-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CN+fCC72jDXtaVbUwnC/zeZm+EGVGEWKcxs3H/wcSMld9E0LODMUT4EZLUJ2mbkM rszbNaK1lyhx4loPdI0OGQ== 0000004457-95-000021.txt : 199507030000004457-95-000021.hdr.sgml : 19950703 ACCESSION NUMBER: 0000004457-95-000021 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950630 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERCO /NV/ CENTRAL INDEX KEY: 0000004457 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 880106815 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11255 FILM NUMBER: 95551681 BUSINESS ADDRESS: STREET 1: 1325 AIRMOTIVE WY STE 100 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7027860488 MAIL ADDRESS: STREET 1: 1325 AIRMOTIVE WAY STREET 2: SUITE 100 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: AMERCO DATE OF NAME CHANGE: 19770926 10-K 1 FORM 10-K AMERCO 3/95 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] ------------------------------- For the fiscal year ended March 31, 1995 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] ------------------------------- For the transition period from ______________________ to _______________________ Commission Registrant, State of Incorporation I.R.S. Employer File Number Address and Telephone Number Identification No. - ----------- ---------------------------------- ------------------ 0-7862 AMERCO 88-0106815 (A Nevada Corporation) 1325 Airmotive Way, Suite 100 Reno, Nevada 89502-3239 Telephone (702) 688-6300 2-38498 U-Haul International, Inc. 86-0663060 (A Nevada Corporation) 2727 N. Central Avenue Phoenix, Arizona 85004 Telephone (602) 263-6645 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Registrant Title of Class on Which Registered - ---------- -------------- ----------------------- AMERCO Serial preferred stock, New York Stock Exchange with or without par value U-Haul International, Inc. None Securities registered pursuant to Section 12(g) of the Act: Registrant Title of Class ---------- -------------- AMERCO Common U-Haul International, Inc. None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 38,619,063 shares of AMERCO Common Stock, $.25 par value, were outstanding at June 26, 1995. The aggregate market value of AMERCO Common Stock held by non-affiliates (i.e., stock held by persons other than officers and directors of AMERCO or those persons who are parties to the stockholder agreement referenced in footnote 1 to the stock ownership Table in Part III, Item 12 of this report) based on the latest closing price as of June 26, 1995 was $444,296,634. The aggregate market value was computed using the closing price for the Common Stock trading on Nasdaq on June 23, 1995. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at June 26, 1995. None of these shares were held by non- affiliates. U-Haul International, Inc. meets the conditions set forth in General Instructions (J)(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format. 2 TABLE OF CONTENTS PAGE NO. ITEM 1. BUSINESS...................................... 3 A. THE COMPANY.............................. 3 B. HISTORY.................................. 3 C. BUSINESS STRATEGY........................ 4 D. U-HAUL OPERATIONS........................ 6 E. INSURANCE OPERATIONS..................... 9 F. AMERCO REAL ESTATE OPERATIONS............ 14 G. ENVIRONMENTAL MATTERS.................... 15 ITEM 2. PROPERTIES.................................... 17 ITEM 3. LEGAL PROCEEDINGS............................. 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................. 23 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............... 23 ITEM 6. SELECTED FINANCIAL DATA....................... 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................... 42 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES................................... 42 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS............................... 42 ITEM 11. EXECUTIVE COMPENSATION........................ 46 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................... 49 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................. 54 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............ 58 3 PART I ITEM 1. BUSINESS THE COMPANY AMERCO, a Nevada corporation (AMERCO or Company), is the holding company for U-Haul International, Inc. (U-Haul), Ponderosa Holdings, Inc. (Ponderosa), and AMERCO Real Estate Company (ARC). Throughout this Form 10-K, unless the context otherwise requires, the term "Company" includes all of the Company's subsidiaries. The Company's principal executive offices are located at 1325 Airmotive Way, Suite 100, Reno, Nevada 89502-3239, and the telephone number of the Company is (702) 688-6300. As used in this Form 10-K, all references to a fiscal year refer to the Company's fiscal year ended March 31 of that year. U-Haul is primarily engaged, through subsidiaries, in the rental of trucks, automobile-type trailers, and support rental items to the do-it-yourself moving customer. The Company's do-it- yourself moving business operates under the registered tradename U- Haul(REGISTERED TRADEMARK) through an extensive and geographically diverse distribution network throughout the United States and Canada. Additionally, U-Haul sells related products and services and rents self-storage facilities and various kinds of equipment. AREC owns a majority of the real estate used in connection with the foregoing businesses. Ponderosa serves as the holding company for the Company's insurance businesses. Ponderosa's two principal subsidiaries are Oxford Life Insurance Company (Oxford) and Republic Western Insurance Company (RWIC). Oxford primarily reinsures life, health, and annuity type insurance products and administers the Company's self-insured employee health plan. RWIC originates and reinsures property and casualty type insurance products for various market participants, including independent third parties, the Company's customers, and the Company. Oxford and RWIC have been consolidated on the basis of calendar years ended December 31. Accordingly, all references to the years 1994, 1993, and 1992 corresponds to the Company's fiscal years 1995, 1994, and 1993, respectively. See Note 20 of Notes to Consolidated Financial Statements in Item 8 for financial information regarding the Company's three primary industry segments, which are represented by U-Haul, Oxford and RWIC. HISTORY The Company was founded in 1945 under the name "U-Haul Trailer Rental Company". From 1945 to 1975, the Company rented trailers and trucks on a one-way and in-town round-trip basis through independent dealers (at that time principally independent gasoline service stations). Since 1974, the Company has developed a network of Company-owned rental centers (U-Haul Centers) (through which U-Haul rents its trucks and trailers and provides a number of other related products and services) and has expanded the number and geographic diversity of its independent dealers. At March 31, 1995, the Company's distribution network included over 1,000 U-Haul Centers and over 13,200 independent dealers. 4 In March 1974, in conjunction with the acquisition and construction of U-Haul Centers, the Company entered the self- storage business. As of March 31, 1995, such self-storage facilities were located at or near approximately 67% of the Company's U-Haul Centers. Beginning in 1974, the Company introduced the sale and installation of hitches and towing systems, as well as the sale of support items such as packing and moving aids. During 1983, the Company expanded its range of do-it- yourself rental products to include tools and equipment for the homeowner and small contractor and other general rental items. In 1969, the Company acquired Oxford to provide employee health and life insurance for the Company in a cost-effective manner. In 1973, the Company formed RWIC to provide automobile liability insurance for the U-Haul truck and trailer rental customers. Commencing in 1987, the Company began the implementation of a strategic plan designed to emphasize reinvestment in its core do-it-yourself rental, moving, and storage business. The plan included a fleet renewal program (see "Business - U-Haul Operations - - Rental Equipment Fleet"), and provided for the discontinuation of certain unprofitable and unrelated operations. As part of its plan, the Company discontinued the operation of its full-service moving van lines, initiated the phase out of its recreational vehicle rental operations, and began the disposition of its recreational vehicle rental fleet. The disposition of the moving van lines' assets and the recreational vehicle rental fleet were completed in 1988 and 1992, respectively. The Company also eliminated various types of rental equipment and closed certain warehouses and repair facilities. The Company believes that its refocused business strategy enabled U-Haul to generate higher revenues and to achieve significant cost savings. Since 1987, the Company has sold surplus real estate assets with a book value of approximately $39.2 million for total proceeds of approximately $79.3 million. In 1990, the Company reorganized its operations into separate legal entities, each with its own operating, financial, and investment strategies. The reorganization separated the Company into three parts: U-Haul rental operations, insurance, and real estate. The purpose of the reorganization was to increase management accountability and to allow the allocation of capital based on defined performance measurements. BUSINESS STRATEGY U-HAUL OPERATIONS The Company's present business strategy remains focused on the do-it-yourself moving customer. The objective of this strategy is to offer, in an integrated manner over a diverse geographical area, a wide range of products and services to the do- it-yourself moving customer. 5 Through its "Moving Made Easier(REGISTERED TRADEMARK)" program, the Company strives to offer its customers a high quality, reliable, and convenient fleet of trucks and trailers at reasonable prices while simultaneously offering other related products and services, including moving accessories, self-storage facilities, and other items often desired by the do-it-yourself mover. The rental trucks purchased in the fleet renewal program have been designed with the do-it-yourself customer in mind to include features such as low decks, air conditioning, power steering, automatic transmissions, soft suspensions, AM/FM cassette stereo systems, and over-the-cab storage. The Company has introduced certain insurance products, including "Safemove(REGISTERED TRADEMARK)" and "Safestor(REGISTERED TRADEMARK)", to provide the do-it-yourself mover with certain moving-related insurance coverage. In addition, the Company provides rental customers the option of storing their possessions at either their points of departure or destination. Since 1987, the Company has more than doubled the number of U-Haul rental locations, with a net addition of over 7,700 independent dealers. To effectively service the U-Haul customer at these additional rental locations with equipment commensurate with the Company's commitment to product excellence, the Company, as part of the fleet renewal program, purchased approximately 73,000 new trucks between March 1987 and March 1995 and reduced the overall average age of its truck fleet from approximately 11 years at March 1987 to approximately five years at March 1995. During this period, approximately 62,000 trucks were retired or sold. Since 1990, U-Haul has replaced approximately 55% of its trailer fleet with new, more aerodynamically designed trailers better suited to the low height profile of many newly manufactured automobiles. Given the mechanical simplicity of a trailer relative to a truck and a trailer's longer useful life, the Company expects to replace trailers only as necessary. Beginning in 1983, the Company implemented a point-of- sale computer system for all of its Company-owned locations. The system was designed primarily to handle the Company's reservations, traffic, and reporting of rental transactions. The Company believes that the implementation of the system has been a significant factor in allowing the Company to increase its fleet utilization. Since the initial implementation, the Company has added several additional enhancements to the system, including full budgeting and financial reporting systems. INSURANCE OPERATIONS Oxford's business strategy emphasizes long-term capital growth funded through earnings from reinsurance and investment activities. In the past, Oxford has selectively reinsured life, health, and annuity-type insurance products. Oxford anticipates pursuing its growth strategy by providing reinsurance facilities to well-managed insurance or reinsurance companies offering similar type products who are desirous of additional capital either as a result of rapid growth or regulatory demands or who are divesting non-core business lines. 6 RWIC's principal business strategy is to capitalize on its knowledge of insurance products aimed at the moving and rental markets. RWIC believes that providing U-Haul and U-Haul customers with property and casualty insurance coverage has enabled it to develop expertise in the areas of rental vehicle lessee insurance coverage, self-storage property coverage, motor home insurance coverage, and general rental equipment coverage. RWIC has used and plans to continue to use this knowledge to expand its customer base by offering similar products to customers other than U-Haul. In addition, RWIC plans to expand its involvement in specialized areas by offering commercial multi-peril and excess workers' compensation and by assuming reinsurance business. U-HAUL OPERATIONS GENERAL The Company's do-it-yourself moving business operates under the U-Haul name through an extensive and geographically diverse distribution network of Company-owned U-Haul Centers and independent dealers throughout the United States and Canada. Substantially all of the Company's rental revenue is derived from do-it-yourself moving customers. The remaining business comes from commercial/industrial customers. Moving rentals include: (i) in-town (round-trip) rentals, where the equipment is returned to the originating U-Haul Center or independent dealer and (ii) one-way rentals, where the equipment is returned to a U-Haul Center or independent dealer in another city. Typically, the number of in-town(REGISTERED TRADEMARK) rental transactions in any given year is substantially greater than the number of one-way rental transactions. However, total revenues generated by one-way transactions in any given year typically exceed total revenues from in-town rental transactions. As part of the Company's integrated approach to the do-it- yourself moving market, U-Haul has a variety of product offerings. U-Haul's "Moving Made Easier(REGISTERED TRADEMARK)" program is designed to offer clean, well-maintained rental trucks and trailers at a price the customer can afford and to provide support items such as furniture pads, hand trucks, appliance and utility dollies, mirrors, tow bars, tow dollies, and bumper hitches. The Company also sells boxes, tape, and packaging materials and rents additional items such as floor polishers and carpet cleaning equipment at its U-Haul Center locations. U-Haul Centers also install hitches and sell propane, and some of them sell gasoline. U-Haul sells insurance packages such as (i) "Safemove(REGISTERED TRADEMARK)", which provides moving customers with a damage waiver, cargo protection, and medical and life coverage, and (ii) "Safestor(REGISTERED TRADEMARK)", which provides self-storage rental customers with various insurance coverages. 7 The U-Haul truck and trailer rental business tends to be seasonal with more transactions and revenues generated in the spring and summer months than during the balance of the year. The Company attributes this seasonality to the preference of do-it- yourself movers to move during this time. Also, consistent with do- it-yourself mover preferences, the number of rental transactions tends to be higher on weekends than on weekdays. RENTAL EQUIPMENT FLEET As of March 31, 1995, U-Haul's rental equipment fleet consisted of approximately 81,000 trucks and approximately 91,000 trailers. Rental trucks are offered in five sizes and range in size from the ten-foot "Mini-Mover" to the twenty-six-foot "Super-Mover". In addition, U-Haul offers pick-up trucks and cargo vans at many of its locations. Trailers range between six feet and twelve feet in length and are offered in both open and closed box configurations. DISTRIBUTION NETWORK The Company's U-Haul products and services are marketed across the United States and Canada through, as of March 31, 1995, over 1,000 Company-owned U-Haul Centers and over 13,200 independent dealers. The independent dealers, which include gasoline station operators, general equipment rental operators, and others, rent U- Haul trucks and trailers in addition to carrying on their principal lines of business. U-Haul Centers, however, are dedicated to the U- Haul line of products and services and offer those and related products and services. Independent dealers are commonly located in suburban and rural markets, while U-Haul Centers are concentrated in urban and suburban markets. Independent dealers receive U-Haul equipment on a consignment basis and are paid a commission on gross revenues generated from their rentals. Independent dealers also may earn referral commissions on U-Haul products and services provided at other U-Haul locations. The Company maintains contracts with its independent dealers that can be cancelled upon thirty days' written notice by either party. In addition, the Company has sought to improve the productivity of its rental locations by installing computerized reservations and network management systems in each U-Haul Center and a limited number of independent dealers. The Company believes that these systems have been a major factor in enabling the Company to deploy equipment more effectively throughout its network of locations and anticipates expanding these systems to cover additional independent dealers. The Company's U-Haul Center and independent dealer network in the United States and Canada is divided into 11 districts, each supervised by an area district vice president. Within the districts, the Company has established local marketing companies, each of which, guided by a marketing company president, is responsible for retail marketing at all U-Haul Centers and independent dealers within its respective geographic area. 8 Although rental dealers are independent, U-Haul area field managers work with the dealer network by reviewing each independent dealer's facilities, auditing their activities, and providing training on securing more customers on a regular basis. In addition, the area field managers recruit new independent dealers for expansion or replacement purposes. U-Haul has instituted performance compensation programs that focus on accomplishment and reward strong performers. SELF-STORAGE BUSINESS U-Haul entered the self-storage business in 1974 and since that time has increased the rentable square footage of its storage locations through the acquisition of existing facilities and new construction. In addition, the Company has entered into management agreements to manage self-storage properties owned by other companies and is expanding its ownership of self-storage facilities. The Company also provides financing and management services for independent self-storage businesses. Through approximately 700 Company-owned locations in the United States and Canada, the Company offers for rent more than 15.0 million square feet of self-storage space. The Company's self- storage facility locations range in size from 1,000 to 147,000 square feet of storage space, with individual storage spaces ranging in size from 16 square feet to 200 square feet. The primary market for storage rooms is customers storing household goods. The majority of customers renting storage rooms are in the process of a move. Even with an increase of over 31,000 new and acquired storage rooms during fiscal 1995, average occupancy remained high, ranging from mid-80% to low-90% with very little seasonal variations. During fiscal 1995 and fiscal 1994, delinquent rentals as a percentage of total storage rentals were approximately 6% in each year, which rate the Company considers to be satisfactory. EQUIPMENT DESIGN, MANUFACTURE AND MAINTENANCE The Company designs and manufactures its truck van boxes, trailers, and various other support rental equipment items. With the needs of the do-it-yourself moving customer in mind, the Company's equipment is designed to achieve high safety standards, simplicity of operation, reliability, convenience, durability, and fuel economy. Truck chassis are manufactured to Company specifications by both foreign and domestic truck manufacturers. These chassis receive certain post-delivery modifications and are joined with van boxes at eight Company-owned manufacturing and assembly facilities in the United States. The Company services and maintains its trucks and trailers through an extensive preventive maintenance program. Regular vehicle maintenance is generally performed at Company-owned facilities located throughout the United States and Canada. Major repairs are performed either by the chassis manufacturers' dealers or by Company-owned repair shops. To the extent available, the Company takes advantage of manufacturers' warranties. 9 COMPETITION The do-it-yourself moving truck and trailer rental market is highly competitive and dominated by national operators in both the in-town and one-way markets. These competitors include the truck rental divisions of Ryder System, Penske Truck Leasing, and Budget Rent-A-Car. Management believes that there are two distinct users of rental trucks: commercial users and do-it-yourself users. As noted above, the Company focuses on the do-it-yourself mover. The Company believes that the principal competitive factors are price, convenience of rental locations, and availability of quality rental equipment. The self-storage industry is also highly competitive. The top three national firms, including the Company, Public Storage and Shurgard, only account for ten percent of total industry square footage. Efficient management of occupancy and delinquency rates, as well as price and convenience, are key competitive factors. EMPLOYEES For the period ended March 31, 1995, the Company's non- seasonal workforce consisted of approximately 12,000 employees comprised of approximately 41% part-time and 59% full-time employees. During the summer months, the Company increases its workforce by approximately 400 employees and the percentage of part- time employees increases to approximately 46% of the total workforce. The Company's employees are non-unionized, and management believes that its relations with its employees are satisfactory. INSURANCE OPERATIONS OXFORD - LIFE INSURANCE Oxford underwrites life, health and annuity insurance, both as a direct writer and as an assuming reinsurer. Oxford's direct writings are primarily related to the underwriting of credit life and accident and health business which accounted for 18.6% of Oxford's premium revenues for the year ended December 31, 1994. Oxford's other direct lines are related to group life and disability coverage issued to employees of AMERCO and its subsidiaries. For the year ended December 31, 1994, approximately 7.2% of Oxford's premium revenues resulted from business with AMERCO and its subsidiaries. In addition, direct premium includes individual life insurance acquired from other insurers. Oxford administers AMERCO's self-insured group health and dental plans. Oxford's reinsurance assumed lines, which accounted for approximately 73.8% of Oxford's premium revenues for the year ended December 31, 1994, include individual life insurance coverage, annuity coverages, excess loss health insurance coverage, credit life, credit accident and health and short-term travel accident coverage. These reinsurance arrangements are entered into with unaffiliated insurers, except for travel accident products reinsured from RWIC. 10 RWIC - PROPERTY AND CASUALTY RWIC's underwriting activities consist of three basic areas: U-Haul and U-Haul-affiliated underwriting; direct underwriting; and assumed reinsurance underwriting. U-Haul underwritings include coverage for U-Haul and U-Haul employees, and U-Haul-affiliated underwritings consist primarily of coverage for U- Haul customers. For the year ended December 31, 1994, approximately 40% of RWIC's written premiums resulted from U-Haul and U-Haul-affiliated underwriting activities. RWIC's direct underwriting is done through home office underwriters and selected general agents. The products provided include liability coverage for rental vehicle lessees and storage rental properties, and coverage for commercial multiple peril and excess workers' compensation. RWIC's assumed reinsurance underwriting is done via broker markets and includes, among other things, reinsurance of municipal bond insurance written through MBIA, Inc. RWIC's liability for unpaid losses is based on estimates of the ultimate cost of settling claims reported prior to the end of the accounting period, estimates received from ceding reinsurers and estimates for incurred but unreported losses based on RWIC's historical experience supplemented by insurance industry historical experience. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expense paid to losses paid. The liabilities are estimates of the amount necessary to settle all claims as of the date of the stated reserves and all incurred but not reported claims. RWIC updates the reserves as additional facts regarding claims become apparent. In addition, court decisions, economic conditions and public attitudes impact the estimation of reserves and also the ultimate cost of claims. In estimating reserves, no attempt is made to isolate inflation from the combined effect of numerous factors including inflation. Unpaid losses and unpaid loss expenses are not discounted. RWIC's unpaid loss and loss expenses are certified annually by an independent actuarial consulting firm as required by state regulation. 11 Activity in the liability for unpaid claims and claim adjustment expenses is summarized as follows: 1994 1993 1992 -------------------------- (in thousands) Balance at January 1 $ 314,482 320,509 325,453 Less reinsurance recoverable 76,111 81,747 89,434 ------- ------- ------- Net balance at January 1 238,371 238,762 236,019 Incurred related to: Current year 102,782 91,044 96,451 Prior years 6,576 12,688 (4,241) ------- ------- ------- Total incurred 109,358 103,732 92,210 Paid related to: Current year 22,269 20,200 23,936 Prior years 70,382 83,923 65,531 ------- ------- ------- Total paid 92,651 104,123 89,467 Net balance at December 31 255,078 238,371 238,762 Plus reinsurance recoverable 74,663 76,111 81,747 ------- ------- ------- Balance at December 31 $ 329,741 314,482 320,509 ======= ======= ======= As a result of changes in estimates of insured events in prior years, the provision for unpaid loss and loss adjustment expenses (net of reinsurance recoveries of $26.5 million and $24.3 million in 1994 and 1993, respectively) increased by $6.6 million and $12.7 million in 1994 and 1993, respectively, because of higher than anticipated losses and related expenses for claims associated with assumed reinsurance and certain retrospectively rated policies. The table on page 12 illustrates the change in unpaid loss and loss expenses. The first line shows the reserves as originally reported at the end of the stated year. The second section, reading down, shows the cumulative amounts paid as of the end of successive years with respect to that reserve. The third section, reading down, shows reestimates of the original recorded reserve as of the end of successive years. The last section compares the latest reestimated reserve amount to the reserve amount as originally established. This last section is cumulative and should not be summed. 12
Unpaid Loss and Loss Adjustment Expenses December 31 ---------------------------------------------------------------------------------------------- 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- (in thousands) Reserve for Unpaid Loss and Loss Adjustment Expenses: $ 90,315 123,342 146,391 168,688 199,380 207,939 226,324 236,019 238,762 314,482 329,741 - ------------------- Paid (Cumulative) as of: ------------------ One year later 24,602 41,170 54,627 49,681 59,111 50,992 55,128 65,532 83,923 70,382 Two years later 50,628 77,697 92,748 91,597 89,850 87,850 97,014 105,432 123,310 Three years later 70,719 105,160 124,278 110,834 114,979 116,043 120,994 126,390 Four years later 84,936 126,734 137,744 129,261 133,466 132,703 133,338 Five years later 95,583 133,421 151,354 142,618 145,864 142,159 Six years later 98,018 142,909 161,447 152,579 153,705 Seven years later 102,805 151,379 169,601 158,531 Eight years later 109,055 158,728 173,666 Nine years later 114,334 162,082 Ten years later 117,465 Reserve Reestimated as of: - ------------------- One year later 101,097 138,287 167,211 187,663 200,888 206,701 229,447 231,779 251,450 321,058 Two years later 107,111 147,968 192,272 190,715 202,687 206,219 221,450 224,783 254,532 Three years later 115,746 168,096 192,670 194,280 203,343 199,925 211,988 223,403 Four years later 119,977 168,040 199,576 195,917 199,304 198,986 207,642 Five years later 119,513 175,283 201,303 195,203 200,050 197,890 Six years later 122,791 178,232 202,020 196,176 198,001 Seven years later 125,863 182,257 202,984 196,770 Eight years later 128,815 184,266 202,654 Nine years later 132,207 187,247 Ten years later 136,854 Initial Reserve in Excess of (Less than) Reestimated Reserve: ------------------- Amount (Cumulative) $(46,539) (63,905) (56,263) (28,082) 1,379 10,049 18,682 12,616 (15,770) (6,576)
13 The operating results of the property and casualty insurance industry, including RWIC, are subject to significant fluctuations due to numerous factors, including premium rate competition, catastrophic and unpredictable events (including man-made and natural disasters), general economic and social conditions, interest rates, investment returns, changes in tax laws, regulatory developments, and the ability to accurately estimate liabilities for unpaid losses and loss expenses. INVESTMENTS Oxford's and RWIC's investments must comply with the insurance laws of the State of Arizona where the companies are domiciled. These laws prescribe the type, quality, and concentration of investments that may be made. In general, these laws permit investments in federal, state, and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages, and real estate, within specified limits and subject to certain qualifications. Moreover, in order to be considered an acceptable reinsurer by cedents and intermediaries, a reinsurer must offer financial security. The quality and liquidity of invested assets are important considerations in determining such security. The investment philosophies of Oxford and RWIC emphasize protection of principal through the purchase of investment grade fixed income securities. Approximately 99.0% of Oxford's portfolio and 95.5% of RWIC's portfolio consist of investment grade securities. The maturity distributions are designed to provide sufficient liquidity to meet future cash needs. REINSURANCE The Company's insurance operations assume and cede insurance from and to other insurers and members of various reinsurance pools and associations. Reinsurance arrangements are utilized to provide greater diversification of risk and to minimize exposure on large risks. However, the original insurer remains liable should the assuming insurer not be able to meet its obligations under the reinsurance agreements. REGULATION The Company's insurance subsidiaries are subject to considerable regulation and supervision in the states in which they transact business. The purpose of such regulation and supervision is primarily to provide safeguards for policyholders. As a result of federal legislation, the primary regulation of the insurance industry is performed by the states. State regulation extends to such matters as licensing companies; restricting the types or quality of investments; regulating capital and surplus and actuarial reserve maintenance; setting solvency standards; requiring triennial financial examinations, conduct market surveys, and the filing of reports on financial condition; licensing agents; regulating aspects of the insurance companies' relationship with their agents; restricting expenses, commissions, and new business issued; imposing 14 requirements relating to policy contents; restricting use of some underwriting criteria; regulating rates, forms, and advertising; limiting the grounds for cancellations or non-renewal of policies; regulating solicitation and replacement practices; and specifying what might constitute unfair practices. State laws also regulate transactions and dividends between an insurance company and its parent or affiliates, and generally require prior approval or notification for any change in control of the insurance subsidiary. In the past few years, the insurance and reinsurance regulatory framework has been subjected to increased scrutiny by the National Association of Insurance Commissioners (the NAIC), state legislatures, insurance regulators, and the United States Congress. State legislatures have considered or enacted legislative proposals that alter, and in many cases increase, state authority to regulate insurance companies and holding company systems. The NAIC and state insurance regulators have been examining existing laws and regulations with an emphasis on insurance company investment and solvency issues. Legislation has been introduced in Congress that could result in the federal government assuming some role in the regulation of the insurance industry. It is not possible to predict the future impact of changing state and federal regulation on the operations of Oxford and RWIC. Beginning in 1993, the NAIC adopted and implemented minimum risk- based capitalization requirements for life insurance companies, including Oxford. As of the date of this report, Oxford is in compliance with these requirements. The NAIC has adopted a model for establishing minimum risk- based capitalization requirements for property and casualty insurance and reinsurance companies in 1994. RWIC is in compliance with these requirements. COMPETITION The insurance industry is competitive. Competitors include a large number of life insurance companies and property and casualty insurance companies, some of which are owned by stockholders and others of which are owned by policyholders (mutual). Many companies in competition with Oxford and RWIC have been in business for a longer period of time or possess substantially greater financial resources. Competition in the insurance business is based upon price, product design, and services rendered to producers and policyholders. AMERCO REAL ESTATE OPERATIONS AREC owns and manages most of the Company's real estate assets, including the Company's U-Haul Center locations. AREC has responsibility for acquiring and developing properties suitable for new U-Haul Centers and self-storage locations. In addition to the U-Haul operations, AREC actively seeks to lease or dispose of surplus properties. See "Business - History". 15 ENVIRONMENTAL MATTERS Underground Storage Tanks The Company owns properties that, as of March 31, 1995, contained a total of approximately 1,000 underground storage tanks (USTs). The USTs are used to store various petroleum products, including gasoline, fuel oil, and waste oil. The USTs are subject to various federal, state, and local laws and regulations that require testing and removal of leaking USTs, and remediation of polluted soils and groundwater under certain circumstances. In addition, if leakage from USTs has migrated, the Company may be subject to civil liability to third parties. In fiscal years 1990 through 1995, the Company incurred expenditures totaling approximately $21.0 million for removal and remediation of 1,709 USTs, a portion of which may be recovered from insurance and certain states' funds for the removal of USTs. Expenditures incurred through the end of fiscal 1995 may not be representative of future experience. However, the Company believes that compliance with laws and regulations, and cleanup and liability costs related to USTs will not have a material adverse effect on the Company's financial condition or operating results. In fiscal 1989, the Company instituted a program to test its USTs for leakage and to remove all but approximately 100 of the approximately 2,755 USTs then existing by the year 2000. The approximately 100 USTs expected to remain at the conclusion of the Company's testing and removal program are currently anticipated to consist primarily of waste oil tanks not required to be removed under current laws and regulations and gasoline tanks located at its remote rental locations where their use is deemed necessary to service the Company's moving customers. The Company currently budgets $5 million annually for UST testing, removal, and remediation. The Company treats these costs as capital costs to the extent that they improve the safety or efficiency of the associated properties as compared to when the properties were originally acquired or if the costs are incurred in preparing the properties for sale, but not in excess of the net realizable value of such properties. Federal Superfund Sites The Company has been named as a "potentially responsible party" (PRP) with respect to the disposal of hazardous wastes at ten federal superfund hazardous waste sites located in ten states. Under applicable laws and regulations the Company could be held jointly and severally liable for the costs to clean-up these sites. Currently, the Company has entered into buyout agreement settlements for eight of the sites for de minimis amounts and one site is under negotiation for settlement. One of the sites has been disputed by the Company with no response for more than five years. Based upon the information currently available to the Company regarding these ten sites, the current anticipated magnitude of the clean-up, the number of PRPs, and the volumes of hazardous waste currently anticipated to be attributed to the Company and other PRPs, the Company believes its share of the cost of investigation and clean-up at the ten superfund sites will not have a material adverse effect on the Company's financial condition or operating results. 16 Washington State Hazardous Waste Sites The Company owns property within two state hazardous waste sites in the State of Washington. The Company owns a parcel of property in Yakima, Washington that is believed to contain elevated levels of pesticide and other contaminant residue as a result of onsite operations conducted by one or more former owners. The State of Washington has designated the property as a state hazardous waste site known as the "Yakima Valley Spray Site". The Company has been named by the State of Washington as a "potentially liable party" (PLP) under state law with respect to this site. The Company, together with eight other companies and persons, has formed a committee that has retained an environmental consultant. The process of site assessment on the Yakima Valley Spray Site is ongoing and, based upon the information currently available to the Company regarding the volume and nature of wastes present, the Company is unable to reasonably assess the potential investigation and clean-up costs, but the costs could be substantial. Although the Company has entered into an agreement with such other companies and persons under which the Company has assumed responsibility for 20% of the costs to investigate the site, no agreement among the parties with respect to clean-up costs has been entered into at the date of this Form 10-K. In addition, the Company has been named by the State of Washington as a PLP along with 12 other PLPs with respect to another state- listed hazardous waste site known as the "Yakima Railroad Site". The Yakima Valley Spray Site is located within the Yakima Railroad Site. The Company has been notified that the Yakima Railroad Site involves potential groundwater contamination in an area of approximately two square miles. The Company has contested its designation as a PLP at this site, but, at the date of this Form 10-K, no formal ruling has been issued in this matter. In February 1992, the State of Washington issued an enforcement order to the Company and eight other parties requiring conduct of an interim remedial action involving the provision of bottled water to households that obtain drinking water from wells within the Yakima Railroad Site. Without conceding any liability, the Company and several of the other PLPs have implemented the bottled water program. The State of Washington has stated its intention to expand the existing municipal water system to supply municipal water to those households currently receiving bottled water, and it is estimated that the cost thereof will be approximately $6 million, with such cost being allocated among the PLPs. In addition, there will be costs associated with remedial measures to address the regional groundwater contamination issue. The process of site assessment on the Yakima Railroad Site is ongoing and, based upon the information currently available to the Company regarding the volume and nature of wastes present, the Company is unable to reasonably assess the potential investigation and clean-up costs, but the costs could be substantial. Moreover, the investigative and remedial costs incurred by the State can be imposed upon the Company and any other PLP as a joint and several liability. At the date of this Form 10-K, other than the indication of the expansion of the municipal water system, there has been no formal indication from the State of Washington of its intentions regarding future cost recoveries at the Yakima Railroad Site. 17 Other The Company owns eight facilities that manufacture and assemble various components of the Company's equipment. In addition, the Company owns various facilities engaged in the maintenance and servicing of its equipment. Various individual properties owned and operated by the Company are subject to various state and local laws and regulations relating to the methods of disposal of solvents, tires, batteries, antifreeze, waste oils and other materials. Compliance with these requirements is monitored and enforced at the local level. Based upon information currently available to the Company, compliance with these local laws and regulations has not had, and is not expected to have, a material adverse effect on the Company's financial condition or operating results. The Company currently leases approximately 200 properties to various businesses. The Company has a policy of leasing properties subject to an environmental indemnification from the lessee for operations conducted by the lessee. It should be recognized, however, that such indemnifications do not cover pre-existing conditions and may be limited by the lessee's financial capabilities. In any event, to the extent that any lessee does not perform any of its obligations under applicable environmental laws and regulations, the Company may remain potentially liable to governmental authorities and other third parties for environmental conditions at the leased properties. Furthermore, as between the Company and its lessees, disputes may arise as to allocations of liability with respect to environmental conditions at the leased properties. Finally, it should be recognized that the Company's present and past facilities have been in operation for many years and, over that time in the course of those operations, some of the Company's facilities have generated, used, stored, or disposed of substances or wastes that are or might be considered hazardous. Therefore, it is possible that additional environmental issues may arise in the future, the precise nature of which the Company cannot now predict. ITEM 2. PROPERTIES The Company and its subsidiaries own property, plant and equipment that are utilized in the manufacture, repair and rental of U-Haul equipment and that provide offices for the Company. See Note 13 of Notes to Consolidated Financial Statements in Item 8 for information regarding the leasing obligations of the Company and its subsidiaries, including those under U-Haul TRAC leases. Such facilities exist throughout the United States and Canada. The majority of land and buildings used by U-Haul is owned in fee and is substantially unencumbered. In addition, U-Haul owns certain real estate not currently used in its operations. U-Haul operates over 1,000 U-Haul Centers (approximately 700 of which rent self-storage space), 8 manufacturing facilities, and 23 repair facilities. 18 ITEM 3. LEGAL PROCEEDINGS Shoen Litigation Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and William E. Carty, who are current members of the Board of Directors of the Company and Paul F. Shoen, who is a former director are defendants in an action in the Superior Court of the State of Arizona, Maricopa County, entitled Samuel W. Shoen, M.D., et al. v. Edward J. Shoen, ------------------------------------------------- et al., No. CV88-20139, instituted August 2, 1988 (the Shoen Litigation). - ------ The Company was also a defendant in the action as originally filed, but the Company was dismissed from the action on August 15, 1994. The plaintiffs, who collectively hold 47.3% of the Company's common stock and who are all members of a stockholder group that is currently opposed to existing Company management have alleged, among other things, that certain of the individual plaintiffs were wrongfully excluded from sitting on the Company's Board of Directors in 1988 through the sale of Company common stock to certain key employees. That sale allegedly prevented the plaintiffs from gaining a majority position in the Company's voting stock and control of the Company's Board of Directors. The plaintiffs alleged various breaches of fiduciary duty and other unlawful conduct by the individual defendants and sought equitable relief, compensatory damages, punitive damages, and statutory post judgment interest. Based on the plaintiffs' theory of damages (that their stock has little or no current value), the Court ruled that the plaintiffs elected as their remedy in this lawsuit to transfer their shares of stock to the defendants upon the satisfaction of the judgment. On October 7, 1994, the jury determined that the defendants breached their fiduciary duties and such breach diminished the value of the plaintiffs' stock. The jury also determined the value of the plaintiffs' stock in 1988 to be $81.12 per share or approximately $1.48 billion. On February 2, 1995, the judge in this case granted the defendants' motion for remittitur or a new trial on the issue of damages. The judge determined that the value of the plaintiffs' stock in 1988 was $25.30 per share or approximately $461.8 million. On February 13, 1995, the plaintiffs filed a statement accepting the remittitur. The jury also awarded the plaintiffs $70 million in punitive damages against Edward J. Shoen. The judge ruled that this punitive damage award was excessive and granted Edward J. Shoen's motion for remittitur or a new trial on the issue of punitive damages. The judge reduced the award of punitive damages against Edward J. Shoen to $7 million. On February 13, 1995, the plaintiffs filed a statement accepting the remittitur reducing the punitive damage to $7 million. On February 21, 1995, judgment was entered against the defendants. On March 23, 1995, Edward J. Shoen filed a notice of appeal with respect to the award of punitive damages and the plaintiffs have subsequently cross-appealed the judge's remittitur of the punitive damages. 19 Pursuant to separate indemnification agreements, the Company has agreed to indemnify the defendants to the fullest extent permitted by law or the Company's Articles of Incorporation or By-Laws, for all expenses and damages, if any, incurred by the defendants in this proceeding, subject to certain exceptions. With respect to the defendants who have filed for protection under the federal bankruptcy laws (as described below), the extent of the Company's indemnification obligations may be an issue in the bankruptcy proceedings. Before the Company will have any indemnification obligations, the defendants must request indemnification from the Company and a determination must be made under Nevada law as to the validity of the indemnification claims. The defendants have not attempted to make demands upon or prosecute their indemnification claims against the Company. The Company reserves the right to contest the validity of any indemnification claims made by the defendants. The extent of the Company's obligations under the indemnification agreements, if any, cannot be reasonably estimated. No provision has been made in the Company's consolidated financial statements for any possible indemnification claims. If valid indemnification claims are made, the Company believes that it can fulfill any such indemnification obligations consistent with its existing credit agreements, or in the alternative, the Company may seek the waiver or amendment of certain of the provisions of one or more of its credit agreements when the indemnification obligations are determined. The Company believes, but no assurance can be given, that it can obtain any necessary waivers or amendments. Any attempted transfer of common stock from the plaintiffs to the defendants will implicate rights held by the Company. For example, pursuant to the Company's By-Laws, the Company has certain rights of first refusal with respect to the transfer of the plaintiffs' stock. In addition, the defendants' rights to acquire the plaintiffs' stock may present a corporate opportunity which the Company is entitled to exercise. On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and William E. Carty (the Director-Defendants) filed for protection under Chapter 11 of the federal bankruptcy laws, resulting in the issuance of an order automatically staying the execution of the judgment against those defendants. In late April 1995, the Director- Defendants, in cooperation with the Company, filed plans of reorganization in the United States Bankruptcy Court for the District of Arizona (collectively, the Plan), all of which propose the same funding and treatment of the plaintiffs' claims resulting from the judgment in the Shoen Litigation. Under the Plan, the Director-Defendants will transfer (or cause to be transferred) to a trust (the Trust), property having a stipulated or adjudicated value in excess of $461.8 million. Each of the plaintiffs would receive a trust certificate representing an undivided, fractional beneficial interest in the Trust. The property transferred to the Trust is expected to consist of (i) approximately $300 million in Series B dividend paying non-voting cumulative preferred stock issued by the Company or one of its subsidiaries; (ii) a 1993 REMIC certificate held by the Company with a face 20 value of $11.5 million evidencing a pool of 61 commercial mortgage loans which are secured by mortgages or deeds of trust on 60 self-storage properties; (iii) mortgage loans with an aggregate principal balance of approximately $109.9 million on property held by the Company, one or more of its subsidiaries, or two corporations affiliated with the Company; and (iv) real property held free and clear by the Company or its subsidiaries having a total fair value of approximately $50 million. Upon the funding of the Trust, the plaintiffs participating in the Trust will have their judgment satisfied and will be obligated to transfer their shares of common stock to the Company or its designee. Alternatively, and in lieu of their respective proportionate shares of the property to be transferred to the Trust, each of the plaintiffs may elect to participate in a settlement and receive a discounted cash payment in full satisfaction of his or her claim (the Settlement). The Settlement provides for a cash fund of up to $350 million to be paid by the Company to satisfy the claims of all plaintiffs electing to participate in the Settlement. Any plaintiff electing to participate in the Settlement will receive a pro rata distribution of such fund based on the percentage of all of the plaintiffs' stock held by such plaintiff. Any plaintiff so electing will not participate in or be entitled to any interest in the Trust and the amount of property transferred to the Trust will be correspondingly reduced. The Company plans to fund the Settlement through its existing lines of credit, additional debt or equity issuances, asset sales or a combination of the foregoing. The Company will determine which financing source or sources to use to fund the Settlement based on, among other things, market conditions as they exist from time to time and the number of plaintiffs electing to participate in the Settlement. The Company is unable to estimate the amount or cost of the financing, if any, necessary to fund the Settlement. Upon receipt of the cash distribution pursuant to the Settlement, the plaintiffs electing to participate in the Settlement will be obligated to transfer their common stock to the Company or its designee. The Company expects the court to consider the Plan during 1995. However, there is no assurance that the Plan will be confirmed by the federal bankruptcy court or that the Plan as confirmed will operate as described above. The Company's participation in the Plan is subject to the approval of the Board of Directors. Because of the Plan's complexity and the alternatives provided to the plaintiffs under the Plan, and because the Plan has not yet been confirmed, the Company is unable to determine the Plan's impact on the Company's financial condition, results of operations, or capital expenditure plans. However, as a result of funding the Plan, the Company is likely to incur additional costs in the future in the form of dividends on preferred stock and/or interest on borrowed funds. 21 No provision has been made in the Company's financial statements for any payments to be made to the plaintiffs or the Trust pursuant to the Plan. In addition, in the event any consideration paid by the Company for the plaintiffs' stock is in excess of the fair value of the stock received by the Company, the Company will be required to record an expense equal to that difference. On April 25, 1995, the Director-Defendants filed an action in the United States Bankruptcy Court for the District of Arizona entitled Edward ------ J. Shoen, et al. v. Leonard S. Shoen, et al., Case No. 95-1430-PHX-JMM, - ------------------------------------------------ Adversary No. 95-284, seeking injunctive relief to prevent the Company from conducting its 1994 and 1995 annual meetings of stockholders until the Plan is confirmed and/or to prevent the plaintiffs from voting the common stock that they are required to transfer pursuant to the Shoen Litigation. The Director-Defendants alleged that despite the election by the plaintiffs to transfer their common stock and thereby disengage themselves from Company ownership, the plaintiffs have two members of their stockholder group nominated to fill two director positions which are scheduled for election at the 1994 annual meeting of stockholders. The Director-Defendants argued that it is inappropriate to base the plaintiffs' right to vote at stockholders meetings on their record ownership of common stock which is the subject of the judgment in the Shoen Litigation. The Director- Defendants further alleged that if the Company is not enjoined from holding the 1994 and 1995 annual meetings until the Plan is confirmed and if the plaintiffs are not enjoined from voting their common stock, the plaintiffs are likely to elect up to half of the members of the Company's Board of Directors before the end of 1995 because the plaintiffs currently control more common stock than the stockholder group that supports existing Company management. The election of Board of Director nominees supported by the plaintiffs would be likely to disrupt the Company's ability to support and fund the Plan. Such disruption, the Director-Defendants alleged, would affect their ability to reorganize and would cause them substantial and irreparable injury. On June 8, 1995 the court enjoined the Company from conducting its 1994 and 1995 annual meetings of stockholders until an order is entered confirming or denying confirmation of the Plan, or until further order of the court. Arbitration Proceedings Sophia M. Shoen, Paul F. Shoen and the Company are parties to separate Share Repurchase and Registration Rights Agreements which require all disputes relating thereto to be resolved by arbitration. On April 8, 1994, Sophia M. Shoen and Paul F. Shoen commenced the dispute resolution process. Private arbitration proceedings pursuant to these agreements were convened on June 19, 1994. All of the claims asserted by Paul F. Shoen in the arbitration have been dismissed pursuant to a settlement agreement described in the following paragraph. In the arbitration, Sophia M. Shoen asserted that the Company has breached its obligations to her by failing to timely register the sale of her shares which were sold to the public in November 1994 and by failing to remove the right of first refusal on all of 22 the Company's common stock. Sophia M. Shoen asserted that, as a consequence of this alleged breach, she was entitled to give notice of termination of a stockholder agreement among Edward J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, Sophia M. Shoen, certain trusts for the benefit of the foregoing, and the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the Stockholder Agreement). The Company disagrees with the above assertions. Sophia M. Shoen gave such notice of termination on July 11, 1994. The arbitration hearings concluded on August 21, 1994. It is unknown when the arbitration panel will render a decision. Mark V. Shoen, as a party to the Stockholder Agreement, has filed a lawsuit against Sophia M. Shoen to which the Company is not a party, seeking a declaratory judgment that the Stockholder Agreement has not been terminated and remains in full force and effect. The Company, the Company's Board of Directors, the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the ESOP), and the trustees of the ESOP were defendants in an action in the United States District Court for the District of Nevada entitled Paul F. -------- Shoen v. AMERCO, et al., No. CV-N-94-0475-ECR, instituted July 19, 1994 and - ----------------------- dismissed February 10, 1995. On February 9, 1995, Paul F. Shoen executed a settlement agreement with the Company and the other defendants resolving all of his claims in this case and in the arbitration described in the preceding paragraph. As part of the settlement, the Company agreed, among other things, to select and appoint independent trustees for the ESOP and to place Paul F. Shoen on management's slate of directors for the 1994 annual meeting of stockholders which was originally delayed by judicial order at the request of Paul F. Shoen. Securities Litigation The Company, certain members of the Company's Board of Directors, and others are defendants in actions currently pending in United States District Court for the District of Nevada entitled Sidney Wisotzky and --------------------- Dorothy Wisotzky, et al. v. Edward J. Shoen, et al., No. CV-N-94-771-HDM - ----------------------------------------------------- (filed October 28, 1994), Evan Julber v. Edward J. Shoen, et al., No. CV-N- -------------------------------------- 94-00811-HDM (filed November 16, 1994), and Anne Markin v. Edward J. Shoen, ------------------------------- et al., No. CV-N-94-00821-ECR (filed November 18, 1994). The plaintiffs in - ------ these cases, who claim to have purchased the Company's Series A 8 1/2% Preferred Stock, are seeking class action certification and are defining the class as all persons who purchased or otherwise acquired the Series A 8 1/2% Preferred Stock of the Company from October 14, 1993 through October 18, 1994, inclusive, and who sustained damage as a result of such purchases. The plaintiffs allege, among other things, that the defendants violated the federal securities laws by inflating the price of the Series A 8 1/2% Preferred Stock via false and misleading statements, concealing material adverse information, and taking other manipulative actions, and that the Prospectus for the Series A 8 1/2% Preferred Stock, certain Form 10-K and Form 10-Q filings made by the Company, and the Company's Notice and Proxy Statement dated July 8, 1994 contained false and misleading statements and omissions regarding the Shoen Litigation. In addition, the Company and certain members of the Company's Board of Directors are 23 defendants in an action currently pending in United States District Court for the District of Nevada entitled Bernard L. and Frieda Goldwasser, et ------------------------------------- al. v. Edward J. Shoen, et al., No. CV-N-94-00810-ECR (filed November 16, - ------------------------------- 1994). The plaintiffs in this case allege derivatively on behalf of the Company, that the defendants breached their fiduciary duties to the Company and its stockholders by causing the Company to violate the federal securities laws, by concealing the financial responsibility of the Company for the claims asserted in the Shoen Litigation, by subjecting the Company to adverse publicity, and by misusing their corporate control for personal benefit. In addition, the plaintiffs are seeking equitable and/or injunctive relief to prevent the defendants in this case from causing the Company to indemnify the defendants in the Shoen Litigation against their liability in that case. The plaintiffs in these cases are requesting unspecified compensatory damages as well as attorneys' fees and costs. The Company and the individual defendants deny the plaintiffs' allegations of wrongdoing and intend to vigorously defend themselves in these actions. The Company is a defendant in a number of suits and claims incident to the types of business it conducts and several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management that none of such suits, claims, or proceedings involving the Company, individually or in the aggregate, are expected to result in a material loss. See Item 1 - Business-Environmental Matters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise. The 1994 annual meeting of stockholders was originally delayed on July 20, 1994 by the United States District Court for the District of Nevada. In addition, on June 8, 1995 the United States Bankruptcy Court for the District of Arizona enjoined the Company from conducting its 1994 and 1995 annual meetings of stockholders until further order of the Court. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of June 26, 1995, there were 1,547 holders of record of the Company's common stock in comparison to 161 as of June 24, 1994. 24 Prior to November 1994, no established public trading market existed for the Company's common stock. Since November 1994, the Company's common stock has been quoted on Nasdaq National Market (Nasdaq) under the symbol "AMOO". The following table sets forth the high and low closing prices of the common stock of AMERCO trading on Nasdaq for the periods indicated. For the Year Ended March 31, 1995 High Low ------------------ -------------- First quarter - - Second quarter - - Third quarter 18 15 3/4 Fourth quarter 22 1/2 17 3/8 Cash dividends declared to the Company's stockholders of record for the two most recent fiscal years are as follows: Date Cash Dividend per Common Share ---- ------------------------------ August 3, 1993 $ .0814 The Company does not have a formal dividend policy. The Company's Board of Directors periodically considers the advisability of declaring and paying dividends in light of existing circumstances. The dividends paid during fiscal 1994 are not indicative of future dividends and there is no assurance that dividends on common stock will be declared in the future. See Note 5 of Notes to Consolidated Financial Statements in Item 8 for a discussion of certain contractual restrictions on the Company's ability to pay dividends. See Note 19 of Notes to Consolidated Financial Statements in Item 8 for a discussion of certain statutory restrictions on Ponderosa's ability to pay dividends to the Company. See Note 15 of Notes to Consolidated Financial Statements in Item 8 for a discussion of the Company's non-cash dividends. See Note 6 of Notes to Consolidated Financial Statements in Item 8 for a discussion of changes to common shares outstanding and per share amounts. The common stock of U-Haul is wholly-owned by the Company. As a result, no active trading market exists for the purchase and sale of such common stock. No cash dividends were declared to the Company by U-Haul during the two most recent fiscal years. 25 AMERCO AND CONSOLIDATED SUBSIDIARIES ITEM 6. SELECTED FINANCIAL DATA (4)
For the Years Ended March 31, ---------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands, except per share data and ratios) Summary of Operations: Rental, net sales and other revenue $ 1,063,130 972,704 901,446 845,128 860,044 Premiums and net investment income 177,733 162,151 139,465 126,756 126,620 ---------- ---------- ---------- ---------- ---------- 1,240,863 1,134,855 1,040,911 971,884 986,664 ---------- ---------- ---------- ---------- ---------- Operating expense and cost of sales 783,933 735,841 697,700 661,229 668,149 Benefits, losses and amortization of deferred acquisition costs 144,303 130,168 115,969 99,091 126,626 Depreciation 151,409 133,485 110,105 109,641 114,589 Interest expense 67,762 68,859 67,958 76,189 80,815 ---------- ---------- ---------- ---------- ---------- 1,147,407 1,068,353 991,732 946,150 990,179 ---------- ---------- ---------- ---------- ---------- Pretax earnings (loss) from operations 93,456 66,502 49,179 25,734 (3,515) Income tax expense (33,424) (19,853) (17,270) (4,940) (6,354) ---------- ---------- ---------- ---------- ---------- Earnings (loss) from operations before extraordinary loss on early extinguishment of debt and cumulative effect of change in accounting principle 60,032 46,649 31,909 20,794 (9,869) Extraordinary loss on early extinguishment of debt - (3,370) - - - Cumulative effect of change in accounting principle - (3,095) - - - ---------- ---------- ---------- ---------- ---------- Net earnings (loss) $ 60,032 40,184 31,909 20,794 (9,869) ========== ========== ========== ========== ========== Earnings (loss) from operations before extraordinary loss on early extinguishment of debt and cumulative effect of change in accounting principle per common share (3) $ 1.23 1.06 .83 .53 (.25) Net earnings (loss) per common share (3) 1.23 .89 .83 .53 (.25) Weighted average common shares outstanding (2) 38,190,552 38,664,063 38,664,063 38,880,069 39,213,080 Cash dividends declared 12,964 7,900 1,994 - 1,176 Ratio of earnings to fixed charges (1) 1.87 1.64 1.45 1.21 -(1) 26 AMERCO AND CONSOLIDATED SUBSIDIARIES ITEM 6. SELECTED FINANCIAL DATA (4), continued As of March 31, ---------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands) Balance Sheet Data: Total property, plant and equipment, net $ 1,274,246 1,174,236 989,603 987,095 1,040,342 Total assets 2,605,989 2,344,442 2,024,023 1,979,324 1,822,977 Notes and loans payable 881,222 723,764 697,121 733,322 804,826 Stockholders' equity 686,784 651,787 479,958 451,888 435,180 (1) For purposes of computing the ratio of earnings to fixed charges, "earnings" consists of pretax earnings from operations plus total fixed charges excluding interest capitalized during the period and "fixed charges" consists of interest expense, preferred stock dividends, capitalized interest, amortization of debt expense and discounts and one-third of the Company's annual rental expense (which the Company believes is a reasonable approximation of the interest factor of such rentals). For the year ended March 31, 1991, pretax earnings were not sufficient to cover fixed charges by an amount of $4.2 million. (2) Reflects the adoption of Statement of Position 93-6, "Employer's Accounting for Employee Stock Ownership Plans." (3) For the fiscal year ended March 31, 1995 and 1994, Earnings (loss) and net earnings per common share were computed after giving effect to the dividend on the Company's Series A 8 1/2% preferred stock. (4) See "Item 3. Legal Proceedings" and "Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Agreements" for a discussion of material uncertainties.
27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For financial statement preparation, the Company's insurance subsidiaries report on a calendar year basis while the Company reports on a fiscal year basis ending March 31. Accordingly, with respect to the Company's insurance subsidiaries, any reference to the years 1994, 1993, and 1992 corresponds to the Company's fiscal years 1995, 1994, and 1993, respectively. There have been no events related to such subsidiaries between January 1 and March 31 of 1995, 1994, or 1993 that would materially affect the Company's consolidated financial position or results of operations as of and for the fiscal years ended March 31, 1995, 1994, and 1993, respectively. The following management's discussion and analysis should be read in conjunction with Notes 1, 19, and 20 of Notes to Consolidated Financial Statements in Item 8, which discuss the principles of consolidation, summarized consolidated financial information, and industry segment and geographic area data, respectively. In consolidation, all intersegment premiums are eliminated and the benefits, losses, and expenses are retained by the insurance companies. RESULTS OF OPERATIONS FISCAL YEARS ENDED MARCH 31, 1995, 1994, and 1993 The following table shows industry segment data from the Company's three industry segments, rental operations, life insurance, and property and casualty insurance, for the fiscal years ended March 31, 1995, 1994, and 1993. Rental operations is composed of the operations of U-Haul and AREC. Life insurance is composed of the operations of Oxford. Property and casualty insurance is composed of the operations of RWIC.
Property/ Adjustments Rental Life Casualty and Operations Insurance Insurance Eliminations Consolidated ---------- --------- --------- ------------ ------------ (in thousands) 1995 Revenues: Outside $1,056,874 39,347 144,642 - 1,240,863 Intersegment (42) 1,444 20,657 (22,059) - --------- ------- ------- -------- --------- Total revenues $1,056,832 40,791 165,299 (22,059) 1,240,863 ========= ======= ======= ======== ========= Operating profit $ 128,278 9,824 23,074 42 161,218 ========= ======= ======= ======== Interest expense 67,762 --------- Pretax earnings from operations 93,456 ========= Identifiable assets $1,827,995 479,778 579,821 (281,605) 2,605,989 ========= ======= ======= ======== ========= 1994 Revenues: Outside $ 965,839 31,357 137,659 - 1,134,855 Intersegment (357) 2,834 18,862 (21,339) - --------- ------- ------- -------- --------- Total revenues $ 965,482 34,191 156,521 (21,339) 1,134,855 ========= ======= ======= ======== ========= Operating profit $ 106,248 9,106 20,705 (698) 135,361 ========= ======= ======= ======== Interest expense 68,859 --------- Pretax earnings from operations 66,502 ========= Identifiable assets $1,593,044 461,464 550,795 (260,861) 2,344,442 ========= ======= ======= ======== ========= 28 Property/ Adjustments Rental Life Casualty and Operations Insurance Insurance Eliminations Consolidated ---------- --------- --------- ------------ ------------ (in thousands) 1993 Revenues: Outside $ 891,599 33,619 115,693 - 1,040,911 Intersegment - 2,630 18,402 (21,032) - --------- ------- ------- -------- --------- Total revenues $ 891,599 36,249 134,095 (21,032) 1,040,911 ========= ======= ======= ======== ========= Operating profit $ 88,581 12,325 16,231 - 117,137 ========= ======= ======= ======== Interest expense 67,958 --------- Pretax earnings from operations 49,179 ========= Identifiable assets $1,377,386 472,669 422,079 (248,111) 2,024,023 ========= ======= ======= ======== =========
FISCAL YEAR ENDED MARCH 31, 1995 VERSUS FISCAL YEAR ENDED MARCH 31, 1994 U-HAUL OPERATIONS U-Haul revenues consist of (i) total rental and other revenue and (ii) net sales. Total rental and other revenue increased by $78.2 million, approximately 9.7%, to $887.6 million in fiscal 1995. The increase from fiscal 1994 is primarily attributable to a $68.6 million increase in net revenues from the rental of moving related equipment. Moving related revenues benefited from transactional (volume) growth within the truck and trailer fleets. Revenues from the rental of self-storage facilities increased by $9.7 million to $80.2 million in fiscal 1995, an increase of approximately 13.8%. Storage revenues continue to be positively impacted by additional rentable square footage and higher average rental rates. Other revenue categories decreased in the aggregate by $0.1 million, with declines in general rental item revenues and other miscellaneous revenues, offset by increases in interest income and gains on the sale of property, plant and equipment. Net sales were $170.2 million in fiscal 1995 which represents an increase of approximately 9.1% from fiscal 1994 net sales of $156.0 million. Revenue growth from moving support sale items (i.e., boxes, etc.), hitches and propane resulted in an $11.2 million increase, offset by a $1.9 million decrease in revenue from gasoline sales consistent with the Company's ongoing efforts to remove underground storage tanks and gradually discontinue gasoline sales. Cost of sales was $93.5 million in fiscal 1995, as compared to $92.2 million in fiscal 1994. The decrease in cost of sales reflects a reduction in the provision for obsolete inventory between the two years due to management's continued emphasis on disposing of such inventory, including the complete liquidation of RV parts inventory during fiscal 1994. The decrease is also reflective of improved margins on hitch sales. Increased material costs from the sale of moving support sale items and propane, which can be primarily attributed to higher sales levels, partially offset these decreases. 29 Operating expenses increased to $683.7 million in fiscal 1995 from $633.6 million in fiscal 1994, an increase of approximately 7.9%. The change from the prior year reflects a $36.9 million increase in rental equipment maintenance costs. Efforts to minimize downtime, an increase in fleet size and higher transaction levels are primarily responsible for the increase. Lease expense declined by $17.9 million to $66.5 million reflecting lease terminations, lease restructuring, and lower finance costs on new leases originated during the past two years. All other operating expense categories increased in the aggregate by $31.0 million, approximately 8.3%, to $402.5 million. These increases are consistent with the growth in revenues. Depreciation expense during fiscal 1995 was $151.4 million as compared to $133.5 million in the prior year, reflecting the increase in fleet size and real property acquisitions. OXFORD - LIFE INSURANCE Premiums from Oxford's reinsurance lines before intercompany eliminations were $17.4 million for the year ended December 31, 1994, an increase of $1.6 million, approximately 10.1% over 1993 and accounted for 73.8% of Oxford's premiums in 1994. These premiums are primarily from term life insurance and matured deferred annuity contracts. Increases in premiums are primarily from the anticipated increase in annuitizations as a result of the maturing of deferred annuities. Premiums from Oxford's direct lines before intercompany eliminations were $6.2 million in 1994, an increase of $4.2 million, or 210% from the prior year. This increase in direct premium revenues is primarily attributable to Oxford's entrance into the credit life and credit accident and health business ($4.4 million in premium revenues). Oxford's direct business related to group life and disability coverage issued to employees of AMERCO and its subsidiaries for the year ended December 31, 1994 accounted for approximately 7.2% of premiums. Other direct lines, including the credit business, accounted for approximately 19.0% of Oxford's premiums in 1994. Net investment income before intercompany eliminations was $14.1 million and $12.6 million for the years ended December 31, 1994 and 1993, respectively. This increase is due to increasing margins on the interest sensitive business. Gains on the disposition of fixed maturity investments were $1.3 million and $2.1 million for 1994 and 1993, respectively. Oxford had $1.9 million and $1.8 million of other income for 1994 and 1993, respectively. Benefits and expenses incurred were $31.0 million for the year ended December 31, 1994, an increase of 27.0% over 1993. Comparable benefits and expenses incurred for 1993 were $24.4 million. This increase is primarily due to the increase in reserves caused by the increase in annuitizations discussed above. 30 Operating profit before intercompany eliminations decreased by $0.1 million, or approximately 1.0%, in 1994 to $9.7 million, primarily due to the decrease in gains on sale of fixed maturity investments. Such decrease was partially offset by the increasing margins on the interest sensitive business. RWIC - PROPERTY AND CASUALTY RWIC gross premium writings for the year ended December 31, 1994 were $179.2 million as compared to $175.1 million in 1993. This represents an increase of $4.1 million, or 2.3%. As in prior years, the rental industry market accounts for a significant share of total premiums, approximately 42.8% and 36.6% in 1994 and 1993, respectively. These writings include U-Haul customers, fleetowners and U-Haul as well as other rental industry insureds with similar characteristics. Growth is also occurring in selected general agency lines. These premiums accounted for approximately 15.1% of gross written premiums for 1994, compared to 12.9% in 1993. RWIC continues underwriting professional reinsurance via broker markets, and premiums in this area decreased in 1994 to $58.3 million, or 32.5% of total gross premiums, from comparable 1993 figures of $70.2 million, or 40.1% of total premiums. Net earned premiums increased $8.0 million, or 6.38% to $133.4 million for the year ended December 31, 1994, compared with premiums of $125.4 million for the year ended December 31, 1993. The premium increase was primarily due to planned increased writings in the rental industry and general agency lines. Underwriting expenses incurred were $142.1 million for the twelve months ended December 31, 1994, an increase of $5.6 million, or 4.1% over 1993. Comparable underwriting expenses incurred for 1993 were $136.5 million. The increase in underwriting expenses is due to the larger premium volume being written in 1994, which increased acquisition costs and commensurate reserves. The ratio of underwriting expenses to net earned premiums decreased from 1.09 in 1993 to 1.07 in 1994. This improvement is primarily attributable to improved loss experience combined with continued market rate strength which affects the Company's assumed reinsurance area. Net investment income was $29.0 million for the year ended December 31, 1994, an increase of 5.8% over 1993 net investment income of $27.4 million. The increase is due to an increased asset base generated from larger premium volume. RWIC completed 1994 with income before taxes before intercompany eliminations of $23.2 million as compared to $19.9 million for the comparable period ended December 1993. This represents an increase of $3.3 million or 16.6% over 1993. Improved underwriting results in the Company's assumed reinsurance area was offset by declines in its workers' compensation and rental industry liability lines. 31 INTEREST EXPENSE Interest expense decreased by $1.0 million to $67.8 million in fiscal 1995, as compared to $68.8 million in fiscal 1994. While average debt levels outstanding increased, the decrease in interest expense reflects a reduction in the average cost of funds. RESULTS OF OPERATIONS - CONSOLIDATED GROUP As a result of the foregoing, pre-tax earnings of $93.5 million were realized in fiscal 1995 as compared to $66.5 million in fiscal 1994. After providing for income taxes, net earnings for fiscal 1995 were $60.0 million as compared to $40.2 million for the same period of the prior year. The consolidated results for the prior year reflect a cumulative effect adjustment resulting from the adoption of Statement of Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" and extraordinary costs associated with early extinguishment of debt. FISCAL YEAR ENDED March 31, 1994 VERSUS FISCAL YEAR ENDED MARCH 31, 1993 U-HAUL OPERATIONS U-Haul revenues consist of (i) total rental and other revenue and (ii) net sales. Total rental and other revenue increased by $63.3 million, approximately 8.5%, to $809.4 million in fiscal 1994. The increase from fiscal 1993 is primarily attributable to a $52.2 million increase in net revenues from the rental of moving related equipment, which benefited from transactional (volume) growth reflecting higher utilization and rental fleet expansion. Revenues from the rental of self-storage facilities increased by $6.6 million to $70.5 million in fiscal 1994, an increase of approximately 10.3%. Storage revenues were positively impacted by additional rentable square footage, higher average occupancy levels, and higher average rental rates. All other revenue categories increased in the aggregate by $8.7 million during fiscal 1994 which primarily reflects increases in gains on note sales of approximately $5.0 million and interest income. Net sales revenues were $156.0 million in fiscal 1994, which represented an increase of approximately 7.2% from fiscal 1993 net sales of $145.5 million. Revenue from the sale of hitches, moving support items (i.e., boxes, etc.), and propane increased $10.7 million during fiscal 1994. Cost of sales was $92.2 million in fiscal 1994, which represented a decrease of approximately 1.0% from fiscal 1993. The reduction in fiscal 1994 reflects a combination of the absence of recreational vehicle sales, reduced levels of outside repairs and a reduction in inventory adjustments which fully offset increased material costs corresponding to the increase in hitch, moving support and propane sales. 32 Operating expenses increased to $633.6 million in fiscal 1994 from $599.8 million in fiscal 1993, an increase of approximately 5.6%. The change from the prior year reflects increases in almost all major expense categories with the exception of lease expense for equipment. Rental equipment maintenance costs increased by $27.4 million reflecting fleet expansion, higher utilization, a marginal increase in the age of the fleet and increased emphasis on maximizing rental equipment available to rent by reducing downtime. Lease expense for equipment declined from $117.6 million in fiscal 1993 to $82.9 million in fiscal 1994, a decrease of approximately 29.5%, reflecting lease terminations, lease restructuring and lower finance costs on new leases originated during fiscal 1994. All other operating expense categories increased in the aggregate by $41.1 million, approximately 12.4%, to $373.0 million which is primarily attributable to higher levels of rental and sales activity. Depreciation expense during fiscal 1994 was $133.5 million as compared to $110.1 million in the prior year, reflecting the addition of new trucks and trailers and the acquisition of trucks that were previously leased. OXFORD - LIFE INSURANCE Premiums from Oxford's reinsurance lines before intercompany eliminations were $15.8 million for the year ended December 31, 1993, an increase of $0.9 million, approximately 6.0% over 1992 and accounted for 88.7% of Oxford's premiums in 1993. These premiums are primarily from term life insurance and single and flexible premium deferred annuities. Increases in premiums are primarily from the anticipated increase in annuitizations as a result of the maturing of deferred annuities. Premiums from Oxford's direct lines before intercompany eliminations were $2.0 million in 1993, a decrease of $1.0 million (33%) from the prior year. The decrease is primarily attributable to an experience refund incurred on the Company's group life insurance business. Oxford's direct lines are principally related to the underwriting of group life and disability income. Insurance on the lives of the employees of AMERCO and its subsidiary companies accounted for approximately 6.3% of Oxford's premiums in 1993. Other direct lines accounted for approximately 5.0% of Oxford's premiums in 1993. Net investment income before intercompany eliminations was $12.6 million and $11.5 million for the years ended December 31, 1993 and 1992, respectively. The increase was primarily due to a decrease in interest credited to policyholders because of the increase in annuitizations. Gains on the disposition of fixed maturity investments were $2.1 million and $4.7 million for the years ended December 31, 1993 and 1992, respectively. Oxford had $1.8 million and $2.2 million of other income, for 1993 and 1992, respectively. 33 Benefits and expenses incurred were $24.4 million for the year ended December 31, 1993, an increase of 5.2% over 1992. Comparable benefits and expenses incurred for 1992 were $23.2 million. This increase is primarily due to the increase in annuitizations discussed above. Operating profit before intercompany eliminations decreased by $3.4 million, approximately 25.8%, in 1993 to $9.8 million, primarily due to the decrease in gains on fixed maturity investments. RWIC - PROPERTY AND CASUALTY RWIC gross premium writings for the year ended December 31, 1993 were $175.1 million, compared to $155.2 million in 1992, an increase of approximately 12.8%. The rental industry market accounted for a significant share of these premiums, approximately 37% and 40% in 1993 and 1992, respectively. These writings include U-Haul customers, fleetowners and U-Haul as well as other rental industry insureds with similar characteristics. Selected general agency lines, principally commercial multiple peril, surety and excess workers' compensation and casualty accounted for 8.1%, 3.2% and 5.4%, respectively, of gross premium writings in 1993, compared to approximately 15.4%, 2.8% and 11.9%, respectively, in 1992. RWIC also underwrites reinsurance via broker markets, and gross premiums in this area increased from $51.5 million in 1992 to $70.2 million in 1993 due to favorable market conditions. Net earned premiums increased $24.3 million, approximately 24%, to $125.4 million for the year ended December 31, 1993. This compares with net earned premiums of $101.1 million for the year ended December 31, 1992. The premium increase was primarily due to increased writings in the reinsurance area, along with growth in the excess workers' compensation line of RWIC's general agency business. These planned increases are due to strong rates and reduced capacity in the reinsurance market and increased marketing emphasis on the long standing presence in the excess workers' compensation market. Underwriting expenses incurred were $135.6 million for the year ended December 31, 1993, an increase of $17.8 million, approximately 15.1%, over 1992. Comparable underwriting expenses incurred for 1992 were $117.8 million. Higher underwriting expenses are due to larger premium volumes being written in 1993 which increased acquisition costs and commensurate reserves. The ratio of underwriting expenses to net premiums earned improved from 1.17 in 1992 to 1.08 in 1993. This improvement was primarily attributable to improved loss experience in the Company's assumed reinsurance area, including the lack of catastrophic losses such as those related to Hurricane Andrew in 1992, as well as the previously mentioned strength in rates. 34 Net investment income was $27.4 million in 1993, a decrease of approximately 6.5%, as compared to 1992 net investment income of $29.3 million. This decrease is due primarily to lower rates available in the high quality fixed income market. RWIC's net realized gain on the sale of investments was $2.1 million and $0.7 million in 1993 and 1992, respectively, while other income totaled $1.4 million and $2.9 million, respectively. RWIC completed 1993 with income before tax expense before intercompany eliminations of $19.9 million as compared to $15.5 million for the comparable period ended December 1992. This represents an increase of $4.4 million, or 28.4% over 1992. The increase is due to a combination of better underwriting results and unplanned gains on bond calls. INTEREST EXPENSE Interest expense was $68.8 million in fiscal 1994, as compared to $68.0 million in fiscal 1993. The increase reflects higher average levels of debt outstanding (See "Liquidity and Capital Resources"), a higher proportion of fixed rate debt, and a lengthening of maturities offset by lower cost of funds. EXTRAORDINARY LOSS ON EXTINQUISHMENT OF DEBT During the first and third quarters of fiscal 1994, the Company extinguished $25.2 million of its medium-term notes originally due in fiscal 1995 through 2000. The weighted average rate of the notes purchased was 9.34%. The purchase resulted in an extraordinary charge of $1.9 million, net of $1.0 million of tax benefit. During the fourth quarter of fiscal 1994, the Company terminated swaps with a notional value of $77.0 million originally due in fiscal 1995. The terminations resulted in an extraordinary charge of $1.5 million, net of $0.8 million of tax benefit. RESULTS OF OPERATIONS - CONSOLIDATED GROUP As a result of the foregoing, pre-tax earnings of $66.5 million were realized in fiscal 1994 as compared to $49.2 million in fiscal 1993. After providing for income taxes, extraordinary costs associated with the early extinguishment of debt and the cumulative effect of a change in accounting principle, net earnings for fiscal 1994 were $40.2 million as compared to $31.9 million in fiscal 1993. 35 QUARTERLY RESULTS The following table presents unauditied quarterly results for the eight quarters in the period beginning April 1, 1993 and ending March 31, 1995. The Company believes that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, the selected quarterly information when read in conjunction with the consolidated financial statements incorporated herein by reference. The Company's results of operations have historically fluctuated from period to period, including on a quarterly basis. In particular, the Company's U- Haul business is seasonal and a majority of the Company's revenues and substantially all of its net earnings from its U-Haul business are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period. Quarter Ended --------------------------------------------- June 30, Sept. 30, Dec. 31, March 31, 1994 1994 1994 1995 -------- --------- -------- --------- (in thousands, except per share data) Total revenues $323,578 $361,115 $295,888 $260,282 Net earnings (loss) 29,413 40,071 1,907 (11,359) Net earnings (loss) per common share (1)(2) .71 1.00 (.04) (.44) Quarter Ended --------------------------------------------- June 30, Sept. 30, Dec. 31, March 31, 1993 1993 1993 1994 -------- --------- -------- --------- (in thousands, except per share data) Total revenues $291,348 $324,968 $267,448 $251,091 Net earnings (loss) 17,359 30,601 1,799 (9,575) Net earnings (loss) per common share (1) .45 .79 (.02) (.33) ________________ (1)For the quarters ended December 31, 1993, March 31, June 30, September 30, December 31, 1994 and March 31, 1995, net earnings (loss) per common share amounts were computed after giving effect to the dividend on the Company's Series A 8 1/2% Preferred Stock. (2)Reflects the adoption of Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plan." 36 LIQUIDITY AND CAPITAL RESOURCES U-HAUL OPERATIONS To meet the needs of its customers, U-Haul must maintain a large inventory of fixed asset rental items. At March 31, 1995, net property, plant and equipment represented approximately 69.7% of total U-Haul assets and approximately 48.9% of consolidated assets. In fiscal 1995, capital expenditures were $435.0 million as compared to $530.5 million in fiscal 1994, reflecting expansion of the rental fleet in both periods, purchase of trucks previously leased, and increases in the available square footage in self- storage operations. The capital needs required to fund these acquisitions were funded with internally generated funds from operations, debt, and equity financings. Cash flows from operating activities were $176.6 million in fiscal 1995, as compared to $163.8 million in fiscal 1994. The increase results from an increase in net earnings and depreciation and amortization. OXFORD - LIFE INSURANCE Oxford's primary sources of cash are premiums, receipts from interest-sensitive products, and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements. Cash provided/(used) by operating activities were $28.9 million, $22.4 million, and $(2.1) million for the years ended December 31, 1994, 1993, and 1992, respectively. In 1994, cash flows from financing activities of new reinsurance agreements were approximately $26.0 million. During 1993 and 1992, there were no cash flows from financing activities related to new reinsurance agreements. In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. At December 31, 1994 and 1993, short-term investments amounted to $11.8 million and $8.4 million, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs. Stockholder's equity of Oxford, excluding investment in RWIC (in prior years), decreased to $85.6 million in 1994 from $86.9 million in 1993. During 1994, Oxford paid cash dividends of $4.9 million to Ponderosa. Ponderosa now holds 100% of the common stock of RWIC as a result of a property dividend made by Oxford on June 30, 1994. 37 Applicable laws and regulations of the State of Arizona require the Company's insurance subsidiaries to maintain minimum capital determined in accordance with statutory accounting practices. With respect to Oxford, such amount is $400,000. In addition, the amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. As a result of the dividend of the RWIC common stock on June 30, 1994, the State of Arizona must approve future dividends made through June 30, 1995. These restrictions are not expected to have a material adverse effect on the ability of the Company to meet its cash obligations. RWIC - PROPERTY AND CASUALTY Cash flows from operating activities were $28.8 million and $15.7 million for the years ended December 31, 1994 and 1993, respectively. The increase is primarily attributable to increased premium writings. RWIC's short-term investment portfolio was $7.5 million at December 31, 1994. This level of liquid assets, combined with budgeted cash flow, is adequate to meet periodic needs. This balance also reflects funds in transition from maturity proceeds to long-term investments. The structure of the long-term portfolio is designed to match future cash needs. Capital and operating budgets allow RWIC to accurately schedule cash needs. RWIC maintains a diversified investment portfolio, primarily in bonds at varying maturity levels. Approximately 95.5% of the portfolio consists of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity is adequate, with current invested assets equal to 95.7% of total liabilities. Stockholder's equity increased 1.8% from $165.1 million at December 31, 1993 to $168.1 million at December 31, 1994. RWIC considers current stockholder's equity to be adequate to support future growth and absorb unforeseen risk events. RWIC does not use debt or equity issues to increase capital and therefore has no exposure to capital market conditions. RWIC paid stockholder dividends of $9.7 million during the third quarter of 1994. Applicable laws and regulations of the State of Arizona require the Company's insurance subsidiaries to maintain minimum capital determined in accordance with statutory accounting practices. With respect to RWIC, such amount is $1,000,000. In addition, the amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. 38 CONSOLIDATED GROUP At March 31, 1995, total notes and loans payable outstanding was $881.2 million as compared to $723.8 million at March 31, 1994. This increase reflects the expansion in the rental fleet and self-storage operation. During each of the fiscal years ending March 31, 1996, 1997, and 1998, U-Haul estimates gross capital expenditures will average approximately $350 million as a result of the expansion of the rental truck fleet and self-storage operation. This level of capital expenditures, combined with an average of approximately $100 million in annual long-term debt maturities during this same period, are expected to create annual average funding needs of approximately $430 million. Management estimates that U-Haul will fund approximately 60% of these requirements with internally generated funds, including proceeds from the disposition of older trucks and other asset sales. The remainder of the required capital expenditures are expected to be financed through existing credit facilities, new debt placements, and equity offerings. Also, see "Legal Proceedings" for discussion of potential additional funding requirements. CREDIT AGREEMENTS The Company's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes, and revolving lines of credit with domestic and foreign banks. Principally to finance its fleet of trucks and trailers, the Company routinely enters into sale and leaseback transactions. As of March 31, 1995, the Company had $881.2 million in total notes and loans payable outstanding and unutilized committed lines of credit of approximately $257.0 million. Certain of the Company's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, maintaining certain financial ratios, and placing certain additional liens on its properties and assets. These agreements also contain other provisions, including a discussion of "change in control." See "Legal Proceedings" as it relates to the Company's credit agreements. In addition, these credit agreements contain provisions that could result in a required prepayment upon a "change in control" of the Company. The Company is further restricted in the type and amount of dividends and distributions that it may issue or pay, and in the issuance of certain types of preferred stock. The Company is prohibited from issuing shares of preferred stock that provide for any mandatory redemption, sinking fund payment, or mandatory prepayment, or that allow the holders thereof to require the Company or any subsidiary of the Company to repurchase such preferred stock at the option of such holders or upon the occurrence of any event or events without the consent of its lenders. 39 STOCKHOLDER LITIGATION As disclosed in "Legal Proceedings," a judgment has been entered in the Shoen Litigation against five of the Company's current directors and one former director. As a result of the judgment, the plaintiffs in the action are required to transfer their common stock to the defendants in exchange for approximately $461.8 million. The Company has agreed to indemnify the defendants to the fullest extent permitted by law or the Company's Articles of Incorporation or By-Laws for all expenses and damages, if any, incurred by the defendants in this proceeding, subject to certain exceptions. The five director-defendants have filed for protection under Chapter 11 of the federal bankruptcy laws and have filed, in cooperation with the Company, plans of reorganization (collectively, the Plan), all of which propose the same funding and treatment of the plaintiffs' claims resulting from the judgment in the Shoen Litigation. Under the Plan, the Director-Defendants will transfer (or cause to be transferred) to a trust (the Trust), property having a stipulated or adjudicated value in excess of $461.8 million. Each of the plaintiffs would receive a trust certificate representing an undivided, fractional beneficial interest in the Trust. The property transferred to the Trust is expected to consist of (i) approximately $300 million in Series B dividend paying non-voting cumulative preferred stock issued by the Company or one of its subsidiaries; (ii) a 1993 REMIC certificate held by the Company with a face value of $11.5 million evidencing a pool of 61 commercial mortgage loans which are secured by mortgages or deeds of trust on 60 self-storage properties; (iii) mortgage loans with an aggregate principal balance of approximately $109.9 million on property held by the Company, one or more of its subsidiaries, or two corporations affiliated with the Company; and (iv) real property held free and clear by the Company or its subsidiaries having a total fair value of approximately $50 million. Upon the funding of the Trust, the plaintiffs participating in the Trust will have their judgment satisfied and will be obligated to transfer their shares of common stock to the Company or its designee. Alternatively, and in lieu of their respective proportionate shares of the property to be transferred to the Trust, each of the plaintiffs may elect to participate in a settlement and receive a discounted cash payment in full satisfaction of his or her claim (the Settlement). The Settlement provides for a cash fund of up to $350 million to be paid by the Company to satisfy the claims of all plaintiffs electing to participate in the Settlement. Any plaintiff electing to participate in the Settlement will receive a pro rata distribution of such fund based on the percentage of all of the plaintiffs' stock held by such plaintiff. Any plaintiff so electing will not participate in or be entitled to any interest in the Trust and the amount of property transferred to the Trust will be correspondingly reduced. The Company plans to fund the Settlement through its existing lines of credit, additional debt or equity issuances, asset sales or a combination of the foregoing. The Company will determine which financing source or sources to use 40 to fund the Settlement based on, amoung other things, market conditions as they exist from time to time and the number of plaintiffs electing to participate in the Settlement. The Company is unable to estimate the amount or cost of the financing, if any, necessary to fund the Settlement. Upon receipt of the cash distribution pursuant to the Settlement, the plaintiffs electing to participate in the Settlement will be obligated to transfer their common stock to the Company or its designee. The Company expects the court to consider the Plan during 1995. However, there is no assurance that the Plan will be confirmed by the federal bankruptcy court or that the Plan as confirmed will operate as described above. The Company's participation in the Plan is subject to the approval of the Board of Directors. Because of the Plan's complexity and the alternatives provided to the plaintiffs under the Plan, and because the Plan has not yet been confirmed, the Company is unable to determine the Plan's impact on the Company's financial condition, results of operations, or capital expenditure plans. However, as a result of funding the Plan, the Company is likely to incur additional costs in the future in the form of dividends on preferred stock and/or interest on borrowed funds. See Item 3 - Legal Proceedings. OTHER Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan", was issued by the Financial Accounting Standards Board in May 1993. This standard is effective for years beginning after December 15, 1994. The standard requires that an impaired loan's fair value be measured and compared to the recorded investment in the loan. If the fair value of the loan is less than the recorded investment in the loan, a valuation allowance is established. The Company will adopt this statement in the first quarter of fiscal 1996. The Company believes that the adoption will have no material impact on its financial condition or result of operations. Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" was issued by the Financial Accounting Standards Board in May 1993. This standard requires classification of debt securities into one of the following three categories based on management's intention with regard to such securities: held-to-maturity, available-for- sale and trading. Securities classified as held-to-maturity are recorded at cost adjusted for the amortization of premiums or accretion of discounts while those classified as available-for-sale are recorded at fair value with unrealized gains or losses reported on a net basis in a separate component of shareholders' equity. Securities classified as trading are recorded at fair value with unrealized gains or losses reported on a net basis in income. The Company (excluding RWIC) adopted the standard effective fiscal 1995, except for RWIC which adopted the standard effective December 31, 1993. The net unrealized loss of approximately $6,483,000 is reflected as a separate component of shareholders' equity. The Company does not currently maintain a trading portfolio. 41 Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of," was issued by the Financial Accounting Standards Board in March 1995. This standard is effective for fiscal years beginning after December 15, 1995, and establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Otherwise, an impairment loss is not recognized. Measurement of an impairment loss for long-lived assets and identifiable intangibles that an entity expects to hold and use should be based on the fair value of the asset. The Company has not completed an evaluation of the effect of this standard. Statement of Position 93-7, "Reporting on Advertising Costs", was issued by the Accounting Standards Executive Committee in December 1993. This statement of position provides guidance on financial reporting on advertising costs in annual financial statements. The statement of position requires reporting advertising costs as expenses when incurred or when the advertising takes place, reporting the costs of direct-response advertising, and amortizing the amount of direct-response advertising reported as assets. This statement of position is effective for financial statements for years beginning after June 15, 1994. The Company currently matches certain advertising costs with revenue generated in future periods. The Company will adopt this statement in the first quarter of fiscal 1996. The Company believes that the adoption will have no material impact on its financial condition or results of operations. Other pronouncements issued by the Financial Accounting Standards Board with future effective dates are either not applicable or not material to the consolidated financial statements of the Company IMPACT OF INFLATION Inflation has had no material financial effect on the Company's results of operations in the years discussed. 42 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Accountants and Consolidated Financial Statements of the Company, including the notes to such statements, are set forth on pages 60 through 113, and are hereby incorporated herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES The Registrants have had no disagreements with their independent accountants in regard to accounting and financial disclosure and have not changed their independent accountants in the 24 months prior to date of filing. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS Directors and/or Executive Officers of the Registrants as of June 26, 1995 were: Name Age Office ---- --- ----- Edward J. Shoen 46 Chairman of the Board and President of AMERCO and U-Haul Mark V. Shoen 44 Director of AMERCO and U-Haul James P. Shoen 35 Vice President of AMERCO; Director of AMERCO and U-Haul William E. Carty 68 Director of AMERCO and U-Haul Aubrey K. Johnson 73 Director of AMERCO John M. Dodds 58 Director of AMERCO and U-Haul Richard J. Herrera 41 Director of AMERCO and U-Haul and Vice President of U-Haul Charles J. Bayer 55 Director of AMERCO Gary B. Horton 51 Treasurer of AMERCO and Assistant Treasurer of U-Haul Gary V. Klinefelter 47 Secretary and General Counsel of AMERCO and U-Haul John A. Lorentz 68 Assistant Secretary of AMERCO and U-Haul Rocky D. Wardrip 37 Assistant Treasurer of AMERCO Harry B. DeShong, Jr. 46 Director and Executive Vice President of U-Haul John C. Taylor 37 Director and Executive Vice President of U-Haul Donald W. Murney 34 Treasurer of U-Haul George R. Olds 53 Assistant Secretary of AMERCO and U-Haul 43 Class I (Term expires at 1995 Meeting) -------------------------------------- Aubrey K. Johnson, 73, was a Director of the Company from 1987 until 1991. From 1991 until his re-election to the Board in August 1993, he served as a consultant and advisor to various organizations and individuals. Richard J. Herrera, a Director of AMERCO since September 1991 and of U-Haul since June 1990, has been associated with the Company since April 1988. He is presently the Vice President of Marketing, Retail Sales for U-Haul. Class II (Term expires at 1996 Meeting) --------------------------------------- William E. Carty, a Director of AMERCO since May 1987 and a Director of U-Haul since June 1990, has been associated with the Company since 1946. He has served in various executive positions in all areas of the Company. He served most recently as product director. Mr. Carty retired from the Company in December 1987. Charles J. Bayer, a Director of AMERCO since September 1990, has been associated with the Company since 1967. He has served in various executive positions and has served as President of AMERCO Real Estate Company since September 1990. He also served as Director of U-Haul from July 1988 until June 1990, Product Director for U-Haul from January 1988 to August 1990, the Director of Finance and Administration for the U-Haul Technical Center from 1986 to 1988, and the Manager of Repair and Maintenance of the Company from 1984 to 1986. Class III (Term expires at 1997 Meeting) ---------------------------------------- James P. Shoen, a Director of AMERCO since December 1986, Vice President of AMERCO since May 1989 and Director of U-Haul since June 1990, has been associated with the Company since July 1976. He was employed as a Center General Manager with U-Haul Co. of San Francisco from 1981 to 1989. From March 1989 to March 1990, he served as the Director of the U-Haul Technical Services Center. He has served from April 1990 to present as Executive Vice President of U-Haul. John M. Dodds, a Director of AMERCO since September 1987, and Director of U-Haul since June 1990, has been associated with the Company since 1963. He served in regional field operations until December 1986, and served in national field operations until May 1994. Mr. Dodds retired from the Company in May 1994. Class IV (Term expires at 1994 Meeting) --------------------------------------- Edward J. Shoen has served as Director and Chairman of the Board of AMERCO since December 1986, as President since June 1987, as a Director of U-Haul since June 1990 and as the President of U-Haul since March 1991. Mr. Shoen has been associated with the Company since May 1971. Mr. Shoen is the founder and owner of Space Age Paints. Mr. Shoen has been an officer of Form Builders since 1981. 44 Mark V. Shoen has served as a Director of AMERCO since April 1990 and a Director of U-Haul since June 1990 and has served as President of U-Haul from June 1990 to March 1991. From June to August 1987, he was Assistant to the President of AMERCO with responsibilities relating to product. He served from August 1987 to December 1990 as President of A & M Associates, Inc., a wholly- owned subsidiary of U-Haul. He has served from December 1990 to September 1994 as Executive Vice President of Product for U-Haul. He has served as President, Phoenix Operation, from September 1994 to present. Mr. Shoen was President of Form Builders, Inc., Mesa, Arizona from August 1981 to December 1986. Other Directors and Executive Officers -------------------------------------- Gary B. Horton, has served as Treasurer of AMERCO since 1982 and serves as Assistant Treasurer of U-Haul. His previous positions include Treasurer of U-Haul. He has been associated with the Company since October 1969. Gary V. Klinefelter, Secretary of AMERCO since July 1988, and Secretary of U-Haul since June 1990, is licensed as an attorney in Arizona and has served as General Counsel for AMERCO and U-Haul since June 1988. He served U-Haul as Assistant General Counsel from May 1978 until May 1980, and as General Counsel, Marketing, from May 1980 until September 1985. From September 1985 to June 1988, he was in private practice. John A. Lorentz, Assistant Secretary of AMERCO since July 1988 and Assistant Secretary of U-Haul since June 1990, is licensed as an attorney in Oregon and has been associated with the Company since September 1953. His previous positions include Secretary of AMERCO and U-Haul. Rocky D. Wardrip, Assistant Treasurer of AMERCO since September 1990, has been associated with the Company since 1978 in various capacities within accounting and treasury operations. He was previously Assistant Treasurer of U-Haul from 1988 to 1990. Harry B. DeShong, Jr., Director of U-Haul since May 1992, has been associated with the Company since June 1964. He has served as Executive Vice President of U-Haul since November 1988. Mr. DeShong previously held a number of responsible positions in the Company's field management organization, including eight years as a U-Haul Marketing Company President. John C. Taylor, Director of U-Haul since June 1990, has been associated with the Company since 1981. He is presently an Executive Vice President U-Haul. Donald W. Murney has been Treasurer of U-Haul since June 1990. He was previously employed as the Senior Vice President and Chief Financial Officer of Coury Financial Services. George R. Olds, Assistant Secretary of AMERCO and U-Haul since February, 1993, has been associated with the Company since 1975 as a member of the U-Haul legal department specializing in taxation. 45 Edward J., Mark V. and James P. Shoen are brothers. William E. Carty is the uncle of Edward J. and Mark V. Shoen. On February 21, 1995, Edward J. Shoen, James P. Shoen, William E. Carty, John M. Dodds, and Aubrey K. Johnson filed for protection under Chapter 11 of the federal bankruptcy laws in connection with certain litigation as more fully described in Item 3. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers, directors, and owners of ten percent or more of the Company's common stock to file ownership reports with the Securities and Exchange Commission. Failure to do so can result in substantial monetary penalties in addition to injunctive remedies. Based upon the Company's non-receipt of Section 16 reports required to be furnished to the Company, the persons and corporations listed below have failed to file reports required by Section 16(a) for the fiscal year ended March 31, 1995: L.S. Shoen Cecilia M. Hanlon L.S.S. Inc. Cemar, Inc. Michael L. Shoen Katrina M. Carlson Mickl Inc. Kattydid, Inc. Samuel W. Shoen Mary Anna Shoen-Eaton Sawmill, Inc. Maran, Inc. Theresa M. Romero Paul F. Shoen Thermar, Inc. Sophia M. Shoen Based on the stockholder agreements described in footnotes 1 and 2, pages 50 and 51, the foregoing persons and corporations beneficially own more than ten percent of the Company's common stock. To the best of the Company's knowledge based solely on a review of copies of Section 16 reports it has received, all filings required of the Company's officers and directors are current and in compliance with the Securities Exchange Act of 1934. However, certain Form 5 filings required to be made by May 15, 1995 by certain officers, directors, and stockholders of the Company were not timely made. The forms required to be filed by Gary V. Klinefelter, John A. Lorentz, George R. Olds, and Oxford Life Insurance Company as Trustee for certain trusts established by Edward J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, and Sophia M. Shoen were not filed until May 23, 1995. The forms required to be filed by Edward J. Shoen, Mark V. Shoen, Charles J. Bayer, Richard J. Herrera, and Donald W. Murney were not filed until May 24, 1995. The form required to be filed by Aubrey K. Johnson was not filed until May 26, 1995. The form required to be filed by the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan was not filed until May 30, 1995. The form required to be filed by Rocky D. Wardrip was not filed until May 31, 1995. The forms required to be filed by James P. Shoen, Gary B. Horton, and Henry E. Martin were not filed until June 1, 1995. The forms required to be filed by John M. Dodds and W. E. Carty were not filed until June 6, 1995. 46 In addition, certain Form 4 filings, made by the following officers and/or directors of the Company, were not timely: (i) a form required to be filed by Gary B. Horton by November 10, 1994 was not filed until approximately November 17, 1994; (ii) two forms required to be filed by Edward J. Shoen by November 10, 1994 were not filed until approximately November 23, 1994; (iii) a form required to be filed by Mark V. Shoen by November 10, 1994 was not filed until approximately November 23, 1994; (iv) a form required to be filed by W.E. Carty by November 10, 1994 was not filed until November 29, 1994; and (v) a form required to be filed by Donald W. Murney by November 10, 1994 was not filed until November 29, 1994. ITEM 11. EXECUTIVE COMPENSATION The following Summary Compensation Table shows the annual compensation paid to the Company's chief executive officer and the four other most highly compensated executive officers of the Company during each of the last three fiscal years. Summary Compensation Table Annual Compensation --------------------------------- All Other Name and Principal Salary Bonus Compensation Position Year ($) ($) ($)(1) - --------------------------------------------------------------------- Edward J. Shoen 1995 250,004 - 6,821 Chairman of the Board and President 1994 197,123 2,101,490 10,675 of AMERCO and U-Haul 1993 236,925 - 8,045 Mark V. Shoen 1995 277,120 - 6,821 Director of AMERCO and U-Haul 1994 227,697 - 9,586 1993 203,851 - 7,166 James P. Shoen 1995 203,850 - 6,821 Vice President and Director of AMERCO 1994 211,543 - 9,227 and U-Haul 1993 203,851 - 7,166 Gary V. Klinefelter 1995 206,312 54,000 6,821 Secretary and General Counsel of AMERCO and 1994 210,005 50,000 10,448 U-Haul 1993 103,812 150,000 8,045 Harry B. DeShong, Jr. 1995 165,308 19,000 5,651 Executive Vice President and Director of U-Haul 1994 148,754 - 6,440 1993 128,248 - 4,462 47 (1) Represents the value of common stock awarded under the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan. The annual fee for all services as a director is $22,100, which is paid in equal monthly installments. The Company's regular board meetings are held quarterly in May, August, November and February. An annual meeting is held in the first month following the annual meeting of stockholders. Report on Executive Compensation While the Company established a Compensation Committee in fiscal 1995 consisting of Charles J. Bayer, William E. Carty, and Aubrey K. Johnson, the entire Board of Directors reviewed and determined the amount of compensation paid to the Chairman of the Board and President for fiscal 1995. The determination was subjective and not subject to a specific criteria. Although the Board of Directors had primary authority with respect to compensation decisions for the Company's other executive officers during fiscal 1995, the Chairman of the Board and President has historically made these decisions with the counsel of individual Board members, subject to the ability of the full Board to revise or override these decisions. The Chairman of the Board and President has advised the Board that the compensation levels for the Company's executive officers during fiscal year 1995 did not bear a specific relationship to the Company's performance. Rather, executive compensation was set at levels designed to retain the Company's executive officers and was based on subjective factors such as his perception of each officer's performance and changes in functional responsibility. In addition to its involvement in executive compensation matters as described above, the Board of Directors determines the amount, if any, of the Company's contribution pursuant to the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan. The Compensation Committee consists of Charles J. Bayer, William E. Carty and Aubrey K. Johnson. The Company's stockholders approved a stock option plan at the 1992 Annual Meeting of Stockholders. The stock option and incentive plan is designed to attract and retain employees upon whose judgment and effort the Company's success is dependent. As of June 26, 1995, no awards had been made under such plan. Charles J. Bayer Aubrey K. Johnson William E. Carty COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee consists of Charles J. Bayer, William E. Carty, and Aubrey K. Johnson. Mr. Bayer is President of Amerco Real Estate Company, one of the Company's subsidiaries. Mr. Carty served in various executive positions in all areas of the Company until his retirement in 1987. 48 In May 1990, William E. Carty sold 40,684 shares of the Company's common stock to the ESOP Trust at the then-appraised value of $10.00 per share. The ESOP Trust purchased the shares for cash in the amount of $76,840 and a promissory note for $330,000. The note is payable in six annual installments at an interest rate of 9.6%. Performance on the note is guaranteed by the Company. In April 1994, William E. Carty sold a 46.5% interest in 90.88 acres of land to the Company for cash in the amount of $4,000,000. An independent opinion of value was used to determine the Company's offer to purchase and the purchase was completed below the amount so determined. Pursuant to plans of reorganization filed by William E. Carty and Aubrey K. Johnson under Chapter 11 of the federal bankruptcy laws, the Company will be funding the acquisition by it or its designee of approximately 47.3% of the Company's outstanding common stock currently beneficially held by Leonard S. Shoen, Samuel W. Shoen, Michael L. Shoen, Mary Anna Shoen-Eaton, Theresa M. Shoen, Cecilia M. Shoen-Hanlon, and Katrina M. Carlson. See "Legal Proceedings" for additional information regarding these bankruptcy proceedings. PERFORMANCE GRAPH The following graph compares the cumulative total stockholder return on the Company's Common Stock for the period March 31, 1990 through March 31, 1995 with the cumulative total return on the Dow Jones Composite Average and the Dow Jones Transportation Average. The comparison assumes that $100 was invested on March 31, 1990 in the Company's Common Stock and in each of the comparison indices. Because no active trading market for the Company's Common Stock existed prior to November 1994, the graph reflects the annual Common Stock appraisals obtained in connection with the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan for 1990 through 1994 and the closing price of the Common Stock trading on Nasdaq on March 31, 1995. (The following descriptive data is supplied in accordance with Rule 304(d) of Regulation S-T.) 1990 1991 1992 1993 1994 1995 ------ ------ ------ ------ ------ ------ AMERCO 100.00 92.00 108.00 155.00 170.00 213.75 Dow Jones Transportation Average 100.00 93.78 116.96 132.71 138.21 138.25 Dow Jones Composite Average 100.00 102.26 114.79 126.40 128.23 137.19 49 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT To the best of the Company's knowledge, the following table lists, as of June 26, 1995, (i) the beneficial ownership of Common Stock of each director and director nominee of the Company, of each executive officer named in Item 11, of all directors and executive officers of the Company as a group, and of those persons who beneficially own more than five percent (5%)of the Company's common stock; and (ii) the beneficial ownership of each director and director nominee of the Company, of each executive officer named in Item 11, and of all directors and executive officers of the Company as a group, of the percentage of net payments received by such persons during the 1995 fiscal year in respect of fleet- owner contracts issued by U-Haul. PERCENTAGE OF SHARES OF NET FLEET NAME AND COMMON STOCK PERCENTAGE OWNER ADDRESS OF BENEFICIALLY OF COMMON CONTRACT BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS - ---------------- ------------ ----------- ------------- Edward J. Shoen, 17,199,585(1) 44.54 .011 Chairman of the Board and President 2727 N. Central Ave. Phoenix, AZ 85004 Mark V. Shoen, 17,199,585(1) 44.54 .013 Director 2727 N. Central Ave. Phoenix, AZ 85004 James P. Shoen 17,199,585(1) 44.54 .024 Director and Vice President 1325 Airmotive Way Suite 100 Reno, NV 89502 Paul F. Shoen 17,199,585(1) 44.54 .008 P.O. Box 524 Glenbrook, NV 89413 Sophia M. Shoen 17,199,585(1) 44.54 .022 5104 N. 32nd Street Phoenix, AZ 85018 Irrevocable Trust 17,199,585(1) 44.54 N/A between Edward J. Shoen and Oxford Life Insurance Company, as Trustee 2721 N. Central Ave. Phoenix, AZ 85004 50 PERCENTAGE OF SHARES OF NET FLEET NAME AND COMMON STOCK PERCENTAGE OWNER ADDRESS OF BENEFICIALLY OF COMMON CONTRACT BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS - ---------------- ------------ ----------- ------------- Irrevocable Trust 17,199,585(1) 44.54 N/A between Mark V. Shoen and Oxford Life Insurance Company, as Trustee 2721 N. Central Ave. Phoenix, AZ 85004 Irrevocable Trust 17,199,585(1) 44.54 N/A between James P. Shoen and Oxford Life Insurance Company, as Trustee 2721 N. Central Ave. Phoenix, AZ 85004 Irrevocable Trust 17,199,585(1) 44.54 N/A between Paul F. Shoen and Oxford Life Insurance Company, as Trustee 2721 N. Central Ave. Phoenix, AZ 85004 Irrevocable Trust 17,199,585(1) 44.54 N/A between Sophia M. Shoen and Oxford Life Insurance Company, as Trustee 2721 N. Central Ave. Phoenix, AZ 85004 The ESOP Trust(3) 17,199,585(1) 44.54 N/A 2727 N. Central Ave. Phoenix, AZ 85004 John M. Dodds 0 0 N/A Director 2727 N. Central Ave. Phoenix, AZ 85004 William E. Carty 0 0 .077 Director 2727 N. Central Ave. Phoenix, AZ 85004 Charles J. Bayer 1,050 ** .006 Director 2727 N. Central Ave. Phoenix, AZ 85004 Richard J. Herrera 776 ** N/A Director 2727 N. Central Ave. Phoenix, AZ 85004 51 PERCENTAGE OF SHARES OF NET FLEET NAME AND COMMON STOCK PERCENTAGE OWNER ADDRESS OF BENEFICIALLY OF COMMON CONTRACT BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS - ---------------- ------------ ----------- ------------- Aubrey K. Johnson 0 0 N/A Director 2727 N. Central Ave. Phoenix, AZ 85004 Gary V. Klinefelter 1,981 ** N/A Secretary and General Counsel 2727 N. Central Ave. Phoenix, AZ 85004 Harry DeShong 1,528 ** N/A Executive Vice President and Director of U-Haul 2727 N. Central Ave. Phoenix, AZ 85004 Leonard S. Shoen 18,254,596(2) 47.27 .049 (L.S.S., Inc.)* 3079 Ocotillo Ct. Las Vegas, NV 89121 Samuel W. Shoen 18,254,596(2) 47.27 .010 (Sawmill, Inc.)* 1253 Umatilla Street Port Townsend, WA 98368 Michael L. Shoen 18,254,596(2) 47.27 N/A (Mickl, Inc.)* 8202 N.W. 16th Ave. Vancouver, WA 98665 Mary Anna 18,254,596(2) 47.27 .004 Shoen-Eaton (Maran, Inc.)* 52 Spanish River Drive Ocean Ridge, FL 33435 Theresa M. Romero 18,254,596(2) 47.27 .021 (Thermar, Inc.)* 7625 East Via Del Reposo Scottsdale, AZ 85258 Cecilia M. Hanlon 18,254,596(2) 47.27 .034 (Cemar, Inc.)* 1421 Ranier Falls Drive Atlanta, GA 30329 52 PERCENTAGE OF SHARES OF NET FLEET NAME AND COMMON STOCK PERCENTAGE OWNER ADDRESS OF BENEFICIALLY OF COMMON CONTRACT BENEFICIAL OWNER OWNED STOCK CLASS PAYMENTS - ---------------- ------------ ----------- ------------- Katrina M. Carlson 18,254,596(2) 47.27 .070 (Kattydid, Inc.)* 837 15th Street #D Santa Monica, CA 90404 Officers and Directors 17,207,177(4) 44.56 N/A as a group (13 persons) *This corporation is the record owner of the shares of Common Stock beneficially owned by the named individual. To the best of the Company's knowledge, the named individual has sole voting control of the corporation that is the record owner of the Common Stock. **The percentage of the referenced class beneficially owned is less than one percent. 1.- This number includes beneficial ownership of shares attributed to a stockholder agreement dated as of May 1, 1992, as amended (the "Stockholder Agreement") and includes shares directly owned by Edward J. Shoen (3,483,681); Mark V. Shoen (3,475,520); James P. Shoen (2,278,814); Paul F. Shoen (2,782,058); Sophia M. Shoen (1,638,472); an Irrevocable Trust between Mark V. Shoen and Oxford Life Insurance Company ("Oxford"), as Trustee (527,604); an Irrevocable Trust between James P. Shoen and Oxford, as Trustee (337,426); an Irrevocable Trust between Paul F. Shoen and Oxford, as Trustee (71,976); an Irrevocable Trust between Sophia M. Shoen and Oxford, as Trustee (108,891); an Irrevocable Trust between Edward J. Shoen and Oxford, as Trustee (559,443); and The ESOP Trust (1,935,700) (collectively the "Stockholder Group"). The shares listed as held by the ESOP Trust include only the unallocated Common Stock and the Common Stock allocated to the accounts of Edward J. Shoen (2,432.17), Mark V. Shoen (2,157.57), James P. Shoen (2,126.50), Paul F. Shoen (779.33), and Sophia M. Shoen (196.87). These shares are not included in the number of shares directly owned by Edward J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, and Sophia M. Shoen, as referenced in the first sentence of this footnote 1. The Stockholder Agreement restricts the disposition of shares of Common Stock to certain types of permitted dispositions. James P. Shoen, whose address is listed above, is the appointed attorney and authorized to vote the shares as agreed upon by the stockholders holding a majority of the shares subject to the Stockholder Agreement. As of the date of this Form 10-K, Edward J. Shoen, Mark V. Shoen, and James P. Shoen, each of whom is a director of the Company, collectively hold a majority of the shares subject to the Stockholder Agreement and, therefore, have the ability, if they so agree, to control the vote of the Common Stock that is subject to the Stockholder Agreement. The Stockholder Agreement will expire on March 5, 1999 unless earlier terminated (i) by the consent of stockholders holding more than 60% of the shares held under the Stockholder Agreement, (ii) upon the effective date of certain mergers or consolidations 53 involving the Company, or (iii) at the respective election of Paul F. Shoen or Sophia M. Shoen, upon the Company's failure to effect the registration of securities described under "Certain Relationships and Related Transactions" (pages 54 - 57) and under "Legal Proceedings" (pages 18-23). The information about the Stockholder Agreement contained in this footnote was obtained from one or more Schedule 13D filings. See footnote 3 below for information about the ESOP Trust and the ESOP Trustee's ability to vote the Common Stock held in the ESOP Trust. 2 - This number includes beneficial ownership of shares attributed to a shareholders' agreement and includes shares directly owned by Samuel W. Shoen/Sawmill, Inc. (4,041,924); Michael L. Shoen/Mickl, Inc. (4,035,924); Mary Anna Shoen- Eaton/Maran, Inc. (3,343,076); Cecilia M. Hanlon/Cemar, Inc. (2,331,984); Katrina M. Carlson/Kattydid, Inc. (2,016,624); Theresa M. Romero/Thermar, Inc. (1,651,644); and Leonard S. Shoen/L.S.S., Inc. (833,420). The agreement, dated as of September 14, 1991, provides for the voting of the subject shares at the direction of a majority of the shareholders (on the basis of one vote per shareholder) party to the agreement. Leonard S. Shoen, Michael L. Shoen, and Theresa M. Romero, whose addresses are listed above, have each been granted a proxy to vote the shares as agreed upon by a majority of the shareholders. Unless earlier terminated by a majority of the shareholders, the agreement will terminate on January 1, 2001. The information about the shareholders' agreement contained in this footnote was obtained from one or more Schedule 13D filings. Accordingly, the Company assumes no responsibility for its accuracy. 3 - The complete name of the ESOP Trust is the ESOP Trust Fund for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Trust. The ESOP Trustee, which consists of three individuals without a past or present employment history or business relationship with the Company, is appointed by the Company's Board of Directors. Under the ESOP, each participant (or such participant's beneficiary) in the ESOP directs the ESOP Trustee with respect to the voting of all common stock allocated to the participant's account. All shares in the ESOP Trust not allocated to participants continue to be voted by the ESOP Trustee, subject to the Stockholder Agreement. As of June 26, 1995, of the 3,148,037 shares of common stock held by the ESOP Trust, 1,220,029 shares were allocated to participants and 1,928,008 shares remained unallocated. Of the 1,220,029 allocated shares, approximately 7,692 shares are allocated to members of the Stockholder Group, which shares are voted in accordance with the terms of the Stockholder Agreement. Therefore, as of the date of this report, the Stockholder Group controls approximately 44.54% of the Company's outstanding common stock. Further, additional shares of common stock not presently allocated to participants' accounts in the ESOP Trust will be allocated as certain debt obligations of the ESOP Trust are repaid, resulting in a further reduction in the number of common shares subject to the Stockholder Agreement. 4 - The 17,207,177 shares include the shares beneficially owned by directors and officers as a result of the Stockholders Agreement discussed in footnote 1 above. Beneficial ownership of the shares of current officers and directors, without giving effect 54 to Stockholder Agreement, discussed in Note 17 of Notes to Consolidated Financial Statements is 10,676,796 shares, or approximately 27.7% of the outstanding shares of Common Stock as of June 26, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to plans of reorganization filed by Edward J. Shoen, James P. Shoen, William E. Carty, Aubrey K. Johnson, and John M. Dodds under Chapter 11 of the federal bankruptcy laws, the Company may be financing the acquisition by it or its designee of approximately 47.3% of the Company's outstanding Common Stock currently beneficially held by Leonard S. Shoen, Samuel W. Shoen, Michael L. Shoen, Mary Anna Shoen-Eaton, Theresa M. Romero, Cecilia M. Hanlon, and Katrina M. Carlson. Edward J. Shoen and James P. Shoen are major stockholders, directors, and officers of the Company. William E. Carty, Aubrey K. Johnson, and John M. Dodds are directors of the Company. See Item 3 - Legal Proceedings for additional information regarding the bankruptcy proceedings. During fiscal 1995, a tow dolly fleet owned by SAMLO, whose partners include L.S., Samuel W., Michael L., Mark V., Jacqueline Y., Paul F., James P., Sophia M., Bente B., Esben L.B. Shoen, Theresa M. Romero, Katrina M. Carlson, and Asia A. and Maxwell L. Eaton, generated net operating revenues of $53,000. Mark V. and James P. Shoen are major stockholders and directors of the Company. L.S., Samuel W., Paul F., Sophia M., Michael L. Shoen, Theresa M. Romero and Katrina M. Carlson are major stockholders of the Company. Pursuant to a Share Repurchase and Registration Rights Agreement, dated May 1, 1992 (the "Sophia Shoen Registration Rights Agreement"), among Sophia M. Shoen, Sophmar, Inc., and the Company, Sophia M. Shoen had the right to require the Company to repurchase, with certain limitations, up to $3,000,000 of Common Stock owned by her. The Sophia Shoen Registration Rights Agreement provides that the Company's obligations to repurchase any shares from Sophia M. Shoen may be satisfied if such shares are purchased by the ESOP Trust. Pursuant to the Sophia Shoen Registration Rights Agreement, on June 30, 1994, Sophia M. Shoen sold 88,235 shares of Common Stock to the ESOP Trust at the then appraised value of $17.00 per share, for an aggregate sales price of approximately $1,500,000. In addition, Sophia M. Shoen, subject to certain limitations and restrictions, may also elect under the Sophia Shoen Registration Rights Agreement to cause the Company to effect a registration under the Securities Act of 1933, as amended, and applicable state securities laws of shares of Common Stock held by her. Sophia M. Shoen sold 575,000 shares of Common Stock to the public in late 1994 pursuant to her registration rights. Sophia M. Shoen is a major stockholder of the Company. Pursuant to a Management Consulting Agreement, dated as of May 1, 1992, Sophia M. Shoen agreed to provide environmental and other consulting services to the Company. In consideration for these services, the Company agreed to pay Sophia M. Shoen a yearly fee of $100,000. The Management Consulting Agreement terminated May 1, 1995. 55 Pursuant to a Share Repurchase and Registration Rights Agreement, dated as of March 1, 1992 (the "Paul Shoen Registration Rights Agreement") among Paul F. Shoen, Pafran, Inc., and the Company, Paul F. Shoen had the right to require the Company to repurchase, with certain limitations, up to $3,000,000 of Common Stock owned by him. The Paul Shoen Registration Rights Agreement provides that the Company's obligation to repurchase any shares from Paul F. Shoen shall be satisfied if such shares are purchased by the ESOP Trust. Pursuant to the Paul Shoen Registration Rights Agreement, (i) on June 30, 1994, Paul F. Shoen sold 58,825 shares of Common Stock to the ESOP Trust at the then appraised value of $17.00 per share for an aggregate sales price of approximately $1,000,000 and (ii) on January 17, 1995, Paul F. Shoen sold 50,632 shares of Common Stock to the ESOP Trust at the most recent closing price for the Common Stock trading on Nasdaq of $19.75 per share for an aggregate sales price of approximately $1,000,000. In addition, Paul F. Shoen, subject to certain limitations and restrictions, may also elect under the Paul Shoen Registration Rights Agreement to cause the Company to effect a registration under the Securities Act of 1933, as amended, and applicable state securities laws of shares of Common Stock held by him. Paul F. Shoen sold 500,000 shares of Common Stock to the public in March of 1995 pursuant to his registration rights. Paul F. Shoen is a major stockholder of the Company. Pursuant to a Management Consulting Agreement, dated as of March 5, 1992, Paul F. Shoen agreed to provide management consulting services to the Company on matters relating to the Company's business and the organization and management of the Company. In consideration for these services, the Company has agreed to pay Paul F. Shoen a yearly fee of $200,000. A total of $100,000 was paid for the year ended March 31, 1995. The Management Consulting Agreement terminated on March 1, 1995. As disclosed in Item 3 - Legal Proceedings, on February 9, 1995, Paul F. Shoen executed a settlement agreement with the Company and others whereby Paul F. Shoen agreed to the dismissal of certain claims he had asserted in an arbitration proceeding and in an action in the United States District Court for the District of Nevada. In exchange for Paul F. Shoen's agreement to dismiss such claims, the Company agreed, among other things, to appoint independent trustees for the ESOP and to place Paul F. Shoen on management's slate of directors for the 1994 Annual Meeting of Stockholders. In addition, the settlement agreement provides for the Company to pay Paul F. Shoen $925,000 and for the Company to receive a full release of all claims by Paul F. Shoen, subject to certain exceptions, through the settlement date, including but not limited to, claims for reimbursement of attorneys fees related to certain matters to which Paul F. Shoen is or was a party. The terms of the settlement will not result in a material adverse effect of the Company's financial condition or results of operations. Paul F. Shoen is a major stockholder of the Company. On April 13, 1994, the Company and Edward J. Shoen entered into an Agreement in Principle pursuant to which the Company agreed to acquire all of the outstanding capital stock of EJOS, Inc., all of which stock was held by Edward J. Shoen and a certain irrevocable trust established by Edward J. Shoen, in 56 exchange for the same number of shares of the Company's common stock as were held by EJOS, Inc. In exchange for EJOS, Inc.'s capital stock, Edward J. Shoen and the irrevocable trust established by Edward J. Shoen received 3,483,681 and 559,443 shares of the Company's common stock, respectively. The exchange described above was effected in accordance with the terms of an Agreement and Plan of Exchange of Shares of EJOS, Inc. and AMERCO, dated May 18, 1994, among EJOS, Inc., the Company, Edward J. Shoen, and the irrevocable trust established by Edward J. Shoen. Edward J. Shoen is a major stockholder, Chairman of the Board, and President of the Company. On August 24, 1994, the Company entered into an Exchange Agreement with Edward J. Shoen, the Company's Chairman of the Board and President. Pursuant to the agreement, in exchange for 3,483,681 shares of Common Stock owned by Edward J. Shoen, Edward J. Shoen received 3,483,681 shares of Series A Common Stock. During fiscal year 1995, U-Haul purchased $3,417,000 of printing from Form Builders, Inc. Edward J. Shoen is an officer of Form Builders, Inc. and Mark V. Shoen and his minor child are major stockholders of Form Builders, Inc. In May 1990, William E. Carty sold 40,684 shares of the Company's common stock to the ESOP Trust at the then-appraised value of $10.00 per share. The ESOP Trust purchased the shares for cash in the amount of $76,840 and a promissory note for $330,000. The note is payable in six annual installments at an interest rate of 9.6%. Performance on the note is guaranteed by the Company. William E. Carty is a director of the Company. In April 1994, William E. Carty sold 46.5% of 90.88 acres of land to the Company for cash in the amount of $4,000,000. An independent opinion of value was used to determine the Company's offer to purchase and the purchase was completed below the amount so determined. William E. Carty is a director of the Company. During fiscal 1995, a subsidiary of the Company made a loan to SAC Self-Storage Corporation (SAC) in the total principal amount of $54,671,000 for the purchase of 44 self-storage properties by SAC. Of the 44 SAC properties, SAC acquired 24 from the Company or its subsidiaries at a purchase price of $26,287,000. All 24 of these properties were acquired by the Company or its subsidiaries since June 1993. These 24 properties were sold to SAC for an amount equal to the Company's acquisition cost plus capitalized costs. Such properties are currently being managed by the Company pursuant to a management agreement, under which the Company receives a management fee equal to 6% of the gross receipts from the properties. The management fee percentage is consistent with the fee received by the Company for other properties managed by the Company. For fiscal 1995, SAC incurred management fees to the Company in the amount of $327,000. The SAC loan consists of two notes, a senior note in the amount of $45,500,000 bearing interest at the rate of 9% and a junior note in the amount of $9,171,000 bearing interest at the rate of 13%. As of March 31, 1995, accrued interest on the senior note was $2,008,000 and $385,000 on the junior note. Subsequent to March 31, 1995, senior principal paid was $546,000, senior interest paid was $2,008,000 and junior interest paid was $133,000. Both the senior note and 57 the junior note are secured by senior and junior mortgages, respectively, on all 44 properties. The SAC notes mature in 2004, or on demand. The Company believes that the transactions with SAC were consummated on terms equivalent to those that prevail in arms- length transactions. In addition, during fiscal 1995, a subsidiary of the Company has been in the process of loaning TWO SAC Self-Storage Corporation (TWO SAC) funds to purchase approximately four self- storage properties. Subsequent to year end, the Company funded the purchase of 14 additional properties by TWO SAC. As of March 31, 1995, $7,840,000 in principal was due from TWO SAC, while interest of $351,000 has been accrued. No payment of principal or interest will be made until the notes are finalized. Such properties are currently or will be managed by the Company pursuant to a management agreement, under which the Company receives a management fee equal to 6% of the gross receipts from the properties. The management fee percentage is consistent with the fee received by the Company for other properties managed by the Company. The TWO SAC loan will consist of two notes, a senior note bearing interest at the rate of 9% and a junior note bearing interest at the rate of 13%. The TWO SAC notes will be secured by senior and junior mortgages and are expected to mature in 2004 or 2005, or on demand. TWO SAC anticipates acquiring approximately 28 properties from the Company that had been acquired by the Company or its subsidiaries since June 1993. Mark V. Shoen, a major stockholder, director, and officer of the Company, owns all of the issued and outstanding voting common stock of SAC and TWO SAC. The SAC Non-Business Trust dated as of May 24, 1995 with IBJ Schroder Bank & Trust Company as Trustee, owns all of the issued and outstanding nonvoting common stock of SAC and TWO SAC. Edward J. Shoen and James P. Shoen, major stockholders, directors and officers of the Company, formerly were directors and stockholders of SAC and TWO SAC. Edward J. Shoen continues to serve as an officer of SAC and TWO SAC. Mark V. Shoen has capitalized SAC and TWO SAC via a contribution of 92,000 shares of AMERCO common stock each to SAC and TWO SAC. Mark V. Shoen has indicated to the Company that he intends, after reserving sufficient funds for expenses and other reasonable amounts, to distribute any remaining SAC and TWO SAC funds to the SAC Non- Business Trust. The SAC Non-Business Trust is required to distribute funds to its Beneficiary, which must be a non-profit entity benefitting the college age children of the Company's employees. At present, the Beneficiary is the U-Haul Scholarship Foundation, which exists to award scholarships to the children of the Company's qualifying employees. All scholarships will be awarded on behalf of the U-Haul Scholarship Foundation by an independent panel of educators. On November 28, 1994, the Company entered into an Exchange Agreement with Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the Exchange Agreement, in exchange for 3,475,520 shares of Series A Common Stock owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of Common Stock. Management believes that the foregoing transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. 58 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: Page No. -------- 1. All Financial Statements Report of Independent Accountants - AMERCO and Consolidated Subsidiaries 60 Consolidated Balance Sheets - March 31, 1994 and 1993 62 Consolidated Statements of Earnings - Years ended March 31, 1994, 1993 and 1992 64 Consolidated Statements of Changes in Stockholders' Equity - Years ended March 31, 1994, 1993 and 1992 65 Consolidated Statements of Cash Flows - Years ended March 31, 1994, 1993 and 1992 67 Notes to Consolidated Financial Statements - March 31, 1994, 1993 and 1992 69 Summary of Earnings of Independent Trailer Fleets 114 Notes to Summary of Earnings of Independent Trailer Fleets 115 2. Financial Statement Schedules required to be filed by Item 8 and Paragraph (d) of this Item 14 Condensed Financial Information of Registrant -- Schedule I 117 Amounts Receivable from Related Parties and Under- writers, Promoters and Employees Other than Related Parties -- Schedule II 122 Supplemental Information (for Property-Casualty Insurance Underwriters) -- Schedule V 123 All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes. 3. Exhibits Filed Exhibit No. Description ----------- ----------- 2 Disclosure Statement for Debtor's Plan of Reorganization Proposed By Edward J. Shoen 3.1 Restated Articles of Incorporation (1) 3.2 Restated By-Laws of AMERCO as of January 10, 1995 (2) 10.1 AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (3) 10.2 U-Haul Dealership Contract (3) 59 3. Exhibits Filed, continued Exhibit No. Description 10.3 Share Repurchase and Registration Rights Agreement (3) 10.4 Share Repurchase and Registration Rights Agreement (3) 10.5 Management Consulting Agreement (4) 10.6 Management Consulting Agreement (4) 10.7 ESOP Loan Credit Agreement (4) 10.8 ESOP Loan Agreement (4) 10.9 Trust Agreement for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership (4) 10.10 Amended Indemnification Agreement (4) 10.11 Indemnification Trust Agreement (4) 10.12 W.E. Carty Installment Sales Agreement (4) 10.13 Exchange Agreement with Mark V. Shoen (5) 10.14 Exchange Agreement with James P. Shoen (5) 10.15 Exchange Agreement with Edward J. Shoen (5) 10.16 Exchange Agreement with Mark V. Shoen (2) 10.17 W.E. Carty Contract of Purchase and Sale of Land (5) 10.18 Promissory Notes between SAC Self-Storage Corporation and a subsidiary of AMERCO (6) 10.19 Settlement Agreement with Paul F. Shoen 12 Statements re Computation of Ratios 27 Financial Data Schedule P28 Information Furnished to State Insurance Regulators (7) ________________ (1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, file no. 0-7862. (2) Incorporated by reference to the Company Quarterly Report on Form 10-Q for the quarter ended December 31, 1994, file no. 0-7862. (3) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1993, file no. 0-7862. (4) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended March 31, 1990, file no. 0-7862. (5) Incorporated by reference to the Company's Registration Statement on Form S-2, Registration no. 33-54289. (6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, file no. 0-7862. (7) Filed in paper under cover of Form S-E. (b) No report on Form 8-K has been filed during the last quarter of the period covered by this report. 60 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of AMERCO In our opinion, the consolidated financial statements and schedules listed in the index appearing under Item 14(a)(1) and (2) on page 58 present fairly, in all material respects, the financial position of AMERCO and its subsidiaries at March 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for certain investments in fiscal 1995. As discussed in Notes 1 and 11 to the consolidated financial statements, the Company changed its method of accounting for certain investments and postretirement benefits in fiscal 1994, respectively. As discussed in Note 14, certain current and former directors of the Company have sought protection under federal bankruptcy laws as a result of litigation brought by certain shareholders. Because of existing indemnification agreements, the Company may be liable, wholly or in part, for damages attributed to the defendants. In addition, the Company may participate as the funding source for the Plan of Reorganization filed by the defendants described further in Note 14. The ultimate outcome of the litigation cannot be determined at present. No provision for any liability that may result from this matter has been made in the accompanying consolidated financial statements. 61 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Summary of Earnings of Independent Trailer Fleets included on pages 114 through 116 of this Form 10-K is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /S/ PRICE WATERHOUSE LLP Phoenix, Arizona June 26, 1995 62 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets March 31,
Assets 1995 1994 -------------------- (in thousands) Cash and cash equivalents $ 35,286 18,442 Receivables 300,238 204,814 Inventories 50,337 49,012 Prepaid expenses 25,933 24,503 Investments, fixed maturities 705,428 719,605 Investments, other 135,220 84,738 Deferred policy acquisition costs 49,244 47,846 Other assets 30,057 21,246 --------- --------- Property, plant and equipment, at cost: Land 214,033 186,210 Buildings and improvements 735,624 676,297 Furniture and equipment 179,016 163,495 Rental trailers and other rental equipment 245,892 212,187 Rental trucks 913,641 820,395 General rental items 51,890 57,421 --------- --------- 2,340,096 2,116,005 Less accumulated depreciation 1,065,850 941,769 --------- --------- Total property, plant and equipment 1,274,246 1,174,236 --------- --------- $ 2,605,989 2,344,442 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 63 Liabilities and Stockholders' Equity 1995 1994 -------------------- (in thousands) Liabilities: Accounts payable and accrued liabilities $ 127,613 124,062 Notes and loans 881,222 723,764 Policy benefits and losses, claims and loss expenses payable 475,187 439,266 Liabilities from premium deposits 304,979 312,708 Cash overdraft 31,363 26,559 Other policyholders' funds and liabilities 20,378 9,592 Deferred income 7,426 5,913 Deferred income taxes 71,037 50,791 --------- --------- Stockholders' equity: Serial preferred stock, with or without par value, 50,000,000 shares authorized; 6,100,000 issued without par value and outstanding as of March 31, 1995 and 1994 - - Serial common stock, with or without par value, 150,000,000 shares authorized - - Series A common stock of $.25 par value. Authorized 10,000,000 shares, issued 5,762,495 shares in 1995, issued 5,754,334 shares in 1994 1,441 1,438 Common stock of $.25 par value. Authorized 150,000,000 shares, issued 34,237,505 shares in 1995 and 34,245,666 shares in 1994 8,559 8,562 Additional paid-in capital 165,675 165,651 Foreign currency translation adjustment (12,435) (11,152) Unrealized gain (loss) on investments (6,483) 679 Retained earnings 561,589 514,521 --------- --------- 718,346 679,699 Less: Cost of common shares in treasury (1,335,937 shares as of March 31, 1995 and 1994) 10,461 10,461 Unearned employee stock ownership plan shares 21,101 17,451 --------- --------- Total stockholders' equity 686,784 651,787 Contingent liabilities and commitments --------- --------- $ 2,605,989 2,344,442 ========= =========
64 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Earnings Years ended March 31,
1995 1994 1993 ---------------------------------- (in thousands except per share data) Revenues Rental and other revenue $ 892,926 816,666 755,932 Net sales 170,204 156,038 145,514 Premiums 135,648 123,344 98,825 Net investment income 42,085 38,807 40,640 ---------- ---------- ---------- Total revenues 1,240,863 1,134,855 1,040,911 Costs and expenses Operating expense 690,448 643,662 604,596 Cost of sales 93,485 92,179 93,104 Benefits and losses 133,407 120,825 106,617 Amortization of deferred acquisition costs 10,896 9,343 9,352 Depreciation 151,409 133,485 110,105 Interest expense 67,762 68,859 67,958 ---------- ---------- ---------- Total costs and expenses 1,147,407 1,068,353 991,732 Pretax earnings from operations 93,456 66,502 49,179 Income tax expense (33,424) (19,853) (17,270) ---------- ---------- ---------- Earnings from operations before extraordinary loss on early extinguishment of debt and cumulative effect of change in accounting principle 60,032 46,649 31,909 Extraordinary loss on early extinguishment of debt, net - (3,370) - Cumulative effect of change in accounting principle, net - (3,095) - ---------- ---------- ---------- Net earnings $ 60,032 40,184 31,909 ========== ========== ========== Earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt and cumulative effect of change in accounting principle $ 1.23 1.06 .83 Extraordinary loss on early extinguishment of debt, net - (.09) - Cumulative effect of change in accounting principle, net - (.08) - ---------- ---------- ---------- Net earnings $ 1.23 .89 .83 ========== ========== ========== Weighted average common shares outstanding 38,190,552 38,664,063 38,664,063 ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
65 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Years ended March 31,
1995 1994 1993 ------------------------ (in thousands) Series A common stock of $.25 par value: Authorized 10,000,000 shares,issued 5,762,495 in 1995, 5,754,334 in 1994, and none in 1993 Beginning of year $ 1,438 - - Exchange for Series A common stock 871 1,438 - Exchange for common stock (868) - - ------- ------- ------- End of year 1,441 1,438 - ------- ------- ------- Common stock of $.25 par value: Authorized 150,000,000 shares in 1995, 1994 and 1993, 34,237,505 issued in 1995, 34,245,666 in 1994 and 40,000,000 issued in 1993 Beginning of year 8,562 10,000 10,000 Exchange for Series A common stock (871) (1,438) - Exchange for common stock 868 - - ------- ------- ------- End of year 8,559 8,562 10,000 ------- ------- ------- Additional paid-in capital: Beginning of year 165,651 19,331 19,331 Issuance of preferred stock - 146,320 - Issuance of common shares under leveraged employee stock ownership plan 24 - - ------- ------- ------- End of year 165,675 165,651 19,331 ------- ------- ------- Foreign currency translation: Beginning of year (11,152) (6,122) (3,551) Change during year (1,283) (5,030) (2,571) ------- ------- ------- End of year (12,435) (11,152) (6,122) ------- ------- ------- Unrealized gains (losses) on investments: Beginning of year 679 - - Change during year (7,162) 679 - ------- ------- ------- End of year (6,483) 679 - ------- ------- ------- The accompanying notes are an integral part of these consolidated financial statements. 66 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity, continued Years ended March 31, 1995 1994 1993 ------------------------ (in thousands) Retained earnings: Beginning of year 514,521 482,163 452,202 Net earnings 60,032 40,184 31,909 Dividends paid to stockholders: Preferred stock: ($2.13 and $0.78 per share for 1995 and 1994, respectively) (12,964) (4,753) - Common stock: ($.08 and $.05 per share for 1994 and 1993, respectively) - (3,147) (1,994) Tax benefits related to leveraged employee stock ownership plan dividends - 74 46 ------- ------- ------- End of year 561,589 514,521 482,163 ------- ------- ------- Treasury stock: Beginning of year 10,461 10,461 10,461 Unearned employee stock ownership plan shares: Beginning of year 17,451 14,953 15,633 Increase in loan 5,672 4,335 1,120 Proceeds from loan (2,022) (1,837) (1,800) ------- ------- ------- End of year 21,101 17,451 14,953 ------- ------- ------- Total stockholders' equity $ 686,784 651,787 479,958 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements.
67 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Years ended March 31,
1995 1994 1993 ------------------------ (in thousands) Cash flows from operating activities: Net earnings $ 60,032 40,184 31,909 Depreciation and amortization 163,890 148,740 128,530 Provision for losses on accounts receivable 4,958 1,938 2,354 Net gain on sale of real and personal property (3,390) (2,114) (2,428) Gain on sale of investments (868) (4,195) (5,392) Cumulative effect of change in accounting principle - 3,095 - Changes in policy liabilities and accruals 38,401 13,330 22,637 Additions to deferred policy acquisition costs (12,119) (7,440) (8,735) Net change in other operating assets and liabilities (16,501) 8,781 (6,063) -------- -------- -------- Net cash provided by operating activities 234,403 202,319 162,812 Cash flows from investing activities: Purchases of investments: Property, plant and equipment (434,992) (530,520) (130,841) Fixed maturities (186,000) (280,345) (276,946) Real estate (11,576) (176) (529) Mortgage loans (107,571) (64,467) (54,346) Proceeds from sales of investments: Property, plant and equipment 185,098 214,543 20,656 Fixed maturities 192,428 211,437 251,808 Real estate 927 1,552 1,882 Mortgage loans 18,535 81,619 5,984 Changes in other investments (12,327) 8,539 37,475 -------- -------- -------- Net cash used by investing activities (355,478) (357,818) (144,857) The accompanying notes are an integral part of these consolidated financial statements. 68 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows, continued Years ended March 31, 1995 1994 1993 ------------------------ (in thousands) Cash flows from financing activities: Net change in short-term notes payable and commercial paper 178,750 21,750 2,975 Proceeds from notes 68,845 186,000 55,000 Loan to leveraged Employee Stock Ownership Plan (5,672) (4,335) (1,120) Proceeds from leveraged Employee Stock Ownership Plan 2,022 1,837 1,800 Principal payments on notes (90,137) (181,107) (94,176) Issuance of preferred stock - 146,320 - Extraordinary loss on early extinguishment of debt - (3,370) - Net change in cash overdraft 4,804 1,708 5,307 Dividends paid (12,964) (7,900) (1,994) Investment contract deposits 51,908 31,932 51,047 Investment contract withdrawals (59,637) (40,185) (27,889) -------- -------- ------- Net cash provided (used) by financing activities 137,919 152,650 (9,050) -------- -------- ------- Increase (decrease) in cash and cash equivalents 16,844 (2,849) 8,905 Cash and cash equivalents at beginning of year 18,442 21,291 12,386 -------- -------- ------- Cash and cash equivalents at end of year $ 35,286 18,442 21,291 ======== ======== ======= The accompanying notes are an integral part of these consolidated financial statements.
69 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 1995, 1994 and 1993 (1) Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of the parent corporation, AMERCO, and its subsidiaries, all of which are wholly-owned. All material intercompany accounts and transactions of AMERCO and its subsidiaries (herein called the "Company" or the "consolidated group") have been eliminated. The operating results and financial position of AMERCO's consolidated insurance operations are determined as of December 31 of each year. There were no effects related to intervening events between January 1 and March 31 of 1995, 1994 or 1993, that would materially affect the consolidated financial position or results of operations for the financial statements presented herein. See Note 19 of Notes to Consolidated Financial Statements of AMERCO for additional information regarding the subsidiary. Description of Business: The consolidated group's principal line of business is the rental of various kinds of equipment, principally trucks, automobile-type trailers, auto transports and general rental items, including floor care items, tools for home and garden use, recreational equipment and accessories under the brand name U- Haul and the sale of related products and services. In addition, the consolidated group is engaged in the rental of self-storage facilities for the storage of household goods and other forms of personal property. Through Ponderosa Holdings, Inc., (Ponderosa), which serves as the holding company for Oxford Life Insurance Company (Oxford) and Republic Western Insurance Company (RWIC), the Company operates in various life, annuity, group health and property-casualty insurance products. A portion of the insurance subsidiaries' business is conducted with members of the consolidated group. Such transactions have been eliminated in consolidation. Foreign Currency: The consolidated financial statements include the accounts of U-Haul Co. (Canada) Ltd., a subsidiary of AMERCO. Assets and liabilities, denominated in currencies other than U.S. dollars, are translated to U.S. dollars at the exchange rate as of the balance sheet date. Income and expense amounts are translated at the average exchange rate during the fiscal year. Cash and Cash Equivalents: The Company considers liquid investments with an original maturity of three months or less to be cash equivalents. 70 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable of Ponderosa include premiums and agents' balances due, net of commissions payable, and amounts due from ceding reinsurers. Accounts receivable of Ponderosa are reduced by amounts considered to be uncollectible. Accounts receivable of the Company's rental subsidiaries principally include trade accounts receivable and mortgage and other notes receivable. An allowance for doubtful accounts is provided based on historical collection loss experience and a review of the current status of existing receivables by the Company's rental subsidiaries. Inventories: Inventories are primarily valued at the lower of cost (last-in first-out) (LIFO) or market. Investments: Fixed maturities are carried in accordance with Statement of Financial Accounting Standards No. 115 (SFAS 115) as described under "New Accounting Standards" later in this note. Oxford adopted SFAS 115 effective January 1, 1994 and RWIC adopted SFAS 115 effective December 31, 1993. In prior years, Oxford's fixed maturities were carried at cost, adjusted for amortization of premium or accretion of discount. AMERCO and its subsidiaries, excluding Ponderosa, have no investments which are subject to SFAS 115. Mortgage loans on real estate are carried at unpaid balances, net of allowance for possible losses and any unamortized premium or discount. Real estate is carried at cost less accumulated depreciation. Policy loans are carried at their unpaid balance. Short-term investments consist of other securities scheduled to mature within one year of their acquisition date. See Note 4 of Notes to Consolidated Financial Statements of AMERCO. Interest on bonds is recognized when earned. Dividends on preferred stocks are recognized on ex-dividend dates. Realized gains and losses on the sale of investments are recognized at the trade date and included in net income using the specific identification method. Deferred Policy Acquisition Costs: Commissions and other costs incurred in acquiring traditional life insurance, interest sensitive life and annuity policies, accident and health insurance and property-casualty insurance which vary with and are primarily related to the production of new business, have been deferred. Traditional life, annuity and group health acquisition costs are amortized over the premium paying period of the related policies in proportion to the ratio of annual premium income to expected total premium income. Such expected premium income is estimated using assumptions as to mortality and withdrawals consistent with those used in calculating the policy benefit reserves. 71 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued Credit life and health acquistion costs are deferred and amortized over the term of the contracts in relation to premiums earned. Acquisition costs for annuity policies are amortized over the lives of the policies in relation to the present value of estimated gross profits from surrender charges and investment, mortality and expense margins. Property-casualty acquisition costs are amortized over the related contract period which generally does not exceed one year. Property, Plant and Equipment: Property, plant and equipment are carried at cost and are depreciated on the straight-line and accelerated methods over the estimated useful lives of the assets. Maintenance and repairs are charged to operating expenses as incurred. Major overhaul costs of rental equipment, principally trucks, are amortized over the estimated period benefitted. Renewals and betterments are capitalized. Gains and losses on dispositions of property, plant and equipment are included in other revenue as realized. Interest costs incurred as part of the initial construction of assets are capitalized. Interest expense of $1,727,000, $595,000 and $159,000 was capitalized in the years ended 1995, 1994 and 1993, respectively. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and depreciated over the estimated useful lives of the properties. The capitalized costs improve the safety or efficiency of the property as compared to when the property was originally acquired or are incurred in preparing the property for sale. At March 31, 1995, the book value of the Company's real estate deemed to be surplus was approximately $27,466,000. Financial Instruments: The Company enters into interest rate swap agreements to reduce its interest rate exposure; the company does not use them for trading purposes. Amounts to be paid or received under the agreements are accrued as interest rates change and are recognized as incurred. Although the Company is exposed to credit loss for the interest rate differential in the event of nonperformance by the counterparties to the agreements, it does not anticipate nonperformance by the counterparties. At March 31, 1995, interest rate swap agreements with an aggregate notional amount of $193,000,000 were outstanding. Management estimates that at March 31, 1995 and 1994, the Company would be required to pay $6,000,000 and $14,000,000, respectively, to terminate the agreements. Such amounts were determined from current treasury rates combined with swap spreads on agreements outstanding. 72 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued The Company has mortgage loans which potentially expose the Company to credit risk. The portfolio of notes is principally collateralized by mini-warehouse storage facilities and other residential and commercial properties. The Company has not experienced losses related to the notes from individual notes or groups of notes in any particular industry or geographic area. At March 31, 1995, mortgage notes with a book value of $135,424,000 were outstanding. The estimated fair value of the notes at March 31, 1995 was $138,862,000. The estimated fair values were determined using discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings. At March 31, 1994, mortgage notes with a book value of $42,482,000 were outstanding. The estimated fair value at March 31, 1994 was approximate to the book value. Other financial instruments that are subject to fair value disclosure requirements are carried in the financial statements at amounts that approximate fair value. The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments and trade receivables. The Company places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers and their dispersion across many different industries and geographic areas. Policy Benefits and Losses, Claims and Loss Expenses Payable: Liabilities for policy benefits payable on traditional life and annuity policies are established in amounts adequate to meet estimated future obligations on policies in force. These liabilities are computed using the net level premium method and include mortality and withdrawal assumptions which are based upon recognized actuarial tables and contain margins for adverse deviation. At December 31, 1994, interest assumptions used to compute policy benefits payable range from 2.5% to 12.8%. With respect to interest sensitive life and annuity policies, the liability for policy benefits and expenses payable consists of policy account balances that accrue to the benefit of the policyholders, excluding surrender charges. Liabilities for accident and health and other policy claims and benefits payable represent estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred but not yet reported. These estimates are based on past claims experience and consider current claim trends as well as social and economic conditions. 73 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued With respect to property-casualty, the liability for unpaid losses is based on the estimated ultimate cost of settling claims reported prior to the end of the accounting period, estimates received from ceding reinsurers and estimates for unreported losses based on RWIC's historical experience supplemented by insurance industry historical experience. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from reinsurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the reinsured policy. Adjustments to the liability for unpaid losses and loss expenses as well as amounts recoverable from reinsurers on unpaid losses are charged or credited to expense in periods in which they are made. Rental and Other Revenue: AMERCO recognizes its share of rental revenue on the accrual basis pursuant to contractual arrangements between AMERCO, fleet owners, rental dealers and customers. See Note 8 of Notes to Consolidated Financial Statements of AMERCO for further discussion. Premium Revenue: Accident and health, credit life and health, and property-casualty gross premiums are recognized over the term of the related contracts. Traditional life and annuity premiums are recognized as revenue when due from policyholders. Revenue for annuity policies consists of investment margins and surrender charges that have been assessed against policy account balances during the period. Reinsurance: Reinsurance premiums, commissions, and expense reimbursements related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premium income. See also "Policy Benefits and Losses, Claims and Loss Expenses" above. Income Taxes: In addition to charging income for taxes paid or payable, the provision for income taxes reflects deferred income taxes resulting from changes in temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company files a consolidated federal income tax return with its insurance subsidiaries. 74 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued New Accounting Standards: Statement of Financial Accounting Standards No. 114 - Accounting by Creditors for Impairment of a Loan. Effective for years beginning after December 15, 1994. The standard requires that an impaired loan's fair value be measured and compared to the recorded investment in the loan. If the fair value of the loan is less than the recorded investment in the loan, a valuation allowance is established. The Company will adopt this statement in the first quarter of fiscal 1996. The Company believes that the adoption will have no material impact on its financial condition or results of operations. Statement of Financial Accounting Standards No. 115 - Accounting for Certain Investments in Debt and Equity Securities. Effective January 1, 1994, U-Haul and Oxford adopted SFAS 115. RWIC adopted SFAS 115 effective December 31, 1993. This statement requires classification of debt securities into one of the following three categories based on management's intention with regard to such securities: held-to-maturity, available-for-sale and trading. Securities classified as held-to-maturity are recorded at cost adjusted for the amortization of premiums or accretion of discounts while those classified as available-for-sale are recorded at fair value with unrealized gains or losses reported on a net basis as a separate component of stockholders' equity. Securities classified as trading, if any, are recorded at fair value with unrealized gains or losses reported on a net basis in income. The Company does not currently maintain a trading portfolio. Statement of Financial Accounting Standards No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. Effective for fiscal years beginning after December 15, 1995, the standard establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Otherwise, an impairment loss is not recognized. Measurement of an impairment loss for long-lived assets and identifiable intangibles that an entity expects to hold and use should be based on the fair value of the asset. The Company has not completed an evaluation of the effect of this standard. 75 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (1) Summary of Significant Accounting Policies, continued New Accounting Standards, continued Effective April 1, 1994, the Company adopted Statement of Position 93-6 "Employers' Accounting for Employee Stock Ownership Plans" for shares purchased subsequent to December 31, 1992. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the statement of financial position. As shares purchased after December 31, 1992 are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings-per-share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest. Statement of Position 93-7, "Reporting on Advertising Costs", was issued by the Accounting Standards Executive Committee in December 1993. This statement of position provides guidance on financial reporting on advertising costs in annual financial statements. The statement of position requires reporting advertising costs as expenses when incurred or when the advertising takes place, reporting the costs of direct-response advertising, and amortizing the amount of direct-response advertising reported as assets. This statement of position is effective for financial statements for years beginning after June 15, 1994. The Company currently matches certain advertising costs with revenue generated in future periods. The Company will adopt this statement in the first quarter of fiscal 1996. The Company believes that the adoption will have no material impact on its financial condition or results of operations. Other pronouncements issued by the Financial Standards Board with future effective dates are either not applicable or not material to the consolidated financial statements of the Company. Earnings per share: Earnings per common share are computed based on the weighted average number of shares outstanding, excluding shares of the employee stock ownership plan that have not been committed to be released. Net income is reduced for preferred dividends. See Note 6 of Notes to Consolidated Financial Statements of AMERCO for further discussion. Financial Statement Presentation: Certain reclassifications have been made to the financial statements for the years ended 1994 and 1993 to conform with the current year's presentation. 76 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Receivables A summary of receivables follows: Year ended ------------------- 1995 1994 ------------------- (in thousands) Trade accounts receivable $ 12,527 16,073 Mortgage and note receivables, net of discount 78,499 45,288 Note receivable and accrued interest from SAC and TWO SAC 65,255 - Premiums and agents' balances in course of collection 33,150 29,078 Reinsurance recoverable 84,270 81,760 Accrued investment income 13,377 13,565 Independent dealer receivable 8,749 6,870 Other receivables 9,050 14,189 ------- ------- 304,877 206,823 Less allowance for doubtful accounts (4,639) (2,009) ------- ------- $ 300,238 204,814 ======= ======= During fiscal 1995, a subsidiary of the Company made a loan to SAC Self-Storage Corporation (SAC) in the total principal amount of $54,671,000 for the purchase of 44 self-storage properties by SAC. Of the 44 SAC properties, SAC acquired 24 from the Company or its subsidiaries at a purchase price of $26,287,000. All 24 of these properties were acquired by the Company or its subsidiaries since June 1993. These 24 properties were sold to SAC for an amount equal to the Company's acquisition cost plus capitalized costs. Such properties are currently being managed by the Company pursuant to a management agreement, under which the Company receives a management fee equal to 6% of the gross receipts from the properties. The management fee percentage is consistent with the fee received by the Company for other properties managed by the Company. For fiscal 1995, SAC incurred management fees to the Company in the amount of $327,000. The SAC loan consists of two notes, a senior note in the amount of $45,500,000 bearing interest at the rate of 9% and a junior note in the amount of $9,171,000 bearing interest at the rate of 13%. As of March 31, 1995, accrued interest on the senior note was $2,008,000 and $385,000 on the junior note. Subsequent to March 31, 1995, senior principal paid was $546,000, senior interest paid was $2,008,000 and junior interest paid was $133,000. Both the senior note and the junior note are secured by senior and junior mortgages, respectively, on all 44 properties. The SAC notes mature in 2004, or on demand. The Company believes that the transactions with SAC were consummated on terms equivalent to those that prevail in arms-length transactions. 77 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Receivables, continued In addition, during fiscal 1995, a subsidiary of the Company has been in the process of loaning TWO SAC Self-Storage Corporation (TWO SAC) funds to purchase approximately four self-storage properties. Subsequent to year end, the Company funded the purchase of 14 additional properties by TWO SAC. As of March 31, 1995, $7,840,000 in principal was due from TWO SAC, while interest of $351,000 has been accrued. No payment of principal or interest will be made until the notes are finalized. Such properties are currently or will be managed by the Company pursuant to a management agreement, under which the Company receives a management fee equal to 6% of the gross receipts from the properties. The management fee percentage is consistent with the fee received by the Company for other properties managed by the Company. The TWO SAC loan will consist of two notes, a senior note bearing interest at the rate of 9% and a junior note bearing interest at the rate of 13%. The TWO SAC notes will be secured by senior and junior mortgages and are expected to mature in 2004 or 2005, or on demand. TWO SAC anticipates acquiring approximately 28 properties from the Company that had been acquired by the Company or its subsidiaries since June 1993. Mark V. Shoen, a major stockholder, director, and officer of the Company, owns all of the issued and outstanding voting common stock of SAC and TWO SAC. The SAC Non-Business Trust dated as of May 24, 1995 with IBJ Schroder Bank & Trust Company as Trustee, owns all of the issued and outstanding nonvoting stock of SAC and TWO SAC. Edward J. Shoen and James P. Shoen, major stockholders, directors and officers of the Company, formerly were directors and stockholders of SAC and TWO SAC. Edward J. Shoen continues to serve as an officer of SAC and TWO SAC. Mark V. Shoen has capitalized SAC and TWO SAC via a contribution of 92,000 shares of AMERCO common stock each to SAC and TWO SAC. Mark V. Shoen has indicated to the Company that he intends, after reserving sufficient funds for expenses and other reasonable amounts, to distribute any remaining SAC and TWO SAC funds to the SAC Non-Business Trust. The SAC Non- Business Trust is required to distribute funds to its Beneficiary, which must be a non-profit entity benefitting the college age children of the Company's employees. At present, the Beneficiary is the U-Haul Scholarship Foundation, which exists to award scholarships to the children of the Company's qualifying employees. All scholarships will be awarded on behalf of the U-Haul Scholarship Foundation by an independent panel of educators. 78 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (3) Inventories A summary of inventory components follows: Year ended ------------------- 1995 1994 ------------------- (in thousands) Trailers, truck and recreational vehicle parts and accessories $ 31,636 31,684 Moving aids and promotional items 7,127 7,032 Hitches and towing components 11,516 10,236 Other 58 60 ------- ------- $ 50,337 49,012 ======= ======= Certain general and administrative expenses are allocated to ending inventories. Such costs remaining in inventory at fiscal years ended 1995, 1994 and 1993 are estimated at $6,848,000, $7,679,000 and $7,224,000, respectively. For the fiscal years ended March 31, 1995, 1994 and 1993, aggregate general and administrative costs were $377,471,000, $430,209,000 and $467,390,000, respectively. LIFO inventories, which represent approximately 98% of total inventories at March 31, 1995 and 1994 would have been $3,657,000 and $3,591,000 greater at March 31, 1995 and 1994, respectively, if the consolidated group had used the FIFO method. (4) Investments Major categories of net investment income consists of the following (in thousands): December 31, -------------------------- 1994 1993 1992 -------------------------- Fixed maturities $ 53,236 52,903 54,836 Real estate 223 142 235 Policy loans 604 609 566 Mortgage loans 5,338 4,669 5,751 Short-term, amounts held by ceding reinsurers, net and other investments 2,064 874 2,481 ------ ------ ------- Investment income 61,465 59,197 63,869 Less investment expenses 19,380 20,390 23,229 ------ ------ ------- Net investment income $ 42,085 38,807 40,640 ====== ====== ====== A comparison of amortized cost to estimated fair value for fixed maturities is as follows (in thousands): 79 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Investments, continued December 31, 1994 - ----------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Held-to-Maturity of shares cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 28,342 $ 28,254 229 523 27,960 U.S. government agency mortgage backed securities $ 52,394 52,081 207 6,414 45,874 Obligations of states and political subdivisions $ 32,285 31,931 1,822 349 33,404 Corporate securities $ 223,825 228,605 1,117 6,002 223,720 Mortgage-backed securities $ 110,785 109,127 382 9,371 100,138 Redeemable preferred stocks 35 2,126 233 - 2,359 ------- ----- ------ ------- 452,124 3,990 22,659 433,455 ------- ----- ------ ------- December 31, 1994 - ----------------- Gross Gross Estimated Consolidated Amortized unrealized unrealized market Available-for-Sale Par Value cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 9,685 9,801 430 32 10,199 U.S. government agency mortgage backed securities $ 8,982 8,868 602 84 9,386 States, municipalities and political subdivisions $ 3,325 3,610 - 47 3,563 Foreign government securities $ 2,500 2,534 28 17 2,545 Corporate securities $ 210,184 211,495 864 8,419 203,940 Mortgage-backed securities $ 26,699 26,528 126 2,983 23,671 ------- ----- ------ ------- 262,836 2,050 11,582 253,304 ------- ----- ------ ------- Total $ 714,960 6,040 34,241 686,759 ======= ===== ====== ======= 80 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Investments, continued December 31, 1993 - ----------------- Gross Gross Estimated OXFORD Amortized unrealized unrealized market Par Value cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 10,340 $ 9,395 949 - 10,344 U.S. government agency mortgage backed securities $ 69,653 69,053 1,626 448 70,231 States, municipalities and political subdivisions $ 1,000 1,003 28 - 1,031 Foreign government securities $ 1,000 1,002 152 - 1,154 Corporate securities $ 191,177 194,940 11,499 924 205,515 Mortgage-backed securities $ 41,001 40,252 1,182 282 41,152 Public utility securities $ 38,950 37,844 2,503 - 40,347 ------- ----- ------ ------- Total $ 353,489 17,939 1,654 369,774 ======= ===== ====== ======= December 31, 1993 - ----------------- Par Value Gross Gross Estimated RWIC or number Amortized unrealized unrealized market Held-to-Maturity of shares cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 38,213 $ 39,425 3,025 55 42,395 States, municipalities and political subdivisions $ 43,625 43,154 4,345 334 47,165 Corporate securities $ 195,350 202,401 8,444 1,577 209,268 Mortgage-backed securities $ 36,085 36,140 488 368 36,260 Redeemable preferred stock 2,300 2,300 400 - 2,700 ------- ----- ------ ------- 323,420 16,702 2,334 337,788 ======= ===== ====== ======= 81 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Investments, continued December 31, 1993 - ----------------- Par Value Gross Gross Estimated RWIC or number Amortized unrealized unrealized market Available-for-Sale of shares cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 6,000 6,125 1,175 - 7,300 States, municipalities and political subdivisions $ 40 40 - 2 38 Corporate securities $ 19,000 19,233 23 152 19,104 Mortgage-backed securities $ 16,098 16,254 - - 16,254 ------- ----- ------ ------- 41,652 1,198 154 42,696 ------- ----- ------ ------- Total $ 365,072 17,900 2,488 380,484 ======= ====== ====== ======= Fixed maturities fair value are based on publicly quoted market prices at the close of trading December 31, 1994 or December 31, 1993, as appropriate. The amortized cost and estimated market value of debt securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 1994 - ----------------- Amortized Estimated Consolidated cost fair value Held-to-Maturity --------- ---------- (in thousands) Due in one year or less $ 27,181 27,037 Due after one year through five years 155,096 155,296 Due after five years through ten years 89,559 86,131 After ten years 17,626 17,569 --------- --------- 289,462 286,033 Mortgage-backed securities 160,536 145,063 Redeemable preferred stock 2,126 2,359 --------- --------- 452,124 433,455 --------- --------- 82 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Investments, continued December 31, 1994 - ----------------- Amortized Estimated Consolidated cost fair value Available-for-sale --------- ---------- (in thousands) Due in one year or less 12,609 12,596 Due after one year through five years 80,128 78,286 Due after five years through ten years 127,496 122,268 After ten years 5,207 5,366 --------- --------- 225,440 218,516 Mortgage-backed securities 37,396 34,788 --------- --------- 262,836 253,304 --------- --------- Total $ 714,960 686,759 ========= ========= December 31, 1993 - ----------------- Amortized Estimated OXFORD cost fair value --------- ---------- (in thousands) Due in one year or less $ 15,362 15,641 Due after one year through five years 118,343 125,274 Due after five years through ten years 108,693 115,402 After ten years 1,786 2,075 --------- --------- 244,184 258,392 Mortgage-backed securities 109,305 111,382 --------- --------- Total $ 353,489 369,774 ========= ========= December 31, 1993 - ----------------- Amortized Estimated RWIC cost fair value Held-to-Maturity --------- ---------- (in thousands) Due in one year or less $ 35,997 32,090 Due after one year through five years 148,894 155,908 Due after five years through ten years 90,443 100,726 After ten years 9,646 10,104 --------- --------- 284,980 298,828 Mortgage-backed securities 36,140 36,260 Redeemable preferred stock 2,300 2,700 --------- --------- 323,420 337,788 --------- --------- 83 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Investments, continued December 31, 1993 Amortized Estimated RWIC cost fair value Available-for-sale --------- ---------- (in thousands) Due after one year through five years 9,864 9,829 Due after five years through ten years 8,185 8,838 After ten years 7,349 7,775 --------- --------- 25,398 26,442 Mortgage-backed securities 16,254 16,254 --------- --------- 41,652 42,696 --------- --------- Total $ 365,072 380,484 ========= ========= Proceeds from sales of investments in debt securities during 1994 and 1993 were $71,242,000 and $25,409,000, respectively. Gross gains of $1,447,000 and $1,665,000 and gross losses of $332,000 and $91,000 were realized on those sales during 1994 and 1993, respectively. Proceeds from maturities and early redemptions of investments in debt securities during 1994 and 1993 were $117,233,000 and $169,089,000. Gross gains of $633,000 and $2,326,000 and gross losses of $510,000 and $254,000 were realized on these securities during 1994 and 1993, respectively. At December 31, 1994 and 1993 fixed maturities include bonds with an amortized cost of $16,775,000 and $15,450,000, respectively, on deposit with insurance regulatory authorities to meet statutory requirements. Real estate held for investment, net of accumulated depreciation of $357,000 in 1994 and $329,000 in 1993, is comprised of land, buildings and building improvements. Depreciation on buildings is computed using the straight-line method. The general range of useful lives for buildings is 15 to 40 years. Depreciation on building improvements is computed utilizing the straight-line method or an accelerated method over the range of useful lives of 10 to 15 years. At December 31, 1994 and 1993, mortgage notes held by Ponderosa with a book value of $79,498,000 and $48,395,000, respectively, were outstanding. The estimated fair value of the notes at December 31, 1994 and 1993 was $86,132,000 and $50,297,000, respectively. The estimated fair values were determined using discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings. Ponderosa's investment in mortgage loans, included as a component of investments, are reported net of allowance for possible losses of $525,000 in both 1994 and 1993. 84 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Notes and Loans Payable Notes and loans payable consist of the following: Year ended ---------------- 1995 1994 ---------------- (in thousands) Short-term promissory notes $ 33,500 50,000 Notes payable to banks under revolving lines of credit, unsecured 6.43% to 6.74% interest rates, 293,000 97,750 Medium-term notes payable, unsecured 8.50% to 11.50% interest rates, due through 2000 169,270 198,870 Notes payable to insurance companies, unsecured 5.89% to 10.27% interest rates, due through 2010 336,000 281,000 Notes payable to banks, unsecured 5.375% to 5.67% interest rates, due through 1999 45,700 94,800 Mortgages payable, secured 5.0% to 10.00% interest rates, due through 2016 3,660 1,246 Other notes payable, unsecured 9.50% interest rate, due through 2005 92 98 ------- ------- $ 881,222 723,764 ======= ======= Mortgages payable are secured by land and buildings at various locations, which carry a net book value of $13,976,000 at year-end 1995. Domestic/Eurodollar revolving credit loans are available from participating banks under an agreement which provides for a total credit line of $365,000,000 through the expiration date of the revolving term of June 1, 1997. The Company may elect to borrow under the credit agreement in the form of Eurodollar borrowings or domestic dollar borrowings. Depending on the form of borrowing elected, interest will be based on the prime rate, the certificate of deposit rate, the federal funds effective rate or the interbank offering rate and in addition, margin interest rates will be charged. Loans may also be at a fixed rate based upon the discretion of the borrower and lender. At March 31, 1995, the weighted average interest rate on borrowings outstanding was 6.48%. 85 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Notes and Loans Payable, continued Facility fees, which are based upon the amount of credit line, aggregated $901,000 and $588,000 for 1995 and 1994, respectively. As of year-end 1995, loans outstanding under the revolving credit line totaled $293,000,000. Management intends to refinance the borrowings on a long-term basis by either replacing them with long- term obligations, renewing or extending them. Year ended -------------------------- 1995 1994 1993 -------------------------- (in thousands) A summary of revolving credit activity follows: Weighted average interest rate during the year 5.62% 3.62% 4.36% at year end 6.48% 3.93% 3.56% Maximum amount outstanding during the year $ 293,000 159,750 126,000 Average amount outstanding during the year $ 191,146 67,354 96,667 A summary of notes payable follows: Weighted average interest rate: during the year 5.25% 3.80% 4.09% at year end 6.44% 4.04% 3.66% Maximum amount outstanding during the year $ 135,000 50,000 25,000 Average amount outstanding during the year $ 46,604 11,380 14,167 AMERCO has lines of credit with various banks totaling $275,001,000 at March 31, 1995. The Company has executed interest rate swap agreements ("SWAPS") to potentially mitigate the impact of changes in interest rates on its floating rate debt. These agreements effectively change the Company's interest rate exposure on $193,000,000 of floating rate notes to a weighted average fixed rate of 8.62%. The SWAP's mature at the time the related notes mature. During the year a swap with a notional value of $15,000,000 matured. Incremental interest expense associated with SWAP activity was $7,092,000 and $11,989,000 during 1995 and 1994, respectively. 86 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Notes and Loans Payable, continued Certain of the Company's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, maintaining certain financial ratios, and placing certain additional liens on its properties and assets. At March 31, 1995, the Company was in compliance with these covenants. In addition, these credit agreements contain provisions that could result in a required prepayment upon a "change in control" of the Company. See also Note 14. In May 1995, the Company amended a $185 million revolving credit agreement to extend the maturity to September 1995. The annual maturities of long-term debt for the next five years, if the revolving credit lines are outstanding to maturity, are: Year Ended --------------------------------------------- 1996 1997 1998 1999 2000 --------------------------------------------- (in thousands) Mortgages $ 422 236 443 188 131 Medium-term and other notes 74,226 66,807 14,258 11,009 3,010 Insurance Placements 11,000 63,833 45,762 50,762 44,247 Bank Placements 21,600 21,600 1,600 900 - Revolving Credit - - 293,000 - - ------- ------- ------- ------- ------- $107,248 152,476 355,063 62,859 47,388 ======= ======= ======= ======= ======= During the first and third of fiscal 1994, the Company purchased $25.2 million of its medium-term notes originally due in fiscal 1995 through 2000. The weighted average rate of the notes purchased is 9.34%. The purchase resulted in an extraordinary charge of $1,897,000 net of $1,021,000 of tax benefit. During the fourth quarter of fiscal 1994, the Company terminated swaps with the notional value of $77 million originally due in fiscal 1995. The terminations resulted in an extraordinary charge of $1,473,000 net of $793,000 of tax benefit. (6) Stockholders' Equity In October 1992, the stockholders approved an amendment to the Company's Articles of Incorporation to increase the authorized capital stock of the Company to a total of 350,000,000 shares from 65,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. The increased capital stock consists of 150,000,000 shares of Common Stock, 150,000,000 shares of Serial Common Stock and 50,000,000 shares of Preferred Stock. The Board of Directors (the Board) may authorize the Serial Common Stock to be issued in such 87 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (6) Stockholders' Equity, continued series and on such terms as the Board shall determine. The amendment also clarifies the voting rights of the Preferred Stock and allows the issuance of Preferred Stock with or without par value. In October 1993, the Company issued 6,100,000 shares of 8.5% cumulative, no par, non-voting preferred stock. The preferred stock is not convertible into, or exchangeable for, shares of any other class or classes of stock of the Company. Dividends are payable quarterly in arrears and have priority as to dividends over the Company's common stock. The preferred stock is not redeemable prior to December 1, 2000. On or after December 1, 2000, the Company, at its option, may redeem all or part of the preferred stock, for cash at $25.00 per share plus accrued and unpaid dividends to the redemption date. On February 1, 1994, the Company entered into an Exchange Agreement with Mark V. Shoen. Pursuant to the exchange agreement, in exchange for 3,475,520 shares of common stock owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of Series A common stock. On April 13, 1994, the Company and Edward J. Shoen entered into an Agreement in Principle pursuant to which the Company agreed to acquire all of the outstanding capital stock of EJOS, Inc., all of which stock was held by Edward J. Shoen and a certain irrevocable trust established by Edward J. Shoen, in exchange for the same number of shares of the Company's common stock as were held by EJOS, Inc. In exchange for EJOS, Inc.'s capital stock, Edward J. Shoen and the irrevocable trust established by Edward J. Shoen received 3,483,681 and 559,443 shares of the Company's common stock, respectively. The exchange described above was effected in accordance with the terms of an Agreement and Plan of Exchange of Shares of EJOS, Inc. and AMERCO, dated May 18, 1994, among EJOS, Inc., the Company, Edward J. Shoen, and the irrevocable trust established by Edward J. Shoen. Edward J. Shoen is a major stockholder, Chairman of the Board, and President of the Company. On August 24, 1994, the Company entered into an Exchange Agreement with Edward J. Shoen, the Company's Chairman of the Board and President. Pursuant to the exchange agreement, in exchange for 3,483,681 shares of common stock owned by Edward J. Shoen, Edward J. Shoen received 3,483,681 shares of Series A common stock. On November 28, 1994, the Company entered into an Exchange Agreement with Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the exchange agreement, in exchange for 3,475,520 shares of Series A common stock owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of common stock. 88 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Income Taxes The components of the consolidated expense for income taxes applicable to operations are as follows: Year ended -------------------------- 1995 1994 1993 -------------------------- (in thousands) Current: Federal $ 12,629 2,112 1,800 State 1,038 185 726 Deferred: Federal 19,678 16,365 13,902 State 79 1,191 842 ------ ------ ------ $ 33,424 19,853 17,270 ====== ====== ====== Deferred tax liabilities (assets) are comprised as follows: Year ended -------------------------- 1995 1994 1993 -------------------------- (in thousands) Accelerated depreciation of: property, plant and equipment $ 155,756 145,391 134,466 Benefit of tax NOL and credit carryforwards (64,076) (74,905) (85,326) Rental equipment overhaul costs amortized 419 751 1,126 Deferred inventory adjustments (103) (1,177) (356) Deferred acquisition costs 15,720 15,361 15,761 Deferred gain from intercompany transactions 459 (894) (2,780) Bad debt expense (1,935) (1,635) (1,429) Accrued expense on future dealer benefits (3,451) (3,347) (2,576) Accrued vacation and sick-pay (1,338) (1,182) (1,132) Accelerated retirement deductions - - 860 Customer deposit liability (2,884) (2,375) - Deferred revenue from sale/leaseback (437) (1,357) (1,779) Accrued retirement expense (2,279) (1,755) - Policy benefits and losses, claims and loss expenses payable (24,671) (24,022) (24,986) Other (2,455) (283) 1,041 ------ ------ ------ Total $ 68,725 48,571 32,890 ====== ====== ====== 89 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Income Taxes, continued Year ended -------------------------- 1995 1994 1993 -------------------------- (in thousands) Balance comprised of: Deferred tax assets $ 2,312 2,220 2,223 Deferred tax liability 71,037 50,791 35,113 ------ ------ ------ Net deferred taxes $ 68,725 48,571 32,890 ====== ====== ====== Actual tax expense reported on earnings from operations differs from the "expected" tax expense amount (computed by applying the United States federal corporate tax rate of 35% in 1995 and 1994, and 34% in 1993) as follows: Year ended -------------------------- 1995 1994 1993 -------------------------- (in thousands) Computed "expected" tax expense $ 32,696 23,276 16,938 Increases (reductions) in taxes resulting from: Tax-exempt interest income (1,243) (1,525) (2,278) Dividends received deduction (62) (101) (289) Net reinsurance effect 120 120 116 Canadian subsidiary income tax (expense) benefit unrealized (1,078) (204) 230 True-up of prior year estimated current tax 1,030 (1,327) - Federal tax benefit of state and local taxes (391) (482) (534) Other 1,235 (1,280) 1,519 ------ ------ ------ Actual federal tax expense 32,307 18,477 15,702 State and local income tax expense 1,117 1,376 1,568 ------ ------ ------ Actual tax expense of operations $ 33,424 19,853 17,270 ====== ====== ====== 90 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Income Taxes, continued The 1993 financial statements have been restated to give retroactive effect to the adoption of SFAS 109. The impact on previously issued financial statements, income (loss), is as follows (in thousands except per share data): Year ended -------------- 1993 -------------- (in thousands) Earnings: Effect of change on income before extraordinary item as originally reported $ (2,309) Effect of change on net income as originally reported (8,687) Earnings per common share: Effect of change on income before extraordinary item as originally reported $ (.06) Effect of change on net income as originally reported (.22) Under the provisions of the Tax Reform Act of 1984 (the Act), the balance in Oxford's account designated "Policyholders' Surplus Account" is frozen at its December 31, 1983 balance of $19,251,000. Federal income taxes (Phase III) will be payable thereon at applicable current rates if amounts in this account are distributed to the stockholder or to the extent the account exceeds a prescribed maximum. Oxford did not incur a Phase III liability for the years ended December 31, 1994, 1993 and 1992. The Internal Revenue Service has examined AMERCO's income tax returns for the years ended 1990 and 1991. All agreed issues have been provided for in the financial statements including the application of such adjustments to open years. The tax effect of the unagreed issues will not have a material impact on the financial statements. At year-end 1995 AMERCO and RWIC have non-life net operating loss carryforwards available to offset taxable income in future years of $106,500,000 for tax purposes. These carryforwards expire in 2000 through 2007. AMERCO also has investment tax credit and other credit carryforwards of $885,000 for tax purposes which expire in 1999 through 2005. AMERCO has alternative minimum tax credit carry forwards of $16,575,000 which do not have an expiration date, but may only be utilized in years in which regular tax exceeds alternative minimum tax. The use of certain carryforwards may be limited or prohibited if a reorganization or other change in corporate ownership were to occur. 91 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Income Taxes, continued Provision for federal income taxes has not been made for the difference between the Company's book and tax bases of its investment in Ponderosa, since the Company believes such difference to be permanent in duration. During 1994, Oxford dividended their investment in RWIC common stock to Ponderosa at its book value. As a result of such dividend, a deferred intercompany gain arose due to the difference between the book value and fair value of such common stock. However, such gain can only be triggered if certain events occur. To date, no events have occurred which would trigger such gain recognition. No deferred taxes have been provided in the accompanying consolidated financial statements as management believes that no events will occur to trigger such gain. (8) Transactions With Fleet Owners and Other Rental Equipment Owners Fleet Owners (independent rental equipment owners) own approximately 21% of all U-Haul rental trailers, .04% of all U-Haul rental trucks and certain other rental equipment. There are over 5,400 fleet owners, including certain officers, directors, employees and stockholders of the Company. All rental equipment is operated under contract with U-Haul, a wholly-owned subsidiary of AMERCO, whereby U- Haul administers the operations and marketing of such equipment and in return receives a percentage of rental fees paid by customers. AMERCO guarantees performance of these contracts. Based on the terms of various contracts, rental fees are distributed to the subsidiaries of AMERCO (for services as operators), to the fleet owners (including certain subsidiaries and related parties of AMERCO) and to Rental Dealers (including Company-operated U-Haul Centers). The Company owns over 99% of all general rental items and the remainder of the rental equipment is consigned to AMERCO and its consolidated subsidiaries. The equipment is operated under various contracts with subsidiaries of AMERCO, whereby the consolidated group administers the operations and marketing of the equipment. In return the investors receive a percentage of the rental fees paid by customers. Oxford reinsures short-term accidental death and medical insurance risks for customers who rent vehicles owned by the Company and fleet owners. Premiums earned during the years ended December 31, 1994, 1993 and 1992 were $1,556,000, $1,428,000 and $1,399,000, respectively. 92 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (8) Transactions With Fleet Owners and Other Rental Equipment Owners, continued RWIC insures and reinsures general liability, auto liability, commercial general liability and worker's compensation coverage for member companies of the consolidated group. Premiums earned by RWIC during the years ended December 31, 1994, 1993 and 1992 on these policies amounted to $20,600,000, $18,800,000 and $18,300,000, respectively, and were eliminated in consolidation. RWIC insures and reinsures certain risks of U-Haul customers and independent fleet owners. Premiums earned during the years ended December 31, 1994, 1993 and 1992 on these policies amounted to $39,300,000, $32,800,000 and $31,700,000, respectively. (9) Dealer Financial Security Plan In September 1984, the Company adopted an unfunded dealer financial security plan (the Security Plan) for its independent dealers and their key employees who elected to enroll in the plan. Subsequent to the initial enrollment in the Security Plan, the Company suspended the plan to additional enrollees. Under the Security Plan, deductions are made from dealer commissions in return for future benefits including death, disability and retirement benefits. These benefits are paid directly from the general assets of the Company. Life insurance is carried on each Security Plan participant in favor of the Company to indirectly fund future benefit payments. Total deductions withheld from commissions for 1995, 1994, and 1993 were $466,000, $613,000 and $714,000, respectively. Total insurance premium expense for the years ended 1995, 1994 and 1993 amounted to $1,294,000, $1,304,000 and $1,300,000, respectively. Benefits paid under the Security Plan for the years ended 1995, 1994 and 1993 were insignificant. (10) Employee Benefit Plans AMERCO and its subsidiaries participate in the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the Plan) which is designed to provide all eligible employees with savings for their retirement and to acquire a proprietary interest in the Company. The Plan has three separate features: a profit sharing feature (the Profit Sharing Plan) under which the Employer may make contributions on behalf of participants; a savings feature (the Savings Plan) which allows participants to defer income under Section 401k of the Internal Revenue Code of 1986; and an employee stock ownership feature (the ESOP) under which the Company may make contributions of AMERCO common stock or cash to acquire such stock on behalf of participants. Generally, employees of the Company are eligible to participate in the Plan upon completion of a one year service requirement. 93 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Employee Benefit Plans, continued At its discretion, profits of such amounts as determined by the Board of Directors (which shall not exceed the amounts that are deductible under the Internal Revenue Code) may be contributed to the Profit Sharing Plan at the end of each Plan year to a designated trustee and administered and applied in accordance with the terms of the trust agreement. The Company did not contribute to the Profit Sharing Plan during the years ended 1995, 1994 and 1993. Under the Savings Plan, an employee may make pre-tax contributions of up to eighteen percent of base salary. Participants are immediately vested in all contributions plus actual earnings thereon. The ESOP is designed to enable eligible employees to acquire a proprietary interest in the Company. The Company may, in its sole and absolute discretion, elect to contribute to the trust fund amounts to be used by the ESOP trustee to purchase shares of the $.25 par value common stock of the Company and/or the Company may contribute stock directly to the trust fund. To fund the ESOP trust (ESOT), the Company borrowed $16,000,000 repayable over ten years in annual installments of $1,600,000 beginning December 1989. Proceeds of this borrowing were loaned to the ESOT on the same terms and are used by the ESOT to purchase shares of AMERCO common stock. Interest payments under this agreement were $313,000 in 1995, $253,000 in 1994 and $402,000 in 1993. To fund additional purchases of the Company stock, in May 1990 the ESOT borrowed $1,172,000 from the Company repayable over ten years under a stock pledge agreement. The interest rate is based upon the average interest rate paid by the Company. Interest payments amounted to $72,000, $90,000 and $105,000 for 1995, 1994 and 1993, respectively. As of March 31, 1995, $703,000 is outstanding under this agreement. During fiscal year 1991, the Company executed an additional stock pledge agreement with the ESOT to make loans available in an aggregate principal amount equal to $10,000,000 over a five year commitment period. In April 1994 the ESOT modified the 1991 agreement to increase the commitment from $10,000,000 to $20,000,000 and extend the commitment period an additional five years. Borrowings under the agreement are repaid based upon a twenty year amortization period. Interest is based upon the average rate paid by AMERCO under all promissory notes, commercial paper and other evidences of indebtedness issued by AMERCO and outstanding as of the date the rate is to be calculated. Under this agreement, $14,790,000 is outstanding at March 31, 1995. Interest payments under this agreement were $745,000, $474,000 and $366,000 for 1995, 1994 and 1993, respectively. Subsequent to March 31, 1995 borrowings total $6,600,000. 94 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Employee Benefit Plans, continued Shares are released from collateral and allocated to active employees based on the proportion of debt service paid in the plan year. Contributions to the ESOT charged to expense were $2,571,000, $2,269,000 and $2,255,000 for the years ended 1995, 1994 and 1993, respectively. Effective April 1, 1994, the Company adopted Statement of Position 93-6 "Employers' Accounting for Employee Stock Ownership Plans" for shares purchased subsequent to December 31, 1992. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the statement of financial position. As shares purchased after December 31, 1992 are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings-per-share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest. Shares purchased prior to December 31, 1992 are not accounted for under the above guidance. Dividends are recorded as a reduction of retained earnings, shares are considered outstanding for earnings- per-share calculations, and compensation expense is based upon debt service. The ESOP shares as of March 31 were as follows (in thousands): Shares issued Shares issued prior to subsequent to December, 1993 December, 1993 1995 1994 1995 1994 ------ ------ ------ ------ Allocated shares 1,233 1,109 13 1 Shares committed to be released - - 8 - Unreleased shares 1,211 1,443 594 291 ------ ------ ------ ------ Total ESOP shares 2,444 2,552 615 292 ====== ====== ====== ====== Fair value of unreleased shares $ 11,298 $ 13,134 $ 12,697 $ 4,947 ====== ====== ====== ====== For purposes of this schedule, fair value of unreleased shares issued prior to December 31, 1992 is defined as the historical cost of such shares. Fair value of unreleased shares issued subsequent to December 31, 1992 and held at March 31, 1995 is defined as the March 31, 1995 trading value of such shares. Fair value of unreleased shares issued subsequent to December 31, 1992 and held at March 31, 1994 is defined as the appraised value as such shares were not traded in an active market at that date. Management considers the actual fair value of the shares to be in excess of their trading value at that March 31, 1995. See also Note 17. 95 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Employee Benefit Plans, continued During fiscal 1989, the Company adopted a Key Employee Stock Purchase Plan (the KESPP) authorizing it to sell to employees and non-employee directors of the Company up to 3,240,000 shares of common stock of the Company at a per share price of $6.79, the fair market value of such shares on the date such plan was adopted. Pursuant to authorization by the Board of Directors, five key employees purchased 3,239,600 shares under the KESPP for cash and promissory notes at the rate of nine percent per annum. In July 1989, the Plan purchased 1,904,000 shares of the Company's $.25 par value common stock from four key employees at a per share price of $8.63, the fair market value of such shares on the date of sale. Principal and interest payments on the promissory notes were received by the Company from the key employees. Oxford insures various group life and group disability insurance plans covering employees of the consolidated group. Premiums earned were $1,896,000, $1,325,000 and $1,037,000 for the years ended 1995, 1994 and 1993, respectively and were eliminated in consolidation. As of January 1, 1991, the Company elected to self-fund its group- health and dental plans. (11) Postretirement and Postemployment Benefits The Company provides medical and life insurance benefits to retired employees and eligible dependents over age 65 if the employee meets specified age and service requirements. The Company uses the accrual method of accounting for postretirement benefits. Prior to 1994, the Company recognized these costs, which were not material, as claims were incurred. Upon adoption of SFAS 106, the Company elected to immediately recognize the cumulative effect of the change in accounting for postretirement benefits of $5.0 million ($3.1 million net of income tax benefit) which represents the accumulated postretirement benefit obligation (APBO) existing at April 1, 1993. In addition, the impact of the change in ongoing operations is an increase in expense of about $592,000 and $1,087,000 in 1995 and 1994, respectively. The Company continues to fund medical and life insurance benefit costs as claims are incurred. The components of net periodic postretirement benefit cost for 1995 and 1994 are as follows (in thousands): 1995 1994 ------ ------ Service cost for benefits earned during the period $ 210 $ 489 Interest cost on APBO 382 598 ------ ------ Net periodic postretirement benefit cost $ 592 $ 1,087 ====== ====== 96 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (11) Postretirement and Postemployment Benefits, continued The 1995 and 1994 postretirement benefit liability included the following components (in thousands): 1995 1994 ------- ------- Actuarial present value of postretirement benefit obligation: Retirees $ (1,638) $ (1,848) Eligible active plan participants (341) (413) Other active plan participants (3,105) (3,832) ------- ------- Accumulated postretirement benefit obligation (5,084) (6,093) Unrecognized prior service gain Unrecognized net loss (1,601) - ------- ------- $ (6,685) $ (6,093) ======= ======= The discount rate assumptions used in computing the information above were as follows: 1995 1994 -------- -------- Accumulated postretirement benefit obligation 8.5% 7.75% The year-to-year fluctuations in the discount rate assumptions primarily reflect changes in U.S. interest rates. The discount rate represents the expected yield on a portfolio of high-grade (AA- AAA rated or equivalent) fixed-income investments with cash flow streams sufficient to satisfy benefit obligations under the plans when due. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.0% in 1995, declining annually to an ultimate rate of 4.0% in 2010. The assumed health care cost trend rate reflects a $20,000 maximum lifetime benefit included in the Company's plan. If the health care cost trend rate assumptions were increased by 1.0%, the APBO as of March 31, 1995 would be increased by approximately $800,000. The effect of this change on the sum of the service cost and interest cost components of net periodic postretirement benefit cost for 1995 would be an increase of approximately $140,000. Postemployment benefits provided by the Company are not material. 97 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (12) Reinsurance The Company assumes and cedes reinsurance on both a coinsurance and risk premium basis. The Company obtains reinsurance for that portion of risks exceeding retention limits. The maximum amount of life insurance retained on any one life is $100,000. The Company also reinsures a wide range of property-casualty risks with third parties and insures general and auto liability, multiple peril and worker's compensation coverage for the consolidated group, independent fleet owners and customers as a direct writer and as a reinsurer through third party companies. To the extent that a reinsurer is unable to meet its obligation under the related reinsurance agreements, the Company would remain liable for the unpaid losses and loss expenses. Pursuant to certain of these agreements, the Company holds letters of credit in the amount of $14,800,000 from reinsurers. The Company has issued letters of credit totaling approximately $22,700,000 in favor of certain ceding companies. During fiscal 1995 Oxford issued a letter of credit of approximately $20.6 million in favor of certain ceding companies. AMERCO has guaranteed such letter of credit. RWIC is a reinsurer of municipal bond insurance through an agreement with MBIA, Inc. Premium generated through this agreement is recognized pro rata over the contract coverage period. The related unearned premium as of December 31, 1994 and 1993 was $4,400,000 for each period. RWIC's share of case loss reserves related to this coverage is approximately $41,000 at December 31, 1994. RWIC's aggregate exposure for Class 1 municipal bond insurance was $709,000,000 as of December 31, 1994. A summary of reinsurance transactions by business segment follows: Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ---------------------------------------------------- (in thousands) Year end 1995 Life insurance in force $ 32,046 500 2,729,372 2,760,918 99% ======= ====== ========== ========= Premiums earned: Life $ 1,601 16 8,149 9,734 84% Accident and health 3,980 198 1,513 5,295 29% Annuity 61 - 7,696 7,757 99% Property casualty 86,869 40,871 66,864 112,862 59% ------- ------- ------- ------- Total $ 92,511 41,085 84,222 135,648 ======= ======= ======= ======= 98 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (12) Reinsurance, continued Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ---------------------------------------------------- (in thousands) Year end 1994 Life insurance in force $ 19,860 524 2,979,714 2,999,050 99% ======= ====== ========== ========= Premiums earned: Life $ 53 16 8,876 8,913 99% Accident and health 1,120 209 1,455 2,366 61% Annuity - - 5,419 5,419 100% Property casualty 81,676 45,122 70,092 106,646 66% ------- ------- ------- ------- Total $ 82,849 45,347 85,842 123,344 ======= ======= ======= ======= Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ---------------------------------------------------- (in thousands) Year end 1993 - ------------- Life insurance in force $ 20,983 547 3,375,548 3,395,984 99% ======= ====== ========== ========= Premiums earned: Life $ 81 - 9,910 9,991 99% Accident and health 996 103 2,111 3,004 70% Annuity 202 - 2,907 3,109 94% Property casualty 73,523 39,016 48,214 82,721 58% ------- ------- ------- ------- Total $ 74,802 39,119 63,142 98,825 ======= ======= ======= ======= (13) Contingent Liabilities and Commitments The Company occupies certain facilities and uses certain equipment under operating lease commitments with terms expiring through 2079. Lease expense was $66,487,000, $84,359,000 and $119,106,000 for the years ended 1995, 1994 and 1993, respectively. During the year ended March 31, 1995, U-Haul Leasing & Sales Co., a wholly-owned subsidiary of U-Haul, entered into fifteen transactions, whereby the Company sold rental trucks and subsequently leased them back. Subsequent to year end, no additional lease agreements were executed. AMERCO has guaranteed $42,537,000 of residual values at March 31, 1995 on these assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options and mileage and other restrictions similar to those disclosed in Note 5 for notes payable and loan agreements. 99 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (13) Contingent Liabilities and Commitments, continued Following are the lease commitments for leases having terms of more than one year (in thousands): Year end 1995 --------------------------- Property, plant Rental Year ended and other equipment Trucks Total ------------------------------------------------------------- 1996 $ 1,512 58,777 60,289 1997 1,019 52,051 53,070 1998 750 52,051 52,801 1999 540 52,051 52,591 2000 409 52,051 52,460 Thereafter 4,993 48,838 53,831 ------- ------- ------- $ 9,223 315,819 325,042 ======= ======= ======= The Company is a defendant in a number of suits and claims incident to the types of business it conducts and several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management that none of such suits, claims, or proceedings involving the Company, individually or in the aggregate, are expected to result in a material loss. Also see Notes 12 and 14. (14) Legal Proceedings Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and William E. Carty, who are current members of the Board of Directors of the Company and Paul F. Shoen, who is a former director are defendants in an action in the Superior Court of the State of Arizona, Maricopa County, entitled Samuel W. Shoen, M.D., et al. v. ---------------------------------- Edward J. Shoen, et al., No. CV88-20139, instituted August 2, 1988 ------------------------ (the Shoen Litigation). The Company was also a defendant in the action as originally filed, but the Company was dismissed from the action on August 15, 1994. The plaintiffs, who collectively hold 47.3% of the Company's common stock and who are all members of a stockholder group that is currently opposed to existing Company management have alleged, among other things, that certain of the individual plaintiffs were wrongfully excluded from sitting on the Company's Board of Directors in 1988 through the sale of Company common stock to certain key employees. That sale allegedly prevented the plaintiffs from gaining a majority position in the Company's voting stock and control of the Company's Board of Directors. The plaintiffs alleged various breaches of fiduciary duty and other unlawful conduct by the individual defendants and sought equitable relief, compensatory damages, punitive damages, and statutory post judgment interest. 100 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued Based on the plaintiffs' theory of damages (that their stock has little or no current value), the Court ruled that the plaintiffs elected as their remedy in this lawsuit to transfer their shares of stock to the defendants upon the satisfaction of the judgment. On October 7, 1994, the jury determined that the defendants breached their fiduciary duties and such breach diminished the value of the plaintiffs' stock. The jury also determined the value of the plaintiffs' stock in 1988 to be $81.12 per share or approximately $1.48 billion. On February 2, 1995, the judge in this case granted the defendants' motion for remittitur or a new trial on the issue of damages. The judge determined that the value of the plaintiffs' stock in 1988 was $25.30 per share or approximately $461.8 million. On February 13, 1995, the plaintiffs filed a statement accepting the remittitur. The jury also awarded the plaintiffs $70 million in punitive damages against Edward J. Shoen. The judge ruled that this punitive damage award was excessive and granted Edward J. Shoen's motion for remittitur or a new trial on the issue of punitive damages. The judge reduced the award of punitive damages against Edward J. Shoen to $7 million. On February 13, 1995, the plaintiffs filed a statement accepting the remittitur reducing the punitive damage to $7 million. On February 21, 1995, judgment was entered against the defendants. On March 23, 1995, Edward J. Shoen filed a notice of appeal with respect to the award of punitive damages and the plaintiffs have subsequently cross-appealed the judge's remittitur of the punitive damages. Pursuant to separate indemnification agreements, the Company has agreed to indemnify the defendants to the fullest extent permitted by law or the Company's Articles of Incorporation or By-Laws, for all expenses and damages, if any, incurred by the defendants in this proceeding, subject to certain exceptions. With respect to the defendants who have filed for protection under the federal bankruptcy laws (as described below), the extent of the Company's indemnification obligations may be an issue in the bankruptcy proceedings. Before the Company will have any indemnification obligations, the defendants must request indemnification from the Company and a determination must be made under Nevada law as to the validity of the indemnification claims. The defendants have not attempted to make demands upon or prosecute their indemnification claims against the Company. The Company reserves the right to contest the validity of any indemnification claims made by the defendants. The extent of the Company's obligation under the indemnification agreements, if any, cannot be reasonably estimated. No provision has been made in the Company's consolidated financial statements for any possible indemnification claims. If valid indemnification claims are made, the Company believes that it can fulfill any such indemnification obligations consistent with its existing credit agreements, or in the alternative, the Company may seek the waiver or amendment of certain of the provisions of one or more of its credit agreements when the indemnification obligations are determined. The Company believes, but no assurance can be given, that it can obtain any necessary waivers or amendments. 101 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued Any attempted transfer of common stock from the plaintiffs to the defendants will implicate rights held by the Company. For example, pursuant to the Company's By-Laws, the Company has certain rights of first refusal with respect to the transfer of the plaintiffs' stock. In addition, the defendants' rights to acquire the plaintiffs' stock may present a corporate opportunity which the Company is entitled to exercise. On February 21, 1995, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds, and William E. Carty (the Director- Defendants) filed for protection under Chapter 11 of the federal bankruptcy laws, resulting in the issuance of an order automatically staying the execution of the judgment against those defendants. In late April 1995, the Director-Defendants, in cooperation with the Company, filed plans of reorganization in the United States Bankruptcy Court for the District of Arizona (collectively, the Plan), all of which propose the same funding and treatment of the plaintiffs' claims resulting from the judgment in the Shoen Litigation. Under the Plan, the Director-Defendants will transfer (or cause to be transferred) to a trust (the Trust), property having a stipulated or adjudicated value in excess of $461.8 million. Each of the plaintiffs would receive a trust certificate representing an undivided, fractional beneficial interest in the Trust. The property transferred to the Trust is expected to consist of (i) approximately $300 million in Series B 7 1/2% non-voting cumulative preferred stock issued by the Company or one of its subsidiaries; (ii) a 1993 REMIC certificate held by the Company with a face value of $11,518,000 evidencing a pool of 61 commercial mortgage loans which are secured by mortgages or deeds of trust on 60 self-storage properties; (iii) mortgage loans with an aggregate principal balance of approximately $109,914,000 on property held by the Company, one or more of its subsidiaries, or two corporations affiliated with the Company; and (iv) real property held free and clear by the Company or its subsidiaries having a total value of approximately $50 million. Upon the funding of the Trust, the plaintiffs participating in the Trust will have their judgment satisfied and will be obligated to transfer their shares of common stock to the Company or its designee. Alternatively, and in lieu of their respective proportionate shares of the property to be transferred to the Trust, each of the plaintiffs may elect to participate in a settlement and receive a discounted cash payment in full satisfaction of his or her claim (the Settlement). The Settlement provides for a cash fund of up to $350 million to be paid by the Company to satisfy the claims of all plaintiffs electing to participate in the Settlement. Any plaintiff electing to participate in the Settlement will receive a pro rata distribution of such fund based on the percentage of all of the plaintiffs' stock held by such plaintiff. Any plaintiff so 102 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued electing will not participate in or be entitled to any interest in the Trust and the amount of property transferred to the Trust will be correspondingly reduced. The Company plans to fund the Settlement through its existing lines of credit, additional debt or equity issuances, asset sales or a combination of the foregoing. The Company will determine which financing source or sources to use to fund the Settlement based on, among other things, market conditions as they exist from time to time and the number of plaintiffs electing to participate in the Settlement. The Company is unable to estimate the amount or cost of the financing, if any, necessary to fund the Settlement. Upon receipt of the cash distribution pursuant to the Settlement, the plaintiffs electing to participate in the Settlement will be obligated to transfer their common stock to the Company or its designee. The Company expects the court to consider the Plan during 1995. However, there is no assurance that the Plan will be confirmed by the federal bankruptcy court or that the Plan as confirmed will operate as described above. The Company's participation in the Plan is subject to the approval of the Board of Directors. Because of the Plan's complexity and the alternatives provided to the plaintiffs under the Plan, and because the Plan has not yet been confirmed, the Company is unable to determine the Plan's impact on the Company's financial condition, results of operations, or capital expenditure plans. However, as a result of funding the Plan, the Company is likely to incur additional costs in the future in the form of dividends on preferred stock and/or interest on borrowed funds. No provision has been made in the Company's financial statements for any payments to be made to the plaintiffs or the Trust pursuant to the Plan. In addition, in the event any consideration paid by the Company for the plaintiffs' stock is in excess of the fair value of the stock received by the Company, the Company will be required to record an expense equal to that difference. On April 25, 1995, the Director-Defendants filed an action in the United States Bankruptcy Court for the District of Arizona entitled Edward J. Shoen, et al. v. Leonard S. Shoen, et al., Case No. 95- ----------------------------------------------------- 1430-PHX-JMM, Adversary No. 95-284, seeking injunctive relief to prevent the Company from conducting its 1994 and 1995 annual meetings of stockholders until the Plan is confirmed and/or to prevent the plaintiffs from voting the common stock that they are required to transfer pursuant to the Shoen Litigation. The Director-Defendants alleged that despite the election by the plaintiffs to transfer their common stock and thereby disengage themselves from Company ownership, the plaintiffs have two members of their stockholder group nominated to fill two director positions which are scheduled for election at the 1994 annual meeting of stockholders. The Director-Defendants argued that it is inappropriate to base the plaintiffs' right to vote at stockholders meetings on their record ownership of common stock which is the subject of the judgment in the Shoen Litigation. The Director-Defendants further alleged that 103 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued ownership of common stock which is the subject of the judgment in the Shoen Litigation. The Director-Defendants further alleged that if the Company is not enjoined from holding the 1994 and 1995 annual meetings until the Plan is confirmed and if the plaintiffs are not enjoined from voting their common stock, the plaintiffs are likely to elect up to half of the members of the Company's Board of Directors before the end of 1995 because the plaintiffs currently control more common stock than the stockholder group that supports existing Company management. The election of Board of Director nominees supported by the plaintiffs would be likely to disrupt the Company's ability to support and fund the Plan. Such disruption, the Director-Defendants alleged, would affect their ability to reorganize and would cause them substantial and irreparable injury. On June 8, 1995 the court enjoined the Company from conducting its 1994 and 1995 annual meetings of stockholders until an order is entered confirming or denying confirmation of the Plan, or until further order of the court. Sophia M. Shoen, Paul F. Shoen and the Company are parties to separate Share Repurchase and Registration Rights Agreements which require all disputes relating thereto to be resolved by arbitration. On April 8, 1994, Sophia M. Shoen and Paul F. Shoen commenced the dispute resolution process. Private arbitration proceedings pursuant to these agreements were convened on June 19, 1994. All of the claims asserted by Paul F. Shoen in the arbitration have been dismissed pursuant to a settlement agreement described in the following paragraph. In the arbitration, Sophia M. Shoen asserted that the Company has breached its obligations to her by failing to timely register the sale of her shares which were sold to the public in November 1994 and by failing to remove the right of first refusal on all of the Company's common stock. Sophia M. Shoen asserted that, as a consequence of this alleged breach, she was entitled to give notice of termination of a stockholder agreement among Edward J. Shoen, Mark V. Shoen, James P. Shoen, Paul F. Shoen, Sophia M. Shoen, certain trusts for the benefit of the foregoing, and the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the Stockholder Agreement). The Company disagrees with the above assertions. Sophia M. Shoen gave such notice of termination on July 11, 1994. The arbitration hearings concluded on August 21, 1994. It is unknown when the arbitration panel will render a decision. Mark V. Shoen, as a party to the Stockholder Agreement, has filed a lawsuit against Sophia M. Shoen to which the Company is not a party, seeking a declaratory judgment that the Stockholder Agreement has not been terminated and remains in full force and effect. 104 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued The Company, the Company's Board of Directors, the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the ESOP), and the trustees of the ESOP were defendants in an action in the United States District Court for the District of Nevada entitled Paul F. Shoen v. AMERCO, et al., No. CV-N-94-0475-ECR, instituted ---------------------------------- July 19, 1994 and dismissed February 10, 1995. On February 9, 1995, Paul F. Shoen executed a settlement agreement with the Company and the other defendants resolving all of his claims in this case and in the arbitration described in the preceding paragraph. As part of the settlement, the Company agreed, among other things, to select and appoint independent trustees for the ESOP and to place Paul F. Shoen on management's slate of directors for the 1994 annual meeting of stockholders which was originally delayed by judicial order at the request of Paul F. Shoen. The Company, certain members of the Company's Board of Directors, and others are defendants in actions currently pending in United States District Court for the District of Nevada entitled Sidney ------ Wisotzky and Dorothy Wisotzky, et al. v. Edward J. Shoen, et al., -------------------------------------------------------------------- No. CV-N-94-771-HDM (filed October 28, 1994), Evan Julber v. Edward ---------------------- J. Shoen, et al., No. CV-N-94-00811-HDM (filed November 16, 1994), ------------------ and Anne Markin v. Edward J. Shoen, et al., No. CV-N-94-00821-ECR ---------------------------------------- (filed November 18, 1994). The plaintiffs in these cases, who claim to have purchased the Company's Series A 8 1/2% Preferred Stock, are seeking class action certification and are defining the class as all persons who purchased or otherwise acquired the Series A 8 1/2% Preferred Stock of the Company from October 14, 1993 through October 18, 1994, inclusive, and who sustained damage as a result of such purchases. The plaintiffs alleged among other things, that the defendants violated the federal securities laws by inflating the price of the Series A 8 1/2% Preferred Stock via false and misleading statements, concealing material adverse information, and taking other manipulative actions, and that the Prospectus for the Series A 8 1/2% Preferred Stock, certain Form 10-K and Form 10-Q filings made by the Company, and the Company's Notice and Proxy Statement dated July 8, 1994 contained false and misleading statements and omissions regarding the Shoen Litigation. In addition, the Company and certain members of the Company's Board of Directors, are defendants in an action currently pending in United States District Court for the District of Nevada entitled Bernard L. and Frieda Goldwasser, et ------------------------------------- al. v. Edward J. Shoen, et al., No. CV-N-94-00810-ECR (filed ------------------------------------ November 16, 1994). The plaintiffs in this case allege derivatively on behalf of the Company, that the defendants breached their fiduciary duties to the Company and its stockholders by causing the Company to violate the federal securities laws, by concealing the financial responsibility of the Company for the claims asserted in the Shoen Litigation, by subjecting the Company to adverse 105 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (14) Legal Proceedings, continued publicity, and by misusing their corporate control for personal benefit. In addition, the plaintiffs are seeking equitable and/or injunctive relief to prevent the defendants in this case from causing the Company to indemnify the defendants in the Shoen Litigation against their liability in that case. The plaintiffs in these cases are requesting unspecified compensatory damages as well as attorneys' fees and costs. The Company and the individual defendants deny the plaintiffs' allegations of wrongdoing and intend to vigorously defend themselves in these actions. (15) Preferred Stock Purchase Rights In July 1988, the Company's Board of Directors adopted a stockholder- rights plan, and such rights were distributed as a dividend at the rate of one right for each outstanding share of the Company's common stock to the holders of record of common shares on July 29, 1988. As a result of the 400-for-1 common stock split that occurred on October 1, 1990, each outstanding share of common stock currently has one four-hundredth of a right associated with it. When exercisable, each right will entitle its holder to purchase from the Company one one-hundredth of a share of the new Series C Preferred Stock of the Company at a price of $15,000. AMERCO has reserved 5,000 shares of authorized but unissued preferred stock for the Series C Preferred Stock authorized in this stockholder-rights plan. The rights will become exercisable if a person or group of affiliated or associated persons acquire or obtain the right to acquire beneficial ownership of 50% or more of the common stock without approval of a majority of the Board of Directors of the Company. The majority approval must be made by members of the Board who were members as of July 25, 1988 (Disinterested Directors) or subsequent members elected to the Board if such persons are recommended or approved by a majority of the Disinterested Directors. The rights will expire on July 29, 1998 unless earlier redeemed by the Company pursuant to authorization by a majority of the Disinterested Directors. In the event the Company is acquired in a merger or other business combination transaction after the rights become exercisable, provision shall be made so that each holder of a right shall have the right to receive, upon exercise thereof and payment of the exercise price, that number of common shares of such corporation which at the time of such transaction would have a market or book value of two times the exercise price of the right. If the Company is the surviving company, each holder would have the right to receive, upon payment of the exercise price, common shares with a market or book value of two times the exercise price. 106 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (16) Stock Option Plan In October 1992, the stockholders approved a ten year incentive plan entitled the AMERCO Stock Option and Incentive Plan (the Plan) for officers and key employees of the Company. Under the Plan, Incentive Stock Options (ISOs), Non-qualified Stock Options, Stock Appreciation Rights (SAR), Restricted Stock Dividend Equivalents and Performance Shares may be awarded. The aggregate numbers of shares of stock subject to award under the Plan may not exceed 3,000,000. The stock subject to the Plan is AMERCO Common Stock unless prior to the date the first award is made under the Plan, a Committee of at least two Board members determines, in its discretion, to utilize another class of the Company's stock. No options or awards have been granted under the Plan. The Plan provides for the granting of ISOs as defined under the Internal Revenue Code and Non-qualified Stock Options under such terms and conditions as the Committee determines in its discretion. The ISOs may be granted at prices not less than one-hundred percent of the fair market value at the date of grant with a term not exceeding ten years. The Plan provides for the granting of SARs subject to certain conditions and limitations to holders of options under the Plan. SARs permit the optionee to surrender an exercisable option for an amount equal to the excess of the market price of the common stock over the option price when the right is exercised. Under the Restricted Stock feature of the Plan, a specified number of common shares may be granted subject to certain restrictions. Restriction violations during a specified period result in forfeiture of the stock. The Committee may, in its discretion, impose any restrictions on a Restricted Stock award. The Plan authorizes the Committee to grant Dividend Equivalents in connection with options. Dividend Equivalents are rights to receive additional shares of Company stock at the time of exercise of the option to which such Dividend Equivalents apply. Under the Plan, Performance Share units may be granted. Each unit is deemed to be the equivalent of one share of Company stock and such units are credited to a Performance Share account. The value of the units at the time of award or payment is the fair market value of an equivalent number of shares of stock. At the end of the award period, payment may be made subject to certain predetermined criteria and restrictions. To date, no stock options have been granted. 107 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (17) Related Party Transactions AMERCO and Consolidated Subsidiaries have related party transactions with certain major stockholders, directors and officers of the consolidated group as disclosed in Notes 2, 6, 8, 19 and 20 of Notes to Consolidated Financial Statements of AMERCO. Additionally, during the years ended 1995, 1994 and 1993, a subsidiary of AMERCO purchased $3,417,000, $2,607,000 and $2,608,000, respectively, of printing from a company wherein an officer is a major stockholder, director and officer of AMERCO. Pursuant to a Share Repurchase and Registration Rights Agreement, dated May 1, 1992, among Sophia M. Shoen, Sophmar, Inc., and the Company, Sophia M. Shoen had the right to require the Company to repurchase, with certain limitations, up to $3,000,000 of Common Stock owned by her. The Sophia Shoen Registration Rights Agreement provides that the Company's obligations to repurchase any shares from Sophia M. Shoen may be satisfied if such shares are purchased by the ESOP Trust. Pursuant to the Sophia Shoen Registration Rights Agreement, on June 30, 1994, Sophia M. Shoen sold 88,235 shares of Common Stock to the ESOP Trust at the then appraised value of $17.00 per share, for an aggregate sales price of approximately $1,500,000. In addition, Sophia M. Shoen, subject to certain limitations and restrictions, may also elect under the Sophia Shoen Registration Rights Agreement to cause the Company to effect a registration under the Securities Act of 1933, as amended, and applicable state securities laws of shares of Common Stock held by her. Sophia M. Shoen sold 575,000 shares of Common Stock to the public in late 1994 pursuant to her registration rights. Sophia M. Shoen is a major stockholder of the Company. Pursuant to a Management Consulting Agreement, dated as of May 1, 1992, Sophia M. Shoen agreed to provide environmental and other consulting services to the Company. In consideration for these services, the Company agreed to pay Sophia M. Shoen a yearly fee of $100,000. The Management Consulting Agreement terminated May 1, 1995. In April 1994, William E. Carty sold 46.5% of 90.88 acres of land to the Company for cash in the amount of $4,000,000. An independent opinion of value was used to determine the Company's offer to purchase and the purchase was completed below the amount so determined. William E. Carty is a director of the Company. On November 28, 1994, the Company entered into an Exchange Agreement with Mark V. Shoen, a director and major stockholder of the Company. Pursuant to the Exchange Agreement, in exchange for 3,475,520 shares of Series A Common Stock owned by Mark V. Shoen, Mark V. Shoen received 3,475,520 shares of Common Stock. 108 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (17) Related Party Transactions, continued Pursuant to a Share Repurchase and Registration Rights Agreement, dated as of March 1, 1992, among Paul F. Shoen, Pafran, Inc., and the Company, Paul F. Shoen had the right to require the Company to repurchase, with certain limitations, up to $3,000,000 of Common Stock owned by him. The Paul Shoen Registration Rights Agreement provides that the Company's obligation to repurchase any shares from Paul F. Shoen shall be satisfied if such shares are purchased by the ESOP Trust. Pursuant to the Paul Shoen Registration Rights Agreement, (i) on June 30, 1994, Paul F. Shoen sold 58,825 shares of Common Stock to the ESOP Trust at the then appraised value of $17.00 per share for an aggregate sales price of approximately $1,000,000 and (ii) on January 17, 1995, Paul F. Shoen sold 50,632 shares of Common Stock to the ESOP Trust at the most recent closing price for the Common Stock trading on Nasdaq of $19.75 per share for an aggregate sales price of approximately $1,000,000. In addition, Paul F. Shoen, subject to certain limitations and restrictions, may also elect under the Paul Shoen Registration Rights Agreement to cause the Company to effect a registration under the Securities Act of 1933, as amended, and applicable state securities laws of shares of Common Stock held by him. Paul F. Shoen sold 500,000 shares of Common Stock to the public in March of 1995 pursuant to his registration rights. Paul F. Shoen is a major stockholder of the Company. On February 9, 1995, Paul F. Shoen executed a settlement agreement with the Company whereby Paul F. Shoen agreed to the dismissal of certain claims he had asserted in an arbitration proceeding and in an action in the United States District Court for the District of Nevada. In exchange for Paul F. Shoen's agreement to dismiss such claims, the Company agreed, among other things, to work in good faith toward appointing independent trustees for the ESOP and to place Paul F. Shoen on the management's slate of directors for the 1994 Annual Meeting of Stockholders. In addition, the settlement agreement provides for the Company to pay Paul F. Shoen $925,000 and for the Company to receive a full release of all claims by Paul F. Shoen through the settlement date, including but not limited to, claims for reimbursement of attorneys fees related to all matters to which Paul F. Shoen is or was a party. The terms of the settlement will not result in a material adverse effect of the Company's financial condition or results of operations. Pursuant to a Management Consulting Agreement, dated as of March 5, 1992, Paul F. Shoen agreed to provide management consulting services to the Company on matters relating to the Company's business and the organization and management of the Company. In consideration for these services, the Company has agreed to pay Paul F. Shoen a yearly fee of $200,000. A total of $100,000 was paid for the year ended March 31, 1995. The Management Consulting Agreement terminated on March 1, 1995. Management believes that these transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. 109 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (18) Supplemental Cash Flow Information The (increase) decrease in receivables, inventories and accounts payable and accrued liabilities net of other operating and investing activities follows: Year ended ------------------------------------ 1995 1994 1993 ------------------------------------ (in thousands) Receivables $ (57,645) (19,945) (4,508) ======= ======= ====== Inventories $ (1,325) 2,425 (4,664) ======= ======= ====== Accounts payable and accrued liabilities $ 3,549 11,538 (1,899) ======= ======= ====== Cash paid for income taxes amounted to $9,465,000, $3,275,000 and $303,000 for 1995, 1994 and 1993, respectively. Interest paid amounted to $67,191,000, $71,448,000 and $81,115,000 for 1995, 1994 and 1993, respectively. (19) Summarized Consolidated Financial Information of Ponderosa Holdings, Inc. and its Subsidiaries A summary consolidated balance sheet for Ponderosa Holdings, Inc. and its subsidiaries is presented below: December 31, ---------------- 1994 1993 ---------------- (in thousands) Investments - fixed maturities $ 705,428 719,605 Other investments 116,151 84,738 Receivables 136,527 138,049 Deferred policy acquisition costs 49,244 47,846 Due from affiliate 15,165 4,927 Deferred federal income taxes 12,090 8,350 Other assets 25,007 8,744 --------- --------- Total assets $ 1,059,612 1,012,259 ========= ========= Policy liabilities and accruals $ 411,249 380,424 Unearned premiums 63,938 58,842 Premium deposits 304,979 312,708 Other policyholders' funds and liabilities 25,739 13,399 --------- --------- Total liabilities 805,905 765,373 --------- --------- Stockholder's equity 253,707 246,886 --------- --------- Total liabilities and stockholder's equity $ 1,059,612 1,012,259 ========= ========= 110 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (19) Summarized Consolidated Financial Information of Ponderosa Holdings, Inc. and its Subsidiaries, continued A summarized consolidated income statement for Ponderosa Holdings, Inc. and subsidiaries is presented below: Year ended December 31, -------------------------------- 1994 1993 1992 -------------------------------- (in thousands) Premiums $ 156,963 142,347 118,206 Net investment income 43,096 40,019 40,817 Other income (loss) 5,958 7,447 10,495 ------- ------- ------- Total revenue 206,017 189,813 169,518 Benefits and losses 133,407 120,825 106,617 Amortization of deferred policy acquisition costs 10,896 9,343 9,352 Other expenses 28,816 29,834 24,993 ------- ------- ------- Income from operations 32,898 29,811 28,556 Federal income tax expense (9,460) (8,723) (7,387) ------- ------- ------- Earnings from operations before change in accounting principle 23,438 21,088 21,169 Cumulative effect of a change in accounting principle - (93) - ------- ------- ------- Net income $ 23,438 20,995 21,169 ======= ======= ======= Applicable laws and regulations of the State of Arizona require maintenance of minimum capital determined in accordance with statutory accounting practices in the amount of $400,000 for Oxford and $1,000,000 for RWIC. In addition, the amount of dividends which can be paid to shareholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus which can be distributed as dividends is $20,268,000 at December 31, 1994. The consolidated audited statutory net income for the years ended December 31, 1994, 1993 and 1992 was $20,858,000, $20,644,000 and $19,708,000, respectively; audited statutory capital and surplus was $205,699,000 and $176,194,000 at December 31, 1994 and 1993, respectively. (20) Industry Segment and Geographic Area Data Industry Segment Data - AMERCO's three industry segments are Rental operations, Life insurance and Property/Casualty insurance. Rental operations is composed of the operations of U-Haul International, Inc., which is engaged in the rental of various kinds of equipment and sales of related products and services. Life insurance is composed of the operations of Oxford Life Insurance Company which operates in various life, accident and health and annuity lines. Property/Casualty insurance is composed of the operations of Republic Western Insurance Company which operates in various property and casualty lines. 111 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (20) Industry Segment and Geographic Area Data, continued Information concerning operations by industry segment follows: Property/ Adjustments Rental Life Casualty and Operations Insurance Insurance Eliminations Consolidated ------------------------------------------------------------ (in thousands) 1995 - ---- Revenues: Outside $1,056,874 39,347 144,642 - 1,240,863 Intersegment (42) 1,444 20,657 (22,059) - --------- ------- ------- -------- --------- Total revenue $1,056,832 40,791 165,299 (22,059) 1,240,863 ========= ======= ======= ======== ========= Pretax operating profit $ 128,278 9,824 23,074 42 161,218 ========= ======= ======= ======== Interest expense 67,762 --------- Pretax earnings from operations 93,456 ========= Identifiable assets $1,827,995 479,778 579,821 (281,605) 2,605,989 ========= ======= ======= ======== ========= Depreciation/ amortization $ 150,187 4,790 8,913 - 163,890 ========= ======= ======= ======== ========= Capital expenditures $ 434,992 - - - 434,992 ========= ======= ======= ======== ========= 1994 - ---- Revenues: Outside $ 965,839 31,357 137,659 - 1,134,855 Intersegment (357) 2,834 18,862 (21,339) - --------- ------- ------- -------- --------- Total revenue $ 965,482 34,191 156,521 (21,339) 1,134,855 ========= ======= ======= ======== ========= Pretax operating profit $ 106,248 9,106 20,705 (698) 135,361 ========= ======= ======= ======== Interest expense 68,859 --------- Pretax earnings from operations 66,502 ========= Identifiable assets $1,593,044 461,464 550,795 (260,861) 2,344,442 ========= ======= ======= ======== ========= Depreciation/ amortization $ 137,220 4,277 7,243 - 148,740 ========= ======= ======= ======== ========= Capital expenditures $ 530,520 - - - 530,520 ========= ======= ======= ======== ========= 112 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (20) Industry Segment and Geographic Area Data, continued Property/ Adjustments Rental Life Casualty and Operations Insurance Insurance Eliminations Consolidated ------------------------------------------------------------ (in thousands) 1993 - ---- Revenues: Outside $ 891,599 33,619 115,693 - 1,040,911 Intersegment - 2,630 18,402 (21,032) - --------- ------- ------- -------- --------- Total revenue $ 891,599 36,249 134,095 (21,032) 1,040,911 ========= ======= ======= ======== ========= Pretax operating profit $ 88,581 12,325 16,231 - 117,137 ========= ======= ======= ======== Interest expense 67,958 --------- Pretax earnings from operations 49,179 ========= Identifiable assets $1,377,386 472,669 422,079 (248,111) 2,024,023 ========= ======= ======= ======== ========= Depreciation/ amortization $ 118,438 5,353 4,739 - 128,530 ========= ======= ======= ======== ========= Capital expenditures $ 130,841 - - - 130,841 ========= ======= ======= ======== ========= Geographic Area Data - United States Canada Consolidated --------------------------------------- (in thousands) 1995 - ---- Revenues $ 1,212,285 28,578 1,240,863 Pretax earnings (loss) from operations $ 90,378 3,078 93,456 Identifiable assets $ 2,552,564 53,425 2,605,989 1994 ---- Revenues $ 1,106,761 28,094 1,134,855 Pretax earnings (loss) from operations $ 65,919 583 66,502 Identifiable assets $ 2,298,948 45,494 2,344,442 1993 ---- Revenues $ 1,013,884 27,027 1,040,911 Pretax earnings (loss) from operations $ 49,855 (676) 49,179 Identifiable assets $ 1,983,419 40,604 2,024,023 113 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (21) Subsequent Events During April 1995, the Board of Directors approved the indemnification, to the fullest extent permitted by law, of each member of the Board's Special Committee. The Special Committee was established in December 1994 for the purpose of making recommendations to the full Board of Directors as to the fairness to the public shareholders of the Company of any proposed transaction which may be submitted by management. On May 2, 1995, the Company declared a cash dividend of $3,241,000 ($.53125 per preferred share) to preferred stockholders of record as of May 12, 1995. On May 31, 1995, the Company purchased 45,000 shares of common stock into treasury. See Notes 2, 5 and 14 for other subsequent event disclosures. 114 SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS Additional Information The following Summary of Earnings of Independent Trailer Fleets is presented for purposes of analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements by Price Waterhouse LLP, independent accountants, whose report thereon appears elsewhere herein.
Years Ended March 31, ---------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands except earnings per $100 of average investment) Earnings data (Note A): Fleet Owner income: Credited to Fleet Owner gross rental income $ 5,288 6,556 7,827 9,814 14,508 Credited to Distribution, Accident and Canadian Duty Fund (Note D) 66 71 114 118 247 ----- ----- ----- ----- ------ Total Fleet Owner income 5,354 6,627 7,941 9,932 14,755 ----- ----- ----- ----- ------ Fleet Owner operation expenses: Charged to Fleet Owner (Note C) 2,127 2,404 3,100 4,389 8,558 Charged to Distribution, Accident and Canadian Duty Funds (Note D) 234 237 290 274 456 ----- ----- ----- ----- ------ Total Fleet Owner operation expenses 2,361 2,641 3,390 4,663 9,014 ----- ----- ----- ----- ------ Fleet Owner earnings before Distribution Accident and Canadian Duty Funds credit, depreciation and income taxes 2,993 3,986 4,551 5,269 5,741 Distribution, Accident and Canadian Duty Funds credit (Note D) 168 165 176 156 209 ----- ----- ----- ----- ------ Net Fleet Owner earnings before depreciation and income taxes $ 3,161 4,151 4,727 5,425 5,950 ===== ===== ===== ===== ====== Investment data (Note A): Amount at end of year $ 4,382 5,257 6,332 7,749 9,914 ===== ===== ===== ===== ====== Average amount during year $ 4,820 5,668 6,976 8,911 10,459 ===== ===== ===== ===== ====== Net Fleet Owner earnings before depreciation and income taxes per $100 of average investment (Note B) $ 65.59 73.23 67.76 60.88 56.89 ===== ===== ===== ===== ====== The accompanying notes are an integral part of this Summary of Earnings of Independent Trailer Fleets. 115 NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS Additional Information (A) The accompanying Summary of Earnings of Independent Trailer Fleets includes the operations of trailers under the brand name of "U-Haul" owned by Independent Fleet Owners. Earnings data represent the aggregate results of operations before depreciation and taxes. Investment data represent the cost of trailers and investments before accumulated depreciation. Fleet Owner income is based on Rental Dealer reports of rentals transacted through the day preceding the last Monday of each month and received by U-Haul International, Inc. by the end of the month and affiliated Rental Company U-Haul Center reports of rentals transacted through the last day of each month. Payments to Fleet Owners for trailers lost or retired from rental service as a result of damage by accident have not been reflected in this summary because such payments do not relate to earnings before depreciation and income taxes but, rather, investment (depreciation). The investment data is based upon the cost of trailers to the Fleet Owners as reflected by sales records of affiliated manufacturing companies. (B) The summary of earnings data stated in terms of amount per $100 of average investment represents the aggregate results of operations (earnings data) divided by the average amount of investment during the periods. The average amount of investment is based upon a simple average of the month-end investment during each period. Average earnings data is not necessarily representative of an individual Fleet Owner's earnings. (C) A summary of operations expenses charged directly to Independent Fleet Owners follows: Year ended March 31, ---------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands) Licenses $ 503 520 593 686 833 Public liability insurance 320 392 510 1,047 1,657 Repairs and maintenance 1,304 1,492 1,997 2,656 6,068 ----- ----- ----- ----- ----- $ 2,127 2,404 3,100 4,389 8,558 ===== ===== ===== ===== ===== (D) The Fleet Owners, Rental Dealers, U-Haul International, Inc. and affiliated Rental Companies forego normal commissions on a portion of gross rental fees designated for transfer to the Distribution Fee Fund, the Accident Fund, and the Canadian Duty Fund. Designated expenses, otherwise chargeable to Fleet Owners, are paid from these Funds to the extent of the financial resources of the Funds. The amounts designated "Distribution, Accident and Canadian Duty Funds credit" in the accompanying summary of earnings represent Operator Contribution expenses borne by the Funds, which exceed Independent Fleetowner commissions foregone. 116 NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS, continued Additional Information (E) Commissions foregone for transfer to the Distribution, Accident and Canadian Duty Funds (net of fees in excess of expenses incurred) follows: Affiliated Fleet Owners ------------------------- Rental Affiliated Companies Companies Independent Total --------- --------- ----------- ----- (in thousands) Year ended: March 31, 1995 986 465 66 1,517 March 31, 1994 873 399 71 1,343 March 31, 1993 879 358 114 1,351 March 31, 1992 875 390 118 1,383 March 31, 1991 1,070 452 247 1,769 (F) A summary of Independent Fleet Owner expenses incurred by the Funds follows: Year ended March 31, 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands) Accident repairs $ 1,295 1,085 1,199 1,142 1,170 Distribution of trailers, paid from redistribution and Canadian duty fees 0 0 0 37 124 ----- ----- ----- ----- ----- Total Fleet Owner expenditures 1,295 1,085 1,199 1,179 1,294 Less portion allocated to fleets owned by affiliated companies 1,061 848 909 905 838 ----- ----- ----- ----- ----- Total Independent Fleet Owner expenses paid by funds 234 237 290 274 456 Add portion allocated to fleets owned by affiliated companies 1,061 848 909 905 838 Return of investment (accident reimbursement) 222 258 152 204 475 ----- ----- ----- ----- ----- Total expenses incurred by Funds $ 1,517 1,343 1,351 1,383 1,769 ===== ===== ===== ===== =====
117 Schedule I Condensed Financial Information of Registrant AMERCO Balance Sheets March 31, 1995 1994 ----------------- (in thousands) Assets - ------ Cash $ 5,967 1,084 Investment in subsidiaries 527,050 468,254 Due from unconsolidated subsidiaries 1,077,014 985,539 Other assets 6,042 9,254 --------- --------- $ 1,616,073 1,464,131 ========= ========= Liabilities and Stockholders' Equity - ------------------------------------ Liabilities: Notes and loans $ 811,562 722,518 Other liabilities 103,029 80,495 --------- --------- Stockholders' equity: Preferred stock - - Common stock 10,000 10,000 Additional paid-in capital 165,675 165,651 Foreign currency translation (12,435) (11,152) Net unrealized gain (loss) on investments (6,483) 679 Retained earnings: Beginning of year 514,521 482,163 Net earnings 60,032 40,184 Dividends paid (12,964) (7,826) --------- --------- 561,589 514,521 Less: Cost of common shares in treasury 10,461 10,461 Unearned employee stock ownership plan shares 6,403 8,120 --------- --------- Total stockholders' equity 701,482 661,118 --------- --------- $ 1,616,073 1,464,131 ========= ========= See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. 118 Schedule I, continued Condensed Financial Information of Registrant AMERCO Statements of Earnings Years Ended March 31, 1995 1994 1993 ------------------------------ (in thousands except per share data) Revenues - -------- Net interest income from subsidiaries $ 66,050 68,327 67,014 Other revenue 465 753 233 ---------- ---------- ---------- Total revenues 66,515 69,080 67,247 ---------- ---------- ---------- Expenses - -------- Interest expense 66,050 68,327 67,014 Other expenses 11,515 9,565 9,082 ---------- ---------- ---------- Total expenses 77,565 77,892 76,096 ---------- ---------- ---------- Operating income (loss) (11,050) (8,812) (8,849) Equity in earnings (losses) of unconsolidated subsidiaries 102,583 71,659 57,514 Income tax benefit (expense) (31,501) (19,293) (16,756) Extraordinary loss on early extinguishment of debt, net - (3,370) - ---------- ---------- ---------- Net earnings $ 60,032 40,184 31,909 ========== ========== ========== Earnings per common share $ 1.23 .89 .83 ========== ========== ========== Weighted average common shares outstanding 38,190,552 38,664,063 38,664,063 ========== ========== ========== See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. 119 Schedule I, continued Condensed Financial Information of Registrant AMERCO Statements of Cash Flows Years Ended March 31, 1995 1994 1993 ------------------------------ (in thousands) Cash flows from operating activities: Net earnings $ 60,032 40,184 31,909 Amortization, net 545 850 1,231 Equity in earnings (losses) of subsidiaries 67,139 49,288 38,419 (Increase) decrease in amounts due from unconsolidated subsidiaries (91,475) (197,093) 10,914 Net change in operating assets and liabilities (100,961) (53,872) (46,605) Other, net (8,194) (3,945) (3,843) ---------- ---------- --------- Net cash provided (used) by operations (72,914) (164,588) 32,025 ---------- ---------- --------- Cash flows from financing activities: Net change in short term borrowings 178,750 21,750 3,000 Proceeds from notes - 186,000 55,000 Proceeds from Leveraged Employee Stock Ownership Plan 1,717 1,717 1,718 Principal payments on notes (89,706) (179,905) (89,704) Issuance of preferred stock - 146,320 - Dividends paid (12,964) (7,900) (1,994) Extraordinary loss on early extinguishment of debt - (3,370) - ---------- ---------- --------- Net cash provided (used) by financing activities 77,797 164,612 (31,980) ---------- ---------- --------- Increase (Decrease) in cash 4,883 24 45 Cash at beginning of year 1,084 1,060 1,015 ---------- ---------- --------- Cash at end of year $ 5,967 1,084 1,060 ========== ========== ========= Income taxes paid in cash amounted to $8,794,000, $3,025,000 and $42,000 for 1995, 1994 and 1993, respectively. Interest paid in cash amounted to $65,840,000, $81,115,000 and $80,365,000 for 1995, 1994 and 1993, respectively. See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. 120 Schedule I, continued Condensed Financial Information of Registrant AMERCO Notes to Condensed Financial Information March 31, 1995, 1994 and 1993 (1) Summary of Significant Accounting Policies AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the holding company of all companies affiliated with the U-Haul Rental System. The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Form 10-K. The Company is included in a consolidated Federal income tax return with all of its U.S. subsidiaries. Accordingly, the provision for income taxes has been calculated for Federal income taxes of the Registrant and subsidiaries included in the consolidated return of the Registrant excluding Oxford Life Insurance Company (Oxford) and Republic Western Insurance Company (RWIC). State taxes for all subsidiaries and Federal taxes for Oxford and RWIC are allocated to the respective subsidiaries. The financial statements include only the accounts of the Registrant (a Nevada corporation), which include certain of the corporate operations of AMERCO. The debt and related interest expense of the Registrant have been allocated to the consolidated subsidiaries. The intercompany interest income and expenses are eliminated in the consolidated financial statements. (2) Guarantees AMERCO has guaranteed performance of fleet owner contract obligations of U-Haul International, Inc., a wholly-owned subsidiary, and residual values on certain long-term leases. See Notes 8 and 13 of Notes to Consolidated Financial Statements. 121 Schedule I, continued Condensed Financial Information of Registrant AMERCO Notes to Condensed Financial Information March 31, 1995, 1994 and 1993 (3) Notes and Loans Payable Notes and loans payable consist of the following: Year end ----------------- 1995 1994 ----------------- (in thousands) Medium-term notes payable 8.50% to 11.50% interest rates, due through 2000 $ 169,270 198,870 Note payable to insurance companies 5.89% to 10.27% interest rates, due through 2006 270,000 281,000 Notes payable to banks 5.38% to 5.67% interest rates, due through 1999 45,700 94,800 Other notes payable 9.50% interest rate, due through 2005 92 98 Unsecured notes payable to banks under revolving lines of credit 6.43% to 6.74% interest rates 293,000 97,750 Other short-term promissory notes 33,500 50,000 ------- ------- $ 811,562 722,518 ======= ======= For additional information, see Note 5 of Notes to Consolidated Financial Statements. 122 Schedule II AMERCO and Consolidated Subsidiaries Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other than Related Parties March 31, 1995
Deductions ---------- Balance at Amounts Amounts Balance at Debtor March 31, 1994 Additions collected written off March 31, 1995 ------ -------------- --------- --------- ----------- -------------- SAC Self-Storage Corporation - $57,063,393 - - $57,063,393 ============= ========== ======== ========== ============ TWO SAC Self-Storage - $ 8,191,536 - - $ 8,191,536 ============= ========== ======== ========== ============
Mark V. Shoen, a Director of AMERCO and major shareholder of AMERCO is the sole voting shareholder of SAC Self-Storage Corporation and TWO SAC Self- Storage Corporation. 123 Schedule V AMERCO AND CONSOLIDATED SUBSIDIARIES Supplemental Information (For Property-Casualty Insurance Underwriters) Years ended December 31, 1994, 1993 and 1992
Reserves Amorti- for Unpaid zation Paid Claims Claims and of Claims Deferred and Claim Adjustment Deferred and Policy Claim Net Net Expenses Incurred Policy Claim Net Affiliation Acqui- Adjust- Discount Earned Invest- Related to Acqui- Adjust- Premiums With sition ment if any, Unearned Premiums ment Current Prior sition ment Written Year Registrant Costs Expenses Deducted Premiums (1) Income Year Year Costs Expenses (2) ---- ---------- ----- -------- -------- -------- --------- ------ ---- ---- ----- -------- -------- (in thousands) 95 Consolidated property - casualty entity $ 8,973 329,741 N/A 63,938 112,862 29,026 102,782 6,576 6,644 92,651 119,952 94 Consolidated property - casualty entity 6,644 314,482 N/A 58,842 105,801 27,446 91,044 12,688 5,377 104,123 113,672 93 Consolidated property - casualty entity 5,377 238,762 N/A 39,094 82,721 29,320 96,451 (4,241) 3,570 89,467 97,348 (1) The earned premiums are reported net of intersegment transactions. Earned premiums eliminated in consolidation amount to $20,575,000, $18,798,000 and $18,344,000 for the years ended 1995, 1994 and 1993, respectively. (2) The premiums written are reported net of intersegment transactions. Premiums written eliminated in consolidation amount to $19,407,000, $18,335,000 and $18,616,000 for the years ended 1995, 1994 and 1993, respectively.
124 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERCO By: /S/ EDWARD J. SHOEN ---------------------------------- Edward J. Shoen Chairman of the Board Dated: June 26, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /S/ EDWARD J. SHOEN Chairman of the Board June 26, 1995 - -------------------------- (Principal Executive Edward J. Shoen Officer) /S/ GARY B. HORTON Principal Financial June 26, 1995 - -------------------------- and Accounting Officer Gary B. Horton /S/ MARK V. SHOEN Director June 26, 1995 - -------------------------- Mark V. Shoen /S/ JAMES P. SHOEN Director June 26, 1995 - -------------------------- James P. Shoen /S/ RICHARD J. HERRERA Director June 26, 1995 - -------------------------- Richard J. Herrera /S/ CHARLES J. BAYER Director June 26, 1995 - -------------------------- Charles J. Bayer EX-2 2 DISCLOS ST PLAN OF REORG 1 EXHIBIT 2 --------- IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ARIZONA In re: ) In Proceedings Under Chapter 11 ) EDWARD J. SHOEN, ) Case No. 95-1430-PHX-JMM ) Debtor. ) ) - ------------------------------) ) In re: ) ) JAMES P. SHOEN, ) Case No. 95-1431-PHX-JMM ) Debtor. ) ) - ------------------------------) In re: ) ) AUBREY K. JOHNSON, ) Case No. 95-1432-PHX-CGC ) Debtor. ) ) - ------------------------------) ) In re: ) ) JOHN M. DODDS, ) Case No. 95-1433-PHX-RGM ) Debtor. ) ) - ------------------------------) ) In re: ) ) WILLIAM E. CARTY, ) Case No. 1434-PHX-GBN ) (Jointly Administered Debtor. ) Case No. 95-1430-PHX-JMM) ) - ------------------------------) DISCLOSURE STATEMENT FOR DEBTOR'S PLAN OF ----------------------------------------- REORGANIZATION PROPOSED BY EDWARD J. SHOEN ------------------------------------------ DATED: April 25, 1995 John J. Dawson, Esq. (Az Bar No. 002786) Susan G. Boswell, Esq. (Az Bar No. 004791) Ronald E. Reinsel, Esq. (Az Bar No. 011059) STREICH LANG, P.A. Renaissance One Two North Central Avenue Phoenix, Arizona 85004-2391 Attorneys for EDWARD J. SHOEN, Debtor and Debtor-In-Possession 2 I. INTRODUCTION. ------------ On February 21, 1995, Edward J. Shoen ("Debtor") filed his voluntary petition under Chapter 11 of the Bankruptcy Code, thereby commencing this Chapter 11 bankruptcy case. The Debtor has prepared this Disclosure Statement in connection with the solicitation of acceptances of the "Debtor's Plan Of ---------------- Reorganization Proposed By Edward J. Shoen" (the "Plan"). A copy - ------------------------------------------ of the Plan is attached to this Disclosure Statement as Exhibit "B", and is hereby incorporated by this reference. Capitalized terms used herein have the same meanings as defined in the Plan and the Bankruptcy Code. Terms defined in this Disclosure Statement which are also defined in the Plan are solely for convenience; and the Debtor does not intend to change the definitions of those terms from the Plan. If there is any inconsistency between the Plan and this Disclosure Statement, the Plan is, and will be, controlling. II. INFORMATION REGARDING PLAN AND DISCLOSURE STATEMENT. --------------------------------------------------- The objective of a Chapter 11 case is the confirmation (i.e., approval by the Bankruptcy Court) of a plan of ---- reorganization. A plan describes in detail (and in language appropriate for a legal contract) the means for satisfying the claims against, and interests in, a debtor. After a plan has been filed, the holders of such claims and interests are permitted to vote to accept or reject the plan. Before a debtor can solicit acceptances of a plan, Bankruptcy Code (SECTION)1125 requires the debtor to prepare a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable those parties entitled to vote on the plan to make an informed judgment about the plan and whether they should accept or reject the plan. The purpose of this Disclosure Statement is to provide sufficient information about the Debtor and the Plan to enable you to make an informed decision in exercising your right to accept or reject the Plan. Therefore, this Disclosure Statement provides relevant information about the Debtor, his property, his financial situation, and the Plan. 3 This Disclosure Statement will be used to solicit acceptances of the Plan only after the Bankruptcy Court has entered an order approving this Disclosure Statement. Bankruptcy Court approval of this Disclosure Statement means only that the Bankruptcy Court has found that this Disclosure Statement meets the statutory requirement of Bankruptcy Code (SECTION)1125 to provide adequate information. Such approval by the Bankruptcy Court is not an opinion or ruling on any other merits of this Disclosure Statement; and it does not mean that the Plan has been approved, or will be approved, by the Bankruptcy Court. After this Disclosure Statement has been approved by the Bankruptcy Court and there has been voting on the Plan, there will be a hearing on the Plan to determine whether it should be confirmed. At the hearing, the Bankruptcy Court will consider whether the Plan satisfies the various requirements of the Bankruptcy Code. The Bankruptcy Court also will receive and consider a ballot report prepared by the Debtor which will present a tally of the votes accepting or rejecting the Plan cast by those entitled to vote. Once confirmed, the Plan is treated essentially as a new contract and is binding on all Creditors and other parties in interest in the Debtor's reorganization case. THIS DISCLOSURE STATEMENT IS NOT THE PLAN. FOR THE CONVENIENCE OF CREDITORS, THE PLAN IS SUMMARIZED IN THIS DISCLOSURE STATEMENT. ALL SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THE PLAN ITSELF, WHICH IS ATTACHED TO THIS DISCLOSURE STATEMENT. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THIS DISCLOSURE STATEMENT AND THE PLAN, THE PLAN WILL CONTROL. The Bankruptcy Court will hold a hearing on confirmation of the Plan; and before that hearing the report of Ballots cast will be prepared and filed with the Bankruptcy Court. Accordingly, all votes are important because they can determine whether the Plan will be confirmed. III. REPRESENTATIONS. --------------- This Disclosure Statement has not been subject to a certified audit but has been prepared in part from information compiled by the Debtor from records maintained in the ordinary course of his personal financial affairs, from 4 information provided by AMERCO, a Nevada corporation (herein referred to as "AMERCO") or from information received from other third parties. Every effort has been made to be as accurate as possible in the preparation of this Disclosure Statement. Other than as stated in this Disclosure Statement, the Debtor has not authorized any representations or assurances concerning: (i) the Debtor; (ii) his financial affairs and assets; (iii) the operations of AMERCO pertaining only to the funding of the Plan by AMERCO in the satisfaction of the Shareholder Plaintiffs' Claims; or (iv) the value of his assets. Therefore, in deciding to accept or reject the Plan, you should not rely on any information relating to the Debtor or the Plan other than that contained in this Disclosure Statement (or in the Plan itself). You should report any unauthorized representations or inducements to counsel for the Debtor, who may present such information to the Bankruptcy Court for action as may be appropriate. This is a solicitation by the Debtor only and is not a solicitation by his attorneys, agents, financial advisors, accountants, or any other professionals employed by the Debtor. IV. VOTING PROCEDURES AND REQUIREMENTS. ---------------------------------- A. WHO IS ENTITLED TO VOTE. ----------------------- If you are the holder of an Allowed Claim which is "impaired" under the Plan, you are entitled to vote to accept or reject the Plan. Accordingly, to be entitled to vote, your Claim must be both "allowed" and "impaired." 1. ALLOWED CLAIMS. -------------- You have an Allowed Claim if: (i) you timely filed a proof of claim and no objection has been filed to your Claim; (ii) you timely filed a proof of claim, an objection was filed to your Claim, and the Bankruptcy Court has ruled and allowed your Claim; (iii) your Claim is listed by the Debtor in his Schedules (which are on file with the Bankruptcy Court as a public record) as liquidated - -------------------------- The Debtor is an officer and Director of AMERCO. AMERCO and/or one or more of its subsidiaries or affiliates is providing the funding for satisfaction of the Shareholder Plaintiffs' claims as discussed more fully in Section V., infra. ----- 5 in amount and undisputed and no objection has been filed to your Claim; or (iv) your Claim is listed by the Debtor in his Schedules as liquidated in amount and undisputed, an objection was filed to your Claim, and the Bankruptcy Court has ruled and allowed your Claim. If your Claim is not an Allowed Claim, it is a Disputed Claim; and you will not be entitled to vote on the Plan unless the Bankruptcy Court temporarily or provisionally allows or estimates your Claim for voting purposes pursuant to Rule 3018, Federal Rules of Bankruptcy Procedure. If you are uncertain regarding the status of your Claim, you should check the Bankruptcy Court record carefully, including the Debtor's Schedules; and you should seek appropriate legal advice if you have any dispute with the Debtor. The Debtor and his professionals cannot advise you about such matters. 2. IMPAIRED CLAIMS. --------------- Claims are "impaired" when the full amounts of the Allowed Claims will not be paid under the Plan, or when the holders' legal, equitable, or contractual rights are otherwise altered by the Plan. Holders of Claims which are not "impaired" under the Plan are deemed to have accepted the Plan pursuant to Bankruptcy Code (SECTION)1126(f); and their acceptances of the Plan need not be solicited. B. PROCEDURES FOR VOTING. --------------------- 1. SUBMISSION OF BALLOTS. --------------------- All Creditors whose votes are solicited will be sent a Ballot (together with instructions for voting) with a copy of this Disclosure Statement, as approved by the Bankruptcy Court, and a copy of the Plan. You should read the Ballot carefully and follow the instructions contained therein. Please use only the Ballot which was sent with this Disclosure Statement. You should complete your Ballot and return it to: STREICH LANG, P.A. One Renaissance Two North Central Avenue Phoenix, Arizona 85004-2391 Telephone Number: (602) 229-5200 Telefax Number: (602) 229-5690 Attn: Ronald E. Reinsel, Esq. 6 TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED AT THE ADDRESS LISTED ABOVE BY 5:00 P.M., MOUNTAIN STANDARD TIME, ON [WILL INSERT DATE ----------------- SET BY COURT ORDER]. ------------------- A properly addressed and stamped return envelope will be included with your Ballot. However, if the need arises, the telefax number where your Ballot must be returned also is given above. 2. EFFECT ON VOTING OF ELECTION OF CREDITOR ---------------------------------------- SETTLEMENT OPTION. ----------------- The Plan provides for an election by the Shareholder Plaintiffs whose Claims are classified in Classes 3A, 3B, 3C, 3D, 3E, 3F, and 3G to participate in the Accepting Creditor Settlement. The election is to be made at the time such Creditor casts his or her ballot to accept or reject the Plan. If the Creditor elects the Accepting Creditor Settlement, such Creditor is deemed to have accepted the Plan and the vote will count as an acceptance. A Creditor cannot, however, accept the Accepting Creditor Settlement and vote to reject the Plan. 3. INCOMPLETE BALLOTS. ------------------ Unless otherwise ordered by the Bankruptcy Court, Ballots which are signed, dated, and timely received, but on which a vote to accept or reject the Plan has not been indicated, will be counted as a vote to accept the Plan. 4. WITHDRAWAL OF BALLOTS. --------------------- A Ballot, including any election therein, may not be withdrawn or changed after it is cast, unless the Bankruptcy Court permits you to do so after notice and a hearing to determine whether sufficient cause exists to permit the change. 5. QUESTIONS AND LOST OR DAMAGED BALLOTS. ------------------------------------- If you have any questions concerning voting procedures, if your Ballot is damaged or lost, or if you believe you should have received a Ballot but did not receive one, you may contact Ronald E. Reinsel, Esq. at the address and telephone or telefax numbers listed above. 7 C. SUMMARY OF VOTING REQUIREMENTS. ------------------------------ In order for the Plan to be confirmed, the Plan must be accepted by at least one impaired class of Claims. For a class of Claims to vote to accept the Plan, votes representing at least two- thirds (2/3) in amount and a majority in number of the Claims voted in that class must be cast for acceptance of the Plan. As more fully described in Article XII of this Disclosure Statement, the Debtor is seeking acceptances from holders of Allowed Claims in the following classes which are or may be "impaired" under the Plan, provided, however, that the Debtor will have the right to supplement - ----------------------- this Disclosure Statement as to any other impaired classes, if any. CLASS DESCRIPTION ----- ----------- 3 Stock Transfer Claims, including Classes 3A through 3G inclusive 4 General Unsecured Claims 5 Punitive Damage Claim 6 Securities Litigation Claims 7 Stock Transfer Judgment Codebtor Claims IT IS IMPORTANT THAT HOLDERS OF ALLOWED IMPAIRED CLAIMS EXERCISE THEIR RIGHTS TO VOTE TO ACCEPT OR REJECT THE PLAN. The specific treatment of each Class under the Plan is described in the Plan and is summarized in Article IX of this Disclosure Statement. Bankruptcy Code (SECTION)1129(b) provides that, if the Plan is rejected by one or more impaired classes of Claims, the Plan (or any modification thereof) nevertheless may be confirmed by the Bankruptcy Court if the Bankruptcy Court determines that the Plan does not discriminate unfairly and is fair and equitable with respect to the rejecting class or classes of Claims impaired under the Plan. A VOTE FOR ACCEPTANCE OF THE PLAN BY THOSE HOLDERS OF A CLAIM WHO ARE ENTITLED TO VOTE IS MOST IMPORTANT. THE DEBTOR ASSERTS THAT THE TREATMENT OF CREDITORS UNDER THE PLAN IS THE BEST ALTERNATIVE FOR CREDITORS AND THE DEBTOR RECOMMENDS THAT THE HOLDERS OF ALLOWED CLAIMS VOTE IN FAVOR OF THE PLAN. V. OVERVIEW OF THE PLAN. -------------------- The following is a general overview of the Plan and certain provisions of the Plan. This overview has been prepared to describe the Plan and some of its more pertinent provisions in basic terms; and the Debtor does not 8 offer it as a comprehensive analysis of the Plan, which is a complicated legal document. A more extensive narrative of the Plan is provided in Article IX of this Disclosure Statement; but even that description is still a summary and is subject to and controlled by the Plan itself. If it is important to you to understand every nuance of the Plan as a complicated and precise legal contract, you are urged to read the Plan in its entirety and to consult with legal counsel to understand the Plan fully. A. GENERAL STRUCTURE OF THE PLAN. ----------------------------- The Plan proposes the reorganization of the Debtor and his Estate. The Debtor, when he becomes the Reorganized Debtor, will be responsible for all obligations of the Debtor as provided under the Plan. The Debtor proposes to implement the Plan by restructuring and satisfying his obligations to both his secured and unsecured creditors. 1. INCIDENT LEADING TO THE FILING OF THE ------------------------------------- CHAPTER 11 CASE. --------------- On August 2, 1988, Leonard S. Shoen, Samuel W. Shoen, M.D., Michael L. Shoen, Mary Anna Shoen Eaton, Cecilia M. Shoen Hanlon, Katrina M. Shoen Carlson, Theresa Shoen Romero and the following Arizona corporations: L.S.S., Inc., Samwill, Inc., Mickl, Inc., Maran, Inc., Cemar, Inc., Kattydid, Inc., and Thermar, Inc. (collectively the "Shareholder Plaintiffs"), instituted an action against Edward J. Shoen, Paul F. Shoen, James P. Shoen, Aubrey K. Johnson, William E. Carty, and John M. Dodds, all of whom were directors of AMERCO at the time (the "Director Defendants"). The Shareholder Plaintiffs alleged various breaches of fiduciary duty and other unlawful conduct by the - -------------------------- The Shareholder Plaintiffs collectively own 18,254,976 shares of AMERCO common stock. Before a 1988 stock sale (which was a subject of the Arizona Litigation) the Shareholder Plaintiffs owned approximately 49.66% of the common stock of AMERCO. The term "Director Defendants" is defined in the Plan as, and collectively comprises, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William H. Carty who are the debtors in these jointly administered Chapter 11 cases. Paul F. Shoen was also a defendant in the Arizona Litigation, and is also a party against whom the Stock Transfer Judgment has been rendered. The Debtor is informed and believes, as the preparation date of the Plan, that Paul F. Shoen has not sought bankruptcy relief. 9 individual Director Defendants in their capacity as directors of AMERCO and sought equitable relief, compensatory damages, and punitive damages (the "Arizona Litigation"). Prior to trial and pursuant to rulings by the Court in the Arizona Litigation, the Shareholder Plaintiffs elected a remedy which requires a forced sale of all of their common stock in AMERCO to the Director Defendants. The price was to be determined based on the value of those shares (the "Stock Transfer Claim" as defined in the Plan) as determined in the Arizona Litigation. On October 7, 1994, the jury in the Arizona Litigation returned its verdict against the Director Defendants finding (in addition to liability) that the value of the Shareholder Plaintiffs' shares of AMERCO stock was $81.12 per share or approximately $1.48 billion. The jury also awarded the Shareholder Plaintiffs $70 million in punitive damages against the Debtor. On February 2, 1995, The Honorable Thomas Dunevant III, who presided over the Arizona Litigation, ruled, among other things, that the jury's award of damages against the Director Defendants was excessive because it was based upon an excessive valuation of the Shareholder Plaintiffs' shares of stock. Accordingly, a remittitur of the verdict against the Director Defendants was granted and the verdict was reduced to $461,838,000 plus interest from February 14, 1995 at the rate of ten percent (10%) per annum plus taxable costs (the "Stock Transfer Judgment"). In addition, the verdict against the Debtor for punitive damages was remitted to $7,000,000. The Shareholder Plaintiffs accepted these remitted amounts. Prior to entry of the Stock Transfer Judgment, the Debtor was solvent and paying his debts as they became due. However, the entry of the Stock Transfer Judgment, for which the Debtor is jointly and severally liable, caused the Debtor to become insolvent and in need of reorganization, and the Debtor and - ------------------------- At the time relevant to the complaint, AMERCO's common stock was privately held. Thus, the value of the Shareholder Plaintiffs'shares could not be determined by reference to stock reports. 10 the four other Director Defendants were forced to file petitions for protection under Chapter 11 of the Bankruptcy Code on February 21, 1995. The Stock Transfer Judgment provides for a judicially ordered sale of the Shareholder Plaintiffs' AMERCO common stock. Specifically, the Stock Transfer Judgment provides that the Debtor and the other Director Defendants, jointly and severally, must pay the monetary obligations owing to the respective Shareholder Plaintiffs under that judgment (i.e., the total principal amount of ---- $461,838,000, plus accrued interest and taxable costs, as allocated to each of the Shareholder Plaintiffs according to each of their proportionate stock interests (defined in the Plan as the "Stock Transfer Judgment Amount")). In return, the Stock Transfer Judgment requires all of the Shareholder Plaintiffs to transfer their AMERCO common stock to the Director Defendants or their designee. 2. SUMMARY OF PLAN. --------------- The Claims of the Shareholder Plaintiffs pursuant to the Stock Transfer Judgment are Disputed Claims with respect to the liability of the Debtor and the other Director Defendants for the Stock Transfer Judgment Amount. The Debtor and the other Director Defendants have, among other remedies, unexpired rights to appeal the Stock Transfer Judgment Amount. In addition, the Punitive Damage Claim is a Disputed Claim, and the Debtor has already filed a notice appeal in the Arizona Court of Appeals with respect to the Punitive Damage Claim. The Debtor and the other Director Defendants hold indemnification claims against AMERCO which may apply to the Stock Transfer Judgment; and they have preserved and scheduled those indemnification claims in their respective Chapter 11 cases. At the same time, the Debtor and the other Director Defendants have not attempted to make demands upon and prosecute their indemnification claims against AMERCO because: (i) they believe that the enforcement of such indemnification claims against AMERCO probably would require protracted and expensive litigation against AMERCO and against other parties (e.g., various other AMERCO ---- stockholders) who may try to prevent AMERCO from performing its 11 indemnification agreements with the Director Defendants; (ii) they believe that the eventual outcome of that litigation is uncertain; and (iii) they believe that the ultimate collectibility of any indemnification judgment (if and when such a judgment is obtained) is uncertain. Pursuant to AMERCO's corporate bylaws, AMERCO has certain rights of first refusal with respect to certain sales of the Shareholder Plaintiffs' AMERCO common stock, including the purchase of that stock by the Debtor and the other Director Defendants. Moreover, the Director Defendants' rights to purchase the Shareholder Plaintiffs' AMERCO common stock pursuant to the Stock Transfer Judgment may present a corporate opportunity which AMERCO is entitled to exercise. In the context of the facts and circumstances described above, the Debtor and the other Director Defendants, in cooperation with AMERCO, have proposed in their respective plans of reorganization the following funding and treatment of the Shareholder Plaintiffs' Disputed Claims under the Stock Transfer Judgment: 1. In full settlement and satisfaction of the Shareholder Plaintiffs' Disputed Claims under the Stock Transfer Judgment, on the Plan's Effective Date (as defined therein), the Debtor and the other Director Defendants will transfer to the Shareholder Plaintiffs (pursuant to the Stock Transfer Trust defined in the Plan) property having either a stipulated or adjudicated value equal to the full amount which the Shareholder Plaintiffs are entitled to recover from the insolvent estates of the Debtor and the other Director Defendants on account of the Shareholder Plaintiffs' Disputed Claims for the Stock Transfer Judgment Amount. Specifically, the stipulated or adjudicated value of the property transferred will be $461,838,000, plus interest thereon at the rate of 10% per year from February 14, 1995 to and including the February 21, 1995 - ------------------------- See Article IX(A) (Class 6) for a discussion of certain litigation --- which is pending against the Debtor and the other Director Defendants arising out of the Stock Transfer Judgment and the possibility that AMERCO would indemnify the Debtor and the other Director Defendants for liability arising out of the Stock Transfer Judgment. 12 Petition Date, plus any taxable costs awarded in the Arizona Litigation (defined collectively as the "Shareholder Plaintiffs' Effective Date Payoff"). 2. Alternatively, and in lieu of their respective proportionate shares of the property comprising the Shareholder Plaintiffs' Effective Date Payoff, each of the Shareholder Plaintiffs may elect to participate in the Accepting Creditor Settlement and receive discounted cash payments on the Effective Date in full settlement and satisfaction of their respective Disputed Claims. The total discounted cash payments available to the Shareholder Plaintiffs will be $350,000,000; and the Shareholder Plaintiffs voluntarily choosing to participate in the Accepting Creditor Settlement will receive shares of $350,000,000 in the same proportions as their otherwise applicable shares of the Shareholder Plaintiffs' Effective Date Payoff. If any Shareholder Plaintiffs accept the discounted cash payoff on the Effective Date, the Shareholder Plaintiffs' Effective Date Payoff will be reduced by what otherwise would be the proportionate share of each settling Shareholder Plaintiff. 3. AMERCO will be the funding source of the property comprising the Shareholder Plaintiffs' Effective Date Payoff and the alternatively available discounted cash payments. 4. On the Effective Date, all of the Shareholder Plaintiffs' AMERCO common stock will be transferred to an entity which will be designated prior to the Effective Date. 5. The Punitive Damage Claim will be satisfied, when and if it becomes an Allowed Claim in any amount, in full, by payments of Cash or property either to the Disbursing Agent (if the Punitive Damage Claim has become as Allowed Claim at the time of payment) or to the Impoundment Trust (if the Punitive Damage Claim has not become an Allowed Claim at the time of Payment). Exclusive of the Shareholder Plaintiffs and/or their Disputed Claims under the Stock Transfer Judgment, the Debtor deals with the Claims of other - ------------------------- See Exhibit "A", which is attached to this Disclosure Statement --- and is hereby incorporated herein, for a detailed description of the property which is going to be transferred to the Stock Transfer Trust in satisfaction of the Disputed Claims of the Shareholder Plaintiffs. 13 Creditors in the Plan. With respect to these other Claims and Creditors, the Debtor proposes to implement the Plan by making payments from income earned after the Petition Date and/or by selling or transferring other assets of the Debtor or the Debtor's Estate--all as provided in the Plan and described in more detail below. The Debtor's implementation of the Plan will include, but is not limited to, obtaining final adjudications of any other Claims which are disputed Claims (whether by stipulations or after litigation and the exhaustion of appellate rights and remedies). VI. SIGNIFICANT EVENTS DURING THE REORGANIZATION CASES. -------------------------------------------------- A. JOINT ADMINISTRATION. -------------------- On or about February 22, 1995, the Debtor and the other Director Defendants filed a Joint Motion for the joint administration of their respective Chapter 11 cases or for the assignment of certain of the cases to the Honorable James M. Marlar pursuant to Bankruptcy Local Rule 5005(c). On March 30, 1995, the Bankruptcy Court entered an Order administratively consolidating the five cases, with all matters to be docketed in Case No. 95- 1430-PHX-JMM. B. EMPLOYMENT OF PROFESSIONALS. --------------------------- As of the date of this Disclosure Statement, the Debtor has employed Streich Lang, P.A. as the general bankruptcy counsel to the Debtor, which employment was approved by Order of the Bankruptcy Court. C. APPEAL OF PUNITIVE DAMAGE CLAIM. ------------------------------- On or about March 23, 1995, the Debtor filed an appeal of the Punitive Damage Claim with the Arizona Court of Appeals. Because of the recent filing, briefs in support and opposition of the appeal have not been submitted. Accordingly, it is not possible to predict when the appeal will be resolved. D. APPOINTMENT OF UNSECURED COMMITTEE. ---------------------------------- On April 11, 1995, the United States Trustee appointed the Unsecured Committee, allegedly to represent the interests of the Unsecured Creditors. - ------------------------- At the time the Reorganization Cases were filed, the first two (and the lowest numbered cases--the Debtor's and James P. Shoen's) were assigned to Judge Marlar. 14 The Creditors appointed to the Unsecured Committee are all Shareholder Plaintiffs who are also insiders of the Debtor. In addition, the Shareholder Plaintiffs are not representative of the other general unsecured creditors. Accordingly, the Debtor and the other Director Defendants intend to object to the appointment. E. PLAN AND DISCLOSURE STATEMENT. ----------------------------- The Debtor and the other Director Defendants filed their Plans within approximately sixty (60) days of the Petition Date. F. COMPLAINT FOR INJUNCTIVE RELIEF. ------------------------------- Contemporaneously with the filing of the Plan and this Disclosure Statement, the Debtor and other Director Defendants filed a Complaint against AMERCO and the Shareholder Plaintiffs in the Bankruptcy Court seeking injunctive relief pertaining to the impending Shareholders' annual meeting and election of certain members of the AMERCO Board of Directors. Specifically, the Director Defendants are asking the Bankruptcy Court either to: (i) maintain the status quo by enjoining AMERCO from holding the annual meeting until after the Plan has been confirmed, or (ii) enjoin the Shareholder Plaintiffs from voting at such annual meeting on the election of members of the AMERCO Board of Directors. The Shareholder Plaintiffs had expressed (even after the Stock Transfer Judgment was entered) and continue to express their desire to change management of AMERCO even though they will no longer be shareholders of AMERCO with voting rights. Accordingly, since AMERCO is funding the satisfaction of the Stock Transfer Claims, it is in the best interests of all Creditors of the Director Defendants and AMERCO that there not be a disruption in management by shareholders who will shortly be divested of their stock through satisfaction in full of their Stock Transfer Claims. VII. THE PRESENT CONDITION OF THE DEBTOR IN CHAPTER 11. ------------------------------------------------- Pursuant to the automatic stay of Bankruptcy Code (SECTION)362(a), the Shareholder Plaintiffs are stayed from commencing collection actions against the Debtor to enforce the Stock Transfer Judgment during the pendency of this case, or until the Bankruptcy Court grants relief from the automatic stay. In addition, by operation of the automatic stay the Director Defendants have 15 unexpired appeal rights relating to the Stock Transfer Judgment. During this time AMERCO is arranging the funding of the Plan with respect to the Stock Transfer Claim. In addition, the Debtor is paying his post-petition obligations as they become due in the ordinary course of his personal financial affairs. It is not anticipated that the Debtor will have any difficulty in continuing to do so throughout the pendency of this case. VIII. THE ANTICIPATED FUTURE OF THE DEBTOR. ------------------------------------ Once the Stock Transfer Claim is satisfied and extinguished pursuant to the Plan, the Debtor will once again be solvent and able to pay his debts as they become due. The Debtor, after satisfaction of the Stock Transfer Claim, will be able to satisfy all of his obligations other than the Stock Transfer Judgment from his assets and future income. In addition, the Debtor anticipates that after the Effective Date his future income and other assets will enable him to remain solvent and continue to pay his debts as they become due. Thus, the Debtor will not need any further financial reorganization. IX. DESCRIPTION OF THE PLAN. ----------------------- The following is a general description of the Plan and certain provisions of the Plan. This description has been prepared to describe the Plan and some of its more pertinent provisions in basic terms; and the Debtor does not offer it as a comprehensive analysis of the Plan, which is a complicated legal document. If it is important to you to understand every nuance of the Plan as a complicated and precise legal contract, you are urged to read the Plan in its entirety and to consult with legal counsel to understand the Plan fully. The following description of the Plan is for informational purposes only and does not purport to change or supersede any of the specific contractual language of the Plan. THE PLAN IS CONTROLLING IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE CONTENTS OF THE PLAN AND THE CONTENTS OF THIS DISCLOSURE STATEMENT. A. CLASSIFICATION AND TREATMENT OF CLAIMS UNDER THE PLAN. ----------------------------------------------------- CLASS 1: ADMINISTRATIVE CLAIMS. The Class 1 Claims will ------------------------------- be all Claims which are Administrative Claims, including all Professional Charges of Chapter 11 professionals. The holder of every Class 1 Administrative Claim will 16 be paid fully and in cash on the Effective Date if the Claim is then an Allowed Claim, or fully and in cash (including any interest allowed by the Bankruptcy Court) when and if the Claim becomes an Allowed Claim after the Effective Date, or as otherwise agreed in writing by the holder of the Allowed Claim or ordered by the Bankruptcy Court. Every Allowed Class 1 Claim for an operating expense of the Debtor incurred in the ordinary course of the Debtor's business will be paid fully and in cash in the ordinary course of such business. The likely sources of the payments of all Allowed Class 1 Administrative Claims will be: (a) AMERCO, as to Professional Charges; and (b) the Debtor's post-petition income, as to all other Class 1 Administrative Claims. Accordingly, Class 1 Administrative Claims are UNIMPAIRED pursuant to the Plan and Bankruptcy Code ---------- (SECTION)1124, 11 U.S.C. (SECTION)1124. CLASS 2: PRIORITY UNSECURED CLAIMS. The Class 2 Claims ----------------------------------- will be all Claims which are Priority Unsecured Claims. The likely sources of the payments of all such Allowed Claims, if there are any such Allowed Claims, will be the Debtor's post-petition income. The holder of every Class 2 Priority Unsecured Claim will be paid: (i) fully and in cash on the Effective Date if the Claim is then an Allowed Claim; (ii) fully and in cash (including any interest allowed by the Bankruptcy Court) when and if the Claim becomes an Allowed Claim after the Effective Date; (iii) fully and in cash (including any interest allowed by the Bankruptcy Court) with respect to any Allowed Claim for unpaid taxes of the kind provided in Bankruptcy Code (SECTION)507(a)(8), 11 U.S.C. (SECTION)507(a)(8), provided, however, that as permitted by Bankruptcy Code (SECTION)1129(a)(9), - ----------------------- 11 U.S.C. (SECTION)1129(a)(9), any such Allowed Claim will be paid in deferred quarterly cash payments of principal and market rate interest payable in arrears over a period of six (6) years from and after the date of assessment of such Claim; or (iv) as otherwise agreed in writing by the holder of the Allowed Claim or ordered by the Bankruptcy Court. Any disputes between the Debtor and the Creditors holding Priority Unsecured Claims will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. The Debtor proposes eight percent (8%) per year as an appropriate market rate of interest. Accordingly, Class 2 Claims are UNIMPAIRED ---------- 17 pursuant to the Plan and Bankruptcy Code (SECTION)1124, 11 U.S.C. (SECTION)1124. The Debtor has scheduled $244,000 in unliquidated, contingent and disputed Unsecured Priority Claims. CLASS 3: STOCK TRANSFER CLAIMS. ------------------------------- CLASS 3A: L.S. SHOEN AND/OR LSS, INC. STOCK TRANSFER CLAIMS. ------------------------------------------------------------ The Class 3A Claims will be all Claims of L.S. Shoen and/or LSS, Inc. which are Stock Transfer Claims. CLASS 3B: SAMUEL W. SHOEN AND/OR SAMWILL, INC. STOCK TRANSFER -------------------------------------------------------------- CLAIMS. The Class 3B Claims will be all Claims of Samuel W. Shoen ------ and/or SAMWILL, Inc. which are Stock Transfer Claims. Class 3C: MICHAEL L. SHOEN AND/OR MICKL, INC. STOCK TRANSFER ------------------------------------------------------------- CLAIMS. The Class 3C Claims will be all Claims of Michael L. Shoen ------ and/or MICKL, Inc. which are Stock Transfer Claims. CLASS 3D: MARY ANNA EATON AND/OR MARAN, INS. STOCK TRANSFER ------------------------------------------------------------ CLAIMS. The Class 3D Claims will be all Claims of Mary Anna Eaton ------ and/or MARAN, Inc. which are Stock Transfer Claims. CLASS 3E: CECILIA HANLON AND/OR CEMAR, INS. STOCK TRANSFER ----------------------------------------------------------- CLAIMS. The Class 3E Claims will be all Claims of Cecilia Hanlon ------ and/or CEMAR, Inc. which are Stock Transfer Claims. CLASS 3F: THERESA ROMERO AND/OR THERMAR, INC. STOCK TRANSFER ------------------------------------------------------------- CLAIMS. The Class 3F Claims will be all Claims of Theresa Romero ------ and/or THERMAR, Inc. which are Stock Transfer Claims. CLASS 3G: KATRINA CARLSON AND/OR KATTYDID, INC. STOCK TRANSFER --------------------------------------------------------------- CLAIMS. The Class 3G Claims will be all Claims of Katrina Carlson ------ and/or KATTYDID, Inc. which are Stock Transfer Claims. The description of the treatment of the Stock Transfer Claims and of the source of funding to satisfy the Stock Transfer Claims is set forth in detail in Exhibit "A" which is attached hereto and by this reference incorporated herein. The Class 3A - 3G Claims are IMPAIRED pursuant to the Plan. The Class 3A - 3G -------- Claims collectively, if allowed in full, are $461,838,000 plus interest 18 at the rate of ten percent (10%) per year from February 14, 1995 to the Petition Date and taxable costs. CLASS 4: GENERAL UNSECURED CLAIMS. The Class 4 Claims ----------------------------------- will be all Claims which are General Unsecured Claims. Holders of Allowed Class 4 Claims will be paid in full, along with a market rate of interest, in three installments: 1) on the Effective Date; 2) on or before the six (6) month anniversary of the Effective Date; and 3) on or before the one (1) year anniversary of the Effective Date. These payments will be pro rata distributions and -------- subject to reserves for Class 4 Claims which may be Disputed Claims. As an appropriate market rate of interest the Debtor has proposed eight percent (8%) per year; however, any dispute as to an appropriate market rate of interest will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. The likely source of the payments of the Allowed Class 4 General Unsecured Claims will be the Debtor's post-petition income. The General Unsecured Claims which comprise the Class 4 Claims are IMPAIRED pursuant to the Plan. The Debtor has scheduled - -------- approximately $55,302 in unliquidated, contingent and disputed Class 4 Claims. CLASS 5: PUNITIVE DAMAGE CLAIMS. Class 5 Claims will be -------------------------------- all Claims which comprise the Punitive Damage Claim. The Punitive Damage Claim is a Disputed Claim and will be treated and paid (if, when, and to the extent it is an Allowed Claim) pursuant to Class 5 under the Plan as follows: on the Effective Date, and annually for ten years thereafter, the Debtor will pay into an Impoundment Trust money or property which will be sufficient to amortize and pay in full the Punitive Damages Claim, including a market-rate of interest (from the Effective Date), over a period of ten years. Subject to such amortization, the entire unpaid balance, together with any unpaid interest, will be fully due and payable on the tenth (10th) anniversary of the Effective Date. When and if the Punitive Damage Claim becomes an Allowed Claim, the deposits in the Impoundment Trust (including any interest thereon) will be disbursed pro rata to the Creditors holding the Punitive Damage -------- Claim based upon their proportionate 19 interests in the Impoundment Trust. Thereafter, if the Punitive Damage Claim has not been fully paid pursuant to the Plan, the payment to the holders of the Allowed Claim will be paid directly, and the Impoundment Trust will terminate. If the Debtor has deposited property (as opposed to money) into the Impoundment Trust, the Reorganized Debtor will have ninety (90) days after the Punitive Damage Claim becomes an Allowed Claim to sell, liquidate or otherwise dispose of such property and pay cash equal to the value of the property to the Impoundment Trust prior to its distribution to the holders of Allowed Claims. The Debtor has proposed eight percent (8%) per year as an appropriate market interest rate for the Punitive Damage Claim; however, any dispute regarding the appropriate market interest rate will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. The likely source of the payments of the Punitive Damage Claim will be the future income and property of the Debtor. The Punitive Damage Claim which comprises the Class 6 Claim is IMPAIRED -------- pursuant to the Plan. The punitive damages awarded in the Arizona Litigation, which the Debtor scheduled in the amount of $7,000,000, are unliquidated, contingent and disputed Class 5 Claims. The Punitive Damage Claim is on appeal. CLASS 6: SECURITIES LITIGATION CLAIMS. The Class 6 --------------------------------------- Claims will be all Claims which are Securities Litigation Claims. The Securities Litigation Claims, which are Disputed Claims, will be treated and paid (when, if, and to the extent that they are Allowed Claims) pursuant to Class 6 of the Plan, are subject to subordination pursuant to Bankruptcy Code (SECTION)510(b), 11 U.S.C. (SECTION)510(b), and will be subordinated to all other Claims for purposes of distribution under the Plan. The Securities Litigation Claims are Disputed Claims that were asserted subsequent to the jury's verdict in the Arizona Litigation. Specifically, certain holders of preferred stock in AMERCO (collectively, the "Nevada Plaintiffs") filed four (4) separate lawsuits against AMERCO, the Debtor, and certain of the other Director Defendants in the United States District Court for the District of Nevada (collectively, the "Securities Litigation"). The Nevada Plaintiffs primarily seek relief for alleged securities violations arising from 20 the purchase and sale of AMERCO preferred stock. One of the four (4) lawsuits comprising the Securities Litigation is a derivative action purportedly brought on behalf of AMERCO (the "Derivative Lawsuit") wherein the plaintiffs also sought an injunction in the Nevada District Court (the "Injunction Proceedings") to prevent AMERCO from indemnifying any of the Director Defendants from any liability arising from the Arizona Litigation. The Securities Litigation and the Injunction Proceedings were stayed by the filing of the Chapter 11 reorganization cases pursuant to 11 U.S.C. (SECTION)362(a); and the plaintiffs in the Derivative Lawsuit have agreed to stay the Injunction Proceedings pursuant to a standstill agreement with the Debtor and the other defendants. The Debtor believes that the claims asserted in the Securities Litigation are unfounded, disputes the Securities Litigation Claims, and believes that there will be no recovery on the Securities Litigation Claims when and if those claims are finally adjudicated. As, when, and to the extent that a Securities Litigation Claim becomes an Allowed Claim, it will be treated and paid, with an allowed market rate of interest, over a period of ten (10) years. The Debtor has proposed eight percent (8%) as an appropriate market interest rate which, if there is a dispute, will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. The likely source of the payments of the Securities Litigation Claim will be, to the extent that such Claim is not satisfied through any right of contribution, reimbursement, or payment by any other party or entity, the post-petition income and property of the Debtor. The Securities Litigation Claims which comprise the Class 6 Claim are IMPAIRED pursuant to the Plan. -------- CLASS 7: STOCK TRANSFER JUDGMENT CODEBTOR CLAIMS. -------------------------------------------------- Class 7 Stock Transfer Judgment Codebtor Claims will be all Claims against the Debtor which are asserted by the Creditor to arise from rights of contribution or reimbursement (including, but not limited to, subrogation rights) with respect to payment and/or settlement and satisfaction of the Stock Transfer Judgment. In light of the treatment of the Stock Transfer Claims provided in the Plan, the 21 Debtor does not believe that there are (or will be) any Stock Transfer Judgment Codebtor Claims which are (or will become) Allowed Claims against the Debtor. Such claims, if any, until allowed, will be Disputed Claims, and no distributions of any kind will be made on account of any Stock Transfer Judgment Codebtor Claims. As, when, and to the extent that the Stock Transfer Judgment Codebtor Claims become Allowed Claims, they will be treated and paid in full, including any accrued interest thereon, in equal annual installments by the tenth (10th) anniversary of the Effective Date. Subject to the above-stated amortization provisions, the entire unpaid balance of all Stock Transfer Judgment Codebtor Claims (if any) which become Allowed Claims, including any unpaid interest, will be due and payable on the tenth (10th) anniversary of the Effective Date. The Stock Transfer Judgment Codebtor Claims (if allowed) will bear interest at a market rate of interest from and after the later of: (i) the Effective Date; or (ii) the date on which the Claim becomes an Allowed Claim. If there is any dispute between the Debtor and the Creditors holding such Claims regarding the appropriate market interest rate, that dispute will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. As an appropriate market interest rate, the Debtor proposes eight percent (8%) per year. To the extent that any Allowed Stock Transfer Judgment Codebtor Claim is not satisfied by or through any rights to contribution, reimbursement, or payment by any other individual or entity (all of which the Debtor and the Reorganized Debtor expressly reserve), the likely source of the payments of any Allowed Securities Litigation Claim will be the post-petition income and property of the Reorganized Debtor. The Stock Transfer Judgment Codebtor Claims which comprise the Class 7 Claims are IMPAIRED pursuant to the Plan. - -------- CLASS 8: DEBTOR'S EQUITY INTEREST. The Class 8 equity ----------------------------------- interest will be the equity interest of the Debtor, who is an individual. Subject to the provisions of the Plan providing for payment in full of the Creditors holding the Allowed Claims in Classes 1 through 7, the Debtor will retain all of his equity 22 interest which will revest in the Reorganized Debtor on the Effective Date. The Class 8 equity interest is or may be UNIMPAIRED pursuant to the Plan. - ---------- B. SUMMARY OF OTHER PLAN PROVISIONS. -------------------------------- 1. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. ----------------------------------------------------- Before the Confirmation Hearing, the Debtor will file one or more motions identifying the Executory Contracts which he intends to assume as of the Confirmation Date and those which he intends to reject as of the Confirmation Date; and such motions and the Bankruptcy Court's orders thereon will be deemed incorporated in the Plan. All Executory Contracts which are assumed will be vested in the Reorganized Debtor as of the Effective Date. 2. EFFECTIVE DATE OF THE PLAN. -------------------------- The "Effective Date" of the Plan determines when the performance of many of the obligations under the Plan are due. The Effective Date is defined in the Plan. The Debtor expects that the Plan will be effective by the first Business Day (as defined herein) after January 1, 1996 (although nothing in the Plan prohibits an earlier or later Effective Date as the circumstances of the case may permit or require). In light of the provisions regarding the Shareholder Plaintiffs' Effective Date Payoff or the alternative discounted cash payments, the Plan will be substantially consummated on the Effective Date. 3. MEANS FOR IMPLEMENTATION OF THE PLAN. ------------------------------------ Whenever the Plan requires a payment (whether by payment of Cash or transfer of property) to be made, such payment will be deemed made and effective upon tender thereof by the Debtor or the Reorganized Debtor to the Creditor to which payment is due, or in the case of the Stock Transfer Trust, when the transfer by AMERCO of the Stock Transfer Trust Property is completed. If any Creditor refuses a tender, the amount tendered and refused will be held by the Debtor, or the Reorganized Debtor, or the Stock Transfer Trust for the benefit of that Creditor pending final adjudication of the dispute. However, when and if the dispute is finally adjudicated and the Creditor receives the funds or property previously tendered and refused, the Creditor will be obliged to apply the funds or 23 property in accordance with the Plan as of the date of the tender; and while a dispute is pending and after adjudication thereof, the Creditor will not have the right to claim interest or other charges on account of the tendered amount or to exercise any other right which would be enforceable by the Creditor if the Debtor failed to pay the tendered payment, or make the tendered property transfer. 4. PROVISIONS REGARDING DISTRIBUTIONS UNDER THE PLAN. ------------------------------------------------- No payments or other distributions will be made to Creditors unless and until their Claims are Allowed Claims. Under the Plan, the Debtor or the Reorganized Debtor can object to the allowance of any Claim which is not already an Allowed Claim on the Confirmation Date. If the Debtor objects to a Claim, the Claim will be treated as a Disputed Claim until the objection has been settled or fully adjudicated, although the Bankruptcy Court may estimate or temporarily allow the Disputed Claim (e.g., for ---- purposes of voting). 5. CLAIMS AGAINST THIRD PARTIES. ---------------------------- Under the Plan, the Debtor will retain any and all claims, actions, defenses, counterclaims, setoffs, and recoupments belonging to the Debtor or his Estate. As such, the Debtor may enforce, compromise, settle, release, or otherwise dispose of such rights and claims as he may deem appropriate in his considered business judgment, including, without limitation, any and all claims, actions, defenses, counterclaims, setoffs, and recoupments held by the Debtor or its Estate against: (i) any other Person against which the Debtor or the Reorganized Debtor may hold a claim; and (ii) any governmental unit for tax protests and similar claims. Notwithstanding the above-stated reservation of rights, and the powers to exercise those rights, and when and if requested by AMERCO, the Reorganized Debtor will transfer and assign to AMERCO, wholly or in part, all rights of contribution or reimbursement against other individuals or entities arising from or related to the Stock Transfer Judgment. Such assigned rights will or may include, without limitation, all Claims (if any) of the Debtor and the other Director Defendants against each other which otherwise would be (or might be) Stock Transfer Judgment Codebtor Claims and all similar rights and claims against Paul F. Shoen, 24 provided, however, that any rights and claims against Paul F. Shoen - ----------------------- first will be set off and recouped by the Debtor and the Reorganized Debtor against any Stock Transfer Judgment Codebtor Claim which that individual may assert. 6. MODIFICATION OF THE PLAN. ------------------------ The Debtor or the Reorganized Debtor may modify the Plan from time to time in accordance with, and pursuant to, Bankruptcy Code (SECTION)1127. 7. DISCHARGE OF THE DEBTOR. ----------------------- Unless otherwise expressly stated in the Plan, distributions to holders of Claims under the Plan are in full discharge and satisfaction of those Claims against the Debtor. Moreover, on the Effective Date of the Plan, all Claims against the Debtor which arose prior to the entry of the Confirmation Order will be discharged pursuant to Bankruptcy Code (SECTION)1141(d). Accordingly, except for performance of the Plan, holders of Claims cannot assert any further Claims against the Debtor based on any such discharged Claims and any rights, remedies, demands, damages, or liabilities of any kind arising from or related to any such discharged Claims. 8. RETENTION OF JURISDICTION. ------------------------- The Plan provides that the Bankruptcy Court will (or may) retain jurisdiction over certain matters, including, without limitation: (i) determining the allowance and payment of Claims; (ii) determining any disputes regarding the interpretation of any provision of the Plan; (iii) enforcing any provision of the Plan; (iv) adjudicating any causes of action or other proceedings pending in the Bankruptcy Court or otherwise referenced in the Plan; (v) entering a final decree; (vi) implementing and enforcing the Confirmation Order; (vii) determining any motions regarding assumption or rejection of Executory Contracts, including unexpired leases; and (viii) hearing and adjudicating any motions, adversary actions, contested matters or disputes regarding the organization of, the funding of, or the settlement of, the Stock Transfer Trust, if the Debtor is a party or real party-in-interest to the dispute. 25 9. VESTING. ------- As of the Effective Date, the Reorganized Debtor will be vested with all property of the Debtor and its Estate, free and clear of all Claims, liens, security interests, assignments, encumbrances, charges, and other interests of Creditors (except those Creditors whose Claims have been restructured and/or whose liens survive as provided in the Plan, and except where the Bankruptcy Court has retained jurisdiction regarding any specified matter). After the Effective Date, the Reorganized Debtor will be free of any restrictions imposed by the Bankruptcy Code. 10. SUCCESSORS AND ASSIGNS. ---------------------- The rights and obligations of any holder of a Claim referred to in the Plan will bind and inure to the benefit of that holder's successors, assigns, heirs, devisees, executors, and personal representatives. 11. PREFERENCE ANALYSIS. ------------------- The Debtor does not believe that there are any transactions subject to recovery or avoidance as preferences pursuant to Bankruptcy Code (SECTION)547. Furthermore, the Debtor does not believe that there have been any transactions between the Debtor and his insiders within one (1) year before the Petition Date in which any insider has received any avoidable transfer from the Debtor. X. CERTAIN INCOME TAX CONSEQUENCES. ------------------------------- Under the Internal Revenue Code of 1986, as amended (the "Code"), there may be federal income tax issues arising under the Plan described in this Disclosure Statement. It is not practicable to present a detailed explanation of the possible federal income tax ramifications of the Plan, particularly in light of differences in the nature of the Claims of various Creditors, their methods of tax accounting, and prior actions taken by Creditors with respect to their Claims. The federal income tax consequences to any particular Creditor may be affected by special considerations unique to that Creditor and certain types of Creditors may be subject to special tax rules. THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN MANY AREAS, UNCERTAIN. 26 ACCORDINGLY, ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH SPECIFIC REFERENCE TO THE FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF THE PLAN WITH RESPECT TO SUCH HOLDER. NEITHER THE DEBTOR NOR THE DEBTOR'S COUNSEL MAKES ANY REPRESENTATIONS REGARDING THE PARTICULAR TAX CONSEQUENCES OF CONFIRMATION AND CONSUMMATION OF THE PLAN AS TO ANY CREDITOR. XI. INTEREST RATE ANALYSIS. ---------------------- The Debtor believes that, wherever the Plan provides for post-Effective Date interest payments to the various Classes of Creditors (other than interest payments which the Shareholder Plaintiffs may receive from the Stock Transfer Trust Property), the Debtor has proposed appropriate market interest rates. Since the Shareholder Plaintiffs (whether they are beneficiaries of the Stock Transfer Trust or accept the Creditor Settlement Option) are not receiving deferred payments pursuant to the Plan, this discussion of interest rates does not apply to such Shareholder Plaintiffs. Moreover, the interest rates proposed by the Debtor in the Plan are offered rates. If there is a dispute regarding whether any interest rate proposed by the Debtor is an appropriate market interest rate, the final determination will be made by the Bankruptcy Court at or in conjunction with the Confirmation Hearing; and the Reorganized Debtor will pay what the Bankruptcy Court determines to be the market interest rate(s). Accordingly, the Debtor has proposed eight percent (8%) per year as the appropriate market interest rate for the Class 2 Priority Unsecured Claims; the Class 4 General Unsecured Claims; the Class 5 Punitive Damage Claim; the Class 6 Securities Litigation Claims; and the Class 7 Stock Transfer Judgment Codebtor Claims. The Debtor considers that proposed interest rate to be commensurate with the legitimate expectations of unsecured Creditors regarding payment of their Claims, the general market conditions bearing on claims of this type, and the present value thereof on the Effective Date. XII. CONFIRMATION OF THE PLAN. ------------------------ A. CONFIRMATION HEARING. -------------------- Pursuant to Bankruptcy Code (SECTION)1128(a), the Bankruptcy Court will hold a hearing regarding confirmation of the Plan at the 27 time and place determined by the Bankruptcy Court with notice to all Creditors, the Debtor and other interested parties. B. OBJECTIONS TO CONFIRMATION OF THE PLAN. -------------------------------------- Bankruptcy Code (SECTION)1128(b) provides that any party in interest may object to confirmation of a plan. Any objection(s) to confirmation of the Plan must be in writing; must state with specificity the grounds for any such objections; and must be filed with the Bankruptcy Court and served upon the following parties so as to be received on or before the time fixed by the Bankruptcy Court: Debtor: STREICH LANG, P.A. One Renaissance Two North Central Avenue Phoenix, Arizona 85004-2391 Telefax Number: 602-229-5690 Attention: Ronald E. Reinsel, Esq. United States Trustee: OFFICE OF THE UNITED STATES TRUSTEE Department of Justice Adrianne Kalyna, Esq. 320 North Central Avenue, Suite 100 Phoenix, Arizona 85004-2196 C. REQUIREMENTS FOR CONFIRMATION OF THE PLAN. ----------------------------------------- For the Plan to be confirmed, the Plan must satisfy the requirements stated in Bankruptcy Code (SECTION)1129. In this regard, the Plan must satisfy, among other things, the following requirements: 1. BEST INTERESTS OF CREDITORS AND LIQUIDATION ANALYSIS. ---------------------------------------------------- Pursuant to Bankruptcy Code (SECTION)1129(a)(7), for the Plan to be confirmed, it must provide that Creditors will receive at least as much under the Plan as they would receive in a liquidation of the Debtor under Chapter 7 of the Bankruptcy Code. Because all Creditors will have their Allowed Claims satisfied in full pursuant to the Plan (together with appropriate market rates of interest from and after the Effective Date or the date of allowance), the Debtor believes that the distributions to Creditors under the Plan will exceed the recoveries which Creditors would receive in a Chapter 7 liquidation of the Debtor and its Estate. 28 The Debtor is insolvent, and the Debtor will fund payments under the Plan (other than payments to the Shareholder Plaintiffs pursuant to the Stock Transfer Judgment) not only by selling or transferring assets of the Debtor or the Estate, but also by making payments from post-petition income. The Debtor's post-petition income would not be available to pay Allowed Claims in a Chapter 7 liquidation of the Debtor's Estate. In addition, Creditors holding General Unsecured Claims would not receive interest on those Claims in a Chapter 7 liquidation. Thus, Creditors with General Unsecured Claims will receive more under the Debtor's Plan than they would in a Chapter 7 liquidation. There is no guarantee that AMERCO would or could indemnify the Debtor and the other Director Defendants for the Stock Transfer Judgment in a Chapter 7 case. In light of facts and circumstances discussed in preceding sections of this Disclosure Statement, enforcement of any such indemnification rights against AMERCO by a Chapter 7 Trustee is questionable. Without AMERCO's cooperation and agreement to fund the treatment of the Stock Transfer Claim through the Director Defendants' Chapter 11 reorganization cases, a Chapter 7 Trustee would not be able to satisfy the Stock Transfer Judgment in a Chapter 7 liquidation. Thus, the Shareholder Plaintiffs will receive more through the Debtor's Plan than they would in a Chapter 7 liquidation. Based on the above analysis, the Debtor asserts that the Plan provides an equal or better return to Creditors than they could otherwise receive under Chapter 7 and, thus, the "best interests of creditors" test has been satisfied. Notwithstanding the Debtor's belief that the Plan provides an equal or better return to Creditors than they could otherwise receive under Chapter 7, there is no assurance that the Bankruptcy Court will conclude that the "best interests of creditors" test has been met. The test will be the subject of evidence presented in conjunction with the Confirmation Hearing. 2. FEASIBILITY. ----------- Bankruptcy Code (SECTION)1129(a)(11) includes what is commonly described as the "feasibility" standard. When the feasibility standard applies, it requires that confirmation of a plan will not be followed by liquidation or the need for further financial 29 reorganization unless the plan provides for that alternative. The Debtor believes that his Plan satisfies the feasibility requirements of Bankruptcy Code (SECTION)1129(a)(11). As discussed in detail in Exhibit "A", AMERCO is funding the satisfaction of the Stock Transfer Judgment. In addition, the Debtor has a demonstrated and steady source of post-petition income with which to fund the other payments required under the Plan. 3. ACCEPTING IMPAIRED CLASS. ------------------------ For the Plan to be confirmed, the Plan must be accepted by at least one impaired Class of Claims. For an impaired Class of Claims to accept the Plan, votes representing at least two-thirds (2/3) in amount and a majority in number of the Allowed Claims voted in that Class must be cast for acceptance of the Plan (not including the votes of insiders of the Debtor). D. CONFIRMATION OVER DISSENTING CLASS (CRAM DOWN). ---------------------------------------------- Even if an impaired Class of Claims does not accept the Plan, the Bankruptcy Court nevertheless may confirm the Plan at the Debtor's request. Bankruptcy Code (SECTION)1129(b) provides that if all other requirements of Bankruptcy Code (SECTION)1129(a) are satisfied and if the Bankruptcy Court finds that: (i) the Plan does not discriminate unfairly; and (ii) the Plan is fair and equitable with respect to the rejecting Class(es) of Claims which are impaired under the Plan, the Bankruptcy Court may confirm the Plan despite the rejection of the Plan by a dissenting impaired Class. 1. NO UNFAIR DISCRIMINATION. ------------------------ A plan of reorganization "does not discriminate unfairly" if: (i) the legal rights of a non-accepting class are treated in a manner that is consistent with the treatment of other classes whose legal rights are related to those of the non-accepting class; and (ii) no class receives payments in excess of those which it is legally entitled to receive on account of its Claims. The Debtor asserts that under the Plan: (a) all Classes of impaired Claims are being treated in a manner which is consistent with the treatment of other similar Classes of Claims; and (b) no Class of Claims will receive payments or property with an aggregate value greater than the sum of the Allowed Claims in the Class. 30 The Debtor believes that the Plan does not discriminate unfairly as to any impaired Class of Claims. 2. FAIR AND EQUITABLE. ------------------ The Bankruptcy Code establishes different "fair and equitable" tests for Secured Creditors and Unsecured Creditors, as follows: a. SECURED CREDITORS. ----------------- Either: (i) each impaired Secured Creditor retains its lien and receives deferred cash payments having a present value equal to the amount of its Allowed Secured Claim; (ii) each impaired Secured Creditor realizes the "indubitable equivalent" of its Allowed Secured Claim; or (iii) the property securing the Claim is sold free and clear of liens (subject to Bankruptcy Code (SECTION)363(k) credit bidding rights) with such liens attaching to the sale proceeds, and those liens are treated in accordance with clause (i) or (ii) of this subsection. b. UNSECURED CREDITORS. ------------------- Either: (i) each impaired Unsecured Creditor receives or retains under the Plan property of a value equal to the amount of its Allowed Claim as of the Effective Date; or (ii) the holders of Claims which are junior to the Claims of the non-accepting Class do not receive any property under the Plan on account of such Claims and (except as may be permitted by the new value corollary to the absolute priority rule). Since the Plan provides for payment and satisfaction in full of all Allowed Claims, the new value corollary to the absolute priority rule does not apply in this Reorganization Case. The Debtor believes that the Plan satisfies the "fair and equitable" test with respect to all impaired Classes. The Debtor has requested, if necessary, confirmation of the Plan pursuant to Bankruptcy Code (SECTION)1129(b) with respect to any impaired Class of Claims which does not vote to accept the Plan. The Debtor believes that the Plan satisfies all of the statutory requirements for confirmation as discussed above; that the Debtor has complied or will have complied with all the statutory requirements for confirmation of the Plan; and that the Plan is proposed in good faith. At the hearing on confirmation of the 31 Plan, the Bankruptcy Court will determine whether the Plan satisfies the statutory requirements for confirmation of the Plan. XIII. ALTERNATIVES TO THE PLAN. ------------------------ The Debtor believes that the Plan and the debt restructures contemplated therein will enable the Debtor to reorganize successfully. In the course of his Chapter 11 case, the Debtor has considered alternatives to the Plan, including liquidation under Chapter 7 of the Bankruptcy Code. Under Chapter 7, a trustee would sell the assets of the Estate (or Secured Creditors would foreclose). The trustee would be entitled to administrative fees of up to three percent (3%) of the sales proceeds (in addition to paying standard commissions, closing costs, and other expenses). The Debtor believes that the Plan provides the greatest possible recovery to all Creditors. Accordingly, the Debtor believes that the Plan, as described herein, enables all Creditors to receive the most value under the circumstances. 32 XIV. RECOMMENDATION AND CONCLUSION. ----------------------------- The Debtor recommends that all Creditors which are entitled to vote on the Plan should vote to accept the Plan. DATED this 25th day of April, 1995. /S/ EDWARD J. SHOEN ---------------------------------- EDWARD J. SHOEN PREPARED AND SUBMITTED BY: STREICH LANG A Professional Association One Renaissance Two North Central Avenue Phoenix, Arizona 85004-2391 (602) 229-5200 By /S/ JOHN J. DAWSON ----------------------------- John J. Dawson Susan G. Boswell Ronald E. Reinsel Attorneys for EDWARD J. SHOEN, Debtor and Debtor-In-Possession 33 EXHIBIT "A" ---------- SUMMARY OF PLAN PROVISIONS REGARDING THE CLASS 3A, 3B, 3C, 3D, 3E, 3F AND 3G CLAIMS A. OVERVIEW OF PLAN TREATMENT OF CLASS 3A, 3B, 3C, 3D,3E, ------------------------------------------------------ 3F AND 3G CLAIMS. ---------------- The Class 3A, 3B, 3C, 3D, 3E, 3F and 3G Claims consist of the Claims held by the Shareholder Plaintiffs as a result of the Stock Transfer Judgment (the "Stock Transfer Claims"). The Director Defendants, including the Debtor, were defendants in the Arizona Litigation which resulted in the Stock Transfer Judgment. The Stock Transfer Judgment provides for a judicially ordered sale of the Shareholder Plaintiffs' AMERCO common stock. Specifically, the Stock Transfer Judgment requires the Director Defendants, jointly and severally, to pay the monetary obligations of the Stock Transfer Judgment in the total principal amount of $461,838,000, plus accrued interest and taxable costs, as allocated to each of the Shareholder Plaintiffs, according to each of their proportionate stock interests. In turn, the Stock Transfer Judgment requires each of the Shareholder Plaintiffs to transfer their AMERCO common stock to the Director Defendants or their designees. The Stock Transfer Claims are Disputed Claims with respect to the monetary obligations due pursuant to the Stock Transfer Judgment. The Debtor has, among other remedies, unexpired rights to appeal the Stock Transfer Judgment Amount. The Director Defendants hold indemnification claims against AMERCO; and the Debtor has preserved and scheduled those indemnification claims in his Reorganization Case. At the same time, the Debtor and the other Director Defendants have not attempted to make demand upon and prosecute their indemnification claims because: (i) they believe that the enforcement of such indemnification claims against AMERCO would probably require protracted and expensive litigation against AMERCO and against other parties such as various other AMERCO stockholders who would try to prevent AMERCO from performing its indemnification agreements with the Director Defendants; (ii) the eventual outcome of such litigation is uncertain; and (iii) they believe the ultimate collectability of any indemnification judgment, if and when obtained, is uncertain. 34 Pursuant to AMERCO's corporate by-laws, AMERCO has certain rights of first refusal with the respect to sales of the Shareholder Plaintiffs' common stock in AMERCO and the purchase of that stock by the Director Defendants or certain other parties. Moreover, the Director Defendants' rights to purchase the Shareholder Plaintiffs' AMERCO common stock pursuant to the Stock Transfer Judgment may present a corporate opportunity which AMERCO is entitled to exercise. Therefore, in the context of the facts and circumstances described above, the Debtor, in cooperation with AMERCO, has proposed the following funding and treatment of the Shareholder Plaintiffs' Disputed Claims under the Stock Transfer Judgment in the Plan: 1. In full settlement and satisfaction of the Shareholder Plaintiffs' Disputed Claims, on the Effective Date the Debtors will transfer (or cause to be transferred) to the Shareholder Plaintiffs (pursuant to the Stock Transfer Trust) property having a stipulated or adjudicated value of the full amount which the Shareholder Plaintiffs are entitled to recover from the insolvent estate of the Debtor on account of the Shareholder Plaintiffs' Disputed Claims. Specifically, the stipulated or adjudicated value of the property transferred will be $461,838,000, plus interest thereon at the rate of ten percent (10%) per annum from February 14, 1995, to and including the Petition Date, plus any taxable costs awarded in the Arizona Litigation (the "Shareholder Plaintiffs' Effective Date Payoff"). 2. Alternatively, and in lieu of their respective proportionate shares of the property comprising the Shareholder Plaintiffs' Effective Date Payoff, each of the Shareholder Plaintiffs may elect to participate in the Accepting Creditor Settlement and receive the discounted cash payments in full settlement and satisfaction of their respective Disputed Claims. - ------------------------- In this context (i.e., funding of the Plan), the defined term ---- "AMERCO" also includes involved subsidiaries and affiliates of AMERCO. The amount stated as the stipulated or adjudicated value does not take into account any reduction in the value of the property to be transferred to the Stock Transfer Trust in the event any Shareholder Plaintiff elects to participate in the Accepting Creditor Settlement discussed below. 35 In order to effect the Shareholder Plaintiffs' Effective Date Payoff, on the Effective Date AMERCO will transfer into a non-business trust (the "Stock Transfer Trust") property which has a stipulated or adjudicated value equal to the allowed amount of the Stock Transfer Judgment. In the event of any dispute concerning the value or composition of the Stock Transfer Trust Property or any other related matter, the dispute will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing and the Court will have and retain jurisdiction to address any such matters after the Confirmation Date. In particular, but without limitation, the Bankruptcy Court will have and retain jurisdiction (if the Debtor and the Shareholder Plaintiffs cannot agree on the value of the transferred property) to adjudicate the value of the Stock Transfer Trust Property in order to ensure that, as of the Effective Date, the Shareholder Plaintiffs participating in the Stock Transfer Trust will receive their proportionate shares of the Shareholder Plaintiffs' Effective Date Payoff. The sole beneficiaries of the Stock Transfer Trust will be the Shareholder Plaintiffs, who (i) have not elected the Accepting Creditor Settlement; and (ii) who are obligated pursuant to the Stock Transfer Judgment (and who will be obligated pursuant to the provisions of the Plan) to transfer their shares of stock upon funding of the Stock Transfer Trust to an entity which will be designated prior to the Effective Date. The Stock Transfer Claims will therefore be satisfied in full on the Effective Date by each Shareholder Plaintiff who has not elected the Accepting Creditor Settlement receiving a proportionate, undivided beneficial interest in the Stock Transfer Trust. The specifics of the funding and administration of the Stock Transfer Trust are set forth in more detail below. B. ORGANIZATION OF THE STOCK TRANSFER TRUST. ---------------------------------------- The Stock Transfer Trust will be established as a non- business trust. The trust agreement will be prepared by the Debtor and/or AMERCO and a copy will be provided to the Shareholder Plaintiffs no less than forty-five (45) days prior to the Confirmation Hearing. Any disputes regarding the terms of - ------------------------- The Stock Transfer Judgment obligates the Shareholder Plaintiffs' to transfer their AMERCO common stock to the Director Defendants or their designee ----------------- upon tender of the purchase price of the stock. 36 the trust instrument which are not otherwise resolved by agreement of the parties will be resolved by the Bankruptcy Court at, or in conjunction with, the Confirmation Hearing. The Debtor or the Reorganized Debtor, with the consent of AMERCO, will nominate a Trustee to hold legal title to the property which is the subject of the Stock Transfer Trust (collectively, the "Stock Transfer Trust Property") and administer the trust (the "Stock Transfer Trustee"). The Stock Transfer Trustee will be an institutional or corporate trustee in good standing, licensed and bonded under the laws of the state in which the Stock Transfer Trustee has its principal place of business and authorized to act as a trustee of trusts of a type similar to the Stock Transfer Trust. The Bankruptcy Court will confirm the appointment of the nominated Stock Transfer Trustee, or confirm such other Stock Transfer Trustee as the Bankruptcy Court determines should act in the event the Court does not approve the Stock Transfer Trustee which is nominated by the Debtor or the Reorganized Debtor with the consent of AMERCO. The Stock Transfer Trustee will be entitled to compensation based upon the fees it customarily charges for administering trusts of a kind similar to the Stock Transfer Trust. Any such fees and other costs of administration of the Stock Transfer Trust will be a charge against the Stock Transfer Trust Property and will be paid prior to any distribution to the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust. Any dispute over the fees and other costs to be charged by the Stock Transfer Trustee will be resolved by the Bankruptcy Court as part of the confirmation process. Each Shareholder Plaintiff's fractional, undivided beneficial interest in the Stock Transfer Trust will be determined by dividing the number of shares of the common stock of AMERCO owned by that particular Shareholder Plaintiff (and which is to be transferred to AMERCO pursuant to the Plan) by the total number of shares of the common stock of AMERCO owned by all of the Shareholder Plaintiffs who are also beneficiaries of the Stock Transfer Trust on the Effective Date. Each Shareholder Plaintiff will, on the Effective Date, be issued a trust certificate equal to the proportionate interest of each such Shareholder Plaintiff as determined pursuant to the above formula. Upon receiving the trust certificate issued by the Stock Transfer Trustee, each Creditor holding a Stock Transfer Claim will transfer all of such Creditor's 37 AMERCO common stock to the designated recipient of that stock as specified and/or approved in writing by AMERCO. The trust certificates issued to the Creditors holding Stock Transfer Claims will be freely transferable and the holders thereof and/or their successors-in-interest will have the right to direct the Stock Transfer Trustee to sell or otherwise liquidate such trust certificate holder's proportionate interests in the Stock Transfer Trust and to distribute such proceeds (valued as of the date of such disposition) to the trust certificate holders. Each trust certificate holder will have a trust account corresponding to that trust certificate holder's proportionate interest in the Stock Transfer Trust. All net income and proceeds received by the Stock Transfer Trustee with respect to the Stock Transfer Trust Property will be deposited in the trust accounts and thereafter disbursed on a monthly basis to the holders of the trust certificates in accordance with each trust certificate holder's percentage interest in the Stock Transfer Trust. C. FUNDING OF THE STOCK TRANSFER TRUST. ----------------------------------- On the Effective Date, AMERCO will transfer property having an adjudicated or stipulated value on the Effective Date equal to the total amount of the Allowed Claims of the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust. The Stock Transfer Trust Property will consist of a combination of four categories of property: (1) preferred stock in AMERCO; (2) a Class C Pass-Through Certificate in Storage Trust 1993-1 Commercial Asset Trust Pass-Through Certificate discussed in more detail below; (3) certain mortgage notes and the rights to receive payments thereon, secured by first-lien position interests in income producing real properties upon which self-storage businesses, among other things, are operated; and (iv) certain real property assets. AMERCO reserves the sole right to alter the respective amounts of the three types of assets to be transferred to the Stock Transfer Trust, so long as the property transferred into the Stock Transfer Trust is marketable, and the total value of the Stock Transfer Property is at least equal to the total amount of the Allowed Claims held by - ------------------------- For example, if none of the Shareholder Plaintiffs elect the Accepting Creditor Settlement, the Stock Transfer Claim, if allowed in full, would be $461,838,000.00 plus interest from February 14, 1995, to the Petition Date, plus taxable costs. 38 Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust, as determined by the Bankruptcy Court. By way of illustration, and subject to the foregoing reservation, the Debtor anticipates that AMERCO will fund the Stock Transfer Trust with approximately $300 million in preferred stock; the Class C certificate having a value of approximately $11 million; a number of mortgage notes having a total value of approximately $100 million; and one or more parcels of unencumbered real property having a total value of approximately $50 million. In the event a determination is made by the Bankruptcy Court that the Stock Transfer Trust Property proposed by the Debtor is not equal to the Allowed Claims of the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust as of the Effective Date, the Debtor and/or AMERCO will transfer so much additional property of a type and nature described herein into the Stock Transfer Trust as is necessary to equal the total amount of the Allowed Claims of the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust. Similarly, if the Bankruptcy Court determines that the Stock Transfer Property proposed by the Debtor has a value which exceeds the value of the Allowed Claims of the Shareholder Plaintiffs, AMERCO will only transfer so much of the property listed below as is necessary to satisfy in full the Allowed Claims of the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust. 1. INFORMATION REGARDING THE PREFERRED STOCK. ----------------------------------------- AMERCO, or one of its subsidiaries, will issue new, Series "B" preferred stock (the "Preferred Stock") to the Stock Transfer Trust. The Preferred Stock will be non-voting and cumulative. The terms of the Preferred Stock will allow redemption by AMERCO (or the issuer if the issuer is not AMERCO) at regular intervals. The stated yield will be 7-1/2% per annum. The Preferred Stock will be registered and will be immediately marketable as of the Effective Date. If there is any dispute regarding the value of the Preferred Stock which is not resolved prior to the Confirmation Hearing, the value of the Preferred Stock will be determined as part of the confirmation process. The prospectus pertaining to the Preferred Stock will be available for review at the offices of Streich Lang, P.A., at One Renaissance, Two North Central Avenue, Phoenix, Arizona 85004-2391. In addition, a copy of the prospectus will be 39 provided to each Shareholder Plaintiff in conjunction with the confirmation process at least forty-five (45) days prior to the Confirmation Hearing. 2. INFORMATION REGARDING THE CLASS C CERTIFICATE. --------------------------------------------- AMERCO holds a Class C Pass-Through Certificate of the U-Haul Self-Storage Corporation, Storage Trust 1993-1 Commercial Mortgage Asset Pass-Through Certificate (the "1993 REMIC Certificate"), with a face value of $11,518,452.00, plus accrued interest as of the Effective Date. The 1993 REMIC Certificate results from a 1993 securitization of a pool of 61 fixed and adjustable rate commercial mortgage loans which are secured by mortgages or deeds of trust on 60 self-storage properties. The 1993 REMIC Certificate represents a beneficial interest in the Class C Interest, which is a "regular interest" in a "real estate mortgage investment conduit," as those terms are defined, respectively, in Sections 860G and 860D of the Internal Revenue Code of 1986, as amended. The 1993 REMIC Certificate bears interest at a rate of 9.15 percent per annum. Pursuant to an Agreement which governs the operation of the trust which holds the pool of mortgage loans, this interest is paid to the holder of the 1993 REMIC Certificate monthly and principal payments are made on a quarterly basis. If there is any dispute regarding the value of the 1993 REMIC Certificate which is not resolved prior to the Confirmation Hearing (or the Effective Date), the value of the 1993 REMIC Certificate will be determined as part of the confirmation process. A copy of the 1993 REMIC Certificate is attached hereto as Schedule "1," and by this reference is hereby incorporated herein. Copies of other documents relating to the 1993 REMIC Certificate, such as the Agreement, are available in the offices of Streich Lang, P.A., counsel to the Debtor, at One Renaissance, Two North Central Avenue, Phoenix, Arizona 85004-2391. Any person desiring more information may either contact Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200, or may review these documents during normal business hours at the address set forth above. 3. INFORMATION REGARDING THE MORTGAGE LOANS. ---------------------------------------- a. OVERVIEW OF THE MORTGAGE LOANS. ------------------------------ 40 Through various means, AMERCO and one or more of its subsidiaries as well as two corporations which are affiliates of AMERCO have acquired (or will acquire) fee ownership of a number of income-producing properties throughout the United States, all of which consist of existing and operating self-storage facilities (the "Properties"). The affiliates of AMERCO who own fee title to substantially all of the Properties are SAC Self Storage Corporation ("SAC") and Two SAC Self Storage Corporation ("Two SAC"). In addition, AMERCO and/or its affiliates or subsidiaries are continuing to construct or acquire additional such Properties. Each of the Properties held by SAC and Two SAC, or acquired by SAC and Two SAC, is (or will be) subject to first- position notes and mortgages (the "Mortgage Loans"). The Mortgage Loans and the rights to receive payments thereunder, together with the first-lien interests which secure the Mortgage Loans, in amounts to be determined by the Debtor or the Reorganized Debtor with the consent of AMERCO prior to or in conjunction with the confirmation process, will be transferred into the Stock Transfer Trust pursuant to the Plan. In addition, the property and rights transferred to the Stock Transfer Trust will consist of rights under certain insurance policies with respect to the Properties and the proceeds thereof, all amounts on deposit in any pooled accounts representing proceeds of the Mortgage Loans for the benefit of the holder thereof, condemnation proceeds received with respect to any one or more of the Properties, and all proceeds of the foregoing. The Properties will continue to be managed by U-Haul or a subsidiary of U-Haul pursuant to management agreements between U-Haul and the owners of the Properties. U-Haul will remit to the Stock Transfer Trustee (or a third party servicer designated by the Stock Transfer Trustee), the payments and other proceeds to which the Stock Transfer Trustee is entitled pursuant to the Mortgage Loans. Each of the Mortgage Loans is marketable, and its market value is a function of the terms of the Mortgage Loan and the value of the self-storage facility which serves as collateral for each of the various Mortgage Loans. The Mortgage Loans will be secured by Property having a value which provides, in the aggregate, a loan to value ratio of at least eighty percent (80%). Conveyance of the Mortgage Loans to the Stock Transfer Trustee will be without recourse to the holder thereof. 41 In the event of any dispute regarding the value of the Mortgage Loans which is not resolved prior to the Confirmation Hearing (or prior to the Effective Date), the value of the Mortgage Loans will be determined by the Bankruptcy Court as part of the confirmation process. b. DETAILED DESCRIPTION OF THE MORTGAGE LOANS. ------------------------------------------ (1) GENERAL. ------- With the exception of approximately eighteen properties which secure the same number of Mortgage Loans and which are owned by third parties unrelated to or unaffiliated with the Debtors or AMERCO (collectively, the "Third Party Owners"), all of the Properties are owned by SAC and Two SAC. The Third Party Owners, SAC and Two SAC are the makers of the promissory notes which comprise part of the Mortgage Loans. SAC or Two SAC will be the makers of the promissory notes pertaining to the properties which are being acquired. There are four different types of Mortgage Loans: (1) the "Restructured Mortgage Loans"; (2) the "Existing Mortgage Loans"; (3) the "SAC Mortgage Loan"; and (4) the "Two SAC Mortgage Loan." The Restructured Mortgage Loans consist of Twelve (12) Mortgage Loans with a current aggregate principal balance of $13,180,260 as of April 18, 1995; the Existing Mortgage Loans consist of four (4) Mortgage Loans with a current aggregate principal balance of $2,733,520 as of April 18, 1995; the SAC Mortgage Loan currently consists of a single promissory note secured by first-lien mortgages with a current principal balance of $45,500,091 as of April 18, 1995. The Two SAC Mortgage Loan will consist of single promissory note secured by first-lien mortgages with a current principal balance of $48,500,000. The additional properties which are acquired by SAC and/or Two SAC prior to the Effective Date and which become collateral for the Mortgage Loans will be subject to terms and conditions consistent with those described herein. The Debtor will provide the Shareholder Plaintiffs with a complete list of the Mortgage Loans and the exact terms thereof no less than forty-five (45) days prior to the Confirmation Hearing. Each Mortgage Loan is (or will be) secured by one or more first priority mortgages, deeds-of-trust or deeds-to-secure- debt on self-storage facilities and their related properties (or in two instances, leasehold estates with respect to the underlying real properties) located throughout the United States 42 and Canada, all of which are (or will be), with the exception of the Existing Mortgage Loans, operated by subsidiaries of U-Haul pursuant to various operating agreements. All of the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan (including those which may come into existence after the date of this Disclosure Statement) bear (or will bear) interest at a fixed rate of 9% per annum up to maturity, with interest accruing at a fixed rate of 12% per annum from and after the stated maturity date. Interest on the Restructured Mortgage Loans is calculated on the basis of the actual number of days in each calendar month and each Loan Year. Interest on the SAC Mortgage Loan and the Two SAC Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve 30-day months. All of the Existing Mortgage Loans bear interest at a fixed rate which varies from loan to loan. Interest on all of the Existing Mortgage Loans is calculated on the basis of the actual number of days in each calendar month and each year. Each Restructured Mortgage Loan provides for the amortization of the outstanding principal balance through the application of "Excess Cash Flow" from the Gross Receipts received with respect to the Property securing such Restructured Mortgage Loan over a specified period of time, with a final Balloon Payment due at the stated maturity date of each Restructured Mortgage Loan. The SAC Mortgage Loan and the Two SAC Mortgage Loan provide for the amortization of principal based upon an amortization period of 20 years. Any and all remaining unamortized principal due on the SAC Mortgage Loan and the Two SAC Mortgage Loan will be due in a balloon payment on the maturity date of January 1, 2005. All of the Existing Mortgage Loans provide for the amortization of some principal over a certain period of months and also have balloon payments due at the stated maturity of such Mortgage Loans. At maturity, the Properties will either be refinanced or sold in order to pay the balloon payments. Attached hereto as Schedule "2" and incorporated herein by this reference is a chart which, among other things: (i) describes the location of the Properties; (ii) identifies the 43 owner (and maker of the respective Mortgage Loan(s)); (iii) sets forth the current appraised value of the Properties; (iv) sets forth the aggregate net operating income for the Properties (the "NOI"); and (v) provides certain other pertinent information regarding the Properties and the Mortgage Loans. NOI, as used herein with respect to each Property, means, unless otherwise specified herein, total operating revenues (primarily rental income and deposit forfeitures) less total operating expenses (primarily expenses for advertising, general administration, management fees and disbursements, utilities, repairs and maintenance, insurance, real estate taxes, replacement repairs (based solely on the respective mortgagors' estimates of the useful lives of various assets) and certain other expenses). NOI does not reflect capital expenditures or partnership expenses. No representations are made regarding future performance of the Properties, which may vary significantly from that described in Schedule "2". Also attached hereto as Schedule "3," and by this reference incorporated herein, is a description of certain pertinent information regarding the Mortgage Loans, including, among other things: (i) the date of the first interest payment; (ii) the original amount of the Mortgage Loan; (iii) the maturity date; and (iv) the current interest rate. AMERCO, any of its subsidiaries, SAC or Two SAC may acquire additional Properties and encumber them with additional Mortgage Loans prior to the Effective Date. In that event, and subject to the reservation by AMERCO of the right to substitute or delete Properties so long as the loan to value ratio of the Properties securing the Mortgage Loans, in the aggregate, equals at least eighty percent (80%), the description of the Properties is subject to change. Debtor and AMERCO will provide all interested parties with updated information on all Properties prior to the Effective Date. (2) THE APPRAISAL. ------------- - ------------------------- In some cases where acquisitions are pending or under certain other circumstances the appraisals on the Properties are not completed and Schedule "2" so provides. However, it is the intent of the Debtor that all of the Properties will have been appraised prior to the Confirmation Hearing. This explanation of NOI is offered by way of illustration only. Additional information regarding NOI, cash flow and financial performance may be obtained with reference to the appraisals. 44 AMERCO retained Robert A. Stanger & Co., Inc., an independent appraisal firm (the "Appraiser"), to appraise all of the Properties. The purpose of such appraisal (the "Appraisal") was to estimate the "Market Value" of the fee simple interest or, where appropriate, leasehold interest, in the related Property under then prevailing market conditions. The Appraisal involved a site inspection of all of the appraised Properties. The Appraiser relied upon the sales comparison (or market data) approach and the income approach to value in order to deliver an opinion of value of the Properties and did not employ the cost approach. The estimated value of the Properties arrived at by the sales comparison approach was reconciled with estimated values of the Properties arrived at by the income approach. The income approach to valuation was given primary consideration based upon the income producing nature of the Properties and their appeal to investors. The sales comparison approach was given secondary consideration. The appraised values of the Properties for which appraisals currently exist are listed in Schedule "2", which is attached hereto. Complete copies of the Appraisals, including a complete discussion of the Appraiser's methodology, procedure and assumptions, are available in the offices of Streich Lang, P.A., counsel to the Debtor, at One Renaissance, Two North Central Avenue, Phoenix, Arizona, 85004-2391. Any person desiring more information may either contact Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200, or may review the Appraisals during normal business hours at the address set forth above. The Appraisals are subject to the assumptions and limiting conditions stated therein. Except for the Appraisals described in this section, no separate independent appraisal or reappraisal has been prepared by AMERCO or the Debtor. The Debtors believe that the procedures utilized by the Appraiser were reasonably designed to reach accurate valuations; however, there can be no assurance that another appraiser would not have arrived at different, and perhaps significantly different, results, particularly if such other appraiser utilized different capitalization or discount - ------------------------- AMERCO will also utilize the Appraiser to appraise any properties which are to be acquired, and which are to be included as security for the Mortgage Loans, and for which an appraisal has not yet been obtained. 45 rates, different net operating income calculations, or a different appraisal approach. (3) SUBORDINATE LOANS. ----------------- Each of the Properties which is subject to a Restructured Mortgage Loan, the SAC Mortgage Loan or the Two SAC Mortgage Loan secures a "Subordinate Loan" as well as a first position Mortgage Loan. Information regarding the amount of the Mortgage Loans and the Subordinate Loans is set forth in Schedule "2", which is attached hereto. The Subordinate Loans are secured by a second priority lien on the related Property (or Properties in the case of the SAC and Two SAC Properties) and will be payable to the holder of the Subordinate Loan (the "Junior Mortgagee") strictly from subordinated excess cash flow available from such Property or Properties after the payment of all payments required under the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan. Properties acquired after the date of this Disclosure Statement which are subject to Mortgage Loans which will be part of the Stock Transfer Trust Property, are or may be subject to Subordinate Loans as well. The Subordinate Loans are and will be in all respects junior and subordinate to the Mortgage Loans. All of the Mortgage Loans will be subject to the conditions of the Subordinate Mortgage Loans. Generally, the Stock Transfer Trustee will not have the right to exercise any of its remedies under the Mortgage Loan documentation if a payment event of default occurs until: (i) the Stock Transfer Trustee has notified the Junior Mortgagee and, in the case of a Restructured Mortgage Loan, the holder of any applicable Purchase Option, of such Payment Event of Default, (ii) such Payment Event of Default has continued for 25 days after the Stock Transfer Trustee has given such notice, and (iii) the Junior Mortgagee or the holder of the Purchase Option either failed to cure the Payment Event of Default or waived its rights to cure. Such notice is in addition to any notice required to be given to the mortgagors pursuant to the Mortgage Loan documents. - ------------------------- The Existing Mortgages are not believed to have any Subordinate Loans which encumber those Properties. 46 (4) EXISTING LOAN ESCROW ACCOUNTS. ----------------------------- The Stock Transfer Trustee will establish and maintain one or more "Existing Loan Escrow Accounts" on behalf of certain mortgagors of the Existing Mortgage Loans which require tax and/or insurance escrow accounts. The Stock Transfer Trustee will regularly deposit any amounts required to be paid, as set forth in a particular Mortgage Loan, into the Existing Loan Escrow Accounts. (5) INSURANCE AND CONDEMNATION -------------------------- PROCEEDS ESCROW ACCOUNTS. ------------------------ The Stock Transfer Trustee will establish and maintain, as appropriate, an "Insurance and Condemnation Proceeds Escrow Account" on behalf of each mortgagor of the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan in which the Stock Transfer Trustee will deposit insurance or condemnation proceeds promptly following the receipt and identification thereof. (6) CAPITAL EXPENDITURE ACCOUNTS. ---------------------------- A Capital Expenditure Account on behalf of each mortgagor of Property securing the Restructured Mortgage Loans will be established. The Capital Expenditure Accounts will be available to the U-Haul Property Manager (as defined below) to fund any capital expenses relating to the Properties securing the Restructured Mortgage Loans certified as necessary by the U-Haul Property Manager, with notice thereof given to the Stock Transfer Trustee. (7) INSURANCE POLICIES. ------------------ The U-Haul Property Manager will use its best efforts to cause the mortgagors of the Mortgage Loans to maintain insurance in accordance with the related mortgage (the "Required Insurance Policy"). (8) DESCRIPTION OF THE ------------------ PROPERTY MANAGERS. ----------------- The Properties securing the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan will be managed by the U-Haul Property Manager and those securing the Existing Mortgage Loans will be managed by different limited partnerships, general partnerships, trusts, individuals, corporations, joint ventures and tenants-in-common, which are either the owners of the Properties securing the Existing Mortgage Loans or agents thereof (the "Existing Property Managers"). 47 (a) THE U-HAUL ---------- PROPERTY MANAGER. ---------------- U-Haul International, Inc., and its affiliates thereof ("U-Haul"), is a wholly-owned subsidiary of AMERCO and will be the U-Haul Property Manager. U-Haul entered the management of self-storage facilities in 1973 when it opened its first self- storage facilities. U-Haul's self-storage business has steadily expanded, having grown to 650 facilities by the end of fiscal year 1994. (b) RESPONSIBILITIES ---------------- OF THE U-HAUL ------------- PROPERTY MANAGER. ---------------- All of the Properties securing the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan will be managed by the U-Haul Property Manager pursuant to property management agreements (the "Property Management Agreements") between the U-Haul Property Manager and each of the Junior Mortgagees under the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan. The Property Management Agreements are generally described below. Copies of the existing Property Management Agreements are available in the offices of Streich Lang, P.A., counsel to the Debtor, at One Renaissance, Two North Central Avenue, Phoenix, Arizona, 85004-2391. Any person desiring more information may either contact Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200, or may review the Property Management Agreements during normal business hours at the address set forth above. The U-Haul Property Manager has the exclusive authority to supervise the Properties securing the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan, and to supervise and direct the business and affairs associated or related to the daily operation of the Properties, including the hiring and discharge of employees. Pursuant to the Property Management Agreements, the U-Haul Property Manager is responsible for compliance with any law, regulation, ordinance, or order of any government or regulatory authority having jurisdiction over the Properties respecting the use of the Property or the construction, maintenance, or operation thereof. The U-Haul Property Manager pays all taxes, personal and real, and all assessments levied on the Property. The U-Haul Property Manager is required to obtain, and keep in force, fire, comprehensive, liability and other 48 insurance policies in amounts generally carried with respect to similar facilities. The U-Haul Property Manager controls the maintenance, repair and landscaping of the Properties and the acquisition of fixtures and supplies for the Properties. The U-Haul Property Manager also supervises and maintains the operation of the accounting system for each Property, and prepares and delivers financial statements and other required reports. The U-Haul Property Manager directs the marketing activities of the employees and is responsible for purchasing media advertising. The U-Haul Property Manager is entitled to receive a management fee quarterly, payable no later than the Business Day immediately preceding the distribution date following the third month of each quarterly period, in an amount equal to 6% of the gross receipts collected from each Property (the "U-Haul Property Management Fee") during such quarterly period, and reimbursement of operation expenses and taxes during the quarterly period. The U-Haul Property Management Fee is consistent with fees generally charged by other experienced property managers of properties similar to the Properties. The mortgagors of the Restructured Mortgage Loans and the SAC Mortgage Loan have agreed that they will not terminate the Management Agreement at any time without the express written consent of the applicable Junior Mortgagee unless, during the term of the Management Agreement, net cash flow declines by a predetermined percentage during an agreed-upon period of time. (9) THE EXISTING ------------ PROPERTY MANAGERS. ----------------- The Properties securing the Existing Mortgages are managed by unrelated third parties. c. CERTAIN LEGAL ASPECTS OF THE ---------------------------- MORTGAGE LOANS. -------------- The following discussion contains summaries of certain legal aspects of mortgage loans which are general in nature. Because many of the legal aspects of mortgage loans are governed by applicable state laws (which may vary substantially), the following summaries do not purport to be complete, to reflect the laws of any particular state, to reflect all the laws applicable to any particular Mortgage Loan or to encompass the laws of all 49 states in which the Properties are situated. The summaries are qualified in their entirety by reference to the applicable federal and state laws governing the Mortgage Loans. As to Mortgage Loans which come into existence after the date of this Disclosure Statement but before the Confirmation Hearing, the terms thereof and certain legal aspects thereof will be consistent with the information provided herein. This summary specifically does not consider the legal aspects of any Canadian Mortgaged Property. (1) MORTGAGES AND DEEDS ------------------- OF TRUST GENERALLY. ------------------ The Mortgage Loans are secured by either mortgages or deeds of trust or other similar security instruments, depending upon the prevailing practice in the state in which the related Mortgaged Property is located. (2) LEASES AND RENTS. ---------------- The Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan are secured by assignments of leases and rents which are incorporated in the Mortgage. (3) ENFORCEABILITY OF ----------------- DUE-ON-SALE PROVISIONS. ---------------------- Most of the Mortgages contain due-on-sale clauses, which permit the lender to accelerate the maturity of the loan if the mortgagor sells, transfers, or conveys the Property or its interest in the Property. (4) SECONDARY FINANCING; ------------------- DUE-ON-ENCUMBRANCE ------------------ PROVISIONS. ---------- Each of the Restructured Mortgage Loans, the SAC Mortgage Loan and the Two SAC Mortgage Loan and some of the Existing Mortgage Loans permit the lender to accelerate the maturity of the Mortgage Loan if the mortgagor further encumbers the Property. However, such provisions may be unenforceable in certain jurisdictions under certain circumstances. (5) CERTAIN LAWS AND ---------------- REGULATIONS. ----------- The Properties are subject to compliance with various federal, state and local statutes and regulations. Failure to comply (together with an inability to remedy any such failure) could result in material diminution in the value of a Property which could, together with the possibility of limited alternative 50 uses for a particular Property, result in a failure to realize the full principal amount of the Mortgage Loans. (6) ACCELERATION ON --------------- DEFAULT. ------- All of the Mortgage Loans include a debt-acceleration clause, which permits the lender to accelerate the debt upon a monetary or nonmonetary default of the borrower. (7) ENVIRONMENTAL RISKS. ------------------- The Debtor and AMERCO make no representations or warranties regarding compliance by the owners of the properties with Environmental Law. "Environmental Law," includes, but is not limited to, any and all local, state, federal, international, governmental, public or private laws, statutes, ordinances, regulations, orders, consent decrees, settlement agreements, injunctions, judgments, permits, licenses, codes, covenants, deed restrictions, common laws, treaties, and reported state or federal court decisions thereunder, related to environmental protection, health and safety of persons, natural resource damages, conservation, wildlife, waste management, the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport or any other activity related to hazardous and toxic substances, or any other environmental matter, including but not limited to any of the following statutes: Solid Waste Disposal Act, as amended by the Resource Conservation & Recovery Act of 1976, and Solid Hazardous Waste Amendments of 1984, 42 U.S.C. (SECTION)(SECTION)9601, et seq.; Comprehensive Environmental Response, Compensation ------- & Liability Act of 1980, as amended, 42 U.S.C. (SECTION)(SECTION)9601-9675; Clean Air Act of 1966, as amended, 42 U.S.C. (SECTION)(SECTION)7401-7642;Hazardous Materials Transportation Control Act of 1970, as amended, 49 U.S.C. (SECTION)(SECTION)1801-1812; WaterPollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. (SECTION)(SECTION)1251- 1387; Insecticide, Fungicide & Rodenticide Act, as amended, 7 U.S.C. (SECTION)(SECTION)136-136y; Toxic Substances Control Act, as amended, 15 U.S.C. (SECTION)(SECTION)2601-2671; Safe Drinking Water Act, 42 U.S.C. (SECTION)(SECTION)300f-300j-26; Occupational Safety & Health Act of 1970, as amended, 29 U.S.C. (SECTION)(SECTION)651, et seq.; Emergency ------- Planning & Community Right-To-Know Act of 1986, 42 U.S.C. (SECTION)(SECTION)1101-11050; National Environmental Policy Act of 1978, 51 42 U.S.C. (SECTION)(SECTION)300(f), et seq.; the Federal Rivers & Harbors ------- Act, 33 U.S.C. (SECTION)403; the Federal National Environmental Policy Act, 42 U.S.C. (SECTION)(SECTION)4321, et seq.; Endangered Species ------- Act, 16 U.S.C. (SECTION)(SECTION)1451, et seq.; the Federal Oil ------- Pollution Act of 1990, 33 U.S.C. (SECTION)(SECTION)2701, et seq.; and ------- any similar or implementing state or local laws, statutes, ordinances; and all amendments, rules, regulations, guidance documents and publications promulgated under any and all of the above. AMERCO has obtained "Phase I" environmental assessments for all of the Properties and "Phase II" environmental reports for some of the Properties. Because the environmental assessments were performed by several independent environmental consulting firms, they vary substantially in quality and detail. The reports are available for review and may be reviewed by contacting Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200. Certain of the Properties are located on, adjacent to or in the vicinity of properties (including gasoline stations) that contain or have contained storage tanks or that have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous substances into the soil or groundwater. Any potential future environmental liabilities arising out of such activities could have a material adverse effect on the future financial condition or results of operations of the affected Property. In addition, one of the Properties is located within areas designated as state and/or federal superfund sites. NOTWITHSTANDING THE FOREGOING ----------------------------- DISCUSSION, NO REPRESENTATIONS OR WARRANTIES ARE MADE BY THE - ------------------------------------------------------------- DEBTOR, THE REORGANIZED DEBTOR OR AMERCO WITH REGARD TO ANY - ----------------------------------------------------------- ENVIRONMENTAL CONDITIONS AFFECTING ANY OF THE PROPERTIES. - -------------------------------------------------------- 4. INFORMATION REGARDING THE REAL PROPERTY. --------------------------------------- a. OVERVIEW OF THE REAL PROPERTY. ----------------------------- AMERCO, and one or more of its subsidiaries, is the fee owner of certain other Real Property which is owned free and clear of any lien interests (the "Real Property"), all or part of which may be transferred and conveyed into the Stock Transfer Trust pursuant to the Plan with the consent of AMERCO. The property rights transferred to the Stock Transfer Trust with respect to the Real Property will consist of all of AMERCO's interests in and to such Real Property. 52 b. DETAILED DESCRIPTION OF THE REAL PROPERTY. ----------------------------------------- Each of the individual parcels which collectively comprise the Real Property is marketable, and its value is a function of the current local market for similar properties. Attached hereto as Schedule "4" and incorporated herein by this reference is a chart which, among other things: (i) describes the location of each of the parcels which comprise the Real Property; (ii) identifies the size of each of the parcels which comprise the Real Property and any buildings thereon; and (iii) identifies the appraised value of certain of the parcels of the Real Property and the date of any such appraisal. Complete copies of the appraisals which currently exist are available in the offices of Streich Lang, P.A., counsel for the Debtor, at One Renaissance, Two North Central Avenue, Phoenix, Arizona 85004-2391. Any person desiring more information may either contact Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200, or may review the appraisals during normal business hours at the address set forth above. The appraisals of the Real Property are, and will be, subject to the assumptions and limiting conditions stated therein. The Debtor believes that the procedures utilized in the preparation of the appraisals of the Real Property were (and with respect to those parcels of Real Property which have not yet been appraised, such procedures will be) reasonably designed to reach accurate valuations; however, there can be no assurance that another appraiser would not arrive at a different, and perhaps significantly different, result, particularly if such other appraiser utilized different valuation procedures or assumptions. c. ENCUMBRANCES. ------------ The Debtor believes that all of the parcels which comprise the Real Property are free and clear of liens and encumbrances. AMERCO has obtained, or is in the process of obtaining, current title reports with respect to the Real Property which will identify all matters of record with respect to the Real Property. The reports are, and will be, available - ------------------------- AMERCO is in the process of obtaining appraisals of the remaining parcels of the Real Property and will make such supplemental appraisals available for review. 53 for review and may be reviewed by contacting Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200. d. ENVIRONMENTAL RISKS. ------------------- The Debtor and AMERCO make no representations or warranties regarding compliance of the Real Property with Environmental Law. "Environmental Law," includes, but is not limited to, any and all local, state, federal, international, governmental, public or private laws, statutes, ordinances, regulations, orders, consent decrees, settlement agreements, injunctions, judgments, permits, licenses, codes, covenants, deed restrictions, common laws, treaties, and reported state or federal court decisions thereunder, related to environmental protection, health and safety of persons, natural resource damages, conservation, wildlife, waste management, the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport or any other activity related to hazardous and toxic substances, or any other environmental matter, including but not limited to any of the following statutes: Solid Waste Disposal Act, as amended by the Resource Conservation & Recovery Act of 1976, and Solid Hazardous Waste Amendments of 1984, 42 U.S.C. (SECTION)(SECTION)9601, et seq.; ------- Comprehensive Environmental Response, Compensation & Liability Act of 1980, as amended, 42 U.S.C. (SECTION)(SECTION)9601-9675; Clean Air Act of 1966, as amended, 42 U.S.C. (SECTION)(SECTION)7401-7642; Hazardous Materials Transportation Control Act of 1970, as amended, 49 U.S.C. (SECTION)(SECTION)1801-1812; Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. (SECTION)(SECTION)1251-1387; Insecticide, Fungicide & Rodenticide Act, as amended, 7 U.S.C. (SECTION)(SECTION)136-136y; Toxic Substances Control Act, as amended, 15 U.S.C. (SECTION)(SECTION)2601-2671; Safe Drinking Water Act, 42 U.S.C. (SECTION)(SECTION)300f-300j-26; Occupational Safety & Health Act of 1970, as amended, 29 U.S.C. (SECTION)(SECTION)651, et seq.; Emergency Planning & Community ------- Right-To-Know Act of 1986, 42 U.S.C. (SECTION)(SECTION)1101-11050; National Environmental Policy Act of 1978, 42 U.S.C. (SECTION)(SECTION)300(f), et seq.; the Federal Rivers & Harbors ------- Act, 33 U.S.C. (SECTION)403; the Federal National Environmental Policy Act, 42 U.S.C. (SECTION)(SECTION)4321, et seq.; Endangered Species ------- Act, 16 U.S.C. (SECTION)(SECTION)1451, et seq.; the Federal Oil ------- Pollution Act of 1990, 33 U.S.C. (SECTION)(SECTION)2701, et seq.; and ------- any similar or 54 implementing state or local laws, statutes, ordinances; and all amendments, rules, regulations, guidance documents and publications promulgated under any and all of the above. AMERCO has obtained "Phase I" environmental assessments for most of the parcels which comprise the Real Property and is in the process of obtaining Phase I assessments on the rest of the parcels. Because the environmental assessments were performed by several independent environmental consulting firms, they vary substantially in quality and detail. The reports are, and will be, available for review and may be reviewed by contacting Ronald E. Reinsel, Esq., counsel for the Debtor at (602) 229-5200. NOTWITHSTANDING THE FOREGOING DISCUSSION, NO -------------------------------------------- REPRESENTATIONS OR WARRANTIES ARE MADE BY THE DEBTOR, THE - --------------------------------------------------------- REORGANIZED DEBTOR OR AMERCO WITH REGARD TO ANY ENVIRONMENTAL - ------------------------------------------------------------- CONDITIONS AFFECTING ANY OF THE PROPERTIES. - ------------------------------------------ D. POST-EFFECTIVE DATE ADMINISTRATION OF THE STOCK ----------------------------------------------- TRANSFER TRUST. -------------- Pursuant to the Plan, the conveyance to the Stock Transfer Trust of the Stock Transfer Property which has a value equal to the value of the Allowed Claims of the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust will constitute satisfaction in full of the Claims held by Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust, and the Debtor will be discharged from any further liability under the Stock Transfer Judgment. On the Effective Date, and pursuant to the terms of the Plan, the Shareholder Plaintiffs will tender their shares of common stock to AMERCO, and the full equitable interest in the Stock Transfer Trust will vest in the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust. On the Effective Date, conditioned only upon the tender of the shares of stock in AMERCO, the Plaintiffs will assume and enjoy full control over the Stock Transfer Trust pursuant to the terms of such trust. The trust certificates issued to the Creditors holding Stock Transfer Claims will be freely transferable and the holders thereof and/or their successors-in- interest will have the right to direct the Stock Transfer Trustee to sell or otherwise liquidate such trust certificate holder's proportionate interests in the Stock Transfer Trust and to distribute such proceeds (valued as of the date of such disposition) to the trust certificate holders. Neither AMERCO nor the Debtor will retain any legal or equitable interest in the 55 Stock Transfer Trust and neither AMERCO nor the Debtor will exercise any control over the Stock Transfer Trust after the Effective Date. If the Shareholder Plaintiffs choose to liquidate the Stock Transfer Trust, or partition it, or chose to maintain it, they may do so at their own discretion; however, the Shareholder Plaintiffs who are beneficiaries of the Stock Transfer Trust will enjoy not only any appreciation in the value of the Stock Transfer Trust, but will bear the risk of any diminution in value of the Stock Transfer Trust from and after the Effective Date. Accordingly, if any beneficiary of the Stock Transfer Trust directs the Stock Transfer Trustee to liquidate his/her proportionate share of the Stock Transfer Trust, he/she will receive only his/her proportionate share of the Stock Transfer Trust Property, valued as of the date of liquidation, and will have no claim against the Debtor or AMERCO resulting from the increase or diminution in the value of the Stock Transfer Trust Property. E. ACCEPTING CREDITOR SETTLEMENT. ----------------------------- Each Shareholder Plaintiff is given the option under the Plan to elect to participate in the Accepting Creditor Settlement. The Accepting Creditor Settlement provides for a cash fund of up to $350,000,000 to be paid by AMERCO, to fully settle and satisfy all or part of the Allowed Claims of the Shareholder Plaintiffs. Any Shareholder Plaintiff who elects the Accepting Creditor Settlement will receive a pro rata -------- distribution of the Accepting Creditor Settlement Fund equal to the percentage thereof that the number of shares of common stock in AMERCO held by the holder of such Stock Transfer Claim bears to the total number of shares of common stock in AMERCO held by all of the Shareholder Plaintiffs as of the Effective Date. Any Shareholder Plaintiff who elects to participate in the Accepting Creditor Settlement will not participate in or be entitled to any interest in the Stock Transfer Trust. Upon receipt of the cash distribution pursuant to the Accepting Creditor Settlement, such Shareholder Plaintiff's common stock in AMERCO will be transferred to AMERCO or its designee. The election by a Shareholder Plaintiff to participate in the Accepting Creditor Settlement Fund must be made at the time set by the Bankruptcy Court for submission of the ballot accepting or rejecting the Plan. In the event that less than all 56 of the Shareholder Plaintiffs elect the Accepting Creditor Settlement, the Accepting Creditor Settlement Fund will only be funded to the extent necessary to satisfy the Allowed Claims of the electing Shareholder Plaintiffs. EX-10 3 EX 10.19 SETTLEMENT AGREEMENT 1 SETTLEMENT AGREEMENT -------------------- This Settlement Agreement, dated as of February 3, 1995 (the "Execution Date"), is made by and among PAUL F. SHOEN ("P. SHOEN"); AMERCO, a Nevada corporation; EDWARD J. SHOEN, RICHARD J. HERRERA, MARK V. SHOEN, AUBREY K. JOHNSON, WILLIAM E. CARTY, JAMES P. SHOEN, CHARLES J. BAYER and JOHN M. DODDS (collectively, the "AMERCO DIRECTORS"); the AMERCO EMPLOYEE SAVINGS, PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP PLAN (the "AMERCO ESOP"); and DONALD W. MURNEY and GARY B. HORTON (with EDWARD J. SHOEN, the "ESOP TRUSTEES"). I. RECITALS. -------- A. The Proxy Litigation. -------------------- 1.1 On or about July 19, 1994, P. SHOEN filed a Complaint in the United States District Court for the District of Nevada (the "District Court"), asserting claims for legal and equitable relief against AMERCO, the AMERCO DIRECTORS, the AMERCO ESOP and the ESOP TRUSTEES, under the caption PAUL F. SHOEN v. ---------------- AMERCO, et al., Case No. CV-N-94-0475-ECR (hereinafter referred - -------------- to as the "PROXY LITIGATION"). 1.2 On or about July 20, 1994, the District Court entered its Order temporarily restraining the holding of AMERCO's 1994 Annual Meeting (the "TRO"). Subsequent orders of the District Court extended the effect of the TRO until the District Court's ruling on P. SHOEN's application for a preliminary injunction, which is discussed below. 2 1.3 On or about October 5, 1994, the District Court entered its Memorandum and Order, vacating the TRO, and issuing a preliminary injunction granting certain relief (the "Preliminary Injunction"). 1.4 On or about October 11, 1994, AMERCO and the AMERCO DIRECTORS, and the AMERCO ESOP and the ESOP TRUSTEES, filed their respective Notices of Appeal from the Preliminary Injunction to the United States Court of Appeals for the Ninth Circuit. The appeal taken by AMERCO and the AMERCO DIRECTORS bears Case No. 94-16812, and the appeal taken by the AMERCO ESOP and the ESOP TRUSTEES bears Case No. 94-16809 (collectively, the "FIRST APPEALS"). 1.5 On or about October 24, 1994, the District Court entered an Order in the PROXY LITIGATION, modifying the Preliminary Injunction (the "Modifying Order"). 1.6 On or about November 10, 1994, AMERCO and the AMERCO DIRECTORS, and the AMERCO ESOP and the ESOP TRUSTEES, filed their respective Notices of Appeal from the Modifying Order to the United States Court of Appeals for the Ninth Circuit. The appeal taken by AMERCO and the AMERCO DIRECTORS bears Case No. 94-17101, and the appeal taken by the AMERCO ESOP and the ESOP TRUSTEES bears Case No. 94-17103 (collectively, the "SECOND APPEALS"). 1.7 As of the Execution Date, there has been no final adjudication on the merits of any claim, defense, allegation or issue in the PROXY LITIGATION, and there has been no final ruling or determination in the FIRST APPEALS or the SECOND APPEALS. 3 B. The Paul Shoen Arbitration. -------------------------- 1.8 On or about April 8, 1994, P. SHOEN commenced an arbitration proceeding against AMERCO pursuant to Section 4.11 of that certain Share Repurchase and Registration Rights Agreement between P. SHOEN and AMERCO, dated as of March 1, 1992 (the "Registration Rights Agreement"). 1.9 In his arbitration proceeding initiated on or about April 8, 1994, P. SHOEN requested various forms of relief. (The arbitration claims and proceedings initiated by P. SHOEN are referred to hereinafter as the "PAUL SHOEN ARBITRATION".) 1.10 As of the Execution Date, there has been no adjudication on the merits of any claim, defense, allegation or issue in the PAUL SHOEN ARBITRATION. C. The Defense Costs Dispute. ------------------------- 1.11 On or about August 2, 1988, an action was commenced in the Superior Court of the State of Arizona, Maricopa County, by certain AMERCO shareholders against, inter alia, the persons who constituted the AMERCO Board of Directors as of July 1988, including P. SHOEN. That lawsuit is captioned SAMUEL W. --------- SHOEN, M.D., et al. v. EDWARD J. SHOEN, et al., Case No. CV 88- - ---------------------------------------------- 20139 (the "SHAREHOLDER LITIGATION"). 1.12 On or about December 5, 1989, P. SHOEN entered into an Indemnity Agreement with AMERCO, dated as of February 6, 1989. 4 1.13 During the trial of the SHAREHOLDER LITIGATION from August to October 1994, P. SHOEN was separately represented by counsel of his own choosing. 1.14 A dispute has arisen between P. SHOEN and AMERCO concerning the extent of AMERCO's obligation, if any, to bear the cost of separate and independent counsel chosen by P. SHOEN in the SHAREHOLDER LITIGATION, and in any future appeal(s) and/or retrial(s) of the SHAREHOLDER LITIGATION (the "DEFENSE COSTS DISPUTE"). D. The P. SHOEN Registration. ------------------------- 1.15 On or about September 1, 1994, P. SHOEN gave notice to AMERCO of his intention to register and sell 500,000 shares of his AMERCO common stock pursuant to the Registration Rights Agreement (the "P. SHOEN Registration"). 1.16 On or about December 29, 1994, AMERCO commenced an arbitration proceeding against P. SHOEN, demanding arbitration of certain disputes related to the P. SHOEN Registration (the "AMERCO Arbitration"). E. The Revision of The Right of First Refusal. ------------------------------------------ 1.17 On or about January 10, 1995, AMERCO modified the right of first refusal contained in its Bylaws as reflected on Exhibit No. 1 which is attached hereto. A fundamental assumption of the parties' settlement negotiations is that this modification will remain in effect. 5 F. The Settlement Conference. ------------------------- 1.18 On or about December 14, 1994, upon motion filed by AMERCO and the AMERCO DIRECTORS in the PROXY LITIGATION, the District Court ordered all of the parties to this Settlement Agreement (collectively, the "Parties" or, individually, a "Party") to participate in a settlement conference before Magistrate Judge Robert Johnston in Las Vegas, Nevada. 1.19 The Settlement Conference was convened by Magistrate Judge Johnston on January 12, 1995 (hereinafter, the "Settlement Date"), and all of the Parties to the Settlement Agreement participated therein, either directly or through their authorized representatives. 1.20 At the Settlement Conference, the Parties hereto, represented by counsel, freely and voluntarily negotiated and placed on the record before the Magistrate Judge the terms of their settlement. The Parties enter this Settlement Agreement for the purpose of memorializing their settlement and settling and compromising all the Parties' disputes in the PROXY LITIGATION, the FIRST APPEALS, the SECOND APPEALS, the PAUL SHOEN ARBITRATION, the DEFENSE COSTS DISPUTE, and any and all other claims or disputes based on any acts, events, representations or omissions occurring on or before the Settlement Date, between and/or among P. SHOEN and any or all of the other Parties to this Settlement Agreement, except as specifically provided herein, 6 without any Party to this Settlement Agreement admitting or conceding, either expressly or implicitly, any liability or wrongdoing whatsoever. II. SETTLEMENT TERMS ---------------- 2.1 The Parties to this Settlement Agreement covenant and agree that, upon the execution of this Settlement Agreement, they will instruct their respective legal counsel promptly to sign and file with the District Court a Stipulation for Dismissal of the PROXY LITIGATION in substantially the same form as is attached hereto as Exhibit No. 2, and incorporated herein by this reference. The Parties further covenant and agree that they will take such further action, if any, as may be necessary to ensure that the PROXY LITIGATION shall be dismissed promptly, with prejudice, each side to bear its own costs and fees. The Parties further agree that if any third party attempts to intervene as a plaintiff in the PROXY LITIGATION, AMERCO and/or the other defendants shall be responsible for defending against and otherwise responding to such intervention, and P. SHOEN shall be obligated only to join in any opposition that AMERCO may submit and provide such reasonable assistance as AMERCO may request, at AMERCO's expense. P. SHOEN covenants and agrees that he will not encourage any third party to pursue any of the claims asserted in the PROXY LITIGATION, and that he will not assist in any way any third party to pursue any such claims; provided, however, that P. SHOEN may provide any discovery or testimony required by law. 7 2.2 The Parties covenant and agree that, upon the execution of this Settlement Agreement, they will instruct their respective counsel promptly to sign and file with the Ninth Circuit the Stipulations for Dismissal of the FIRST APPEALS and the SECOND APPEALS in substantially the same forms as are attached hereto as Exhibit Nos. 3 and 4, and incorporated herein by this reference. The Parties further covenant and agree that they will take such further action, if any, as may be necessary to ensure that the FIRST APPEALS and the SECOND APPEALS shall be dismissed promptly, each side to bear its own costs and fees. 2.3 P. SHOEN and AMERCO covenant and agree that, upon execution of this Settlement Agreement by all Parties, they will instruct their respective counsel promptly to sign and file with the arbitration panel in the PAUL SHOEN ARBITRATION the Stipulation for Dismissal in substantially the same form as is attached hereto as Exhibit No. 5, and incorporated herein by this reference. P. SHOEN and AMERCO further covenant and agree that they will take such further action, if any, as may be necessary to ensure that the PAUL SHOEN ARBITRATION shall be dismissed promptly, each side to bear its own costs and fees. 2.4 AMERCO covenants and agrees that immediately upon the execution of this Settlement Agreement by all Parties, it will pay to P. SHOEN the sum of NINE HUNDRED TWENTY-FIVE THOUSAND and NO/100 DOLLARS ($925,000.00). 8 2.5 AMERCO covenants and agrees that it will afford to P. SHOEN the same defense and indemnification rights that are afforded to the other defendants in the SHAREHOLDER LITIGATION. Except to the extent of the compromise of the DEFENSE COSTS DISPUTE provided in subparagraphs 2.5.1 through 2.5.4 of this Settlement Agreement, nothing set forth in this Settlement Agreement shall be deemed to limit, alter or otherwise affect the terms of P. SHOEN's Indemnity Agreement with AMERCO dated as of February 6, 1989 (the "Indemnity Agreement"), or any rights or obligations P. SHOEN may have under applicable common or statutory law. 2.5.1 AMERCO covenants and agrees that if there is a retrial of the SHAREHOLDER LITIGATION only as to P. SHOEN, AMERCO will reimburse P. SHOEN for the defense costs and fees for counsel of P. SHOEN's own choosing, including the costs and fees incurred by P. SHOEN for any subsequent appeal(s). 2.5.2 AMERCO covenants and agrees that if there is a retrial limited to the issue of damages in the SHAREHOLDER LITIGATION as to multiple defendants, including P. SHOEN, AMERCO will pay up to FIFTY THOUSAND and NO/100 DOLLARS ($50,000.00) to reimburse P. SHOEN for separate defense costs and fees for counsel of P. SHOEN's own choosing incurred for such retrial, including any subsequent appeal(s) therefrom. In exchange, P. SHOEN covenants and agrees that AMERCO shall not be obligated, in connection with such retrial, including any subsequent appeal(s) therefrom, to reimburse P. SHOEN for in excess of FIFTY THOUSAND 9 and NO/100 DOLLARS ($50,000.00) for separate defense costs and fees incurred by P. SHOEN. 2.5.3 AMERCO covenants and agrees that if there is a retrial of liability and damages in the SHAREHOLDER LITIGATION as to multiple defendants, including P. SHOEN, AMERCO will pay up to ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) to reimburse P. SHOEN for separate defense costs and fees for counsel of P. SHOEN's own choosing incurred for such retrial, including any subsequent appeal(s) therefrom. In exchange, P. SHOEN covenants and agrees that AMERCO shall not be obligated , in connection with such retrial, including any subsequent appeal(s) therefrom, to reimburse P. SHOEN for in excess of ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) for separate defense costs and fees incurred by P. SHOEN. 2.5.4 P. SHOEN covenants and agrees that if there is an appeal from the Superior Court's rulings on any or all of the post-trial motions pending in the SHAREHOLDER LITIGATION as of the Settlement Date, and that appeal involves multiple defendants, including P. SHOEN, without an intervening trial, P. SHOEN, and not AMERCO, will bear the costs and fees for separate counsel of his own choosing, if any, incurred in connection with such appeal. 2.5.5 To the extent, if any, that P. SHOEN decides to have his interests in any proceedings in the SHAREHOLDER LITIGATION represented by the legal counsel provided by AMERCO for the representation of the other defendants, AMERCO 10 covenants and agrees that it will pursue and protect P. SHOEN's interests equally with the interests of the other defendants. 2.6 The AMERCO DIRECTORS, in the exercise of their business judgment, agree to nominate P. SHOEN as one of the AMERCO DIRECTORS' slate of candidates for election to the AMERCO Board of Directors for a term expiring at the 1998 AMERCO Annual Meeting, which position will be filled at AMERCO's 1994 Annual Meeting (i.e., at the first Annual Meeting of AMERCO shareholders held after the date of this Settlement Agreement or an adjournment or postponement thereof). AMERCO shall solicit proxies and otherwise support the election of P. SHOEN as a Director at the 1994 Annual Meeting in the same manner and with the same resources and materials as it uses on behalf of all other candidates on the AMERCO DIRECTORS' slate. P. SHOEN covenants and agrees that he will not solicit proxies for any candidate for election to the AMERCO Board of Directors at the 1994 Annual Meeting. The AMERCO DIRECTORS make no representation as to the likelihood of success of their slate of candidates for election to the Board of Directors at the 1994 Annual Meeting. In the event that P. SHOEN is elected to the AMERCO BOARD, he shall have the same rights, privileges and perquisites as a director as are afforded to each of the other directors. 2.7 P. SHOEN covenants and agrees that he will run at the 1994 Annual Meeting of AMERCO shareholders only as one of AMERCO's management's candidates for Director, and that he will 11 not also run in the 1994 Annual Meeting election as a Director candidate of any other group or constituency. P. SHOEN further covenants and agrees that he will not conduct his own proxy campaign in support of or in opposition to any proposal for decision by shareholder vote at the 1994 Annual Meeting of AMERCO. P. SHOEN hereby withdraws the shareholder proposals and Director nominations that he submitted for consideration at the AMERCO Annual Meeting originally scheduled for July 21, 1994, and he covenants and agrees that he will not submit any new proposals or nominations for the 1994 Annual Meeting. Nothing contained in this paragraph shall be deemed to limit or restrict P. SHOEN's ability to submit nominations or proposals, or to solicit proxies, for the 1995 and later Annual Meetings of AMERCO. Similarly, nothing contained in this paragraph shall be deemed to obligate any Party to this Settlement Agreement to nominate and/or support P. SHOEN for election to the AMERCO Board of Directors at any Annual Meeting other than the 1994 Annual Meeting. 2.8 P. SHOEN hereby reaffirms and ratifies that certain Amended and Restated Stockholder Agreement dated as of May 1, 1992, to which P. SHOEN is a party (the "Stockholder Agreement"), and acknowledges that he shall remain bound by the Stockholder Agreement in accordance with the terms of this Settlement Agreement. P. SHOEN covenants and agrees with EDWARD J. SHOEN, MARK V. SHOEN, JAMES P. SHOEN and the ESOP TRUSTEES (collectively, the "Stockholder Parties"), for and on behalf of 12 the AMERCO Employee Savings and Profit Sharing and Employee Stock Ownership Trust (the "ESOP Trust"), that if the Stockholder Agreement is, or shall be declared to have been, terminated or invalidated for any reason as a result of any default, breach, failure to perform, omission or action which occurred prior to the Settlement Date (or any future court ruling based on such prior default, breach, failure to perform, omission or action), P. SHOEN will promptly enter into a new agreement with EDWARD J. SHOEN, MARK V. SHOEN, JAMES P. SHOEN and, if they so choose, the ESOP TRUSTEES (or any successor Trustees, as the case may be), for and on behalf of the ESOP Trust, as well as any other stockholder of AMERCO common stock who desires to become a party to such agreement in accordance with its terms, to combine the voting power of P. SHOEN's AMERCO common stock with the voting power of the AMERCO common stock voted respectively by EDWARD J. SHOEN, MARK V. SHOEN, JAMES P. SHOEN and, if they so choose, the ESOP TRUSTEES (or any successor Trustees, as the case may be), for and on behalf of the ESOP Trust, as well as the voting power of the AMERCO common stock voted by any other AMERCO stockholder who desires to become a party to such agreement in accordance with its terms, on the same terms and conditions as those contained in the Stockholder Agreement, for the remainder of the full term established in the Stockholder Agreement (i.e., until March 5, 1999). P. SHOEN expressly acknowledges and warrants that his agreement, as set forth in the immediately preceding sentence, is not merely an agreement to agree, but rather is a 13 statement of his present intention and agreement that he will continue to be bound by the terms and provisions set forth in the Stockholder Agreement for the duration of its term. P. SHOEN and the Stockholder Parties covenant and agree that they will vote in favor of the AMERCO DIRECTORS' slate of candidates for election at the 1994 Annual Meeting, including P. SHOEN. 2.9 AMERCO and the AMERCO DIRECTORS covenant and agree that they will proceed in good faith to select and appoint three independent Trustees for the AMERCO ESOP. III. RELEASES. -------- 3.1 In consideration of the promises and covenants set forth in this Settlement Agreement, P. SHOEN, for himself and his marital community, heirs, executors, administrators, assigns, agents, representatives and beneficiaries, does hereby release and forever discharge AMERCO, the AMERCO DIRECTORS, the AMERCO ESOP and the ESOP TRUSTEES, and their respective marital communities, predecessors, successors, affiliates, parents, subsidiaries, agents, representatives, servants, employees and attorneys, of and from any and all claims, liabilities, demands and causes of action of whatsoever nature, whether known or unknown, asserted or unasserted, for any and all relief, damages or losses of whatsoever nature, whether contractual or extracontractual, direct or consequential, known or unknown, which are based upon or arise from events, acts, representations or omissions occurring on or before the Settlement Date. 14 3.2 In consideration of the promises and covenants set forth in this Settlement Agreement, AMERCO, the AMERCO DIRECTORS, the AMERCO ESOP, and the ESOP TRUSTEES, for themselves and their respective marital communities, predecessors, successors, affiliates, parents, subsidiaries, heirs, assigns, executors, administrators, agents, representatives and beneficiaries, do hereby release and forever discharge P. SHOEN, his marital community, and his agents, representatives, servants, employees and attorneys, of and from any and all claims, liabilities, demands and causes of action of whatsoever nature, whether known or unknown, asserted or unasserted, for any and all relief, damages or losses of whatsoever nature, whether contractual or extracontractual, direct or consequential, known or unknown, which are based upon or arise from events, acts, representations or omissions occurring on or before the Settlement Date. 3.3 Nothing contained in this Settlement Agreement, including the releases set forth in paragraphs 3.1 and 3.2, shall be deemed to release, discharge or otherwise affect (a) the claims asserted by AMERCO in the AMERCO Arbitration; (b) any claim that might be asserted after the Settlement Date by P. SHOEN or by AMERCO relating to the P. SHOEN Registration, regardless of whether such claim is based upon acts or events occurring before the Settlement Date; (c) any claim or cause of action of Sophia M. Shoen against any Party hereto, and any claim or cause of action against Sophia M. Shoen by any Party hereto; 15 (d) any claim for contribution or indemnity against any Party to this Settlement Agreement with respect to any claim or liability arising out of the SHAREHOLDER LITIGATION; and (e) any right, duty or obligation of any Party hereto, after the Settlement Date, pursuant to this Settlement Agreement, the Registration Rights Agreement, the Stockholder Agreement, the P. SHOEN Merger Option Agreement dated as of March 1, 1992 and/or P. SHOEN's Consulting Agreement with AMERCO dated as of March 5, 1992. IV. MISCELLANEOUS PROVISIONS ------------------------ 4.1 This Settlement Agreement contains all of the material terms and provisions that were negotiated among the Parties at the Settlement Conference in the PROXY LITIGATION on January 12, 1995, and is the complete and exclusive statement of the entire settlement agreement among the Parties hereto. No Party has relied upon any representations, covenants, agreements or warranties of any kind, by, between or among any of the Parties hereto, relating to any of the terms or provisions contained in this Settlement Agreement, that are not set forth specifically herein. 4.2 This Settlement Agreement may not be modified except by a writing signed by all Parties hereto. 4.3 This Settlement Agreement, and all of the rights and obligations set forth herein, shall be binding upon and inure to the benefit of the Parties hereto, their respective marital communities, and their successors, heirs and assigns. 16 4.4 The Parties to this Settlement Agreement, for themselves and for their successors, heirs, assigns, personal representatives, administrators and marital communities, hereby represent and warrant to each other that (a) they have full capacity and authority to enter into, execute, deliver and perform this Settlement Agreement; and (b) they have not assigned or transferred any claim, liability, demand or cause of action released by paragraphs 3.1 and 3.2 above. 4.5 This Settlement Agreement is to be construed and enforced in accordance with the laws of the State of Nevada. 4.6 This Settlement Agreement may be executed by the Parties hereto in any number of counterparts, and each counterpart shall be deemed a duplicate original. Similarly, a photocopy or facsimile of any signature page signed in counterpart by any Party to this Settlement Agreement shall be deemed a duplicate original, provided the original or a photocopy thereof is delivered to counsel for P. SHOEN and AMERCO within five business days of the Execution Date. /S/ PAUL F. SHOEN ------------------------------ PAUL F. SHOEN AMERCO, a Nevada corporation By /S/ JOHN A LORENTZ ---------------------- Its ASST SECRETARY --------------------- 17 AMERCO EMPLOYEE SAVINGS,PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP PLAN By /S/ GARY B. HORTON ---------------------- Trustee By /S/ DONALD W. MURNEY ---------------------- Trustee By /S/ EDWARD J. SHOEN ---------------------- Trustee /S/ EDWARD J. SHOEN ------------------------------ EDWARD J. SHOEN /S/ MARK V. SHOEN ------------------------------ MARK V. SHOEN /S/ JAMES P. SHOEN ------------------------------ JAMES P. SHOEN /S/ RICHARD J. HERRERA ------------------------------ RICHARD J. HERRERA /S/ WILLIAM E. CARTY ------------------------------ WILLIAM E. CARTY /S/ AUBREY K. JOHNSON ------------------------------ AUBREY K. JOHNSON /S/ JOHN M. DODDS ------------------------------ JOHN M. DODDS /S/ CHARLES J. BAYER ------------------------------ CHARLES J. BAYER 18 /S/ DONALD W. MURNEY ------------------------------ DONALD W. MURNEY /S/ GARY B. HORTON ------------------------------ GARY B. HORTON APPROVED as to form and content: LATHAM & WATKINS Attorneys for Paul F. Shoen By: ---------------------------- Marc W. Rappel STREICH LANG, P.A. Attorneys for AMERCO and Edward J. Shoen, Mark V. Shoen, James P. Shoen, Richard J. Herrera, William E. Carty, and Aubrey K. Johnson, in their capacities as Directors of AMERCO By: /S/ JAMES A. RYAN ---------------------------- James A. Ryan CAHILL GORDON & REINDEL Attorneys for Charles J. Bayer and John M. Dodds, in their capacities as Directors of AMERCO By: ---------------------------- Laurence A. Silverman GIBSON, DUNN & CRUTCHER Attorneys for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan, and Gary B. Horton, Edward J. Shoen and Donald W. Murney, in their capacities as Trustees of the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan By: ---------------------------- Wayne W. Smith EX-12 4 RATIOS Exhibit 12. Statement Re: Computation of Ratios
Year end -------------------------------------------- 1995 1994 1993 1992 1991 -------------------------------------------- Pretax earnings from operations 93.5 66.5 49.2 25.7 (3.5) Plus: Interest expense 67.8 68.9 68.0 76.2 80.8 Preferred stock dividends 13.0 4.8 - - - Amortization of debt expense and discounts .8 1.1 1.6 1.5 .9 A portion of rental expense (1/3) 22.2 28.1 39.7 41.3 38.4 ----- ----- ----- ----- ----- Subtotal (A) 197.3 169.4 158.5 144.7 116.6 ----- ----- ----- ----- ----- Divided by: Fixed charges: Interest expense 67.8 68.9 68.0 76.2 80.8 Preferred stock dividends 13.0 4.8 - - - A portion of rental expense (1/3) 22.2 28.1 39.7 41.3 38.4 Interest capitalized during the period 1.7 .6 .2 .2 .7 Amortization of debt expense and discounts .8 1.1 1.6 1.5 .9 ----- ----- ----- ----- ----- Subtotal (B) 105.5 103.5 109.5 119.2 120.8 ----- ----- ----- ----- ----- Ratio of earnings to fixed charges (A)/(B) 1.87 1.64 1.45 1.21 -(1) ===== ===== ===== ===== ===== The Company believes that one-third of the Company's annual rental expense is a reasonable approximation of the interest factor of such rentals. (1) For the year ended March 31, 1991, pretax earnings were not sufficient to cover fixed charges by an amount of $4.2 million.
EX-27 5 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10K MARCH 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-1995 MAR-31-1995 35,286 0 300,238 0 50,337 0 2,340,096 1,065,850 2,605,989 0 881,222 10,000 0 0 676,784 2,605,989 170,204 1,240,863 93,485 981,202 0 4,958 67,762 93,456 33,424 60,032 0 0 0 60,032 1.23 1.23 THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNTS NET OF THEIR ALLOWANCES. AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
-----END PRIVACY-ENHANCED MESSAGE-----