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 June 30, 201 6

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

 

( Nevada Corporation)

 

 

5555 Kietzke Lane , Ste. 100

 

 

Reno, Nevada 895 11

 

 

Telephone (775) 688-6300

 

 

 

 

 

N/A

 

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

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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files) .   Yes   [x]   No   [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated 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. (Check one):  

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 August 1, 201 6 .



 

TABLE OF CONTENTS

 

 

Page  

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of June 30, 201 6 (unaudited) and March 31, 201 6

1

 

b) Condensed Consolidated Statements of Operations for the Quarters ended June 30, 201 6 and 201 5 (unaudited)

2

 

c ) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters ended June 30, 201 6 and 201 5 (unaudited)

3

 

d ) Condensed Consolidated Statements of Cash Flows for the Quarters ended June 3 0 , 201 6 and 201 5 (unaudited)

4

 

e ) Notes to Condensed Consolidated Financial Statements (unaudited)

5

Item 2.

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

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4 8

Item 4.

Controls and Procedures

4 9

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults Upon Senior Securities

51

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

51


 

 


Part i Financial information

ITEM 1. Financial Statements

AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED balance sheets

 

 

June 30,

 

March 31,

 

 

2016

 

2016

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

646,188

$

600,646

Reinsurance recoverables and trade receivables, net

 

189,317

 

175,210

Inventories, net

 

82,923

 

79,756

Prepaid expenses

 

94,540

 

134,300

Investments, fixed maturities and marketable equities

 

1,656,159

 

1,510,538

Investments, other

 

280,860

 

310,072

Deferred policy acquisition costs, net

 

126,830

 

136,386

Other assets

 

80,467

 

77,210

Related party assets

 

80,812

 

85,734

 

 

3,238,096

 

3,109,852

Property, plant and equipment, at cost:

 

 

 

 

Land

 

603,246

 

587,347

Buildings and improvements

 

2,289,715

 

2,187,400

Furniture and equipment

 

422,404

 

399,943

Rental trailers and other rental equipment

 

479,071

 

462,379

Rental trucks

 

3,702,784

 

3,514,175

 

 

7,497,220

 

7,151,244

Less: Accumulated depreciation

 

(2,191,507)

 

(2,133,733)

Total property, plant and equipment

 

5,305,713

 

5,017,511

Total assets

$

8,543,809

$

8,127,363

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

480,116

$

502,613

Notes, loans and leases payable

 

2,827,052

 

2,665,396

Policy benefits and losses, claims and loss expenses payable

 

1,072,728

 

1,071,412

Liabilities from investment contracts

 

1,016,653

 

951,490

Other policyholders' funds and liabilities

 

8,891

 

8,650

Deferred income

 

31,506

 

22,784

Deferred income taxes, net

 

687,576

 

653,612

Total liabilities

 

6,124,522

 

5,875,957

 

 

 

 

 

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 June 30 and March 31, 2016

 

 

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

 

 

 

 

issued and outstanding as of June 30 and March 31, 2016

 

 

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

 

 

 

 

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

 

 

 

 

none issued and outstanding as of June 30 and March 31, 2016

 

 

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 June 30 and March 31, 2016

 

10,497

 

10,497

Additional paid-in capital

 

451,773

 

451,629

Accumulated other comprehensive loss

 

(40,125)

 

(60,525)

Retained earnings

 

2,680,814

 

2,533,641

Cost of common shares in treasury, net (22,377,912 shares as of June 30 and March 31, 2016)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of June 30 and March 31, 2016)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,022)

 

(6,186)

Total stockholders' equity

 

2,419,287

 

2,251,406

Total liabilities and stockholders' equity

$

8,543,809

$

8,127,363

 

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

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands, except share and per share data)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

646,336

$

629,286

Self-storage revenues

 

67,722

 

57,191

Self-moving and self-storage products and service sales

 

77,303

 

77,258

Property management fees

 

6,604

 

6,111

Life insurance premiums

 

40,892

 

40,266

Property and casualty insurance premiums

 

11,255

 

10,556

Net investment and interest income

 

27,549

 

21,972

Other revenue

 

45,748

 

42,165

Total revenues

 

923,409

 

884,805

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

385,082

 

363,169

Commission expenses

 

73,816

 

73,058

Cost of sales

 

43,362

 

41,255

Benefits and losses

 

47,003

 

43,391

Amortization of deferred policy acquisition costs

 

7,942

 

4,778

Lease expense

 

11,048

 

17,064

Depreciation, net of (gains) losses on disposals of ($18,640) and ($45,984), respectively

 

95,381

 

50,982

Total costs and expenses

 

663,634

 

593,697

 

 

 

 

 

Earnings from operations

 

259,775

 

291,108

Interest expense

 

(26,644)

 

(22,100)

Pretax earnings

 

233,131

 

269,008

Income tax expense

 

(85,958)

 

(97,723)

Earnings available to common stockholders

$

147,173

$

171,285

Basic and diluted earnings per common share

$

7.51

$

8.74

Weighted average common shares outstanding: Basic and diluted

 

19,586,069

 

19,596,129

 

Related party revenues for the first quarter of fiscal 201 7 and 201 6 , net of eliminations, were $ 7.8 million and $ 8.5 million , respectively.

Related party costs and expenses for the first quarter of fiscal 201 7 and 201 6 , net of eliminations, were $ 16.4 million and $ 15.6 million , respectively.

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 June 30, 2016

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

233,131

$

(85,958)

$

147,173

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation

 

(278)

 

 

(278)

Unrealized net gain on investments

 

29,828

 

(10,440)

 

19,388

Change in fair value of cash flow hedges

 

2,081

 

(791)

 

1,290

Total comprehensive income

$

264,762

$

(97,189)

$

167,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2015

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

269,008

$

(97,723)

$

171,285

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation

 

2,533

 

 

2,533

Unrealized net gain on investments

 

10,653

 

(3,728)

 

6,925

Change in fair value of cash flow hedges

 

3,370

 

(1,281)

 

2,089

Total comprehensive income

$

285,564

$

(102,732)

$

182,832

 

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

 

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of cash flows

 

 

Quarter Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net earnings

$

147,173

$

171,285

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

114,021

 

96,966

Amortization of deferred policy acquisition costs

 

7,942

 

4,778

Amortization of debt issuance costs

 

961

 

743

Interest credited to policyholders

 

5,059

 

5,484

Change in allowance for losses on trade receivables

 

21

 

(61)

Change in allowance for inventory reserves

 

1,221

 

(248)

Net gain on sale of real and personal property

 

(18,640)

 

(45,984)

Net gain on sale of investments

 

(2,406)

 

(1,453)

Deferred income taxes

 

22,733

 

18,866

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

(14,138)

 

(19,349)

Inventories

 

(4,391)

 

(140)

Prepaid expenses

 

39,828

 

56,624

Capitalization of deferred policy acquisition costs

 

(7,252)

 

(7,137)

Other assets

 

(3,392)

 

9,368

Related party assets

 

4,084

 

5,666

Accounts payable and accrued expenses

 

57,099

 

53,997

Policy benefits and losses, claims and loss expenses payable

 

1,373

 

11,669

Other policyholders' funds and liabilities

 

242

 

4,700

Deferred income

 

8,727

 

8,342

Related party liabilities

 

781

 

1,438

Net cash provided by operating activities

 

361,046

 

375,554

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

Purchase of:

 

 

 

 

Property, plant and equipment

 

(437,287)

 

(452,572)

Short term investments

 

(277,038)

 

(73,517)

Fixed maturity investments

 

(166,648)

 

(47,072)

Equity securities

 

 

(967)

Preferred stock

 

 

(2)

Real estate

 

(3,495)

 

(23)

Mortgage loans

 

(62,572)

 

(82,839)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

147,196

 

194,133

Short term investments

 

279,341

 

88,332

Fixed maturity investments

 

55,946

 

30,340

Equity securities

 

 

799

Preferred stock

 

2,000

 

Real estate

 

831

 

Mortgage loans

 

94,015

 

14,306

Net cash used by investing activities

 

(367,711)

 

(329,082)

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

Borrowings from credit facilities

 

103,338

 

88,206

Principal repayments on credit facilities

 

(48,326)

 

(82,797)

Debt issuance costs

 

(223)

 

Capital lease payments

 

(37,405)

 

(33,974)

Employee Stock Ownership Plan

 

(1,393)

 

(1,388)

Securitization deposits

 

93

 

Common stock dividends paid

 

(19,586)

 

Investment contract deposits

 

74,157

 

33,768

Investment contract withdrawals

 

(14,051)

 

(13,215)

Net cash provided (used) by financing activities

 

56,604

 

(9,400)

 

 

 

 

 

Effects of exchange rate on cash

 

(4,397)

 

(3,360)

 

 

 

 

 

Increase in cash and cash equivalents

 

45,542

 

33,712

Cash and cash equivalents at the beginning of period

 

600,646

 

441,850

Cash and cash equivalents at the end of period

$

646,188

$

475,562

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


 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a first fiscal quarter that ends on the 30 th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 3 1 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose any material events , if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 201 6 and 20 15 correspond to fiscal 201 7 and 201 6 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 June 30 , 201 6 and the related condensed consolidated statements of operations , comprehensive income (loss) and cash flows for the first quarter of fiscal 201 7 and 201 6 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, 201 6 .

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”),

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

Oxford Life Insurance Company (“Oxford”).

Unless the context otherwise requires, the term s “Company,” “we,” “us” or “our” refer 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 Storage operati ng segment (“Moving and Storage”) 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 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.

 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements (Continued)

The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Rep w est and its wholly-owned subsidiaries and ARCOA R isk R etention G roup (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across North America. 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 products in other U-Haul related programs. ARCOA is a group captive insurer owned by us and our wholly-owned subsidiaries whose purpose is to provide insurance products related to the 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 21,548 and 10,851 as of June 30 , 201 6 and June 30 , 201 5 , respectively.

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 $ 17.4 million and $17.3 million at June 30 , 201 6 and March 31, 2016, respectively .

Available-for-Sale Investments

Available-for-sale investments at June 30 , 201 6 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

$

98,134

$

6,159

$

$

(50)

$

104,243

U.S. government agency mortgage-backed securities

 

30,884

 

1,741

 

(5)

 

 

32,620

Obligations of states and political subdivisions

 

165,322

 

14,339

 

(32)

 

(16)

 

179,613

Corporate securities

 

1,232,287

 

45,160

 

(7,890)

 

(16,275)

 

1,253,282

Mortgage-backed securities

 

42,850

 

855

 

 

(7)

 

43,698

Redeemable preferred stocks

 

15,977

 

530

 

 

(191)

 

16,316

Common stocks

 

17,732

 

8,700

 

(10)

 

(35)

 

26,387

 

$

1,603,186

$

77,484

$

(7,937)

$

(16,574)

$

1,656,159

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Available-for-sale investments at March 31 , 201 6 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

$

85,861

$

3,791

$

$

(193)

$

89,459

U.S. government agency mortgage-backed securities

 

21,845

 

1,596

 

(6)

 

(39)

 

23,396

Obligations of states and political subdivisions

 

166,725

 

10,660

 

(81)

 

(414)

 

176,890

Corporate securities

 

1,143,125

 

26,861

 

(8,013)

 

(28,181)

 

1,133,792

Mortgage-backed securities

 

42,991

 

475

 

 

(62)

 

43,404

Redeemable preferred stocks

 

17,977

 

556

 

 

(105)

 

18,428

Common stocks

 

17,732

 

7,822

 

(10)

 

(375)

 

25,169

 

$

1,496,256

$

51,761

$

(8,110)

$

(29,369)

$

1,510,538

The available-for-sale table s 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 $56.9 million during the first quarter of fiscal 201 7 . The gross realized gains on these sales totaled $ 1.1 million. The gross realized losse s on these sales totaled $0.6 million .

The unrealized losses of more than twelve months in the available-for-sale table s 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 first quarter of fiscal 201 7 or 201 6 .

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 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) for the first quarter of fiscal 2017.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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

 

 

June 30, 2016

 

March 31, 2016

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

 

 

(In thousands)

Due in one year or less

$

31,772

$

32,158

$

48,679

$

49,146

Due after one year through five years

 

298,190

 

307,633

 

250,576

 

256,597

Due after five years through ten years

 

628,082

 

644,932

 

557,984

 

557,961

Due after ten years

 

568,583

 

585,035

 

560,317

 

559,833

 

 

1,526,627

 

1,569,758

 

1,417,556

 

1,423,537

 

 

 

 

 

 

 

 

 

Mortgage backed securities

 

42,850

 

43,698

 

42,991

 

43,404

Redeemable preferred stocks

 

15,977

 

16,316

 

17,977

 

18,428

Equity securities

 

17,732

 

26,387

 

17,732

 

25,169

 

$

1,603,186

$

1,656,159

$

1,496,256

$

1,510,538

 

4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

June 30,

 

March 31,

 

2017 Rate (a)

 

Maturities

 

2016

 

2016

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

6.93%

 

2023

$

202,500

$

205,000

Senior mortgages

2.46% - 5.50%

 

2016 - 2038

 

1,116,682

 

1,121,897

Working capital loan (revolving credit)

-

 

2018

 

 

Fleet loans (amortizing term)

1.95% - 4.76%

 

2017 - 2023

 

218,076

 

218,998

Fleet loan (securitization)

4.90%

 

2017

 

60,139

 

62,838

Fleet loans (revolving credit)

1.60% - 2.30%

 

2018 - 2021

 

410,000

 

347,000

Capital leases (rental equipment)

2.12% - 7.92%

 

2016 - 2023

 

778,731

 

672,825

Other obligations

3.00% - 8.00%

 

2016 - 2045

 

63,547

 

60,200

Less: Debt issuance costs

 

 

 

 

(22,623)

 

(23,362)

Total notes, loans and leases payable

 

 

 

$

2,827,052

$

2,665,396

 

 

 

 

 

 

 

 

(a) Interest rate as of June 30, 2016, 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. As of June 30, 2016 , the outstanding balance on the Real Estate Loan was $202.5 million. 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 final maturity of the term loan is April 20 23

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. At June 30, 2016 , the applicable LIBOR was 0.45% and the applicable margin was 1.50%, the sum of which was 1.95%. The rate on the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on current margin. The interest rate swap expires in August 2018, after which date the remaining balance will incur interest at a rate of LIBOR plus a margin of 1.50%. 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 Amerco Real Estate Company and U-Haul International, Inc. are borrowers under certain senior mortgages. These senior mortgage loan balances as of June 30, 2016 were in the aggregate amount of $ 1,116.7 million and mature between 2016 and 2038. The senior mortgages require monthly principal and interest 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 4.20% and 5.50%. 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. Ad ditionally , $ 135.1 million of these loans have variable interest rates comprised of applicable LIBOR base rates between 0.45% and 0.46% plus margins between 2.00% and 2.50%, the sum of which was between 2.46 % and 2.95 %. 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 $ 50 .0 million. At June 30, 2016 the full $ 50 .0 million was available to be drawn. This loan is secured by certain properties owned by the borrower. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. T he final maturity of this loan is September 2018 . Th is loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. AMERCO is the guarantor 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. The interest rate 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 June 30, 2016 was $ 218.1 million with the final maturities between July 201 7 and May 202 3 .

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 the applicable LIBOR plus the applicable margin s . At June 30, 2016 , the applicable LIBOR was between 0.44% and 0.4 6 % and applicable margins were between 1.72% and 2.50%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 4.76% based on current margins. Additionally, $ 143.6 million of these loans are carried at fixed rates ranging between 1.95% and 3.94%.

AMERCO and , in some cases, 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.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Rental Truck Securitizations

2010 U-Haul S Fleet and its subsidiaries (collectively, “2010 USF”) issued a $155.0 million asset-backed note (“2010 Box Truck Note”). 2010 USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul International, 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 June 30, 2016 , the outstanding balance was $ 60.1 million . The note is secur ed by the box trucks purchased and the corresponding operating cash flows associated with their operation.

The 2010 Box Truck Note is subject to certain 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.

Rental Truck Revolvers

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $75 million, which can be increased to a maximum of $225 million. In June 2016, the loan commitment was increased to $150 million. The loan matures in Septem ber 2018. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin . At June 30, 2016 , the applicable LIBOR was 0.45 % and the margin was reduced to 1.1 5% in April 2016 , the sum of which was 1.60 %. Only interest is paid during the first four years of the loan with principal due monthly over the last nine months . As of June 30, 2016, the outstanding balance was $ 127.0 million .

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $100 million, which can be increased to a maximum of $215 million . This loan matures March 2020. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At June 30, 2016, the applicable LIBOR was 0.46 % and the margin was 1.15%, the sum of which was 1.61 %. Only interest is paid on the loan until the last nine months when principal is due monthly . As of June 30, 2016 , the outstanding balance was $ 88.0 million .

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $70 million . The loan matures in May 2019 . This agreement contains an option to extend the maturity through January 2020. At June 30, 2016 , the applicable LIBOR was 0.45 % and the margin was 1.85%, the sum of which was 2.30 % . Only interest is paid during the first five years of the loan with principal due upon maturity. As of June 30, 2016 , the outstanding balance was $ 70.0 million .

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $ 12 5 million. The loan matures in November 2021 . The interest rate, per the provision of the Loan Agreement, is the a pplicable LIBOR plus the applicable margin . At June 30, 2016 , the applicable LIBOR was 0.46 % and the margin was 1.1 5%, the sum of which was 1.61 %. Only interest is paid during the first f ive years of the loan with principal due monthly over the last nine months . As of June 30, 2016, the outstanding balance was $125.0 million .

Capital Leases

We regularly enter into capital leases for new equipment with the terms of the leases between five and seven years. During the first quarter of fiscal 2017, we entered into $143.5 million of new capital leases. At June 30, 2016, the balance of our capital leases was $ 778.7 million . The net book value of the corresponding capitalized assets was $ 1,065.1 million at June 30, 2016.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Other Obligations

In February 2011 , the Company and U . S . Bank, NA (the “Trustee”) entered into the U-Haul Investors Club ® Indenture.   The Company 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 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.

At June 30, 2016, the aggregate outstanding principal balance of the U-N otes issued was $68.8 million of which $ 5.3 million is held by our insurance subsidiaries and eliminated in consolidation. I nterest rates range between 3.00% and 8.00% and maturity dates range between 2016 and 2 04 5 .

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and as such the FHLB has made a deposit with Oxford. As of March 31, 2016, the FHLB made two deposits that totaled $48.4 million. The first deposit is for $30.0 million to which Oxford pays a fixed interest rate of 0.57% due on the maturity date of September 30, 2016. The other deposit is for $18.4 million with a variable rate of 0.48%, which is calculated daily based upon a spread of the overnight FED funds benchmark and is payable monthly. This deposit does not have a scheduled maturity date. The balance of the deposits is included within the balance of Liabilities from investment contracts on the consolidated balance sheet.

Annual Maturities of Notes, Loans and Leases Payable

The annual maturities of long-term debt , including capital leases, as of June 30, 2016 for the next five years and thereafter are as follows:

 

 

Year Ended June 30,

 

 

2017

 

2018

 

2019

 

2020

 

2021

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and leases payable, secured

$

412,924

$

399,936

$

364,383

$

379,501

$

218,793

$

1,051,515

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Quarter Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

24,303

$

18,542

Capitalized interest

 

(1,313)

 

(551)

Amortization of transaction costs

 

843

 

743

Interest expense resulting from derivatives

 

2,811

 

3,366

Total interest expense

$

26,644

$

22,100

Interest paid in cash , including payments related to derivative contracts, amounted to $ 27.2 million and $ 22.0 million for the first quarter of fiscal 201 7 and 201 6 , 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 June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the quarter

 

1.73%

 

1.65%

Interest rate at year end

 

1.72%

 

1.65%

Maximum amount outstanding during the quarter

$

410,000

$

191,000

Average amount outstanding during the quarter

$

369,637

$

180,714

Facility fees

$

41

$

94

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 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.

 

Original variable rate debt and lease amount

 

Agreement Date

 

Effective Date

 

Expiration Date

 

Designated cash flow hedge date

 

(Unaudited)

 

 

 

 

 

 

 

 

 

(In millions)

 

 

 

 

 

 

 

 

$

300.0

 

 

8/16/2006

 

8/18/2006

 

8/10/2018

 

8/4/2006

 

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

 

6/1/2011

 

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 June 30 , 201 6 , the total notional amount of our variable interest rate swaps on debt and an operating lease was $ 277.1 million and $9.0 million , respectively

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

 

 

Net Liability Derivative Fair Value as of

 

 

June 30, 2016

 

March 31, 2016

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments

$

12,766

$

14,845

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


 

 

The Effect of Interest Rate

 

 

Contracts on the Statements of Operations

 

 

Quarters Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

2,811

$

3,366

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

$

(2,081)

$

(3,370)

Loss reclassified from AOCI into income (effective portion)

$

2,809

$

3,360

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

$

2

$

6

Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During the first quarter of fiscal 201 7 , we recognized an increase in the fair value of our cash flow hedges of $1.3 million, net of taxes. Embedded in this change was $2.8 million of losses reclassified from accumulated other comprehensive income to interest expense during the first quarter of fiscal 2017, net of taxes. At June 30, 2016, we expect to reclassify $8.0 million of net losses on interest rate contracts from accumulated other comprehensive income to earnings as interest expense over the next twelve months.

6 . Accumulated Other Comprehensive Income (Loss)

A summary of accumulated other comprehensive income (loss) 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 at March 31, 2016

$

(63,643)

$

14,115

$

(9,208)

$

(1,789)

$

(60,525)

Foreign currency translation

 

(278)

 

 

 

 

(278)

Unrealized net gain on investments

 

 

19,388

 

 

 

19,388

Change in fair value of cash flow hedges

 

 

 

4,099

 

 

4,099

Amounts reclassified from AOCI

 

 

 

(2,809)

 

 

(2,809)

Other comprehensive income (loss)

 

(278)

 

19,388

 

1,290

 

 

20,400

Balance at June 30, 2016

$

(63,921)

$

33,503

$

(7,918)

$

(1,789)

$

(40,125)

7 . Stockholders’ Equity

On March 1 5, 201 6 , we declared a cash dividend on our Common Stock of $1.00 per share to holders of record on April 5 , 201 6 . The dividend was paid on April 2 1, 201 6 .

On June 8, 2016, the stockholder’s approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of June 30, 2016, no awards had been issued under this plan.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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 2019. As of June 30, 2016 , we have guaranteed $ 21.6 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 value guarantees.

Operating l ease 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 June 30:

 

 

 

 

 

 

2017

$

16,187

$

13,181

$

29,368

2018

 

15,147

 

10,829

 

25,976

2019

 

14,444

 

7,329

 

21,773

2020

 

15,494

 

430

 

15,924

2021

 

15,346

 

 

15,346

Thereafter

 

48,897

 

 

48,897

Total

$

125,515

$

31,769

$

157,284

9 . Contingencies

PODS Enterprises, Inc. v. U-Haul International, Inc.

On July 3, 2012, PODS Enterprises, Inc. (“PEI”), filed a lawsuit against U-Haul International, Inc. (“U-Haul”), in the United States District Court for the Middle District of Florida, Tampa Division, alleging (1) Federal Trademark Infringement under Section 32 of the Lanham Act, (2) Federal Unfair Competition under Section 43(a) of the Lanham Act, (3) Federal Trademark dilution by blurring in violation of Section 43(c) of the Lanham Act, (4) common law trademark infringement under Florida law, (5) violation of the Florida Dilution; Injury to Business Reputation statute, (6) unfair competition and trade practices, false advertising and passing off under Florida common law, (7) violation of the Florida Deceptive and Unfair Trade Practices Act, and (8) unjust enrichment under Florida law. 

The claims arose from U-Haul’s use of the word “pod” and “pods” as a generic term for its U-Box moving and storage product. PEI alleged that such use is an inappropriate use of its PODS mark.  Under the claims alleged in its Complaint, PEI sought a Court Order permanently enjoining U-Haul from: (1) the use of the PODS mark, or any other trade name or trademark confusingly similar to the mark; and (2) the use of any false descriptions or representations or committing any acts of unfair competition by using the PODS mark or any trade name or trademark confusingly similar to the mark. PEI also sought a Court Order (1) finding all of PEI’s trademarks valid and enforceable and (2) requiring U-Haul to alter all web pages to promptly remove the PODS mark from all websites owned or operated on behalf of U-Haul. Finally, PEI sought an award of damages in an amount to be proven at trial, but which are alleged to be approximately $70 million. PEI also sought pre-judgment interest, trebled damages, and punitive damages.

U-Haul does not believe that PEI’s claims have merit and vigorously defended the lawsuit.  On September 17, 2012, U-Haul filed its Counterclaims, seeking a Court Order declaring that: (1) U-Haul’s use of the term “pods” or “pod” does not infringe or dilute PEI’s purported trademarks or violate any of PEI’s purported rights; (2) t he purported mark “PODS” is not a valid, protectable, or registrable trademark; and (3) t he purported mark “PODS PORTABLE ON DEMAND STORAGE” is not a valid, protectable, or registrable trademark. U-Haul also sought a Court Order cancelling the marks at issue in the case.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


The case was tried to a jury beginning on September 8, 2014. On September 19, 2014, the Court granted U-Haul’s motion for directed verdict on the issue of punitive damages.  The Court deferred ruling on U-Haul’s motion for directed verdict on its defense that the words “pod” and “pods” were generic terms for a container used for the moving and storage of goods at the time PEI obtained its trademark (“genericness defense”).  Closing arguments were on September 22, 2014.

On September 25, 2014, the jury returned a unanimous verdict, finding in favor of PEI and against U-Haul on all claims and counterclaims.  The jury awarded PEI $45 million in actual damages and $15.7 million in U-Haul’s alleged profits attributable to its use of the term “pod” or “pods . ” 

On October 1, 2014, the Court ordered briefing on U-Haul’s oral motion for directed verdict on its genericness defense, the motion on which the Court had deferred ruling during trial.  Pursuant to the Court’s order, the parties’ briefing on that motion was completed by October 21, 2014.

On March 11, 2015, the Court denied U-Haul’s Renewed Motion for Directed Verdict, For Judgment as a Matter of Law, Or in the Alternative, Motion for a New Trial. Also on March 11, 2015, the Court entered Judgment on the jury verdict in favor of PEI and against U-Haul in the amount of $60.7 million. This was recorded as an accrual in our financial statements.

The parties filed a series of post-Judgment motions: 

On March 25, 2015, PEI filed a motion for an award of attorneys’ fees and expenses in the amount of $6.5 million.  On April 27, 2015, U-Haul filed its opposition brief to that motion. 

On March 25, 2015, PEI filed a Proposed Bill of Costs in the amount of $186,411.  On April 14, 2015, U-Haul filed an opposition to PEI’s P roposed B ill of C osts.  On May 1, 2015, PEI filed an amended bill of costs in the amount of $196,133.

On April 6, 2015, U-Haul filed, with PEI’s consent, a motion to stay execution of the Judgment, pending the trial court’s rulings on U-Haul’s post-Judgment motions.  That motion was supported by a supersedeas bond in the amount of $60.9 million, which represents 100% of the Judgment plus post-Judgment interest at the rate of 0.25% per year for 18 months. PEI and U-Haul both reserved the right to modify the amount of the bond in the event the Judgment is modified by the Court’s rulings on the parties’ post-Judgment motions (described below).  On April 7, 2015, the Court granted U-Haul’s motion on consent, staying the Judgment pending rulings on U-Haul’s post-Judgment motions.

On April 8, 2015, U-Haul filed its Renewed Motion for Judgment As Matter of Law, or in the Alternative, Motion for New Trial, or to Alter the Judgment.  U-Haul argued that it is entitled to judgment as a matter of law because even when all evidence is viewed in PEI’s favor, it was legally insufficient for the jury to find for PEI.  Alternatively, U-Haul argued that it is entitled to a new trial because the verdict is against the weight of the evidence. Alternatively, U-Haul argued that the Court should reduce the damages and profits award under principles of equity.  On April, 27, 2015, PEI filed its opposition brief.

On April 8, 2015, PEI filed a Motion to Amend the Judgment pursuant to Fed. R. Civ. P. 59(e), in which it asked that the Judgment be amended to include (i) the entry of a permanent injunction; (ii) an award of pre-Judgment interest in the amount of $4.9 million; (iii) an award of post-Judgment interest in the amount of $11,441 and continuing to accrue at the rate of 0.25% while the case proceeds; (iv) doubling of the damages award to $121.4 million; and (v) the entry of an order directing the Patent and Trademark Office to dismiss the cancellation proceedings that U-Haul filed, which sought cancellation of the PODS trademarks.  On April 27, 2015, U-Haul filed its opposition brief arguing, among other things, that (1) PEI is not entitled to recover double the windfall the jury incorrectly awarded it; (2) PEI is not entitled to the overreaching injunction it seeks; (3) PEI is not entitled to pre-judgment interest; (4) PEI has overstated the amount of post-Judgment interest to which it is entitled; and (5) PEI’s request that the Court order the Trademark Trial and Appeal Board to dismiss U-Haul’s cancellation proceeding is premature.

On April 9, 2015, U-Haul filed a protective Notice of Appeal. 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


On August 24, 2015, the trial court entered two orders resolving the parties' post-trial motions.  In short, U-Haul’s efforts at setting aside the judgment, getting a new trial or reducing the amount of the jury award were denied, PEI’s motions to enhance ( i.e. , double) the jury award and receive an award for attorneys’ fees were denied, but the Court entered a permanent injunction, and awarded PEI $4 .9 million in pre-judgment interest, $82,727 in costs, and post-judgment interest at the rate of 0.25%, beginning March 11, 2015, computed daily and compounded annually. This was recorded as an accrual of $5.0 million in our financial statements during fiscal 2016.

On September 4, 2015, U-Haul filed in the trial court its (i) amended notice of appeal, (ii) motion on consent of PEI to approve the bond and stay execution of the judgment pending appeal, and (iii) motion to stay or modify the injunction.

On September 8, 2015, the trial court entered an Order granting U-Haul’s Motion on Consent to Approve Bond and Stay Execution of Judgment.  The Judgment, as amended by the trial court’s orders adding an award of costs and pre-judgment interest, is stayed pending resolution of appeals.  

On October 15, 2015, the trial court denied U-Haul’s motion to modify or stay the injunction pending appeal. But in the process, the Court clarified that (i) the reach of the injunction is limited to “ advertising,   promoting, marketing, or describing any products or services” and (ii) use of the terms “pod” and “pods” in comparative advertising is not prohibited, thereby allowing “nominative fair use" and truthful communications in customer dialogue and making clear that “nothing in the injunction mandates censorship with respect to consumer comments .

PEI’s deadline for filing a notice of cross-appeal was September 23, 2015, and PEI did not file a notice of cross-appeal. 

On September 23, 2015, the Eleventh Circuit Court of Appeals granted the parties’ joint motion for an extension of time for filing their respective briefs on appeal. 

U-Haul filed its opening brief on appeal with the Eleventh Circuit Court of Appeals on December 17, 201 5. PEI filed its response brief on March 16, 2016 . U-Haul filed its reply brief on April 29, 2016.  

On July 19, 2016, the Eleventh Circuit Court of Appeals issued a Memorandum setting oral argument for September 13, 2016, in Jacksonville, Florida.

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.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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 N ASDAQ 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. Management believes that the transactions described below and in the related notes were completed on terms substantially equivalent to those that would prevail in arm’s-length transactions.

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 .

Related Party Revenue

 

 

Quarter Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

1,223

$

1,239

U-Haul interest income revenue from Private Mini

 

 

1,126

U-Haul management fee revenue from SAC Holdings

 

5,118

 

4,814

U-Haul management fee revenue from Private Mini

 

901

 

746

U-Haul management fee revenue from Mercury

 

584

 

551

 

$

7,826

$

8,476

During the first quarter of fiscal 201 7 , a subsidiary of ours held a junior unsecured note from SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Willow Grove Holdings LP , which is owned by Mark V. Shoen ( a significant stock holder ), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant shareholder) and Mark V. Shoen . We do not have an equity ownership interest in SAC Holdings. We received cash interest payments of $ 1.1 million and $ 1.2 million from SAC Holdings during the first quarter of fiscal 201 7 and 201 6 , respectively. The largest aggregate amount of the note receivable outstanding during the first quarter of fiscal 201 7 was $ 49.3 million and the aggregate note receivable balance at June 30 , 201 6 was $ 49.0 m illion. In accordance with the terms of th is note, SAC Holdings may prepay the note without penalty or premium at any time. The scheduled maturit y of th is note is 201 7 .

During fiscal 2016 , AMERCO held a junior note 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 $1.1 million from Private Mini during the first quarter of fiscal 2016. In July 2015, Private Mini repaid its note and all outstanding interest due AMERCO totaling $56.8 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 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 $ 8.7 million and $9.0 million from the above mentioned entities during the first quarter of fiscal 201 7 and 201 6, respectively . This management fee is consistent with the fee received for other properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are indirectly owned by Mark V. Shoen, James P. Shoen ( a significant stock holder ) and a trust benefitting the children and grandchild of Edward J. Shoen .

Related Party Costs and Expenses

 

 

Quarter Ended June 30,

 

 

2016

 

2015

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

688

$

654

U-Haul commission expenses to SAC Holdings

 

14,701

 

13,991

U-Haul commission expenses to Private Mini

 

1,052

 

980

 

$

16,441

$

15,625

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 June 30 , 201 6 , 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 us based upon equipment rental revenues .

These agreements and note with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $ 7.2 million, expenses of $0.7 million and cash flows of $ 6.6 million during the first quarter of fiscal 201 7 . Revenues and commission expenses related to the Dealer Agreements were $ 72.5 million and $ 15.8 million, respectively during the first quarter of fiscal 201 7 .

Pursuant to the variable interest entity model under Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”) , Management determined that the junior note of SAC Holdings as well as the management agreements with SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini represents potential variable interests for us. Management evaluated whether it should be identified as the primary beneficiary of one or more of these VIEs using a two - step approach in which management (i) identified all other parties that hold interests in the VIEs, and (ii) determined if any variable interest holder has the power to direct the activities of the VIEs that most significantly impact their economic performance.

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

We have junior debt with the holding entit y SAC Holding Corporation which represents a variable interest in the entity. Though we have certain protective rights within th is debt agreement, we have no present influence or control over th is holding entit y unless the 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 th is entit y .

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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 agreements 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 assets, 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 basis under ASC 810 to consolidate these entities.

We have not provided financial or other support explicitly or implicitly during the quarter ended June 3 0 , 201 6 to any of these entities that it was not previously contractually required to provide. In addition, we currently 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

 

 

June 30,

 

March 31,

 

 

2016

 

2016

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul receivable from Private Mini

$

2,661

$

2,752

U-Haul notes receivable from SAC Holding Corporation

 

49,035

 

49,322

U-Haul interest receivable from SAC Holdings

 

5,061

 

4,970

U-Haul receivable from SAC Holdings

 

19,809

 

20,375

U-Haul receivable from Mercury

 

4,854

 

8,016

Other (a)

 

(608)

 

299

 

$

80,812

$

85,734

(a) Timing differences for intercompany balances with insurance subsidiaries resulting from the three month difference in reporting periods .

 

1 1 . Consolidating Financial Information by Industry Segment

AMERCO’s three reportable segments are:

  • Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the subsidiaries of 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 does 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 reportable 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 June 30, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

634,665

$

9,439

$

2,084

$

 

$

646,188

Reinsurance recoverables and trade receivables, net

 

45,166

 

112,399

 

31,752

 

 

 

189,317

Inventories, net

 

82,923

 

 

 

 

 

82,923

Prepaid expenses

 

94,540

 

 

 

 

 

94,540

Investments, fixed maturities and marketable equities

 

 

248,016

 

1,408,143

 

 

 

1,656,159

Investments, other

 

23,274

 

53,775

 

203,811

 

 

 

280,860

Deferred policy acquisition costs, net

 

 

 

126,830

 

 

 

126,830

Other assets

 

77,372

 

740

 

2,355

 

 

 

80,467

Related party assets

 

84,329

 

12,326

 

562

 

(16,405)

(c)

 

80,812

 

 

1,042,269

 

436,695

 

1,775,537

 

(16,405)

 

 

3,238,096

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

459,239

 

 

 

(459,239)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

603,246

 

 

 

 

 

603,246

Buildings and improvements

 

2,289,715

 

 

 

 

 

2,289,715

Furniture and equipment

 

422,404

 

 

 

 

 

422,404

Rental trailers and other rental equipment

 

479,071

 

 

 

 

 

479,071

Rental trucks

 

3,702,784

 

 

 

 

 

3,702,784

 

 

7,497,220

 

 

 

 

 

7,497,220

Less:  Accumulated depreciation

 

(2,191,507)

 

 

 

 

 

(2,191,507)

Total property, plant and equipment

 

5,305,713

 

 

 

 

 

5,305,713

Total assets

$

6,807,221

$

436,695

$

1,775,537

$

(475,644)

 

$

8,543,809

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

(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 June 30, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

474,414

$

1,396

$

4,306

$

 

$

480,116

Notes, loans and leases payable

 

2,827,052

 

 

 

 

 

2,827,052

Policy benefits and losses, claims and loss expenses payable

 

384,710

 

251,072

 

436,946

 

 

 

1,072,728

Liabilities from investment contracts

 

 

 

1,016,653

 

 

 

1,016,653

Other policyholders' funds and liabilities

 

 

3,024

 

5,867

 

 

 

8,891

Deferred income

 

31,506

 

 

 

 

 

31,506

Deferred income taxes

 

656,252

 

9,586

 

21,738

 

 

 

687,576

Related party liabilities

 

14,000

 

2,317

 

88

 

(16,405)

(c)

 

Total liabilities

 

4,387,934

 

267,395

 

1,485,598

 

(16,405)

 

 

6,124,522

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity :

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

451,983

 

91,120

 

26,271

 

(117,601)

(b)

 

451,773

Accumulated other comprehensive income (loss)

 

(40,125)

 

7,474

 

26,029

 

(33,503)

(b)

 

(40,125)

Retained earnings

 

2,680,604

 

67,405

 

235,139

 

(302,334)

(b)

 

2,680,814

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,022)

 

 

 

 

 

(6,022)

Total stockholders' equity

 

2,419,287

 

169,300

 

289,939

 

(459,239)

 

 

2,419,287

Total liabilities and stockholders' equity

$

6,807,221

$

436,695

$

1,775,537

$

(475,644)

 

$

8,543,809

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

(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 6 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

585,666

$

14,049

$

931

$

 

$

600,646

Reinsurance recoverables and trade receivables, net

 

34,451

 

111,978

 

28,781

 

 

 

175,210

Inventories, net

 

79,756

 

 

 

 

 

79,756

Prepaid expenses

 

134,300

 

 

 

 

 

134,300

Investments, fixed maturities and marketable equities

 

 

238,570

 

1,271,968

 

 

 

1,510,538

Investments, other

 

21,431

 

47,374

 

241,267

 

 

 

310,072

Deferred policy acquisition costs, net

 

 

 

136,386

 

 

 

136,386

Other assets

 

71,719

 

3,088

 

2,403

 

 

 

77,210

Related party assets

 

88,022

 

12,465

 

613

 

(15,366)

(c)

 

85,734

 

 

1,015,345

 

427,524

 

1,682,349

 

(15,366)

 

 

3,109,852

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

432,277

 

 

 

(432,277)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

587,347

 

 

 

 

 

587,347

Buildings and improvements

 

2,187,400

 

 

 

 

 

2,187,400

Furniture and equipment

 

399,943

 

 

 

 

 

399,943

Rental trailers and other rental equipment

 

462,379

 

 

 

 

 

462,379

Rental trucks

 

3,514,175

 

 

 

 

 

3,514,175

 

 

7,151,244

 

 

 

 

 

7,151,244

Less:  Accumulated depreciation

 

(2,133,733)

 

 

 

 

 

(2,133,733)

Total property, plant and equipment

 

5,017,511

 

 

 

 

 

5,017,511

Total assets

$

6,465,133

$

427,524

$

1,682,349

$

(447,643)

 

$

8,127,363

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(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 indus try segment as of March 31, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

492,982

$

1,535

$

8,096

$

 

$

502,613

Notes, loans and leases payable

 

2,665,396

 

 

 

 

 

2,665,396

Policy benefits and losses, claims and loss expenses payable

 

386,366

 

252,819

 

432,227

 

 

 

1,071,412

Liabilities from investment contracts

 

 

 

951,490

 

 

 

951,490

Other policyholders' funds and liabilities

 

 

3,017

 

5,633

 

 

 

8,650

Deferred income

 

22,784

 

 

 

 

 

22,784

Deferred income taxes

 

633,061

 

7,526

 

13,025

 

 

 

653,612

Related party liabilities

 

13,138

 

2,067

 

161

 

(15,366)

(c)

 

Total liabilities

 

4,213,727

 

266,964

 

1,410,632

 

(15,366)

 

 

5,875,957

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity :

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

451,839

 

91,120

 

26,271

 

(117,601)

(b)

 

451,629

Accumulated other comprehensive income (loss)

 

(60,525)

 

3,611

 

10,504

 

(14,115)

(b)

 

(60,525)

Retained earnings

 

2,533,431

 

62,528

 

232,442

 

(294,760)

(b)

 

2,533,641

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,186)

 

 

 

 

 

(6,186)

Total stockholders' equity

$

2,251,406

 

160,560

 

271,717

 

(432,277)

 

 

2,251,406

Total liabilities and stockholders' equity

 

6,465,133

$

427,524

$

1,682,349

$

(447,643)

 

$

8,127,363

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Consolidating statement of operations by industry segment for the quarter ended June 30, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

647,116

$

$

$

(780)

(c)

$

646,336

Self-storage revenues

 

67,722

 

 

 

 

 

67,722

Self-moving and self-storage products and service sales

 

77,303

 

 

 

 

 

77,303

Property management fees

 

6,604

 

 

 

 

 

6,604

Life insurance premiums

 

 

 

40,892

 

 

 

40,892

Property and casualty insurance premiums

 

 

11,255

 

 

 

 

11,255

Net investment and interest income

 

2,112

 

5,630

 

19,994

 

(187)

(b)

 

27,549

Other revenue

 

44,974

 

 

909

 

(135)

(b)

 

45,748

Total revenues

 

845,831

 

16,885

 

61,795

 

(1,102)

 

 

923,409

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

373,672

 

6,285

 

6,031

 

(906)

(b,c)

 

385,082

Commission expenses

 

73,816

 

 

 

 

 

73,816

Cost of sales

 

43,362

 

 

 

 

 

43,362

Benefits and losses

 

 

3,097

 

43,906

 

 

 

47,003

Amortization of deferred policy acquisition costs

 

 

 

7,942

 

 

 

7,942

Lease expense

 

11,095

 

 

 

(47)

(b)

 

11,048

Depreciation, net of (gains) losses on disposals

 

95,381

 

 

 

 

 

95,381

Total costs and expenses

 

597,326

 

9,382

 

57,879

 

(953)

 

 

663,634

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

248,505

 

7,503

 

3,916

 

(149)

 

 

259,775

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

7,574