Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K-Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1998
---------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________ to _______________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ---------------------------------- ------------------
0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
- ---------- -------------- ---------------------
AMERCO Series A 8 1/2% New York Stock Exchange
Preferred Stock
U-Haul International, Inc. None
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
---------- --------------
AMERCO Common
U-Haul International, Inc. None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
22,614,087 shares of AMERCO Common Stock, $0.25 par value, were
outstanding at June 29, 1998. 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 a stockholder agreement relating to 13,975,862 shares of AMERCO
Common Stock, was $259,146,750. The aggregate market value was
computed using the closing price for the Common Stock trading on
Nasdaq on June 22, 1998.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01
par value, were outstanding at June 29, 1998. None of these shares
were held by non-affiliates. U-Haul International, Inc. meets the
conditions set forth in General Instructions (I)(1)(a) and (b) of Form
10-K and is therefore filing this Form with the reduced disclosure
format.
Portions of AMERCO's Proxy Statement relating to its
Annual Meeting of Stockholders to be held on August 28, 1998, are
incorporated by reference in Part III hereof.
2
TABLE OF CONTENTS
PAGE NO.
PART I
ITEM 1. BUSINESS...................................... 3
A. THE COMPANY.............................. 3
B. HISTORY.................................. 3
C. MOVING AND STORAGE OPERATIONS............ 3
D. INSURANCE OPERATIONS..................... 6
ITEM 2. PROPERTIES.................................... 11
ITEM 3. LEGAL PROCEEDINGS............................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............... 12
ITEM 6. SELECTED FINANCIAL DATA....................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.......................................... 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ................................... 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................... 26
ITEM 11. EXECUTIVE COMPENSATION........................ 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K............. 27
3
PART I
ITEM 1. BUSINESS
A. THE COMPANY
AMERCO, a Nevada corporation (AMERCO or Company), is the
holding company for U-Haul International, Inc. (U-Haul), Amerco
Real Estate Company (AREC), Republic Western Insurance Company
(RWIC) and Oxford Life Insurance Company (Oxford). 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. RWIC and Oxford have been
consolidated on the basis of calendar years ended December 31.
Accordingly, all references to the years 1997, 1996 and 1995
correspond to the Company's fiscal years 1998, 1997 and 1996,
respectively. The Company's three primary industry segments are
represented by Moving and Storage Operations (U-Haul and AREC),
Property and Casualty Insurance (RWIC) and Life Insurance (Oxford).
See Note 20 of Notes to Consolidated Financial Statements in Item 8
for financial information regarding the industry segments.
Moving and Storage Operations
Moving and self-storage operations consist of the rental of
trucks, automobile-type trailers and self-storage space to the
do-it-yourself mover under the registered tradename
U-Haul throughout the United States and Canada.
AREC owns approximately 90% of the Company's real estate
assets, including the Company's U-Haul Center and Storage
locations.
Property and Casualty Insurance
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.
Life Insurance
Oxford originates and reinsures life, health and annuity-type
insurance products and administers the Company's self-insured
employee health and dental plans.
On November 21, 1997, Oxford purchased all of the issued and
outstanding shares of Encore Financial, Inc. and its subsidiaries
(Encore). Encore's primary subsidiary is North American Insurance
Company (NAI) (domiciled in Wisconsin), its premium volume is
primarily derived from the sale of credit life and disability
products. NAI's subsidiary, North American Fire & Casualty
Insurance Company is a property and casualty company domiciled in
Louisiana. On November 24, 1997, Oxford purchased all of the
issued and outstanding shares of Safe Mate Life Insurance Company
(domiciled in Texas), its premium volume is derived from the sale
of credit life and disability products.
B. HISTORY
The Company was founded in 1945 under the name "U-Haul Trailer
Rental Company". From 1945 to 1974, the Company rented trailers
and, starting in 1959, trucks on a one-way and
In-Town basis through independent dealers.
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 related products and services
(e.g., the sale and installation of hitches, as well as the sale of
boxes and moving supplies). At March 31, 1998, the Company's distribution
network included 1,200 U-Haul Centers and 14,500 independent dealers.
C. MOVING AND STORAGE OPERATIONS
Business Strategies
The Company's present business strategy remains focused on do-
it-yourself moving and self-storage customers. The Company
believes that customer access, in terms of truck or trailer
availability and proximity of rental locations, is critical to its
success. Under the U-Haul name, this strategy is to offer, in an
integrated manner over an extensive and geographically diverse
network of 15,700 Company-owned Centers and independent dealers, a
wide range of products and services to do-it-yourself moving and
self-storage customers.
4
Moving Operations
U-Haul has a variety of product offerings. Rental trucks have
been designed with do-it-yourself customers in mind, and may
include features such as Low Decks, air
conditioning, power steering, automatic transmissions,
Gentle-Ride Suspensions, AM/FM cassette stereo
systems and over-the-cab storage. Aerodynamically designed U-Haul
trailers are suited to the low profile of many newly manufactured
automobiles. As of March 31, 1998, the U-Haul rental equipment fleet
consisted of 90,000 trucks, 83,000 trailers and 16,000 tow dollies.
Additionally, the Company provides support rental items such
as furniture pads, hand trucks, Appliance Dollies
TRADEMARK>, Utility Dollies, mirrors,
tow bars, tow dollies and bumper hitches. The
Company also sells boxes, tape and packaging materials, and rents
additional items such as floor polishers and carpet cleaning
equipment at its U-Haul Center locations. U-Haul Centers also sell
and install hitches and towing systems, and sell propane.
U-Haul offers protection packages such as (i)
"Safemove", which provides moving customers
with a damage waiver, cargo protection and medical and life
coverage and (ii) "Safestor", which provides
self-storage rental customers with various types of protection for
their goods in storage.
Independent dealers receive U-Haul equipment on a consignment
basis and are paid a commission on gross revenues generated from
their rentals. The Company maintains contracts with its independent
dealers that typically may be canceled upon 30 days written notice
by either party.
A high percentage of the Company's rental revenue is derived
from do-it-yourself movers. Moving rentals include: (i)
In-Town rentals, where the equipment is returned
to the originating U-Haul location and (ii) one-way rentals, where the
equipment is returned to a U-Haul location in another city.
The U-Haul truck and trailer rental business tends to be
seasonal, with proportionally more transactions and revenues
generated in the spring and summer months than during the balance
of the year.
The Company designs and manufactures its truck van boxes,
trailers and various other support rental equipment items. The
Company's equipment is designed to achieve high safety standards,
simplicity of operation, reliability, convenience, durability and
fuel economy. Truck chassis are manufactured by both foreign and
domestic truck manufacturers. These chassis receive certain post-
delivery modifications and are joined with van boxes at seven
Company-owned manufacturing and assembly facilities in the United
States.
The Company services and maintains its trucks and trailers
through an extensive preventive-maintenance program, generally
performed at Company-owned facilities located at or near U-Haul
Centers. Major repairs are performed either by the chassis
manufacturers' dealers or by Company-owned repair shops, and the
Company takes advantage of manufacturers' warranties.
Self-Storage Business
U-Haul entered the self-storage business in 1974 and since
then has increased the rentable square footage of its storage
locations through the acquisition of existing facilities and new
construction. In addition, the Company has entered into management
agreements to manage self-storage properties owned by others. The
Company has also entered into a strategic and financial partnership
with Private Mini Storage Realty, L.P., a Texas-based operator of
45 self-storage properties.
Through over 800 Company-owned or managed storage locations in
the United States and Canada, the Company offers for rent more than
26.1 million square feet of self-storage space. The Company's self-
storage facility locations range in size up to 149,000 square feet
of storage space, with individual storage spaces in sizes from 16
square feet to 400 square feet or larger.
The primary market for storage rooms is the storage of
household goods. With the addition of over 8,900 storage rooms
during fiscal 1998, average occupancy rates were 83.0%, with modest
seasonal variation. During fiscal 1998 and fiscal 1997, delinquent
rentals as a percentage of total storage rentals were approximately
6% in each year. The Company considers this rate to be
satisfactory.
5
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. During the past
year, two major competitors combined. Budget Rent-A-Car acquired
TRS (Ryder Truck Rentals) as a subsidiary. 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 convenience of rental locations,
availability of quality rental equipment and price.
The self-storage industry is highly competitive. The top
three national firms, including the Company, Public Storage and
Storage USA, account for only 11% of total industry square footage.
Convenience, customer service and price are the key competitive
factors. Efficient management of occupancy, delinquency and
expenses are the key profitability factors.
Employees
For the period ended March 31, 1998, the Company's non-
seasonal work force consisted of 14,000 employees.
Amerco Real Estate Operations
AREC has responsibility for actively marketing properties
available for sale or lease. AREC is also responsible for managing
any environmental risks associated with the Company's real estate.
Environmental Matters
The environment is protected by many federal, state and local
laws. Environmental laws impact the way the Company stores and
disposes of various petroleum products (including gasoline, fuel
oil and waste oil), tires, batteries and other materials used in
the rental, maintenance and manufacturing of its rental fleets.
Since fiscal 1990, the Company has incurred environmental-related
expenditures of approximately $37.0 million primarily for removal
and disposal fees and remediation of over 3,000 underground storage
tanks. There are approximately 200 underground storage tanks
remaining.
The Company has been named as a "potentially responsible party"
with respect to disposal of hazardous waste at 16 federal and two
state superfund sites located in 14 states. The Company has entered
into settlements for 15 of the sites for de minimus amounts. One of
these sites has been disputed by the Company with no response for
over five years, a second is in dispute over statute of limitations
restrictions and a third is too recent to be assessed.
A subsidiary of U-Haul owns one property located within two
different state hazardous substance sites in the State of
Washington. The property is located in Yakima, Washington and is
believed to contain elevated levels of pesticide and other
contaminants 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 substance site known as the "Yakima
Valley Spray Site", and has named the subsidiary, U-Haul Co. of
Inland Northwest (Inland Northwest) as a "potentially liable party"
(PLP) under state law with respect to this site. An enforcement
order has been issued to Inland Northwest to conduct a remedial
investigation and feasibility study (RI/FS) of the site. While the
state has not, as yet, named any other PLPs at this site, several
other parties are participating in the RI/FS as the result of
litigation brought by Inland Northwest. This RI/FS group retained
an environmental consultant to perform the work and the RI/FS
consultant costs are being shared with Inland Northwest paying 20%
of the costs. The state has accepted the RI, but the FS has not
been completed due to the disputes over the determination of
cleanup levels for the site. The state has indicated that, because
it wants actual remediation to begin at the site in 1998, it plans
on issuing an enforcement order to Inland Northwest concerning the
conduct of remediation even though the FS has not been completed.
No agreement has been negotiated, as of this time, between Inland
Northwest and other parties with respect to allocation of costs of
remediation or of the state's oversight costs at this site. The
process of site assessment and cleanup at the Yakima Valley Spray
Site is ongoing and, based upon the information currently
available, Inland Northwest is unable to reasonably assess the
potential future costs, but the costs could be substantial.
6
In addition, Inland Northwest has been named by the State of
Washington as a PLP along with over 100 other PLPs with respect to
another state-listed hazardous substance site known as the "Yakima
Railroad Area". The Yakima Valley Spray Site is located within the
Yakima Railroad Area. Inland Northwest has been notified that the
Yakima Railroad Site involves potential groundwater contamination
in an area of approximately two square miles. Inland Northwest has
contested its designation as a PLP at this site, but, at the date
hereof, no formal ruling has been issued in this matter.
In February 1992, the State of Washington issued an
enforcement order to Inland Northwest and eight other parties
requiring an interim remedial action and the provision of bottled
water to households that obtain drinking water from wells within
the Yakima Railroad Area. Without conceding any liability, Inland
Northwest and several of the other PLPs implemented a bottled water
program. Over the past five years, Inland Northwest has incurred
an average annual expense of $720 for the bottled water program.
Utilizing grants of approximately $6.0 million from the Washington
Department of Ecology (WDOE), the local governments have expanded
the existing municipal water system throughout the Yakima Railroad
Area and have connected many of the residences receiving bottled
water to the municipal water supply. WDOE has reserved its rights
concerning recovery of the funds for the municipal water system
expansion.
In addition, WDOE is conducting additional investigations of
the scope and extent of contamination within the Yakima Railroad
Area. One facet of this involves the sampling of all existing
monitoring wells within the area, including those at the Yakima
Valley Spray Site. WDOE issued an enforcement order to Inland
Northwest regarding such additional sampling. The Company expects
there will be costs associated with remedial measures to address
the regional groundwater contamination issue. The process of site
assessment on the Yakima Railroad Area is ongoing and, based upon
the information currently available to Inland Northwest, Inland
Northwest is unable to reasonably assess the potential
investigation and clean-up costs, but the costs could be
substantial. Moreover, the investigative and remedial costs
incurred by the State can be imposed upon Inland Northwest and any
other PLP as a joint and several liability. At the date of this
report, other than the imposition of the bottled water program and
ordering of site-specific actions at individual properties within
the Yakima Railroad Area, there has been no formal indication from
the State of Washington of its intentions regarding future cost
recoveries at the Yakima Railroad Area.
Based upon the information currently available to the Company,
compliance with the environmental laws and its share of
investigation and cleanup costs of the hazardous waste sites, the
Company is not expecting to incur losses with respect to the sites
that would have a material adverse effect on the Company's
financial position or operating results.
D. INSURANCE OPERATIONS
Business Strategies
RWIC's principal business strategy is to provide specialty
personal and commercial insurance and reinsurance products and
services. RWIC focuses on selected regional and under-served
markets in predominantly non-urban areas. RWIC keeps distribution
expenses low by using a network of independent agents and brokers
working directly with underwriters in the home office. RWIC also
capitalizes on its knowledge of moving and rental markets. This
knowledge was gained through its years of insuring U-Haul and its
customers. RWIC provides insurance products to rental equipment
stores, self-storage facilities and rental vehicle operators.
These products include Commercial Multi-Peril lines, Business
Owners Programs, Commercial Auto and Umbrella Liability.
Oxford's business strategy is long-term capital growth through
direct writing of annuity, credit and accident and health products.
In the past, Oxford experienced significant growth by selectively
reinsuring certain life and annuity products. Currently, Oxford is
pursuing a growth strategy of increased direct writing via
acquisitions, expanded distribution channels and product
enhancement and diversity. The acquisition of North American
Insurance Company and Safe Mate Life Insurance Company in 1997
represents a significant movement toward this long-term goal.
Through these acquisitions, Oxford obtained significant
distribution channels and administrative capabilities.
7
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, 1997, approximately 39.7% of RWIC's
written premiums resulted from U-Haul and U-Haul-affiliated
underwriting activities. RWIC's direct underwriting is done
through company-employed underwriters and selected general agents.
The products provided include liability coverage for rental vehicle
lessees, storage rental properties and coverage for commercial
multiple peril and excess workers' compensation. RWIC's assumed
reinsurance underwriting is done via broker markets.
RWIC's liability for unpaid losses is based on estimates of
the ultimate cost of settling claims reported prior to the end of
the accounting period, estimates of reinsurers and estimates of
incurred but not reported losses which are based on RWIC's
experience and insurance industry historical experience. Unpaid
loss adjustment expenses are based on historical ratios of loss
adjustment expenses paid to losses paid.
The liability for unpaid claims and unpaid claims expenses
represents estimates of the amount necessary to settle all claims
as of the statement date. Both unreported claims and incurred but
not reported claims are included in the liability. RWIC updates
the liability estimate as additional facts regarding claim costs
become available. These estimates are subject to uncertainty and
variation due to numerous factors including, but not limited to,
court decisions, economic conditions and public attitudes. In
estimating reserves, no attempt is made to isolate inflation from
the combined effect of other factors including inflation. Unpaid
losses and unpaid loss expenses are not discounted.
RWIC's unpaid loss and loss expenses are certified annually by
an independent actuarial consulting firm as required by state
regulation.
Activity in the liability for unpaid claims and claim
adjustment expenses is summarized as follows:
1997 1996 1995
---------------------------
(in thousands)
Balance at January 1 $ 332,674 341,981 329,741
Less reinsurance recoverable 60,319 73,873 74,663
---------------------------
Net balance at January 1 272,355 268,108 255,078
Incurred related to:
Current year 132,291 112,394 114,110
Prior years 23,192 11,527 8,292
---------------------------
Total incurred 155,483 123,921 122,402
Paid related to:
Current year 28,972 30,633 22,576
Prior years 89,336 89,041 86,796
---------------------------
Total paid 118,308 119,674 109,372
Net balance at December 31 309,530 272,355 268,108
Plus reinsurance recoverable 75,286 60,319 73,873
---------------------------
Balance at December 31 $ 384,816 332,674 341,981
===========================
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 $35.2 million) increased by $23.2
million in 1997 due to higher than anticipated losses and related
expenses for claims associated with assumed reinsurance and certain
other business written on a direct basis.
The table on page 10 illustrates the change in unpaid loss and
loss adjustment expenses. The first line shows the reserves as
originally reported at the end of the stated year. The second
section, reading down, shows the cumulative amounts paid as of the
end of successive years with respect to that reserve. The third
section, reading down, shows revised estimates of the original
recorded reserve as of the end of successive years. The last
section compares the latest revised estimated reserve amount to the
reserve amount as originally established. This last section is
cumulative and should not be summed.
8
The operating results of the property and casualty insurance
industry, including RWIC, are subject to significant fluctuations.
Factors which may influence this include premium rate competition,
catastrophic and unpredictable events (including man-made and
natural disasters), general economic and social conditions,
interest rates, investment returns, changes in tax laws, regulatory
developments and the ability to accurately estimate liabilities for
unpaid losses and loss adjustment expenses. Additionally, there
may be other unforeseen events that affect the profitability of
property and casualty insurance companies.
Life Insurance
Oxford underwrites life, health and annuity insurance, both as
a direct writer and as an assuming reinsurer. Oxford's direct
writings principally related to the underwriting of credit life and
disability insurance accounted for 18.3% of Oxford's premiums for
the year ended December 31, 1997. Oxford's other direct lines are
related to group life and disability coverage issued to employees
of the Company accounted for 8.8% of Oxford's premiums for the year
ended December 31, 1997. In addition, Oxford administers the
Company's self-insured group health and dental plans. Oxford's
reinsurance assumed lines accounted for 56.2% of premiums for the
year ended December 31, 1997, include individual life insurance,
annuities, credit life and disability insurance. These reinsurance
arrangements are entered into with unaffiliated reinsurers. Prior
to 1997, direct premiums included travel accident products
reinsured from RWIC.
Oxford's subsidiaries, North American Insurance Company and
Safe Mate Life Insurance Company, underwrite credit life and
disability insurance. Premiums from these subsidiaries are
included in Oxford's premiums from the acquisition dates through
December 31, 1997 and account for 16.7% of Oxford's premiums.
Investments
The Company's insurance operations investments must comply
with the insurance laws of the State of domicile. These laws
prescribe the type, quality and concentration of investments that
may be made. 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 RWIC and Oxford emphasize
protection of principal through the purchase of investment grade
fixed-income securities. Approximately 94% of RWIC's and 97% of
Oxford's fixed-income securities 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 retains primary liability to
the policyholder should the assuming insurer not be able to meet
its obligations under the reinsurance agreements.
Regulation
The Company's insurance operations are subject to
comprehensive regulation throughout the United States. The
regulation extends to such matters as licensing companies and
agents, restricting the types, quality or quantity of investments,
regulating capital and surplus and actuarial reserve maintenance,
setting solvency standards, filing of annual and other reports on
financial position, and regulating trade 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. These regulators are considering increased 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 RWIC and Oxford.
RWIC and Oxford have adopted the NAIC minimum risk-based
capitalization (RBC) requirements for insurance companies. As of
December 31, 1997, RWIC and Oxford are in compliance with these
requirements. NAI is also in compliance with the NAIC RBC
requirements but triggered a State of Wisconsin RBC Company Action
Level Event. Oxford intends to cure the non-compliance by
9
December 31, 1998 through improved operating performance and/or capital
restructuring. The Company Action Level Event has no impact on the
Company's financial position or results of operations.
Competition
The highly competitive insurance industry includes a large
number of property and casualty insurance companies and life
insurance companies. Some of the insurance companies are owned by
stockholders and others are owned by policyholders (mutual). Many
competitors 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.
10
Unpaid Loss and Loss Adjustment Expenses
December 31
- ---------------------------------------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Unpaid Loss and Loss
Adjustment Expenses: $168,688 199,380 207,939 226,324 236,019 238,762 314,482 329,741 341,981 332,674 384,816
Paid (Cumulative)
as of:
One year later 49,681 59,111 50,992 55,128 65,532 83,923 70,382 86,796 89,041 89,336
Two years later 91,597 89,850 87,850 97,014 105,432 123,310 115,467 139,247 150,001
Three years later 110,834 114,979 116,043 120,994 126,390 153,030 146,640 173,787
Four years later 129,261 133,466 132,703 133,338 143,433 173,841 166,068
Five years later 142,618 145,864 142,159 144,764 153,730 181,677
Six years later 152,579 153,705 151,227 152,424 160,875
Seven years later 158,531 161,498 158,043 157,979
Eight years later 165,021 167,224 162,038
Nine years later 170,411 170,749
Ten years later 173,978
Reserve Reestimated
as of:
One year later 187,663 200,888 206,701 229,447 231,779 251,450 321,058 338,033 353,508 354,776
Two years later 190,715 202,687 206,219 221,450 224,783 254,532 323,368 340,732 369,852
Three years later 194,280 203,343 199,925 211,998 223,403 253,844 309,936 349,459
Four years later 195,917 199,304 198,986 207,642 214,854 231,536 317,687
Five years later 195,203 200,050 197,890 200,629 198,320 239,888
Six years later 196,176 198,001 194,601 189,601 210,872
Seven years later 196,770 197,112 189,175 200,556
Eight years later 196,072 195,522 199,075
Nine years later 196,169 204,442
Ten years later 205,135
Cumulative Redundancy
(Deficiency) $(36,447) (5,062) 8,864 25,768 25,147 (1,126) (3,205) (19,718) (27,871) (22,102)
Retro Premium
Recoverable $ (1,168) - 10 - 3,140 2,226 (105) 13,956 13,582 19,880
Reestimated Reserve:
Amount (Cumulative) $(37,615) (5,062) 8,874 25,768 28,287 1,100 (3,310) (5,762) (14,289) (2,222)
11
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. 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. U-Haul also
manages storage facilities owned by others. In addition, U-Haul owns
certain real estate not currently used in its operations. U-Haul operates
1,200 U-Haul Centers (including Company-owned storage locations), manages
145 storage centers and operates 12 manufacturing and assembly facilities.
The Company also operates 125 repair facilities located at or near a U-Haul
Center.
ITEM 3. LEGAL PROCEEDINGS
See Note 14 of Notes to Consolidated Financial Statements in Item 8
for disclosure of the 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 and the resulting
- -------
bankruptcy proceedings (the "Shoen Litigation").
On September 7, 1995, Paul F. Shoen, major stockholder of the Company
and a director, filed a complaint in the Ninth Judicial District Court of
the State of Nevada, Douglas County, entitled Paul F. Shoen v. AMERCO, Case
-----------------------
No. 95-CV-0227. The complaint, as amended on March 9, 1998, alleges that
by failing to reimburse him for expenses, including attorneys' fees and
other charges, incurred by him in the Shoen Litigation and the subsequent
bankruptcy proceedings, the Company breached his indemnification agreement
with the Company. Mr. Shoen alleges that the Company has caused damages of
no less than $297,183 as of September 7, 1995, and seeks additional amounts
to be alleged at trial. The Company has denied the allegations and
believes it has valid defenses against his claims. Paul F. Shoen filed a
motion for partial summary judgment on November 15, 1995, and the Company
filed an opposition and cross-motion for partial summary judgment on
December 11, 1995. This matter was heard on November 12, 1996, and both
motions were denied.
In the normal course of business, the Company is a defendant in a
number of suits and claims. The Company is also a party to several
administrative proceedings arising from state and local provisions that
regulate the removal and/or clean-up of underground fuel storage tanks. It
is the opinion of management that none of the 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 the security holders during the
fourth quarter of the fiscal year covered by this report, through the
solicitation of proxies or otherwise.
12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 26, 1998, there were approximately 4,500 holders of record
of the Company's Common Stock.
The Company's Common Stock has been traded on Nasdaq National Market
(Nasdaq) since November 1994 under the symbol "UHAL". The following table
sets forth the high and low closing prices of the common stock of AMERCO
trading on Nasdaq for the periods indicated.
For the Years Ended March 31,
---------------------------------------------
1998 1997
---------------------------------------------
High Low High Low
---------------------------------------------
First quarter 32 23 1/2 28 1/4 19 1/2
Second quarter 31 7/8 26 1/2 41 21 1/2
Third quarter 35 7/8 24 1/2 48 1/2 33 1/2
Fourth quarter 31 24 1/4 38 1/2 24 1/2
The Company has not declared any cash dividends to common stockholders
for the two most recent fiscal years.
The Company does not have a formal dividend policy. The Company's
Board of Directors periodically considers the advisability of declaring and
paying dividends in light of existing circumstances. See Note 19 of Notes
to Consolidated Financial Statements in Item 8 for a discussion of certain
statutory restrictions on the ability of the Company's insurance
subsidiaries 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.
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.
13
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA
For the Years Ended March 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------------------
(in thousands, except per share data and ratios)
Summary of Operations:
Rental and net sales $ 1,195,634 1,146,751 1,107,782 1,067,916 972,930
Premiums and net investment income 214,308 213,024 200,238 177,733 162,151
---------- --------- --------- --------- ---------
1,409,942 1,359,775 1,308,020 1,245,649 1,135,081
---------- --------- --------- --------- ---------
Operating expenses
and cost of sales (4) (9) 991,365 964,300 902,673 785,358 724,082
Benefits, losses and amortization of
deferred acquisition costs 208,607 194,768 174,646 159,236 149,686
Depreciation, net (5) 69,655 66,742 83,989 148,018 131,371
---------- --------- --------- --------- ---------
1,269,627 1,225,810 1,161,308 1,092,612 1,005,139
---------- --------- --------- --------- ---------
Earnings from operations 140,315 133,965 146,712 153,037 129,942
Interest expense, net 64,016 50,437 50,486 59,581 63,440
---------- --------- --------- --------- ---------
Pretax earnings from operations 76,299 83,528 96,226 93,456 66,502
Income tax expense (27,643) (29,344) (35,832) (33,424) (19,853)
---------- --------- --------- --------- ---------
Earnings from operations before
extraordinary loss on early
extinguishment of debt and
cumulative effect of change
in accounting principle 48,656 54,184 60,394 60,032 46,649
Extraordinary loss on early
extinguishment of debt, net (6) (13,672) (2,319) - - (3,370)
Cumulative effect of change in
accounting principle, net (8) - - - - (3,095)
---------- --------- --------- --------- ---------
Net earnings $ 34,984 51,865 60,394 60,032 40,184
========== ========= ========= ========= =========
Earnings from operations before
extraordinary loss on early
extinguishment of debt and cumulative
effect of change in accounting
principle per common share (2) (3) (7) $ 1.28 1.44 1.33 1.23 1.06
Net earnings per common share (2) (3) (7) .66 1.35 1.33 1.23 .89
Weighted average common shares
outstanding (2) (7) 21,896,101 25,479,651 35,736,335 38,190,552 38,664,063
Cash dividends declared:
Preferred stock 20,766 16,875 12,964 12,964 4,753
Common stock - - - - 3,147
Ratio of earnings to fixed charges (1) 1.56 1.64 1.89 1.87 1.64
14
AMERCO AND CONSOLIDATED SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA, continued
For the Years Ended March 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------------------
(in thousands)
Balance Sheet Data:
Total property, plant and
equipment, net $ 1,275,756 1,247,066 1,316,715 1,274,246 1,174,236
Total assets 2,913,277 2,718,994 2,823,407 2,605,989 2,344,442
Notes and loans payable 1,025,323 983,550 998,220 881,222 723,764
Stockholders' equity (7) 595,059 602,320 649,548 686,784 651,787
(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).
(2) Reflects the adoption of Statement of Position 93-6, "Employers'
Accounting for Employee Stock Ownership Plans" for the year ended March
31, 1995.
(3) Earnings and net earnings per common share were computed after giving
effect to the dividends on the Company's Series B floating rate stock for
the years ended March 31, 1998 and 1997.
(4) Reflects the adoption of Statement of Position 93-7, "Reporting on
Advertising Costs" during the year ended March 31, 1996.
(5) Reflects the change in estimated residual value during the years ended
March 31, 1998 and 1996.
(6) See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations".
(7) Reflects the acquisition of treasury shares acquired pursuant to the
Shoen Litigation as discussed in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Stockholder
Litigation".
(8) Reflects the adoption of Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits other than
Pensions".
(9) Reflects the adoption of Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" during
the year ended March 31, 1998.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward looking statements. Additional
written or oral forward-looking statements may be made by the
Company from time to time in filings with the Securities and
Exchange Commission or otherwise. Such forward-looking statements
are within the meaning of that term in Section 27A of the
Securities Act, and Section 21E of the Securities Exchange Act of
1934, as amended. Such statements may include, but not be limited
to, projections of revenues, income or loss, estimates of capital
expenditures, plans for future operations, products or services and
financing needs or plans, as well as assumptions relating to the
foregoing. The words "believe", "expect", "anticipate",
"estimate", "project" and similar expressions identify forward
looking statements, which speak only as of the date the statement
was made. Forward looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results could differ
materially from those set forth in, contemplated by or underlying
the forward looking statements. The following disclosures, as well
as other statements in the Company's report and in the Notes to the
Company's Consolidated Financial Statements, describe factors,
among others, that could contribute to or cause such differences,
or that could affect the Company's stock price.
General
For financial statement preparation, the Company's insurance
subsidiaries report on a calendar year basis while the Company
reports on a fiscal year basis ending March 31. Accordingly, with
respect to the Company's insurance subsidiaries, any reference to
the years 1997, 1996 and 1995 correspond to the Company's fiscal
years 1998, 1997 and 1996, respectively. There have been no events
related to such subsidiaries between January 1 and March 31 of
1998, 1997 or 1996 that would materially affect the Company's
consolidated financial position or results of operations as of and
for the fiscal years ended March 31, 1998, 1997 and 1996,
respectively.
Information on industry segments is incorporated by reference
to "Item 8. Financial Statements and Supplementary Data - Notes 1,
19 and 20 of Notes to Consolidated Financial Statements". The
notes 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 Year Ended March 31, 1998 Versus Fiscal Year Ended March 31,
1997
Moving and Storage Operations
Revenues consist of rental revenues and net sales.
Rental revenue increased by $44.9 million, approximately 4.6%,
to $1,018.7 million in fiscal 1998. This increase primarily
reflects the growth in truck rental revenues which benefited from
transactional growth and higher average revenue per transaction.
Net sales revenues were $176.9 million in fiscal 1998, which
represents an increase of approximately 2.3% as compared to fiscal
1997 net sales of $173.0 million. Revenue growth from the sale of
moving support items (i.e. boxes, etc.) and propane resulted in a
$5.6 million increase during the current year.
Cost of sales was virtually unchanged at $101.6 million in
fiscal 1998, as compared to $103.8 million in fiscal 1997. Lower
material costs associated with the sale of propane offset increased
costs in other areas.
16
Operating expenses increased to $896.0 million during fiscal
1998 from $871.1 million in fiscal 1997, an increase of
approximately 2.9%. Increased property values and business
activity contributed to a $4.9 million increase in taxes. Lease
expense contributed an increase of $3.9 million to reflect new
leasing activity within the rental fleet and storage facilities.
Increased rental business contributed to a $3.9 million increase in
liability insurance. A reduction in expense offsets(credits)
caused an increase in operating expenses of $6.1 million. All
other operating expenses increased in the aggregate by $6.1
million.
Depreciation expense for the year was $69.7 million, as
compared to $66.7 million in the prior year. This increase
reflects a $6.2 million reduction in gains from the disposition of
property, plant and equipment offset by an increase in depreciation
expense of buildings and non-rental equipment.
Property and Casualty
RWIC gross premium writings for the year ended December 31,
1997 were $174.2 million as compared to $167.8 million for 1996.
This represents an increase of $6.4 million, or 3.8%. As in prior
periods, the rental industry market accounts for a significant
share of total premiums, 52.4% and 46.3% for the years ended
December 31, 1997 and 1996, respectively. These writings include
U-Haul customers, fleetowners and U-Haul as well as other rental
industry insureds with similar characteristics. RWIC underwrites
professional reinsurance via broker markets and the percentage of
total premiums in this area for 1997 remained consistent with 1996
at 29.1% and 29.2%, respectively. RWIC continues its direct
multiple peril coverage of various commercial properties and
business in 1997 with premiums accounting for 13.3% of the total
gross premiums for the year ended December 31, 1997 as compared to
10.7% for 1996. The increase is the result of planned business
expansion. Premium writings in selected general agency lines were
5.2% of total gross written premiums for the period ended December
31, 1997 as compared to 13.8% for 1996. This decrease resulted
from the cancellation of a general agency agreement in November
1996.
Net earned premiums decreased $0.6 million, or 0.4%, to $155.9
million for the year ended December 31, 1997, compared with
premiums of $156.5 million for 1996. General agency earnings
decreased $3.1 million offset by a $2.5 million increase in direct
multiple peril, assumed treaty reinsurance and rental industry
segments. The $3.1 million decrease in the general agency lines is
attributable to the cancellation of an agency agreement in November
1996. The $2.5 million increase is due to a $1.3 million increase
in the assumed treaty reinsurance line attributable to the
reporting of unearned premiums from brokers, an increase of $0.6
million due to the expansion of the direct multiple peril line and
an increase of $0.6 million in rental industry markets.
Net investment income was $31.3 million for the year ended
December 31, 1997, an increase of 2.3% over 1996 net investment
income of $30.6 million. The increase resulted from enhanced yield
provided by an increased investment in preferred stock.
Underwriting expenses incurred were $186.5 million for the
year ended December 31, 1997, an increase of $17.7 million, or
10.5%, over 1996. Comparable underwriting expenses incurred for
the year ended December 31, 1996 were $168.8 million. The increase
is attributed to increased losses and loss adjustment expenses
incurred and general underwriting expenses offset by a decrease in
net commission expense. Losses and loss adjustment expenses
incurred increased $31.6 million in the general agency, rental
industry and assumed treaty reinsurance lines offset by a decrease
in the direct multiple peril markets. Approximately $31.0 million
of the losses and loss adjustment expenses incurred increase is
attributable to all programs and results from an increase in
liabilities for unpaid claims due to estimated future losses on
current and prior business, a component of losses and loss
adjustment expenses incurred. The liability for unpaid losses is
based on the estimated ultimate cost of settling claims reported
prior to the end of the accounting period, estimates received from
ceding reinsurers and estimates for unreported losses based on the
historical experience of RWIC, supplemented by insurance industry
historical experience. Unpaid loss adjustment expenses are based
on historical ratios of loss adjustment expenses paid to losses
paid. Unpaid loss and loss expenses are not discounted. Net
commission expense decreased $15.7 million due to the recognition
of contingent commissions on reinsurance agreements for the general
agency and the assumed reinsurance treaty lines. All other
underwriting expenses increased in the aggregate of $1.8 million.
17
RWIC completed the year ended December 31, 1997 with income
before tax expense of $0.7 million as compared to $18.3 million for
the same period ended December 31, 1996. This represents a
decrease of $17.6 million, or 96.2% over 1996. Increased
underwriting expenses (including losses and loss adjustment
expenses incurred) were the primary cause for the reduction in
income before taxes.
Life Insurance
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $16.7 million for the year ended December 31,
1997, a decrease of $3.6 million or 17.7% over 1996 and accounted
for 56.2% of Oxford's premiums in 1997. These premiums are
primarily from term life insurance and deferred annuity contracts
that have matured. Decreases in premiums are primarily due to
decreased policyholder renewals on term life insurance and
decreased annuitizations on deferred annuity contracts.
Premiums from Oxford's direct lines before intercompany
eliminations were $8.1 million in 1997, an increase of $0.6 million
or 8.0% from the prior year. This increase in direct premium is
primarily attributable to an increase in life and disability
coverage for the Company's employees. Oxford's direct business
related to group life and disability coverage issued to employees
of the Company accounted for 8.8% of premiums for the year ended
December 31, 1997. Other direct lines, including the credit
business, accounted for approximately 18.3% of Oxford's premiums in
1997. Premiums from Oxford's subsidiaries, acquired in November,
1997, were $4.9 million and accounted for 16.7% of premiums. These
premiums are primarily related to Medicare supplement and credit
life and disability insurance.
Net investment income before intercompany eliminations was
$17.8 million and $18.8 million for the years ended December 31,
1997 and 1996, respectively. This decrease is due to a decrease in
invested assets at the start of the year, which is the result of a
$30.0 million cash dividend paid to Oxford's parent on December 31,
1996.
Benefits and expenses incurred were $33.1 million for the year
ended December 31, 1997, a decrease of 8.3% over 1996. Comparable
benefits and expenses incurred for 1996 were $36.1 million. This
decrease is primarily due to the deferred annuity contracts that
have matured. Benefits and expenses incurred by Oxford's
subsidiaries were $3.8 million.
Operating profit before tax and intercompany eliminations was
$10.6 million for both the years ended December 31, 1997 and
December 31, 1996. Included in operating profit for 1997 is more
than $1.3 million from Oxford's subsidiaries.
Interest Expense
Interest expense, net of interest income, increased by $13.6
million to $64.0 million during fiscal 1998, as compared to $50.4
million in fiscal 1997. The increase can be primarily attributed
to lower levels of interest income in the current year.
Extraordinary Loss on Extinguishment of Debt
During the second quarter of fiscal 1998, the Company
extinguished $76.0 million of 10.27% interest-bearing notes
originally due in fiscal 1999 through fiscal 2002. This resulted
in an extraordinary loss of $4.0 million, net of tax of $2.4
million ($0.18 per share).
During the third quarter of fiscal 1998, the Company
extinguished $255.0 million of 6.43% to 8.13% interest-bearing
notes originally due in fiscal 1999 through fiscal 2010. This
resulted in an extraordinary loss of $9.7 million, net of tax of
$5.6 million ($0.44 per share).
Results of Operations - Consolidated Group
As a result of the foregoing, pretax earnings of $76.3 million
were realized in fiscal 1998, as compared to $83.5 million in the
prior year. After providing for income taxes, earnings from
operations were $48.7 million in fiscal 1998 as compared to $54.2
million in fiscal 1997. Following deductions for an extraordinary
loss from the extinguishment of debt, net earnings for the current
year were $35.0 million, as compared to $51.9 million in fiscal
1997.
18
Fiscal Year Ended March 31, 1997 Versus Fiscal Year Ended March 31, 1996
Moving and Storage Operations
Revenues consist of rental revenues and net sales.
Rental revenue increased by $30.8 million, approximately 3.3%,
to $973.8 million in fiscal 1997. The increase in rental revenues
resulted from growth in the rental of moving-related equipment and
self-storage market, which grew in the aggregate by $40.6 million
to $974.5 million, as compared to $933.9 million in fiscal 1996.
Truck rental revenues growth was due to improved utilization, an
increase in the fleet size and higher average dollars per
transaction. Self-storage facilities rental growth was positively
impacted by additional rentable square footage and higher
management fees derived from storage facilities managed for others.
Net sales revenues were $173.0 million in fiscal 1997, an
increase of 5.0% as compared to fiscal 1996 net sales of $164.8
million. Revenue growth from the sale of moving support items
(i.e. boxes, etc.), propane and hitches resulted in an $8.3 million
increase during the year.
Cost of sales was $103.8 million in fiscal 1997, a decrease of
0.3% from $104.1 million in fiscal 1996. A contributing factor
towards the decrease was a $4.9 million decrease in allowances for
inventory shrinkage and other inventory adjustments. Material
costs from the sale of propane and hitches increased by $3.7
million reflecting higher sales levels.
Operating expenses increased to $871.1 million in fiscal 1997
from $800.3 million during fiscal 1996, an increase of 8.8%. An
aggregate increase in personnel, rental equipment maintenance and
rental equipment lease expense of $56.8 million contributed to the
increase. Increased rental, sales and repair activity increased
personnel costs. Expansion of the rental fleet and transactional
growth resulted in higher rental equipment maintenance costs.
Increased leasing activity resulted in higher lease expense for
rental equipment. Advertising expense in fiscal 1997 declined by
$7.0 million to $31.9 million from $38.9 million in fiscal 1996.
This decrease reflects a one-time expense of $8.6 million
recognized in fiscal 1996, due to the adoption of Statement of
Position 93-7. The Company had been deferring yellow page directory
costs and amortizing the costs over the life of the directory. The
Company is currently reviewing its implementation procedures. All
other operating expense categories increased in the aggregate by
$21.0 million.
Depreciation expense in fiscal 1997 declined by $17.3 million
to $66.7 million from $84.0 million in the prior year. The decline
from the prior year is due to the increase in leasing activity and
the sale/leaseback of rental trailers in June 1996 and an increase
in net gains from the sale of real property of $10.1 million.
Property and Casualty
RWIC gross premium writings for the year ended December 31, 1996
were $167.8 million as compared to $174.2 million in 1995.
The rental industry market accounts for a significant share of
total premiums, 46.3% and 45.2% in 1996 and 1995, respectively.
These writings include U-Haul customers, fleetowners and U-Haul as
well as other rental industry insureds with similar
characteristics. RWIC continues underwriting reinsurance via
broker markets. Premiums in this area decreased during 1996 to
$49.0 million, or 29.2% of total gross premiums, from comparable
1995 figures of $50.1 million, or 28.7% of total premiums. This
decrease can be primarily attributed to inadequate pricing and
market conditions. Premium writings in selected general agency
lines were 13.1% of total gross written premiums in 1996 as
compared to 16.3% in 1995. This decrease resulted from a business
decision to withdraw from a regional commercial multiple peril
market. RWIC continued its direct multiple peril coverage of
various commercial properties and businesses during 1996. These
premiums accounted for 10.7% of the total gross written premium
during the year ended December 31, 1996 as compared to 9.1% during
1995.
Net earned premiums increased $15.7 million, or 11.2%, to
$156.5 million for the year ended December 31, 1996, compared with
premiums of $140.8 million for the year ended December 31, 1995.
The premium increase was primarily due to increased earnings on the
rental industry and direct multiple peril markets, offset by
decreases in assumed broker market reinsurance and general agency
lines.
Net investment income was $30.6 million for the year ended
December 31, 1996, an increase of 2.3% over 1995 net investment
income of $29.9 million. The marginal increase resulted from
19
enhanced yield provided by an increased investment in preferred
stock.
Underwriting expenses incurred were $168.8 million for the
year ended December 31, 1996, an increase of $19.6 million, or
13.1% over 1995. Comparable underwriting expenses incurred for
1995 were $149.2 million. The increase is largely attributable to
a $16.6 million increase in commission expense and a $1.5 million
increase in losses incurred. Commission expense at December 1995
was reduced by $9.0 million in order to realize a guaranteed margin
on a canceled general agency program. Commission expense in 1996
includes a $2.0 million allowance for doubtful accounts as a result
of a settlement agreement with the Receiver for American Bonding
Company, which provided for the return of $2.3 million of funds
held as collateral. An additional increase in commission expense
resulted from increased acquisition expenses on broker market
reinsurance business. The $1.5 million losses incurred increase
consisted of increases in the rental industry liability and broker
market reinsurance lines and was offset by a decrease in the
general agency lines. All other underwriting expenses increased in
the aggregate of $1.5 million.
Income before tax expense was $18.3 million for the year ended
December 31, 1996, as compared to $21.4 million for the year ended
December 31, 1995. This represents a decrease of $3.1 million, or
14.5% over 1995. Increased premium earnings and investment income
were offset by a disproportionate increase in underwriting expenses
as discussed above.
Life Insurance
Premiums from Oxford's reinsurance lines before intercompany
eliminations were $20.3 million for the year ended December 31,
1996, an increase of $0.9 million or 4.6% over 1995 and accounted
for 73.0% of Oxford's premiums in 1996. These premiums are
primarily from matured term life insurance and deferred annuity
contracts. Increases in premiums are primarily from an increase in
annuitizations as a result of the maturing of deferred annuities.
Premiums from Oxford's direct lines before intercompany
eliminations were $7.5 million in 1996, a decrease of $0.1 million
or 1.3% from the prior year. This decrease in direct premium is
primarily attributable to the credit life and disability insurance
business ($5.2 million in premium). Oxford's direct business
related to group life and disability coverage issued to employees
of the Company accounted for approximately 7.9% of premiums for the
year ended December 31, 1996. Other direct lines, including the
credit business, accounted for approximately 19.1% of Oxford's
premiums in 1996.
Net investment income before intercompany eliminations was
$18.8 million and $16.7 million for the years ended December 31,
1996 and 1995, respectively. This increase is due to increasing
margins on the interest sensitive business. Gains (losses) on the
disposition of investments were $(0.4) million and $4.8 million for
1996 and 1995, respectively.
Benefits and expenses incurred were $36.1 million for the year
ended December 31, 1996, an increase of 15.7% over 1995.
Comparable benefits and expenses incurred for 1995 were $31.2
million. This increase is primarily due to an increase in
annuitizations on maturing deferred annuities, partially offset by
decreases in death benefits and amortization of deferred
acquisition costs.
Operating profit before tax and intercompany eliminations
decreased by $2.0 million, or approximately 15.9%, in 1996 to $10.6
million, primarily due to the realization of capital gains in 1995.
The decrease in operating profit was partially offset by larger
margins on Oxford's interest sensitive business in 1996.
Interest Expense
Interest expense net of interest income decreased by $0.1
million to $50.4 million in fiscal 1997, as compared to $50.5
million in the prior year. Higher average debt levels during
fiscal 1997 increased interest expense which were offset by higher
interest income from the previous year.
20
Extraordinary Loss on Extinguishment of Debt
During the second quarter of fiscal 1997, the Company
extinguished debt of approximately $76.3 million by irrevocably
placing cash into a trust of U.S. Treasury securities to be used to
satisfy scheduled payments of principal and interest. The Company
also extinguished $86.2 million of its long-term notes originally
due in fiscal 1997 through fiscal 1999. These transactions
resulted in an extraordinary loss of $2.3 million, net of tax of
$1.4 million ($0.09 per share).
Results of Operations - Consolidated Group
As a result of the foregoing, pretax earnings from operations
of $83.5 million were realized in fiscal 1997, as compared to $96.2
million for fiscal 1996. After providing for income taxes and
extraordinary loss on early extinguishment of debt, net of tax; net
earnings for fiscal 1997 were $51.9 million, as compared to $60.4
million for the prior year.
Quarterly Results
The following table presents unaudited quarterly results for
the eight quarters in the period beginning April 1, 1996 and ending
March 31, 1998. The Company believes that all necessary
adjustments have been included in the amounts stated below to
present fairly, and in accordance with generally accepted
accounting principles, the selected quarterly information when read
in conjunction with the consolidated financial statements
incorporated herein by reference. The Company's U-Haul moving and
storage operations are seasonal and proportionally more of the
Company's revenues and net earnings from its U-Haul moving and
storage operations are generated in the first and second quarters
of each fiscal year (April through September). The operating
results for the periods presented are not necessarily indicative of
results for any future period (in thousands except share and per
share data).
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1997 1997 1997 1998
----------------------------------------------
Total revenues $ 372,021 416,771 322,543 298,607
Earnings from operations
before extraordinary loss
on early extinguishment
of debt (6) (7) 29,198 39,032 (5,390) (14,184)
Net earnings (loss) (3) (6) (7) 29,198 34,894 (15,236) (13,872)
Weighted average common
shares outstanding (4) 21,879,156 21,890,072 21,901,521 21,913,654
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common
share (2) (6) (7) 1.09 1.54 (0.49) (0.85)
Net earnings (loss) per
common share (both basic
and diluted) (1) (2) (4)
(6) (7) 1.09 1.35 (0.94) (0.84)
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1996 1996 1996 1997
----------------------------------------------
Total revenues $ 361,053 398,449 316,892 283,381
Earnings from operations
before extraordinary loss
on early extinguishment
of debt (5) 40,005 39,741 (9,538) (16,024)
Net earnings (loss) (5) 40,005 37,737 (9,853) (16,024)
Weighted average common
shares outstanding (4) 32,015,301 27,675,192 20,359,873 21,868,241
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common share
(1) (2) (4) (5) 1.15 1.29 (0.72) (0.97)
Net earnings (loss) per
common share (both basic
and diluted) (1) (2) (4) (5) 1.15 1.22 (0.74) (0.97)
21
_______________
(1) Net earnings (loss) per common share amounts were computed after giving
effect to the dividends on the Company's Preferred Stock.
(2) Reflects the adoption of Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" during
the fourth quarter of fiscal 1998.
(3) Reflects the change in estimated residual value during the fourth
quarter of fiscal 1998.
(4) Reflects the acquisition of treasury shares acquired pursuant to the Shoen
Litigation as discussed in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Stockholder Litigation".
(5) During second quarter of fiscal 1997, the Company extinguished
$76.3 million of debt and $86.2 million of its long-term notes originally
due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary
loss of $2.3 million, net of tax of $1.4 million ($0.09 per share).
(6) During the second quarter of fiscal 1998, the Company extinguished
$76.0 million of 10.27% interest-bearing notes originally due in fiscal
1999 through fiscal 2002. This resulted in an extraordinary loss of
$4.0 million, net of tax of $2.4 million ($0.18 per share).
(7) During the third quarter of fiscal 1998, the Company extinguished
$255.0 million of 6.43% to 8.13% interest-bearing notes originally due in
fiscal 1999 through fiscal 2010. This resulted in an extraordinary loss
of $9.7 million, net of tax of $5.6 million ($0.44 per share).
22
Liquidity and Capital Resources
Moving and Storage Operations
To meet the needs of its customers, U-Haul must maintain a
large inventory of fixed asset rental items. At March 31, 1998,
net property, plant and equipment represented approximately 67.7%
of total U-Haul assets and approximately 43.8% of consolidated
assets. In fiscal 1998, gross capital expenditures for property,
plant and equipment were $392.3 million, as compared to $203.9
million in fiscal 1997. These expenditures primarily reflect
expansion of the rental truck fleet, purchase of trucks previously
leased and real property acquisitions. The capital needs required
to fund these acquisitions were funded with internally generated
funds from operations, debt and lease financings.
Cash flow from operations was $127.8 million in fiscal 1998,
as compared to $156.7 million in fiscal 1997 and $146.6 million in
fiscal 1996. The decrease results from an increase in receivables,
an increase in accounts payable and accrued expenses offset by a
decrease in inventories.
Property and Casualty
Cash flows from operating activities were $23.8 million, $15.0
million and $31.0 million for the years ended December 31, 1997,
1996 and 1995, respectively. The change for 1997 resulted from a
decrease in due from affiliates, offset by a decrease in cash due
to a decrease in net income, other liabilities and federal tax
payable and an increase in accounts receivable. An additional
increase in cash resulted from increased loss and expense reserves
and a smaller unearned premium decrease than for the year ended
December 31, 1996.
RWIC's cash and cash equivalents and short-term investment
portfolio were $16.3 million and $30.8 million at December 31, 1997 and
December 31, 1996, respectively. This level of liquid assets,
combined with budgeted cash flow, is adequate to meet periodic
needs. The decrease is attributable to a $13.5 million investment
in a Texas based self-storage partnership in February 1997. The
structure of the long-term portfolio is designed to match future
liability cash needs. Capital and operating budgets allow RWIC to
schedule cash needs in accordance with investment and underwriting
proceeds.
RWIC maintains a diversified securities investment portfolio,
primarily in bonds at varying maturity levels with 94.0% of the
fixed-income securities consisting of investment grade securities.
The maturity distribution is designed to provide sufficient
liquidity to meet future cash needs. Current liquidity remains
strong, with current invested assets equal to 100.7% of total
liabilities.
Stockholder's equity increased $3.1 million from $192.3
million at December 31, 1996 to $195.4 million at December 31,
1997. RWIC considers current stockholder's equity to be adequate
to support future growth and absorb unforeseen risk events. RWIC
does not use debt or equity issues to increase capital and
therefore has no exposure to capital market conditions.
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 $1.0 million. In
addition, the amount of dividends that can be paid to stockholders
by insurance companies domiciled in the State of Arizona is
limited. Any dividend in excess of the limit requires prior
regulatory approval.
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.
23
Cash provided by operating activities was $8.2 million, $16.5
million and $9.0 million for the years ended December 31, 1997,
1996 and 1995, respectively. In 1997, cash flows provided (used)
by financing activities were approximately $(9.1) million. During
1996 and 1995, cash flows provided (used) by financing activities
were $(10.0) million and $87.9 million, respectively. Cash flows
from deferred annuity sales increase investment contract deposits,
which are a component of financing activities, as well as the
purchase of fixed maturities which are a component of investing
activities.
In addition to cash flows from operating and financing
activities, a substantial amount of liquid funds is available
through Oxford's short-term portfolio. At December 31, 1997 and
1996, short-term investments aggregated $12.2 million and $4.5
million, respectively. Management believes that the overall
sources of liquidity will continue to meet foreseeable cash needs.
Stockholder's equity of Oxford increased to $85.8 million in
1997 from $75.3 million in 1996. During 1997, Oxford did not pay
dividends to its parent, during 1996, Oxford paid cash dividends of
$33.9 million to its parent.
Applicable laws and regulations of the State of Arizona
require the Company's insurance subsidiaries to maintain minimum
capital and surplus determined in accordance with statutory
accounting practices. With respect to Oxford, the amount is $0.4
million. In addition, the amount of dividends that can be paid to
shareholders by insurance companies domiciled in the State of
Arizona is limited. Any dividend in excess of the limit requires
prior regulatory approval. Statutory surplus which can be
distributed as dividends without regulatory approval is $4.6
million at December 31, 1997. These restrictions are not expected
to have a material adverse effect on the ability of the Company to
meet its cash obligations.
Consolidated Group
During each of the fiscal years ending March 31, 1999, 2000
and 2001, U-Haul estimates gross capital expenditures will average
approximately $325 million primarily reflecting rental fleet
rotation. This level of capital expenditures, combined with a
potential range of $30-$115 million in annual long-term debt
maturities, if certain features of debt are exercised during this
same period, are expected to create annual average funding needs of
approximately $375-$415 million. Management estimates that U-Haul
will fund 100% of these requirements with internally generated
funds, including proceeds from the disposition of older trucks and
other asset sales.
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, 1998, the Company had
$1,025.3 million in total notes and loans outstanding and
unutilized committed lines of credit of approximately $220.0
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. At March 31, 1998, the Company was in
compliance with these covenants.
The Company is further restricted in the issuance of certain
types of preferred stock. The Company is prohibited from issuing
shares of preferred stock that provide for any mandatory
redemption, sinking fund payment or mandatory prepayment, or that
allow the holders thereof to require the Company or any subsidiary
of the Company to repurchase such preferred stock at the option of
such holders or upon the occurrence of any event or events without
the consent of its lenders.
Stockholder Litigation
On October 1, 1996, the Company paid the last portion of a
total of approximately $448.1 million to the plaintiffs (non-
management members of the Shoen family and their affiliates) in
full settlement of a long-standing legal dispute involving the
Shoen family and related to control of the Company. As a result,
the plaintiffs that owned AMERCO stock were required to transfer
all of their shares of Common Stock to the Company. The total
number of shares transferred was 18,254,976.
24
An issue remains regarding whether or not the plaintiffs are
entitled to statutory post-judgment interest at the rate of ten
percent (10%) per year from February 21, 1995 (the date the
Director-Defendants filed for protection under Chapter 11) until
the judgment was satisfied. On July 19, 1996, the bankruptcy
court ruled the plaintiffs are entitled to such interest. The
Director-Defendants and the Company have appealed the court's
decision. The Company has deposited approximately $48.2 million
into an escrow account to secure payment of the disputed interest,
pending final resolution of this issue (including all appeals by
either side). The escrow account is reflected as a component of
"Other assets" in the Company's financial statements. If the
interest issue is decided adversely to the Company and the Director-
Defendants, the amount deposited into the escrow account will be
transferred to the plaintiffs. The ultimate outcome of this issue
will not have the effect of increasing or decreasing the Company's
net earnings, but could reduce stockholders' equity.
The Company has deducted for income tax purposes approximately
$324.0 million of the payments made to the plaintiffs. While the
Company believes that such income tax deductions are appropriate,
there can be no assurance that such deductions ultimately will be
allowed in full.
Other
On April 1, 1995, the Company implemented Statement of
Position 93 - 7, "Reporting on Advertising Costs", issued by the
Accounting Standards Executive Committee in December 1993. This
statement of position provides guidance on financial reporting on
advertising costs in annual financial statements. Upon
implementation, the Company recognized additional advertising
expense of $8,647,000 for advertising costs not qualifying as
direct-response. The adoption had the effect of reducing net
income by $5,474,000 ($0.15 per share) for the year ended March
31, 1996. The Company is currently reviewing its implementation
procedures.
For the year ended March 31, 1998, the Company implemented
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", issued by the
Accounting Standards Executive Committee in March 1998. This
statement of position establishes guidelines for the accounting
for the costs of all computer software developed or obtained for
internal use, including payroll and other direct costs.
For the year ended March 31, 1998, the Company implemented
Statement of Financial Standards No. 130, "Reporting Comprehensive
Income". Effective for fiscal years beginning after December 15,
1997, this statement establishes standards for reporting and
displaying comprehensive income and its components in general-
purpose financial statements. The standard requires that
comprehensive income and its components be displayed in the
financial statements, the items be classified by their nature and
display the accumulated balances of other comprehensive income in
stockholders' equity separately from retained earnings and
additional paid-in-capital. The statement had no effect on the
Company's results of operations, financial position, capital
resources or liquidity.
For the year ended March 31, 1998, the Company implemented
Statement of Financial Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information". Effective for
financial periods beginning after December 15, 1997, this
statement requires public business enterprises to report certain
information about their operating segments in a complete set of
financial statements to stockholders; to report certain enterprise-
wide information about their products and services, their
activities in different geographic areas and their reliance on
major customers; and to disclose certain segment information in
their interim financial statements. The statement had no effect
on the Company's results of operations, financial position,
capital resources or liquidity.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities". This
statement standardizes the accounting for derivative instruments
by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure
them at fair value. It also provides for matching the timing of
gain or loss recognition on the hedging instrument with the
recognition of (a) the changes in the fair value of hedged asset
25
or liability attributable to the hedged risk or (b) the earnings
effect of the hedged forecasted transaction. This statement
becomes effective for fiscal periods beginning after June 15,
1999. The Company is evaluating the effect this statement will
have on its financial reporting and disclosures and when it will
adopt the statement.
Other pronouncements issued by the Financial Accounting
Standards Board adopted during the year are not material to the
consolidated financial statements of the Company. Further,
pronouncements with future effective dates are either not
applicable or not material to the consolidated financial statements
of the Company.
Year 2000 Disclosure
The Company is and has been working since 1997 to identify and
evaluate the changes necessary to its existing computerized
business systems to make these systems compliant for Year 2000
processing. The Year 2000 processing problem is caused by currently
installed computer systems and software products, including several
used by the Company, being coded to accept only two digit entries
in the date code field. Beginning in the year 2000, these date
code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. The Company's date
critical functions related to the Year 2000 and beyond, such as
rental transaction processing and financial systems may be
adversely affected unless these computer systems are or become Year
2000 compliant. The Company has been replacing, upgrading or
modifying key financial systems in the normal course of business.
The Company is utilizing both internal and external resources to
identify, correct, reprogram and test its systems for Year 2000
compliance. In particular, the Company has an outside consulting
firm on-site currently making the necessary modifications to
existing systems. The Company expects to be fully Year 2000
compliant by March 1999 at an estimated cost of approximately $2.0
million. Although the Company believes it will achieve compliance
on a timely basis and does not anticipate incurring material costs
beyond the estimated $2.0 million, no assurance can be given that
the Company's computer systems will be Year 2000 compliant by March
1999 or otherwise in a timely manner or that the Company will not
incur significant additional costs pursuing Year 2000 compliance.
If the appropriate modifications are not made, or are not timely,
the Year 2000 problem may have a material adverse effect on the
Company. Furthermore, even if the Company's systems will be Year
2000 compliant, there can be no assurance the Company will not be
adversely affected by the failure of others to become Year 2000
compliant. For example, the Company may be affected by, among
other things, the failure of inventory suppliers, credit card
processors, security companies, or other vendors and service
providers to become Year 2000 compliant. In an effort to evaluate
and reduce its exposure in this area, the Company has ongoing
communication with its vendors and other service providers about
their progress in identifying and addressing problems to ensure
that their computer systems will be Year 2000 compliant. However,
despite the Company's efforts to date, there can be no assurance
that the Year 2000 problem will not have a material adverse effect
on the Company in the future.
26
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 and the related schedules, are set forth on pages 30
through 76 and are hereby incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT
ING AND FINANCIAL DISCLOSURE
The Registrants have had no disagreements with their
independent accountant in regard to accounting and financial
disclosure matters and have not changed their independent
accountant during the two most recent fiscal years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Information regarding (i) directors and executive officers of
the Company is set forth under the captions "Election of
Directors", "Executive Officers of the Company", and "Shoen
Litigation" and (ii) compliance with Section 16(a) is set forth
under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement relating to the 1998
Annual Meeting of Stockholders (the "1998 Proxy Statement")
portions of which are incorporated by reference into this Form 10-K
Report, which will be filed with the Securities and Exchange
Commission in accordance with Rule 14a-6 promulgated under the
Securities Exchange Act of 1934, as amended. With the exception of
the foregoing information and other information specifically
incorporated by reference into this report, the 1998 Proxy
Statement is not being filed as a part hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth
under the caption "Executive Compensation" in the 1998 Proxy
Statement, which information is incorporated herein by reference;
provided, however, that the "Board Report on Executive
Compensation" and the "Performance Graph" contained in the 1998
Proxy Statement are not incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial
owners and management is set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the 1998
Proxy Statement, which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions of management is set forth under the captions "Certain
Relationships and Related Transactions" and "Shoen Litigation" in
the 1998 Proxy Statement, which information is incorporated herein
by reference.
27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
Page No.
-------
1. Financial Statements
Report of Independent Accountants 30
Consolidated Balance Sheets -
March 31, 1998 and 1997 31
Consolidated Statements of Earnings -
Years ended March 31, 1998, 1997 and 1996 33
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 1998, 1997 and 1996 34
Consolidated Statements of Cash Flows - Years ended
March 31, 1998, 1997 and 1996 36
Notes to Consolidated Financial Statements 38
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 69
Notes to Summary of Earnings of Independent
Trailer Fleets 70
3. Financial Statement Schedules required to be filed
by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant --
Schedule I 72
Supplemental Information (For Property-Casualty
Insurance Underwriters) -- Schedule V 76
All other schedules are omitted as the required information is
not applicable or the information is presented in the financial
statements or related notes thereto.
(b) No report on Form 8-K has been filed during the last quarter
of the period covered by this report.
28
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Order Confirming Plan (1)
2.2 Second Amended and Restated Debtor's Plan of
Reorganization Proposed by Edward J. Shoen (1)
3.1 Restated Articles of Incorporation (2)
3.2 Restated By-Laws of AMERCO as of August 27, 1996 (3)
4.1 Debt Securities Indenture (1)
4.2 First Supplemental Indenture, Dated as of May 6, 1996 (4)
4.3 Stockholders Rights Plan (5)
4.4 AMERCO Stock Option and Incentive Plan (5)
4.5 AMERCO and Citibank, N.A. Trustee Second Supplemental
Indenture Dated as of October 22, 1997 (11)
4.6 Calculation Agency Agreement (11)
4.7 6.65%-AMERCO Series 1997 A Bond Backed Asset Trust
Certificates ("Bats") Due October 15, 1999 (11)
10.1* AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan (5)
10.2 U-Haul Dealership Contract (5)
10.3 Share Repurchase and Registration Rights
Agreement (5)
10.4 Share Repurchase and Registration Rights
Agreement (5)
10.5 ESOP Loan Credit Agreement (6)
10.6 ESOP Loan Agreement (6)
10.7 Trust Agreement for the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership
Plan(6)
10.8 Amended Indemnification Agreement (6)
10.9 Indemnification Trust Agreement (6)
10.10 Promissory Note between SAC Holding Corporation
and a subsidiary of AMERCO (12)
10.11 Promissory Notes between Four SAC Self-Storage
Corporation and a subsidiary of AMERCO (12)
10.12 Management Agreement between Three SAC Self-
Storage Corporation and a subsidiary of AMERCO (12)
10.13 Management Agreement between Four SAC Self-
Storage Corporation and a subsidiary of AMERCO (12)
10.14 Agreement, dated October 17, 1995, among AMERCO,
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds and William E. Carty (8)
10.15 Directors' Release, dated October 17, 1995,
executed by Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds and William E. Carty
in favor of AMERCO (8)
10.16 AMERCO Release, dated October 17, 1995, executed
by AMERCO in favor of Edward J. Shoen, James P. Shoen,
Aubrey K. Johnson, John M. Dodds and William E. Carty (8)
10.17 Settlement Agreement with Paul F. Shoen (9)
10.18 Series B Preferred Stock Purchase Agreement, dated as of
August 30, 1996 (3)
10.19 Series B Preferred Stock Amended and Restated
Side Agreement, dated as of June 1, 1997 (10)
10.20 Settlement Agreement, dated October 15, 1996
between L.S. Shoen and AMERCO (12)
10.21 Settlement Agreement between AMERCO and Sophia
Shoen (10)
12 Statements Re: Computation of Ratios
21 Subsidiaries of AMERCO
* Indicates compensatory plan arrangement
29
c. Exhibits, continued
23 Consent of Independent Accountants
27 Financial Data Schedule
________________
(1) Incorporated by reference to the Company's Registration
Statement on Form S-3, Registration no. 333-1195.
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, file no. 0-
7862.
(3) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996, file no.
0-7862.
(4) Incorporated by reference to the Company's Current Report on
Form 8-K, dated May 6, 1996.
(5) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1993, file no. 0-7862.
(6) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1990, file no. 0-7862.
(7) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994, file no. 0-
7862.
(8) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, file no. 0-
7862.
(9) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1995, file no. 0-7862.
(10)Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997, file no. 0-
7862.
(11)Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997, file no. 0-
7862.
(12)Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1997, file no. 0-7862.
30
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Stockholders of AMERCO
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) and (3) on page 27 present
fairly, in all material respects, the financial position of AMERCO
and its subsidiaries at March 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in
the period ended March 31, 1998, 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.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Summary of
Earnings of Independent Trailer Fleets included on pages 69 through
71 of this Form 10-K is presented for purposes of additional
analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
PRICE WATERHOUSE LLP
Phoenix, Arizona
June 26, 1998
31
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 1998 1997
---------------------
(in thousands)
Cash and cash equivalents $ 31,606 41,752
Receivables 317,620 238,523
Inventories 68,887 65,794
Prepaid expenses 21,154 17,264
Investments, fixed maturities 886,873 859,694
Investments, other 164,064 127,306
Deferred policy acquisition costs 44,255 48,598
Other assets 103,062 72,997
---------------------
Property, plant and equipment, at cost:
Land 208,028 209,803
Buildings and improvements 838,419 814,744
Furniture and equipment 214,513 199,126
Rental trailers and other rental
equipment 158,750 148,807
Rental trucks 939,561 947,911
General rental items 20,475 21,600
---------------------
2,379,746 2,341,991
Less accumulated depreciation 1,103,990 1,094,925
---------------------
Total property, plant and equipment 1,275,756 1,247,066
---------------------
$ 2,913,277 2,718,994
=====================
The accompanying notes are an integral part of these consolidated
financial statements.
32
Liabilities and Stockholders' Equity 1998 1997
---------------------
(in thousands)
Liabilities:
Accounts payable and accrued
expenses $ 144,201 131,099
Notes and loans 1,025,323 983,550
Policy benefits and losses, claims
and loss expenses payable 592,642 469,134
Liabilities from premium deposits 425,347 433,397
Cash overdraft 21,414 23,606
Other policyholders' funds and
liabilities 34,911 30,966
Deferred income 45,298 35,247
Deferred income taxes 29,082 9,675
---------------------
Stockholders' equity:
Serial preferred stock, with or
without par value, 50,000,000
shares authorized -
Series A preferred stock, with no par
value, 6,100,000 shares authorized;
6,100,000 shares issued and
outstanding as of March 31, 1998
and 1997 - -
Series B preferred stock, with no par
value, 100,000 shares authorized;
75,000 and 100,000 shares issued
and outstanding as of March 31,
1998 and 1997, respectively - -
Serial common stock, with or without
par value, 150,000,000 shares
authorized -
Series A common stock of $0.25 par
value, 10,000,000 shares
authorized; 5,762,495 shares
issued as of March 31, 1998 and 1997 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized;
36,487,505 issued as of March 31,
1998 and 1997 9,122 9,122
Additional paid-in capital 313,444 337,933
Accumulated other comprehensive income (9,384) (9,722)
Retained earnings 658,227 644,009
---------------------
972,850 982,783
Less:
Cost of common shares in treasury, net
(19,635,913 shares as of March 31,
1998 and 1997) 359,723 359,723
Unearned employee stock
ownership plan shares 18,068 20,740
---------------------
Total stockholders' equity 595,059 602,320
Contingent liabilities and commitments _____________________
$ 2,913,277 2,718,994
=====================
The accompanying notes are an integral part of these consolidated
financial statements.
33
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
1998 1997 1996