
85
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 $901,000 and $588,000 for 1995 and 1994, respectively.
As of year-end 1995, loans outstanding under the revolving credit
line totaled $293,000,000. 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
--------------------------
1995 1994 1993
--------------------------
(in thousands)
A summary of revolving credit
activity follows:
Weighted average interest rate
during the year 5.62% 3.62% 4.36%
at year end 6.48% 3.93% 3.56%
Maximum amount outstanding
during the year $ 293,000 159,750 126,000
Average amount outstanding
during the year $ 191,146 67,354 96,667
A summary of notes payable
follows:
Weighted average interest rate:
during the year 5.25% 3.80% 4.09%
at year end 6.44% 4.04% 3.66%
Maximum amount outstanding
during the year $ 135,000 50,000 25,000
Average amount outstanding
during the year $ 46,604 11,380 14,167
AMERCO has lines of credit with various banks totaling $275,001,000
at March 31, 1995.
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 $193,000,000 of floating rate
notes to a weighted average fixed rate of 8.62%. The SWAP's mature
at the time the related notes mature. During the year a swap with a
notional value of $15,000,000 matured. Incremental interest expense
associated with SWAP activity was $7,092,000 and $11,989,000 during
1995 and 1994, respectively.
86
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Notes and Loans Payable, continued
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, 1995, the Company was in
compliance with these covenants. In addition, these credit
agreements contain provisions that could result in a required
prepayment upon a "change in control" of the Company. See also Note
14.
In May 1995, the Company amended a $185 million revolving credit
agreement to extend the maturity to September 1995.
The annual maturities of long-term debt for the next five years, if
the revolving credit lines are outstanding to maturity, are:
Year Ended
---------------------------------------------
1996 1997 1998 1999 2000
---------------------------------------------
(in thousands)
Mortgages $ 422 236 443 188 131
Medium-term and other
notes 74,226 66,807 14,258 11,009 3,010
Insurance Placements 11,000 63,833 45,762 50,762 44,247
Bank Placements 21,600 21,600 1,600 900 -
Revolving Credit - - 293,000 - -
------- ------- ------- ------- -------
$107,248 152,476 355,063 62,859 47,388
======= ======= ======= ======= =======
During the first and third of fiscal 1994, the Company purchased
$25.2 million of its medium-term notes originally due in fiscal
1995 through 2000. The weighted average rate of the notes purchased
is 9.34%. The purchase resulted in an extraordinary charge of
$1,897,000 net of $1,021,000 of tax benefit.
During the fourth quarter of fiscal 1994, the Company terminated
swaps with the notional value of $77 million originally due in
fiscal 1995. The terminations resulted in an extraordinary charge
of $1,473,000 net of $793,000 of tax benefit.
(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
87
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Stockholders' Equity, continued
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 an Exchange Agreement
with Mark V. Shoen. Pursuant to the exchange agreement, in exchange
for 3,475,520 shares of common stock owned by Mark V. Shoen, Mark V.
Shoen received 3,475,520 shares of Series A common stock.
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.
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.
88
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
--------------------------
1995 1994 1993
--------------------------
(in thousands)
Current:
Federal $ 12,629 2,112 1,800
State 1,038 185 726
Deferred:
Federal 19,678 16,365 13,902
State 79 1,191 842
------ ------ ------
$ 33,424 19,853 17,270
====== ====== ======
Deferred tax liabilities (assets) are comprised as follows:
Year ended
--------------------------
1995 1994 1993
--------------------------
(in thousands)
Accelerated depreciation of:
property, plant and equipment $ 155,756 145,391 134,466
Benefit of tax NOL and credit
carryforwards (64,076) (74,905) (85,326)
Rental equipment overhaul costs
amortized 419 751 1,126
Deferred inventory adjustments (103) (1,177) (356)
Deferred acquisition costs 15,720 15,361 15,761
Deferred gain from
intercompany transactions 459 (894) (2,780)
Bad debt expense (1,935) (1,635) (1,429)
Accrued expense on future
dealer benefits (3,451) (3,347) (2,576)
Accrued vacation and sick-pay (1,338) (1,182) (1,132)
Accelerated retirement deductions - - 860
Customer deposit liability (2,884) (2,375) -
Deferred revenue from
sale/leaseback (437) (1,357) (1,779)
Accrued retirement expense (2,279) (1,755) -
Policy benefits and losses,
claims and loss expenses
payable (24,671) (24,022) (24,986)
Other (2,455) (283) 1,041
------ ------ ------
Total $ 68,725 48,571 32,890
====== ====== ======
89
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
Year ended
--------------------------
1995 1994 1993
--------------------------
(in thousands)
Balance comprised of:
Deferred tax assets $ 2,312 2,220 2,223
Deferred tax liability 71,037 50,791 35,113
------ ------ ------
Net deferred taxes $ 68,725 48,571 32,890
====== ====== ======
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 1995 and 1994, and 34%
in 1993) as follows:
Year ended
--------------------------
1995 1994 1993
--------------------------
(in thousands)
Computed "expected" tax
expense $ 32,696 23,276 16,938
Increases (reductions) in taxes
resulting from:
Tax-exempt interest income (1,243) (1,525) (2,278)
Dividends received deduction (62) (101) (289)
Net reinsurance effect 120 120 116
Canadian subsidiary income
tax (expense) benefit
unrealized (1,078) (204) 230
True-up of prior year
estimated current tax 1,030 (1,327) -
Federal tax benefit of
state and local taxes (391) (482) (534)
Other 1,235 (1,280) 1,519
------ ------ ------
Actual federal tax
expense 32,307 18,477 15,702
State and local income tax
expense 1,117 1,376 1,568
------ ------ ------
Actual tax expense
of operations $ 33,424 19,853 17,270
====== ====== ======
90
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
The 1993 financial statements have been restated to give retroactive
effect to the adoption of SFAS 109. The impact on previously issued
financial statements, income (loss), is as follows (in thousands
except per share data):
Year ended
--------------
1993
--------------
(in thousands)
Earnings:
Effect of change on income
before extraordinary item
as originally reported $ (2,309)
Effect of change on net
income as originally reported (8,687)
Earnings per common share:
Effect of change on income
before extraordinary item
as originally reported $ (.06)
Effect of change on net
income as originally reported (.22)
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, 1994, 1993 and 1992.
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 1995 AMERCO and RWIC have non-life net operating loss
carryforwards available to offset taxable income in future years of
$106,500,000 for tax purposes. These carryforwards expire in 2000
through 2007. AMERCO also has investment tax credit and other
credit carryforwards of $885,000 for tax purposes which expire in
1999 through 2005. AMERCO has alternative minimum tax credit carry
forwards of $16,575,000 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.
91
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, continued
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 will occur to trigger such gain.
(8) Transactions With Fleet Owners and Other Rental Equipment Owners
Fleet Owners (independent rental equipment owners) own approximately
21% of all U-Haul rental trailers, .04% of all U-Haul rental trucks
and certain other rental equipment. There are over 5,400 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 during the years ended December 31, 1994,
1993 and 1992 were $1,556,000, $1,428,000 and $1,399,000,
respectively.
92
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Transactions With Fleet Owners and Other Rental Equipment Owners,
continued
RWIC insures and reinsures general liability, auto liability,
commercial general liability and worker's compensation coverage for
member companies of the consolidated group. Premiums earned by RWIC
during the years ended December 31, 1994, 1993 and 1992 on these
policies amounted to $20,600,000, $18,800,000 and $18,300,000,
respectively, and were eliminated in consolidation.
RWIC insures and reinsures certain risks of U-Haul customers and
independent fleet owners. Premiums earned during the years ended
December 31, 1994, 1993 and 1992 on these policies amounted to
$39,300,000, $32,800,000 and $31,700,000, 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 for
1995, 1994, and 1993 were $466,000, $613,000 and $714,000,
respectively. Total insurance premium expense for the years ended
1995, 1994 and 1993 amounted to $1,294,000, $1,304,000 and
$1,300,000, respectively. Benefits paid under the Security Plan for
the years ended 1995, 1994 and 1993 were insignificant.
(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 401k 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.
93
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Employee Benefit Plans, continued
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 1995, 1994 and
1993.
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
$.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 $313,000 in 1995, $253,000 in 1994 and $402,000 in
1993.
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
amounted to $72,000, $90,000 and $105,000 for 1995, 1994 and 1993,
respectively. As of March 31, 1995, $703,000 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,
$14,790,000 is outstanding at March 31, 1995. Interest payments
under this agreement were $745,000, $474,000 and $366,000 for 1995,
1994 and 1993, respectively. Subsequent to March 31, 1995
borrowings total $6,600,000.
94
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 $2,571,000,
$2,269,000 and $2,255,000 for the years ended 1995, 1994 and 1993,
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 (in thousands):
Shares issued Shares issued
prior to subsequent to
December, 1993 December, 1993
1995 1994 1995 1994
------ ------ ------ ------
Allocated shares 1,233 1,109 13 1
Shares committed to be
released - - 8 -
Unreleased shares 1,211 1,443 594 291
------ ------ ------ ------
Total ESOP shares 2,444 2,552 615 292
====== ====== ====== ======
Fair value of
unreleased shares $ 11,298 $ 13,134 $ 12,697 $ 4,947
====== ====== ====== ======
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 and held at March 31, 1995 is defined as the
March 31, 1995 trading value of such shares. Fair value of
unreleased shares issued subsequent to December 31, 1992 and held
at March 31, 1994 is defined as the appraised value as such shares
were not traded in an active market at that date. Management
considers the actual fair value of the shares to be in excess of their
trading value at that March 31, 1995. See also Note 17.
95
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Employee Benefit Plans, continued
During fiscal 1989, the Company adopted a Key Employee Stock
Purchase Plan (the KESPP) authorizing it to sell to employees and
non-employee directors of the Company up to 3,240,000 shares of
common stock of the Company at a per share price of $6.79, the fair
market value of such shares on the date such plan was adopted.
Pursuant to authorization by the Board of Directors, five key
employees purchased 3,239,600 shares under the KESPP for cash and
promissory notes at the rate of nine percent per annum. In July
1989, the Plan purchased 1,904,000 shares of the Company's $.25 par
value common stock from four key employees at a per share price of
$8.63, the fair market value of such shares on the date of sale.
Principal and interest payments on the promissory notes were
received by the Company from the key employees.
Oxford insures various group life and group disability insurance
plans covering employees of the consolidated group. Premiums earned
were $1,896,000, $1,325,000 and $1,037,000 for the years ended 1995,
1994 and 1993, respectively and were eliminated in consolidation.
As of January 1, 1991, the Company elected to self-fund its group-
health and dental plans.
(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 about $592,000 and $1,087,000 in 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 1995
and 1994 are as follows (in thousands):
1995 1994
------ ------
Service cost for benefits earned
during the period $ 210 $ 489
Interest cost on APBO 382 598
------ ------
Net periodic postretirement benefit cost $ 592 $ 1,087
====== ======
96
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Postretirement and Postemployment Benefits, continued
The 1995 and 1994 postretirement benefit liability included the
following components (in thousands):
1995 1994
------- -------
Actuarial present value of postretirement
benefit obligation:
Retirees $ (1,638) $ (1,848)
Eligible active plan participants (341) (413)
Other active plan participants (3,105) (3,832)
------- -------
Accumulated postretirement benefit obligation (5,084) (6,093)
Unrecognized prior service gain
Unrecognized net loss (1,601) -
------- -------
$ (6,685) $ (6,093)
======= =======
The discount rate assumptions used in computing the information
above were as follows:
1995 1994
-------- --------
Accumulated postretirement benefit obligation 8.5% 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.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 10.0% in 1995,
declining annually to an ultimate rate of 4.0% 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, 1995 would be increased by
approximately $800,000. The effect of this change on the sum of
the service cost and interest cost components of net periodic
postretirement benefit cost for 1995 would be an increase of
approximately $140,000.
Postemployment benefits provided by the Company are not material.
97
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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 $14,800,000 from reinsurers. The Company has issued
letters of credit totaling approximately $22,700,000 in favor of
certain ceding companies.
During fiscal 1995 Oxford issued a letter of credit of approximately
$20.6 million in favor of certain ceding companies. AMERCO has
guaranteed such letter of credit.
RWIC is a reinsurer of municipal bond insurance through an agreement
with MBIA, Inc. Premium generated through this agreement is
recognized pro rata over the contract coverage period. The related
unearned premium as of December 31, 1994 and 1993 was $4,400,000 for
each period. RWIC's share of case loss reserves related to this
coverage is approximately $41,000 at December 31, 1994. RWIC's
aggregate exposure for Class 1 municipal bond insurance was
$709,000,000 as of December 31, 1994.
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 end 1995
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
======= ======= ======= =======
98
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 end 1994
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
======= ======= ======= =======
Percentage
Ceded Assumed of amount
Direct to other from other Net assumed to
amount companies companies amount net
----------------------------------------------------
(in thousands)
Year end 1993
- -------------
Life insurance
in force $ 20,983 547 3,375,548 3,395,984 99%
======= ====== ========== =========
Premiums earned:
Life $ 81 - 9,910 9,991 99%
Accident and
health 996 103 2,111 3,004 70%
Annuity 202 - 2,907 3,109 94%
Property
casualty 73,523 39,016 48,214 82,721 58%
------- ------- ------- -------
Total $ 74,802 39,119 63,142 98,825
======= ======= ======= =======
(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 $66,487,000, $84,359,000 and $119,106,000 for the
years ended 1995, 1994 and 1993, respectively. During the year
ended March 31, 1995, U-Haul Leasing & Sales Co., a wholly-owned
subsidiary of U-Haul, entered into fifteen transactions, whereby the
Company sold rental trucks and subsequently leased them back.
Subsequent to year end, no additional lease agreements were
executed. AMERCO has guaranteed $42,537,000 of residual values at
March 31, 1995 on these assets at the end of the respective lease
terms. Certain leases contain renewal and fair market value
purchase options and mileage and other restrictions similar to those
disclosed in Note 5 for notes payable and loan agreements.
99
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 1995
---------------------------
Property, plant Rental
Year ended and other equipment Trucks Total
-------------------------------------------------------------
1996 $ 1,512 58,777 60,289
1997 1,019 52,051 53,070
1998 750 52,051 52,801
1999 540 52,051 52,591
2000 409 52,051 52,460
Thereafter 4,993 48,838 53,831
------- ------- -------
$ 9,223 315,819 325,042
======= ======= =======
The Company is a defendant in a number of suits and claims incident
to the types of business it conducts and 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.
(14) Legal Proceedings
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 Paul F. Shoen, who is a former director
are defendants 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). The Company was also a defendant in the
action as originally filed, but the Company was dismissed from the
action on August 15, 1994. The plaintiffs, who collectively hold
47.3% of the Company's common stock and who are all members of a
stockholder group that is currently opposed to existing Company
management have 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 voting 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.
100
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
Based on the plaintiffs' theory of damages (that their stock has
little or no current value), the Court ruled that the plaintiffs
elected as their remedy in this lawsuit to transfer their shares of
stock to the defendants upon the satisfaction of the judgment. On
October 7, 1994, the jury determined that the defendants breached their
fiduciary duties and such breach diminished the value of the plaintiffs'
stock. The jury also determined the value of the plaintiffs' stock in
1988 to be $81.12 per share or approximately $1.48 billion. On
February 2, 1995, the judge in this case granted the defendants' motion
for remittitur or a new trial on the issue of damages. The judge
determined that the value of the plaintiffs' stock in 1988 was $25.30 per
share or approximately $461.8 million. On February 13, 1995, the
plaintiffs filed a statement accepting the remittitur. The jury also
awarded the plaintiffs $70 million in punitive damages against
Edward J. Shoen. The judge ruled that this punitive damage award was
excessive and granted Edward J. Shoen's motion for remittitur or a new
trial on the issue of punitive damages. The judge reduced the award of
punitive damages against Edward J. Shoen to $7 million. On
February 13, 1995, the plaintiffs filed a statement accepting the
remittitur reducing the punitive damage to $7 million. On
February 21, 1995, judgment was entered against the defendants.
On March 23, 1995, Edward J. Shoen filed a notice of appeal with respect
to the award of punitive damages and the plaintiffs have subsequently
cross-appealed the judge's remittitur of the 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, if any, incurred by the defendants in this
proceeding, subject to certain exceptions. With respect to the
defendants who have filed for protection under the federal
bankruptcy laws (as described below), the extent of the Company's
indemnification obligations may be an issue in the bankruptcy
proceedings. Before the Company will have any indemnification
obligations, the defendants must request indemnification from the
Company and a determination must be made under Nevada law as to the
validity of the indemnification claims. The defendants have not
attempted to make demands upon or prosecute their indemnification
claims against the Company. The Company reserves the right to
contest the validity of any indemnification claims made by the
defendants. The extent of the Company's obligation under the
indemnification agreements, if any, cannot be reasonably estimated.
No provision has been made in the Company's consolidated financial
statements for any possible indemnification claims. If valid
indemnification claims are made, the Company believes that it can
fulfill any such indemnification obligations consistent with its
existing credit agreements, or in the alternative, the Company may
seek the waiver or amendment of certain of the provisions of one or
more of its credit agreements when the indemnification obligations are
determined. The Company believes, but no assurance can be given, that
it can obtain any necessary waivers or amendments.
101
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
Any attempted transfer of common stock from the plaintiffs to the
defendants will 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.
In addition, the defendants' rights to acquire the plaintiffs'
stock may present a corporate opportunity which the Company is
entitled to exercise.
On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds, and William E. Carty (the Director-
Defendants) filed for protection under Chapter 11 of the federal
bankruptcy laws, resulting in the issuance of an order automatically
staying the execution of the judgment against those defendants. In
late April 1995, the Director-Defendants, in cooperation with the
Company, filed plans of reorganization in the United States
Bankruptcy Court for the District of Arizona (collectively, the
Plan), all of which propose the same funding and treatment of the
plaintiffs' claims resulting from the judgment in the Shoen
Litigation.
Under the Plan, the Director-Defendants will transfer (or cause to
be transferred) to a trust (the Trust), property having a stipulated
or adjudicated value in excess of $461.8 million. Each of the
plaintiffs would receive a trust certificate representing an
undivided, fractional beneficial interest in the Trust. The
property transferred to the Trust is expected to consist of (i)
approximately $300 million in Series B 7 1/2% non-voting cumulative
preferred stock issued by the Company or one of its subsidiaries;
(ii) a 1993 REMIC certificate held by the Company with a face value
of $11,518,000 evidencing a pool of 61 commercial mortgage loans
which are secured by mortgages or deeds of trust on 60 self-storage
properties; (iii) mortgage loans with an aggregate principal balance
of approximately $109,914,000 on property held by the Company, one
or more of its subsidiaries, or two corporations affiliated with the
Company; and (iv) real property held free and clear by the Company
or its subsidiaries having a total value of approximately $50
million. Upon the funding of the Trust, the plaintiffs
participating in the Trust will have their judgment satisfied and
will be obligated to transfer their shares of common stock to the
Company or its designee.
Alternatively, and in lieu of their respective proportionate shares
of the property to be transferred to the Trust, each of the
plaintiffs may elect to participate in a settlement and receive a
discounted cash payment in full satisfaction of his or her claim
(the Settlement). The Settlement provides for a cash fund of up
to $350 million to be paid by the Company to satisfy the claims of
all plaintiffs electing to participate in the Settlement. Any
plaintiff electing to participate in the Settlement will receive a
pro rata distribution of such fund based on the percentage of all of
the plaintiffs' stock held by such plaintiff. Any plaintiff so
102
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
electing will not participate in or be entitled to any interest in
the Trust and the amount of property transferred to the Trust will be
correspondingly reduced. The Company plans to fund the Settlement
through its existing lines of credit, additional debt or equity
issuances, asset sales or a combination of the foregoing. The Company
will determine which financing source or sources to use to fund the
Settlement based on, among other things, market conditions as they exist
from time to time and the number of plaintiffs electing to participate
in the Settlement. The Company is unable to estimate the amount or cost
of the financing, if any, necessary to fund the Settlement. Upon receipt
of the cash distribution pursuant to the Settlement, the plaintiffs
electing to participate in the Settlement will be obligated to transfer
their common stock to the Company or its designee.
The Company expects the court to consider the Plan during 1995.
However, there is no assurance that the Plan will be confirmed by
the federal bankruptcy court or that the Plan as confirmed will
operate as described above. The Company's participation in the Plan
is subject to the approval of the Board of Directors. Because of the
Plan's complexity and the alternatives provided to the plaintiffs under
the Plan, and because the Plan has not yet been confirmed, the Company
is unable to determine the Plan's impact on the Company's financial
condition, results of operations, or capital expenditure plans. However,
as a result of funding the Plan, the Company is likely to incur
additional costs in the future in the form of dividends on preferred
stock and/or interest on borrowed funds.
No provision has been made in the Company's financial statements for
any payments to be made to the plaintiffs or the Trust pursuant to
the Plan. In addition, in the event any consideration paid by the
Company for the plaintiffs' stock is in excess of the fair value of
the stock received by the Company, the Company will be required to
record an expense equal to that difference.
On April 25, 1995, the Director-Defendants filed an action in the
United States Bankruptcy Court for the District of Arizona entitled
Edward J. Shoen, et al. v. Leonard S. Shoen, et al., Case No. 95-
-----------------------------------------------------
1430-PHX-JMM, Adversary No. 95-284, seeking injunctive relief to
prevent the Company from conducting its 1994 and 1995 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. The Director-Defendants
alleged that despite the election by the plaintiffs to transfer
their common stock and thereby disengage themselves from Company
ownership, the plaintiffs have two members of their stockholder
group nominated to fill two director positions which are scheduled
for election at the 1994 annual meeting of stockholders. The
Director-Defendants argued that it is inappropriate to base the
plaintiffs' right to vote at stockholders meetings on their record
ownership of common stock which is the subject of the judgment in
the Shoen Litigation. The Director-Defendants further alleged that
103
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
ownership of common stock which is the subject of the judgment in the
Shoen Litigation. The Director-Defendants further alleged that
if the Company is not enjoined from holding the 1994 and 1995 annual
meetings until the Plan is confirmed and if the plaintiffs are not
enjoined from voting their common stock, the plaintiffs are likely
to elect up to half of the members of the Company's Board of
Directors before the end of 1995 because the plaintiffs currently
control more common stock than the stockholder group that supports
existing Company management. The election of Board of Director
nominees supported by the plaintiffs would be likely to disrupt the
Company's ability to support and fund the Plan. Such disruption,
the Director-Defendants alleged, would affect their ability to
reorganize and would cause them substantial and irreparable injury.
On June 8, 1995 the court enjoined the Company from conducting its
1994 and 1995 annual meetings of stockholders until an order is
entered confirming or denying confirmation of the Plan, or until
further order of the court.
Sophia M. Shoen, Paul F. Shoen and the Company are parties to
separate Share Repurchase and Registration Rights Agreements which
require all disputes relating thereto to be resolved by arbitration.
On April 8, 1994, Sophia M. Shoen and Paul F. Shoen commenced the
dispute resolution process. Private arbitration proceedings
pursuant to these agreements were convened on June 19, 1994. All of
the claims asserted by Paul F. Shoen in the arbitration have been
dismissed pursuant to a settlement agreement described in the
following paragraph. In the arbitration, Sophia M. Shoen asserted
that the Company has breached its obligations to her by failing to
timely register the sale of her shares which were sold to the public
in November 1994 and by failing to remove the right of first refusal
on all of the Company's common stock. Sophia M. Shoen asserted
that, as a consequence of this alleged breach, she was entitled to
give notice of termination of a stockholder agreement among Edward
J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, Sophia M.
Shoen, certain trusts for the benefit of the foregoing, and the
AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Plan (the Stockholder Agreement). The Company disagrees with the
above assertions. Sophia M. Shoen gave such notice of termination
on July 11, 1994. The arbitration hearings concluded on August 21,
1994. It is unknown when the arbitration panel will render a
decision. Mark V. Shoen, as a party to the Stockholder Agreement,
has filed a lawsuit against Sophia M. Shoen to which the Company is
not a party, seeking a declaratory judgment that the Stockholder
Agreement has not been terminated and remains in full force and
effect.
104
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
The Company, the Company's Board of Directors, the AMERCO Employee
Savings, Profit Sharing and Employee Stock Ownership Plan (the
ESOP), and the trustees of the ESOP were defendants in an action in
the United States District Court for the District of Nevada entitled
Paul F. Shoen v. AMERCO, et al., No. CV-N-94-0475-ECR, instituted
----------------------------------
July 19, 1994 and dismissed February 10, 1995. On February 9, 1995,
Paul F. Shoen executed a settlement agreement with the Company and
the other defendants resolving all of his claims in this case and in
the arbitration described in the preceding paragraph. As part of
the settlement, the Company agreed, among other things, to select
and appoint independent trustees for the ESOP and to place Paul F.
Shoen on management's slate of directors for the 1994 annual meeting
of stockholders which was originally delayed by judicial order at
the request of Paul F. Shoen.
The Company, certain members of the Company's Board of Directors,
and others are defendants in actions currently pending in United
States District Court for the District of Nevada entitled Sidney
------
Wisotzky and Dorothy Wisotzky, et al. v. Edward J. Shoen, et al.,
--------------------------------------------------------------------
No. CV-N-94-771-HDM (filed October 28, 1994), Evan Julber v. Edward
----------------------
J. Shoen, et al., No. CV-N-94-00811-HDM (filed November 16, 1994),
------------------
and Anne Markin v. Edward J. Shoen, et al., No. CV-N-94-00821-ECR
----------------------------------------
(filed November 18, 1994). The plaintiffs in these cases, who claim
to have purchased the Company's Series A 8 1/2% Preferred Stock, are
seeking class action certification and are defining the class as all
persons who purchased or otherwise acquired the Series A 8 1/2%
Preferred Stock of the Company from October 14, 1993 through October
18, 1994, inclusive, and who sustained damage as a result of such
purchases. The plaintiffs alleged among other things, that the
defendants violated the federal securities laws by inflating the
price of the Series A 8 1/2% Preferred Stock via false and misleading
statements, concealing material adverse information, and taking
other manipulative actions, and that the Prospectus for the Series A
8 1/2% Preferred Stock, certain Form 10-K and Form 10-Q filings made by
the Company, and the Company's Notice and Proxy Statement dated July
8, 1994 contained false and misleading statements and omissions
regarding the Shoen Litigation. In addition, the Company and
certain members of the Company's Board of Directors, are defendants
in an action currently pending in United States District Court for
the District of Nevada entitled Bernard L. and Frieda Goldwasser, et
-------------------------------------
al. v. Edward J. Shoen, et al., No. CV-N-94-00810-ECR (filed
------------------------------------
November 16, 1994). The plaintiffs in this case allege derivatively
on behalf of the Company, that the defendants breached their
fiduciary duties to the Company and its stockholders by causing the
Company to violate the federal securities laws, by concealing the
financial responsibility of the Company for the claims asserted in
the Shoen Litigation, by subjecting the Company to adverse
105
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Legal Proceedings, continued
publicity, and by misusing their corporate control for personal
benefit. In addition, the plaintiffs are seeking equitable and/or
injunctive relief to prevent the defendants in this case from
causing the Company to indemnify the defendants in the Shoen
Litigation against their liability in that case. The plaintiffs in
these cases are requesting unspecified compensatory damages as well
as attorneys' fees and costs. The Company and the individual
defendants deny the plaintiffs' allegations of wrongdoing and intend
to vigorously defend themselves in these actions.
(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.
106
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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. No
options or awards have been granted under the Plan.
The Plan provides for the granting of ISOs as defined under the
Internal Revenue Code and Non-qualified Stock Options under such
terms and conditions as the Committee determines in its discretion.
The ISOs may be granted at prices not less than one-hundred percent
of the fair market value at the date of grant with a term not
exceeding ten years.
The Plan provides for the granting of SARs subject to certain
conditions and limitations to holders of options under the Plan.
SARs permit the optionee to surrender an exercisable option for an
amount equal to the excess of the market price of the common stock
over the option price when the right is exercised.
Under the Restricted Stock feature of the Plan, a specified number
of common shares may be granted subject to certain restrictions.
Restriction violations during a specified period result in
forfeiture of the stock. The Committee may, in its discretion,
impose any restrictions on a Restricted Stock award.
The Plan authorizes the Committee to grant Dividend Equivalents in
connection with options. Dividend Equivalents are rights to receive
additional shares of Company stock at the time of exercise of the
option to which such Dividend Equivalents apply.
Under the Plan, Performance Share units may be granted. Each unit
is deemed to be the equivalent of one share of Company stock and
such units are credited to a Performance Share account. The value
of 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 have been granted.
107
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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, 19 and 20 of Notes
to Consolidated Financial Statements of AMERCO.
Additionally, during the years ended 1995, 1994 and 1993, a
subsidiary of AMERCO purchased $3,417,000, $2,607,000 and
$2,608,000, respectively, of printing from a company wherein an
officer is a major stockholder, director and officer of AMERCO.
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 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. William E. Carty is a director of the Company.
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.
108
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.
Management believes that these transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions.
109
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
------------------------------------
1995 1994 1993
------------------------------------
(in thousands)
Receivables $ (57,645) (19,945) (4,508)
======= ======= ======
Inventories $ (1,325) 2,425 (4,664)
======= ======= ======
Accounts payable and
accrued liabilities $ 3,549 11,538 (1,899)
======= ======= ======
Cash paid for income taxes amounted to $9,465,000, $3,275,000 and
$303,000 for 1995, 1994 and 1993, respectively.
Interest paid amounted to $67,191,000, $71,448,000 and $81,115,000
for 1995, 1994 and 1993, 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,
----------------
1994 1993
----------------
(in thousands)
Investments - fixed maturities $ 705,428 719,605
Other investments 116,151 84,738
Receivables 136,527 138,049
Deferred policy acquisition costs 49,244 47,846
Due from affiliate 15,165 4,927
Deferred federal income taxes 12,090 8,350
Other assets 25,007 8,744
--------- ---------
Total assets $ 1,059,612 1,012,259
========= =========
Policy liabilities and accruals $ 411,249 380,424
Unearned premiums 63,938 58,842
Premium deposits 304,979 312,708
Other policyholders' funds and liabilities 25,739 13,399
--------- ---------
Total liabilities 805,905 765,373
--------- ---------
Stockholder's equity 253,707 246,886
--------- ---------
Total liabilities and
stockholder's equity $ 1,059,612 1,012,259
========= =========
110
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,
--------------------------------
1994 1993 1992
--------------------------------
(in thousands)
Premiums $ 156,963 142,347 118,206
Net investment income 43,096 40,019 40,817
Other income (loss) 5,958 7,447 10,495
------- ------- -------
Total revenue 206,017 189,813 169,518
Benefits and losses 133,407 120,825 106,617
Amortization of deferred policy
acquisition costs 10,896 9,343 9,352
Other expenses 28,816 29,834 24,993
------- ------- -------
Income from operations 32,898 29,811 28,556
Federal income tax expense (9,460) (8,723) (7,387)
------- ------- -------
Earnings from operations before
change in accounting principle 23,438 21,088 21,169
Cumulative effect of a change
in accounting principle - (93) -
------- ------- -------
Net income $ 23,438 20,995 21,169
======= ======= =======
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 $20,268,000 at December 31, 1994.
The consolidated audited statutory net income for the years ended
December 31, 1994, 1993 and 1992 was $20,858,000, $20,644,000 and
$19,708,000, respectively; audited statutory capital and surplus was
$205,699,000 and $176,194,000 at December 31, 1994 and 1993,
respectively.
(20) Industry Segment and Geographic Area Data
Industry Segment Data - AMERCO's three industry segments are Rental
operations, Life insurance and Property/Casualty insurance. Rental
operations is composed of the operations of U-Haul International,
Inc., which is engaged in the rental of various kinds of equipment
and sales of related products and services. Life insurance is
composed of the operations of Oxford Life Insurance Company which
operates in various life, accident and health and annuity lines.
Property/Casualty insurance is composed of the operations of
Republic Western Insurance Company which operates in various
property and casualty lines.
111
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(20) Industry Segment and Geographic Area Data, continued
Information concerning operations by industry segment follows:
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
------------------------------------------------------------
(in thousands)
1995
- ----
Revenues:
Outside $1,056,874 39,347 144,642 - 1,240,863
Intersegment (42) 1,444 20,657 (22,059) -
--------- ------- ------- -------- ---------
Total revenue $1,056,832 40,791 165,299 (22,059) 1,240,863
========= ======= ======= ======== =========
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
========= ======= ======= ======== =========
1994
- ----
Revenues:
Outside $ 965,839 31,357 137,659 - 1,134,855
Intersegment (357) 2,834 18,862 (21,339) -
--------- ------- ------- -------- ---------
Total revenue $ 965,482 34,191 156,521 (21,339) 1,134,855
========= ======= ======= ======== =========
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
========= ======= ======= ======== =========
112
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)
1993
- ----
Revenues:
Outside $ 891,599 33,619 115,693 - 1,040,911
Intersegment - 2,630 18,402 (21,032) -
--------- ------- ------- -------- ---------
Total revenue $ 891,599 36,249 134,095 (21,032) 1,040,911
========= ======= ======= ======== =========
Pretax
operating
profit $ 88,581 12,325 16,231 - 117,137
========= ======= ======= ========
Interest
expense 67,958
---------
Pretax
earnings
from
operations 49,179
=========
Identifiable
assets $1,377,386 472,669 422,079 (248,111) 2,024,023
========= ======= ======= ======== =========
Depreciation/
amortization $ 118,438 5,353 4,739 - 128,530
========= ======= ======= ======== =========
Capital
expenditures $ 130,841 - - - 130,841
========= ======= ======= ======== =========
Geographic Area Data - United States Canada Consolidated
---------------------------------------
(in thousands)
1995
- ----
Revenues $ 1,212,285 28,578 1,240,863
Pretax earnings (loss)
from operations $ 90,378 3,078 93,456
Identifiable assets $ 2,552,564 53,425 2,605,989
1994
----
Revenues $ 1,106,761 28,094 1,134,855
Pretax earnings (loss)
from operations $ 65,919 583 66,502
Identifiable assets $ 2,298,948 45,494 2,344,442
1993
----
Revenues $ 1,013,884 27,027 1,040,911
Pretax earnings (loss)
from operations $ 49,855 (676) 49,179
Identifiable assets $ 1,983,419 40,604 2,024,023
113
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(21) Subsequent Events
During April 1995, the Board of Directors approved the indemnification,
to the fullest extent permitted by law, of each member of the Board's
Special Committee. The Special Committee was established in December
1994 for the purpose of making recommendations to the full Board of
Directors as to the fairness to the public shareholders of the Company
of any proposed transaction which may be submitted by management.
On May 2, 1995, the Company declared a cash dividend of $3,241,000
($.53125 per preferred share) to preferred stockholders of record as
of May 12, 1995.
On May 31, 1995, the Company purchased 45,000 shares of common
stock into treasury.
See Notes 2, 5 and 14 for other subsequent event disclosures.
114
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.
Years Ended March 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands except earnings per $100 of average investment)
Earnings data (Note A):
Fleet Owner income:
Credited to Fleet Owner gross
rental income $ 5,288 6,556 7,827 9,814 14,508
Credited to Distribution, Accident
and Canadian Duty Fund (Note D) 66 71 114 118 247
----- ----- ----- ----- ------
Total Fleet Owner income 5,354 6,627 7,941 9,932 14,755
----- ----- ----- ----- ------
Fleet Owner operation expenses:
Charged to Fleet Owner (Note C) 2,127 2,404 3,100 4,389 8,558
Charged to Distribution, Accident
and Canadian Duty Funds (Note D) 234 237 290 274 456
----- ----- ----- ----- ------
Total Fleet Owner operation
expenses 2,361 2,641 3,390 4,663 9,014
----- ----- ----- ----- ------
Fleet Owner earnings before
Distribution Accident and
Canadian Duty Funds credit,
depreciation and income taxes 2,993 3,986 4,551 5,269 5,741
Distribution, Accident and Canadian
Duty Funds credit (Note D) 168 165 176 156 209
----- ----- ----- ----- ------
Net Fleet Owner earnings before
depreciation and income taxes $ 3,161 4,151 4,727 5,425 5,950
===== ===== ===== ===== ======
Investment data (Note A):
Amount at end of year $ 4,382 5,257 6,332 7,749 9,914
===== ===== ===== ===== ======
Average amount during year $ 4,820 5,668 6,976 8,911 10,459
===== ===== ===== ===== ======
Net Fleet Owner earnings before
depreciation and income taxes
per $100 of average investment
(Note B) $ 65.59 73.23 67.76 60.88 56.89
===== ===== ===== ===== ======
The accompanying notes are an integral part of this Summary of Earnings of Independent Trailer Fleets.
115
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
Additional Information
(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 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 affiliated Rental
Company 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
affiliated manufacturing companies.
(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.
(C) A summary of operations expenses charged directly to Independent Fleet Owners follows:
Year ended March 31,
----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
Licenses $ 503 520 593 686 833
Public liability insurance 320 392 510 1,047 1,657
Repairs and maintenance 1,304 1,492 1,997 2,656 6,068
----- ----- ----- ----- -----
$ 2,127 2,404 3,100 4,389 8,558
===== ===== ===== ===== =====
(D) The Fleet Owners, Rental Dealers, U-Haul International, Inc. and affiliated 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.
116
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:
Affiliated Fleet Owners
-------------------------
Rental Affiliated
Companies Companies Independent Total
--------- --------- ----------- -----
(in thousands)
Year ended:
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
March 31, 1991 1,070 452 247 1,769
(F) A summary of Independent Fleet Owner expenses incurred by the Funds follows:
Year ended March 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
Accident repairs $ 1,295 1,085 1,199 1,142 1,170
Distribution of trailers, paid from redistribution and
Canadian duty fees 0 0 0 37 124
----- ----- ----- ----- -----
Total Fleet Owner expenditures 1,295 1,085 1,199 1,179 1,294
Less portion allocated to fleets owned by affiliated
companies 1,061 848 909 905 838
----- ----- ----- ----- -----
Total Independent Fleet Owner expenses paid
by funds 234 237 290 274 456
Add portion allocated to fleets owned by affiliated
companies 1,061 848 909 905 838
Return of investment (accident reimbursement) 222 258 152 204 475
----- ----- ----- ----- -----
Total expenses incurred by Funds $ 1,517 1,343 1,351 1,383 1,769
===== ===== ===== ===== =====
117
Schedule I
Condensed Financial Information of Registrant
AMERCO
Balance Sheets
March 31,
1995 1994
-----------------
(in thousands)
Assets
- ------
Cash $ 5,967 1,084
Investment in subsidiaries 527,050 468,254
Due from unconsolidated subsidiaries 1,077,014 985,539
Other assets 6,042 9,254
--------- ---------
$ 1,616,073 1,464,131
========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Notes and loans $ 811,562 722,518
Other liabilities 103,029 80,495
--------- ---------
Stockholders' equity:
Preferred stock - -
Common stock 10,000 10,000
Additional paid-in capital 165,675 165,651
Foreign currency translation (12,435) (11,152)
Net unrealized gain (loss) on investments (6,483) 679
Retained earnings:
Beginning of year 514,521 482,163
Net earnings 60,032 40,184
Dividends paid (12,964) (7,826)
--------- ---------
561,589 514,521
Less:
Cost of common shares in treasury 10,461 10,461
Unearned employee stock
ownership plan shares 6,403 8,120
--------- ---------
Total stockholders' equity 701,482 661,118
--------- ---------
$ 1,616,073 1,464,131
========= =========
See accompanying notes to condensed financial information and notes
to consolidated financial statements incorporated herein by
reference.
118
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Earnings
Years Ended March 31,
1995 1994 1993
------------------------------
(in thousands except per share data)
Revenues
- --------
Net interest income from
subsidiaries $ 66,050 68,327 67,014
Other revenue 465 753 233
---------- ---------- ----------
Total revenues 66,515 69,080 67,247
---------- ---------- ----------
Expenses
- --------
Interest expense 66,050 68,327 67,014
Other expenses 11,515 9,565 9,082
---------- ---------- ----------
Total expenses 77,565 77,892 76,096
---------- ---------- ----------
Operating income (loss) (11,050) (8,812) (8,849)
Equity in earnings (losses) of
unconsolidated subsidiaries 102,583 71,659 57,514
Income tax benefit (expense) (31,501) (19,293) (16,756)
Extraordinary loss on early
extinguishment of debt, net - (3,370) -
---------- ---------- ----------
Net earnings $ 60,032 40,184 31,909
========== ========== ==========
Earnings per common share $ 1.23 .89 .83
========== ========== ==========
Weighted average common
shares outstanding 38,190,552 38,664,063 38,664,063
========== ========== ==========
See accompanying notes to condensed financial information and notes
to consolidated financial statements incorporated herein by
reference.
119
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Statements of Cash Flows
Years Ended March 31,
1995 1994 1993
------------------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 60,032 40,184 31,909
Amortization, net 545 850 1,231
Equity in earnings (losses) of
subsidiaries 67,139 49,288 38,419
(Increase) decrease in amounts due
from unconsolidated subsidiaries (91,475) (197,093) 10,914
Net change in operating assets and
liabilities (100,961) (53,872) (46,605)
Other, net (8,194) (3,945) (3,843)
---------- ---------- ---------
Net cash provided (used) by operations (72,914) (164,588) 32,025
---------- ---------- ---------
Cash flows from financing activities:
Net change in short term borrowings 178,750 21,750 3,000
Proceeds from notes - 186,000 55,000
Proceeds from Leveraged Employee
Stock Ownership Plan 1,717 1,717 1,718
Principal payments on notes (89,706) (179,905) (89,704)
Issuance of preferred stock - 146,320 -
Dividends paid (12,964) (7,900) (1,994)
Extraordinary loss on early
extinguishment of debt - (3,370) -
---------- ---------- ---------
Net cash provided (used) by
financing activities 77,797 164,612 (31,980)
---------- ---------- ---------
Increase (Decrease) in cash 4,883 24 45
Cash at beginning of year 1,084 1,060 1,015
---------- ---------- ---------
Cash at end of year $ 5,967 1,084 1,060
========== ========== =========
Income taxes paid in cash amounted to $8,794,000, $3,025,000 and
$42,000 for 1995, 1994 and 1993, respectively. Interest paid in
cash amounted to $65,840,000, $81,115,000 and $80,365,000 for 1995,
1994 and 1993, respectively.
See accompanying notes to condensed financial information and notes
to consolidated financial statements incorporated herein by
reference.
120
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Notes to Condensed Financial Information
March 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
AMERCO, a Nevada corporation, was incorporated in April, 1969, and
is the holding company of all companies affiliated with the U-Haul
Rental System. 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 excluding Oxford Life Insurance Company (Oxford) and
Republic Western Insurance Company (RWIC). State taxes for all
subsidiaries and Federal taxes for Oxford and RWIC 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.
121
Schedule I, continued
Condensed Financial Information of Registrant
AMERCO
Notes to Condensed Financial Information
March 31, 1995, 1994 and 1993
(3) Notes and Loans Payable
Notes and loans payable consist of the following:
Year end
-----------------
1995 1994
-----------------
(in thousands)
Medium-term notes payable
8.50% to 11.50% interest
rates, due through 2000 $ 169,270 198,870
Note payable to insurance companies
5.89% to 10.27% interest
rates, due through 2006 270,000 281,000
Notes payable to banks
5.38% to 5.67% interest
rates, due through 1999 45,700 94,800
Other notes payable
9.50% interest rate,
due through 2005 92 98
Unsecured notes payable to banks
under revolving lines of credit
6.43% to 6.74% interest rates 293,000 97,750
Other short-term promissory notes 33,500 50,000
------- -------
$ 811,562 722,518
======= =======
For additional information, see Note 5 of Notes to Consolidated
Financial Statements.
122
Schedule II
AMERCO and Consolidated Subsidiaries
Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other than Related Parties
March 31, 1995
Deductions
----------
Balance at Amounts Amounts Balance at
Debtor March 31, 1994 Additions collected written off March 31, 1995
------ -------------- --------- --------- ----------- --------------
SAC Self-Storage
Corporation - $57,063,393 - - $57,063,393
============= ========== ======== ========== ============
TWO SAC
Self-Storage - $ 8,191,536 - - $ 8,191,536
============= ========== ======== ========== ============
Mark V. Shoen, a Director of AMERCO and major shareholder of AMERCO is
the sole voting shareholder of SAC Self-Storage Corporation and TWO SAC Self-
Storage Corporation.
123
Schedule V
AMERCO AND CONSOLIDATED SUBSIDIARIES
Supplemental Information (For Property-Casualty Insurance Underwriters)
Years ended December 31, 1994, 1993 and 1992
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 (1) Income Year Year Costs Expenses (2)
---- ---------- ----- -------- -------- -------- --------- ------ ---- ---- ----- -------- --------
(in thousands)
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
93 Consolidated
property -
casualty entity 5,377 238,762 N/A 39,094 82,721 29,320 96,451 (4,241) 3,570 89,467 97,348
(1) The earned premiums are reported net of intersegment transactions. Earned premiums eliminated in consolidation
amount to $20,575,000, $18,798,000 and $18,344,000 for the years ended 1995, 1994 and 1993, respectively.
(2) The premiums written are reported net of intersegment transactions. Premiums written eliminated in consolidation
amount to $19,407,000, $18,335,000 and $18,616,000 for the years ended 1995, 1994 and 1993, respectively.
124
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.
AMERCO
By: /S/ EDWARD J. SHOEN
----------------------------------
Edward J. Shoen
Chairman of the Board
Dated: June 26, 1995
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 Chairman of the Board June 26, 1995
- -------------------------- (Principal Executive
Edward J. Shoen Officer)
/S/ GARY B. HORTON Principal Financial June 26, 1995
- -------------------------- and Accounting Officer
Gary B. Horton
/S/ MARK V. SHOEN Director June 26, 1995
- --------------------------
Mark V. Shoen
/S/ JAMES P. SHOEN Director June 26, 1995
- --------------------------
James P. Shoen
/S/ RICHARD J. HERRERA Director June 26, 1995
- --------------------------
Richard J. Herrera
/S/ CHARLES J. BAYER Director June 26, 1995
- --------------------------
Charles J. Bayer