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 , 2013

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

 

 

 

 

1-11255

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

1325 Airmotive Way, Ste. 100

 

 

Reno, Nevada 89502-3239

 

 

Telephone (775) 688-6300

 

 

 

 

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 requiremen ts for the past 90 days. Yes [x]   No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule   405 of Regulat ion   S-T (§232.405 of this chapter) during the preceding 12   months (or for such shorter period that the registrant was required to submit and post such files) .   Yes   [x]   No   [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an ac celerated filer, a non-accelerated filer , or a smaller reporting company. See the definition s of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  

Large accelerated filer [x]   Accelerated filer [ ]  

Non-accelerated filer [ ] (Do not check if a smaller reporting company)    Smaller reporting company [ ]

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 February 1, 201 4

 

 

 


TABLE OF CONTENTS

 

 

Page  

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of December 31 , 2013 (unaudited) and March 31, 2013

1

 

b) Condensed Consolidated Statements of Operations for the Quarters ended December 31 , 2013 and 2012 (unaudited)

2

 

c) Condensed Consol i dated Statement of Operations for the Nine Months ended December 31 , 2013 and 2012 (unaudited)

3

 

d ) Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months ended December 31 , 2013 and 2012 (unaudited)

4

 

e ) Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31 , 2013 and 2012 (unaudited)

5

 

f ) Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

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

3 7

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

59

Item 4.

Controls and Procedures

60

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

61

Item 1A.

Risk Factors

61

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3.

Defaults Upon Senior Securities

61

Item 4.

Mine and Safety Disclosures

61

Item 5.

Other Information

61

Item 6.

Exhibits

61


 


Part i Financial information

ITEM 1. Financial Statements

AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED balance sheets

 

 

 

December 31,

 

March 31,

 

 

2013

 

2013

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

601,615

$

463,744

Reinsurance recoverables and trade receivables, net

 

228,424

 

261,789

Inventories, net

 

65,258

 

56,396

Prepaid expenses

 

44,344

 

57,451

Investments, fixed maturities and marketable equities

 

1,122,121

 

1,095,338

Investments, other

 

239,348

 

241,765

Deferred policy acquisition costs, net

 

114,467

 

93,043

Other assets

 

95,395

 

99,986

Related party assets

 

170,038

 

182,035

 

 

2,681,010

 

2,551,547

Property, plant and equipment, at cost:

 

 

 

 

Land

 

392,725

 

333,228

Buildings and improvements

 

1,382,182

 

1,197,875

Furniture and equipment

 

320,587

 

311,142

Rental trailers and other rental equipment

 

356,416

 

317,476

Rental trucks

 

2,426,453

 

2,154,688

 

 

4,878,363

 

4,314,409

Less: Accumulated depreciation

 

(1,685,264)

 

(1,559,355)

Total property, plant and equipment

 

3,193,099

 

2,755,054

Total assets

$

5,874,109

$

5,306,601

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

351,796

$

358,491

Notes, loans and leases payable

 

1,862,869

 

1,661,845

Policy benefits and losses, claims and loss expenses payable

 

1,095,610

 

1,115,048

Liabilities from investment contracts

 

596,268

 

510,789

Other policyholders' funds and liabilities

 

7,271

 

7,294

Deferred income

 

29,489

 

30,217

Deferred income taxes

 

436,384

 

393,658

Total liabilities

 

4,379,687

 

4,077,342

 

 

 

 

 

Commitments and contingencies (notes 4, 8, 9 and 10)

 

 

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, 2013

 

 

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

 

 

 

 

issued and outstanding as of December 31 and March 31, 2013

 

 

Series common stock, with or without par value, 150,000,000 shares authorized:

 

 

 

 

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

 

 

 

 

none issued and outstanding as of December 31 and March 31, 2013

 

 

Common stock of $0.25 par value, 150,000,000 shares authorized; 41,985,700

 

 

 

 

issued and 19,607,788 outstanding as of December 31 and March 31, 2013

 

10,497

 

10,497

Additional paid-in capital

 

442,841

 

438,168

Accumulated other comprehensive loss

 

(46,192)

 

(22,680)

Retained earnings

 

1,766,242

 

1,482,630

Cost of common shares in treasury, net (22,377,912 shares as of December 31 and March 31, 2013)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of December 31 and March 31, 2013)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(1,316)

 

(1,706)

Total stockholders' equity

 

1,494,422

 

1,229,259

Total liabilities and stockholders' equity

$

5,874,109

$

5,306,601

 

 

 

 

 

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

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED Statements of operations

 

 

 

Quarter Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

436,207

$

394,945

Self-storage revenues

 

46,120

 

39,111

Self-moving and self-storage products and service sales

 

47,045

 

44,491

Property management fees

 

7,133

 

6,085

Life insurance premiums

 

39,198

 

43,248

Property and casualty insurance premiums

 

12,219

 

9,816

Net investment and interest income

 

20,887

 

22,603

Other revenue

 

32,537

 

22,188

Total revenues

 

641,346

 

582,487

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

313,227

 

290,285

Commission expenses

 

55,573

 

51,130

Cost of sales

 

28,229

 

23,153

Benefits and losses

 

38,630

 

42,608

Amortization of deferred policy acquisition costs

 

4,457

 

3,391

Lease expense

 

24,468

 

27,575

Depreciation, net of (gains) on disposals of (($1,961) and ($1,831), respectively)

 

70,789

 

62,399

Total costs and expenses

 

535,373

 

500,541

 

 

 

 

 

Earnings from operations

 

105,973

 

81,946

Interest expense

 

(23,607)

 

(22,076)

Pretax earnings

 

82,366

 

59,870

Income tax expense

 

(30,145)

 

(23,024)

Earnings available to common stockholders

$

52,221

$

36,846

Basic and diluted earnings per common share

$

2.67

$

1.89

Weighted average common shares outstanding: Basic and diluted

 

19,563,663

 

19,523,794

 

 

 

 

 

 

Related party revenues for the third quarter of fiscal 201 4 and 201 3 , net of eliminations, were $ 10.2 million and $ 9.4 million , respectively.

Related party costs and expenses for the third quarter of fiscal 201 4 and 201 3 , net of eliminations, were $ 11.8 million and $ 10.4 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 in tegral part of these condensed consolidated financial statements.

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED Statements of operations

 

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

1,556,787

$

1,400,300

Self-storage revenues

 

133,791

 

111,825

Self-moving and self-storage products and service sales

 

183,115

 

173,399

Property management fees

 

17,586

 

15,847

Life insurance premiums

 

119,708

 

137,341

Property and casualty insurance premiums

 

31,052

 

26,006

Net investment and interest income

 

59,836

 

52,973

Other revenue

 

122,793

 

76,589

Total revenues

 

2,224,668

 

1,994,280

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

973,268

 

883,892

Commission expenses

 

202,578

 

180,801

Cost of sales

 

98,331

 

86,292

Benefits and losses

 

119,255

 

139,418

Amortization of deferred policy acquisition costs

 

14,197

 

9,290

Lease expense

 

77,293

 

89,962

Depreciation, net of (gains) on disposals of (($22,837) and ($14,879), respectively)

 

191,431

 

177,478

Total costs and expenses

 

1,676,353

 

1,567,133

 

 

 

 

 

Earnings from operations

 

548,315

 

427,147

Interest expense

 

(70,053)

 

(67,680)

Pretax earnings

 

478,262

 

359,467

Income tax expense

 

(175,082)

 

(132,632)

Earnings available to common shareholders

$

303,180

$

226,835

Basic and diluted earnings per common share

$

15.50

$

11.62

Weighted average common shares outstanding: Basic and diluted

 

19,554,641

 

19,512,974

 

 

 

 

 

 

Related party revenues for the first nine months of fiscal 201 4 and 201 3 , net of eliminations, were $ 27.0 million and $ 26.3 million , respectively.

Related party costs and expenses for the first nine months of fiscal 201 4 and 201 3 , net of eliminations, were $41.7 million and $ 36.6 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.

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

 

Quarter Ended December 31, 2013

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

82,366

$

(30,145)

$

52,221

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(3,325)

 

 

(3,325)

Unrealized net loss on investments

 

(2,251)

 

766

 

(1,485)

Change in fair value of cash flow hedges

 

4,398

 

(1,671)

 

2,727

Total comprehensive income

$

81,188

$

(31,050)

$

50,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended December 31, 2012

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

59,870

$

(23,024)

$

36,846

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(1,068)

 

 

(1,068)

Unrealized net gain on investments

 

18,368

 

(6,574)

 

11,794

Change in fair value of cash flow hedges

 

4,248

 

(1,614)

 

2,634

Total comprehensive income

$

81,418

$

(31,212)

$

50,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2013

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

478,262

$

(175,082)

$

303,180

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(5,530)

 

 

(5,530)

Unrealized net loss on investments

 

(43,257)

 

15,020

 

(28,237)

Change in fair value of cash flow hedges

 

16,540

 

(6,285)

 

10,255

Total comprehensive income

$

446,015

$

(166,347)

$

279,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2012

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

359,467

$

(132,632)

$

226,835

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

462

 

 

462

Unrealized net gain on investments

 

30,914

 

(10,923)

 

19,991

Change in fair value of cash flow hedges

 

4,501

 

(1,710)

 

2,791

Total comprehensive income

$

395,344

$

(145,265)

$

250,079

 

 

 

 

 

 

 

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

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of cash flows

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

Cash flow from operating activities:

 

 

 

 

Net earnings

$

303,180

$

226,835

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

214,268

 

192,357

Amortization of deferred policy acquisition costs

 

14,197

 

9,290

Change in allowance for losses on trade receivables

 

12

 

(73)

Change in allowance for inventory reserves

 

3,640

 

2,050

Net gain on sale of real and personal property

 

(22,837)

 

(14,879)

Net gain on sale of investments

 

(6,088)

 

(1,050)

Deferred income taxes

 

48,033

 

17,757

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

33,355

 

71,709

Inventories

 

(12,502)

 

696

Prepaid expenses

 

13,109

 

(13,283)

Capitalization of deferred policy acquisition costs

 

(25,128)

 

(43,085)

Other assets

 

7,929

 

22,712

Related party assets

 

5,630

 

139,590

Accounts payable and accrued expenses

 

(2,772)

 

(872)

Policy benefits and losses, claims and loss expenses payable

 

(18,337)

 

(30,226)

Other policyholders' funds and liabilities

 

(23)

 

(925)

Deferred income

 

(672)

 

(3,704)

Related party liabilities

 

6,257

 

1,388

Net cash provided by operating activities

 

561,251

 

576,287

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of:

 

 

 

 

Property, plant and equipment

 

(690,293)

 

(422,840)

Short term investments

 

(203,763)

 

(289,773)

Fixed maturities investments

 

(237,502)

 

(308,290)

Equity securities

 

(388)

 

(3,130)

Preferred stock

 

(635)

 

(2,761)

Real estate

 

(431)

 

(1,053)

Mortgage loans

 

(48,632)

 

(50,583)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

214,078

 

166,904

Short term investments

 

211,841

 

280,890

Fixed maturities investments

 

124,145

 

85,132

Equity securities

 

26,957

 

Preferred stock

 

6,004

 

5,728

Real estate

 

 

671

Mortgage loans

 

45,234

 

49,215

Net cash used by investing activities

 

(553,385)

 

(489,890)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

323,039

 

251,319

Principal repayments on credit facilities

 

(238,553)

 

(234,698)

Debt issuance costs

 

(3,353)

 

(2,352)

Capital lease payments

 

(37,480)

 

(18,310)

Leveraged Employee Stock Ownership Plan - repayments from loan

 

390

 

559

Securitization deposits

 

 

(1,729)

Common stock dividends paid

 

 

(97,421)

Investment contract deposits

 

109,928

 

268,478

Investment contract withdrawals

 

(24,448)

 

(22,937)

Net cash provided by financing activities

 

129,523

 

142,909

 

 

 

 

 

Effects of exchange rate on cash

 

482

 

(362)

 

 

 

 

 

Increase in cash and cash equivalents

 

137,871

 

228,944

Cash and cash equivalents at the beginning of period

 

463,744

 

357,180

Cash and cash equivalents at the end of period

$

601,615

$

586,124

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

 

 

 

 


 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements

1. Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a third fiscal quarter that ends on the 31 st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 3 0 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. M anagement believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the financial position or results of operations. The Company discloses any material events occurring during the intervening perio d. Consequently, all references to our insurance subsidiaries’ years 201 3 and 20 12 correspond to fiscal 201 4 and 201 3 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 , 201 3 and the related condensed consolidated statements of operations , comprehensive income for the third quarter and first nine mon ths and cash flows for the first nine months of fiscal 201 4 and 201 3 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 Financ ial 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, 201 3 .

Intercompany accounts and transactions have been eliminated.

Description of Legal Entiti es

AMERCO is the holding company for:

U-Haul International, Inc. (“U-Haul”),

Amerco Real Estate Company (“Real Estate”),

Rep w est Insurance Company (“Rep w est”), and

Oxford Life Insurance Company (“Oxford”).

Unless the context otherwise requires, the term “Company,” “we,” “us” or “our” refers to AMERCO and all of its legal subsidiaries.

Description of Operating Segments

AMERCO has three reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.

The Moving and Stora ge operati ng segment include s 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 mobile self-storage spaces 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.


 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements (Continued)

The Property and Casualty Insurance operating segment includes Rep w est and its wholly-owned subsidiaries and A RCOA risk retention group (“ARCOA”). The Property and Casualty Insurance operating segment provides loss adjusting and claims handling for U-Haul through regional offices across North America. The Property and Casualty Insurance operating segment also unde rwrites components of the Safemove, Safetow, Safemove Plus, Safestor and Safestor Mobile protection packages to U-Haul customers. The business plan for the Property and Casualty Insurance operating segment includes offering property and casualty products i n 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 the moving and storage business.

The Life Insurance operating segment includes Oxford and its wholly-owned subsidiaries. The Life Insurance operating segment 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 39,570 and 75,657 as of December 31 , 201 3 and 201 2 , respectively.

3. Investments

Expected maturities may differ from contractua l 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 insur ance regulatory authorities was $ 16.3 million at December 31 , 201 3 .

Available-for-Sale Investments

Available-for-sale investments at December 31 , 201 3 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

$

34,222

$

1,877

$

(2)

$

(544)

$

35,553

U.S. government agency mortgage-backed securities

 

42,401

 

2,585

 

(5)

 

(818)

 

44,163

Obligations of states and political subdivisions

 

164,451

 

7,287

 

 

(2,793)

 

168,945

Corporate securities

 

825,351

 

28,555

 

(57)

 

(24,274)

 

829,575

Mortgage-backed securities

 

5,161

 

321

 

 

(40)

 

5,442

Redeemable preferred stocks

 

18,440

 

274

 

(95)

 

(924)

 

17,695

Common stocks

 

18,485

 

2,751

 

(416)

 

(72)

 

20,748

 

$

1,108,511

$

43,650

$

(575)

$

(29,465)

$

1,122,121

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statemen ts – (continued)


The available-for-sale table includes 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 $153.7 million during the first nine months of fiscal 2014. The gross realized gains on these sales totaled $5.0 million. The gross realized losses on these sales totaled $1.0 million .

The unrealized losses of more than twelve months in the available-for-sale table are considered temporary declines. We track each investment with an unrealized loss and evaluate them on an indi vidual 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 managemen t to be other-than-temporary and we recognize these write-downs through earnings. There were no write downs in the third quarter or for the first nine months of fiscal 2014 and 2013.

The investment portfolio primarily consists of corporate securities and U .S. government securities. 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 each 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 o ur 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 evalu ation 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 c redit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in the third quarter or for the first nine months of fiscal 2014 in other com prehensive income .

The adjusted cost and estimated market value of available-for-sale investments at December 31 , 201 3 , by contractual maturity, were as follows:

 

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

Due in one year or less

$

20,299

$

20,458

Due after one year through five years

 

185,073

 

194,815

Due after five years through ten years

 

338,942

 

343,111

Due after ten years

 

522,111

 

519,852

 

 

1,066,425

 

1,078,236

 

 

 

 

 

Mortgage backed securities

 

5,161

 

5,442

Redeemable preferred stocks

 

18,440

 

17,695

Common stocks

 

18,485

 

20,748

 

$

1,108,511

$

1,122,121

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

December 31,

 

March 31,

 

2014 Rate (a)

 

Maturities

 

2013

 

2013

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

6.93%

 

2023

$

252,500

$

235,000

Real estate loan (amortizing term)

2.07%

 

2016

 

6,982

 

24,630

Real estate loan (revolving credit)

 

 

2014

 

 

Senior mortgages

2.67% - 5.75%

 

2015 - 2038

 

691,630

 

556,522

Working capital loan (revolving credit)

 

 

2015

 

 

Fleet loans (amortizing term)

1.95% - 6.14%

 

2014 - 2020

 

390,083

 

361,079

Fleet loans (securitization)

4.90%

 

2017

 

93,754

 

190,801

Capital leases (rental equipment)

2.23% - 7.82%

 

2015 - 2020

 

390,410

 

273,458

Other obligations

3.00% - 8.00%

 

2014 - 2043

 

37,510

 

20,355

Total notes, loans and leases payable

 

 

 

$

1,862,869

$

1,661,845

 

 

 

 

 

 

 

 

(a) Interest rate as of December 31, 2013, including the effect of applicable hedging instruments.

 

Real Estate Backed Loans

Real Estate Loan

Amerco Real Estate Company and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a Real Estate Loan. During the first quarter of fiscal 2014 this loan was amended . As part of the amendment the revolver component of the agreement was terminated and certain collateral was released. The final maturity date of the term loan was extended to April 20 23 . As of December 31 , 201 3 , the outstanding balance on the Real Estate Loan was $252.5 million . U-Haul International, Inc. is a guarantor of this loan.  The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid intere st 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 l oan a greement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. At December 31 , 201 3 , the applicable LIBOR was 0.17 % and the applicable margin was 1.50%, the sum of which was 1.67 % which applied to $25.8 million of the Real Estate Loan . The rate on the remaining balance of $226.7 million of the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on current margin. 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 restri ctions regarding our use of the funds.

Amerco Real Estate Company and a subsidiary of U-Haul International, Inc. entered into a revolving credit construction loan effective June 29, 2006. This loan was modified and extended on June 2 7 , 201 1 . The loan is no w comprised of a term loan facility with an initial availability of $ 26.1 million and a final maturity of June 201 6 . As of December 31 , 201 3 , the outstanding balance was $7.0 million .

This Real Estate Loan requires monthly principal and interest payments , with the unpaid loan balance and any accrued and unpaid interest due at maturity. The interes t rate, per the provision of this loan a greement, is the applicable LIBOR plus a margin of 1.90%. At December 31 , 201 3 , the applicable LIBOR was 0.17 % and the marg in was 1.90%, the sum of which was 2.07 %. U-Haul International , Inc. and AMERCO are guarantors of this loan. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


On April 29, 2011, Amerco Real Estate Company and U-Haul Company of Florida entered into a revolving credit agreement for $100.0 million. This agreement was amended in February 2013 and the maturity extended to April 2014 with an option for a one year exte nsion and the revolver commitment was reduced to $50.0 million. As of December 31 , 2013, we had the full $ 50.0 million available to be drawn. The interest rate is the applicable LIBOR plus a margin of 1.25%. AMERCO and U-Haul International, Inc. are guaran tors of this facility. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Senior Mortgages

Various subsidiaries of Amerco Real Estate Company and U-Haul Internationa l, Inc. are borrowers under certain senior mortgages. These senior mortgage loan balances as of December 31 , 201 3 were in the aggregate amount of $ 691.6 million and mature between 2015 and 2038 . The s enior m ortgages require average monthly principal and in terest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. 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 4.90 % and 5. 75 %. Additionally, $99.3 million of these loans have an interest rate comprised of an applicable LIBOR of 0.17% plus a margin of 2.50%, the sum of which was 2.67%. Amerco Real Estate Company and U-Haul International, Inc. 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. 

Working Capital Loans

Amerco Real Estate Company is a borrower under an asset backed working capital loan. The maximum amount that can be drawn at any one time is $25.0 million. At December 31 , 2013, we had the full $25.0 million available to be drawn. Thi s loan is secured by certain properties owned by th e borrower. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This agreement was amended in February 2013 and the maturity extended to April 2015. This loan requ ires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. U-Haul International, Inc. and AMERCO are the guarantors of this loan. The default provisions of the loan include non-payment of principal or inter est and other standard reporting and change-in-control covenants. The interest rate, per the provision of th is loan a greement, is the applicable LIBOR plus a margin of 1. 25 %.

Fleet Loans

Rental Truck Amortizing Loans

U-Haul International, Inc. and several of its subsidiaries are borrowers under amortizing term loans. The balance of the loans as of December 31 , 201 3 was $ 275.1 million with the final maturities between February 2014 and September 2020.

The Amortizing Loa ns 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 the applicable LIBOR plus the applicable margin s . At December 31 , 2013, the applicable LIBOR was between 0.16 % and 0.17 % and applicable margins were between 0.90% and 2.63%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 6.14% based on current margins. Additionally, $ 103.0 million of these loans are carried at fixed rates ranging between 1.95% and 3.94 %.

AMERCO and U-Haul International, Inc. are guarantors of these loans. The default provisions of these loans include non-paymen t of principal or interest and other standard reporting and change-in-control covenants.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


On December 31, 2009 , a subsidiary of U-Haul International, Inc. entered into an $85.0 million term note that was used to fund new truck acquisitions. This term note w as amended on August 26, 2011. The amount of the term note was increased to $95.0 million. On December 22, 2011, we entered into another term loan for $20.0 million. The final maturity date of these notes is August 2016 .   The agreement s contain options to extend the maturity through May 2017 . The se note s are secured by the purchased equipment and the corresponding operating cash flows associated with their operation.   These notes have fixed interest rates between 3.52% and 3.53% . At December 31, 2013, the o utstanding balance was $115.0 million .

AMERCO and U-Haul International, Inc. are guarantors 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.

Ren tal Truck Securitizations

U-Haul S Fleet and its subsidiaries (collectively, “USF”) issued a $217.0 million asset-backed note (“2007 B ox Truck Note”) on June 1, 2007 to finance new box truck purchases throughout fiscal 2008. This note was paid in full in N ovember 2013 .

2010 U-Haul S Fleet and its subsidiaries (collectively, “2010 USF”) issued a $155.0 million asset-backed note (“2010 Box Truck Note”) on October 28, 2010. 2010 USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul Internati onal, Inc. The net proceeds from the securitized transaction were used to finance new box truck purchases. U.S. Bank, NA acts as the trustee for this securitization.

The 2010 Box Truck Note has a fixed interest rate of 4.90% with an expected final maturity of October 2017. At December 31 , 201 3 , the outstanding balance was $ 93.8 million. The note is secur ed by the box trucks being purchased and the corresponding operating cash flows associated with their operation.

The 2010 Box Truck Note is subject to cer tain covenants with respect to liens, additional indebtedness of the special purpose entity , the disposition of assets and other customary covenants of bankruptcy-remote special purpose entities. The default provisions of this note include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Capital Leases

We entered into capital leases for new equipment between April 2008 and December 2013 , with terms of the leases between 3 and 7 years . At December 31 , 2013, the balance of these leases was $ 390.4 million .

Other Obligations

In February 2011 , the Company and US Bank, N ational A ssociation (the “Trustee”) entered into the
U-Haul Investors Club Indenture.   The Company and the Trustee entere d 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 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.

A t December 31 , 201 3, the aggregate outstanding principal balance of the U-N otes issued was $ 43.6 million of which $ 6.1 million is with our insurance subsidiaries with interest rates between 3.00% and 8.00% and maturity dates between 201 4 and 204 3 .

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Annual M aturities of Notes, Loans and Leases Payable

The annual maturities of long-term debt as of December 31 , 201 3 for the next five years and thereafter are as follows:

 

 

Year Ending December 31,

 

 

2014

 

2015

 

2016

 

2017

 

2018

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and leases payable, secured

$

181,314

$

590,424

$

347,710

$

168,771

$

138,288

$

436,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Quarter Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

18,532

$

16,540

Capitalized interest

 

(162)

 

(119)

Amortization of transaction costs

 

1,106

 

1,014

Interest expense resulting from derivatives

 

4,131

 

4,641

Total interest expense

$

23,607

$

22,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

54,401

$

48,715

Capitalized interest

 

(432)

 

(290)

Amortization of transaction costs

 

2,800

 

3,149

Interest expense resulting from derivatives

 

13,284

 

16,106

Total interest expense

$

70,053

$

67,680

 

Interest paid in cash , including payments related to derivative contracts, amounted to $ 20.7 million and $ 20.8 million for the third quarter of fiscal 201 4 and 201 3, respectively and $65.6 million and $63.3 million for the first nine months of fiscal 2014 and 2013, respectively.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

Quarter Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the quarter

 

0.00%

 

1.57%

Interest rate at the end of the quarter

 

0.00%

 

1.61%

Maximum amount outstanding during the quarter

$

$

25,000

Average amount outstanding during the quarter

$

$

24,185

Facility fees

$

56

$

115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving Credit Activity

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the first nine months

 

1.00%

 

1.67%

Interest rate at the end of the first nine months

 

0.00%

 

1.61%

Maximum amount outstanding during the first nine months

$

25,000

$

48,920

Average amount outstanding during the first nine months

$

16,364

$

24,830

Facility fees

$

212

$

399

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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, the designated benchmark interest rate being hedged on cert ain 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 counterpartie s and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original variable rate debt amount

 

Agreement Date

 

Effective Date

 

Expiration Date

 

Designated cash flow hedge date

 

(in millions)

 

 

$

300.0

 

 

8/16/2006

 

8/18/2006

 

8/10/2018

 

8/4/2006

 

30.0

 

 

2/9/2007

 

2/12/2007

 

2/10/2014

 

2/9/2007

 

20.0

 

 

3/8/2007

 

3/12/2007

 

3/10/2014

 

3/8/2007

 

20.0

 

 

3/8/2007

 

3/12/2007

 

3/10/2014

 

3/8/2007

 

19.3

(a)

 

4/8/2008

 

8/15/2008

 

6/15/2015

 

3/31/2008

 

19.0

 

 

8/27/2008

 

8/29/2008

 

7/10/2015

 

4/10/2008

 

30.0

 

 

9/24/2008

 

9/30/2008

 

9/10/2015

 

9/24/2008

 

15.0

(a)

 

3/24/2009

 

3/30/2009

 

3/30/2016

 

3/25/2009

 

14.7

(a)

 

7/6/2010

 

8/15/2010

 

7/15/2017

 

7/6/2010

 

25.0

(a)

 

4/26/2011

 

6/1/2011

 

6/1/2018

 

7/1/2011

 

50.0

(a)

 

7/29/2011

 

8/15/2011

 

8/15/2018

 

7/29/2011

 

20.0

(a)

 

8/3/2011

 

9/12/2011

 

9/10/2018

 

8/3/2011

 

15.1

(b)

 

3/27/2012

 

3/28/2012

 

3/28/2019

 

3/26/2012

 

25.0

 

 

4/13/2012

 

4/16/2012

 

4/1/2019

 

4/12/2012

 

44.3

 

 

1/11/2013

 

1/15/2013

 

12/15/2019

 

1/11/2013

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

 

 

 

 

 

 

 

 

 

(b) operating lease

 

 

 

 

 

 

 

 

 

 

As of December 31, 2013 , the total notional amount of our variable interest rate swaps on debt and an operating lease was $ 400.2 million and $ 12.7 million, respectively .

The derivative fair values located in A ccounts payable and accrued expenses in the balance sheets were as follows:

 

 

 

 

 

 

 

Liability Derivatives Fair Values as of

 

 

December 31, 2013

 

March 31, 2013

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments

$

35,462

$

51,550

 

 

 

 

 

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


 

 

 

 

 

 

 

The Effect of Interest Rate Contracts on the Statements of Operations For the Nine Months Ended

 

 

 

 

December 31, 2013

 

December 31, 2012

 

 

(Unaudited)

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

13,284

$

16,106

Gain recognized in AOCI on interest rate contracts (effective portion)

$

(16,540)

$

(4,501)

Loss reclassified from AOCI into income (effective portion)

$

12,832

$

14,828

Loss recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing)

$

452

$

1,278

 

 

 

 

 

 

Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. At December 31, 2013, we expect to reclassify $ 14.6 million of net losses on interest rate contracts from accumulated other comprehensive income to earnings as interest expense over the next twelve months. During the first ni ne months of fiscal 2014, we reclassified $ 12.8 million of net losses on interest rate contracts from accumulated other comprehensive income to interest expense.

6. Stockholders' Equity

On December 4, 2013, we declared a special cash dividend on our common stock of $1.00 per share to holders of record on January 10, 2014 which will be payable on February 14, 2014.

 

7 . Comprehensive Income (Loss)

A summary of accumulated other comprehensive income (loss) components, net of tax, were as follows:

 

 

 

Foreign Currency Translation

 

Unrealized Net Gain (Loss) on Investments

 

Fair Market Value of Cash Flow Hedges

 

Postretirement Benefit Obligation Gain

 

Accumulated Other Comprehensive Income (Loss)

 

 

(Unaudited)

 

 

(In thousands)

Balance at March 31, 2013

$

(30,153)

$

39,645

$

(32,298)

$

126

$

(22,680)

Foreign currency translation

 

(5,530)

 

 

 

 

(5,530)

Unrealized net loss on investments

 

 

(28,237)

 

 

 

(28,237)

Change in fair value of cash flow hedges

 

 

 

(2,577)

 

 

(2,577)

Amounts reclassified from AOCI

 

 

 

12,832

 

 

12,832

Other comprehensive income (loss)

 

(5,530)

 

(28,237)

 

10,255

 

 

(23,512)

Balance at December 31, 2013

$

(35,683)

$

11,408

$

(22,043)

$

126

$

(46,192)

 

 

 

 

 

 

 

 

 

 

 

 

8 . Contingent Liabilities and Commitments

We lease a portion of our rental equipment and certain of our facilities under operating leases with terms that expire at various dates substantially through 20 20 . As of December 31, 2013 , we have guaranteed $ 96.9 million of residual values for these rental equipment assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions. At the expiration of the lease, we have the option to renew the lease, purchase the asset for fair market value, or sell the asset to a third party on behalf of the lessor. We have been leasing equipment since 1987 and ha ve experienced no material losses relating to these types of residual valu e guarantees.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Lease commitments for leases having terms of more than one year were as follows:

 

 

 

 

 

 

 

 

 

Property,

Plant and

Equipment

 

Rental

Equipment

 

Total

 

 

(Unaudited)

 

 

 

 

(In thousands)

 

 

Year-ended December 31:

 

 

 

 

 

 

2014

$

7,641

$

64,973

$

72,614

2015

 

2,039

 

41,075

 

43,114

2016

 

1,909

 

16,616

 

18,525

2017

 

1,782

 

11,297

 

13,079

2018

 

811

 

9,980

 

10,791

Thereafter

 

4,601

 

3,122

 

7,723

Total

$

18,783

$

147,063

$

165,846

 

 

 

 

 

 

 

 

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 i ts 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 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. Accordingly, all such related party transactions are submitted to the Audit Commi ttee for ongoing review and oversight. Our internal processes ensure that our legal and finance departments identify and monitor potential related party transactions which 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. Management believes that the transactions described below and in the related notes were comp leted on terms substantially equivalent to those that would prevail in third party, arm’s-length transactions.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


SAC Holding Corporation and SAC Holding II Corporation, (collectively “SAC Holdings”) were established in order to acquire and develop self-stor age properties. These properties are being managed by us pursuant to management agreements. Between 1994 and 2002 , we sold real estate and various self-storage properties to SAC Holdings, resulting in significant cash flows to the Company.

Related Party Re venue

 

 

Quarter Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

1,730

$

1,981

U-Haul interest income revenue from Private Mini

 

1,347

 

1,356

U-Haul management fee revenue from SAC Holdings

 

3,977

 

3,585

U-Haul management fee revenue from Private Mini

 

614

 

580

U-Haul management fee revenue from Mercury

 

2,543

 

1,920

 

$

10,211

$

9,422

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

5,382

$

6,438

U-Haul interest income revenue from Private Mini

 

4,033

 

4,059

U-Haul management fee revenue from SAC Holdings

 

12,240

 

11,271

U-Haul management fee revenue from Private Mini

 

1,812

 

1,720

U-Haul management fee revenue from Mercury

 

3,536

 

2,856

 

$

27,003

$

26,344

 

 

 

 

 

 

During the first nine months of fiscal 201 4 , subsidiaries of the Company held various junior unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Mark   V. Shoen, a signifi cant stock holder of AMERCO. We do not have an equity ownership interest in SAC Holdings. We received cash interest payments of $ 15.6 million and $ 10.7 million from SAC Holdings during the first nine months of fiscal 201 4 and 201 3 , respectively. The largest aggregate amount of notes receivable outstanding during the first nine months of fiscal 201 4 was $ 72.4 million and the aggregate notes receivable balance at December 31 , 201 3 was $ 71.7 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are between 201 7 and 20 19 .

During the first nine months of fiscal 201 4 , AMERCO and U-Haul held various junior notes issued by Private Mini Storage Realty, L. P. (“Private Mini”). The equity interests of Private Mini are ultimately controlled by Blackwater. We received cash interest payments of $4.0 million and $ 4.1 million from Private Mini during the first nine months of both fiscal 201 4 and 201 3, respectively . The largest aggregate amount outstanding during the first nine months of fiscal 201 4 was $ 65.9 million and t he aggregate notes receivable balance at December 31 , 201 3 was $ 65. 6 million.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury Partners, L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini pursuant to a standard form of management agreement, under whi ch 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 $ 20.8 million and $19.1 million from the above mentioned entities during the first nine months of fiscal 201 4 and 201 3, respectively . This management fee is consistent with the fee received for other properties the Company previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC , Galaxy and Private Mini are substantially controlled by Blackwater. Mercury is substantially controlled by Mark V. Shoen. James P. Shoen, a significant stock holder and director of AMERCO and an estate planning trust benefitting Shoen children also have a n interest in Mercury.

Related Party Costs and Expenses

 

 

Quarter Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

655

$

655

U-Haul commission expenses to SAC Holdings

 

10,414

 

9,142

U-Haul commission expenses to Private Mini

 

691

 

575

 

$

11,760

$

10,372

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

1,965

$

1,971

U-Haul commission expenses to SAC Holdings

 

37,341

 

32,531

U-Haul commission expenses to Private Mini

 

2,379

 

2,082

 

$

41,685

$

36,584

 

 

 

 

 

 

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of SAC Holdings, 5 SAC and Galaxy. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us .

At December 31 , 201 3 , subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by the Company based upon equipment rental revenues .

These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agre ements, provided revenues of $23.5 million, expenses of $ 2.0 million and cash flows of $ 36.5 million during the first nine months of fiscal 201 4 . Revenues and commission expenses related to the Dealer Agreements were $ 181.5 million and $ 39.7 million, respe ctively during the first nine months of fiscal 201 4 .

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Pursuant to the variable interest entity model under ASC 810 – Consolidation (“ASC 810”), Management determined that the junior notes of SAC Holding Corporation and Private Mini as well as the managemen t agreements with SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini represent potential variable interests for us .  Management evaluated whether it should be identified as the primary beneficiary of one or more of these variable interest entity ’s (“VIE’s”) using a two - step approach in which management (i ) identified all other parties that hold interests in the VIE’s, and (ii ) determined if any variable interest holder has the power to direct the activities of the VIE’s that most significantly im pact their economic performance.

Management determined that they do not have a variable interest in the holding entities Mercury, SAC Holding II Corporation, 4 SAC, 5 SAC, or Galaxy based upon management agreements which are with the individual operating e ntities or through the issuance of junior debt; therefore, we are precluded from consolidating these entities.

We have junior debt with the holding entities SAC Holding Corporation and Private Mini which represents a variable interest in each individual e ntity. Though we have certain protective rights within these debt agreements, we have no present influence or control over these holding entities unless their protective rights become exercisable, which management considers unlikely based on their payment history. As a result, we have no basis under ASC 810 to consolidate these entities.

We do not have the power to direct the activities that most significantly impact the economic performance of the individual operating entities which have management agreeme nts with U-Haul. There are no fees or penalties disclosed in the management agreement for termination of the agreement. Through control of the holding entities assets, and its ability and history of making key decisions relating to the entity and its asse ts, Blackwater, and its owner, are the variable interest holder with the power to direct the activities that most significantly impact each of the individual holding entities and the individual operating entities’ performance.  As a result, we have no basi s under ASC 810 to consolidate these entities.

We have not provided financial or other support during the first nine months ended December 31, 2013 to any of these entities that we were not previously contractually required to provide. In addition, we curr ently have no plan to provide any financial support to any of these entities in the future. The carrying amount and classification of the assets and liabilities in our balance sheet s that relate to our variable interests in the aforementioned entities are as follows, which approximate the maximum exposure to loss as a result of our involvement with these entities:

Related Party Assets

 

 

December 31,

 

March 31,

 

 

2013

 

2013

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul notes, receivables and interest from Private Mini

$

72,365

$

68,593

U-Haul notes receivable from SAC Holding Corporation

 

71,721

 

72,397

U-Haul interest receivable from SAC Holdings

 

4,293

 

14,483

U-Haul receivable from SAC Holdings

 

18,259

 

22,336

U-Haul receivable from Mercury

 

5,472

 

3,640

Other (a)

 

(2,072)

 

586

 

$

170,038

$

182,035

 

 

 

 

 

 

 

 

 

 

(a) Timing difference for intercompany balances with insurance subsidiaries.

 

AMERCO AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1 1 . Consolidating Financial Information by Industry Segment

AMERCO’s three reportable segments are:

         Moving and Storage, comprised of AMERCO, U-Haul, an d Real Estate and the subsidiaries of U-Haul and Real Estate,

         Property and Casualty Insurance, comprised of Rep w est and its subsidiaries and ARCOA, and

         Life Insurance , comprised of Oxford and its subsidiaries.

Management tracks revenues separately, but doe s not report any separate measure of the profitability for rental vehicles, rentals of self-storage spaces and sales of products that are required to be classified as a separate operating segment and accordingly does not present these as separate reportabl e segments. Deferred income taxes are shown as liabilities on the condensed consolidating statements.

The information includes elimination entries necessary to consolidate AMERCO, the parent, with its subsidiaries.

Investments in subsidiaries are accounted for by the parent using the equity method of accounting.


AMERCO AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1 1 . Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of December 31, 2013 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moivng & Storage Consolidated

 

Property & Casualty Insurance (a)

 

Life Insurance (a)

 

Eliminations

 

 

AMERCO Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

 

Cash and cash equivalents

$

476,551

$

92,695

$

2,174

$

 

$

571,420

$

5,601

$

24,594

$

 

$

601,615

Reinsurance recoverables and trade receivables, net

 

 

29,847

 

177

 

 

 

30,024

 

162,714

 

35,686

 

 

 

228,424

Inventories, net

 

 

65,258

 

 

 

 

65,258

 

 

 

 

 

65,258

Prepaid expenses

 

 

43,618

 

726

 

 

 

44,344

 

 

 

 

 

44,344

Investments, fixed maturities and marketable equities

 

 

 

 

 

 

 

188,155

 

933,966

 

 

 

1,122,121

Investments, other

 

 

 

32,351

 

 

 

32,351

 

49,006

 

157,991

 

 

 

239,348

Deferred policy acquisition costs, net

 

 

 

 

 

 

 

 

114,467

 

 

 

114,467

Other assets

 

113

 

59,742

 

34,255

 

 

 

94,110

 

1,008

 

277

 

 

 

95,395

Related party assets

 

1,021,397

 

117,121

 

12

 

(964,556)

(c)

 

173,974

 

13,594

 

492

 

(18,022)

(c)

 

170,038

 

 

1,498,061

 

408,281

 

69,695

 

(964,556)

 

 

1,011,481

 

420,078

 

1,267,473

 

(18,022)

 

 

2,681,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

477,063

 

 

 

(104,285)

(b)

 

372,778

 

 

 

(372,778)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

55,599

 

337,126

 

 

 

392,725

 

 

 

 

 

392,725

Buildings and improvements

 

 

200,961

 

1,181,221

 

 

 

1,382,182

 

 

 

 

 

1,382,182

Furniture and equipment

 

70

 

308,713

 

11,804

 

 

 

320,587

 

 

 

 

 

320,587

Rental trailers and other rental equipment

 

 

356,416

 

 

 

 

356,416

 

 

 

 

 

356,416

Rental trucks

 

 

2,426,453

 

 

 

 

2,426,453

 

 

 

 

 

2,426,453

 

 

70

 

3,348,142

 

1,530,151

 

 

 

4,878,363

 

 

 

 

 

4,878,363

Less:  Accumulated depreciation

 

(55)

 

(1,305,591)

 

(379,618)

 

 

 

(1,685,264)

 

 

 

 

 

(1,685,264)

Total property, plant and equipment

 

15

 

2,042,551

 

1,150,533

 

 

 

3,193,099

 

 

 

 

 

3,193,099

Total assets

$

1,975,139

$

2,450,832

$

1,220,228

$

(1,068,841)

 

$

4,577,358

$

420,078

$

1,267,473

$

(390,800)

 

$

5,874,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMERCO AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Consolidating balance sheets by industry segment as of December 31, 2013 are as follows:

 

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

21,567

$

312,826

$

4,671

$

 

$

339,064

$

$

12,732

$

 

$

351,796

Notes, loans and leases payable

 

 

965,308

 

897,561

 

 

 

1,862,869

 

 

 

 

 

1,862,869

Policy benefits and losses, claims and loss expenses payable

 

 

380,940

 

 

 

 

380,940

 

300,351

 

414,319

 

 

 

1,095,610

Liabilities from investment contracts

 

 

 

 

 

 

 

 

596,268

 

 

 

596,268

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

3,118

 

4,153

 

 

 

7,271

Deferred income

 

 

29,489

 

 

 

 

29,489

 

 

 

 

 

29,489

Deferred income taxes

 

457,834

 

 

 

 

 

457,834

 

(32,753)

 

11,303

 

 

 

436,384

Related party liabilities

 

 

522,754

 

454,542

 

(964,556)

(c)

 

12,740

 

4,740

 

542

 

(18,022)

(c)

 

Total liabilities

 

479,401

 

2,211,317

 

1,356,774

 

(964,556)

 

 

3,082,936

 

275,456

 

1,039,317

 

(18,022)

 

 

4,379,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

10,497

 

1

 

1

 

(2)

(b)

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

443,051

 

121,230

 

147,941

 

(269,171)

(b)

 

443,051

 

91,120

 

26,271

 

(117,601)

(b)

 

442,841

Accumulated other comprehensive income (loss)

 

(46,192)

 

(57,600)

 

 

57,600

(b)

 

(46,192)

 

1,542

 

9,866

 

(11,408)

(b)

 

(46,192)

Retained earnings (deficit)

 

1,766,032

 

177,200

 

(284,488)

 

107,288

(b)

 

1,766,032

 

48,659

 

189,519

 

(237,968)

(b)

 

1,766,242

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

 

(1,316)

 

 

 

 

(1,316)

 

 

 

 

 

(1,316)

Total stockholders' equity (deficit)

 

1,495,738

 

239,515

 

(136,546)

 

(104,285)

 

 

1,494,422

 

144,622

 

228,156

 

(372,778)

 

 

1,494,422

Total liabilities and stockholders' equity

$

1,975,139

$

2,450,832

$

1,220,228

$

(1,068,841)

 

$

4,577,358

$

420,078

$

1,267,473

$

(390,800)

 

$

5,874,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMERCO AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Consolidating balance sheets by industry segment as of March 31, 201 3 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

 

 

(In thousands)

Assets:

 

 

Cash and cash equivalents

$

327,119

$

98,926

$

1,515

$

 

$

427,560

$

14,120

$

22,064

$

 

$

463,744

Reinsurance recoverables and trade receivables, net

 

 

43,259

 

 

 

 

43,259

 

186,010

 

32,520

 

 

 

261,789

Inventories, net

 

 

56,396

 

 

 

 

56,396

 

 

 

 

 

56,396

Prepaid expenses

 

22,475

 

34,956

 

20

 

 

 

57,451

 

 

 

 

 

57,451

Investments, fixed maturities and marketable equities

 

21,228

 

 

 

 

 

21,228

 

160,455

 

913,655

 

 

 

1,095,338

Investments, other

 

 

100

 

50,553

 

 

 

50,653

 

65,212

 

125,900

 

 

 

241,765

Deferred policy acquisition costs, net

 

 

 

 

 

 

 

 

93,043

 

 

 

93,043

Other assets

 

118

 

69,671

 

28,828