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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from __________________ to __________________
Commission File Number
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State or other jurisdiction of incorporation or organization |
Registrant, State of Incorporation, Address and Telephone Number |
I.R.S. Employer Identification No. |
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(A Nevada Corporation) |
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Telephone (
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N/A |
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Non-accelerated Filer
☐
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
TABLE OF CONTENTS
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Page |
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PART I FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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a) Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and March 31, 2022 |
1 |
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b) Condensed Consolidated Statements of Operations for the Quarters Ended June 30, 2022, and 2021 (unaudited) |
2 |
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c) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended June 30, 2022, and 2021 (unaudited) |
3 |
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d) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Quarters Ended June 30, 2022, and 2021 (unaudited) |
4 |
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e) Condensed Consolidated Statements of Cash Flows for the Quarters Ended June 30, 2022, and 2021 (unaudited) |
5 |
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f) Notes to Condensed Consolidated Financial Statements (unaudited) |
6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
44 |
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Item 4. |
Controls and Procedures |
46 |
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PART II OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
46 |
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Item 1A. |
Risk Factors |
46 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
46 |
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Item 3. |
Defaults Upon Senior Securities |
46 |
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Item 4. |
Mine Safety Disclosures |
47 |
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Item 5. |
Other Information |
47 |
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Item 6. |
Exhibits |
47 |
part i financial information
Item 1. Financial Statements
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED balance sheets
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June 30, |
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March 31, |
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2022 |
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2022 |
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(Unaudited) |
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(In thousands, except share data) |
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ASSETS |
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Cash and cash equivalents |
$ |
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$ |
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Reinsurance recoverables and trade receivables, net |
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Inventories and parts, net |
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Prepaid expenses |
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Investments, fixed maturities and marketable equities |
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Investments, other |
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Deferred policy acquisition costs, net |
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Other assets |
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Right of use assets - financing, net |
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Right of use assets - operating, net |
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Related party assets |
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Property, plant and equipment, at cost: |
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Land |
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Buildings and improvements |
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Furniture and equipment |
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Rental trailers and other rental equipment |
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Rental trucks |
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Less: Accumulated depreciation |
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( |
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( |
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Total property, plant and equipment, net |
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Total assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Liabilities: |
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Accounts payable and accrued expenses |
$ |
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$ |
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Notes, loans and finance leases payable, net |
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Operating lease liabilities |
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Policy benefits and losses, claims and loss expenses payable |
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Liabilities from investment contracts |
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Other policyholders' funds and liabilities |
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Deferred income |
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Deferred income taxes, net |
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Total liabilities |
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Commitments and contingencies (notes 3, 7, 8 and 9) |
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Stockholders' equity: |
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Series preferred stock, with or without par value,
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Series A preferred stock, with no par value,
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Series B preferred stock, with no par value,
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issued and outstanding as of June 30 and March 31, 2022 |
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Serial common stock, with or without par value, 250,000,000 shares authorized: |
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Serial common stock of $
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none issued and outstanding as of June 30 and March 31, 2022 |
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Common stock, with $
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Common stock of $
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issued and
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
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Retained earnings |
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Cost of common stock in treasury, net (
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( |
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( |
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Cost of preferred stock in treasury, net (
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
AMERCO AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED Statements of operations
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Quarter Ended June 30, |
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2022 |
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2021 |
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(Unaudited) |
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(In thousands, except share and per share amounts) |
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Revenues: |
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Self-moving equipment rentals |
$ |
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$ |
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Self-storage revenues |
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Self-moving and self-storage products and service sales |
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Property management fees |
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Life insurance premiums |
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Property and casualty insurance premiums |
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Net investment and interest income |
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Other revenue |
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Total revenues |
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Costs and expenses: |
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Operating expenses |
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Commission expenses |
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Cost of sales |
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Benefits and losses |
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Amortization of deferred policy acquisition costs |
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Lease expense |
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Depreciation, net of gains on disposal ($64,348 and $50,323, respectively) |
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Net (gains) losses on disposal of real estate |
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( |
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Total costs and expenses |
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Earnings from operations |
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Other components of net periodic benefit costs |
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( |
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( |
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Interest expense |
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( |
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( |
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Pretax earnings |
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Income tax expense |
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( |
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( |
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Earnings available to common stockholders |
$ |
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$ |
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Basic and diluted earnings per common share |
$ |
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$ |
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Weighted average common shares outstanding: Basic and diluted |
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Related party revenues for the first quarter of fiscal 2023 and 2022, net of eliminations, were $9.1 million and $8.4 million, respectively.
Related party costs and expenses for the first quarter of fiscal 2023 and 2022, net of eliminations, were $25.5 million and $23.5 million, respectively.
Please see Note 9, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for more information on the related party revenues and costs and expenses.
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)
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Quarter Ended June 30, 2022 |
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Pre-tax |
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Tax |
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Net |
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(Unaudited) |
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(In thousands) |
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Comprehensive income: |
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Net earnings |
$ |
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$ |
( |
$ |
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Other comprehensive income (loss): |
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Foreign currency translation |
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Unrealized net loss on investments |
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( |
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( |
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Change in fair value of cash flow hedges |
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( |
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Amounts reclassified into earnings on hedging activities |
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( |
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Total other comprehensive income (loss) |
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( |
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( |
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Total comprehensive income |
$ |
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$ |
( |
$ |
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+ |
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Quarter Ended June 30, 2021 |
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Pre-tax |
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Tax |
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Net |
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(Unaudited) |
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(In thousands) |
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Comprehensive income: |
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Net earnings |
$ |
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$ |
( |
$ |
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Other comprehensive income (loss): |
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Foreign currency translation |
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( |
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( |
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Unrealized net loss on investments |
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( |
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( |
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Change in fair value of cash flow hedges |
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( |
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( |
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Amounts reclassified into earnings on hedging activities |
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( |
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Total other comprehensive income (loss) |
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( |
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( |
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Total comprehensive income |
$ |
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$ |
( |
$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Amerco and consolidated subsidiaries
condensed consolidated statements of changes in stockholders’ equity
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Common Stock |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Retained Earnings |
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Less: Treasury Common Stock |
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Less: Treasury Preferred Stock |
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Total Stockholders' Equity |
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(Unaudited) |
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(In thousands) |
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Balance as of March 31, 2022 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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Foreign currency translation |
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Unrealized net loss on investments, net of tax |
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( |
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( |
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Change in fair value of cash flow hedges, net of tax |
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Amounts reclassified into earnings on hedging activities |
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Net earnings |
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Common stock dividends: ($
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( |
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( |
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Net activity |
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( |
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– |
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Balance as of June 30, 2022 |
$ |
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$ |
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$ |
( |
$ |
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$ |
( |
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( |
$ |
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Balance as of March 31, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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Foreign currency translation |
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( |
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( |
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Unrealized net loss on investments, net of tax |
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( |
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( |
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Change in fair value of cash flow hedges, net of tax |
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( |
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( |
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Amounts reclassified into earnings on hedging activities |
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Net earnings |
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Common stock dividends: ($
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( |
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( |
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Net activity |
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( |
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Balance as of June 30, 2021 |
$ |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
AMERCO AND CONSOLIDATED subsidiaries
Condensed consolidatED statements of cash flows
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Quarter Ended June 30, |
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2022 |
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2021 |
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(Unaudited) |
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(In thousands) |
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Cash flows from operating activities: |
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Net earnings |
$ |
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$ |
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Adjustments to reconcile net earnings to cash provided by operations: |
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Depreciation |
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Amortization of deferred policy acquisition costs |
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Amortization of premiums and accretion of discounts related to investments, net |
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Amortization of debt issuance costs |
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Interest credited to policyholders |
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Provision for allowance for losses on trade receivables |
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( |
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( |
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Provision for allowance for inventories and parts reserves |
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Net gains on disposal of personal property |
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( |
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( |
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Net (gains) losses on disposal of real estate |
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( |
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Net (gains) losses on sales of investments |
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( |
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Net (gains) losses on equity investments |
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( |
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Deferred income taxes |
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Net change in other operating assets and liabilities: |
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Reinsurance recoverables and trade receivables |
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( |
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Inventories and parts |
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( |
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( |
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Prepaid expenses |
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Capitalization of deferred policy acquisition costs |
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( |
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( |
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Other assets |
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( |
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Related party assets |
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Accounts payable and accrued expenses |
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Policy benefits and losses, claims and loss expenses payable |
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Other policyholders' funds and liabilities |
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( |
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Deferred income |
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Related party liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Escrow deposits |
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Purchases of: |
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Property, plant and equipment |
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( |
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( |
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Short term investments |
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( |
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( |
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Fixed maturities investments |
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( |
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( |
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Equity securities |
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( |
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Preferred stock |
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( |
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Real estate |
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( |
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Mortgage loans |
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( |
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( |
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Proceeds from sales and paydowns of: |
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Property, plant and equipment |
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Short term investments |
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Fixed maturities investments |
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Equity securities |
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Mortgage loans |
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Net cash used by investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Borrowings from credit facilities |
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Principal repayments on credit facilities |
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( |
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( |
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Payment of debt issuance costs |
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( |
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( |
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Finance lease payments |
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( |
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( |
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Common stock dividends paid |
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( |
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Investment contract deposits |
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Investment contract withdrawals |
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( |
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( |
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Net cash provided by financing activities |
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Effects of exchange rate on cash |
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( |
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( |
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Increase in cash and cash equivalents |
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Cash and cash equivalents at the beginning of period |
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Cash and cash equivalents at the end of period |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements
5
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements
1.Basis of Presentation
AMERCO, a Nevada corporation (“AMERCO”), has a first fiscal quarter that ends on the 30 th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2022 and 2021 correspond to fiscal 2023 and 2022 for AMERCO.
Accounts denominated in non-U.S. currencies have been translated into U.S. dollars.
The condensed consolidated balance sheet as of June 30, 2022 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the first quarter of fiscal 2023 and 2022 are unaudited.
In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
Intercompany accounts and transactions have been eliminated.
Description of Legal Entities
AMERCO is the holding company for:
U-Haul International, Inc. (“U-Haul”);
Amerco Real Estate Company (“Real Estate”);
Repwest Insurance Company (“Repwest”); and
Oxford Life Insurance Company (“Oxford”).
Unless the context otherwise requires, the terms “Company,” “we,” “us” or “our” refer to AMERCO and all of its legal subsidiaries.
Description of Operating Segments
AMERCO has three (
The Moving and Storage operating segment (“Moving and Storage”) includes AMERCO, U-Haul and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, and the rental of fixed and portable moving and storage units to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.
The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Repwest and its wholly owned subsidiaries and ARCOA Risk Retention Group (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul ® through regional offices in the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul-related programs. ARCOA is a group captive insurer owned by us and our wholly owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.
2. Investments
Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
6
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $
Available-for-Sale Investments
Available-for-sale investments as of June 30, 2022 were as follows:
|
|
|
Cost Amortized |
|
Unrealized Gains Gross |
|
Unrealized Losses More than 12 Months Gross |
|
Unrealized Losses Less than 12 Months Gross |
|
Allowance for Expected Credit Losses |
|
Market Value Estimated |
|
|
|
(Unaudited) |
||||||||||
|
|
|
(In thousands) |
||||||||||
|
U.S. treasury securities and government obligations |
$ |
|
$ |
|
$ |
( |
$ |
( |
$ |
|
$ |
|
|
U.S. government agency mortgage-backed securities |
|
|
|
|
|
( |
|
( |
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
( |
|
( |
|
|
|
|
|
Corporate securities |
|
|
|
|
|
( |
|
( |
|
( |
|
|
|
Mortgage-backed securities |
|
|
|
|
|
( |
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale investments as of March 31, 2022 were as follows:
|
|
|
Cost Amortized |
|
Unrealized Gains Gross |
|
Unrealized Losses More than 12 Months Gross |
|
Unrealized Losses Less than 12 Months Gross |
|
Allowance for Expected Credit Losses |
|
Market Value Estimated |
|
|
|
|
||||||||||
|
|
|
(In thousands) |
||||||||||
|
U.S. treasury securities and government obligations |
$ |
|
$ |
|
$ |
|
$ |
( |
$ |
|
$ |
|
|
U.S. government agency mortgage-backed securities |
|
|
|
|
|
( |
|
( |
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
( |
|
|
|
|
|
Corporate securities |
|
|
|
|
|
( |
|
( |
|
( |
|
|
|
Mortgage-backed securities |
|
|
|
|
|
( |
|
( |
|
|
|
|
|
|
|
|
|
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|
|
We sold available-for-sale securities with a fair value of $
For available-for-sale debt securities in an unrealized loss position, we first assess whether the security is below investment grade. For securities that are below investment grade, we evaluate whether the decline in fair value has resulted from credit losses or other factors such as the interest rate environment. Declines in value due to credit are recognized as an allowance. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse market conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, cumulative default rates based on ratings are used to determine the potential cost of default, by year. The present value of these potential costs is then compared to the amortized cost of the security to determine the credit loss, limited by the amount that the fair value is less than the amortized cost basis.
7
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through accumulated other comprehensive income, net of applicable taxes. If we intend to sell a security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. There was a $
The adjusted cost and estimated market value of available-for-sale investments by contractual maturity were as follows:
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|
June 30, 2022 |
|
March 31, 2022 |
||||
|
|
|
Cost Amortized |
|
Market Value Estimated |
|
Cost Amortized |
|
Market Value Estimated |
|
|
|
(Unaudited) |
|
|
||||
|
|
|
(In thousands) |
||||||
|
Due in one year or less |
$ |
|
$ |
|
$ |
|
$ |
|
|
Due after one year through five years |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
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Due after ten years |
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|
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|
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|
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|
Mortgage-backed securities |
|
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|
As of June 30, 2022 and March 31, 2022, our common stock and non-redeemable preferred stock that are included in Investments, fixed maturities and marketable equities on our balance sheet are stated in the table below. The changes in the fair value of these equity investments are recognized through Net investment and interest income.
Equity investments of common stock and non-redeemable preferred stock were as follows:
|
|
|
June 30, 2022 |
|
March 31, 2022 |
||||
|
|
|
Cost Amortized |
|
Market Value Estimated |
|
Cost Amortized |
|
Market Value Estimated |
|
|
|
(Unaudited) |
|
|
|
|
||
|
|
|
(In thousands) |
||||||
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
$ |
|
$ |
|
$ |
|
$ |
|
|
Non-redeemable preferred stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Investments, other
The carrying value of the other investments was as follows:
|
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|
June 30, |
|
March 31, |
|
|
|
2022 |
|
2022 |
|
|
|
(Unaudited) |
|
|
|
|
|
(In thousands) |
||
|
|
|
|
|
|
|
Mortgage loans, net |
$ |
|
$ |
|
|
Short-term investments |
|
|
|
|
|
Real estate |
|
|
|
|
|
Policy loans |
|
|
|
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Other equity investments |
|
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|
|
|
|
|
|
8
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
3. Borrowings
Long Term Debt
Long term debt was as follows:
|
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|
June 30, |
|
March 31, |
|
|
2023 Rates |
|
|
Maturities |
|
2022 |
|
2022 |
|||||
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|||
|
|
|
|
|
|
|
|
|
(In thousands) |
|||||
|
Real estate loans (amortizing term) |
|
% |
- |
|
% |
|
|
- |
|
$ |
|
$ |
|
|
Senior mortgages |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Real estate loans (revolving credit) (a) |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Fleet loans (amortizing term) |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Fleet loans (revolving credit) |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Finance leases (rental equipment) |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Finance liabilities (rental equipment) |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Private placements |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Other obligations |
|
% |
- |
|
% |
|
|
- |
|
|
|
|
|
|
Notes, loans and finance leases payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Debt issuance costs |
|
|
|
|
|
|
|
|
|
|
( |
|
( |
|
Total notes, loans and finance leases payable, net |
|
|
|
|
$ |
|
$ |
|
|||||
|
|
|
|
|||||||||||
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|
|||||||||||
Real Estate Backed Loans
Real Estate Loans
Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan. This loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. This loan is secured by various properties owned by the borrowers. The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. As of June 30, 2022, the applicable LIBOR was
Real Estate is a borrower under another real estate loan. This loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. This loan is secured by various properties owned by the borrowers. The interest rate per the provisions of the loan agreement, is the applicable Secured Overnight Funding Rate (“SOFR”) plus the applicable margin. As of June 30, 2022, the applicable SOFR was
Senior Mortgages
Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between
9
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Real Estate Loans (Revolving Credit)
Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $
AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $
Fleet Loans
Rental Truck Amortizing Loans
The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the loan agreements, are carried at fixed rates ranging between 1.61 % and 4.66 %. All of our rental truck amortizing loans are collateralized by the rental equipment purchased. The majority of these loans are funded at 70%, but some may be funded at 100%.
AMERCO, and in some cases U-Haul, is guarantor of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.
Rental Truck Revolvers
Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $
Finance Leases
The Finance Lease balance represents our sale-leaseback transactions of rental equipment. The agreements are generally seven
Finance Liabilities
Finance liabilities represent our rental equipment financing transactions, and we assess if sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, sale-leasebacks are accounted for as a financial liability and the leased assets are capitalized at cost. Our finance liabilities have an average term of
10
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Private Placements
In September 2021, AMERCO entered into a note purchase agreement to issue $ 600.0 million of fixed rate senior unsecured notes in a private placement offering. These notes consist of four tranches each totaling $ 150.0 million and funded in September 2021. The fixed interest rates range between 2.43 % and 2.78 % with maturities between 2029 and 2033 . Interest is payable semiannually.
In December 2021, AMERCO entered into a note purchase agreement to issue $ 600.0 million of fixed rate senior unsecured notes in a private placement offering. These notes funded in January 2022. These notes consist of three tranches each totaling $ 100.0 million and two tranches each totaling $ 150.0 million. The fixed interest rates range between 2.55 % and 2.88 % with maturities between 2030 and 2035 . Interest is payable semiannually.
Other Obligations
In February 2011, AMERCO and U.S. Bank Trust Company, NA, as successor in interest to U.S. Bank National Association (the “Trustee”) entered into the U-Haul Investors Club ® Indenture. AMERCO and the Trustee entered into this indenture to provide for the issuance of notes by us directly to investors over our proprietary website, uhaulinvestorsclub.com (“U-Notes ® ”). The U-Notes ® are secured by various types of collateral, including, but not limited to, rental equipment and real estate. U-Notes ® are issued in smaller series that vary as to principal amount, interest rate and maturity. U-Notes ® are obligations of the Company and secured by the associated collateral; they are not guaranteed by any of the Company’s affiliates or subsidiaries.
As of June 30, 2022, the aggregate outstanding principal balance of the U-Notes
®
issued was $
Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of March 31, 2022, the deposits had an aggregate balance of $
Annual Maturities of Notes, Loans and Finance Leases Payable
The annual maturities of our notes, loans and finance leases payable, as of June 30, 2022 for the next five years and thereafter are as follows:
|
|
|
Years Ending June 30, |
|
|
||||||||||
|
|
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
Thereafter |
|
Total |
|
|
|
(Unaudited) |
||||||||||||
|
|
|
(In thousands) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on Borrowings
Interest Expense
Components of interest expense include the following:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Interest expense |
$ |
|
$ |
|
|
Capitalized interest |
|
( |
|
( |
|
Amortization of transaction costs |
|
|
|
|
|
Interest expense resulting from cash flow hedges |
|
|
|
|
|
|
|
|
|
|
Interest paid in cash, including payments related to derivative contracts, amounted to $
11
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Interest Rates
Interest rates and Company borrowings related to our revolving credit facilities were as follows:
|
|
|
Revolving Credit Activity |
|
||
|
|
|
Quarter Ended June 30, |
|
||
|
|
|
2022 |
|
2021 |
|
|
|
|
(Unaudited) |
|
||
|
|
|
(In thousands, except interest rates) |
|
||
|
Weighted average interest rate during the quarter |
|
|
% |
|
% |
|
Interest rate at the end of the quarter |
|
|
% |
|
% |
|
Maximum amount outstanding during the quarter |
$ |
|
$ |
|
|
|
Average amount outstanding during the quarter |
$ |
|
$ |
|
|
|
|
|
|
|
|
|
4. Derivatives
We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates with the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes. These fair values are determined using pricing valuation models which include broker quotes for which significant inputs are observable. They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2 in the fair value hierarchy.
The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the condensed consolidated balance sheet were as follows:
|
|
|
June 30, 2022 |
|
March 31, 2022 |
|
|
|
(Unaudited) |
|
|
|
|
|
(In thousands) |
||
|
Interest rate contracts designated as hedging instruments: |
|
|
|
|
|
Assets |
$ |
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Effect of Interest Rate Contracts on the Statements of Operations for the Quarters Ended |
||
|
|
|
|||
|
|
|
June 30, 2022 |
|
June 30, 2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Gain recognized in AOCI on interest rate contracts |
$ |
( |
$ |
( |
|
|
|
|
|
|
Gains or losses recognized in income on interest rate derivatives are recorded as interest expense in the condensed consolidated statements of operations. During the first quarter of fiscal 2023, we recognized an increase in the fair value of our cash flow hedges of $
12
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholder based on the change in the value of the SP 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair value on our balance sheet. As of March 31, 2022 and December 31, 2021, these derivative hedges had a fair value of $
5. Accumulated Other Comprehensive Income (Loss)
A summary of AOCI components, net of tax, were as follows:
|
|
|
Foreign Currency Translation |
|
Unrealized Net Gains (Losses) on Investments |
|
Fair Market Value of Cash Flow Hedges |
|
Postretirement Benefit Obligation Net Loss |
|
Accumulated Other Comprehensive Income (Loss) |
|
|
|
(Unaudited) |
||||||||
|
|
|
(In thousands) |
||||||||
|
Balance as of March 31, 2022 |
$ |
( |
$ |
|
$ |
( |
$ |
( |
$ |
|
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
Unrealized net losses on investments |
|
|
|
( |
|
|
|
|
|
( |
|
Change in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into earnings on hedging activities |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
( |
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
6. Stockholders’ Equity
The following table lists the dividends that have been declared and issued for fiscal year 2023.
|
Common Stock Dividends |
||||||
|
Declared Date |
|
Per Share Amount |
|
Record Date |
|
Dividend Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Leases
The following tables show the components of our ROU assets, net:
|
|
|
As of June 30, 2022 |
||||
|
|
|
Finance |
|
Operating |
|
Total |
|
|
|
(Unaudited) |
||||
|
|
|
(In thousands) |
||||
|
Buildings and improvements |
$ |
|
$ |
|
$ |
|
|
Furniture and equipment |
|
|
|
|
|
|
|
Rental trailers and other rental equipment |
|
|
|
|
|
|
|
Rental trucks |
|
|
|
|
|
|
|
Right-of-use assets, gross |
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
( |
|
( |
|
( |
|
|
|
|
|
|
|
|
13
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
|
|
|
As of March 31, 2022 |
||||
|
|
|
Finance |
|
Operating |
|
Total |
|
|
|
(In thousands) |
||||
|
Buildings and improvements |
$ |
|
$ |
|
$ |
|
|
Furniture and equipment |
|
|
|
|
|
|
|
Rental trailers and other rental equipment |
|
|
|
|
|
|
|
Rental trucks |
|
|
|
|
|
|
|
Right-of-use assets, gross |
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
( |
|
( |
|
( |
|
|
|
|
|
|
|
|
As of June 30, 2022 and March 31, 2022, we had finance lease liabilities for the ROU assets, net of $
|
|
|
Finance leases |
|
||
|
|
|
June 30, |
|
March 31, |
|
|
|
|
2022 |
|
2022 |
|
|
|
|
(Unaudited) |
|
|
|
|
Weighted average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
||
|
|
|
June 30, |
|
March 31, |
|
|
|
|
2022 |
|
2022 |
|
|
|
|
(Unaudited) |
|
|
|
|
Weighted average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
For the quarters ended June 30, 2022 and 2021, cash paid for leases included in our operating cash flow activities were $
The components of lease costs were as follows:
|
|
|
Three Months Ended |
||
|
|
|
June 30, 2022 |
|
June 30, 2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
|
|
|
|
|
|
Operating lease costs |
$ |
|
$ |
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
Amortization of right-of-use assets |
$ |
|
$ |
|
|
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
14
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Maturities of lease liabilities were as follows:
|
|
|
Finance leases |
|
Operating leases |
|
|
|
(Unaudited) |
||
|
Years ending June 30, |
|
(In thousands) |
||
|
|
|
|
|
|
|
2023 |
$ |
|
$ |
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease payments |
|
|
|
|
|
Less: imputed interest |
|
( |
|
( |
|
|
|
|
|
|
8. Contingencies
Environmental
Compliance with environmental requirements of federal, state and local governments may significantly affect Real Estate’s business operations. Among other things, these requirements regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on some of its properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws and has put in place a remedial plan at each site where it believes such a plan is necessary.
Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to result in a material adverse effect on AMERCO’s financial position or results of operations.
Other
9. Related Party Transactions
As set forth in the Company’s Audit Committee Charter and consistent with NASDAQ Listing Rules, our Audit Committee (the “Audit Committee”) reviews and maintains oversight over related party transactions, which are required to be disclosed under the Securities and Exchange Commission (“SEC”) rules and regulations and in accordance with GAAP. Accordingly, all such related party transactions are submitted to the Audit Committee for ongoing review and oversight. Our internal processes are designed to ensure that our legal and finance departments identify and monitor potential related party transactions that may require disclosure and Audit Committee oversight.
AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below.
SAC Holding Corporation and SAC Holding II Corporation (collectively “SAC Holdings”) were established in order to acquire and develop self-storage properties. These properties are being managed by us pursuant to management agreements. SAC Holdings, Four SAC Self-Storage Corporation, Five SAC Self-Storage Corporation, Galaxy Investments, L.P. and 2015 SAC-Self-Storage, LLC are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly owned by Willow Grove Holdings LP, which is owned by Mark V. Shoen (a significant stockholder), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant stockholder) and Mark V. Shoen
15
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Related Party Revenue
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
U-Haul management fee revenue from Blackwater |
$ |
|
$ |
|
|
U-Haul management fee revenue from Mercury |
|
|
|
|
|
|
|
|
|
|
We currently manage the self-storage properties owned or leased by Blackwater and Mercury Partners, L.P. (“Mercury”), pursuant to a standard form of management agreement, under which we receive a management fee of between
Related Party Costs and Expenses
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
U-Haul lease expenses to Blackwater |
$ |
|
$ |
|
|
U-Haul commission expenses to Blackwater |
|
|
|
|
|
|
|
|
|
|
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.
As of June 30, 2022, subsidiaries of Blackwater acted as independent dealers. The financial and other terms of the dealership contracts are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues.
These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $
Management determined that we do not have a variable interest pursuant to the variable interest entity model under Accounting Standards Codification (“ASC”) 810 – Consolidation in the holding entities of Blackwater.
Related Party Assets
|
|
|
June 30, |
|
March 31, |
|
|
|
2022 |
|
2022 |
|
|
|
(Unaudited) |
|
|
|
|
|
(In thousands) |
||
|
U-Haul receivable from Blackwater |
$ |
|
$ |
|
|
U-Haul receivable from Mercury |
|
|
|
|
|
Other (a) |
|
( |
|
|
|
|
|
|
|
|
(a) Timing differences for intercompany balances with insurance subsidiaries resulting from the three-month difference in reporting periods.
16
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
10. Consolidating Financial Information by Industry Segment
AMERCO’s three reportable segments are:
- Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the subsidiaries of UHaul and Real Estate,
- Property and Casualty Insurance, comprised of Repwest and its subsidiaries and ARCOA, and
- Life Insurance, comprised of Oxford and its subsidiaries.
17
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating balance sheets by industry segment as of June 30, 2022 are as follows:
|
|
|
Moving Storage Consolidated |
|
Property Casualty Insurance (a) |
|
Life Insurance (a) |
|
Eliminations |
|
|
AMERCO Consolidated |
|
|
|
(Unaudited) |
|||||||||
|
|
|
(In thousands) |
|||||||||
|
Assets: |
|
||||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
Reinsurance recoverables and trade receivables, net |
|
|
|
|
|
|
|
|
|
|
|
|
Inventories and parts, net |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Investments, fixed maturities and marketable equities |
|
|
|
|
|
|
|
|
|
|
|
|
Investments, other |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred policy acquisition costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets - financing, net |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets - operating, net |
|
|
|
|
|
|
|
|
|
|
|
|
Related party assets |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
|
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost: |
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Rental trailers and other rental equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Rental trucks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
( |
|
|
|
|
|
|
|
|
( |
|
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances as of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany receivables and payables |
|
|
|
|
|
|
|
|
|
|
|
18
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating balance sheets by industry segment as of June 30, 2022, continued
|
|
|
Consolidated Moving Storage |
|
Property Casualty Insurance (a) |
|
Insurance (a) Life |
|
Eliminations |
|
|
Consolidated AMERCO |
|
|
|
(Unaudited) |
|||||||||
|
|
|
(In thousands) |
|||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
Notes, loans and finance leases payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Policy benefits and losses, claims and loss expenses payable |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from investment contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Other policyholders' funds and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes, net |
|
|
|
|
|
( |
|
|
|
|
|
|
Related party liabilities |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
Total liabilities |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Series preferred stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Series B preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Series A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Accumulated other comprehensive income (loss) |
|
( |
|
|
|
( |
|
|
(b) |
|
( |
|
Retained earnings |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Cost of common stock in treasury, net |
|
( |
|
|
|
|
|
|
|
|
( |
|
Cost of preferred stock in treasury, net |
|
( |
|
|
|
|
|
|
|
|
( |
|
Total stockholders' equity |
|
|
|
|
|
|
|
( |
|
|
|
|
Total liabilities and stockholders' equity |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances as of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating balance sheets by industry segment as of March 31, 2022 are as follows:
|
|
|
Moving Storage Consolidated |
|
Property Casualty Insurance (a) |
|
Life Insurance (a) |
|
Eliminations |
|
|
AMERCO Consolidated |
|
|
|
|
|||||||||
|
Assets: |
|
(In thousands) |
|||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
Reinsurance recoverables and trade receivables, net |
|
|
|
|
|
|
|
|
|
|
|
|
Inventories and parts, net |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Investments, fixed maturities and marketable equities |
|
|
|
|
|
|
|
|
|
|
|
|
Investments, other |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred policy acquisition costs, net |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets - financing, net |
|
|
|
|
|
|
|
|
|
|
|
|
Right of use assets - operating, net |
|
|
|
|
|
|
|
|
|
|
|
|
Related party assets |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
|
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost: |
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Rental trailers and other rental equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Rental trucks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
( |
|
|
|
|
|
|
|
|
( |
|
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany receivables and payables |
|
|
|
|
|
|
|
|
|
|
|
20
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating balance sheets by industry segment as of March 31, 2022, continued
|
|
|
Consolidated Moving Storage |
|
Property Casualty Insurance (a) |
|
Insurance (a) Life |
|
Eliminations |
|
|
Consolidated AMERCO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
Notes, loans and finance leases payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Policy benefits and losses, claims and loss expenses payable |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities from investment contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Other policyholders' funds and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes, net |
|
|
|
|
|
|
|
|
|
|
|
|
Related party liabilities |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
Total liabilities |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Series preferred stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Series B preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Series A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Retained earnings |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Cost of common shares in treasury, net |
|
( |
|
|
|
|
|
|
|
|
( |
|
Cost of preferred shares in treasury, net |
|
( |
|
|
|
|
|
|
|
|
( |
|
Total stockholders' equity |
|
|
|
|
|
|
|
( |
|
|
|
|
Total liabilities and stockholders' equity |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating statement of operations by industry segment for the quarter ended June 30, 2022 are as follows:
|
|
|
Consolidated Moving Storage |
|
Property Casualty Insurance (a) |
|
Insurance (a) Life |
|
Eliminations |
|
|
Consolidated AMERCO |
|
|
|
(Unaudited) |
|||||||||
|
|
|
(In thousands) |
|||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals |
$ |
|
$ |
|
$ |
|
$ |
( |
(c) |
$ |
|
|
Self-storage revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving and self-storage products and service sales |
|
|
|
|
|
|
|
|
|
|
|
|
Property management fees |
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance premiums |
|
|
|
|
|
|
|
|
|
|
|
|
Property and casualty insurance premiums |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
Net investment and interest income |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Other revenue |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Total revenues |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
( |
(b,c) |
|
|
|
Commission expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and losses |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred policy acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
Lease expense |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Depreciation, net of gains on disposals |
|
|
|
|
|
|
|
|
|
|
|
|
Net losses on disposal of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations before equity in earnings of subsidiaries |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
|
( |
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations |
|
|
|
|
|
|
|
( |
|
|
|
|
Other components of net periodic benefit costs |
|
( |
|
|
|
|
|
|
|
|
( |
|
Interest expense |
|
( |
|
|
|
( |
|
|
(b) |
|
( |
|
Pretax earnings |
|
|
|
|
|
|
|
( |
|
|
|
|
Income tax expense |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
Earnings available to common stockholders |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances for the quarter ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate intercompany lease / interest income |
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating statements of operations by industry for the quarter ended June 30, 2021 are as follows:
|
|
|
Consolidated Moving Storage |
|
Property Casualty Insurance (a) |
|
Insurance (a) Life |
|
Eliminations |
|
|
Consolidated AMERCO |
|
|
|
(Unaudited) |
|||||||||
|
|
|
(In thousands) |
|||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals |
$ |
|
$ |
|
$ |
|
$ |
( |
(c) |
$ |
|
|
Self-storage revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving and self-storage products and service sales |
|
|
|
|
|
|
|
|
|
|
|
|
Property management fees |
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance premiums |
|
|
|
|
|
|
|
|
|
|
|
|
Property and casualty insurance premiums |
|
|
|
|
|
|
|
( |
(c) |
|
|
|
Net investment and interest income |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Other revenue |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Total revenues |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
( |
(b,c) |
|
|
|
Commission expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and losses |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred policy acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
Lease expense |
|
|
|
|
|
|
|
( |
(b) |
|
|
|
Depreciation, net of gains on disposals |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on disposal of real estate |
|
( |
|
|
|
|
|
|
|
|
( |
|
Total costs and expenses |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations before equity in earnings of subsidiaries |
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
|
( |
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations |
|
|
|
|
|
|
|
( |
|
|
|
|
Other components of net periodic benefit costs |
|
( |
|
|
|
|
|
|
|
|
( |
|
Interest expense |
|
( |
|
|
|
( |
|
|
(b) |
|
( |
|
Pretax earnings |
|
|
|
|
|
|
|
( |
|
|
|
|
Income tax expense |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
Earnings available to common stockholders |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Balances for the quarter ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate intercompany lease / interest income |
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating cash flow statements by industry segment for the quarter ended June 30, 2022 are as follows:
|
|
|
Moving Storage Consolidated |
|
Property Casualty Insurance (a) |
|
Life Insurance (a) |
|
Elimination |
|
|
AMERCO Consolidated |
|
|
|
(Unaudited) |
|||||||||
|
Cash flows from operating activities: |
|
(In thousands) |
|||||||||
|
Net earnings |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
Earnings from consolidated entities |
|
( |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net earnings to the cash provided by operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred policy acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premiums and accretion of discounts related to investments, net |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited to policyholders |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for allowance for losses on trade receivables |
|
( |
|
( |
|
|
|
|
|
|
( |
|
Provision for allowance for inventories and parts reserve |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on disposal of personal property |
|
( |
|
|
|
|
|
|
|
|
( |
|
Net losses on disposal of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Net (gains) losses on sales of investments |
|
|
|
( |
|
|
|
|
|
|
|
|
Net losses on equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in other operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables |
|
|
|
( |
|
( |
|
|
|
|
|
|
Inventories and parts |
|
( |
|
|
|
|
|
|
|
|
( |
|
Prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of deferred policy acquisition costs |
|
|
|
|
|
( |
|
|
|
|
( |
|
Other assets |
|
|
|
( |
|
( |
|
|
|
|
|
|
Related party assets |
|
|
|
( |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
( |
|
( |
|
|
|
|
|
|
Policy benefits and losses, claims and loss expenses payable |
|
|
|
( |
|
|
|
|
|
|
|
|
Other policyholders' funds and liabilities |
|
|
|
( |
|
|
|
|
|
|
|
|
Deferred income |
|
|
|
|
|
( |
|
|
|
|
|
|
Related party liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Escrow deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of: |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
( |
|
|
|
|
|
|
|
|
( |
|
Short term investments |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Fixed maturities investments |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Equity securities |
|
|
|
( |
|
|
|
|
|
|
( |
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Proceeds from sales and paydowns of: |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities investments |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by investing activities |
|
( |
|
( |
|
|
|
|
|
|
( |
|
|
|
(page 1 of 2) |
|||||||||
|
(a) Balance for the period ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
24
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating cash flow statements by industry segment for the quarter ended June 30, 2022, continued
|
|
|
Consolidated Moving Storage |
|
Casualty Insurance (a) Property |
|
Insurance (a) Life |
|
Elimination |
|
|
Consolidated AMERCO |
|
|
|
(Unaudited) |
|||||||||
|
Cash flows from financing activities: |
|
(In thousands) |
|||||||||
|
Borrowings from credit facilities |
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments on credit facilities |
|
( |
|
|
|
|
|
|
|
|
( |
|
Payments of debt issuance costs |
|
( |
|
|
|
|
|
|
|
|
( |
|
Finance lease payments |
|
( |
|
|
|
|
|
|
|
|
( |
|
Common stock dividends paid |
|
( |
|
|
|
|
|
|
|
|
( |
|
Investment contract deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Investment contract withdrawals |
|
|
|
|
|
( |
|
|
|
|
( |
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate on cash |
|
( |
|
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
|
( |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
|
|
(page 2 of 2) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
25
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating cash flow statements by industry segment for the quarter ended June 30, 2021 are as follows:
|
|
|
Moving Storage Consolidated |
|
Property Casualty Insurance (a) |
|
Life Insurance (a) |
|
Elimination |
|
|
AMERCO Consolidated |
|
|
|
(Unaudited) |
|||||||||
|
Cash flows from operating activities: |
|
(In thousands) |
|||||||||
|
Net earnings |
$ |
|
$ |
|
$ |
|
$ |
( |
|
$ |
|
|
Earnings from consolidated entities |
|
( |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net earnings to cash provided by operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred policy acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premiums and accretion of discounts related to investments, net |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited to policyholders |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for allowance for losses on trade receivables |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
Provision for allowance for inventories and parts reserve |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on disposal of personal property |
|
( |
|
|
|
|
|
|
|
|
( |
|
Net gains on disposal of real estate |
|
( |
|
|
|
|
|
|
|
|
( |
|
Net gains on sales of investments |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Net gains on equity investments |
|
|
|
( |
|
|
|
|
|
|
( |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in other operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
Inventories and parts |
|
( |
|
|
|
|
|
|
|
|
( |
|
Prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of deferred policy acquisition costs |
|
|
|
|
|
( |
|
|
|
|
( |
|
Other assets |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
Related party assets |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Policy benefits and losses, claims and loss expenses payable |
|
|
|
|
|
|
|
|
|
|
|
|
Other policyholders' funds and liabilities |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Deferred income |
|
|
|
|
|
( |
|
|
|
|
|
|
Related party liabilities |
|
|
|
( |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Escrow deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of: |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
( |
|
|
|
|
|
|
|
|
( |
|
Short term investments |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Fixed maturities investments |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Preferred stock |
|
|
|
|
|
( |
|
|
|
|
( |
|
Real estate |
|
|
|
|
|
( |
|
|
|
|
( |
|
Mortgage loans |
|
|
|
( |
|
( |
|
|
|
|
( |
|
Proceeds from sales and paydowns of: |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
Short term investments |
|
|
|
|
|
|
|
|
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|
|
|
Fixed maturities investments |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
( |
|
( |
|
( |
|
|
|
|
( |
|
|
|
(page 1 of 2) |
|||||||||
|
(a) Balance for the period ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
26
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Consolidating cash flow statements by industry segment for the quarter ended June 30, 2021, continued
|
|
|
Consolidated Moving Storage |
|
Casualty Insurance (a) Property |
|
Insurance (a) Life |
|
Elimination |
|
|
Consolidated AMERCO |
|
|
|
(Unaudited) |
|||||||||
|
Cash flows from financing activities: |
|
(In thousands) |
|||||||||
|
Borrowings from credit facilities |
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments on credit facilities |
|
( |
|
|
|
( |
|
|
|
|
( |
|
Payment of debt issuance costs |
|
( |
|
|
|
|
|
|
|
|
( |
|
Finance lease payments |
|
( |
|
|
|
|
|
|
|
|
( |
|
Investment contract deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Investment contract withdrawals |
|
|
|
|
|
( |
|
|
|
|
( |
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Effects of exchange rate on cash |
|
( |
|
|
|
|
|
|
|
|
( |
|
|
|
|
|
|
|
|
|
|
|
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|
|
Increase (decrease) in cash and cash equivalents |
|
|
|
( |
|
( |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
$ |
|
$ |
|
$ |
|
$ |
|
|
$ |
|
|
|
|
(page 2 of 2) |
|||||||||
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|
27
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
11. Industry Segment and Geographic Area Data
|
|
|
United States |
|
Canada |
|
Consolidated |
|
|
|
(Unaudited) |
||||
|
|
|
(All amounts are in thousands of U.S. $'s) |
||||
|
Quarter Ended June 30, 2022 |
|
|
|
|
|
|
|
Total revenues |
$ |
|
$ |
|
$ |
|
|
Depreciation and amortization, net of gains on disposal |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
Pretax earnings |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
Identifiable assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2021 |
|
|
|
|
|
|
|
Total revenues |
$ |
|
$ |
|
$ |
|
|
Depreciation and amortization, net of gains on disposal |
|
|
|
( |
|
|
|
Interest expense |
|
|
|
|
|
|
|
Pretax earnings |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. Employee Benefit Plans
The components of the net periodic benefit costs with respect to postretirement benefits were as follows:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
|
|
|
|
|
|
Service cost for benefits earned during the period |
$ |
|
$ |
|
|
Other components of net periodic benefit costs: |
|
|
|
|
|
Interest cost on accumulated postretirement benefit |
|
|
|
|
|
Other components |
|
|
|
|
|
Total other components of net periodic benefit costs |
|
|
|
|
|
|
|
|
|
|
13. Fair Value Measurements
Certain assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three-tiered approach to valuation. Financial assets and liabilities are recorded at fair value and are classified and disclosed in one of the following three categories:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
28
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.
Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.
We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.
Other investments, including short-term investments, are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.
The carrying values and estimated fair values for the financial instruments stated above and their placement in the fair value hierarchy are as follows:
|
|
|
Fair Value Hierarchy |
||||||||
|
|
|
Carrying |
|
|
|
|
|
|
|
Total Estimated |
|
As of June 30, 2022 |
|
Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Fair Value |
|
|
|
(Unaudited) |
||||||||
|
Assets |
|
(In thousands) |
||||||||
|
Reinsurance recoverables and trade receivables, net |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
Mortgage loans, net |
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Notes, loans and finance leases payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy |
||||||||
|
|
|
Carrying |
|
|
|
|
|
|
|
Total Estimated |
|
As of March 31, 2022 |
|
Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Fair Value |
|
|
|
(In thousands) |
||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables, net |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
Mortgage loans, net |
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Notes, loans and finance leases payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of June 30, 2022 and March 31, 2022 that are measured at fair value on a recurring basis and the level within the fair value hierarchy.
|
As of June 30, 2022 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|
|
(Unaudited) |
||||||
|
Assets |
|
(In thousands) |
||||||
|
Short-term investments |
$ |
|
$ |
|
$ |
|
$ |
|
|
Fixed maturities - available for sale |
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
|
|
|
|
|
|
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2022 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|
|
(In thousands) |
||||||
|
Assets |
|
|
|
|
|
|
|
|
|
Short-term investments |
$ |
|
$ |
|
$ |
|
$ |
|
|
Fixed maturities - available for sale |
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
|
|
|
|
|
|
|
Total |
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Revenue Recognition
Revenue Recognized in Accordance with Topic 606
ASC Topic 606, Revenue from Contracts with Customers (Topic 606) , outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.
We enter into contracts that may include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, and remitted to the applicable taxing authorities. We account for a contract under Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For contracts scoped into this standard, revenue is recognized when (or as) the performance obligations are satisfied by means of transferring goods or services to the customer as applicable to each revenue stream as discussed below. There were no material contract assets or liabilities as of June 30, 2022 and March 31, 2022.
30
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. The performance obligations identified for this portfolio of contracts include moving and storage product sales, installation services and/or propane sales. Each of these performance obligations has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied at a point in time. The basis for this conclusion is that the customer does not receive the product/propane or benefit from the installation services until the related performance obligation is satisfied. These products/services being provided have an alternative use as they are not customized and can be sold/provided to any customer. In addition, we only have the right to receive payment once the products have been transferred to the customer or the installation services have been completed. Although product sales have a right of return policy, our estimated obligation for future product returns is not material to the financial statements at this time.
Property management fees are recognized over the period that agreed-upon services are provided. The performance obligation for this portfolio of contracts is property management services, which represents a series of distinct days of service, each of which is comprised of activities that may vary from day to day. However, those tasks are activities to fulfill the property management services and are not separate promises in the contract. We determined that each increment of the promised service is distinct. This is because the customer can benefit from each increment of service on its own and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity’s ability to fulfill another day of service or the benefit to the customer of another day of service. As such, we concluded that the performance obligation is satisfied over time. Additionally, in certain contracts the Company has the ability to earn an incentive fee based on operational results. We measure and recognize the progress toward completion of the performance obligation on a quarterly basis using the most likely amount method to determine an accrual for the incentive fee portion of the compensation received in exchange for the property management service. The variable consideration recognized is subject to constraints due to a range of possible consideration amounts based on actual operational results. The amount accrued in the first quarter of fiscal 2023 did not have a material effect on our financial statements.
Other revenue consists of numerous services or rentals, of which U-Box contracts and service fees from Moving Help are the main components. The performance obligations identified for U-Box contracts are fees for rental, storage and shipping of U-Box containers to a specified location, each of which are distinct. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. The rental and storage obligations in U-Box contracts meet the definition of a lease in Topic 842, while the shipping obligation represents a contract with a customer accounted for under Topic 606. Therefore, we allocate the total transaction price between the performance obligations of storage fees and rental fees and the shipping fees on a standalone selling price basis. U-Box shipping fees are collected once the shipment is in transit. Shipping fees in U-Box contracts are set at the initiation of the contract based on the shipping origin and destination, and the performance obligation is satisfied over time. U-Box shipping contracts span over a relatively short period of time, and the majority of these contracts begin and end within the same fiscal year. Moving Help services fees are recognized in accordance with Topic 606. Moving Help services are generated as we provide a neutral venue for the connection between the service provider and the customer for agreed upon services. We do not control the specified services provided by the service provider before that service is transferred to the customer.
Revenue Recognized in Accordance with Topic 842
The Company’s self-moving rental revenues meet the definition of a lease pursuant to the guidance in Topic 842 because those substitution rights do not provide an economic benefit to the Company that would exceed the cost of exercising the right. Please see Note 7, Leases, of the Notes to the Condensed Consolidated Financial Statements.
Self-moving rentals are recognized over the contract period that trucks and moving equipment are rented. We offer two types of self-moving rental contracts, one-way rentals and in-town rentals, which have varying payment terms. Customer payment is received at the initiation of the contract for one-way rentals which covers an allowable limit for equipment usage. An estimated fee in the form of a deposit is received at the initiation of the contract for in-town rentals, and final payment is received upon the return of the equipment based on actual fees incurred. The contract price is estimated at the initiation of the contract, as there is variable consideration associated with ratable fees incurred based on the number of days the equipment is rented and the number of miles driven. Variable consideration is estimated using the most likely amount method which is based on the intended use of the rental equipment by the customer at the initiation of the contract. Historically, the variability in estimated transaction pricing compared to actual is not significant due to the relatively short duration of rental contracts. Each performance obligation has an observable stand-alone selling price. The input method of passage of time is appropriate as there is a direct relationship between our inputs and the transfer of benefit to the customer over the life of the contract. Self-moving rental contracts span a relatively short period of time, and the majority of these contracts began and ended within the same fiscal year.
Self-storage revenues are recognized as earned over the contract period based upon the number of paid storage contract days.
31
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
We lease portions of our operating properties to tenants under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers.
The following table summarizes the minimum lease payments due from our customers and operating property tenants on leases for the next five years and thereafter:
|
|
|
Years Ending June 30, |
||||||||||
|
|
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
Thereafter |
|
|
|
(Unaudited) |
||||||||||
|
|
|
(In thousands) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
Property lease revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts above do not reflect future rental revenue from the renewal or replacement of existing leases.
Revenue Recognized in Accordance with Other Topics
Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force.
Property and casualty insurance premiums are recognized as revenue over the policy periods. Interest and investment income are recognized as earned.
Net investment and interest income has multiple components. Interest income from bonds and mortgage notes are recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date.
In the following table, revenue is disaggregated by timing of revenue recognition:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
|
|
|
|
|
|
Revenues recognized over time: |
$ |
|
$ |
|
|
Revenues recognized at a point in time: |
|
|
|
|
|
Total revenues recognized under ASC 606 |
|
|
|
|
|
|
|
|
|
|
|
Revenues recognized under ASC 842 |
|
|
|
|
|
Revenues recognized under ASC 944 |
|
|
|
|
|
Revenues recognized under ASC 320 |
|
|
|
|
|
|
|
|
|
|
In the above table, the revenues recognized over time include property management fees, the shipping fees associated with U-Box container rentals and a portion of other revenues. Revenues recognized at a point in time include self-moving equipment rentals, self-moving and self-storage products and service sales and a portion of other revenues .
32
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
15. Allowance for Credit Losses
Trade Receivables
Moving and Storage has two (
The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness. In addition, the Company monitors collections and payments from its customers and maintains an allowance based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high-risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote.
Management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables because the composition of trade receivables as of that date is consistent with that used in developing the historical credit loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time).
To adjust the historical loss rates to reflect the effects of these differences in current conditions and forecasted changes, management assigns a rating to each customer which varies depending on the assessment of risk. Management estimated the loss rate at approximately 2% and 6% as of June 30, 2022 and March 31, 2022, respectively. Management developed this estimate based on its knowledge of past experience for which there were similar improvements in the economy. As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses as of June 30, 2022, was $
Accrued Interest Receivable
Accrued interest receivables on available for sale securities totaled $
As outlined in subtopic 326-20-30-5A, we have elected not to measure an allowance on accrued interest receivables as our practice is to write off the uncollectible balance in a timely manner. Furthermore, we have elected to wrtie off accrued interest receivables by reversing interest income (in accordance with subtopic 326-20-35-8A).
Mortgage loans, net
When management determines that credit losses are expected to occur, an allowance for expected credit losses based on the fair value of the collateral is recorded.
Reinsurance recoverables
Reinsurance recoverables on paid and unpaid benefits was less than
Premium receivables
Premium receivables were $
33
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
The following details the changes in the Company’s reserve allowance for credit losses for trade receivables, fixed maturities and investments, other:
|
|
|
Allowance for Credit Losses |
||||||
|
|
|
Trade Receivables |
|
Investments, Fixed Maturities |
|
Investments, other |
|
Total |
|
|
|
(Unaudited) |
||||||
|
|
|
(in thousands) |
||||||
|
Balance as of March 31, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
|
Allowance change |
|
( |
|
( |
|
|
|
( |
|
Write-offs against allowance |
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2022 |
$ |
|
$ |
|
$ |
|
$ |
|
|
Allowance change |
|
( |
|
|
|
( |
|
( |
|
Write-offs against allowance |
|
|
|
|
|
|
|
|
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Accounting Pronouncements
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”). The amendments in this update require insurance companies to annually review and update the assumptions used for measuring the liability under long-duration contracts, such as life insurance, disability income, and annuities. The amendment prescribes standardized liability discount rate, consistency in measurement of market risk benefits, simplified amortization of deferred acquisition costs and enhanced disclosures. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2020. In November 2020, FASB issued ASU 2020-11, Financial Services – Insurance (Topic 944) , which deferred the effective date of ASU 2018-12 to years beginning after December 15, 2022. We are currently in the process of evaluating the impact of the adoption of ASU 2018-12 on our financial statements; however, the adoption of ASU 2018-12 will impact the statements of operations because the effect of any update to the assumptions we used at the inception of the contracts will be recorded in net income.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MDA”) with the overall strategy of AMERCO, followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022, which is followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources - Summary and Disclosures about Contractual Obligations and Commercial Commitments and a discussion of off-balance sheet arrangements. We conclude this MDA by discussing our current outlook for the remainder of fiscal 2023.
This MDA should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. The various sections of this MDA contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing or in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements.
AMERCO, a Nevada corporation, has a first fiscal quarter that ends on the 30 th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2022 and 2021 correspond to fiscal 2023 and 2022 for AMERCO.
Overall Strategy
Our overall strategy is to maintain our leadership position in the United States and Canada “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul ® with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence.
Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our eMove ® capabilities.
Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates.
Life Insurance is focused on long term capital growth through direct writing and reinsuring of life insurance, Medicare supplement and annuity products in the senior marketplace.
Description of Operating Segments
AMERCO’s three reportable segments are:
- Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate;
- Property and Casualty Insurance, comprised of Repwest and its wholly owned subsidiaries and ARCOA; and
- Life Insurance, comprised of Oxford and its wholly owned subsidiaries.
Moving and Storage
Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.
With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer network, which provides added convenience for our customers and expands the selection and availability of rental equipment to satisfy the needs of our customers.
35
U-Haul ® branded self-moving related products and services, such as boxes, pads and tape, allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind.
uhaul.com ® is an online marketplace that connects consumers to our operations as well as independent Moving Help ® service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market.
U-Haul’s Truck Share 24/7, Skip-the-Counter Self-Storage rentals and Self-checkout for moving supplies provide our customers methods for conducting business with us directly via their mobile devices and also limiting physical exposure.
Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations has helped us to reduce our impact on the environment.
Property and Casualty Insurance
Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul related programs.
Life Insurance
Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.
Critical Accounting Policies and Estimates
Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Impairment of Investments
Under the current expected credit loss model, a valuation allowance is recognized in earnings for credit losses. If we intend to sell a debt security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.
There was a $17 thousand net impairment charge recorded during the quarter ended June 30, 2022.
36
Results of Operations
AMERCO and Consolidated Entities
Quarter Ended June 30, 2022 compared with the Quarter Ended June 30, 2021
Listed below, on a consolidated basis, are revenues for our major product lines for the first quarter of fiscal 2023 and the first quarter of fiscal 2022:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Self-moving equipment rentals |
$ |
1,090,775 |
$ |
1,035,377 |
|
Self-storage revenues |
|
173,177 |
|
137,393 |
|
Self-moving and self-storage products and service sales |
|
109,351 |
|
104,885 |
|
Property management fees |
|
9,139 |
|
8,449 |
|
Life insurance premiums |
|
25,781 |
|
28,705 |
|
Property and casualty insurance premiums |
|
19,972 |
|
16,869 |
|
Net investment and interest income |
|
33,573 |
|
34,999 |
|
Other revenue |
|
136,072 |
|
106,179 |
|
Consolidated revenue |
$ |
1,597,840 |
$ |
1,472,856 |
Self-moving equipment rental revenues increased $55.4 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Revenue per transaction for both our In-Town and one-way markets increased. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks, trailers and towing devices in the rental fleet.
Self-storage revenues increased $35.8 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. The average monthly number of occupied units increased by 19%, or 81,900 units, during the first quarter of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months, we added approximately 5.0 million net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the first quarter of fiscal 2023.
Sales of self-moving and self-storage products and services increased $4.5 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. This was due to increased sales of hitches, moving supplies and propane.
Life insurance premiums decreased $2.9 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022 due primarily to decreased life and Medicare supplement premiums.
Property and casualty insurance premiums increased $3.1 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022 due to an increase in Safetow ® and Safestor ® sales, which was a reflection of the increased equipment and storage rental transactions.
Net investment and interest income decreased $1.4 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Changes in the market value of unaffiliated common stocks held in our property and casualty insurance subsidiary accounted for $3.8 million of the decrease during the quarter. A decrease of $1.5 million realized loss on derivatives used as hedges for our fixed indexed annuities at our life insurance subsidiary also contributed to the decrease during the quarter. This was partially offset by a $4.3 million increase from Moving and Storage due to increase in invested cash combined with higher interest rates on these short-term deposits.
Other revenue increased $29.9 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022, caused primarily by growth in our U-Box program.
37
Listed below are revenues and earnings from operations at each of our operating segments for the first quarter of fiscal 2023 and the first quarter of fiscal 2022. The insurance companies’ first quarters ended March 31, 2022 and 2021.
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Moving and storage |
|
|
|
|
|
Revenues |
$ |
1,523,598 |
$ |
1,393,254 |
|
Earnings from operations before equity in earnings of subsidiaries |
|
481,617 |
|
482,995 |
|
Property and casualty insurance |
|
|
|
|
|
Revenues |
|
23,082 |
|
23,456 |
|
Earnings from operations |
|
8,351 |
|
9,232 |
|
Life insurance |
|
|
|
|
|
Revenues |
|
54,103 |
|
58,659 |
|
Earnings from operations |
|
1,573 |
|
2,366 |
|
Eliminations |
|
|
|
|
|
Revenues |
|
(2,943) |
|
(2,513) |
|
Earnings from operations before equity in earnings of subsidiaries |
|
(382) |
|
(385) |
|
Consolidated results |
|
|
|
|
|
Revenues |
|
1,597,840 |
|
1,472,856 |
|
Earnings from operations |
|
491,159 |
|
494,208 |
Total costs and expenses increased $128.0 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Operating expenses for Moving and Storage increased $118.0 million. Repair costs associated with the rental fleet experienced a $32.1 million increase during the quarter due to preventative maintenance resulting from higher fleet activity combined with a slowdown in the rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs and shipping associated with U-Box transactions. Net gains from the disposal of rental equipment increased $14.0 million from an increase in resale values. Depreciation expense associated with our rental fleet was $126.5 million and $126.6 million for the first quarters of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.2 million to $51.6 million. Net losses on the disposal or retirement of land and buildings increased $6.7 million. The first quarter of fiscal 2022 included a condemnation gain of $4.9 million.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations increased to $491.2 million for the first quarter of fiscal 2023, compared with $494.2 million for the first quarter of fiscal 2022.
Interest expense for the first quarter of fiscal 2023 was $49.8 million, compared with $39.2 million for the first quarter of fiscal 2022, due to an increase in our outstanding debt of $1,570.2 million in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022.
Income tax expense was $107.1 million for the first quarter of fiscal 2023, compared with $109.6 million for the first quarter of fiscal 2022.
As a result of the above-mentioned items, earnings available to common stockholders were $334.0 million for the first quarter of fiscal 2023, compared with $345.2 million for the first quarter of fiscal 2022.
Basic and diluted earnings per share for the first quarter of fiscal 2023 were $17.03, compared with $17.60 for the first quarter of fiscal 2022.
The weighted average common shares outstanding basic and diluted were 19,607,788 for both the first quarter of fiscal 2023 and 2022.
38
Moving and Storage
Quarter Ended June 30, 2022 compared with the Quarter Ended June 30, 2021
Listed below are revenues for our major product lines at Moving and Storage for the first quarter of fiscal 2023 and the first quarter of fiscal 2022:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Self-moving equipment rentals |
$ |
1,091,710 |
$ |
1,036,213 |
|
Self-storage revenues |
|
173,177 |
|
137,393 |
|
Self-moving and self-storage products and service sales |
|
109,351 |
|
104,885 |
|
Property management fees |
|
9,139 |
|
8,449 |
|
Net investment and interest income |
|
4,940 |
|
680 |
|
Other revenue |
|
135,281 |
|
105,634 |
|
Moving and Storage revenue |
$ |
1,523,598 |
$ |
1,393,254 |
Self-moving equipment rental revenues increased $55.5 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Revenue per transaction for both our In-Town and one-way markets increased. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks, trailers and towing devices in the rental fleet.
Self-storage revenues increased $35.8 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. The average monthly number of occupied units increased by 19%, or 81,900 units, during the first quarter of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months, we added approximately 5.0 million net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the first quarter of fiscal 2023.
We own and manage self-storage facilities. Self-storage revenues reported in the condensed consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands, except occupancy rate) |
||
|
Unit count as of June 30 |
|
620 |
|
553 |
|
Square footage as of June 30 |
|
51,845 |
|
46,847 |
|
Average monthly number of units occupied |
|
518 |
|
436 |
|
Average monthly occupancy rate based on unit count |
|
84.5% |
|
79.7% |
|
Average monthly square footage occupied |
|
44,847 |
|
38,671 |
Over the last twelve months we added approximately 5.0 million net rentable square feet of new storage to the system. This was a mix of existing storage locations we acquired and new development.
Sales of self-moving and self-storage products and services increased $4.5 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. This was due to increased sales of hitches, moving supplies and propane.
Net investment and interest income increased $4.3 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022, due to an increase in invested cash combined with higher interest rates on these short-term deposits.
Other revenue increased $29.6 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022, caused primarily by growth in our U-Box program.
39
Total costs and expenses increased $131.7 million during the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Operating expenses increased $118.0 million. Repair costs associated with the rental fleet experienced a $32.1 million increase during the quarter due to preventative maintenance from higher fleet activity combined with a slowdown in the rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs and shipping associated with U-Box transactions. Net gains from the disposal of rental equipment increased $14.0 million from an increase in resale values. Depreciation expense associated with our rental fleet was $126.5 million and $126.6 million for the first quarters of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.2 million to $51.6 million. Net losses on the disposal or retirement of land and buildings increased $6.7 million. The first quarter of fiscal 2022 included a condemnation gain of $4.9 million.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries increased to $481.6 million for the first quarter of fiscal 2023, compared with $483.0 million for the first quarter of fiscal 2022.
Equity in the earnings of AMERCO’s insurance subsidiaries was $7.7 million for the first quarter of fiscal 2023, compared with $9.1 million for the first quarter of fiscal 2022.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations increased to $489.3 million for the first quarter of fiscal 2023, compared with $492.1 million for the first quarter of fiscal 2022.
Property and Casualty Insurance
Quarter Ended March 31, 2022 compared with the Quarter Ended March 31, 2021
Net premiums were $20.8 million and $17.4 million for the quarters ended March 31, 2022 and 2021, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.
Net investment and interest income was $2.3 million and $6.0 million for the quarters ended March 31, 2022 and 2021, respectively. The main driver of the change in net investment income was the decrease in the market value of unaffiliated common stock of $3.8 million.
Net operating expenses were $10.2 million and $8.8 million for the quarters ended March 31, 2022 and 2021, respectively. The change was due to an increase in commissions offset by an increase in loss adjusting fees and subrogation income.
Benefits and losses incurred were $4.4 million and $5.2 million for the quarters ended March 31, 2022 and 2021, respectively. The decrease was due to a favorable loss experience.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $8.4 million and $9.2 million for the quarters ended March 31, 2022 and 2021, respectively.
Life Insurance
Quarter Ended March 31, 2022 compared with the Quarter Ended March 31, 2021
Net premiums were $25.8 million and $28.7 million for the quarters ended March 31, 2022 and 2021, respectively. Medicare Supplement premiums decreased $2.0 million from the policy decrements offset by premium rate increases. Life premiums decreased $1.1 million primarily from the decrease in sales of single premium life products. Premiums on the remaining lines of business increased $0.2 million. Deferred annuity deposits were $85.8 million or $13.0 million below prior year and are accounted for on the balance sheet as deposits rather than premiums. The decrease in deferred annuity deposits is a result of the competitive industry rates.
Net investment and interest income were $27.4 million and $29.3 million for the quarters ended March 31, 2022 and 2021, respectively. Net realized gains decreased $1.3 million coupled with a $1.5 million realized loss on derivatives used as hedges to fixed indexed annuities. This was offset by a $1.1 million increase in the interest income on the invested assets, primarily mortgage loans.
Net operating expenses were $5.1 million and $5.4 million for the quarters ended March 31,2022 and 2021, respectively. The decrease was primarily due to a reduction in commission expenses on single premium whole life due to reduction in premiums.
Benefits and losses incurred were $39.7 million and $42.1 million for the quarters ended March 31, 2022 and 2021, respectively. Life benefits decreased $1.5 million primarily due to improved mortality on single premium whole life. Medicare supplement benefits decreased by $0.7 million from the declined policies in force. Interest credited to policyholders decreased $0.4 million from the reduction in the interest credited rates on fixed indexed annuities driven by market decline. This was partially offset by a $0.2 million increase in supplemental contracts payouts.
40
Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $7.7 million and $8.8 million for the quarters ended March 31, 2022 and 2021, respectively. The decrease in DAC amortization is primarily on annuity policies from the decreased amortization related to realized gains.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $1.5 million and $2.2 million for the quarters ended March 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors that could affect our liquidity, including some which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.
As of June 30, 2022, cash and cash equivalents totaled $3,098.3 million, compared with $2,704.1 million at March 31, 2022. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of June 30, 2022 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were:
|
|
|
Moving Storage |
|
Property Casualty Insurance (a) |
|
Life Insurance (a) |
|
|
|
(Unaudited) |
||||
|
|
|
(In thousands) |
||||
|
Cash and cash equivalents |
$ |
2,982,541 |
$ |
9,065 |
$ |
106,665 |
|
Other financial assets |
|
214,783 |
|
458,866 |
|
2,859,081 |
|
Debt obligations |
|
6,232,564 |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
(a) As of March 31, 2022 |
|
|
|
|
|
|
As of June 30, 2022, Moving and Storage had additional cash available under existing credit facilities of $105.0 million. The majority of invested cash at the Moving and Storage segment is held in government money market funds.
Net cash provided by operating activities decreased $142.8 million in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022 largely as a result of receiving $159 million of federal income tax refund claims in the first quarter of fiscal 2022.
Net cash used in investing activities decreased $45.1 million in the first quarter of fiscal 2023, compared with the first quarter of fiscal 2022. Purchases of property, plant and equipment, increased $137.7 million. Reinvestment in the fleet was less than our projection due to delays in receiving new equipment from our original equipment manufacturers during the first quarter of fiscal 2023; however, the level of reinvestment in the rental fleet has increased in comparison to the first quarter of fiscal 2022. Cash from the sales of property, plant and equipment decreased $23.0 million largely due to fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $202.9 million due to a decrease in purchases of fixed maturity investments.
Net cash provided by financing activities increased $168.5 million in the first quarter of fiscal 2023, as compared with the first quarter of fiscal 2022. This was due to a combination of increased cash from borrowings of $231.4 million, increased debt payments of $36.0 million, decreased finance lease repayments of $10.2 million, an increase of $9.8 million in dividends paid and a decrease in net annuity deposits from Life Insurance of $26.6 million.
41
Liquidity and Capital Resources and Requirements of Our Operating Segments
Moving and Storage
To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. U-Haul estimates that during fiscal 2023 the Company will reinvest in its rental equipment fleet approximately $850 million, net of equipment sales and excluding any lease buyouts. Through the first quarter of fiscal 2023, the Company invested, net of sales, approximately $195 million before any lease buyouts in its rental equipment fleet. Fleet investments in fiscal 2023 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment, the availability of equipment from our original equipment manufacturers and the used-truck sales market. We anticipate that the fiscal 2023 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options. Based upon interactions with our existing lenders, the Company does not believe that COVID-19 will materially inhibit our ability to obtain financing for the purchases of rental equipment in fiscal 2023. Should the situation severely worsen this belief could change.
The Company has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. For the first quarter of fiscal 2023, the Company invested $278.2 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2023, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, the identification and successful acquisition of target properties and any lingering effects of COVID-19. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital.
Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) were $487.0 million and $326.3 million for the first quarter of fiscal 2023 and 2022, respectively. The components of our net capital expenditures are provided in the following table:
|
|
|
Quarter Ended June 30, |
||
|
|
|
2022 |
|
2021 |
|
|
|
(Unaudited) |
||
|
|
|
(In thousands) |
||
|
Purchases of rental equipment |
$ |
350,736 |
$ |
310,389 |
|
Purchases of real estate, construction and renovations |
|
278,196 |
|
184,362 |
|
Other capital expenditures |
|
17,205 |
|
13,660 |
|
Gross capital expenditures |
|
646,137 |
|
508,411 |
|
Less: Sales of property, plant and equipment |
|
(159,180) |
|
(182,146) |
|
Net capital expenditures |
$ |
486,957 |
$ |
326,265 |
Moving and Storage continues to hold significant cash and we believe has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace, pay dividends or reduce existing indebtedness where possible.
Property and Casualty Insurance
State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance’s assets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries. We believe that stockholders’ equity at Property and Casualty Insurance remains sufficient, and we do not believe that its ability to pay ordinary dividends to AMERCO will be restricted per state regulations.
Property and Casualty Insurance’s stockholder’s equity was $289.5 million and $296.1 million as of March 31, 2022 and December 31, 2021, respectively. The change resulted from net earnings of $6.6 million and a decrease in other comprehensive income of $13.2 million due to the decrease in market value of its investment portfolio. Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.
42
Life Insurance
Life Insurance manages its financial assets to meet policyholder and other obligations, including investment contract withdrawals and deposits. Life Insurance’s net deposits for the quarter ended March 31, 2022 were $22.9 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s assets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.
Life Insurance’s stockholder’s equity was $317.3 million and $440.9 million as of March 31, 2022 and December 31, 2021, respectively. The change resulted from net earnings of $1.1 million and a decrease in other comprehensive income of $124.7 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Outside of its membership in the Federal Home Loan Bank (“FHLB”) system, Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. As of March 31, 2022, Oxford had outstanding deposits of $60.0 million in the FHLB. For a more detailed discussion of this deposit, please see Note 3, Borrowings, of the Notes to Condensed Consolidated Financial Statements.
Cash Provided from Operating Activities by Operating Segments
Moving and Storage
Net cash provided from operating activities were $623.6 million and $764.5 million for the first quarter of fiscal 2023 and 2022, respectively, largely as a result of receiving $159 million of federal income tax refund claims in the first quarter of fiscal 2022.
Property and Casualty Insurance
Net cash provided by operating activities were $4.8 million and $3.6 million for the first quarters ended March 31, 2022 and 2021, respectively. The increase was the result of changes in intercompany balances and the timing of payables activity.
Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $43.9 million and $41.7 million as of March 31, 2022 and December 31, 2021, respectively. These balances reflect funds in transition from maturity proceeds to long-term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds.
Life Insurance
Net cash provided by operating activities were $23.0 million and $26.1 million for the first quarters ended March 31, 2022 and 2021, respectively. The decrease in operating cash flows was primarily due to the timing of settlement of payables and receivables for securities offset by the reduced benefit and commission expenses.
In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance’s short-term portfolio and its membership in the FHLB. As of March 31, 2022 and December 31, 2021, cash and cash equivalents and short-term investments amounted to $106.7 million and $50.1 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs.
Liquidity and Capital Resources - Summary
We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs.
As a result of the federal income tax provisions of the Coronavirus Aid, Relief and Economic Security Act, we have filed applicable forms with the Internal Revenue Service to carryback net operating losses. These refund claims total approximately $366 million, of which we have received approximately $243 million and are reflected in Prepaid expense. These amounts are expected to provide us additional liquidity whenever received. It is possible future legislation could negatively impact our ability to receive these tax refunds.
Our borrowing strategy has primarily focused on asset-backed financing, rental equipment leases and private placement borrowings limited by the amount of unencumbered assets available. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of June 30, 2022, we had available borrowing capacity under existing credit facilities of $105.0 million. It is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. We believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long-term debt and
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borrowing capacity, please see Note 3, Borrowings, of the Notes to Condensed Consolidated Financial Statements.
Disclosures about Contractual Obligations and Commercial Commitments
Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Disclosures about Contractual Obligations and Commercial Commitments in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
Fiscal 2023 Outlook
We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals and is likely to increase in fiscal 2023. Revenue in the U-Move ® program could be adversely impacted should we fail to execute in any of these areas. Should we be unable to acquire enough new rental equipment to properly rotate our fleet, repair and maintenance costs will continue to increase. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control.
With respect to our storage business, we have added new locations and expanded existing locations. In fiscal 2023, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. It is likely spending on acquisitions and new development will increase in fiscal 2023. We will continue to invest capital and resources in the U-Box ® program throughout fiscal 2023.
Inflationary pressures may challenge our ability to maintain or improve upon our operating margin.
Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers.
Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.
Interest Rate Risk
The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter into these arrangements with counterparties that are significant financial institutions with whom we generally have other financial arrangements. We are exposed to credit risk should these counterparties not be able to perform on their obligations. Following is a summary of our interest rate swap agreements as of June 30, 2022:
|
|
Notional Amount |
|
|
Fair Value |
|
Effective Date |
|
Expiration Date |
|
Fixed Rate |
|
Floating Rate |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|||
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|||
|
$ |
75,000 |
|
$ |
149 |
|
6/28/2019 |
|
10/31/2022 |
|
1.76% |
|
1 Month LIBOR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2022, we had $1,182.1 million of variable rate debt obligations. If LIBOR were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $8.9 million annually (after consideration of the effect of the above derivative contracts). Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule.
44
Additionally, our insurance subsidiaries’ fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies’ asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates.
We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholder based on the change in the value of the SP 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair market value on our balance sheet. As of March 31, 2022 and December 31, 2021, these derivative hedges had a net market value of $7.0 million and $7.5 million, with notional amounts of $434.0 million and $416.7 million, respectively. These derivative instruments are included in Investments, other, on the condensed consolidated balance sheets.
Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.
Foreign Currency Exchange Rate Risk
The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 5.5% and 5.2% of our revenue was generated in Canada during the first quarter of fiscal 2023 and 2022, respectively. The result of a 10% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.
Cautionary Statements Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” regarding future events and our future results of operations. We may make additional written or oral forward-looking statements from time to time in filings with the SEC or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements may include, but are not limited to, the risk associated with COVID-19 or similar events on employees or customers, impact on the economic environment or demand of our products and the cost and availability of debt and capital, estimates of capital expenditures, plans for future operations, products or services, financing needs, plans and strategies, our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us, liquidity and the availability of financial resources to meet our needs, goals and strategies, plans for new business, storage occupancy, growth rate assumptions, pricing, costs, and access to capital and leasing markets, the impact of our compliance with environmental laws and cleanup costs, our beliefs regarding our sustainable practices, our used vehicle disposition strategy, the sources and availability of funds for our rental equipment and self-storage expansion and replacement strategies and plans, our plan to expand our U-Haul storage affiliate program, that additional leverage can be supported by our operations and business, the availability of alternative vehicle manufacturers, our estimates of the residual values of our equipment fleet, our plans with respect to off-balance sheet arrangements, our plans to continue to invest in the U-Box ® program, the impact of interest rate and foreign currency exchange rate changes on our operations, the sufficiency of our capital resources, the sufficiency of capital of our insurance subsidiaries and inflationary pressures that may challenge our ability to maintain or improve upon our operating margin, as well as assumptions relating to the foregoing. The words “believe,” “expect,” “anticipate,” “plan,” “may,” “will,” “could,” “estimate,” “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the degree and nature of our competition; our leverage; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; the limited number of manufacturers that supply our rental trucks; our ability to effectively hedge our variable interest rate debt; that we are controlled by a small contingent of stockholders; fluctuations in quarterly results and seasonality; changes in, and our compliance with, government regulations, particularly environmental regulations and regulations relating to motor carrier operations; outcomes of litigation; our reliance on our third party dealer network; liability claims relating to our rental vehicles and equipment; our ability to attract, motivate and retain key employees; reliance on our automated systems and the internet; our credit ratings; our ability to recover under reinsurance arrangements and other factors described in our Annual Report on Form 10-K in Item 1A, Risk Factors, and in this Quarterly Report or the other documents we file with the SEC. The above factors, as well as other statements in this Quarterly Report and in the Notes to Condensed Consolidated Financial
45
Statements, could contribute to or cause such risks or uncertainties, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by law.
Item 4. Controls and Procedures
Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section titled Evaluation of Disclosure Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the most recently completed fiscal quarter covered by this Quarterly Report. Our Disclosure Controls are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based upon the controls evaluation, our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our Disclosure Controls were effective at a reasonable assurance level related to the above stated design purposes.
Inherent Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II Other information
Item 1. Legal Proceedings
The information regarding our legal proceedings in Note 8, Contingencies, of the Notes to Condensed Consolidated Financial Statements is incorporated by reference herein.
Item 1A. Risk Factors
We are not aware of any material updates to the risk factors described in our previously filed Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
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Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
The following documents are filed as part of this report:
|
Exhibit Number |
Description |
Page or Method of Filing |
|
Amended and Restated Articles of Incorporation of AMERCO |
Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on June 9, 2016, file no. 1-11255
|
|
|
Restated Bylaws of AMERCO |
Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 5, 2013, file no. 1-11255
|
|
|
Forty-Fourth Supplemental Indenture and Pledge and Security Agreement dated May 10, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee
|
Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 10, 2022, file no. 1-11255. |
|
|
4. 2 |
Amended and Restated Forty-Second Supplemental Indenture and Pledge and Security Agreement dated May 10, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee
|
Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 10, 2022, file no. 1-11255. |
|
Amended and Restated Forty-Third Supplemental Indenture and Pledge and Security Agreement dated May 10, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee
|
Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 10, 2022, file no. 1-11255. |
|
|
31.1 |
Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO
|
Filed herewith |
|
31.2 |
Rule 13a-14(a)/15d-14(a) Certificate of Jason A. Berg, Chief Financial Officer of AMERCO
|
Filed herewith |
|
32.1 |
Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith |
|
32.2 |
Certificate of Jason A. Berg, Chief Financial Officer of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith |
|
101.INS |
Inline XBRL Instance Document
|
Filed herewith |
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|
101.SCH |
Inline XBRL Taxonomy Extension Schema
|
Filed herewith |
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase
|
Filed herewith |
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase
|
Filed herewith |
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase
|
Filed herewith |
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase
|
Filed herewith |
|
104 |
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)
|
Filed herewith |
48
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
|
Date: August 3, 2022 |
|
/s/ Edward J. Shoen |
|
|
|
Edward J. Shoen |
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|
|
President and Chairman of the Board |
|
|
|
(Principal Executive Officer) |
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Date: August 3, 2022 |
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/s/ Jason A. Berg |
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|
Jason A. Berg |
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Chief Financial Officer |
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|
|
(Principal Financial Officer) |
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|
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|
|
Date: August 3, 2022 |
|
/s/ Maria L. Bell |
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|
|
Maria L. Bell |
|
|
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Chief Accounting Officer |
|
|
|
(Principal Accounting Officer) |
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49