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, 2018

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)

 

 

5555 Kietzke Lane, Ste. 100

 

 

Reno, Nevada 89511

 

 

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer [x]   Accelerated filer [ ]  

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

Emerging growth company [ ]


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at August 1, 2018.

 

 


TABLE OF CONTENTS

Page  

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of June 30, 2018 (unaudited) and March 31, 2018

1

 

b) Condensed Consolidated Statements of Operations for the Quarters Ended June 30, 2018 and 2017 (unaudited)

2

 

c) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended June 30, 2018 and 2017 (unaudited)

3

 

d) Condensed Consolidated Statements of Cash Flows for the Quarters Ended June 30, 2018 and 2017 (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

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

51

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

53

Item 1A.

Risk Factors

53

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

53


 

 


Part i Financial information

Item 1. Financial Statements

AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED balance sheets

 

 

June 30,

 

March 31,

 

 

2018

 

2018

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

650,339

$

759,388

Reinsurance recoverables and trade receivables, net

 

207,987

 

193,538

Inventories and parts, net

 

94,901

 

89,877

Prepaid expenses

 

183,536

 

166,129

Investments, fixed maturities and marketable equities

 

1,950,876

 

1,919,860

Investments, other

 

396,622

 

399,064

Deferred policy acquisition costs, net

 

134,133

 

124,767

Other assets

 

248,320

 

244,782

Related party assets

 

30,486

 

33,276

 

 

3,897,200

 

3,930,681

Property, plant and equipment, at cost:

 

 

 

 

Land

 

849,042

 

827,649

Buildings and improvements

 

3,331,918

 

3,140,713

Furniture and equipment

 

641,730

 

632,803

Rental trailers and other rental equipment

 

547,291

 

545,968

Rental trucks

 

4,533,758

 

4,390,750

 

 

9,903,739

 

9,537,883

Less: Accumulated depreciation

 

(2,799,455)

 

(2,721,142)

Total property, plant and equipment

 

7,104,284

 

6,816,741

Total assets

$

11,001,484

$

10,747,422

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

518,033

$

511,115

Notes, loans and leases payable, net

 

3,586,127

 

3,513,076

Policy benefits and losses, claims and loss expenses payable

 

1,252,810

 

1,248,033

Liabilities from investment contracts

 

1,409,705

 

1,364,066

Other policyholders' funds and liabilities

 

9,857

 

10,040

Deferred income

 

41,963

 

34,276

Deferred income taxes, net

 

686,844

 

658,108

Total liabilities

 

7,505,339

 

7,338,714

 

 

 

 

 

Commitments and contingencies (notes 4, 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 June 30 and March 31, 2018

 

 

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

 

 

 

 

issued and outstanding as of June 30 and March 31, 2018

 

 

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

 

 

 

 

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

 

 

 

 

none issued and outstanding as of June 30 and March 31, 2018

 

 

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, 2018

 

10,497

 

10,497

Additional paid-in capital

 

452,862

 

452,746

Accumulated other comprehensive loss

 

(45,966)

 

(4,623)

Retained earnings

 

3,763,339

 

3,635,561

Cost of common shares in treasury, net (22,377,912 shares as of June 30 and March 31, 2018)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of June 30 and March 31, 2018)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,937)

 

(7,823)

Total stockholders' equity

 

3,496,145

 

3,408,708

Total liabilities and stockholders' equity

$

11,001,484

$

10,747,422

 

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,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

716,602

$

669,858

Self-storage revenues

 

86,212

 

76,718

Self-moving and self-storage products and service sales

 

79,241

 

78,911

Property management fees

 

7,416

 

6,762

Life insurance premiums

 

36,888

 

39,091

Property and casualty insurance premiums

 

12,781

 

11,815

Net investment and interest income

 

24,605

 

27,217

Other revenue

 

55,832

 

47,553

Total revenues

 

1,019,577

 

957,925

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

496,554

 

416,692

Commission expenses

 

79,257

 

75,365

Cost of sales

 

49,881

 

47,595

Benefits and losses

 

48,554

 

47,720

Amortization of deferred policy acquisition costs

 

6,031

 

6,321

Lease expense

 

8,169

 

8,287

Depreciation, net of gains on disposal of ($16,295 and $5,088, respectively)

 

126,427

 

126,335

Net losses on disposal of real estate

 

 

347

Total costs and expenses

 

814,873

 

728,662

 

 

 

 

 

Earnings from operations

 

204,704

 

229,263

Other components of net periodic benefit costs

 

(253)

 

(232)

Interest expense

 

(35,254)

 

(30,345)

Pretax earnings

 

169,197

 

198,686

Income tax expense

 

(41,348)

 

(72,479)

Earnings available to common stockholders

$

127,849

$

126,207

Basic and diluted earnings per common share

$

6.53

$

6.44

Weighted average common shares outstanding: Basic and diluted

 

19,590,585

 

19,587,891

 

Related party revenues for the first quarter of fiscal 2019 and 2018, net of eliminations, were $7.4 million and $8.0 million, respectively.

Related party costs and expenses for the first quarter of fiscal 2019 and 2018, net of eliminations, were $17.2 million and $16.6 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 June 30, 2018

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

169,197

$

(41,348)

$

127,849

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(2,093)

 

 

(2,093)

Unrealized net loss on investments

 

(50,218)

 

10,546

 

(39,672)

Change in fair value of cash flow hedges

 

560

 

(138)

 

422

Total comprehensive income

$

117,446

$

(30,940)

$

86,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2017

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

198,686

$

(72,479)

$

126,207

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

8,267

 

 

8,267

Unrealized net gain on investments

 

10,631

 

(3,720)

 

6,911

Change in fair value of cash flow hedges

 

1,550

 

(590)

 

960

Total comprehensive income

$

219,134

$

(76,789)

$

142,345

 

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,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net earnings

$  

127,849

$  

126,207

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

142,722

 

131,423

Amortization of deferred policy acquisition costs

 

6,031

 

6,321

Amortization of debt issuance costs

 

984

 

932

Interest credited to policyholders

 

8,060

 

7,651

Change in allowance for losses on trade receivables

 

38

 

(26)

Change in allowance for inventories and parts reserves

 

2,139

 

1,114

Net gains on disposal of personal property

 

(16,295)

 

(5,088)

Net losses on disposal of real estate

 

 

347

Net (gains) losses on sales of investments

 

506

 

(1,985)

Deferred income taxes

 

38,678

 

12,024

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

(14,543)

 

(8,870)

Inventories and parts

 

(7,170)

 

(11,982)

Prepaid expenses

 

(17,999)

 

44,788

Capitalization of deferred policy acquisition costs

 

(5,808)

 

(8,228)

Other assets

 

(761)

 

(2,523)

Related party assets

 

2,205

 

7,836

Accounts payable and accrued expenses

 

89,348

 

61,704

Policy benefits and losses, claims and loss expenses payable

 

5,291

 

4,747

Other policyholders' funds and liabilities

 

(184)

 

4,083

Deferred income

 

7,732

 

8,393

Related party liabilities

 

474

 

(2,532)

Net cash provided by operating activities

 

369,297

 

376,336

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Escrow deposits

 

(4,559)

 

23,005

Purchases of:

 

 

 

 

Property, plant and equipment

 

(548,147)

 

(480,259)

Short term investments

 

(14,390)

 

(16,491)

Fixed maturity investments

 

(103,121)

 

(123,090)

Equity securities

 

(46)

 

Preferred stock

 

(81)

 

Real estate

 

(80)

 

(505)

Mortgage loans

 

(8,262)

 

(24,382)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

187,546

 

142,343

Short term investments

 

20,416

 

24,639

Fixed maturity investments

 

14,946

 

36,559

Preferred stock

 

500

 

Real estate

 

 

2,664

Mortgage loans

 

9,402

 

6,054

Net cash used by investing activities

 

(445,876)

 

(409,463)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

103,641

 

155,367

Principal repayments on credit facilities

 

(73,770)

 

(64,819)

Payment of debt issuance costs

 

(1,420)

 

(1,734)

Capital lease payments

 

(84,374)

 

(56,522)

Employee stock ownership plan shares

 

(57)

 

3,516

Securitization deposits

 

 

49

Common stock dividends paid

 

(9,795)

 

Investment contract deposits

 

76,343

 

155,437

Investment contract withdrawals

 

(38,763)

 

(54,205)

Net cash provided (used) by financing activities

 

(28,195)

 

137,089

 

 

 

 

 

Effects of exchange rate on cash

 

(4,275)

 

4,424

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(109,049)

 

108,386

Cash and cash equivalents at the beginning of period

 

759,388

 

697,806

Cash and cash equivalents at the end of period

$  

650,339

$  

806,192

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 31 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose any material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2018 and 2017 correspond to fiscal 2019 and 2018 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, 2018 and the related condensed consolidated statements of operations, comprehensive income (loss) and cash flows for the first quarter of fiscal 2019 and 2018 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, 2018.

Intercompany accounts and transactions have been eliminated.

Description of Legal Entities

AMERCO is the holding company for:

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

Amerco Real Estate Company (“Real Estate”),

Repwest Insurance Company (“Repwest”), and

Oxford Life Insurance Company (“Oxford”).

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

Description of Operating Segments

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

The Moving and Storage operating segment (“Moving and Storage”) includes AMERCO, U-Haul, and Real Estate and the wholly-owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, and the rental of fixed and portable moving and storage units to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.

 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements (Continued)

The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Repwest and its wholly-owned subsidiaries and ARCOA Risk Retention Group (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul ® through regional offices in the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul-related programs. ARCOA is a group captive insurer owned by us and our wholly-owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.

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 16,828 and 19,533 as of June 30, 2018 and June 30, 2017, 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 $31.4 million and $32.4 million at June 30, 2018 and March 31, 2018, respectively.

Available-for-Sale Investments

Available-for-sale investments at June 30, 2018 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

$

123,420

$

1,858

$

(1,561)

$

(911)

$  

122,806

U.S. government agency mortgage-backed securities

 

63,031

 

714

 

(1)

 

(662)

 

63,082

Obligations of states and political subdivisions

 

190,454

 

7,481

 

(236)

 

(538)

 

197,161

Corporate securities

 

1,423,091

 

26,369

 

(5,291)

 

(15,275)

 

1,428,894

Mortgage-backed securities

 

101,605

 

1,055

 

 

(765)

 

101,895

Redeemable preferred stocks

 

2,118

 

93

 

 

 

2,211

 

$

1,903,719

$

37,570

$

(7,089)

$

(18,151)

$  

1,916,049

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Available-for-sale investments at March 31, 2018 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

$

123,557

$

3,595

$

(1,036)

$

(203)

$  

125,913

U.S. government agency mortgage-backed securities

 

36,416

 

951

 

(1)

 

(93)

 

37,273

Obligations of states and political subdivisions

 

178,702

 

9,938

 

(217)

 

(18)

 

188,405

Corporate securities

 

1,388,300

 

50,056

 

(3,009)

 

(1,826)

 

1,433,521

Mortgage-backed securities

 

94,106

 

2,072

 

 

(153)

 

96,025

Redeemable preferred stocks

 

2,118

 

129

 

 

 

2,247

 

$

1,823,199

$

66,741

$

(4,263)

$

(2,293)

$  

1,883,384

As of March 31, 2018, equity investments were classified as available-for-sale on our balance sheet. However, upon adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , the updated guidance eliminated the available-for-sale balance sheet classification for equity investments. As of June 30, 2018 and March 31, 2018 we had $8.0 million and $8.7 million of preferred stock and $26.9 million and $27.9 million of common stock, respectively that are included in Investments, fixed maturities and marketable equities on the balance sheet. The changes in the fair value of the equity investments are recognized through Net investment and interest income.

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

We sold available-for-sale securities with a fair value of $14.0 million during the first quarter of fiscal 2019. The gross realized net gains on these sales totaled $0.2 million.

The unrealized losses of more than twelve months in the available-for-sale tables are considered temporary declines. We track each investment with an unrealized loss and evaluate them on an individual basis for other-than-temporary impairments including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognize these write-downs, if any, through earnings. There were no write downs in the first quarter of fiscal 2019 or 2018.

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

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

There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income (loss) for the first quarter of fiscal 2019 and fiscal 2018, respectively.

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, 2018

 

March 31, 2018

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

(In thousands)

Due in one year or less

$

42,372

$

42,546

$

36,446

$

36,674

Due after one year through five years

 

469,929

 

472,652

 

441,223

 

450,816

Due after five years through ten years

 

616,785

 

618,194

 

607,895

 

626,174

Due after ten years

 

670,910

 

678,551

 

641,411

 

671,448

 

 

1,799,996

 

1,811,943

 

1,726,975

 

1,785,112

 

 

 

 

 

 

 

 

 

Mortgage backed securities

 

101,605

 

101,895

 

94,106

 

96,025

Redeemable preferred stocks

 

2,118

 

2,211

 

2,118

 

2,247

 

$

1,903,719

$

1,916,049

$

1,823,199

$

1,883,384

4. Borrowings

Long Term Debt

Long term debt was as follows:

 

 

 

 

 

June 30,

 

March 31,

 

2019 Rate (a)

 

Maturities

 

2018

 

2018

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

3.55% - 6.93%

 

2023

$

132,787

$

135,287

Senior mortgages

3.72% - 6.62%

 

2021 - 2038

 

1,519,614

 

1,487,645

Working capital loans (revolving credit)

3.36%

 

2021

 

75,000

 

55,000

Fleet loans (amortizing term)

1.95% - 4.66%

 

2018 - 2025

 

332,236

 

342,971

Fleet loans (revolving credit)

3.13%

 

2021 - 2022

 

450,000

 

460,000

Capital leases (rental equipment)

1.92% - 5.04%

 

2018 - 2025

 

1,029,405

 

984,217

Other obligations

2.75% - 8.00%

 

2018 - 2047

 

72,978

 

73,579

Notes, loans and leases payable

 

 

 

 

3,612,020

 

3,538,699

Less: Debt issuance costs

 

 

 

 

(25,893)

 

(25,623)

Total notes, loans and leases payable, net

 

 

 

$

3,586,127

$

3,513,076

 

 

 

 

 

 

 

 

(a) Interest rate as of June 30, 2018, including the effect of applicable hedging instruments.

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a Real Estate Loan. As of June 30, 2018, the outstanding balance on the Real Estate Loan was $132.8 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 2023.

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. As of June 30, 2018, the applicable LIBOR was 2.05% and the applicable margin was 1.50%, the sum of which was 3.55%, which was applied to $72.2 million of the Real Estate Loan. The rate of the remaining balance of $60.6 million of the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on the 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 Real Estate and U-Haul are borrowers under certain senior mortgages. These senior mortgage loan balances as of June 30, 2018 were in the aggregate amount of $1,519.6 million and mature between 2021 and 2038. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 3.72% and 6.62%. Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Working Capital Loans

Various subsidiaries of Real Estate and U-Haul are borrowers under an asset backed working capital loan. This loan was amended in June 2018, to extend the maturity date and reduce the applicable margin. The maximum amount that can be drawn at any one time is $85.0 million. As of June 30, 2018, the outstanding balance was $75.0 million. This loan is secured by certain properties owned by the borrowers. This loan agreement provides for term loans, subject to the terms of the loan agreement. The final maturity of the loan is June 2021. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreement, is the applicable LIBOR plus the applicable margin. As of June 30, 2018, the applicable LIBOR was 1.98% and the margin was 1.38%, the sum of which was 3.36%. 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.

AMERCO is a borrower under a working capital loan. The current maximum credit commitment is $150.0 million, which can be increased to $300.0 million by bringing in other lenders. As of June 30, 2018, the full $150.0 million was available to be drawn. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. The final maturity of this loan is September 2020. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate is the applicable LIBOR plus a margin between 1.38% and 1.50% depending on the amount outstanding. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30% fee charged for unused capacity.

Fleet Loans

Rental Truck Amortizing Loans

U-Haul and several of its subsidiaries are borrowers under amortizing term loans. The aggregate balance of the loans as of June 30, 2018 was $332.2 million with the final maturities between September 2018 and June 2025.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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 margins. As of June 30, 2018, the applicable LIBOR was between 1.98% and 2.07% and applicable margins were between 1.72% and 2.25%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 4.11% based on current margins. Additionally, $286.6 million of these loans are carried at fixed rates ranging between 1.95% and 4.66%.

AMERCO and, in some cases, U-Haul 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.

Rental Truck Revolvers

Various subsidiaries of U-Haul entered into three revolving fleet loans in aggregate for $510.0 million, which can be increased to a maximum of $565.0 million. These loans mature between January 2021 and July 2022. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of June 30, 2018, the applicable LIBOR was 1.98% and the margin was 1.15%, the sum of which was 3.13%. Only interest is paid on the loans until the last nine months when principal is due monthly. As of June 30, 2018, the aggregate outstanding balance of the loans was $450.0 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 2019, we entered into $126.9 million of new capital leases. As of June 30, 2018 and March 31, 2018, the balance of our capital leases was $1,029.4 million and $984.2 million, respectively. The net book value of the corresponding capitalized assets was $1,479.4 million and $1,407.6 million as of June 30, 2018 and March 31, 2018, respectively.

Other Obligations

In February 2011, AMERCO and U.S. Bank, NA (the “Trustee”) entered into the U-Haul Investors Club ® Indenture.   AMERCO and the Trustee entered into this indenture to provide for the issuance of notes by us directly to investors over our proprietary website, uhaulinvestorsclub.com (“U-Notes ® ”). The U-Notes ® are secured by various types of collateral including, but not limited to, rental equipment and real estate.   U-Notes ® are issued in smaller series that vary as to principal amount, interest rate and maturity.   U-Notes ® are obligations of the Company and secured by the associated collateral; they are not guaranteed by any of the Company’s affiliates or subsidiaries.

As of June 30, 2018, the aggregate outstanding principal balance of the U-Notes ® issued was $76.5 million, of which $3.5 million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 2.75% and 8.00% and maturity dates range between 2018 and 2047.

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of March 31, 2018, the deposits had an aggregate balance of $60.0 million, for which Oxford pays fixed interest rates between 1.48% and 2.67% with maturities between September 29, 2018 and March 29, 2021. As of March 31, 2018, available-for-sale investments held with the FHLB totaled $125.0 million, of which $72.4 million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Annual Maturities of Notes, Loans and Leases Payable

The annual maturities of long term debt, including capital leases, as of June 30, 2018 for the next five years and thereafter are as follows:

 

 

Year Ended June 30,

 

 

2019

 

2020

 

2021

 

2022

 

2023

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and leases payable, secured

$

483,563

$

433,620

$

526,913

$

534,647

$

259,432

$

1,373,845

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Quarter Ended June 30,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

34,196

$

29,629

Capitalized interest

 

(419)

 

(1,765)

Amortization of transaction costs

 

961

 

932

Interest expense resulting from derivatives

 

516

 

1,549

Total interest expense

 

35,254

 

30,345

Interest paid in cash, including payments related to derivative contracts, amounted to $34.4 million and $31.0 million for the first quarter of fiscal 2019 and 2018, respectively.

Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

Quarter Ended June 30,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the quarter

 

3.11%

 

2.24%

Interest rate at the end of the quarter

 

3.16%

 

2.25%

Maximum amount outstanding during the quarter

$

525,000

$

508,000

Average amount outstanding during the quarter

$

497,967

$

499,659

Facility fees

$

144

$

76

 

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 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. The following is a summary of our interest rate swap agreements as of June 30, 2018:

 

Original variable rate debt 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

 

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, 2018, the total notional amount of our variable interest rate swaps on debt and an operating lease was $107.4 million and $5.8 million, respectively.

The derivative fair values were as follows:

 

 

Derivatives Fair Values as of

 

 

June 30, 2018

 

March 31, 2018

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments:

$

 

$

 

Assets

 

422

 

437

Liabilities

 

(338)

 

(897)

 

 

 

 

 

 

 

 

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

 

 

 

 

June 30, 2018

 

June 30, 2017

 

 

(Unaudited)

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

516

$

1,549

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

$

(560)

$

(1,550)

Loss reclassified from AOCI into income (effective portion)

$

500

$

1,550

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

$

16

$

(1)

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During the first quarter of fiscal 2019, we recognized an increase in the fair value of our cash flow hedges of $0.4 million, net of taxes. Embedded in this change was $0.5 million of losses reclassified from accumulated other comprehensive income (loss) to interest expense during the first quarter of fiscal 2019. As of June 30, 2018, we expect to reclassify $18 thousand of net gains on interest rate contracts from accumulated other comprehensive income (loss) 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, 2018

$

(54,853)

$

52,509

$

(370)

$

(1,909)

$

(4,623)

Foreign currency translation

 

(2,093)

 

 

 

 

(2,093)

Unrealized net loss on investments

 

 

(39,672)

 

 

 

(39,672)

Change in fair value of cash flow hedges

 

 

 

922

 

 

922

Amounts reclassified from AOCI

 

 

 

(500)

 

 

(500)

Other comprehensive income (loss)

 

(2,093)

 

(39,672)

 

422

 

 

(41,343)

Balance at June 30, 2018

$

(56,946)

$

12,837

$

52

$

(1,909)

$

(45,966)

7. Stockholders’ Equity

On March 8, 2018, we declared a cash dividend on our Common Stock of $0.50 per share to holders of record on March 23, 2018. The dividend was paid on April 6, 2018.

On June 6, 2018, we declared a cash dividend on our Common Stock of $0.50 per share to holders of record on June 21, 2018. The dividend was paid on July 5, 2018.

On June 8, 2016, the stockholder’s approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of June 30, 2018, no awards had been issued under this plan.

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 2024. As of June 30, 2018, we have guaranteed $14.2 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 have experienced no material losses relating to these types of residual value guarantees.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Operating and ground lease commitments for leases having terms of more than one year were as follows:

 

 

Property, Plant and Equipment

 

Rental

Equipment

 

 

 

 

Ground

 

Operating

 

Operating

 

Total

 

 

(Unaudited)

 

 

(In thousands)

Year-ended June 30:

 

 

 

 

 

 

 

 

2019

$

1,008

$

17,032

$

7,287

$

25,327

2020

 

1,024

 

17,376

 

428

 

18,828

2021

 

1,025

 

16,213

 

 

17,238

2022

 

1,030

 

15,051

 

 

16,081

2023

 

1,030

 

14,561

 

 

15,591

Thereafter

 

49,391

 

16,579

 

 

65,970

Total

$

54,508

$

96,812

$

7,715

$

159,035

9. Contingencies

Litigation

On July 1, 2014, a 100-pound propane cylinder allegedly filled at a Philadelphia-area U-Haul Co. of Pennsylvania (“UHPA”) center exploded while in use on a food truck. The explosion killed two people and injured eleven. Following the incident, the injured parties and their estates filed a number of lawsuits against U-Haul and its subsidiary, UHPA, both of which denied the allegations. One plaintiff sued AMERCO, which also denied the allegations. All suits were filed in the Philadelphia Court of Common Pleas. The plaintiffs alleged, among other things, that UHPA should not have refilled the propane cylinder at issue because it was out-of-date and improperly fitted with an incorrect valve, which allegedly caused the explosion. The plaintiffs sought compensatory and punitive damages.

After several settlements with the less-injured plaintiffs, in April 2018, the parties reached an agreement, in principle, to settle the remaining cases. We will pay our self-insured retention and attorney’s fees. Together, these amounts are currently estimated to be $27.3 million, of which $26.8 million has already been paid.  The balance of the settlement amount is accrued on our balance sheet in Policy benefits and losses, claims and loss expenses payable with offsetting insurance recoveries from our insurance carriers in Other assets.

Following the resolution of the civil claims in April 2018, the U.S. Attorney’s Office for the Eastern District of Pennsylvania advised the Company that UHPA was a target of an investigation. On June 12, 2018, UHPA was indicted by a grand jury in the U.S. District Court for the Eastern District of Pennsylvania.  The six-count indictment charged UHPA with allegedly improperly filling propane cylinders that were overdue for periodic requalification, offering such cylinders for transportation, and failing to train and certify a UHPA employee dispensing propane. UHPA will vigorously defend itself against the charges.

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 Company’s Audit Committee Charter and consistent with NASDAQ Listing Rules, our Audit Committee (the “Audit Committee”) reviews and maintains oversight over related party transactions which are required to be disclosed under the Securities and Exchange Commission (“SEC”) rules and regulations and in accordance with generally accepted accounting principles (“GAAP”). Accordingly, all such related party transactions are submitted to the Audit Committee for ongoing review and oversight. Our internal processes are designed to ensure that our legal and finance departments identify and monitor potential related party transactions that may require disclosure and Audit Committee oversight.

AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below. 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. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini Storage Realty, L.P. (“Private Mini”) are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Willow Grove Holdings LP (“WGHLP”), which is owned by Mark V. Shoen (a significant shareholder), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant shareholder) and Mark V. Shoen.

Related Party Revenue

 

 

Quarter Ended June 30,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from Blackwater

$

$

1,205

U-Haul management fee revenue from Blackwater

 

6,200

 

6,162

U-Haul management fee revenue from Mercury

 

1,216

 

600

 

$

7,416

$

7,967

We currently manage the self-storage properties owned or leased by Blackwater and Mercury Partners, L.P. (“Mercury”), pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $10.3 million and $10.0 million from the above mentioned entities during the first quarter of fiscal 2019 and 2018, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are indirectly owned by Mark V. Shoen, James P. Shoen (a significant shareholder) and a trust benefitting the children and grandchildren of Edward J. Shoen.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Related Party Costs and Expenses

 

 

Quarter Ended June 30,

 

 

2018

 

2017

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to Blackwater

$

670

$

681

U-Haul commission expenses to Blackwater

 

16,485

 

15,886

 

$

17,155

$

16,567

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.

As of June 30, 2018, subsidiaries of Blackwater 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 with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $6.2 million, expenses of $0.7 million and cash flows of $5.4 million during the first quarter of fiscal 2019. Revenues and commission expenses related to the Dealer Agreements were $75.4 million and $16.5 million, respectively during the first quarter of fiscal 2019.

Pursuant to the variable interest entity (“VIE”) model under Accounting Standards Codification (“ASC”) 810 – Consolidation (“ASC 810”), management determined that the management agreements with subsidiaries of Blackwater represent 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 we do not have a variable interest in the holding entities of Blackwater based upon management agreements which are with the individual operating entities; therefore, we are precluded from consolidating 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 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.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


We have not provided financial or other support explicitly or implicitly during the quarter ended June 30, 2018 to any of these entities that we were 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 sheets 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,

 

 

2018

 

2018

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul receivable from Blackwater

 

25,801

 

24,034

U-Haul receivable from Mercury

 

6,364

 

10,357

Other (a)

 

(1,679)

 

(1,115)

 

$

30,486

$

33,276

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

 

11. 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 Repwest 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)


11. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of June 30, 2018 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

Cash and cash equivalents

$

618,300

$

5,119

$

26,920

$

 

$

650,339

Reinsurance recoverables and trade receivables, net

 

79,460

 

97,351

 

31,176

 

 

 

207,987

Inventories and parts, net

 

94,901

 

 

 

 

 

94,901

Prepaid expenses

 

183,536

 

 

 

 

 

183,536

Investments, fixed maturities and marketable equities

 

 

287,278

 

1,663,598

 

 

 

1,950,876

Investments, other

 

22,993

 

61,557

 

312,072

 

 

 

396,622

Deferred policy acquisition costs, net

 

 

 

134,133

 

 

 

134,133

Other assets

 

244,325

 

1,004

 

2,991

 

 

 

248,320

Related party assets

 

35,211

 

9,452

 

18,304

 

(32,481)

(c)

 

30,486

 

 

1,278,726

 

461,761

 

2,189,194

 

(32,481)

 

 

3,897,200

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

517,861

 

 

 

(517,861)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

849,042

 

 

 

 

 

849,042

Buildings and improvements

 

3,331,918

 

 

 

 

 

3,331,918

Furniture and equipment

 

641,730

 

 

 

 

 

641,730

Rental trailers and other rental equipment

 

547,291

 

 

 

 

 

547,291

Rental trucks

 

4,533,758

 

 

 

 

 

4,533,758

 

 

9,903,739

 

 

 

 

 

9,903,739

Less:  Accumulated depreciation

 

(2,799,455)

 

 

 

 

 

(2,799,455)

Total property, plant and equipment

 

7,104,284

 

 

 

 

 

7,104,284

Total assets

$

8,900,871

$

461,761

$

2,189,194

$

(550,342)

 

$

11,001,484

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

(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, 2018 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

$

509,704

$

3,417

$

4,912

$

 

$

518,033

Notes, loans and leases payable, net

 

3,586,127

 

 

 

 

 

3,586,127

Policy benefits and losses, claims and loss expenses payable

 

572,151

 

232,893

 

447,766

 

 

 

1,252,810

Liabilities from investment contracts

 

 

 

1,409,705

 

 

 

1,409,705

Other policyholders' funds and liabilities

 

 

4,800

 

5,057

 

 

 

9,857

Deferred income

 

41,963

 

 

 

 

 

41,963

Deferred income taxes, net

 

667,537

 

7,523

 

11,784

 

 

 

686,844

Related party liabilities

 

27,244

 

4,860

 

377

 

(32,481)

(c)

 

Total liabilities

 

5,404,726

 

253,493

 

1,879,601

 

(32,481)

 

 

7,505,339

 

 

 

 

 

 

 

 

 

 

 

 

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

 

453,072

 

91,120

 

26,271

 

(117,601)

(b)

 

452,862

Accumulated other comprehensive income (loss)

 

(45,966)

 

1,653

 

11,185

 

(12,838)

(b)

 

(45,966)

Retained earnings

 

3,763,129

 

112,194

 

269,637

 

(381,621)

(b)

 

3,763,339

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

 

(6,937)

 

 

 

 

 

(6,937)

Total stockholders' equity

 

3,496,145

 

208,268

 

309,593

 

(517,861)

 

 

3,496,145

Total liabilities and stockholders' equity

$

8,900,871

$

461,761

$

2,189,194

$

(550,342)

 

$

11,001,484

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

(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, 2018 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

Assets:

 

(In thousands)

Cash and cash equivalents

$

702,036

$

6,639

$

50,713

$

 

$

759,388

Reinsurance recoverables and trade receivables, net

 

64,798

 

99,682

 

29,058

 

 

 

193,538

Inventories and parts, net

 

89,877

 

 

 

 

 

89,877

Prepaid expenses

 

166,129

 

 

 

 

 

166,129

Investments, fixed maturities and marketable equities

 

 

285,846

 

1,634,014

 

 

 

1,919,860

Investments, other

 

22,992

 

65,553

 

310,519

 

 

 

399,064

Deferred policy acquisition costs, net

 

 

 

124,767

 

 

 

124,767

Other assets

 

241,493

 

685

 

2,604

 

 

 

244,782

Related party assets

 

40,003

 

6,959

 

18,334

 

(32,020)

(c)

 

33,276

 

 

1,327,328

 

465,364

 

2,170,009

 

(32,020)

 

 

3,930,681

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

544,151

 

 

 

(544,151)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

827,649

 

 

 

 

 

827,649

Buildings and improvements

 

3,140,713

 

 

 

 

 

3,140,713

Furniture and equipment

 

632,803

 

 

 

 

 

632,803

Rental trailers and other rental equipment

 

545,968

 

 

 

 

 

545,968

Rental trucks

 

4,390,750

 

 

 

 

 

4,390,750

 

 

9,537,883

 

 

 

 

 

9,537,883

Less:  Accumulated depreciation

 

(2,721,142)

 

 

 

 

 

(2,721,142)

Total property, plant and equipment

 

6,816,741

 

 

 

 

 

6,816,741

Total assets

$

8,688,220

$

465,364

$

2,170,009

$

(576,171)

 

$

10,747,422

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

(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, 2018 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

506,158

$

2,582

$

2,375

$

 

$

511,115

Notes, loans and leases payable, net

 

3,513,076

 

 

 

 

 

3,513,076

Policy benefits and losses, claims and loss expenses payable

 

568,456

 

234,359

 

445,218

 

 

 

1,248,033

Liabilities from investment contracts

 

 

 

1,364,066

 

 

 

1,364,066

Other policyholders' funds and liabilities

 

 

5,377

 

4,663

 

 

 

10,040

Deferred income

 

34,276

 

 

 

 

 

34,276

Deferred income taxes, net

 

629,389

 

8,927

 

19,792

 

 

 

658,108

Related party liabilities

 

28,157

 

2,870

 

993

 

(32,020)

(c)

 

Total liabilities

 

5,279,512

 

254,115

 

1,837,107

 

(32,020)

 

 

7,338,714

 

 

 

 

 

 

 

 

 

 

 

 

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

 

452,956

 

91,120

 

26,271

 

(117,601)

(b)

 

452,746

Accumulated other comprehensive income (loss)

 

(4,623)

 

16,526

 

35,982

 

(52,508)

(b)

 

(4,623)

Retained earnings

 

3,635,351

 

100,302

 

268,149

 

(368,241)

(b)

 

3,635,561

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

 

(7,823)

 

 

 

 

 

(7,823)

Total stockholders' equity

 

3,408,708

 

211,249

 

332,902

 

(544,151)

 

 

3,408,708

Total liabilities and stockholders' equity

$

8,688,220

$

465,364

$

2,170,009

$

(576,171)

 

$

10,747,422

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

(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, 2018 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

717,542

$

$

$

(940)

(c)

$

716,602

Self-storage revenues

 

86,212

 

 

 

 

 

86,212

Self-moving and self-storage products and service sales

 

79,241

 

 

 

 

 

79,241

Property management fees

 

7,416

 

 

 

 

 

7,416

Life insurance premiums

 

 

 

36,888

 

 

 

36,888

Property and casualty insurance premiums

 

 

13,348

 

 

(567)

(c)

 

12,781

Net investment and interest income

 

2,563

 

2,541

 

19,917

 

(416)

(b)

 

24,605

Other revenue

 

54,911

 

 

1,058

 

(137)

(b)

 

55,832

Total revenues

 

947,885

 

15,889

 

57,863

 

(2,060)

 

 

1,019,577

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

483,620

 

8,700

 

5,873

 

(1,639)

(b,c)

 

496,554

Commission expenses

 

79,257

 

 

 

 

 

79,257

Cost of sales

 

49,881

 

 

 

 

 

49,881

Benefits and losses

 

 

4,476

 

44,078

 

 

 

48,554

Amortization of deferred policy acquisition costs

 

 

 

6,031

 

 

 

6,031

Lease expense

 

8,305

 

 

 

(136)

(b)

 

8,169

Depreciation, net of (gains) losses on disposal

 

126,427

 

 

 

 

 

126,427

Net (gains) losses on disposal of real estate

 

 

 

 

 

 

Total costs and expenses

 

747,490

 

13,176

 

55,982

 

(1,775)

 

 

814,873

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

200,395

 

2,713

 

1,881

 

(285)

 

 

204,704

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

3,656

 

 

 

(3,656)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

204,051

 

2,713

 

1,881

 

(3,941)

 

 

204,704

Other components of net periodic benefit costs

 

(253)

 

 

 

 

 

(253)

Interest expense

 

(35,539)

 

 

 

285

(b)

 

(35,254)

Pretax earnings

 

168,259

 

2,713

 

1,881

 

(3,656)

 

 

169,197

Income tax expense

 

(40,410)

 

(545)

 

(393)

 

 

 

(41,348)

Earnings available to common shareholders

$

127,849

$

2,168

$

1,488

$

(3,656)

 

$

127,849

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances for the quarter ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Consolidating statements of operations by industry for the quarter ended June 30, 2017 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues: