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 September 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 November 13, 1997. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at November 13, 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 September 30, 1997, March 31, 1997 and September 30, 1996................... 4 b) Consolidated Statements of Earnings for the Six months ended September 30, 1997 and 1996................ 6 c) Consolidated Statements of Changes in Stockholders' Equity for the Six months ended September 30, 1997 and 1996................................................ 7 d) Consolidated Statements of Earnings for the Quarters ended September 30, 1997 and 1996.............. 8 e) Consolidated Statements of Cash Flows for the Six months ended September 30, 1997 and 1996................ 9 f) Notes to Consolidated Financial Statements - September 30, 1997, March 31, 1997 and September 30, 1996...................................... 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 17 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders......... 26 Item 6. Exhibits and Reports on Form 8-K............................ 26
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4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets September 30, March 31, September 30, ASSETS 1997 1997 1996 ------------------------------------ (unaudited) (audited) (unaudited) (in thousands) Cash and cash equivalents $ 33,831 41,752 32,380 Receivables 249,992 238,523 311,480 Inventories 72,273 65,794 54,718 Prepaid expenses 23,927 17,264 11,060 Investments, fixed maturities 856,383 859,694 879,699 Investments, other 149,757 127,306 162,661 Deferred policy acquisition costs 47,505 48,598 56,171 Other assets 71,948 72,997 61,428 --------------------------------- Property, plant and equipment, at cost: Land 209,944 209,803 214,853 Buildings and improvements 822,767 814,744 800,760 Furniture and equipment 205,045 199,126 191,826 Rental trailers and other rental equipment 181,337 170,407 172,678 Rental trucks 1,053,326 947,911 950,209 --------------------------------- 2,472,419 2,341,991 2,330,326 Less accumulated depreciation 1,116,032 1,094,925 1,077,193 --------------------------------- Total property, plant and equipment 1,356,387 1,247,066 1,253,133 --------------------------------- $ 2,862,003 2,718,994 2,822,730 ================================= The accompanying notes are an integral part of these consolidated financial statements.
5 September 30, March 31, September 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997 1996 -------------------------------------- (unaudited) (audited) (unaudited) (in thousands) Liabilities: Accounts payable and accrued liabilities $ 106,471 131,099 153,732 Notes and loans 1,059,044 983,550 940,282 Policy benefits and losses, claims and loss expenses payable 485,415 469,134 485,932 Liabilities from premium deposits 427,556 433,397 435,789 Cash overdraft 21,113 23,606 22,740 Other policyholders' funds and liabilities 26,073 30,966 31,711 Deferred income 35,202 35,247 36,694 Deferred income taxes 46,785 9,675 62,820 --------------------------------- 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 September 30, 1997, March 31, 1997 and September 30, 1996 - - - Series B preferred stock, with no par value, 100,000 shares issued and outstanding as of September 30, 1997, March 31, 1997 and September 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 September 30, 1997, March 31, 1997, and September 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 September 30, 1997 and March 31, 1997, and 34,237,505 shares issued as of September 30, 1996 9,122 9,122 8,559 Additional paid-in capital 336,933 337,933 264,378 Foreign currency translation adjustment (14,653) (14,133) (12,451) Unrealized gain(loss) on investments 4,229 4,411 315 Retained earnings 697,569 644,009 680,279 --------------------------------- 1,034,641 982,783 942,521 Less: Cost of common shares in treasury, (19,635,913 shares as of September 30, 1997 and March 31, 1997, 15,599,609 shares as of September 30, 1996) 359,723 359,723 266,315 Unearned employee stock ownership plan shares 20,574 20,740 23,176 --------------------------------- Total stockholders' equity 654,344 602,320 653,030 Contingent liabilities and commitments --------------------------------- $ 2,862,003 2,718,994 2,822,730 =================================
6 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Earnings Six months ended September 30, (Unaudited) 1997 1996 ----------------------- (in thousands except per share data) Revenues Rental revenue $ 576,846 554,421 Net sales 108,465 107,192 Premiums 79,845 72,749 Net investment income 23,636 25,140 ----------------------- Total revenues 788,792 759,502 Costs and expenses Operating expense 461,830 446,058 Cost of sales 61,654 62,639 Benefits and losses 82,033 66,716 Amortization of deferred acquisition costs 7,123 8,057 Depreciation, net 39,273 31,739 ----------------------- Total costs and expenses 651,913 615,209 Earnings from operations 136,879 144,293 Interest expense, net of interest income of $7,064 and $18,637 in 1997 and 1996, respectively 33,644 17,714 ----------------------- Pretax earnings from operations 103,235 126,579 Income tax expense (35,005) (46,833) ----------------------- Earnings from operations before extraordinary loss on early extinguishment of debt 68,230 79,746 Extraordinary loss on early extinguishment of debt, net (4,138) (2,004) ----------------------- Net earnings $ 64,092 77,742 ======================= Earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 2.63 2.43 Extraordinary loss on early extinguishment of debt, net (.19) (.07) ----------------------- Net earnings $ 2.44 2.36 ======================= Weighted average common shares outstanding 21,884,614 29,845,247 ======================= The accompanying notes are an integral part of these consolidated financial statements.
7 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Six months ended September 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 September 30, 1997, March 31, 1997 and September 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 September 30, 1997 and March 31, 1997, and 34,237,505 shares issued as of September 30, 1996 Beginning and end of period 9,122 8,559 ------------------- Additional paid-in capital: Beginning of period 337,933 165,756 Issuance of preferred stock (1,000) 98,622 ------------------- End of period 336,933 264,378 ------------------- Foreign currency translation: Beginning of period (14,133) (11,877) Change during period (520) (574) ------------------- End of period (14,653) (12,451) ------------------- Unrealized gain (loss) on investments: Beginning of period 4,411 11,097 Change during period (182) (10,782) ------------------- End of period 4,229 315 ------------------- Retained earnings: Beginning of period 644,009 609,019 Net earnings 64,092 77,742 Dividends paid to stockholders: Preferred stock Series A ($1.06 per share) (6,482) (6,482) Preferred stock Series B($40.50 per share) (4,050) - ------------------- End of period 697,569 680,279 ------------------- Less Treasury stock: Beginning of period 359,723 111,118 Net increase (8,390,532 shares in 1996) - 155,197 ------------------- End of period 359,723 266,315 ------------------- Less Unearned employee stock ownership plan shares: Beginning of period 20,740 23,329 Increase in loan 3 - Proceeds from loan (169) (153) ------------------- End of period 20,574 23,176 ------------------- Total stockholders' equity $ 654,344 653,030 =================== The accompanying notes are an integral part of these consolidated financial statements.
8 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Earnings Quarters ended September 30, (Unaudited) 1997 1996 ----------------------- (in thousands except per share data) Revenues Rental revenue $ 308,597 293,504 Net sales 51,746 51,213 Premiums 44,380 41,594 Net investment income 12,048 12,138 ----------------------- Total revenues 416,771 398,449 Costs and expenses Operating expense 241,152 235,403 Cost of sales 30,257 31,058 Benefits and losses 46,934 43,458 Amortization of deferred acquisition costs 3,663 4,035 Depreciation, net 18,694 12,460 ----------------------- Total costs and expenses 340,700 326,414 Earnings from operations 76,071 72,035 Interest expense, net of interest income of $3,586 and $7,754 in 1997 and 1996, respectively 16,956 9,743 ----------------------- Pretax earnings from operations 59,115 62,292 Income tax expense (20,083) (22,551) ----------------------- Earnings from operations before extraordinary loss on early extinguishment of debt 39,032 39,741 Extraordinary loss on early extinguishment of debt, net (4,138) (2,004) ----------------------- Net earnings $ 34,894 37,737 ======================= Earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 1.54 1.29 Extraordinary loss on early extinguishment of debt, net (.19) (.07) ----------------------- Net earnings $ 1.35 1.22 ======================= Weighted average common shares outstanding 21,890,072 27,675,192 ======================= The accompanying notes are an integral part of these consolidated financial statements.
9 AMERCO AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Six months ended September 30, (Unaudited) 1997 1996 -------------------- (in thousands) Cash flows from operating activities: Net earnings $ 64,092 77,742 Depreciation and amortization 53,334 48,582 Provision for losses on accounts receivable 2,350 1,841 Net (gain) loss on sale of real and personal property (465) (6,980) Gain (loss) on sale of investments 25 50 Changes in policy liabilities and accruals 29,244 17,688 Additions to deferred policy acquisition costs (5,709) (10,469) Net change in other operating assets and liabilities (19,808) (13,530) -------------------- Net cash provided by operating activities 123,063 114,924 -------------------- Cash flows from investing activities: Purchases of investments: Property, plant and equipment (284,035) (134,247) Fixed maturities (66,883) (88,295) Equity investments (24,500) (2,596) Mortgage loans (11,858) (8,944) Real estate - (767) Proceeds from sale of investments: Property, plant and equipment 134,320 200,785 Fixed maturities 68,693 68,895 Real estate 194 389 Mortgage loans 10,623 12,943 Changes in other investments 3,083 (40,510) -------------------- Net cash provided (used) by investing activities (170,363) 7,653 -------------------- Cash flows from financing activities: Net change in short-term borrowings 176,000 (177,500) Proceeds from notes - 337,500 Debt issuance costs (506) (4,125) Loan to leveraged Employee Stock Ownership Plan (3) - Proceeds from leveraged Employee Stock Ownership Plan 169 153 Extraordinary loss on early extinguishment of debt, net (4,138) (2,004) Principal payments on notes (100,506) (217,938) Issuance of preferred stock (1,000) 98,622 Net change in cash overdraft (2,493) (9,419) Dividends paid (10,532) (6,482) Treasury stock acquisitions - (155,197) Investment contract deposits 11,726 42,950 Investment contract withdrawals (29,338) (27,925) -------------------- Net cash provided (used) by financing activities 39,379 (121,365) -------------------- Increase (decrease)in cash and cash equivalents (7,921) 1,212 Cash and cash equivalents at beginning of period 41,752 31,168 -------------------- Cash and cash equivalents at end of period $ 33,831 32,380 ==================== The accompanying notes are an integral part of these consolidated financial statements.
10 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 1997, March 31, 1997 and September 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 September 30, 1997 and 1996, and the related consolidated statements of earnings, changes in stockholders' equity and cash flows for the quarters ended September 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. 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 is charged to operating expenses as incurred, while renewals and betterments are capitalized. Major overhaul costs are amortized over the estimated period benefited. Gains and losses on dispositions are netted against depreciation expense when realized. 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 six months ended September 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: June 30, 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 $ 16,506 1,015 (25) 17,496 U.S. government agency mortgage- backed securities $ 47,372 47,112 384 (1,719) 45,777 Obligations of states and political subdivisions $ 29,220 29,031 1,106 (12) 30,125 Corporate securities $ 166,440 170,250 2,870 (1,646) 171,474 Mortgage-backed securities $ 110,431 109,008 1,390 (1,537) 108,861 Redeemable preferred stocks 1,207 33,636 433 (180) 33,889 ---------------------------------------- 405,543 7,198 (5,119) 407,622 ---------------------------------------- June 30, 1997 ------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Available-for-Sale of shares cost gains losses value ------------------------------------------------------ U.S. treasury securities and government obligations $ 11,685 11,762 816 - 12,578 U.S. government agency mortgage- backed securities $ 28,350 27,863 460 (60) 28,263 States, municipalities and political subdivisions $ 12,400 12,573 510 (84) 12,999 Corporate securities $ 298,957 302,139 6,092 (2,309) 305,922 Mortgage-backed securities $ 75,635 75,061 1,573 (470) 76,164 Redeemable preferred stocks 561 14,620 331 (37) 14,914 ---------------------------------------- 444,018 9,782 (2,960) 450,840 ---------------------------------------- Total $ 849,561 16,980 (8,079) 858,462 ======================================== 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: June 30, --------------------- 1997 1996 --------------------- (in thousands) Investments - fixed maturities $ 412,140 394,750 Other investments 24,014 13,678 Receivables 117,613 135,339 Deferred policy acquisition costs 9,217 11,833 Due from affiliate 32,521 36,696 Deferred federal income taxes 16,851 17,320 Other assets 9,867 13,369 ------------------- Total assets $ 622,223 622,985 =================== Policy liabilities and accruals $ 348,252 335,130 Unearned premiums 55,235 74,266 Other policyholders' funds and liabilities 22,166 20,896 ------------------- Total liabilities 425,653 430,292 Stockholder's equity 196,570 192,693 ------------------- Total liabilities and stockholder's equity $ 622,223 622,985 =================== A summarized consolidated income statement for RWIC is presented below: Six months ended June 30, ------------------------- 1997 1996 ------------------------- (in thousands) Premiums $ 78,996 64,754 Net investment income 15,280 15,157 --------------------- Total revenue 94,276 79,911 Benefits and losses 69,918 55,283 Amortization of deferred policy acquisition costs 4,311 4,929 Other expenses 14,224 9,998 --------------------- Income from operations 5,823 9,701 Federal income tax expense (1,645) (2,957) --------------------- Net income $ 4,178 6,744 =====================
13 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued A summary consolidated balance sheet for Oxford is presented below: June 30, --------------------- 1997 1996 --------------------- (in thousands) Investments - fixed maturities $ 444,243 484,949 Other investments 102,894 85,196 Receivables 14,527 14,761 Deferred policy acquisition costs 38,288 44,338 Due from affiliate 121 307 Other assets 2,402 1,585 ------------------- Total assets $ 602,475 631,136 =================== Policy liabilities and accruals $ 81,928 76,735 Premium deposits 427,556 435,789 Other policyholders' funds and liabilities 5,108 11,810 Deferred taxes 10,033 9,455 ------------------- Total liabilities 524,625 533,789 Stockholder's equity 77,850 97,347 ------------------- Total liabilities and stockholder's equity $ 602,475 631,136 =================== A summarized consolidated income statement for Oxford is presented below: Six months ended June 30, ------------------------- 1997 1996 ------------------------- (in thousands) Premiums $ 12,700 14,302 Net investment income 8,909 9,385 -------------------- Total revenue 21,609 23,687 Benefits and losses 12,115 11,433 Amortization of deferred policy acquisition costs 2,812 3,128 Other expenses 2,776 3,538 -------------------- Income from operations 3,906 5,588 Federal income tax expense (1,085) (1,977) -------------------- Net income $ 2,821 3,611 ====================
14 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 4. CONTINGENT LIABILITIES AND COMMITMENTS During the six months ended September 30, 1997, a subsidiary of U-Haul entered into sixteen transactions, whereby the Company sold rental trucks and subsequently leased back. The Company has guaranteed $22,202,000 of residual values for these assets at the end of the respective lease terms. U-Haul also 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 six months ended September 30, 1997, which have a term of more than one year (in thousands): Year ended Lease March 31, Commitments ------------------------------ 1998 $ (5,900) 1999 (7,977) 2000 (7,977) 2001 2,020 2002 9,562 Thereafter 33,149 ------- $ 22,877 ======= During the six months ended September 30, 1997, the Company has reduced future lease commitments by $83,713,000 through early termination of certain leases. Residual value guarantees were also reduced by $14,301,000 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: Six months ended September 30, 1997 1996 --------------------- (in thousands) Receivables $ (14,736) 22,396 ===================== Inventories $ (6,479) (8,827) ===================== Accounts payable and accrued liabilities $ (24,420) 1,921 ===================== Income taxes paid in cash amounted to $1,159,000 and $1,694,000 for the six months ended September 30, 1997 and 1996, respectively. Interest paid in cash amounted to $44,609,000 and $36,173,000 for the six months ended September 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): Six months ended September 30, Quarter ended 1997 1996 1997 1996 ---------------------- --------------------- Earnings from operations before extraordinary loss on early extinguishment of debt $ 68,230 79,746 39,032 39,741 Less dividends on preferred shares 10,571 7,137 5,316 3,897 ---------------------- ---------------------- 57,659 72,609 33,716 35,844 Extraordinary loss on early extinguishment of debt (4,138) (2,004) (4,138) (2,004) ---------------------- ---------------------- Net earnings for per share calculation $ 53,521 70,605 29,578 33,840 ====================== ====================== Net earnings for per share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 2.63 2.43 1.54 1.29 Extraordinary loss on early extinguishment of debt, net (.19) (.07) (.19) (.07) ---------------------- ---------------------- Net earnings $ 2.44 2.36 1.35 1.22 ====================== ====================== Weighted average common shares outstanding 21,884,614 29,845,247 21,890,072 27,675,192 ====================== ====================== 7. RELATED PARTIES During the six months ended September 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 $3,513,000 from SAC Holdings during the period. 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 $916,000 during the six months ended September 30, 1997. The management fee percentage is consistent with the fees received by the Company for other properties managed by the Company.
16 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 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. 9. SUBSEQUENT EVENTS In October 1997, the Company issued $300,000,000 of Bond Backed Asset Trust Certificates. The net proceeds will be used to prepay floating rate indebtedness of the Company under revolving credit agreements. On November 4, 1997, the Company declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of November 14, 1997. On September 11, 1997, Oxford entered into an agreement to purchase all of the issued and outstanding shares of Encore Financial, Inc. and its subsidiaries (Encore) for $5,760,000. Encore's primary subsidiary is North American Insurance Company (NAI). NAI is an insurance company domiciled in the state of Wisconsin whose premium volume is primarily derived from the sale of credit life and disability products, as well as health insurance. This purchase is subject to approval by regulatory authorities in Wisconsin and Louisiana.
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 and 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 and 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 of each fiscal year (April through September). Moving and Property and Adjustments Storage Casualty Life and Operations Insurance Insurance Eliminations Consolidated ------------------------------------------------------------ (in thousands) Six months ended September 30, 1997 Revenues: Outside $ 684,828 83,031 20,933 - 788,792 Intersegment - 11,245 676 (11,921) - ----------------------------------------------------------- Total revenues 684,828 94,276 21,609 (11,921) 788,792 =========================================================== Operating profit $ 127,150 5,823 3,906 - 136,879 =========================================== Interest expense 33,644 Pretax earnings ------- from operations $ 103,235 ======= Identifiable assets $1,961,218 622,223 602,475 (323,913) 2,862,003 =========================================================== Moving and Property and Adjustments Storage Casualty Life and Operations Insurance Insurance Eliminations Consolidated ------------------------------------------------------------ (in thousands) Six months ended September 30, 1996 Revenues: Outside $ 662,149 74,095 23,258 - 759,502 Intersegment - 5,816 429 (6,245) - ----------------------------------------------------------- Total revenues 662,149 79,911 23,687 (6,245) 759,502 =========================================================== Operating profit $ 129,004 9,701 5,588 - 144,293 =========================================== Interest expense 17,714 Pretax earnings ------- from operations $ 126,579 ======= Identifiable assets $1,903,461 622,985 631,136 (334,852) 2,822,730 ===========================================================
18 SIX MONTHS ENDED SEPTEMBER 30, 1997 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1996 Moving and Storage Operations Revenues consist of rental revenue and net sales. Rental revenue increased by $22.4 million, approximately 4.0%, to $576.8 million in the first six months of fiscal 1998. Transactional growth and improved pricing within the truck fleet contributed toward the increase in rental revenue. Net sales revenues were $108.5 million in the first six months of fiscal 1998, which represents an increase of approximately 1.2% from the first six months of fiscal 1997 net sales of $107.2 million. Revenue growth from the sale of moving support items (i.e. boxes, etc.) and propane resulted in a $3.5 million increase during the six month period, which was partially offset by a $0.9 million decrease in revenue from gasoline sales. Cost of sales was $61.7 million in the first six months of fiscal 1998, which represents a decrease of approximately 1.4% from $62.6 million for the same period in fiscal 1997. Cost of sales related to material costs from the sale of hitches and moving support items remained consistent during the first six months of fiscal 1998 and 1997 even though sales increased. Operating expense increased to $456.8 million in the first six months of fiscal 1998 from $438.8 million in the first six months of fiscal 1997, an increase of approximately 4.1%. The change from the prior year primarily reflects a $5.9 million increase in lease expense reflecting increased leasing activity and a $6.7 million increase in insurance costs due to increased cost of risk and increased rental activity. All other operating expense categories increased in the aggregate by $5.4 million, approximately 1.5% in conjunction with higher rental and sales costs. Depreciation expense for the first six months of fiscal 1998 was $39.7 million, as compared to $38.7 million in the same period of the prior year. Fiscal 1997 net gain (loss) on disposition of real and personal property was $7.0 million compared to $0.4 million for the same period of fiscal 1998. Property and Casualty RWIC's gross premium writings for the six months ended June 30, 1997 were $89.1 million, as compared to $89.4 million in the six months ended June 30, 1996. This represents a decrease of $0.3 million, or 0.3%. As in prior periods, the rental industry market accounts for a significant share of total premiums, approximately 51.4% and 45.6% in the first six months of 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 increased during the first six months of 1997 to $30.6 million or 34.4% of total gross premiums, from comparable 1996 figures of $28.9 million or 32.3% of total gross premiums. This increase can be attributed to an increase in new business written. Premium writings in selected general agency lines were 2.3% of total gross written premiums for the period ended June 30, 1997 as compared to 13.8% 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 11.9% of the total gross written premiums for the six months ended June 30, 1997 as compared to 8.2% for the same period in 1996. The increase is the result of planned business expansion. Net earned premiums increased $14.2 million, or 22.0%, to $79.0 million for the six months ended June 30, 1997, compared with premiums of $64.8 million for the same period ended June 30, 1996. The premium increase was primarily due to planned business expansion in the rental industry and direct multiple peril markets, offset by a decrease in general agency lines. As mentioned previously, the decrease in general agency lines resulted from the cancellation of a general agency agreement. Underwriting expenses incurred were $88.8 million for the six months ended June 30, 1997, an increase of $18.3 million, or 25.9% over 1996. Comparable underwriting expenses incurred for the first six months of 1996 were $70.6 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, offset by a decrease in the direct multiple peril markets. Net investment income was $15.3 million for the period ended June 30, 1997, an increase of 0.7% over 1996 net investment income of $15.2 million. The marginal increase resulted from a shift in investment type to preferred stock.
19 RWIC completed the six months ended June 30, 1997 with income before tax expense of $5.8 million as compared to $9.7 million for the same period ended June 30, 1996. This represents a decrease of $3.9 million, or 40.2% under 1996. Life Insurance Premiums from Oxford's reinsurance lines before intercompany eliminations were $8.7 million for the six months ended June 30, 1997, a decrease of $1.9 million or approximately 17.9% under 1996 and accounted for 68.5% of Oxford's premiums in 1997. These premiums are primarily from term life insurance and deferred annuity contracts that have matured. Decreases in premiums are primarily from these matured reinsurance contracts. Premiums from Oxford's direct lines before intercompany eliminations were $4.0 million for the six months ended June 30, 1997, an increase of $0.3 million or 8.1% from the prior year. This increase in direct premium is primarily attributable to the Company's disability and group life business. Oxford's direct business related to group life and disability coverage issued to employees of the Company for the six months ended June 30, 1997 accounted for approximately 10.0% of premiums. Other direct lines, including credit life and health business, accounted for approximately 21.5% of Oxford's premiums in 1997. Net investment income before intercompany eliminations was $8.9 million and $9.4 million for the six months ended June 30, 1997 and 1996, respectively. This decrease is due to a lower asset base resulting from a dividend paid to Oxford's parent. Benefits and expenses incurred were $17.6 million for the six months ended June 30, 1997 as compared to $17.7 million for the six months ended June 30, 1996. Operating profit before tax and before intercompany elimination decreased by $1.7 million or approximately 30.4% in 1997 to $3.9 million. On September 11, 1997, Oxford entered into an agreement to purchase all of the issued and outstanding shares of Encore Financial, Inc. and its subsidiaries (Encore) for $5,760,000. Encore's primary subsidiary is North American Insurance Company (NAI). NAI is an insurance company domiciled in the state of Wisconsin whose premium volume is primarily derived from the sale of credit life and disability products, as well as health insurance. The purchase will provide Oxford with additional marketing and administrative tools to substantially increase direct written premium in these markets. This purchase is subject to approval by regulatory authorities in Wisconsin and Louisiana. Interest Expense, net Interest expense increased by $4.3 million to $40.7 million for the six months ended September 30, 1997, as compared to $36.4 million for the six months ended September 30, 1996. The increase can be attributed to higher average debt levels outstanding during the current year. The decline in interest income reflects a reduced level in interest income for mortgage notes on storage properties sold at the end of the first quarter of fiscal 1997. Extraordinary Loss on Extinguishment of Debt During the second quarter of fiscal 1998, the Company extinguished $76.0 million of 10.27% interest-bearing notes originally due in fiscal 1999 through fiscal 2002. This resulted in an extraordinary loss of $4.1 million, net of tax of $2.3 million ($0.19 per share). During the second quarter of fiscal 1997, the Company extinguished $76.3 million of debt and $86.2 million of long- term notes originally due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary loss of $2.3 million, net of tax of $1.4 million ($0.09 per share). Consolidated Group As a result of the foregoing, pretax earnings of $103.2 million were realized in the six months ended September 30, 1997, as compared to $126.6 million for the same period in 1996. After providing for income taxes and an extraordinary loss from the extinguishment of debt, net earnings for the six months ended September 30, 1997 were $64.1 million, as compared to $77.7 million for the same period of the prior year.
20 QUARTERLY RESULTS The following table presents unaudited quarterly results for the ten quarters in the period beginning April 1, 1995 and ending September 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 of the Company. 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 Sep 30 1997 1997 ------------------------ Total revenues $ 372,021 416,771 Earnings from operations before extraordinary loss on early extinguishment of debt (4) 29,198 39,032 Net earnings 29,198 34,894 Weighted average common shares outstanding 21,879,156 21,890,072 Earnings from operations before extraordinary loss on early extinguishment of debt per common share 1.09 1.54 Net earnings per common share (1)(4) 1.09 1.35 Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 1996 1996 1996 1997 ---------------------------------------------- Total revenues $ 361,053 398,449 320,583 308,105 Earnings from operations before extraordinary loss on early extinguishment of debt (3) 40,005 39,741 (9,538) (16,024) 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) 1.15 1.29 (0.72) (0.97) 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 $ 340,331 381,746 313,063 298,656 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 Notes to Consolidated Financial Statements in Item 8 of the Company's Form 10-K for the year ended March 31, 1997.
21 (3)During the second quarter of fiscal 1997, the Company extinguished $76.3 million of debt and $86.2 million of long-term notes originally due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary loss of $2.3 million, net of tax of $1.4 million ($0.09 per share). (4)During the second quarter of fiscal 1998, the Company extinguished $76.0 million of 10.27% interest-bearing notes originally due in fiscal 1999 through fiscal 2002. This resulted in an extraordinary loss of $4.1 million, net of tax of $2.3 million ($0.19 per share).
22 QUARTER ENDED SEPTEMBER 30, 1997 VERSUS QUARTER ENDED SEPTEMBER 30, 1996 Moving and Storage Operations Revenues consist of rental revenue and net sales. Rental revenue increased by $15.1 million, approximately 5.1%, to $308.6 million in the second quarter of fiscal 1998. This increase reflects higher in-town utilization and improved one-way pricing from the rental of moving-related equipment. Net sales were $51.7 million in the second quarter of fiscal 1998, which represents an increase of 1.0% from the second quarter of fiscal 1997 net sales of $51.2 million. Revenue growth from the sale of moving support items (i.e. boxes, etc.) and propane resulted in a $1.7 million increase during the quarter, which was offset by a $0.5 million decrease in gasoline sales. Cost of sales was $30.3 million in the second quarter of fiscal 1998, which represents a decrease of 2.6% from $31.1 million for the same period in fiscal 1997. Operating expense increased to $237.6 million in the second quarter of fiscal 1998 from $227.5 million in the second quarter of fiscal 1997, an increase of approximately 4.4%. Marginal increases in most operating expense categories were offset by reduced personnel expense. Depreciation expense for the second quarter of fiscal 1998 was $19.2 million, as compared to $19.9 million in the same period of the prior year. Net gain (loss) on disposition of real and personal property was $7.5 million for the second quarter of fiscal 1997 compared to $0.5 million for the same period of fiscal 1998. Property and Casualty RWIC's gross premium writings for the quarter ended June 30, 1997 were $54.9 million as compared to $41.4 million in the second quarter of 1996. The rental industry market accounts for a significant share of total premiums, approximately 58.6% and 66.9% in the second quarters of 1997 and 1996, respectively. These writings include U-Haul, U- Haul customers and fleetowners as well as other rental industry insureds with similar characteristics. RWIC continues underwriting professional reinsurance via broker markets. Premiums in this area increased during the second quarter of 1997 to $15.8 million, or 28.8% of total gross premiums, from comparable 1996 figures of $4.7 million, or 11.4% of total gross premiums. Premiums in selected general agency lines accounted for a 1.1% share of written premiums in 1997 as compared to a 12.1% share in 1996. This decrease resulted from the cancellation of a general agency agreement in November 1996. RWIC continued its direct multiple peril coverage of various commercial properties and businesses in 1997. These premiums accounted for 11.4% of total gross written premium during the second quarter 1997, as compared to 9.5% in 1996. This increase is the result of planned business expansion. Net earned premiums increased to $44.5 million for the quarter ended June 30, 1997, compared with $39.5 million for the quarter ended June 30, 1996. The premium increase was primarily due to planned business expansion in the rental industry and direct multiple peril markets, offset by a decrease in general agency lines. As mentioned previously, the decrease in general agency lines resulted from the cancellation of a general agency agreement. Underwriting expenses incurred were $51.2 million for the quarter ended June 30, 1997, an increase of $7.6 million, or 17.4% over 1996. The increase is attributed to increased commission expense and losses incurred. Losses incurred increased in the rental industry and direct multiple peril markets, offset by a decrease in the assumed treaty reinsurance segment. The increased commission expense resulted from the increases for the direct multiple peril and assumed treaty reinsurance lines. Net investment income was $8.0 million for the quarter ended June 30, 1997, an increase of 8.1% over 1996 net investment income of $7.4 million. The increase over 1996 resulted from increased cash flow from operations. RWIC completed the second quarter of 1997 with income before tax expense of $0.8 million as compared to $3.7 million for the comparable period ended June 30, 1996. This represents a decrease of $2.9 million, or 78.4% under 1996. Increased premium earnings and investment income were offset by increased underwriting expenses, as discussed above.
23 Life Insurance Premiums from Oxford's reinsurance lines before intercompany eliminations were $4.8 million for the quarter ended June 30, 1997, a decrease of $0.6 million or approximately 11.1% under 1996 and accounted for 70.5% of Oxford's premiums in the quarter ended June 30, 1997. These premiums are primarily from term life insurance and deferred annuity contracts that have matured. Decreases in premiums are primarily from these matured reinsurance agreements. Premiums from Oxford's direct lines before intercompany eliminations were $2.0 million in the quarter ended June 30, 1997, an increase of $0.2 million or 11.1% from the same period of the prior year. This increase in direct premium is primarily attributable to the Company's disability and group life business. Oxford's direct business related to group life and disability coverage issued to employees of the Company accounted for approximately 9.3% of premiums. Other direct lines, including credit life and health business, accounted for approximately 20.2% of Oxford's premium in the quarter ended June 30, 1997. Net investment income before intercompany eliminations was $4.5 million for the quarters ended June 30, 1997 and 1996. Benefits and expenses incurred were $9.2 million for the quarter ended June 30, 1997, a decrease of 7.1% over 1996. Comparable benefits and expenses incurred for the quarter ended June 30, 1996 were $9.9 million. This decrease is primarily due to decreases in accident and health benefits, commissions and general expenses partially offset by increases in death and annuity benefits. Operating profit before tax and intercompany eliminations decreased by $0.7 million or approximately 26.9% in the quarter ended June 30, 1997 to $1.9 million, primarily due to a decrease in premium income and increase in death and annuity benefits. Interest Expense, net Net interest expense was $17.0 million for the quarter ended September 30, 1997 versus $9.7 million in the prior year's second quarter. Higher average debt levels and a decrease in interest income contributed to higher net interest expense. Extraordinary Loss on Extinguishment of Debt During the second quarter of fiscal 1998, the Company extinguished $76.0 million of 10.27% interest-bearing notes originally due in fiscal 1999 through fiscal 2002. This resulted in an extraordinary loss of $4.1 million, net of tax of $2.3 million ($0.19 per share). During the second quarter of fiscal 1997, the Company extinguished $76.3 million of debt and $86.2 million of long- term notes originally due in fiscal 1997 through fiscal 1999. This resulted in an extraordinary loss of $2.3 million, net of tax of $1.4 million ($0.09 per share). Consolidated Group As a result of the foregoing, pretax earnings of $59.1 million were realized during the quarter ended September 30, 1997, as compared to $62.3 million for the same period in 1996. After providing for income taxes and extraordinary losses from the extinguishment of debt, net earnings for the quarter ended September 30, 1997 were $34.9 million, as compared to $37.7 million for the same period of the prior year.
24 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 September 30, 1997, net property, plant and equipment represented approximately 69.2% of total U-Haul assets and approximately 47.4% of consolidated assets. In the first two quarters of fiscal 1998, capital expenditures were $284.0 million, as compared to $134.2 million in the first two quarters of fiscal 1997. These expenditures primarily reflect expansion of the rental truck fleet, purchase of trucks previously leased and real property acquisitions. The capital needs required to fund these acquisitions were funded with internally generated funds from operations, debt and lease financings. Cash flows from operations were $106.9 million in the first two quarters of fiscal 1998, as compared to $104.5 million in the first two quarters of fiscal 1997. For fiscal 1998, increased revenues were offset by an increase in receivables and prepaid expenses, and a decrease in accounts payable and accrued liabilities. In fiscal 1997, cash flow from operations was impacted by the sale of mortgage notes receivable and an increase in other assets. At September 30, 1997, total notes and loans payable outstanding were $1,059.1 million as compared to $983.6 million at March 31, 1997 and $940.3 million at September 30, 1996. This increase was primarily due to early termination of $104.5 million of truck lease terminations. Property and Casualty Cash flows provided (used) by operating activities were $1.7 million and $(12.5) million for the six months ended June 30, 1997 and June 30, 1996, respectively. This change is due to decreased due from affiliates offset by an increase in accounts receivable, paid losses recoverable and other liabilities, as well as an increase in loss and expense reserve and a smaller unearned premium decrease than that for the six months ended June 30, 1996. The short-term investment portfolio was $1.5 million at June 30, 1997. This balance reflects 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. Approximately 94.9% of the portfolio consists 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 2.5% more invested assets than total liabilities. Stockholder's equity increased 2.4% from $192.3 million at December 31, 1996 to $196.6 at June 30, 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, deferred annuity sales 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 flows provided by operating activities were $14.5 million and $20.9 million for the six months ended June 30, 1997 and 1996, respectively. In 1997, cash flows provided (used) by financing activities were approximately $(17.6) million. During 1996 cash flows provided by financing activities were $11.1 million. Cash flows from deferred annuity sales are a component of financing activities and result in the purchase of fixed maturities, which are a component of investing activities. In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. At June 30, 1997 and 1996, short-term investments amounted to $4.5 million and $9.5 million, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs.
25 Stockholder's equity of Oxford decreased to $77.9 million in 1997 from $97.3 million in 1996 as the result of a dividend of $30.0 million paid to Oxford's parent on December 31, 1996. Applicable laws and regulations of the State of Arizona require the Company's insurance subsidiaries to maintain minimum capital and surplus determined in accordance with statutory accounting practices in the amount of $600,000. 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. Statutory surplus which can be distributed as dividends without regulatory approval is zero at June 30, 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 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 virtually all of these capital expenditure requirements with internally generated funds. The remainder, if any, of the anticipated capital expenditures and maturing debt will be funded 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 September 30, 1997, the Company had $1,059.1 million in total notes and loans payable outstanding and unutilized lines of credit of approximately $180.0 million. Certain of the Company's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, maintaining certain financial ratios and placing certain additional liens on its properties and assets. At September 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 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.
26 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1997 Annual Meeting of Stockholders was held August 22, 1997. At the 1997 Annual Meeting of Stockholders, John M. Dodds and James P. Shoen were elected to serve until the 2001 Annual Meeting of Stockholders; Richard J. Herrera was elected to fill a vacated seat until the 2000 Annual Meeting of Stockholders. Aubrey K. Johnson and Paul F. Shoen continue as directors with terms that expire at the 1998 Annual Meeting of Stockholders; William E. Carty and Charles J. Bayer continue to serve as directors until the 1999 Annual Meeting of Stockholders; and Edward J. Shoen continues to serve as a director until the 2000 Annual Meeting of Stockholders. The following table sets forth the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes with respect to each matter voted on at the Combined Annual Meeting of Stockholders: Matters Submitted Votes cast Votes cast Votes Broker To a Vote For Against Withheld Abstentions Non-Votes - ------------------------------------------------------------------------------- 1. Election of Directors James P. Shoen 19,707,227 49,040 97,971 9,110 - John M. Dodds 19,710,148 34,016 112,686 6,497 - Richard J. Herrera 19,711,886 46,071 95,824 9,567 - 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) 27 Financial Data Schedule b. Reports on Form 8-K. No report on Form 8-K was filed for the quarter ended September 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.
27 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: November 13, 1997 By: /S/ GARY B. HORTON ___________________________________ Gary B. Horton, Treasurer (Principal Financial Officer)