AMERCO
Address:
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
U.S.A.
Telephone: (775) 688-6300
Fax: (775) 688-6338
http://www.amerco.com
Statistics:
Public Company
Incorporated: 1969
Employees: 17,230
Sales: $2.17 billion (2004)
Stock Exchanges: NASDAQ New York
Ticker Symbol: UHAL (NASDAQ); AOPRA (New York)
NAIC: 532120 Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing; 531130 Lessors of Miniwarehouses and Self-Storage Units
Company Perspectives:
It is our intent to be a medium-size company with an entrepreneurial, aggressive management team, relatively immune to the potholes of corporate bureaucracy.
Key Dates:
1945: L.S. Shoen launches U-Haul Trailer Rental Company in Ridgefield, Washington.
1967: Corporate headquarters is moved to Phoenix, Arizona.
1969: Shoen incorporates American Family Corporation (AMERCO) as a Reno, Nevada-based holding company, with U-Haul the main operating company.
1974: First company-owned U-Haul Centers are established.
1986: Control of the company is wrested from L.S. Shoen by his sons Joe and Mark.
1988: The new leaders fend off an attempt by the founder and his allies to regain control.
1994: In a lawsuit stemming from the 1988 battle, a jury returns a $1.47 billion judgment against Joe Shoen and five other AMERCO directors.
1995: A judge reduces the judgment to $461.8 million; AMERCO is forced to shoulder the payments based on an indemnification agreement.
2002: Company restates its financial results for the previous seven years because of accounting irregularities.
2003: AMERCO files for Chapter 11 bankruptcy protection.
2004: Having refinanced its debt, the company emerges from bankruptcy.
Company History:
AMERCO is a holding company whose primary subsidiary is Phoenix-based U-Haul International, Inc., North America's leading provider of move-it-yourself rental equipment, one of the largest operators of self-storage facilities, and the world's largest installer of permanent trailer hitches. The U-Haul rental system, which includes a fleet of nearly 200,000 vehicles (including moving vans, trucks, and trailers) and automobile towing devices, operates through more than 1,350 company-owned U-Haul retail centers in the United States and Canada and nearly 14,000 independent U-Haul dealers. U-Haul was founded in the 1940s by Leonard Samuel (L.S.) Shoen as what he hoped would be the cornerstone of a family business empire. From the 1970s into the 1990s, control of the company was the subject of one of the bitterest family feuds in the history of American business. In the early 2000s the Shoen family continued to own about 40 percent of AMERCO, which was now led by Edward J. (Joe) Shoen, son of the founder.
Do-It-Yourself Moving Pioneer
L.S. Shoen was the son of an Oregon farmer who lost his land during the Great Depression. The younger Shoen worked picking fruit, butchering cattle, and cutting hair to pay for a three-year stint at college, which ended when he was expelled for providing answers for a classmate. He then entered the U.S. Navy just in time for World War II. During the war he moved his family from military base to military base in borrowed trailers, an experience that led him to envision a nationwide company that would provide mobile Americans with reliable, rented trailers that they could use to move their belongings without worrying about how they would return the vehicles.
With the help of his wife, Anna Mary, Shoen launched U-Haul Trailer Rental Company in Ridgefield, Washington, a city just outside Portland, Oregon, in 1945. With a $5,000 investment, the Shoens began to buy and build trailers, painting and stenciling the company's name on each of the trailers themselves. They were originally rented for $2 a day. The couple had six children by the time Anna Mary Shoen died in 1957, and L.S. Shoen eventually had a total of 12 children with three wives.
Throughout the 1940s and 1950s, L.S. Shoen built a business empire of trailer dealerships that had automobile service stations as their main outlets. Traveling by car for weeks at a time, he recruited new dealers for his U-Haul trailers and used the tool box he carried to patch and repair his company's rolling stock, often by the light of street lamps late at night. He also rented trailers to people who would travel to cities he could not visit, provided that they return those trailers to service stations he thought were potential U-Haul dealers. By the mid-1950s his dealer network stretched from Portland, Oregon, to Miami, Florida, and from Los Angeles, California, to New York City.
In You and Me, a 1980 book in which he chronicled his family's history and outlined his corporate philosophy, Shoen illustrated his entrepreneurial spirit and homespun management style. "The first day we rented a trailer, I set my sights on 1,000 trailers, and when we got 1,000 trailers on the road, I wanted 10,000," he wrote. He made surprise visits to his dealers, sometimes at night, and as an example to his employees of wasteful spending, he once threw $1,000 in cash from the 11th floor of his headquarters building. Shoen stressed economy in all areas, mandating that his executives eat at fast-food restaurants and stay at cheap hotels on company business trips. Because he planned to hand over his business empire to his children, they were fully instructed in running the company, including painting and repairing the U-Haul fleet. As they grew up, his first four sons joked that they had orange U-Haul paint in their veins rather than blood.
Reorganizing the Company, New Competitive Threat: Late 1960s and Early 1970s
In the 1960s U-Haul was the preeminent do-it-yourself trailer rental company in the United States and Canada. In 1967, at the height of the company's success, Shoen moved his corporate headquarters to Phoenix, Arizona. Two years later, in 1969, Shoen incorporated American Family Corporation (AMERCO) in Reno, Nevada, as the holding company for what he hoped would become a diversified corporation. AMERCO later started the Ponderosa Group, a captive insurance company established to cover corporate risks. Through its real estate subsidiary, AMERCO also acquired a property portfolio with an estimated value of $1 billion.
Events of the 1970s significantly altered AMERCO's future. The first critical change arose from the founding in 1970 of Ryder System, Inc. in Miami. Eventually becoming a formidable competitor, Ryder copied the idea and style established for the trailer and truck rental business that Shoen had founded. In 1989 U-Haul and Ryder each controlled nearly 45 percent of the United States market for do-it-yourself rentals of trailers and trucks.
While the long-term effects of Ryder's presence in the market was largely indeterminable in the early 1970s, the second threat to AMERCO's business was more immediate and forced the company to consider new businesses and directions. The 1973 oil crisis, which struck at the heart of the company's basic business by curtailing the mobility of Americans, also caused fundamental changes in the way gasoline was distributed and resulted in the closing of many of the independently owned service stations that comprised U-Haul's dealership network. In response, U-Haul expanded its operations starting in 1974 by establishing U-Haul Centers--company-owned stores that offered a variety of rental services, from jet skis and party goods to sexually explicit videocassettes. A huge investment expense for AMERCO at a time when its sales and profits were declining and competition was increasing, the stores were ultimately unsuccessful and brought the company additional losses.
Beginning of Family Feud, Mid- to Late 1970s
As these changes were occurring, strife arose between Shoen and his eldest children, who were not getting along with his second wife, Suzanne Gilbert. Disputes between Gilbert and the Shoen children while L.S. Shoen was out of town on business sometimes had to be settled by the Phoenix police. In 1977 the couple divorced.
Over the years Shoen gave his children progressively greater shares of the company in preparation for eventually handing it over to their control, so that by the early 1980s, his seven sons and five daughters owned 95 percent of the outstanding shares of the company, while he controlled only 2 percent. Relations between Shoen and his four eldest sons, Sam, Mike, Edward J. (Joe), and Mark, began to deteriorate in the mid-1970s, when the four siblings had moved into the upper management of the company. The sons believed that the investment in the 1,100 U-Haul Center stores, which offered a wide variety of rental items, was not benefitting U-Haul. They argued that the stores detracted from the servicing and maintenance of U-Haul's aging fleet of trucks and trailers, which were put in greater jeopardy with the growth of rival Ryder Systems.
By 1979 Joe and Mark Shoen had resigned from U-Haul because of this dispute over the direction of the company, and a year later Mark's relationship with his father and brother Sam deteriorated still further when they refused to help him out of a financial predicament by buying some of his AMERCO stock. Mark Shoen, who later became president of U-Haul International, noted in an interview with the Los Angeles Times, "[We] were millionaires in name only. We were told we were wealthy, but we didn't have enough money to buy a car."
1986: Ousting of Founder by Sons
Mark and Joe Shoen set out to wrest control of the company from their father and brother Sam. By 1986 Joe and Mark Shoen had drummed up enough support among their brothers and sisters to oust L.S. Shoen as chairman of the corporation. The brothers moved quickly after assuming control of the company to return it to its basic businesses. They kept U-Haul's rental storage facilities but eliminated many of the company's extraneous rental offerings, focusing on trucks and trailers, boxes, moving pads, and packing materials as featured items at the company's U-Haul Centers. In addition, they cut back on the company's workforce, purging executives who supported L.S. and Sam Shoen.
At the 1987 annual meeting, Sam and L.S. Shoen appeared to have convinced enough family members to return to their side; by early 1988 Sam and L.S. Shoen hoped to control 52 percent of the corporation. Joe Shoen, a lawyer with an M.B.A. degree from Harvard University, foiled that plan by wooing 53 percent of those voting to his side.
To retain his control of the corporation, Joe Shoen issued 8,099 shares of the corporation's treasury stock to friendly executives. In March 1989 the company's annual meeting allegedly turned into a brawl when L.S. Shoen and his son Mike attempted to set up a tape recorder to record the proceedings. After the meeting Mike Shoen posed shirtless for a photographer and alleged that his brother Mark had hit him, while Joe Shoen said in an interview with the Arizona Republic that no one was "beaten up."
On August 6, 1990, Eva Shoen, the 44-year-old wife of Sam Shoen, was murdered. The homicide, which news reports claimed had signs of a professional hit, was under investigation for months with no official police suspects. The murder became the source of a libel suit filed by Joe Shoen against his father, L.S. Shoen, who said publicly that he believed Joe was involved in it. In November 1994, however, a New Mexico man was sentenced to 24 years in prison for shooting Eva Shoen in a botched robbery. The libel suit, meanwhile, was one of several court proceedings involving the Shoen family and the company that carried on well into the 1990s; all of the cases argued that one or another of the family factions was the rightful manager of the company.
During the 1980s AMERCO's annual income rose from a $2 million loss in 1981 to gains of more than $41 million in 1984, but the corporation's earnings were never steady. Though in the late 1980s and early 1990s revenues increased in part because of AMERCO's improvements of U-Haul's core rental business, income generally remained on a downward trend. Net income for 1990, for example, dropped 39 percent from the previous year to $28.3 million; revenues, however, rose significantly to $737.6 million in 1990 and to $986 million in 1991. During 1991 a corporate restructuring that eliminated and consolidated second-tier subsidiaries and cut the workforce from 18,000 to 10,900 led to income for the year of just $416,000. Analysts blamed inconsistencies and roller coaster-like changes in the company's profit on the instability brought on by feuding among Shoen family members.
Culmination of Family Feud in the 1990s
During fiscal 1993 net income nearly doubled to $40.1 million, while revenues surpassed the $1 billion mark for the first time, reaching $1.04 billion. In October 1993 stock in AMERCO began trading on the New York Stock Exchange through an offering of 6.1 million shares of preferred stock. Then the following year AMERCO common stock began trading on the NASDAQ.
The lawsuits stemming from the late 1980s family feud came to a head in the mid-1990s. In October 1994 a jury sided with the L.S. Shoen/Sam Shoen side, agreeing that the 1988 sale of shares was improper and had prevented the plaintiffs from gaining control of the company board. They stipulated that Joe Shoen and five other AMERCO directors had to pay the plaintiffs $1.47 billion in compensation and that Joe Shoen had to pay an additional $70 million in punitive damages. The following February, however, an Arizona state court judge slashed the two awards to $461.8 million and $7 million, respectively, finding them "excessive." The directors, claiming they could not shoulder the judgment, then filed for bankruptcy court protection, leading AMERCO to indemnify them for the award, as part of a preexisting indemnification agreement. AMERCO was forced to sell or lease back millions of dollars worth of assets, including vehicles and trailers, to fulfill the judgment. Meantime, the company founder and his allies had to agree to give up their shares in the company. Joe Shoen carried on the battle, appealing the $7 million personal judgment against him for acting with malice in his 1988 dealings with family members. He lost his appeal in 1998 and was ordered to pay the punitive damages. In a sad postscript to the family feud, L.S. Shoen died in October 1999 at the age of 83, apparently having committed suicide by driving his car into a power pole.
Over the course of the 1990s AMERCO's revenues grew fairly steadily, culminating in $1.68 billion in sales for the fiscal year ending in March 2000. Net income was stagnant, ending at $65.5 million, not much above the $60 million or $60.4 million figures for 1995 and 1996, respectively.
Early 2000s: Accounting Irregularities, Bankruptcy, More Lawsuits
The soap opera-like history of AMERCO continued in the early 2000s. In 2002 AMERCO became the latest company facing allegations of accounting irregularities. In 1994 so-called special purpose entities (made infamous by Enron Corporation) collectively known as SAC Holdings had been set up by U-Haul President Mark Shoen to own land where U-Haul storage facilities were based. In February 2002, in the wake of the Enron scandal, AMERCO's auditor, PricewaterhouseCoopers (PwC), told AMERCO that it had to consolidate the results of SAC Holdings with AMERCO and restate the latter's financial results for the previous seven years. During fiscal 2003 the company did so, and the consolidation of SAC Holdings' debt sharply reduced AMERCO's net earnings and net worth. For example, the net income figure for fiscal 2000 was cut to $21.8 million, and the company now posted a net loss for fiscal 2001 of $42.1 million. AMERCO, however, soon fired PwC and then later sued the accounting firm for $2.5 billion, accusing it of providing flawed financial advice that brought the company to the brink of bankruptcy.
Indeed, in October 2002, AMERCO missed a $100 million bond payment and later missed a second payment. Unable to secure new financing, the company filed for Chapter 11 bankruptcy protection in June 2003 to expedite the restructuring of its debt. The filing was unusual in that the company aimed to pay all of its creditors in full and to leave its preferred and common stock intact. In this it was successful. In March 2004 the company emerged from bankruptcy on the back of a $550 million credit facility through a banking syndicate.
Clouding the company's future was still more litigation. Paul Shoen, another brother of Joe and Mark, sued AMERCO in connection with the SAC accounting irregularities in a reprise of the family feud. His case was consolidated with four others before being dismissed in May 2003, but the plaintiffs planned to appeal. AMERCO additionally faced four class-action lawsuits, again connected with SAC, on behalf of company shareholders. In May 2003 the Securities and Exchange Commission (SEC) opened an investigation into AMERCO's accounting practices, and twice had to go to court seeking orders to compel the company to comply with SEC document requests.
Principal Subsidiaries: AMERCO Real Estate Company; Oxford Life Insurance Company; Republic Western Insurance Company; U-Haul International, Inc.
Principal Competitors: Budget Rent A Car System, Inc.; Penske Truck Leasing; Public Storage, Inc.; Shurgard Storage Centers, Inc.; Storage USA, Inc.
Further Reading:
- Adelson, Andrea, "Gains at U-Haul Dampened by Feud in Owning Family," New York Times, January 31, 1989.
- Atlas, Riva D., "U-Haul's Parent Finds Equity Gains in Bankruptcy," New York Times, August 20, 2003, p. C1.
- Berke, Jonathan, "Amerco Wrestles with Credibility Gap," Daily Deal, August 11, 2003.
- ------, "Mission Impossible," Daily Deal, November 20, 2003.
- Blumenthal, Karen, "Award in Dispute over Amerco Is Cut to $461.8 Million," Wall Street Journal, February 6, 1995, p. B9.
- Boorstein, Michelle, "U-Haul Making a Turnaround Move," Las Vegas Review-Journal, December 7, 1995, p. 11D.
- Buckler, Arthur, "Jury Sets Damages in Amerco Lawsuit at $1.47 Billion," Wall Street Journal, October 11, 1994, p. B9.
- Fiscus, Chris, "Don't Judge U-Haul by Feud, Leader Says," Arizona Business Gazette, April 26, 1991, pp. 1+.
- Fix, Janet, "No More Mr. Nice Guy," Forbes, February 11, 1985, pp. 64+.
- Freudmann, Aviva, "IRS May Appeal Tax Court Rulings on Captive Insurers," Journal of Commerce, April 9, 1991.
- Friedland, Jonathan, and Jonathan Weil, "U-Haul Parent Amerco Inc. Sues Pricewaterhouse over Accounting," Wall Street Journal, April 21, 2003, p. A2.
- Gately, Edward, "U-Haul Parent Alters Accounting Practices amid Greater Scrutiny," East Valley Tribune (Mesa, Ariz.), August 27, 2002.
- ------, "U-Haul Parent Files Suit Against Auditor over Loss of Shareholder Confidence," East Valley Tribune (Mesa, Ariz.), April 22, 2003.
- Groves, Martha, "Family Feud Weighs Down U-Haul," Los Angeles Times, September 4, 1990.
- Kang, Stephanie, "Parent of U-Haul, Amerco Inc., Files for Chapter 11," Wall Street Journal, June 23, 2003, p. B8.
- Luebke, Cathy, "Net Income at U-Haul up Dramatically," Phoenix Business Journal, July 23, 1993, pp. 1+.
- Michaels, Adrian, "A Moving Tale As Financial Woes Deluge Rental Group," Financial Times, October 19, 2002, p. 19.
- Tomsho, Robert, "Supporters of Joe Shoen Take New Steps to Strengthen Grip on U-Haul Empire," Wall Street Journal, September 28, 1990.
- ------, "U-Haul's Patriarch Now Battles Offspring in Bitterest of Feuds," Wall Street Journal, July 16, 1990.
- Toy, Stewart, "A New Generation Takes the Wheel at U-Haul," Business Week, March 28, 1988, p. 57.
- Toy, Stewart, and Judith H. Dobrzynski, "The Family That Hauls Together Brawls Together," Business Week, August 29, 1988, pp. 64+.
- Watkins, Ronald J., Birthright: Murder, Greed, and Power in the U-Haul Family Dynasty, New York: Morrow, 1993, 425 p.
Source: International Directory of Company Histories, Vol.67. St. James Press, 2005.
