AMERCO's Senior Notes Rated `BBB' By Fitch IBCA.Business Editors NEW YORK--(BUSINESS WIRE)--Jan. 28, 2000 Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals , Inc. rates AMERCO's $200 million 8.8% senior notes, due Feb. 2005, `BBB'. These securities were issued under the company's existing $500 million medium-term note Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. shelf offering. Proceeds from this issuance will be used to repay a portion of outstanding indebtedness under the company's bank revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. AMERCO's rating strengths include the company's leadership position in the consumer truck and trailer rental industry, solid operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , and long operating history. Concerns focus on the company's modest, albeit improving, profitability, seasonally inherent within the truck rental industry, and unfocused/uncertain insurance strategy. AMERCO's credit profile has improved in recent years and the current rating outlook is positive. Driven principally by increased fleet utilization rates, favorable fleet positioning dynamics, and improved pricing at its U-Haul International, Inc. subsidiary (U-Haul), AMERCO reported record operating results for the fiscal year-ended March 31, 1999. Earnings contributions from the company's insurance subsidiaries remain modest and somewhat erratic. Nevertheless, AMERCO's overall improvement has continued in fiscal 2000 as the company reported solid revenue growth and strong earnings for the six-month period ended Sept. 30, 1999. Net income rose 15% to $84.4 million during the period, while operating profits margins remained relatively stable at 19%. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average assets and return on average equity for the period was 3.42% and 16.63%, respectively. AMERCO's financial flexibility has improved over the past 18 months. During this period, the company repurchased $100 million of series B convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". , which it had issued in Oct. 1996 as part of the Shoen litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement, thereby reducing annual dividend requirements by nearly $8 million. Additionally, the company refinanced a substantial portion of high coupon debt in its capital structure. In Dec. 1998, the company also completed the sale of 26 non-core properties and realized a $36 million after-tax gain, which was recorded directly to equity. At Sept. 30, 1999, debt represented approximately 63% of AMERCO's total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. . While capital expenditures are expected to rise somewhat in the near-term, such requirements are expected to be financed through internally generated funds. AMERCO's operating cash flow provides adequate debt service coverage, consistent with the assigned rating. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become to interest expense and fixed charge coverage ratios have continued to improve and totaled 5.33 times (x) and 3.12x, respectively, at Sept. 30, 1999. Based in Reno, Nevada, AMERCO is a holding company, whose principal subsidiary is U-Haul International, Inc., the leading consumer truck and trailer rental company in North America. AMERCO also owns two small insurance operations, Republic Western Insurance Co. and Oxford Life Insurance Co., as well as AMERCO Real Estate Co., which owns and manages company real estate assets. For the fiscal year ended March 31, 1999, U-Haul accounted for 84% of AMERCO's consolidated revenues. |
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