-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WQTm+9mGk3qGy0AU52dg5DaCrGMlYYBeXDnNl9DWL3+oduqEwMxvbmWt5uFePS06 PRS9GbbPoz0qlK6okzIGdg== 0000004457-97-000025.txt : 19970820 0000004457-97-000025.hdr.sgml : 19970820 ACCESSION NUMBER: 0000004457-97-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970819 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERCO /NV/ CENTRAL INDEX KEY: 0000004457 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 880106815 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11255 FILM NUMBER: 97666514 BUSINESS ADDRESS: STREET 1: 1325 AIRMOTIVE WY STE 100 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7026886300 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-Q 1 10-Q 06/30/97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission Registrant, State of Incorporation I.R.S. Employer File Number Address and Telephone Number Identification No. _______________________________________________________________________ 0-7862 AMERCO 88-0106815 (A Nevada Corporation) 1325 Airmotive Way, Ste. 100 Reno, Nevada 89502-3239 Telephone (702) 688-6300 2-38498 U-Haul International, Inc. 86-0663060 (A Nevada Corporation) 2727 N. Central Avenue Phoenix, Arizona 85004 Telephone (602) 263-6645 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. 22,614,087 shares of AMERCO Common Stock, $0.25 par value were outstanding at August 19, 1997. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at August 19, 1997. U-Haul International, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. 2 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements. a) Consolidated Balance Sheets as of June 30, 1997, March 31, 1997 and June 30, 1996................... 4 b) Consolidated Statements of Earnings for the Quarters ended June 30, 1997 and 1996.............. 6 c) Consolidated Statements of Changes in Stockholders' Equity for the Quarters ended June 30, 1997 and 1996........................................... 7 d) Consolidated Statements of Cash Flows for the Quarters ended June 30, 1997 and 1996.............. 9 f) Notes to Consolidated Financial Statements - June 30, 1997, March 31, 1997 and June 30, 1996...................................... 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings...................................... 23 Item 6. Exhibits and Reports on Form 8-K....................... 23 3 THIS PAGE LEFT INTENTIONALLY BLANK 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets June 30, March 31, June 30, ASSETS 1997 1997 1996 ----------------------------------- (unaudited) (audited) (unaudited) (in thousands) Cash and cash equivalents $ 33,178 41,752 39,972 Receivables 242,214 238,523 267,287 Inventories 62,926 65,794 51,447 Prepaid expenses 19,775 17,264 14,591 Investments, fixed maturities 850,667 859,694 884,049 Investments, other 150,262 127,306 128,434 Deferred policy acquisition costs 50,924 48,598 54,726 Other assets 73,594 72,997 19,550 ---------------------------------- Property, plant and equipment, at cost: Land 210,995 209,803 213,936 Buildings and improvements 819,770 814,744 784,478 Furniture and equipment 201,911 199,126 190,182 Rental trailers and other rental equipment 152,783 148,807 145,811 Rental trucks 1,051,231 947,911 965,133 General rental items 21,590 21,600 22,574 ---------------------------------- 2,458,280 2,341,991 2,322,114 Less accumulated depreciation 1,106,084 1,094,925 1,072,298 ---------------------------------- Total property, plant and equipment 1,352,196 1,247,066 1,249,816 ---------------------------------- $ 2,835,736 2,718,994 2,709,872 =================================== The accompanying notes are an integral part of these consolidated financial statements. 5 June 30, March 31, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997 1996 ------------------------------------ (unaudited) (audited) (unaudited) (in thousands) Liabilities: Accounts payable and accrued liabilities $ 137,309 131,099 179,378 Notes and loans 1,035,340 983,550 756,098 Policy benefits and losses, claims and loss expenses payable 468,568 469,134 497,461 Liabilities from premium deposits 429,984 433,397 422,514 Cash overdraft 47,942 23,606 22,709 Other policyholders' funds and liabilities 31,896 30,966 30,510 Deferred income 36,317 35,247 33,262 Deferred income taxes 28,000 9,675 89,983 ---------------------------------- Stockholders' equity: Serial preferred stock, with or without par value, 50,000,000 shares authorized - Series A preferred stock, with no par value, 6,100,000 shares issued and outstanding as of June 30, 1997, March 31, 1997 and June 30, 1996 - - - Series B preferred stock, with no par value, 100,000 shares issued and outstanding as of June 30, 1997, March 31, 1997 and none issued and outstanding as of June 30, 1996 - - - Serial common stock, with or without par value, 150,000,000 shares authorized - Series A common stock of $0.25 par value, 10,000,000 shares authorized, 5,762,495 shares issued as of June 30, 1997, March 31, 1997, and June 30, 1996 1,441 1,441 1,441 Common stock of $0.25 par value, 150,000,000 shares authorized, 36,487,505 shares issued as of June 30, 1997 and March 31, 1997, and 34,237,505 shares issued as of June 30, 1996 9,122 9,122 8,559 Additional paid-in capital 337,933 337,933 165,756 Foreign currency translation adjustment (14,365) (14,133) (12,372) Unrealized gain(loss) on investments (1,432) 4,411 3,084 Retained earnings 667,976 644,009 645,783 ---------------------------------- 1,000,675 982,783 812,251 Less: Cost of common shares in treasury, (19,635,913 shares as of June 30, 1997 and March 31, 1997, 7,209,077 shares as of June 30, 1996) 359,723 359,723 111,118 Unearned employee stock ownership plan shares 20,572 20,740 23,176 ---------------------------------- Total stockholders' equity 620,380 602,320 677,957 Contingent liabilities and commitments ---------------------------------- $ 2,835,736 2,718,994 2,709,872 ================================== 6 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Earnings Quarters ended June 30, (Unaudited) 1997 1996 ------------------------ (in thousands except per share data) Revenues Rental and other revenue $ 272,485 260,495 Net sales 56,719 55,979 Premiums 35,465 31,155 Net investment income 11,588 13,002 ----------------------- Total revenues 376,257 360,631 Costs and expenses Operating expense 225,003 210,733 Cost of sales 31,397 31,581 Benefits and losses 35,099 23,258 Amortization of deferred acquisition costs 3,460 4,022 Depreciation 20,490 18,779 Interest expense, net of interest income of $3,478 and $10,883 in 1997 and 1996, respectively 16,688 7,971 ----------------------- Total costs and expenses 332,137 296,344 Pretax earnings from operations 44,120 64,287 Income tax expense (14,922) (24,282) ----------------------- Net earnings $ 29,1982 40,005 ======================= Earnings per common share: Net earnings $ 1.09 1.15 ======================= Weighted average common shares outstanding 21,879,156 32,015,301 ======================= The accompanying notes are an integral part of these consolidated financial statements. 7 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Quarters ended June 30, (Unaudited) 1997 1996 ------------------- (in thousands) Series A common stock of $0.25 par value: 10,000,000 shares authorized, 5,762,495 shares issued as of June 30, 1997, March 31, 1997 and June 30, 1996 Beginning and end of period $ 1,441 1,441 ------------------- Common stock of $0.25 par value: 150,000,000 shares authorized, 36,487,505 shares issued as of June 30, 1997 and March 31, 1997, and 34,237,505 shares issued as of June 30, 1996 Beginning and end of period 9,122 8,559 ------------------- Additional paid-in capital: Beginning and end of period 337,933 165,756 ------------------- Foreign currency translation: Beginning of period (14,133) (11,877) Change during period (232) (495) ------------------- End of period (14,365 (12,372) ------------------- Unrealized gain (loss) on investments: Beginning of period 4,411 11,097 Change during period (5,843) (8,013) ------------------- End of period (1,432) 3,084 ------------------- Retained earnings: Beginning of period 644,009 609,019 Net earnings 29,198 40,005 Dividends paid to stockholders: Preferred stock Series A($0.53 per share) (3,241) (3,241) Preferred stock Series B($19.90 per share) (1,990) - ------------------- End of period $ 667,976 645,783 ------------------- The accompanying notes are an integral part of these consolidated financial statements. 8 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Quarters ended June 30, (Unaudited) 1997 1996 -------------------- (in thousands) Less Treasury stock: Beginning and end of period 359,723 111,118 ------------------- Less Unearned employee stock ownership plan shares: Beginning of period 20,740 23,329 Increase in loan 1 - Proceeds from loan (169) (153) ------------------- End of period 20,572 23,176 ------------------- Total stockholders' equity $ 620,380 677,957 =================== The accompanying notes are an integral part of these consolidated financial statements. 9 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Quarters ended June 30, (Unaudited) 1997 1996 -------------------- (in thousands) Cash flows from operating activities: Net earnings $ 29,198 40,005 Depreciation and amortization 25,435 25,180 Provision for losses on accounts receivable 1,120 869 Net (gain) loss on sale of real and personal property 89 500 Gain on sale of investments 75 (207) Changes in policy liabilities and accruals 7,870 10,976 Additions to deferred policy acquisition costs (3,545) (6,385) Net change in other operating assets and liabilities 19,815 126,755 -------------------- Net cash provided by operating activities 80,057 197,693 -------------------- Cash flows from investing activities: Purchases of investments: Property, plant and equipment (210,431) (61,686) Fixed maturities (39,134) (51,483) Private equity investment (24,500) - Preferred Stock (979) - Real estate - 353 Mortgage loans (6,036) (1,800) Proceeds from sale of investments: Property, plant and equipment 82,937 137,031 Fixed maturities 39,757 31,955 Real estate 138 335 Mortgage loans 6,809 5,366 Changes in other investments 1,497 (4,634) -------------------- Net cash provided (used) by investing activities (149,942) 55,437 -------------------- Cash flows from financing activities: Net change in short-term borrowings 76,000 (391,000) Proceeds from notes - 175,000 Debt issuance costs (439) (2,146) Loan to leveraged Employee Stock Ownership Plan (1) - Repayments from leveraged Employee Stock Ownership Plan 169 153 Principal payments on notes (24,210) (26,122) Net change in cash overdraft 24,336 (9,450) Preferred stock dividends paid (5,231) (3,241) Investment contract deposits 4,818 25,891 Investment contract withdrawals (14,131) (13,411) -------------------- Net cash provided (used) by financing activities 61,311 (244,326) -------------------- Increase (decrease)in cash and cash equivalents (8,574) 8,804 Cash and cash equivalents at beginning of period 41,752 31,168 -------------------- Cash and cash equivalents at end of period $ 33,178 39,972 ==================== The accompanying notes are an integral part of these consolidated financial statements. 10 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1997, March 31, 1997 and June 30, 1996 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AMERCO, a Nevada corporation (the Company), is the holding company for U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (AREC), Republic Western Insurance Company (RWIC) and Oxford Life Insurance Company (Oxford). PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the parent corporation, AMERCO, and its subsidiaries, all of which are wholly-owned. All material intercompany accounts and transactions of AMERCO and its subsidiaries have been eliminated. The consolidated balance sheets as of June 30, 1997 and 1996, and the related consolidated statements of earnings, changes in stockholders' equity and cash flows for the quarters ended June 30, 1997 and 1996 are unaudited; in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The operating results and financial position of AMERCO's consolidated insurance operations are determined on a one quarter lag. There were no effects related to intervening events which would significantly affect consolidated financial position or results of operations for the financial statements presented herein. The financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual financial statements and notes. Earnings per share are computed by dividing net earnings after deduction of preferred stock dividends by the weighted average number of common shares outstanding, excluding shares of the employee stock ownership plan that have not been committed to be released. Preferred dividends include undeclared or unpaid dividends of the Company. Certain reclassifications have been made to the financial statements for the quarter ended June 30, 1996 to conform with the current year's presentation. 11 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 2. INVESTMENTS A comparison of amortized cost to market for fixed maturities is as follows: March 31, 1997 - ------------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Held-to-Maturity of shares cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 16,630 $ 16,514 848 (43) 17,319 U.S. government agency mortgage- backed securities $ 48,547 48,276 287 (2,180) 46,383 Obligations of states and political subdivisions $ 30,130 29,928 869 (130) 30,667 Corporate securities $ 167,680 171,734 2,092 (3,345) 170,481 Mortgage-backed securities $ 111,284 109,827 900 (2,646) 108,081 Redeemable preferred stocks 1,168 32,712 318 (436) 32,594 ---------------------------------------- 408,991 5,314 (8,780) 405,525 ---------------------------------------- March 31, 1997 - ----------------- Gross Gross Estimated Consolidated Amortized unrealized unrealized market Available-for-Sale Par Value cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 11,685 11,766 701 - 12,467 U.S. government agency mortgage- backed securities $ 28,423 27,934 139 (502) 27,571 States, municipalities and political subdivisions $ 11,900 12,079 431 (160) 12,350 Corporate securities $ 299,605 302,960 3,760 (5,465) 301,255 Mortgage-backed securities $ 77,094 76,565 849 (1,238) 76,176 Preferred stock $ 476 11,794 127 (64) 11,857 ---------------------------------------- 443,098 6,007 (7,429) 441,676 ---------------------------------------- Total $ 852,089 11,321 (16,209) 847,201 ---------------------------------------- In February 1997, the Company, through its insurance subsidiaries, invested in the equity of a limited partnership in a Texas-based self-storage corporation. RWIC invested $13,500,000 in exchange for a 27.3% limited partnership and Oxford invested $11,000,000 in exchange for a 22.2% limited partnership. U-Haul is a 50% owner of a corporation which is a general partner in the Texas- based self-storage corporation. The Company has a $10,000,000 note receivable from the corporation. 12 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES A summary consolidated balance sheet for RWIC is presented below: March 31, --------------------- 1997 1996 --------------------- (in thousands) Investments - fixed maturities $ 411,652 413,669 Other investments 22,122 14,330 Receivables 114,790 155,611 Deferred policy acquisition costs 9,778 11,682 Due from affiliate 22,352 12,415 Deferred federal income taxes 14,751 17,119 Other assets 9,095 7,989 ------------------- Total assets $ 604,540 632,815 =================== Policy liabilities and accruals $ 336,969 343,223 Unearned premiums 48,823 79,218 Other policyholders' funds and liabilities 25,721 20,018 ------------------- Total liabilities 411,513 442,459 Stockholder's equity 193,027 190,356 ------------------- Total liabilities and stockholder's equity $ 604,540 632,815 =================== A summarized consolidated income statement for RWIC is presented below: Quarter ended March 31, ----------------------- 1997 1996 ----------------------- (in thousands) Premiums $ 34,482 25,238 Net investment income 7,282 7,737 Other income 55 (52) --------------------- Total revenue 41,819 32,923 Benefits and losses 29,438 17,824 Amortization of deferred policy acquisition costs 2,155 2,464 Other expenses 5,203 6,640 --------------------- Income from operations 5,023 5,995 Federal income tax expense (1,550) (1,886) --------------------- Net income $ 3,473 4,109 ===================== 13 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued A summary consolidated balance sheet for Oxford is presented below: March 31, --------------------- 1997 1996 --------------------- (in thousands) Investments - fixed maturities $ 439,015 470,380 Other investments 105,911 89,679 Receivables 12,349 14,733 Deferred policy acquisition costs 41,146 43,044 Due from affiliate 507 291 Other assets 2,928 2,347 ------------------- Total assets $ 601,856 620,474 =================== Policy liabilities and accruals $ 82,776 75,025 Premium deposits 429,984 422,514 Other policyholders' funds and liabilities 6,587 14,213 Deferred taxes 8,856 10,588 ------------------- Total liabilities 528,203 522,340 Stockholder's equity 73,653 98,134 ------------------- Total liabilities and stockholder's equity $ 601,856 620,474 =================== A summarized consolidated income statement for Oxford is presented below: Quarter ended March 31, ----------------------- 1997 1996 ----------------------- (in thousands) Premiums $ 5,943 7,089 Net investment income 4,433 4,882 Other income 41 (541) -------------------- Total revenue 10,417 11,430 Benefits and losses 5,661 5,434 Amortization of deferred policy acquisition costs 1,305 1,558 Other expenses 1,400 1,483 -------------------- Income from operations 2,051 2,955 Federal income tax expense (604) (1,028) -------------------- Net income $ 1,447 1,927 ==================== 14 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 4. CONTINGENT LIABILITIES AND COMMITMENTS During the three months ended June 30, 1997, a subsidiary of U- Haul entered into eleven transactions, and has subsequently entered into three additional transactions, whereby the Company sold rental trucks and subsequently leased back. The Company has guaranteed $14,857,000 of residual values and an additional $5,346,000 subsequent to June 30, 1997 for these assets at the end of the respective lease terms. U-Haul also subsequently entered into one transaction, whereby the Company sold and subsequently leased back computer equipment. Following are the lease commitments for the leases executed during the three months ended June 30, 1997, and subsequently which have a term of more than one year (in thousands): Net activity Year ended Lease subsequent to March 31, Commitments quarter end Total --------------------------------------------------------- 1998 $ (6,209) 1,097 (5,112) 1999 (8,167) 1,558 (6,609) 2000 (8,167) 1,558 (6,609) 2001 (1,257) 2,565 1,308 2002 5,405 2,876 8,281 Thereafter 21,952 7,986 29,938 ------------------------------------ $ 3,557 17,640 21,197 ==================================== During the three months ended June 30, 1997, the Company has reduced future lease commitments by $68,000,000 and subsequently $8,432,000 through early termination of certain leases. Residual value guarantees were also reduced by $11,402,000 and $1,527,000 in connection with the terminations. In the normal course of business, the Company is a defendant in a number of suits and claims. The Company is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or clean-up of underground fuel storage tanks. It is the opinion of management that none of such suits, claims or proceedings involving the Company, individually or in the aggregate are expected to result in a material loss. 5. SUPPLEMENTAL CASH FLOWS INFORMATION The (increase) decrease in receivables, inventories and accounts payable and accrued liabilities net of other operating and investing activities follows: Quarters ended June 30, 1997 1996 --------------------- (in thousands) Receivables $ (9,049) 74,020 ===================== Inventories $ 2,868 (5,556) ===================== Accounts payable and accrued liabilities $ 6,744 28,728 ===================== Income taxes paid in cash amounted to none and $53,000 for the quarters ended June 30, 1997 and 1996, respectively. Interest paid in cash amounted to $17,395,000 and $18,080,000 for the quarters ended June 30, 1997 and 1996, respectively. 15 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 6. EARNINGS PER SHARE Earnings per share are computed based on the weighted average number of shares outstanding for the year and quarterly periods, excluding shares of the employee stock ownership plan that have not been committed to be released. Preferred dividends include undeclared or unpaid dividends of the Company. Net income is reduced for preferred dividends for purposes of the calculation. The following table reflects the calculation of the earnings per share (in thousands except per share data): Quarters ended June 30, 1997 1996 ----------------------- Earnings from operations $ 29,198 40,005 Less dividends on preferred shares 5,255 3,241 ----------------------- Net earnings for per share calculation $ 23,943 36,764 ======================= Earnings per common share $ 1.09 1.15 ======================== Weighted average common shares outstanding 21,879,156 32,015,301 ========================= 7. RELATED PARTIES During the quarter ended June 30, 1997, a subsidiary held various senior and junior notes with SAC Holding corporation and its subsidiaries (SAC Holdings). The voting common stock of SAC Holdings is held by Mark. V. Shoen, a major stockholder of the Company. The Company's subsidiary received principal payments of $911,000 and interest payments of $1,263,000 from SAC Holdings during the quarter. The Company currently manages the properties owned by SAC Holdings pursuant to a management agreement, under which the Company receives a management fee equal to 6% of the gross receipts from the properties. The Company received management fees of $434,000 during the quarter ended June 30, 1997. The management fee percentage is consistent with the fees received by the Company for other properties managed by the Company. 8. NEW ACCOUNTING STANDARDS On April 1, 1995, the Company implemented Statement of Position 93-7, "Reporting on Advertising Costs", issued by the Accounting Standards Executive Committee in December 1993. This statement of position provides guidance on financial reporting on advertising costs in annual financial statements. The Company is currently reviewing its implementation procedures. Other pronouncements issued by the Financial Standards Board with future effective dates are either not applicable or not material to the consolidated financial statements of the Company. 16 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 9. SUBSEQUENT EVENTS On July 7, 1997, the Company executed an agreement with Sophia Shoen whereby the Company paid $1,250,000 to Sophia Shoen to settle an arbitration proceeding entitled JAMS-ENDISPUTE Link No. 940517195 and -------------- to terminate a Share Repurchase and Registration Right Agreement. Sophia Shoen is a major stockholder and the sister of Edward J., James P., and Paul F. Shoen, who are major stockholders and directors of the Company. In July 1997, the Company extinguished $76,000,000 of its long- term notes originally due in fiscal 1999 through fiscal 2002. The above transactions resulted in an extraordinary loss of $4,134,000, net of tax of $2,275,000 ($0.19 per share). On August 5, 1997, the Company declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of August 15, 1997. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table shows industry segment data from the Company's three primary industry segments: Moving and Storage Operations, Property/Casualty Insurance and Life Insurance. Moving and Storage Operations is composed of the operations of U-Haul, which consists of the rental of trucks, automobile-type trailers and self-storage space and sales of related products and services and AREC. Property/Casualty Insurance is composed of the operations of RWIC, which operates in various property and casualty lines. Life insurance is composed of the operations of Oxford, which operates in various life, accident and health and annuity lines. The Company's U-Haul Moving and Storage Operations are seasonal and proportionately more of the Company's revenues and net earnings are generated in the first and second quarters each fiscal year (April through September). Moving and Property/ Adjustments Storage Casualty Life and Operations Insurance Insurance Eliminations Consolidated ----------------------------------------------------------- (in thousands) Quarter ended June 30, 1997 Revenues: Outside $ 329,202 37,140 9,915 - 376,257 Intersegment - 4,679 502 (5,181) - ---------------------------------------------------------- Total revenues 329,202 41,819 10,417 (5,181) 376,257 ========================================================== Operating profit $ 53,734 5,023 2,051 - 60,808 =========================================== Interest expense 16,688 ------ Pretax earnings from operations $ 44,120 ====== Identifiable assets $1,933,630 604,540 601,856 (304,290) 2,835,736 ========================================================== Moving and Property/ Adjustments Storage Casualty Life and Operations Insurance Insurance Eliminations Consolidated ----------------------------------------------------------- (in thousands) Quarter ended June 30, 1996 Revenues: Outside $ 317,609 31,983 11,039 - 360,631 Intersegment - 940 391 (1,331) - ---------------------------------------------------------- Total revenues 317,609 32,923 11,430 (1,331) 360 631 ========================================================== Operating profit $ 63,308 5,995 2,955 - 72,258 =========================================== Interest expense 7,971 ------- Pretax earnings from operations $ 64,287 ======= Identifiable assets $1,774,805 632,815 620,474 (318,222) 2,709,872 ========================================================== 18 QUARTER ENDED JUNE 30, 1997 VERSUS QUARTER ENDED JUNE 30, 1996 Moving and Storage Operations Revenues consist of rental revenues and net sales. Total rental revenue increased by $11.3 million, 4.3%, to $272.6 million during the first quarter of fiscal 1998. The increase was primarily due to increased fleet activity. Net sales revenues were $56.7 million in the first quarter of fiscal 1998, which represents a 1.3% increase from the first quarter of fiscal 1997 net sales of $56.0 million. Revenue realized from the sale of moving support items (i.e. boxes, etc.) and propane was $1.7 million higher for the first quarter of fiscal 1998. These gains were partially offset by a $0.5 million decrease in gasoline sales and a $0.5 million decrease in outside repair income. Cost of sales was $31.4 million for the first quarter of fiscal 1998, as compared to $31.6 million for the same period in fiscal 1997. Higher material costs for hitches were offset by a reduction in moving support sales item costs and a reduction in gasoline costs related to decreased gasoline sales. Operating expenses increased to $223.6 million in the first quarter of fiscal 1998 from $203.9 million in the first quarter of fiscal 1997, an increase of 9.6%. During the first quarter of fiscal 1998, leasing activity increased $5.3 million and personnel costs increased $3.5 million in conjunction with higher rental and sales activity. Increased insurance costs of $2.7 million were due to increased cost of risk and an increase in the rental fleet. Maintenance and utility costs of the operating facilities increased by $1.5 million. All other operating expenses increased in the aggregate by $6.7 million. Depreciation expense for the first quarter of fiscal 1998 was $20.5 million, as compared to $18.8 million during the same period of the prior year. In accordance with Company policy, $11.9 million of betterments related to rental trucks were capitalized. Property and Casualty RWIC's gross premium writings for the quarter ended March 31, 1997 were $33.1 million, as compared to $48.1 million for the quarter ended March 31, 1996. This represents a decrease of $15.0 million, or 31.2%. As in prior periods, the rental industry market accounts for a significant share of total premiums, approximately 38.1% and 27.7% in the first quarter 1997 and 1996, respectively. These writings include U-Haul customers, fleetowners and U-Haul as well as other rental industry insureds with similar characteristics. RWIC continues underwriting professional reinsurance via broker markets. Premiums in this area decreased during first quarter 1997 to $14.7 million or 44.5% of total gross premiums, from comparable 1996 figures of $24.1 million or 50.2% of total premium. This decrease can be primarily attributed to a written premium accrual procedural change. At March 31, 1997 only premiums due in the present period are accrued while at March 31, 1996, premiums due in future accounting periods were accrued. Premium writings in selected general agency lines were 17.4% of total gross written premiums in the quarter ended March 31, 1997 as compared to 22.1% in the same period of 1996. This decrease resulted from the cancellation of a general agency agreement in November 1996. RWIC continues its direct multiple peril coverage of various commercial properties and businesses in 1997. These premiums accounted for 13.3% of the total gross written premiums for the quarter ended March 31, 1997 as compared to 7.1% for the same period in 1996. The increase is the result of planned business expansion. Net earned premiums increased $9.2 million, or 36.6%, to $34.5 million for the quarter ended March 31, 1997, compared with premiums of $25.2 million for the quarter ended March 31, 1996. The premium increase was primarily due to planned business expansion in the rental industry and direct multiple peril markets, offset by decreases in assumed treaty reinsurance and general agency lines. As mentioned previously, the assumed treaty reinsurance decrease is a result of the change in accrual procedure which eliminated future premiums and the decrease in general agency lines resulted from the cancellation of a general agency agreement. Underwriting expenses incurred were $38.3 million for the quarter ended March 31, 1997, an increase of $9.4 million, or 32.5% over 1996. Comparable underwriting expenses incurred for the first quarter of 1996 were $28.9 million. The increase is attributed to increased commission expense and losses incurred. Losses incurred increased in the rental industry, general agency lines, and assumed treaty reinsurance segments, but were partially offset by a decrease in the direct multiple peril markets. 19 Net investment income was $7.3 million for the quarter ended March 31, 1997, a decrease of 5.8% over 1996 net investment income of $7.7 million. The decrease is due to a planned restructuring of the portfolio. RWIC completed the first quarter of 1997 with income before tax expense of $5.0 million as compared to $6.0 million for the comparable period ended March 31, 1996. This represents a decrease of $1.0 million, or 16.2% over 1996. Increased premium earnings were offset by increased underwriting expenses and decreased investment income discussed above. Life Insurance Premiums from Oxford's reinsurance lines before intercompany eliminations were $3.9 million for the quarter ended March 31, 1997, a decrease of $1.3 million, or 25.0% over the same period in 1996 and accounted for 66.1% of Oxford's premiums for the period. These premiums are primarily from term life insurance and deferred annuity contracts that have matured. Decreases in premiums are primarily from these matured reinsurance contracts. Premiums from Oxford's direct lines before intercompany eliminations were $2.0 million for the quarter ended March 31, 1996, an increase of $0.1 million (5.3%) from the same period during 1996. This increase in direct premium is primarily attributable to the Company's disability and group life business ($0.6 million in premium). Oxford's direct business related to group life and disability coverage issued to employees of the Company for the quarter ended March 31, 1996 accounted for 10.2% of premiums. Other direct lines, including credit life and health business, accounted for 23.7% of Oxford's premiums for the quarter ended March 31, 1997 Net investment income before intercompany eliminations was $4.4 million and $4.9 million for the quarters ended March 31, 1997 and 1996 respectively. This decrease is due to a lower asset base resulting from the dividend paid to the Company during December 1996. Gains (losses) on the disposition of fixed maturity investments were immaterial for the quarter ended March 31, 1997 and $(0.5) million for the quarter ended March 31, 1996. Benefits and expenses incurred were $8.4 million for the quarter ended March 31, 1997, a decrease of 0.1% over 1996. Comparable benefits and expenses incurred for the same quarter in 1996 were $8.5 million. This decrease is primarily due to a decrease in the reserves and amortization of deferred acquisition costs, partially offset by increases in death benefits. Operating profit before tax and intercompany eliminations decreased by $0.9 million, or approximately 30.0%, in the first quarter of 1997 to $2.1 million, primarily due to the decrease in premium income and a lower asset base attributable to the dividend paid to the Company during December 1996, partially offset by a decrease in benefits and expenses. Interest Expense Interest expense was relatively stable at $20.2 million for the quarter ended June 30, 1997, as compared to $18.9 million for the quarter ended June 30, 1996. Higher average debt levels outstanding during the current quarter attributed to the increase. The decline in interest income reflects a reduced level of interest income for mortgage loans on storage properties sold at the end of first quarter of fiscal 1997. Consolidated Group As a result of the foregoing, pretax earnings of $44.1 million were realized in the quarter ended June 30, 1997, as compared to $64.3 million for the same period in 1996. After providing for income taxes, net earnings for the quarter ended June 30, 1997 were $29.2 million, as compared to $40.0 million for the same period of the prior year. 20 QUARTERLY RESULTS The following table presents unaudited quarterly results for the nine quarters in the period beginning April 1, 1995 and ending June 30, 1997. The Company believes that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, the selected quarterly information when read in conjunction with the consolidated financial statements incorporated herein by reference. The Company's U-Haul rental operations are seasonal and proportionally more of the Company's revenues and net earnings from its U-Haul rental operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period (in thousands except for per share data). Quarter Ended --------------- Jun 30 1997 --------------- Total revenues $ 376,257 Net earnings (loss) 29,198 Weighted average common shares outstanding 21,879,156 Net earnings (loss) per common share (1) 1.09 Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 1996 1996 1996 1997 ---------------------------------------------- Total revenues $ 360,631 417,223 320,583 308,105 Earnings from operations before extraordinary loss on early extinguishment of debt (3) - 39,741 (9,538) - Net earnings (loss) 40,005 37,737 (9,853) (16,024) Weighted average common shares outstanding (2) 32,015,301 27,675,192 20,359,873 21,868,241 Earnings from operations before extraordinary loss on early extinguishment of debt per common share (3) - 1.29 (0.72) - Net earnings (loss) per common share (1) (2) (3) 1.15 1.22 (0.74) (0.97) Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 1995 1995 1995 1996 ---------------------------------------------- Total revenues $ 340,359 389,861 313,063 298,656 Net earnings (loss) 15,177 35,332 7,701 2,184 Weighted average common shares outstanding (2) 37,958,426 37,931,825 36,796,961 32,554,458 Net earnings (loss) per common share (1) (2) 0.31 0.85 0.13 (0.04) ________________ (1)Net earnings (loss) per common share amounts were computed after giving effect to the dividends on the Company's Preferred Stock. (2)Reflects the acquisition of treasury shares acquired pursuant to the Shoen Litigation as discussed in Note 14 of the Consolidated Financial Statements in Item 8 of the Company's Form 10-K for the year ended March 31, 1997. (3)During second quarter of fiscal year 1997, the company extinguished $76.3 million of debt and $86.2 million of its long- term notes originally due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary loss of $2.3 million, net of tax of $2.4 million ($0.09 per share). 21 LIQUIDITY AND CAPITAL RESOURCES Moving and Storage Operations To meet the needs of its customers, U-Haul must maintain a large inventory of fixed asset rental items. At June 30, 1997, net property, plant and equipment represented approximately 70.1% of total U-Haul assets and approximately 47.7% of consolidated assets. In the first quarter of fiscal 1998, capital expenditures were $210.4 million, as compared to $61.7 million in the first quarter of fiscal 1997, reflecting expansion of the rental truck fleet, and real property acquisitions. These acquisitions were funded with internally generated funds from operations and debt financings. Cash flows from operations were $67.5 million in the first quarter of fiscal 1998, as compared to $193.7 million in the first quarter of fiscal 1997. The decrease results from the sale of mortgage note receivables for proceeds of $83.5 million for the quarter ended June 30, 1996, along with decreased deferred tax and decreased earnings. Property and Casualty Cash flows from operating activities were $1.5 million and $(0.2) million for the quarters ended March 31, 1997 and 1996, respectively. This change is due to decreased paid losses recoverable, accounts receivable, and due from affiliates, as well as a smaller loss and expense reserve increase and unearned premium decrease than that for the quarter ended March 31, 1996. RWIC's short-term investment portfolio was $1.6 million at March 31, 1997. This level of liquid assets, combined with budgeted cash flow, is adequate to meet periodic needs as well as any near term shortfall. The balances reflect funds in transition from maturity proceeds to long-term investments. The structure of the long-term portfolio is designed to match future liability cash needs. Capital and operating budgets allow RWIC to schedule cash needs in accordance with investment and underwriting proceeds. RWIC maintains a diversified securities investment portfolio, primarily in bonds at varying maturity levels with 94.9% of the fixed- income securities portfolio consisting of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity remains strong, with RWIC having 5.4% more invested assets than total liabilities. Stockholder's equity increased 0.4% from $192.3 million at December 31, 1996 to $193.0 million at March 31, 1997. RWIC considers current stockholder's equity to be adequate to support future growth and absorb unforeseen risk events. RWIC does not use debt or equity issues to increase capital and therefore has no exposure to capital market conditions. Life Insurance Oxford's primary sources of cash are premiums, receipts from interest-sensitive products and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements. Cash provided by operating activities were $11.0 million and $4.1 million for the quarters ended March 31, 1997 and 1996, respectively. Cash flows provided (used) by financing activities were $(9.3) million and $12.5 million for the quarters ended March 31, 1997 and 1996, respectively. Cash flows from financing activities result from deferred annuity sales and annuitizations, which have the effect of increasing and decreasing cash flows, respectively. In addition to cash flow from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. At March 31, 1997 and 1996, short-term investments amounted to $6.5 million and $12.0 million, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs. Stockholder's equity of Oxford decreased to $73.7 million in 1997 from $96.1 million in 1996 as a result of a dividend paid to the Company during December 1996. 22 Applicable laws and regulations of the State of Arizona require the Company's insurance subsidiaries to maintain minimum capital determined in accordance with statutory accounting practices. With respect to Oxford, such amount is $0.6 million. In addition, the amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus that can be distributed as dividends without prior regulatory approval is zero at March 31, 1997. These restrictions are not expected to have a material adverse effect on the ability of the Company to meet its cash obligations. Consolidated Group During each of the fiscal years ending March 31, 1998, 1999, and 2000, U-Haul estimates gross capital expenditures will average approximately $250-$300 million as a result of the expansion of the rental truck fleet and self-storage locations. This level of capital expenditures, combined with an average of approximately $75.0 million in annual long-term debt maturities during this same period, are expected to create annual average funding needs of approximately $325- 375 million. Management estimates that U-Haul will fund between 75% and 88% of these requirements with internally generated funds, including proceeds from the disposition of older trucks and other asset sales. The remainder of the anticipated capital expenditures are expected to be financed through existing credit facilities, new debt placements, lease fundings, and equity offerings. Credit Agreements The Company's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes, and revolving lines of credit with domestic and foreign banks. Principally to finance its fleet of trucks and trailers, the Company routinely enters into sale and leaseback transactions. As of June 30, 1997, the Company had $1,035.3 million in total notes and loans payable outstanding, as compared with $983.6 million at March 31, 1997, and $756.1 million at June 30, 1996. Unutilized committed lines of credit are $260.0 million at June 30, 1997. Certain of the Company's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, maintaining certain financial ratios, and placing certain additional liens on its properties and assets. At June 30, 1997, the Company was in compliance with these covenants. The Company is further restricted in the issuance of certain types of preferred stock. The Company is prohibited from issuing shares of preferred stock that provide for any mandatory redemption, sinking fund payment, or mandatory prepayment, or that allow the holders thereof to require the Company or a subsidiary of the Company to repurchase such preferred stock at the option of such holders or upon the occurrence of any event or events without the consent of its lenders. 23 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. On July 7, 1997, Sophia M. Shoen, a major stockholder of the Company, executed a settlement agreement with the Company resolving a lawsuit in the Second Judicial District Court of the State of Nevada, Case No. CV96-01628 arising out of an arbitration proceeding entitled JAMS-ENDISPUTE Link No. 940517195. In the arbitration proceeding, - -------------- Sophia Shoen alleged that the Company breached her Share Repurchase and Registration Rights Agreement, dated as of May 1, 1992 (the Rights Agreement), with the Company by failing to timely register the sale of her shares of Common Stock which were sold to the public in November 1994. Pursuant to the settlement agreement, (i) the Company paid Sophia M. Shoen $1.25 million, (ii) the Rights Agreement was terminated, (iii) Sophia M. Shoen released the Company and others from any liability relating to the foregoing proceedings and the Rights Agreement, (iv) the Company released Sophia M. Shoen and others from any liability relating to the foregoing proceedings and the Rights Agreement and (v) the shares of Common Stock held by Sophia M. Shoen were released from a stockholder agreement covering approximately 70% of the Company's Common Stock ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits 3.1 Restated Articles of Incorporation (1) 3.2 Restated By-Laws of AMERCO as of August 27, 1996 (2) 10.1 Settlement Agreement between AMERCO and Sophia Shoen 10.2 Amended and Restated Side Agreement, dated as of June 1, 1997 27 Financial Data Schedule b. Reports on Form 8-K. No report on Form 8-K was filed for the quarter ended June 30, 1997. _____________________________________ (1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, file no. 0-7862. (2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, file no. 0-7862. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERCO ___________________________________ (Registrant) Dated: August 19, 1997 By: /S/ GARY B. HORTON ___________________________________ Gary B. Horton, Treasurer (Principal Financial Officer) EX-10.1 2 SETTLEMENT AGREEMENT SETTLEMENT AGREEMENT -------------------- THIS SETTLEMENT AGREEMENT ("Agreement") is made and entered into as of April 24, 1997, by and between AMERCO, a Nevada corporation ("AMERCO" or the "Company"), and Sophia M. Shoen ("Sophia"). RECITALS -------- WHEREAS, Sophia previously initiated a private arbitration against AMERCO, JAMS/ENDISPUTE Link No. 940517195 (the "Arbitration"), alleging that AMERCO had breached that certain Share Repurchase and Registration Rights Agreement dated as of May 1, 1992 (the "Rights Agreement"); and WHEREAS, Sophia previously initiated litigation against AMERCO in the Second Judicial District Court of the State of Nevada, Case No. CV 96-01628 (the "Nevada Action"), arising out of the Arbitration; and WHEREAS, AMERCO previously initiated an appeal to the Nevada Supreme Court, Case No. 30110 (the "Nevada Appeal"), arising out of the Nevada Action; and WHEREAS, AMERCO has denied and continues to deny any wrongful conduct on its part in connection with the Rights Agreement, as asserted in the Arbitration and related court proceedings referred to above; and WHEREAS, the parties hereto desire to resolve all disputes and claims currently existing between them in connection with the Rights Agreement, the Arbitration, the Nevada Action and the Nevada Appeal; and WHEREAS, by resolving such disputes, Sophia and Sophia's employee, Margie Van Nort, will be spared the inconvenience and expense of being called upon to be deposed, to testify and to produce records or documents in response to subpoenas or other discovery procedures. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, and intending to be legally bound, the parties agree as follows: AGREEMENT --------- 1. Payment. Upon execution of this Agreement and the ------- stipulations of dismissal hereinafter referred to, by all intended signatories to each, AMERCO shall pay Sophia the total sum of One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00). 2. Dissolution of the Rights Agreement. Sophia and AMERCO ----------------------------------- agree that the Rights Agreement and all rights, restrictions and obligations thereunder are dissolved, canceled and terminated in their entirety. 3. Release by Sophia of Claims Asserted In or Arising Out ------------------------------------------------------ of the Rights Agreement, the Arbitration, the Nevada Action or - -------------------------------------------------------------- the Nevada Appeal. Sophia does hereby release and forever - ----------------- discharge AMERCO and its past and present officers, directors, attorneys, representatives, employees, affiliates, agents, servants, insurers, predecessors in interest, successors, heirs, executors, indemnitors and assigns, all of whom are recognized as third-party beneficiaries to this Agreement, of and from any and all manner of actions, causes of action, suits, claims, demands, obligations, liability, damages, costs and expenses of any nature whatsoever, known or unknown, anticipated or unanticipated, suspected or unsuspected, which Sophia had, now has or which may hereafter accrue, upon or by reason of any matter, cause or thing which was or could have been asserted in, which arises out of; or which is related to the Rights Agreement, the Arbitration, the Nevada Action and/or the Nevada Appeal. 4. Release by AMERCO of Claims Asserted In or Arising Out ------------------------------------------------------ of the Rights Agreement, the Arbitration, the Nevada Action or - -------------------------------------------------------------- the Nevada Appeal. AMERCO does hereby release and forever - ----------------- discharge Sophia and her attorneys, representatives, employees, affiliates, agents, servants, insurers, predecessors in interest, successors, heirs, executors, indemnitors and assigns, all of whom are recognized as third-party beneficiaries to this Agreement, of and from any and all manner of actions, causes of action, suits, claims, demands, obligations, liability, damages, costs and expenses of any nature whatsoever, known or unknown, anticipated or unanticipated, suspected or unsuspected, which AMERCO had, now has or which may hereafter accrue, upon or by reason of any matter, cause or thing which was or could have been asserted in, which arises out of, or which is related to the Rights Agreement, the Arbitration, the Nevada Action and/or the Nevada Appeal. 5. Dismissal of the Arbitration, the Nevada Action and the ------------------------------------------------------- Nevada Appeal. The Arbitration, the Nevada Action and the Nevada - ------------- Appeal shall each be dismissed with prejudice, each party to bear its own costs and fees, all in accordance with the forms of Stipulation for Dismissal attached hereto as Exhibits 1, 2, and 3, respectively, which each party shall cause its counsel to sign and file with the appropriate court or arbitral body. 6. Authority. Each party for itself; its heirs, personal --------- representatives, successors and assigns, hereby represents and warrants that it has the full capacity and authority to enter into, execute, deliver and perform this Agreement, that such execution, delivery and performance does not violate any contractual or other obligation by which it is bound, and that this Agreement constitutes an agreement binding upon, and enforceable against, that party. Each person signing below on behalf of an entity hereby personally guarantees that he/she has the authority to sign this document on behalf of the entity for which he/she is signing and that his/her signature legally binds the entity to the terms hereof. 7. Circumstances of Negotiation. The parties to this ---------------------------- Agreement recognize and hereby acknowledge that the negotiations leading up to this Agreement were conducted regularly and at arms' length. The parties to this Agreement represent that neither they nor the attorneys acting on their behalf, have made any statement, representation, or promise regarding any fact relied upon by any other party in entering into this Agreement, and they have not relied upon any statement, representation, or promise made by any other party, except for those statements, representations, and promises contained in this Agreement. The undersigned parties further represent and declare that they have read this Agreement in its entirety, and that they fully understand and voluntarily adopt as their own the representations and statements made herein. 8. No Admission of Wrongdoing. The parties to this -------------------------- Agreement, and each of them, understand and agree that this is a compromise settlement of disputed claims and that the promises of this Agreement shall not be construed to be an admission of any liability or obligation whatsoever by any party to any other party or any other person whomsoever. 9. Entire Agreement. This Agreement is the entire ---------------- agreement between the parties hereto relating the subject matter hereof and, as such, supersedes all prior oral and written agreements or understandings between the parties regarding such matters. This Agreement may not hereafter be modified except in a writing signed by all parties hereto. 10. Counterparts. For the convenience of the parties, this ------------ Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together constitute but one and the same instrument. All signatures need not be on the same counterpart. 11. Headings. All headings and titles for convenience only -------- and neither limit, amplify or in any way modify the provisions of the Agreement itself. 12. Successors and Assigns. This Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective personal representatives, heirs and devisees. This Agreement or any rights or obligations under it may not be assigned by any party without the prior written consent of the parties. 13. Governing Law. This Agreement is to be construed and ------------- interpreted in accordance with the laws of the State of Arizona. IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date set forth opposite their names below. AMERCO, a Nevada corporation Dated: July 7, 1997 By: /s/ Edward J. Shoen --------------------- ---------------------------- Edward J. Shoen, President Dated: July 7, 1997 /s/ Sophia M. Shoen --------------------- ---------------------------- Sophia M. Shoen EX-10.2 3 SIDE AGREEMENT AMENDED AND RESTATED SIDE AGREEMENT This Amended and Restated Side Agreement (the "Agreement") is entered into as of June 1, 1997, by and among AMERCO, a Nevada corporation ("AMERCO"), Blue Ridge Investments, L.L.C., a Delaware limited liability company ("Blue Ridge"), and NationsBank Corporation, a North Carolina corporation ("NationsBank"). WHEREAS, AMERCO and Blue Ridge have entered into that certain Series B Preferred Stock Purchase Agreement dated as of August 30, 1996 (the "Stock Purchase Agreement"), providing for the purchase by Blue Ridge from AMERCO of shares of AMERCO's Series B Preferred Stock, no par value (the "Series B Preferred"), and certain other agreements and transactions on August 30, 1996 and October 1, 1996 (the Stock Purchase Agreement and such other agreements and transactions are collectively referred to herein as the "Transaction"), as revised by that certain Side Agreement dated as of October 29, 1996 (the "Side Agreement") and letter agreements dated as of December 26, 1996 and March 25, 1997 (the "Letter Agreements"); WHEREAS, Blue Ridge (or any subsequent holder of the Series B Preferred) has the right to convert, upon the occurrence of certain events described in the Certificate of Designation of Preferences and Rights of Series B Preferred Stock of AMERCO (the "Certificate of Designation"), all of the Series B Preferred into 4,000,000 shares (subject to adjustment) of AMERCO's Series B Common Stock or all of the shares of capital stock of Picacho Peak Investments Co., a Nevada corporation ("Picacho"); WHEREAS, pursuant to the Certificate of Designation, Blue Ridge (or any subsequent holder of the Series B Preferred) also has the right to convert the Series B Preferred as described above on August 31, 1997 and during the first ten business days of each fiscal quarter beginning after August 31, 1997; WHEREAS, the provisions of the Certificate of Designation permitting conversion of the Series B Preferred into Picacho on August 31, 1997 and during the first ten business days of each fiscal quarter beginning after August 31, 1997 would result in an adverse accounting treatment of the Transaction; WHEREAS, AMERCO has advised Blue Ridge that Picacho desires to make one or more loans (individually and collectively, the "Loan") to AMERCO in the aggregate principal amount of $50,000,000, which Loan requires the consent of Blue Ridge and NationsBank; WHEREAS, the parties desire to amend and restate the Side Agreement for the purpose of continuing certain of the agreements contained in the Side Agreement, amending certain other of the agreements contained in the Side Agreement and adding additional agreements to those contained in the Side Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The Side Agreement and the Letter Agreements are terminated and replaced in their entirety by this Agreement. All capitalized terms used in this Agreement, unless otherwise defined herein, shall have the same meaning as in Stock Purchase Agreement. 2. Blue Ridge and NationsBank agree that, notwithstanding the provisions of Section 3(a) of the Certificate of Designation, neither party shall convert, pursuant to Section 3(a)(i) or Section 3(a)(ii) of the Certificate of Designation, the Series B Preferred into any or all of the capital stock of Picacho or into any shares of AMERCO's Series B Common Stock. Nothing in this Agreement shall limit Blue Ridge's or NationsBank's ability to convert the Series B Preferred under any provision other than Section 3(a)(i) or Section 3(a)(ii) of the Certificate of Designation. 3. AMERCO, Blue Ridge and NationsBank agree that, in addition to the provisions of Section 3(a) of the Certificate of Designation, Blue Ridge and NationsBank (or any subsequent holder of the Series B Preferred) shall have the right to convert any or all of the Series B Preferred into shares of AMERCO's Series B Common Stock (a) on January 1, 1998 and for 10 Business Days after January 1, 1998; (b) on July 1, 1998 and for 10 Business Days after July 1, 1998; and (c) on December 1, 1998 and for 10 Business Days after December 1, 1998. 4. AMERCO, Blue Ridge and NationsBank agree that the provisions of the Summary of Indicative Terms and Conditions, attached to that certain letter from NationsBank of Texas, N.A. to AMERCO dated July 16, 1996, creating any obligation of the Arranger (as defined therein) to rebate any portion of its fees are hereby deleted, voided and rendered unenforceable. 5. Blue Ridge and NationsBank agree that, as a condition of any transfer of the Series B Preferred to a third party, such third party shall agree to be bound by the terms of this Agreement. Blue Ridge and NationsBank agree to the placement of the following legend on the stock certificate representing the Series B Preferred: "The securities evidenced hereby are subject to the terms of that certain Amended and Restated Side Agreement, dated as of June 1, 1997, which limits the ability of the holder of the securities to convert the securities." 6. AMERCO, Blue Ridge and NationsBank agree that Section 4.8 of the Stock Purchase Agreement is deleted and amended to read in its entirety as follows: 4.8 Ownership and Operation of Picacho. The -------------------------------------- Corporation will: (a) at all times own all of the outstanding shares, and all interest in the revenues, income, assets and business, of Picacho (except in the event of a conversion of the Series B Preferred into the shares of Picacho); (b) cause Picacho to engage in no business or operations and incur no liabilities or obligations except as permitted by its Articles of Incorporation; (c) cause the Corporation at all times to have sufficient funds legally available for redemption of all of the Series B Preferred; (d) cause Picacho at all times to invest all of its assets with an investment manager satisfactory to the Holder, provided that Picacho may loan to AMERCO from Picacho's assets up to $50,000,000 in principal amount outstanding from time to time, which amount is not required to be invested with an investment manager satisfactory to the Holder during the period that it is loaned to AMERCO; (e) cause Picacho at all times to maintain a stockholders' equity of at least the product of (i) the number of shares of Series B Preferred outstanding and (ii) the Conversion Value. (f) cause Picacho to maintain its Articles of Incorporation and Bylaws in effect as at June 1, 1997. 7. AMERCO, Blue Ridge and NationsBank agree that the Letter Agreement dated as of August 30, 1996 between NationsBank of Texas, N.A. and Picacho Peak Investments Co. is to be terminated and replaced by a letter in substantially the form attached to this Agreement as Exhibit A. 8. AMERCO agrees that: (a) The changes in the Transaction effected by this Agreement shall not be deemed a consent to the amendment of, departure from or waiver of (i) any of the covenants in Section 4.8 of the Stock Purchase Agreement, except as specifically stated in Section 6 of this Agreement; (ii) any other covenant or condition in any Transaction Document; or (iii) any Event of Noncompliance that otherwise may arise as a result of the Loan. The failure to comply with any of the covenants or conditions contained in any Transaction Document shall constitute an Event of Noncompliance; (b) Except as specifically set forth herein, all terms and provisions of the Transaction Documents, all rights of Blue Ridge and NationsBank and all obligations of AMERCO and Picacho thereunder shall remain in full force and effect, are ratified and confirmed in all respects, and shall continue to be legal, valid, binding and enforceable in accordance with their terms; (c) Before any Loan is made by Picacho to AMERCO, AMERCO will provide Blue Ridge and NationsBank a certificate of an authorized officer to the effect that: (i) immediately before and upon making the Loan, the representations and warranties made by AMERCO in Section 2 of the Stock Purchase Agreement are and will continue to be true and correct in all material respects at and as of the date the Loan is made; (ii) immediately before and upon making the Loan, all covenants, agreements, and conditions contained in the Stock Purchase Agreement to be performed by AMERCO on or prior to the date the Loan is made have been performed or complied with and will continue to be performed or complied with in all material respects; and (iii) the making of the Loan has been duly authorized by all necessary action on the part of AMERCO and Picacho and does not and will not: (A) violate any provision of law applicable to AMERCO or Picacho, the certificate of incorporation or bylaws of AMERCO or Picacho or any order, judgment, or decree of any court or agency of government binding upon AMERCO or Picacho; (B) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of AMERCO or Picacho; (C) result in or require the creation or imposition of any material lien upon any of the properties or assets of AMERCO or Picacho; or (D) require any approval or consent of any Person under any material contractual obligation of AMERCO or Picacho except for such approvals and consents which have been obtained. (e) AMERCO will repay the Loan in full on or before December 1, 1998 and Picacho will deliver the amounts received from such repayment directly to NationsBank of Texas, N.A. for investment in accordance with the Investment Letter attached as Exhibit A to this Agreement, subject to conversion or redemption of the Series B Preferred. (d) The failure of AMERCO or Picacho to comply with any of the covenants contained in this Agreement shall constitute an Event of Noncompliance. 9. TO INDUCE BLUE RIDGE AND NATIONSBANK TO AGREE TO THE TERMS OF THIS AGREEMENT, AMERCO REPRESENTS AND WARRANTS THAT AS OF THE DATE OF ITS EXECUTION OF THIS AGREEMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATION UNDER THE TRANSACTION DOCUMENTS AND IN ACCORDANCE THEREWITH IT WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF ITS EXECUTION OF THIS AGREEMENT. 10. AMERCO also represents and warrants to Blue Ridge and NationsBank that the following statements are true, correct and complete: (a) after giving effect to this Agreement, no Event of Noncompliance has occurred and is continuing; (b) after giving effect to this Agreement, the representations and warranties set forth in the Transaction Documents are true and correct in all material respects on and as of the date hereof with the same effect as though made on and as of such date except with respect to any representations and warranties limited by their terms to a specific date; and (c) the execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the part of AMERCO and does not and will not: (1) violate any provision of law applicable to AMERCO or Picacho, the certificate of incorporation or bylaws of AMERCO or Picacho or any order, judgment, or decree of any court or agency of government binding upon AMERCO or Picacho; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of AMERCO or Picacho; (3) result in or require the creation or imposition of any material lien upon any of the properties or assets of AMERCO or Picacho; or (4) require any approval or consent of any Person under any material contractual obligation of AMERCO or Picacho except for such approvals and consents which have been obtained. 11. Blue Ridge and NationsBank agree to execute and deliver such further agreements and instruments, and take such further action as may be requested by AMERCO to carry out the provisions and purposes of this Agreement and to cause all subsequent holders of the Series B Preferred to be bound by the terms of this Agreement. 12. AMERCO agrees to pay (or cause to be paid) all costs and expenses of Blue Ridge and NationsBank in connection with the preparation, negotiation, execution, and delivery of this Agreement and all other instruments, documents, and agreements executed and delivered pursuant to or in connection with this Agreement, as provided in Section 9.1 of the Stock Purchase Agreement. Concurrently with the execution of this Agreement, AMERCO has paid to NationsBank of Texas, N.A. or its affiliate a fee of $1,000,000 13. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS WHETHER WRITTEN OR ORAL RELATING TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. 14. This Agreement shall be governed by and construed in accordance with the internal laws of the State of North Carolina without regard to conflicts of law principles. 15. This Agreement may be executed in one or more counterparts and in telecopied counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. The foregoing Agreement is hereby executed as of the date first above written. AMERCO By: /S/ GARY V. KLINEFELTER ---------------------------- Name: GARY V. KLINEFELTER -------------------------- Title: SECRETARY ------------------------- BLUE RIDGE INVESTMENTS, L.L.C. By: /S/ GEORGE C. CARP ---------------------------- Name: GEORGE C. CARP -------------------------- Title: VP FINANCE ------------------------- NATIONSBANK CORPORATION By: /S/ JOHN E. MACK ---------------------------- Name: JOHN E. MACK -------------------------- Title: SR. VICE PRESIDENT, TREASURER ------------------------- EX-27 4 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 JUN-30-1997 33,178 0 242,214 0 62,926 0 2,458,280 1,106,084 2,835,736 0 1,035,340 0 0 10,563 609,817 2,835,736 56,719 376,257 31,397 282,932 0 1,120 16,688 44,120 14,922 29,198 0 0 0 29,198 1.09 1.09 THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNT NET OF THEIR ALLOWANCES. AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
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