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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2019

or

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to __________________

 

 

 

Commission

File Number

Registrant, State of Incorporation,

Address and Telephone Number

I.R.S. Employer

Identification No.

 

 

 

 

AMERCOLOGO

 

 

 

 

001-11255

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

5555 Kietzke Lane Suite 100

 

 

Reno NV 89511

 

 

Telephone 775 688-6300

 

 

 

 

 

N/A

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock , $0.25 par value

UHAL

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x]   No [ ]

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).   Yes   [x]   No   [ ]

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.  

Large Accelerated Filer [x]    Accelerated Filer [ ]   

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 [ ] No [x]

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at January 31, 2020.

 

 


 

 

 

 


 

                                                                                                                                                                                                                                                              

 

TABLE OF CONTENTS

 

 

Page

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of December 31, 2019 (unaudited) and March 31, 2019

 

1

 

 

b) Condensed Consolidated Statements of Operations for the Quarters Ended December 31, 2019 and 2018 (unaudited)

 

2

 

 

c) Condensed Consolidated Statements of Operations for the Nine Months Ended December 31, 2019 and 2018 (unaudited)

 

3

 

 

d) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters and Nine Months Ended December 31, 2019 and 2018 (unaudited)

 

4

 

 

e) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Quarters Ended December 31, 2019 and 2018 (unaudited)

 

5

 

 

f) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended December 31, 2019 and 2018 (unaudited)

 

6

 

 

g) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2019 and 2018 (unaudited)

 

7

 

 

h) Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

Item 2

 

.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

44

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4.

Controls and Procedures

63

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

64

Item 1A.

Risk Factors

64

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3.

Defaults Upon Senior Securities

64

Item 4.

Mine Safety Disclosures

64

Item 5.

Other Information

64

Item 6.

Exhibits

64

 

 


 

Part i Financial information

Item 1. Financial Statements

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED balance sheets

 

 

December 31,

 

March 31,

 

 

2019

 

2019

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

631,951

$

673,701

Reinsurance recoverables and trade receivables, net

 

200,164

 

224,785

Inventories and parts, net

 

103,003

 

103,504

Prepaid expenses

 

188,780

 

174,100

Investments, fixed maturities and marketable equities

 

2,469,468

 

2,235,397

Investments, other

 

336,727

 

300,736

Deferred policy acquisition costs, net

 

106,354

 

136,276

Other assets

 

71,821

 

78,354

Right of use assets - financing, net

 

1,130,473

 

Right of use assets - operating

 

107,974

 

Related party assets

 

47,988

 

30,889

 

 

5,394,703

 

3,957,742

Property, plant and equipment, at cost:

 

 

 

 

Land

 

1,018,010

 

976,454

Buildings and improvements

 

4,522,855

 

4,003,726

Furniture and equipment

 

733,063

 

689,780

Rental trailers and other rental equipment

 

511,872

 

590,039

Rental trucks

 

3,454,759

 

4,762,028

 

 

10,240,559

 

11,022,027

Less: Accumulated depreciation

 

(2,640,940)

 

(3,088,056)

Total property, plant and equipment, net

 

7,599,619

 

7,933,971

Total assets

$

12,994,322

$

11,891,713

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

551,770

$

556,873

Notes, loans and finance/capital leases payable, net

 

4,548,609

 

4,163,323

Operating lease liability

 

107,581

 

Policy benefits and losses, claims and loss expenses payable

 

1,015,663

 

1,011,183

Liabilities from investment contracts

 

1,753,428

 

1,666,742

Other policyholders' funds and liabilities

 

12,924

 

15,047

Deferred income

 

31,459

 

35,186

Deferred income taxes, net

 

869,671

 

750,970

Total liabilities

 

8,891,105

 

8,199,324

 

 

 

 

 

Commitments and contingencies (notes 4, 8 and 9)

 

 

 

 

Stockholders' equity:

 

 

 

 

Series preferred stock, with or without par value, 50,000,000 shares authorized:

 

 

 

 

Series A preferred stock, with no par value, 6,100,000 shares authorized;

 

 

 

 

6,100,000 shares issued and none outstanding as of December 31 and March 31, 2019

 

 

 

 

Series B preferred stock, with no par value, 100,000 shares authorized; none

 

 

 

 

issued and outstanding as of December 31 and March 31, 2019

 

 

 

 

Serial common stock, with or without par value, 250,000,000 shares authorized:

 

 

 

 

Serial common stock of $0.25 par value, 10,000,000 shares authorized;

 

 

 

 

none issued and outstanding as of December 31 and March 31, 2019

 

 

 

 

Common stock, with $0.25 par value, 250,000,000 shares authorized:

 

 

 

 

Common stock of $0.25 par value, 250,000,000 shares authorized; 41,985,700

 

 

 

 

issued and 19,607,788 outstanding as of December 31 and March 31, 2019

 

10,497

 

10,497

Additional paid-in capital

 

453,819

 

453,326

Accumulated other comprehensive income (loss)

 

39,517

 

(66,698)

Retained earnings

 

4,277,034

 

3,976,962

Cost of common stock in treasury, net (22,377,912 shares as of December 31 and March 31, 2019)

 

(525,653)

 

(525,653)

Cost of preferred stock in treasury, net (6,100,000 shares as of December 31 and March 31, 2019)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

 

(4,048)

Total stockholders' equity

 

4,103,217

 

3,692,389

Total liabilities and stockholders' equity

$

12,994,322

$

11,891,713

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 


AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

621,471

$

626,136

Self-storage revenues

 

106,701

 

93,392

Self-moving and self-storage products and service sales

 

54,454

 

55,665

Property management fees

 

9,098

 

7,899

Life insurance premiums

 

31,164

 

34,778

Property and casualty insurance premiums

 

19,267

 

17,668

Net investment and interest income

 

33,782

 

32,211

Other revenue

 

51,943

 

51,342

Total revenues

 

927,880

 

919,091

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

517,453

 

478,461

Commission expenses

 

66,542

 

67,493

Cost of sales

 

35,318

 

34,149

Benefits and losses

 

42,864

 

42,869

Amortization of deferred policy acquisition costs

 

8,046

 

6,654

Lease expense

 

6,490

 

7,890

Depreciation, net of (gains)/losses on disposal of ($2,151 and ($796), respectively)

 

170,074

 

143,473

Net losses on disposal of real estate

 

528

 

Total costs and expenses

 

847,315

 

780,989

 

 

 

 

 

Earnings from operations

 

80,565

 

138,102

Other components of net periodic benefit costs

 

(263)

 

(253)

Interest expense

 

(39,973)

 

(34,827)

Pretax earnings

 

40,329

 

103,022

Income tax expense

 

(9,397)

 

(24,387)

Earnings available to common stockholders

$

30,932

$

78,635

Basic and diluted earnings per common stock

$

1.58

$

4.01

Weighted average common stock outstanding: Basic and diluted

 

19,607,788

 

19,591,963

 

Related party revenues for the third quarter of fiscal 2020 and 2019, net of eliminations, were $ 9.1 million and $ 7.9 million, respectively.

Related party costs and expenses for the third quarter of fiscal 2020 and 2019, net of eliminations, were $ 14.8 million and $ 15.0 million, respectively.

Please see Note 10, 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 operations

 

 

Nine Months Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

2,174,392

$

2,124,451

Self-storage revenues

 

309,940

 

271,097

Self-moving and self-storage products and service sales

 

207,601

 

207,819

Property management fees

 

23,487

 

22,507

Life insurance premiums

 

96,229

 

107,586

Property and casualty insurance premiums

 

51,056

 

46,732

Net investment and interest income

 

102,629

 

85,043

Other revenue

 

192,009

 

177,940

Total revenues

 

3,157,343

 

3,043,175

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

1,617,338

 

1,504,365

Commission expenses

 

233,540

 

232,084

Cost of sales

 

128,177

 

130,432

Benefits and losses

 

137,695

 

137,196

Amortization of deferred policy acquisition costs

 

20,625

 

18,584

Lease expense

 

19,882

 

24,229

Depreciation, net of gains on disposal of ($32,526 and $29,127, respectively)

 

462,227

 

402,525

Net (gains) losses on disposal of real estate

 

(1,311)

 

10

Total costs and expenses

 

2,618,173

 

2,449,425

 

 

 

 

 

Earnings from operations

 

539,170

 

593,750

Other components of net periodic benefit costs

 

(790)

 

(760)

Interest expense

 

(117,983)

 

(105,111)

Pretax earnings

 

420,397

 

487,879

Income tax expense

 

(100,717)

 

(117,853)

Earnings available to common stockholders

$

319,680

$

370,026

Basic and diluted earnings per common stock

$

16.31

$

18.89

Weighted average common stock outstanding: Basic and diluted

 

19,602,484

 

19,591,282

 

Related party revenues for the first nine months of fiscal 2020 and 2019, net of eliminations, were $ 23.5 million and $ 22.5 million, respectively.

Related party costs and expenses for the first nine months of fiscal 2020 and 2019, net of eliminations, were $ 51.9 million and $ 51.1 million, respectively.

Please see Note 10, 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.

3


 


AMERCO AND CONSOLIDATED SUBSIDIARIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended December 31, 2019

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

40,329

$

(9,397)

$

30,932

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(692)

 

 

(692)

Unrealized net gain on investments

 

28,568

 

(6,190)

 

22,378

Change in fair value of cash flow hedges

 

479

 

(118)

 

361

Amounts reclassified into earnings on hedging activities

 

422

 

(103)

 

319

Total comprehensive income

$

69,106

$

(15,808)

$

53,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended December 31, 2018

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

103,022

$

(24,387)

$

78,635

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(4,101)

 

 

 

(4,101)

Unrealized net gain on investments

 

1,827

 

(384)

 

1,443

Change in fair value of cash flow hedges

 

(1,001)

 

246

 

57

Amounts reclassified into earnings on hedging activities

 

886

 

(218)

 

(144)

Total comprehensive income

$

100,633

$

(24,743)

$

75,890

 

Nine Months Ended December 31, 2019

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

420,397

$

(100,717)

$

319,680

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

2,919

 

 

 

2,919

Unrealized net gain on investments

 

133,046

 

(28,575)

 

104,471

Change in fair value of cash flow hedges

 

(1,555)

 

382

 

(1,173)

Amounts reclassified into earnings on hedging activities

 

(3)

 

1

 

(2)

Total comprehensive income

$

554,804

$

(128,909)

$

425,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2018

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

487,879

$

(117,853)

$

370,026

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(5,081)

 

 

 

(5,081)

Unrealized net loss on investments

 

(70,671)

 

14,841

 

(55,830)

Change in fair value of cash flow hedges

 

700

 

(172)

 

528

Amounts reclassified into earnings on hedging activities

 

31

 

(8)

 

23

Total comprehensive income

$

412,858

$

(103,192)

$

309,666

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders’ equity

 

 

Common Stock

 

Additional Paid-In Capital

 

Accumulated Other Comprehensive

Income (Loss)

 

Retained Earnings

 

Less: Treasury Common Stock

 

Less: Treasury Preferred Stock

 

Less: Unearned Employee Stock Ownership Plan Shares

 

Total Stockholders' Equity

 

(Unaudited)

 

(In thousands, except per share amounts)

Balance as of September 30, 2019

$

10,497

$

453,761

$

17,151

$

4,255,906

$

(525,653)

$

(151,997)

$

(1,597)

$

4,058,068

Increase in market value of released ESOP shares

 

 

58

 

 

 

 

 

 

58

Release of unearned ESOP shares

 

 

 

 

 

 

 

1,597

 

1,597

Purchase of ESOP shares

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

 

(692)

 

 

 

 

 

(692)

Unrealized net gain on investments, net of tax

 

 

 

22,378

 

 

 

 

 

22,378

Change in fair value of cash flow hedges, net of tax

 

 

 

361

 

 

 

 

 

361

Amounts reclassified into earnings on hedging activities

 

 

 

319

 

 

 

 

 

319

Net earnings

 

 

 

 

30,932

 

 

 

 

30,932

Common stock dividends: ($0.50 per share for fiscal 2020)

 

 

 

 

(9,804)

 

 

 

 

(9,804)

Net activity

 

 

58

 

22,366

 

21,128

 

 

 

1,597

 

45,149

Balance as of December 31, 2019

$

10,497

$

453,819

$

39,517

$

4,277,034

$

(525,653)

$

(151,997)

$

$

4,103,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2018

$

10,497

$

453,006

$

(62,238)

$

3,917,087

$

(525,653)

$

(151,997)

$

(7,535)

$

3,633,167

Increase in market value of released ESOP shares

 

 

110

 

 

 

 

 

 

110

Release of unearned ESOP shares

 

 

 

 

 

 

 

2,695

 

2,695

Purchase of ESOP shares

 

 

 

 

 

 

 

(303)

 

(303)

Foreign currency translation

 

 

 

(4,101)

 

 

 

 

 

(4,101)

Unrealized net loss on investments, net of tax

 

 

 

(8,281)

 

 

 

 

 

(8,281)

Change in fair value of cash flow hedges, net of tax

 

 

 

57

 

 

 

 

 

57

Amounts reclassified into earnings on hedging activities

 

 

 

(144)

 

 

 

 

 

(144)

Net earnings

 

 

 

 

78,635

 

 

 

 

78,635

Common stock dividends: ($0.50 per share for fiscal 2019)

 

 

 

 

(9,795)

 

 

 

 

(9,795)

Net activity

 

 

110

 

(12,469)

 

68,840

 

 

 

2,392

 

58,873

Balance as of December 31, 2018

$

10,497

$

453,116

$

(74,707)

$

3,985,927

$

(525,653)

$

(151,997)

$

(5,143)

$

3,692,040

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

5


 

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders’ equity

 

 

 

Common Stock

 

Additional Paid-In Capital

 

Accumulated Other Comprehensive

Income (Loss)

 

Retained Earnings

 

Less: Treasury Common Stock

 

Less: Treasury Preferred Stock

 

Less: Unearned Employee Stock Ownership Plan Shares

 

Total Stockholders' Equity

 

(Unaudited)

 

(In thousands, except per share amounts)

Balance as of March 31, 2019

$

10,497

$

453,326

$

(66,698)

$

3,976,962

$

(525,653)

$

(151,997)

$

(4,048)

$

3,692,389

Increase in market value of released ESOP shares

 

 

493

 

 

 

 

 

 

493

Release of unearned ESOP shares

 

 

 

 

 

 

 

4,253

 

4,253

Purchase of ESOP shares

 

 

 

 

 

 

 

(205)

 

(205)

Foreign currency translation

 

 

 

2,919

 

 

 

 

 

2,919

Unrealized net gain on investments, net of tax

 

 

 

104,471

 

 

 

 

 

104,471

Change in fair value of cash flow hedges, net of tax

 

 

 

(1,173)

 

 

 

 

 

(1,173)

Amounts reclassified into earnings on hedging activities

 

 

 

(2)

 

 

 

 

 

(2)

Net earnings

 

 

 

 

319,680

 

 

 

 

319,680

Common stock dividends: ($1.00 per share for fiscal 2020)

 

 

 

 

(19,608)

 

 

 

 

(19,608)

Net activity

 

 

493

 

106,215

 

300,072

 

 

 

4,048

 

410,828

Balance as of December 31, 2019

$

10,497

$

453,819

$

39,517

$

4,277,034

$

(525,653)

$

(151,997)

$

$

4,103,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2018

$

10,497

$

452,746

$

(4,623)

$

3,635,561

$

(525,653)

$

(151,997)

$

(7,823)

$

3,408,708

Increase in market value of released ESOP shares

 

 

370

 

 

 

 

 

 

370

Release of unearned ESOP shares

 

 

 

 

 

 

 

8,083

 

8,083

Purchase of ESOP shares

 

 

 

 

 

 

 

(5,403)

 

(5,403)

Foreign currency translation

 

 

 

(5,081)

 

 

 

 

 

(5,081)

Unrealized net loss on investments, net of tax

 

 

 

(55,830)

 

 

 

 

 

(55,830)

Change in fair value of cash flow hedges, net of tax

 

 

 

528

 

 

 

 

 

528

Amounts reclassified into earnings on hedging activities

 

 

 

23

 

 

 

 

 

 

23

Adjustment for adoption of ASU 2016 - 01

 

 

 

(9,724)

 

9,724

 

 

 

 

Net earnings

 

 

 

 

370,026

 

 

 

 

370,026

Common stock dividends: ($1.50 per share for fiscal 2019)

 

 

 

 

(29,384)

 

 

 

 

(29,384)

Net activity

 

 

370

 

(70,084)

 

350,366

 

 

 

2,680

 

283,332

Balance as of December 31, 2018

$

10,497

$

453,116

$

(74,707)

$

3,985,927

$

(525,653)

$

(151,997)

$

(5,143)

$

3,692,040

 

The accompanying notes are an integral part of these consolidated financial statements.

6


 

AMERCO AND CONSOLIDATED subsidiaries

Condensed consolidatED statements of cash flows

 

 

Nine Months Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net earnings

$

319,680

$

370,026

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

494,753

 

431,652

Amortization of deferred policy acquisition costs

 

20,625

 

18,584

Amortization of premiums and accretion of discounts related to investments, net

 

9,848

 

9,802

Amortization of debt issuance costs

 

3,275

 

2,922

Interest credited to policyholders

 

38,169

 

28,540

Change in allowance for losses on trade receivables

 

(76)

 

124

Change in allowance for inventories and parts reserves

 

(85)

 

2,539

Net gains on disposal of personal property

 

(32,526)

 

(29,127)

Net (gains) losses on disposal of real estate

 

(1,311)

 

10

Net (gains) losses on sales of investments

 

(8,777)

 

(3,594)

Net (gains) losses on equity investments

 

(3,749)

 

4,289

Deferred income taxes

 

87,805

 

104,325

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

24,759

 

1,601

Inventories and parts

 

589

 

(8,858)

Prepaid expenses

 

(16,402)

 

(12,533)

Capitalization of deferred policy acquisition costs

 

(17,530)

 

(19,994)

Other assets

 

(293)

 

159,125

Related party assets

 

(17,507)

 

(1,838)

Accounts payable and accrued expenses

 

51,754

 

(14,231)

Policy benefits and losses, claims and loss expenses payable

 

3,974

 

(159,285)

Other policyholders' funds and liabilities

 

(2,123)

 

2,867

Deferred income

 

(2,317)

 

(4,982)

Related party liabilities

 

446

 

(3,269)

Net cash provided by operating activities

 

952,981

 

878,695

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Escrow deposits

 

7,153

 

(3,292)

Purchases of:

 

 

 

 

Property, plant and equipment

 

(1,917,862)

 

(1,325,365)

Short term investments

 

(47,457)

 

(39,494)

Fixed maturities investments

 

(267,909)

 

(394,266)

Equity securities

 

(83)

 

(957)

Preferred stock

 

 

(81)

Real estate

 

(484)

 

(505)

Mortgage loans

 

(43,085)

 

(56,892)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

599,797

 

561,848

Short term investments

 

46,859

 

47,012

Fixed maturities investments

 

193,196

 

82,776

Equity securities

 

185

 

8,608

Preferred stock

 

 

1,625

Real estate

 

311

 

Mortgage loans

 

9,052

 

116,800

Net cash used by investing activities

 

(1,420,327)

 

(1,002,183)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

867,862

 

693,132

Principal repayments on credit facilities

 

(225,332)

 

(255,123)

Payment of debt issuance costs

 

(3,671)

 

(5,097)

Finance/capital lease payments

 

(247,188)

 

(236,683)

Employee stock ownership plan stock

 

(206)

 

(203)

Common stock dividends paid

 

(19,600)

 

(29,385)

Investment contract deposits

 

171,465

 

300,920

Investment contract withdrawals

 

(122,948)

 

(109,641)

Net cash provided by financing activities

 

420,382

 

357,920

 

 

 

 

 

Effects of exchange rate on cash

 

5,214

 

(9,435)

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(41,750)

 

224,997

Cash and cash equivalents at the beginning of period

 

673,701

 

759,388

Cash and cash equivalents at the end of period

$

631,951

$

984,385

The accompanying notes are an integral part of these condensed consolidated financial statements .

7


 


 

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a third fiscal quarter that ends on the 31st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 30 th of September 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 2019 and 2018 correspond to fiscal 2020 and 2019 for AMERCO.

Accounts denominated in non-U.S. currencies have been translated into U.S. dollars. Certain amounts reported in previous years have been reclassified to conform to the current presentation.

The condensed consolidated balance sheet as of December 31, 2019 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity for the third quarter and first nine months of fiscal 2020 and 2019 and cash flows for the first nine months of fiscal 2020 and 2019 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

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 ( 3 ) reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.

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

8


 

by us and our wholly owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.

The Life Insurance operating segment (“Life Insurance”) includes Oxford and its wholly owned subsidiaries. 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.

2. Earnings per Share

Our earnings per share is calculated by dividing our earnings available to common stockholders by the weighted average common shares outstanding, basic and diluted.

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 15,559 as of December 31, 2018. As of December 31, 2019, all of these shares have been released.

3. 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.

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $ 30.9 million and $ 30.8 million as of December 31, 2019 and March 31, 2019, respectively.

Available-for-Sale Investments

Available-for-sale investments as of December 31, 2019 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

U.S. treasury securities and government obligations

$

112,784

$

9,370

$

(3)

$

$

122,151

U.S. government agency mortgage-backed securities

 

39,146

 

887

 

(2)

 

 

40,031

Obligations of states and political subdivisions

 

292,619

 

23,669

 

(134)

 

(45)

 

316,109

Corporate securities

 

1,699,751

 

102,544

 

(1,133)

 

(528)

 

1,800,634

Mortgage-backed securities

 

153,880

 

7,602

 

(1)

 

(2)

 

161,479

Redeemable preferred stocks

 

1,493

 

82

 

 

 

1,575

 

$

2,299,673

$

144,154

$

(1,273)

$

(575)

$

2,441,979

 

9


 

Available-for-sale investments as of March 31, 2019 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

 

 

 

(In thousands)

U.S. treasury securities and government obligations

$

136,010

$

2,409

$

(2,104)

$

(447)

$

135,868

U.S. government agency mortgage-backed securities

 

31,101

 

433

 

(146)

 

(19)

 

31,369

Obligations of states and political subdivisions

 

298,955

 

8,079

 

(233)

 

(905)

 

305,896

Corporate securities

 

1,613,199

 

14,777

 

(14,257)

 

(24,986)

 

1,588,733

Mortgage-backed securities

 

148,203

 

880

 

(285)

 

(903)

 

147,895

Redeemable preferred stocks

 

1,493

 

20

 

 

(45)

 

1,468

 

$

2,228,961

$

26,598

$

(17,025)

$

(27,305)

$

2,211,229

 

The available-for-sale tables include gross unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

We sold available-for-sale securities with a fair value of $ 187.9 million during the first nine months of fiscal 2020. The gross realized gains on these sales totaled $ 4.6 million. The gross realized losses on these sales totaled $ 0.2 million.

The unrealized losses of more than twelve months in the available-for-sale tables are considered temporary declines. We track each investment with an unrealized loss and evaluate them on an individual basis for other-than-temporary impairments, including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognize these write-downs, if any, through earnings. There were no write-downs in the third quarter or first nine months of fiscal 2020 or 2019.

The investment portfolio primarily consists of corporate securities and obligations of states and political subdivisions. We believe we monitor our investments as appropriate. Our methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors, including the length of time to maturity, the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. Nothing has come to management’s attention that would lead to the belief that any issuer would not have the ability to meet the remaining contractual obligations of the security, including payment at maturity. We have the ability and intent not to sell our fixed maturity and common stock investments for a period of time sufficient to allow us to recover our costs.

The portion of other-than-temporary impairment related to a credit loss is recognized in earnings. The significant inputs utilized in the evaluation of mortgage-backed securities credit losses include ratings, delinquency rates, and prepayment activity. The significant inputs utilized in the evaluation of asset backed securities credit losses include the time frame for principal recovery and the subordination and value of the underlying collateral.

There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income (loss) (“AOCI”) for the first nine months of fiscal 2020 and fiscal 2019, respectively.

10


 

The adjusted cost and estimated market value of available-for-sale investments by contractual maturity were as follows:

 

 

December 31, 2019

 

March 31, 2019

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

(In thousands)

Due in one year or less

$

114,557

$

115,001

$

71,987

$

71,954

Due after one year through five years

 

554,591

 

572,647

 

541,195

 

540,658

Due after five years through ten years

 

662,534

 

707,015

 

621,031

 

614,485

Due after ten years

 

812,618

 

884,262

 

845,052

 

834,769

 

 

2,144,300

 

2,278,925

 

2,079,265

 

2,061,866

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

153,880

 

161,479

 

148,203

 

147,895

Redeemable preferred stocks

 

1,493

 

1,575

 

1,493

 

1,468

 

$

2,299,673

$

2,441,979

$

2,228,961

$

2,211,229

 

As of December 31, 2019 and March 31, 2019, 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:

 

 

December 31, 2019

 

March 31, 2019

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Common stocks

$

9,775

$

19,988

$

10,123

$

17,379

Non-redeemable preferred stocks

 

7,451

 

7,501

 

7,451

 

6,789

 

$

17,226

$

27,489

$

17,574

$

24,168

 

11


 

4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

March 31,

 

2020 Rates (a)

 

 

Maturities

 

2019

 

2019

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

 

 

 

3.22

%

 

 

 

2023

$

95,413

$

102,913

Senior mortgages

3.36

%

-

6.62

%

 

2021

-

2038

 

1,953,704

 

1,741,652

Real estate loans (revolving credit)

3.03

%

-

3.20

%

 

2022

-

2024

 

435,000

 

429,400

Fleet loans (amortizing term)

1.95

%

-

4.66

%

 

2020

-

2027

 

231,043

 

263,209

Fleet loans (revolving credit)

2.84

%

-

2.86

%

 

2022

-

2024

 

585,000

 

530,000

Finance/capital leases (rental equipment)

1.92

%

-

5.04

%

 

2020

-

2026

 

795,465

 

1,042,652

Finance liability (rental equipment)

2.73

%

-

4.22

%

 

2024

-

2026

 

398,157

 

Other obligations

2.50

%

-

8.00

%

 

2020

-

2048

 

84,159

 

82,417

Notes, loans and finance/capital leases payable

 

 

 

 

 

 

 

 

 

4,577,941

 

4,192,243

Less: Debt issuance costs

 

 

 

 

 

 

 

 

 

 

(29,332)

 

(28,920)

Total notes, loans and finance/capital leases payable, net

 

 

 

 

$

4,548,609

$

4,163,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Interest rates as of December 31, 2019, including the effect of applicable hedging instruments.

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (the “Real Estate Loan”).   The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate 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 December 31, 2019, the applicable LIBOR was 1.72 % and the applicable margin was 1.50 %, the sum of which was 3.22 %. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

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 3.36 % and 6.62 %. 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. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

12


 

Real Estate Loans (Revolving Credit)

Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $ 335.0 million. These loans are secured by certain properties owned by the borrowers. The loan agreements provide for term loans, subject to the terms of the loan agreements. The loans require monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of December 31, 2019, the applicable LIBOR was 1.70 % and the margin was between 1.25 % and 1.50 %, the sum of which was between 2.95 % and 3.20 %. Certain loans have interest rate swaps fixing the rate between 3.03 % and 3.14 % based on current margins. AMERCO is the guarantor of these loans. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $ 150.0 million, which can be increased to $ 300.0 million by bringing in other lenders. As of December 31, 2019, the outstanding balance was $100.0 million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of December 31, 2019, the applicable LIBOR was 1.70 % and the margin was 1.38 %, the sum of which was 3.08 %. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30% fee charged for unused capacity.

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 1.95 % and 4.66 %.

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 $ 590.0 million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of December 31, 2019, the applicable LIBOR was between 1.69 % and 1.71 %, and the margin was 1.15 %, the sum of which was between 2.84 % and 2.86 %. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly.

Finance/Capital Leases

The Finance/Capital Lease balance represents our sale-leaseback transactions of rental equipment that were entered into and classified as capital leases prior to the adoption of ASC 842 on April 1, 2019. The historical capital lease balance was reclassified to Right-of-use assets-finance, net. The agreements are generally 7 year terms with interest rates ranging from 1.92 % to 5.04 %.   All of our finance leases are collateralized by our rental fleet. There were no new financing leases, as assessed under the new leasing guidance, entered into during the nine months ended December 31, 2019.

13


 

Finance Liabilities

Finance Liabilities represent our rental equipment financing transactions that have historically been accounted for as capital leases prior to the adoption of ASC 842 on April 1, 2019, which substantially changed the accounting for sale-leasebacks going forward. In accordance with the new leasing guidance, 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, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost.     Our finance liabilities have an average term of 7 years and interest rates ranging from 2.73 % to 4.22 %. These finance liabilities are collateralized by our rental fleet.  

Other Obligations

In February 2011, AMERCO and U.S. Bank, NA (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 December 31, 2019, the aggregate outstanding principal balance of the U-Notes ® issued was $ 87.0 million, of which $ 2.9 million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 2.50 % and 8.00 % and maturity dates range between 2020 and 2048 .

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of September 30, 2019, the deposits had an aggregate balance of $ 60.0 million, for which Oxford pays fixed interest rates between 1.72 % and 2.95 % with maturities between March 30, 2019 and September 30, 2022. As of September 30, 2019, available-for-sale investments held with the FHLB totaled $ 120.1 million, of which $ 67.9 million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.

Annual Maturities of Notes, Loans and Finance/Capital Leases Payable

The annual maturities of our notes, loans and finance/capital leases payable, as of December 31, 2019 for the next five years and thereafter are as follows:

 

 

Year Ending December 31,

 

 

2020

 

2021

 

2022

 

2023

 

2024

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and finance/capital leases payable, secured

$

483,060

$

446,465

$

995,089

$

596,752

$

586,102

$

1,470,473

Interest on Borrowings

Interest Expense

Components of interest expense were as follows:

 

 

Quarter Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

45,037

$

38,825

Capitalized interest

 

(5,775)

 

(5,055)

Amortization of transaction costs

 

1,176

 

909

Interest expense effect resulting from cash flow hedges

 

(465)

 

148

Total interest expense

$

39,973

$

34,827

14


 

 

 

Nine Months Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

133,111

$

109,241

Capitalized interest

 

(17,943)

 

(7,701)

Amortization of transaction costs

 

3,276

 

2,751

Interest expense effect resulting from cash flow hedges

 

(461)

 

820

Total interest expense

$

117,983

$

105,111

Interest paid in cash, including payments related to derivative contracts, amounted to $ 41.9 million and $ 38.5 million for the third quarter of fiscal 2020 and 2019, respectively, and $ 127.8 million and $ 109.6 million for the first nine months of fiscal 2020 and 2019, respectively.

Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

 

Quarter Ended December 31,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands, except interest rates)

 

Weighted average interest rate during the quarter

 

3.09

%

3.52

%

Interest rate at the end of the quarter

 

2.95

%

3.57

%

Maximum amount outstanding during the quarter

$

1,025,000

$

865,000

 

Average amount outstanding during the quarter

$

1,014,511

$

812,174

 

Facility fees

$

40

$

41

 

 

 

 

Revolving Credit Activity

 

 

 

Nine Months Ended December 31,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands, except interest rates)

 

Weighted average interest rate during the period

 

3.44

%

3.31

%

Interest rate at the end of the period

 

2.95

%

3.57

%

Maximum amount outstanding during the period

$

1,025,000

$

865,000

 

Average amount outstanding during the period

$

995,508

$

632,509

 

Facility fees

$

147

$

313

 

5. 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 and a variable rate operating lease. 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.

15


 

The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the condensed consolidated balance sheet were as follows:

 

 

Derivatives Fair Values as of

 

 

December 31, 2019

 

March 31, 2019

 

 

(Unaudited)

 

 

(In thousands)

Interest rate contracts designated as hedging instruments:

 

 

 

 

Assets

$

$

139

Liabilities

$

1,415

$

Notional amount

$

235,000

$

22,792

 

 

 

The Effect of Interest Rate Contracts on the Statements of Operations for the Quarters Ended

 

 

 

 

December 31, 2019

 

December 31, 2018

 

 

(Unaudited)

 

 

(In thousands)

(Gain) loss recognized in AOCI on interest rate contracts

$

1,558

$

(731)

(Gain) loss reclassified from AOCI into income

$

(458)

$

789

 

Gains or losses recognized in income on derivatives are recorded as interest expense in the condensed consolidated statements of operations. During the first nine months of fiscal 2020, we recognized a decrease in the fair value of our cash flow hedges of $ 1.2 million, net of taxes. During the first nine months of fiscal 2020, we reclassified $ 0.5 million from accumulated other comprehensive income (loss) (“AOCI”) to interest expense. As of December 31, 2019, we expect to reclassify $ 0.1 million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.

 

6. Accumulated Other Comprehensive Income (Loss)

A summary of AOCI components, net of tax, were as follows:

 

 

Foreign Currency Translation

 

Unrealized Net Gain 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, 2019

$

(56,612)

$

(7,259)

$

107

$

(2,934)

$

(66,698)

Foreign currency translation

 

2,919

 

 

 

 

2,919

Unrealized net gain on investments

 

 

104,471

 

 

 

104,471

Change in fair value of cash flow hedges

 

 

 

(1,173)

 

 

(1,173)

Amounts reclassified into earnings on hedging activities

 

 

 

(2)

 

 

(2)

Other comprehensive income (loss)

 

2,919

 

104,471

 

(1,175)

 

 

106,215

Balance as of December 31, 2019

$

(53,693)

$

97,212

$

(1,068)

$

(2,934)

$

39,517

 

 

16


 

7. Stockholders’ Equity

The   dividends declared or paid during the first nine months of fiscal 2020 were as follows:

Common Stock Dividends

Declared Date

 

Per Share Amount

 

Record Date

 

Dividend Date

 

 

 

 

 

 

 

March 6, 2019

$

0.50

 

March 21, 2019

 

April 4, 2019

August 22, 2019

 

0.50

 

September 9, 2019

 

September 23, 2019

December 4, 2019

 

0.50

 

December 19, 2019

 

January 6, 2020

 

On June 8, 2016, our stockholders’ approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of December 31, 2019, no awards had been issued under this plan.

 

8. Leases

Lessor

We have determined that revenues derived by providing self-moving equipment rentals, self-storage rentals and certain other revenues, including U-Box rentals, are within the scope of the accounting guidance contained in Topic 842. Our self-moving equipment rental related revenues have been accounted for under the revenue accounting standard Topic 606, until the adoption of Topic 842.

For the periods after April 1, 2019, we combined all lease and non-lease components of lease contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and account for them in accordance with Topic 842. The revenue streams accounted for in accordance with Topic 842 are recognized evenly over the period of rental. Please see Note 15, Revenue Recognition, of the Notes to Condensed Consolidated Financial Statements.

Lessee

We determine if an arrangement is a lease at inception. Operating leases, which are comprised primarily of storage rental locations, are included in Right-of-Use (“ROU“) assets - operating and operating lease liability in our condensed consolidated balance sheet dated December 31, 2019. Finance leases, which are comprised primarily of rental equipment leases, are included in ROU assets - financing, net, and notes, loans and finance/capital leases payable, net in our condensed consolidated balance sheet dated December 31, 2019.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected remaining lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that we will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Additionally, for certain leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities as the leases are similar in nature and have nearly identical contract provisions.

Adoption of this standard resulted in most of our operating lease commitments being recognized as operating lease liabilities and ROU assets, which increased total assets and total liabilities by approximately $ 105.4 million related to property operating leases, as of April 1, 2019. In addition, we reclassified a net amount of $ 948.2 million related to vehicle financing leases from property, plant, and equipment, net to ROU assets financing, net.

17


 

The standard also changed the manner by which we account for our equipment sale/leaseback transactions.   Based on our assessment, the lease transactions are classified as financing leases, and therefore the transactions do not qualify as a sale.   Pursuant to the guidance, new sale leaseback transactions that fail to qualify as a sale will be accounted for as a financial liability.   Please see Note 4, Borrowings, of the Notes to Condendsed Consolidated Finanical Statements for additional information.

The following table shows the components of our right-of-use assets:

 

 

As of December 31, 2019

 

 

Finance

 

Operating

 

Total

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

 

 

Buildings and improvements

$

$

121,919

$

121,919

Furniture and equipment

 

27,309

 

 

27,309

Rental trailers and other rental equipment

 

117,987

 

 

117,987

Rental trucks

 

1,746,036

 

 

1,746,036

Right-of-use assets, gross

 

1,891,332

 

121,919

 

2,013,251

Less: Accumulated depreciation

 

(760,859)

 

(13,945)

 

(774,804)

Right-of-use assets, net

$

1,130,473

$

107,974

$

1,238,447

 

 

 

Finance

 

Operating

 

 

 

(Unaudited)

 

Weighted average remaining lease term (years)

 

4 Years

 

5 Years

 

Weighted average discount rate

 

3.43

%

4.60

%

 

For the first nine months ended December 31, 2019, cash paid for leases included in our operating and financing cash flow activities were $ 18.9 million and $ 247.2 million, respectively.

The components of lease costs were as follows:

 

 

Nine Months Ended

 

 

December 31, 2019

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

Operating lease costs

$

20,324

 

 

 

Finance lease cost:

 

 

Amortization of right-of-use assets

$

143,574

Interest on lease liabilities

 

24,083

Total finance lease cost

$

167,657

18


 

Maturities of lease liabilities were as follows:

 

 

Finance leases

 

Operating leases

 

 

(Unaudited)

Year ending December 31,

 

(In thousands)

 

 

 

 

 

2020

$

231,189

$

23,585

2021

 

174,105

 

21,204

2022

 

132,805

 

20,354

2023

 

115,521

 

19,689

2024

 

82,385

 

12,195

Thereafter

 

59,460

 

67,422

Total lease payments

 

795,465

 

164,449

Less: imputed interest

 

 

(56,868)

Present value of lease liabilities

$

795,465

$

107,581

 

9. 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. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks.

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

We are named as a defendant in various other litigation and claims arising out of the normal course of business. In management’s opinion, none of these other matters will have a material effect on our financial position and results of operations.

10. 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 generally accepted accounting principles (“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.

19


 

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. In the past, we sold real estate and various self-storage properties to SAC Holdings, and such sales provided significant cash flows to us. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation, Galaxy Investments, L.P. and 2015 SAC self-storage are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly owned by Willow Grove Holdings LP (“WGHLP”), 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.

Related Party Revenue

 

 

Quarter Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

U-Haul management fee revenue from Blackwater

$

5,763

$

5,776

U-Haul management fee revenue from Mercury

 

3,335

 

2,123

 

$

9,098

$

7,899

 

 

 

Nine Months Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

U-Haul management fee revenue from Blackwater

$

18,330

$

18,254

U-Haul management fee revenue from Mercury

 

5,157

 

4,253

 

$

23,487

$

22,507

 

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 4 % and 10 % of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $ 22.7 million and $ 23.8 million from the above-mentioned entities during the first nine months of fiscal 2020 and 2019, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are owned indirectly by James P. Shoen and various trusts benefitting Edward J. Shoen and James P. Shoen or their descendants.   Mercury holds the option to purchase a portfolio of properties currently leased by Mercury and a U-Haul subsidiary, which option is exercisable in 2024.

Related Party Costs and Expenses

 

 

Quarter Ended December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to Blackwater

$

658

$

669

U-Haul commission expenses to Blackwater

 

14,140

 

14,296

 

$

14,798

$

14,965

20


 

 

 

 

Nine Months Ended December 31,

 

 

2019

 

2018