UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2023
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 001-11255
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State or other jurisdiction of incorporation or organization | Registrant, State of Incorporation, Address and Telephone Number | I.R.S. Employer Identification No. |
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Nevada |
| 88-0106815 |
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U-Haul Holding Company
(A Nevada Corporation) |
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| 5555 Kietzke Lane Suite 100 |
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| Reno, Nevada 89511 |
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| Telephone (775) 688-6300 |
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| N/A |
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) | ||
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $0.25 par value | UHAL | New York Stock Exchange |
Series N Non-Voting Common Stock, $0.001 par value | UHAL.B | New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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 ☒ Accelerated Filer ☐
Non-accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
19,607,788 shares of Common Stock, $0.25 par value, were outstanding as of November 3, 2023.
176,470,092 shares of Series N Non-Voting Common Stock, $0.001 par value, were outstanding as of November 3, 2023.
TABLE OF CONTENTS
Part i Financial information
Item 1. Financial Statements
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED balance sheets
|
| September 30, |
| March 31, |
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| 2023 |
| 2023 |
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| (Unaudited) | ||
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| (In thousands, except share data) | ||
ASSETS |
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Cash and cash equivalents | $ | 2,145,131 | $ | 2,060,524 |
Reinsurance recoverables and trade receivables, net |
| 212,565 |
| 189,498 |
Inventories and parts |
| 161,535 |
| 151,474 |
Prepaid expenses |
| 263,541 |
| 241,711 |
Investments, fixed maturities and marketable equities |
| 2,534,164 |
| 2,770,394 |
Investments, other |
| 650,151 |
| 575,540 |
Deferred policy acquisition costs, net |
| 121,365 |
| 128,463 |
Other assets |
| 52,769 |
| 51,052 |
Right of use assets - financing, net |
| 377,733 |
| 474,765 |
Right of use assets - operating, net |
| 65,316 |
| 58,917 |
Related party assets |
| 40,140 |
| 48,308 |
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| 6,624,410 |
| 6,750,646 |
Property, plant and equipment, at cost: |
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Land |
| 1,613,871 |
| 1,537,206 |
Buildings and improvements |
| 7,649,849 |
| 7,088,810 |
Furniture and equipment |
| 966,211 |
| 928,241 |
Rental trailers and other rental equipment |
| 912,046 |
| 827,696 |
Rental trucks |
| 5,921,507 |
| 5,278,340 |
|
| 17,063,484 |
| 15,660,293 |
Less: Accumulated depreciation |
| (4,666,444) |
| (4,310,205) |
Total property, plant and equipment, net |
| 12,397,040 |
| 11,350,088 |
Total assets | $ | 19,021,450 | $ | 18,100,734 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
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Liabilities: |
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Accounts payable and accrued expenses | $ | 757,988 | $ | 761,039 |
Notes, loans and finance leases payable, net |
| 6,400,899 |
| 6,108,042 |
Operating lease liabilities |
| 64,580 |
| 58,373 |
Policy benefits and losses, claims and loss expenses payable |
| 865,397 |
| 880,202 |
Liabilities from investment contracts |
| 2,393,590 |
| 2,398,884 |
Other policyholders' funds and liabilities |
| 7,677 |
| 8,232 |
Deferred income |
| 56,821 |
| 52,282 |
Deferred income taxes, net |
| 1,444,120 |
| 1,329,489 |
Total liabilities |
| 11,991,072 |
| 11,596,543 |
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Commitments and contingencies (notes 4 and 9) |
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Stockholders' equity: |
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Series preferred stock, with or without par value, 50,000,000 shares authorized: |
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Series A preferred stock, with no par value, 6,100,000 shares authorized; |
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6,100,000 shares issued and none outstanding |
| – |
| – |
Series B preferred stock, with no par value, 100,000 shares authorized; none |
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issued and outstanding |
| – |
| – |
Serial common stock, with or without par value, 250,000,000 shares authorized: |
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Serial common stock of $0.25 par value, 10,000,000 shares authorized; |
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none issued and outstanding |
| – |
| – |
Common stock, with $0.25 par value, 250,000,000 shares authorized: |
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Common stock of $0.25 par value, 250,000,000 shares authorized; 41,985,700 |
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issued and 19,607,788 outstanding |
| 10,497 |
| 10,497 |
Series N Non-Voting Common Stock with $0.001 par value, 250,000,000 shares authorized |
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Series N Non-Voting Common Stock, with $0.001 par value, 250,000,000 shares authorized; |
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176,470,092 shares issued and outstanding |
| 176 |
| 176 |
Additional paid-in capital |
| 453,643 |
| 453,643 |
Accumulated other comprehensive loss |
| (275,664) |
| (285,623) |
Retained earnings |
| 7,519,376 |
| 7,003,148 |
Cost of common stock in treasury, net (22,377,912 shares) |
| (525,653) |
| (525,653) |
Cost of preferred stock in treasury, net (6,100,000 shares) |
| (151,997) |
| (151,997) |
Total stockholders' equity |
| 7,030,378 |
| 6,504,191 |
Total liabilities and stockholders' equity | $ | 19,021,450 | $ | 18,100,734 |
The accompanying notes are an integral part of these consolidated financial statements.
1
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED Statements of operations
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| Quarter Ended September 30, | ||
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| 2023 |
| 2022 |
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| (Unaudited) | ||
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| (In thousands, except share and per share amounts) | ||
Revenues: |
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Self-moving equipment rentals | $ | 1,069,405 | $ | 1,162,025 |
Self-storage revenues |
| 208,890 |
| 185,586 |
Self-moving and self-storage products and service sales |
| 91,571 |
| 96,864 |
Property management fees |
| 9,267 |
| 9,277 |
Life insurance premiums |
| 22,498 |
| 25,456 |
Property and casualty insurance premiums |
| 25,571 |
| 25,718 |
Net investment and interest income |
| 64,738 |
| 30,509 |
Other revenue |
| 157,920 |
| 167,429 |
Total revenues |
| 1,649,860 |
| 1,702,864 |
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Costs and expenses: |
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Operating expenses |
| 835,258 |
| 811,594 |
Commission expenses |
| 111,961 |
| 125,341 |
Cost of sales |
| 66,620 |
| 72,625 |
Benefits and losses |
| 42,553 |
| 39,512 |
Amortization of deferred policy acquisition costs |
| 6,826 |
| 6,972 |
Lease expense |
| 8,450 |
| 7,684 |
Depreciation, net of gains on disposal ($46,803 and $64,342 respectively) |
| 154,122 |
| 117,318 |
Net losses on disposal of real estate |
| 1,715 |
| 1,872 |
Total costs and expenses |
| 1,227,505 |
| 1,182,918 |
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Earnings from operations |
| 422,355 |
| 519,946 |
Other components of net periodic benefit costs |
| (364) |
| (304) |
Interest expense |
| (63,943) |
| (57,193) |
Fees on early extinguishment of debt |
| – |
| (959) |
Pretax earnings |
| 358,048 |
| 461,490 |
Income tax expense |
| (84,540) |
| (111,624) |
Net earnings available to common stockholders | $ | 273,508 | $ | 349,866 |
Basic and diluted earnings per share of Common Stock | $ | 1.36 | $ | 2.23 |
Weighted average shares outstanding of Common Stock: Basic and diluted |
| 19,607,788 |
| 19,607,788 |
Basic and diluted earnings per share of Series N Non-Voting Common Stock | $ | 1.40 | $ | 1.73 |
Weighted average shares outstanding of Series N Non-Voting Common Stock: Basic and diluted |
| 176,470,092 |
| 176,470,092 |
Related party revenues for the second quarter of fiscal 2024 and 2023, net of eliminations, were $9.3 million and $9.3 million, respectively.
Related party costs and expenses for the second quarter of fiscal 2024 and 2023, net of eliminations, were $25.6 million and $27.0 million, respectively.
Please see Note 10, Related Party Transactions, of the Notes to Consolidated Financial Statements for more information on the related party revenues and costs and expenses.
The accompanying notes are an integral part of these consolidated financial statements.
2
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED Statements of operations
|
| Six Months Ended September 30, | ||
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| 2023 |
| 2022 |
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| (Unaudited) | ||
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| (In thousands, except share and per share amounts) | ||
Revenues: |
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Self-moving equipment rentals | $ | 2,068,611 | $ | 2,252,800 |
Self-storage revenues |
| 407,851 |
| 358,763 |
Self-moving and self-storage products and service sales |
| 192,443 |
| 206,215 |
Property management fees |
| 18,444 |
| 18,416 |
Life insurance premiums |
| 45,629 |
| 51,237 |
Property and casualty insurance premiums |
| 45,893 |
| 45,690 |
Net investment and interest income |
| 129,330 |
| 64,082 |
Other revenue |
| 281,967 |
| 303,501 |
Total revenues |
| 3,190,168 |
| 3,300,704 |
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Costs and expenses: |
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Operating expenses |
| 1,598,499 |
| 1,544,761 |
Commission expenses |
| 218,888 |
| 243,834 |
Cost of sales |
| 137,295 |
| 152,296 |
Benefits and losses |
| 87,897 |
| 79,269 |
Amortization of deferred policy acquisition costs |
| 14,871 |
| 14,644 |
Lease expense |
| 16,033 |
| 15,159 |
Depreciation, net of gains on disposal ($102,464 and $128,690 respectively) |
| 291,936 |
| 231,114 |
Net losses on disposal of real estate |
| 2,736 |
| 4,179 |
Total costs and expenses |
| 2,368,155 |
| 2,285,256 |
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Earnings from operations |
| 822,013 |
| 1,015,448 |
Other components of net periodic benefit costs |
| (729) |
| (608) |
Interest expense |
| (124,541) |
| (106,992) |
Fees on early extinguishment of debt |
| – |
| (959) |
Pretax earnings |
| 696,743 |
| 906,889 |
Income tax expense |
| (166,397) |
| (218,678) |
Net earnings available to common stockholders | $ | 530,346 | $ | 688,211 |
Basic and diluted earnings per common share | $ | 2.63 | $ | 4.41 |
Weighted average common shares outstanding: Basic and diluted |
| 19,607,788 |
| 19,607,788 |
Basic and diluted earnings per share of Series N Non-Voting Common Stock | $ | 2.71 | $ | 3.41 |
Weighted average shares outstanding of Series N Non-Voting Common Stock: Basic and diluted |
| 176,470,092 |
| 176,470,092 |
Related party revenues for the first six months of fiscal 2024 and 2023, net of eliminations, were $18.4 million and $18.4 million, respectively.
Related party costs and expenses for the first six months of fiscal 2024 and 2023, net of eliminations, were $49.3 million and $52.5 million, respectively.
Please see Note 10, Related Party Transactions, of the Notes to Consolidated Financial Statements for more information on the related party revenues and costs and expenses.
The accompanying notes are an integral part of these consolidated financial statements.
3
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
consolidatED statements of COMPREHENSIVE INCOME (loss)
Quarter Ended September 30, 2023 |
| Pre-tax |
| Tax |
| Net |
|
| (Unaudited) | ||||
|
| (In thousands) | ||||
Comprehensive income: |
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|
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Net earnings | $ | 358,048 | $ | (84,540) | $ | 273,508 |
Other comprehensive income (loss): |
|
|
|
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Foreign currency translation |
| (2,849) |
| – |
| (2,849) |
Unrealized net loss on investments and impact of LFPB discount rates |
| (16,867) |
| 3,570 |
| (13,297) |
Change in fair value of cash flow hedges |
| 4,418 |
| (1,085) |
| 3,333 |
Amounts reclassified into earnings on hedging activities |
| (1,345) |
| 330 |
| (1,015) |
Total other comprehensive income (loss) |
| (16,643) |
| 2,815 |
| (13,828) |
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Total comprehensive income | $ | 341,405 | $ | (81,725) | $ | 259,680 |
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Quarter Ended September 30, 2022 |
| Pre-tax |
| Tax |
| Net |
|
| (Unaudited) | ||||
|
| (In thousands) | ||||
Comprehensive income: |
|
|
|
|
|
|
Net earnings | $ | 461,490 | $ | (111,624) | $ | 349,866 |
Other comprehensive income (loss): |
|
|
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Foreign currency translation |
| (739) |
| – |
| (739) |
Unrealized net loss on investments and impact of LFPB discount rates |
| (137,836) |
| 29,392 |
| (108,444) |
Change in fair value of cash flow hedges |
| 8,336 |
| (2,047) |
| 6,289 |
Amounts reclassified into earnings on hedging activities |
| 24 |
| (5) |
| 19 |
Total other comprehensive income (loss) |
| (130,215) |
| 27,340 |
| (102,875) |
|
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|
|
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|
|
Total comprehensive income | $ | 331,275 | $ | (84,284) | $ | 246,991 |
Six Months Ended September 30, 2023 |
| Pre-tax |
| Tax |
| Net |
|
| (Unaudited) | ||||
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| (In thousands) | ||||
Comprehensive income: |
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Net earnings | $ | 696,743 | $ | (166,397) | $ | 530,346 |
Other comprehensive income (loss): |
|
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Foreign currency translation |
| (2,380) |
| – |
| (2,380) |
Unrealized net gain on investments and impact of LFPB discount rates |
| 8,676 |
| (1,629) |
| 7,047 |
Change in fair value of cash flow hedges |
| 9,511 |
| (2,336) |
| 7,175 |
Amounts reclassified into earnings on hedging activities |
| (2,495) |
| 612 |
| (1,883) |
Total other comprehensive income (loss) |
| 13,312 |
| (3,353) |
| 9,959 |
|
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Total comprehensive income | $ | 710,055 | $ | (169,750) | $ | 540,305 |
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Six Months Ended September 30, 2022 |
| Pre-tax |
| Tax |
| Net |
|
| (Unaudited) | ||||
|
| (In thousands) | ||||
Comprehensive income: |
|
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Net earnings | $ | 906,889 | $ | (218,678) | $ | 688,211 |
Other comprehensive income (loss): |
|
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Foreign currency translation |
| (542) |
| – |
| (542) |
Unrealized net loss on investments and impact of LFPB discount rates |
| (310,882) |
| 66,056 |
| (244,826) |
Change in fair value of cash flow hedges |
| 8,506 |
| (2,089) |
| 6,417 |
Amounts reclassified into earnings on hedging activities |
| 590 |
| (144) |
| 446 |
Total other comprehensive income (loss) |
| (302,328) |
| 63,823 |
| (238,505) |
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Total comprehensive income | $ | 604,561 | $ | (154,855) | $ | 449,706 |
The accompanying notes are an integral part of these consolidated financial statements.
4
U-Haul Holding Company and consolidated subsidiaries
consolidated statements of changes in stockholders’ equity
|
| Common Stock |
| Series N Non-Voting Common Stock |
| Additional Paid-In Capital |
| Accumulated Other Comprehensive Income (Loss) |
| Retained Earnings |
| Less: Treasury Common Stock |
| Less: Treasury Preferred Stock |
| Total Stockholders' Equity |
| (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
Balance as of June 30, 2023 | $ | 10,497 | $ | 176 | $ | 453,643 | $ | (261,836) | $ | 7,252,927 | $ | (525,653) | $ | (151,997) | $ | 6,777,757 |
Foreign currency translation |
| – |
| – |
| – |
| (2,849) |
| – |
| – |
| – |
| (2,849) |
Unrealized net loss on investments and impact of LFPB discount rates, net of tax |
| – |
| – |
| – |
| (13,297) |
| – |
| – |
| – |
| (13,297) |
Change in fair value of cash flow hedges, net of tax |
| – |
| – |
| – |
| 3,333 |
| – |
| – |
| – |
| 3,333 |
Amounts reclassified into earnings on hedging activities |
| – |
| – |
| – |
| (1,015) |
| – |
| – |
| – |
| (1,015) |
Net earnings |
| – |
| – |
| – |
| – |
| 273,508 |
| – |
| – |
| 273,508 |
Series N Non-Voting Common Stock dividends: ($0.04 per share) |
| – |
| – |
| – |
| – |
| (7,059) |
| – |
| – |
| (7,059) |
Net activity |
| – |
| – |
| – |
| (13,828) |
| 266,449 |
| – |
| – |
| 252,621 |
Balance as of September 30, 2023 | $ | 10,497 | $ | 176 | $ | 453,643 | $ | (275,664) | $ | 7,519,376 | $ | (525,653) |
| (151,997) | $ | 7,030,378 |
|
|
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|
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|
|
Balance as of June 30, 2022 | $ | 10,497 | $ | – | $ | 453,819 | $ | (140,622) | $ | 6,440,942 | $ | (525,653) | $ | (151,997) | $ | 6,086,986 |
Foreign currency translation |
| – |
| – |
| – |
| (739) |
| – |
| – |
| – |
| (739) |
Unrealized net loss on investments and impact of LFPB discount rates, net of tax |
| – |
| – |
| – |
| (108,444) |
| – |
| – |
| – |
| (108,444) |
Change in fair value of cash flow hedges, net of tax |
| – |
| – |
| – |
| 6,289 |
| – |
| – |
| – |
| 6,289 |
Amounts reclassified into earnings on hedging activities |
| – |
| – |
| – |
| 19 |
| – |
| – |
| – |
| 19 |
Net earnings |
| – |
| – |
| – |
| – |
| 349,866 |
| – |
| – |
| 349,866 |
Common stock dividends: ($0.50 per share) |
| – |
| – |
| – |
| – |
| (9,804) |
| – |
| – |
| (9,804) |
Net activity |
| – |
| – |
| – |
| (102,875) |
| 340,062 |
| – |
| – |
| 237,187 |
Balance as of September 30, 2022 | $ | 10,497 | $ | – | $ | 453,819 | $ | (243,497) | $ | 6,781,004 | $ | (525,653) | $ | (151,997) | $ | 6,324,173 |
The accompanying notes are an integral part of these consolidated financial statements.
5
U-Haul Holding Company and consolidated subsidiaries
consolidated statements of changes in stockholders’ equity
|
| Common Stock |
| Series N Non-Voting Common Stock |
| Additional Paid-In Capital |
| Accumulated Other Comprehensive Income (Loss) |
| Retained Earnings |
| Less: Treasury Common Stock |
| Less: Treasury Preferred Stock |
| Total Stockholders' Equity |
| (Unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
Balance as of March 31, 2023 | $ | 10,497 | $ | 176 | $ | 453,643 | $ | (285,623) | $ | 7,003,148 | $ | (525,653) | $ | (151,997) | $ | 6,504,191 |
Foreign currency translation |
| – |
| – |
| – |
| (2,380) |
| – |
| – |
| – |
| (2,380) |
Unrealized net gain on investments and impact of LFPB discount rates, net of tax |
| – |
| – |
| – |
| 7,047 |
| – |
| – |
| – |
| 7,047 |
Change in fair value of cash flow hedges, net of tax |
| – |
| – |
| – |
| 7,175 |
| – |
| – |
| – |
| 7,175 |
Amounts reclassified into earnings on hedging activities |
| – |
| – |
| – |
| (1,883) |
| – |
| – |
| – |
| (1,883) |
Net earnings |
| – |
| – |
| – |
| – |
| 530,346 |
| – |
| – |
| 530,346 |
Series N Non-Voting Common Stock dividends: ($0.08) |
| – |
| – |
| – |
| – |
| (14,118) |
| – |
| – |
| (14,118) |
Net activity |
| – |
| – |
| – |
| 9,959 |
| 516,228 |
| – |
| – |
| 526,187 |
Balance as of September 30, 2023 | $ | 10,497 | $ | 176 |
| 453,643 | $ | (275,664) | $ | 7,519,376 | $ | (525,653) |
| (151,997) | $ | 7,030,378 |
|
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Balance as of March 31, 2022 | $ | 10,497 | $ | – | $ | 453,819 | $ | (4,992) | $ | 6,112,401 | $ | (525,653) | $ | (151,997) | $ | 5,894,075 |
Foreign currency translation |
| – |
| – |
| – |
| (542) |
| – |
| – |
| – |
| (542) |
Unrealized net loss on investments and impact of LFPB discount rates, net of tax |
| – |
| – |
| – |
| (244,826) |
| – |
| – |
| – |
| (244,826) |
Change in fair value of cash flow hedges, net of tax |
| – |
| – |
| – |
| 6,417 |
| – |
| – |
| – |
| 6,417 |
Amounts reclassified into earnings on hedging activities |
| – |
| – |
| – |
| 446 |
| – |
| – |
| – |
| 446 |
Net earnings |
| – |
| – |
| – |
| – |
| 688,211 |
| – |
| – |
| 688,211 |
Common stock dividends: ($1.00 per share) |
| – |
| – |
| – |
| – |
| (19,608) |
| – |
| – |
| (19,608) |
Net activity |
| – |
| – |
| – |
| (238,505) |
| 668,603 |
| – |
| – |
| 430,098 |
Balance as of September 30, 2022 | $ | 10,497 | $ | – | $ | 453,819 | $ | (243,497) | $ | 6,781,004 | $ | (525,653) | $ | (151,997) | $ | 6,324,173 |
The accompanying notes are an integral part of these consolidated financial statements.
6
U-Haul holding company AND CONSOLIDATED subsidiaries
consolidatED statements of cash flows
|
| Six Months Ended September 30, | ||
|
| 2023 |
| 2022 |
|
| (Unaudited) | ||
|
| (In thousands) | ||
Cash flows from operating activities: |
|
|
|
|
Net earnings | $ | 530,346 | $ | 688,211 |
Adjustments to reconcile net earnings to cash provided by operations: |
|
|
|
|
Depreciation |
| 394,400 |
| 359,804 |
Amortization of deferred policy acquisition costs |
| 14,871 |
| 14,644 |
Amortization of premiums and accretion of discounts related to investments, net |
| 8,441 |
| 10,249 |
Amortization of debt issuance costs |
| 3,427 |
| 3,356 |
Interest credited to policyholders |
| 36,329 |
| 24,690 |
Provision for allowance (recoveries) for losses on trade receivables, net |
| 578 |
| (5,494) |
Provision for allowance for inventories and parts reserves |
| 3,461 |
| 7,125 |
Net gains on disposal of personal property |
| (102,464) |
| (128,690) |
Net losses on disposal of real estate |
| 2,736 |
| 4,179 |
Net (gains) losses on sales of investments |
| (917) |
| 7,207 |
Net (gains) losses on equity securities |
| (2,745) |
| 7,963 |
Deferred income taxes |
| 107,751 |
| 103,828 |
Net change in other operating assets and liabilities: |
|
|
|
|
Reinsurance recoverables and trade receivables |
| (23,402) |
| 32,342 |
Inventories and parts |
| (13,520) |
| (14,416) |
Prepaid expenses |
| (21,824) |
| 3 |
Capitalization of deferred policy acquisition costs |
| (7,773) |
| (14,900) |
Other assets and right-of-use assets operating, net |
| (8,751) |
| 2,432 |
Related party assets |
| 7,403 |
| (1,640) |
Accounts payable and accrued expenses |
| 23,248 |
| 64,297 |
Policy benefits and losses, claims and loss expenses payable and operating lease liabilities |
| (18,553) |
| 11,460 |
Other policyholders' funds and liabilities |
| (554) |
| 1,314 |
Deferred income |
| 4,115 |
| 9,458 |
Related party liabilities |
| 828 |
| 742 |
Net cash provided by operating activities |
| 937,431 |
| 1,188,164 |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Escrow deposits |
| 573 |
| 9,688 |
Purchases of: |
|
|
|
|
Property, plant and equipment |
| (1,664,387) |
| (1,335,528) |
Short term investments |
| (44,903) |
| (36,173) |
Fixed maturities investments |
| (106,777) |
| (202,265) |
Equity securities |
| (309) |
| (4,356) |
Real estate investments |
| (537) |
| (4,931) |
Mortgage loans |
| (97,702) |
| (75,635) |
Proceeds from sales and paydowns of: |
|
|
|
|
Property, plant and equipment |
| 408,279 |
| 329,611 |
Short term investments |
| 15,959 |
| 33,373 |
Fixed maturities investments |
| 389,216 |
| 106,527 |
Equity securities |
| 300 |
| 717 |
Preferred stock |
| 913 |
| – |
Mortgage loans |
| 13,049 |
| 74,165 |
Net cash used by investing activities |
| (1,086,326) |
| (1,104,807) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Borrowings from credit facilities |
| 704,960 |
| 792,654 |
Principal repayments on credit facilities |
| (351,893) |
| (441,019) |
Payment of debt issuance costs |
| (4,018) |
| (3,942) |
Finance lease payments |
| (59,752) |
| (65,831) |
Securitization deposits |
| 151 |
| 49 |
Common stock dividends paid |
| – |
| (19,608) |
Series N Non-Voting Common Stock dividends paid |
| (14,118) |
| – |
Investment contract deposits |
| 132,630 |
| 169,017 |
Investment contract withdrawals |
| (174,256) |
| (139,917) |
Net cash provided by financing activities |
| 233,704 |
| 291,403 |
|
|
|
|
|
Effects of exchange rate on cash |
| (202) |
| (13,782) |
|
|
|
|
|
Increase in cash and cash equivalents |
| 84,607 |
| 360,978 |
Cash and cash equivalents at the beginning of period |
| 2,060,524 |
| 2,704,137 |
Cash and cash equivalents at the end of period | $ | 2,145,131 | $ | 3,065,115 |
The accompanying notes are an integral part of these consolidated financial statements.
7
1.Basis of Presentation
U-Haul Holding Company, a Nevada corporation (“U-Haul Holding Company”), has a second fiscal quarter that ends on the 30th of September for each year that is referenced. Our insurance company subsidiaries have a second quarter that ends on the 30th of June 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 consolidated financial position or consolidated results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2023 and 2022 correspond to fiscal 2024 and 2023 for U-Haul Holding Company.
Accounts denominated in non-U.S. currencies have been translated into U.S. dollars.
The accompanying interim consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with the accounting principles generally accepted in the United States of America (“GAAP”). Interim results are not necessarily indicative of full year performance. Except for balances affected by the adoption of Accounting Standards Update (“ASU”) 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”) noted below, the year-end consolidated balance sheet data was derived from audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, which include all disclosures required by GAAP. Therefore, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
In our opinion, all adjustments necessary for the fair presentation of such consolidated financial statements have been included. Such adjustments consist only of normal recurring items.
Intercompany accounts and transactions have been eliminated.
Tax regulations may require items to be included in our tax return at different times than when those items are reflected in our financial statements. Some of the differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as an expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is more likely than not to allow for the use of the deduction credit. Our effective tax rates for the six months ended September 30, 2023 and 2022 was a provision of 23.9% and 24.17%, respectively. Such rates differed from the Federal Statutory rate of 21.0% primarily due to state and local income taxes for both periods.
Description of Legal Entities
U-Haul Holding Company 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 U-Haul Holding Company and all of its legal subsidiaries.
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description of Operating Segments
U-Haul Holding Company has three (3) reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.
The Moving and Storage operating segment (“Moving and Storage”) includes U-Haul Holding Company, U-Haul and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, and the rental of fixed and portable moving and storage units to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.
The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Repwest and its wholly owned subsidiaries and ARCOA Risk Retention Group (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul® through regional offices in the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove®, Safetow®, Safemove Plus®, Safestor® and Safestor Mobile® protection packages to U-Haul customers. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul-related programs. ARCOA is a group captive insurer owned by us and our wholly owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.
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.
Accounting Policy Updates:
The following accounting policies were updated since the filing of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 due to the adoption of ASU 2018-12. Please refer to Note 17, Accounting Pronouncements for additional information on the financial statement impacts related to the adoption of this standard.
Deferred Policy Acquisition Costs
Certain costs of acquiring new insurance business are deferred and recorded as an asset. These costs are capitalized on a grouped contract basis and amortized over the expected term of the related contracts and are essential for the acquisition of new insurance business. Deferred acquisition costs (“DAC“) are directly related to the successful issuance of an insurance contract, and primarily include sales commissions, policy issue costs, direct to consumer advertising costs, and underwriting costs. Additionally, DAC includes the value of business acquired (“VOBA“), which are the costs of acquiring blocks of insurance from other companies or through the acquisition of other companies. These costs represent the difference between the fair value of the contractual insurance assets acquired and liabilities assumed, compared against the assets and liabilities for insurance contracts that the Company issues or holds measured in accordance with GAAP.
DAC is amortized on a constant-level basis over the expected term of the grouped contracts, with the related expense included in amortization of deferred acquisition costs. The in-force metric used to compute the DAC amortization rate is premium deposit in-force for deferred annuities, policy count in-force for health insurance, and face amount in-force for life insurance. The assumptions used to amortize acquisition costs include mortality, morbidity, and persistency. These assumptions are reviewed at least annually and revised in conjunction with any change in the future policy benefit assumptions. The effect of changes in the assumptions are recognized over the remaining expected contract term as a revision of future amortization amounts.
Policy Benefits and Losses, Claims and Loss Expenses Payable
The liability for future policy benefits for traditional and limited-payment long duration life and health products comprises approximately 83% of the total liability for future policy benefits. The liability is determined each reporting period based on the net level premium method. This method requires the liability
9
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for future policy benefits be calculated as the present value of estimated future policyholder benefits and the related termination expenses, less the present value of estimated future net premiums to be collected from policyholders. Net level premiums reflect a recomputed net premium ratio using actual experience since the issue date or the Transition Date of April 1, 2021 and expected future experience. The liability is accrued as premium revenue and is recognized and adjusted for differences between actual and expected experience. Long-duration insurance contracts issued by the Company are grouped into cohorts based on the contract issue year, distribution channel, legal entity and product type.
Both the present value of expected future benefit payments and the present value of expected future net premiums are based primarily on assumptions of discount rates, mortality, morbidity, lapse, and persistency. Each quarter, the Company remeasures its liability for future policy benefits using current discount rates with the effect of the change recognized in Other Comprehensive Income, a component of stockholders’ equity. In addition, the Company recognizes a liability remeasurement gain or using original discount rates, and relating to actual experience under the net premium calculation, as compared to the prior reporting period expected cash flows.
The Company reviews, and updates as necessary, its cash flow assumptions (mortality, morbidity, lapses and persistency) used to calculate the change in the liability for future policy benefits at least annually. These cash flow assumptions are reviewed at the same time every year, or more frequently, if suggested by experience. If cash flow assumptions are changed, the net premium ratio is recalculated from the original issue date, or the Transition Date, using actual experience and projected future cash flows. When the expected future net premiums exceed the expected future gross premiums, or the present value of future policyholder benefits exceeds the present value of expected future gross premiums, the liability for future policy benefits is adjusted with changes recognized in policyholder benefits. The cash flow assumptions do not include an adjustment for adverse deviation. Mortality tables used for individual life insurance include various industry tables and reflect modifications based on Company experience. Morbidity assumptions for individual health are based on Company experience and industry data. Lapse and persistency assumptions are based on Company experience.
The liability for future policy benefits is discounted as noted above, using a current upper-medium grade fixed-income instrument yield that reflects the duration characteristics of the liability for future policy benefits. The methodology for determining current discount rates consists of constructing a discount rate curve intended to be reflective of the currency and tenor of the insurance liability cash flows. The methodology is designed to prioritize observable inputs based on market data available in the local debt markets denominated in the same currency as the policies. For the discount rates applicable to tenors for which the single-A debt market is not liquid or there is little or no observable market data, the Company will use estimation techniques consistent with the fair value guidance in Accounting Standards Codification (“ASC“) 820, Fair Value Measurement. We further accrete interest as a component of policyholder benefits using the original discount rate that is locked-in during the year of contract issuance. The original discount rates (or the locked-in discount rates) are used for interest accretion purposes and for the determination of net premiums, whereas the current discount rates are used for purposes of valuing the liability.
The liability for future policy benefits for annuity and interest sensitive life-type products is represented by policy account value. For limited-payment contracts, a deferred profit liability is also recorded, with changes recognized in income over the life of the contract in proportion to the amount of insurance in-force.
2. Earnings per Share
We calculate earnings per share using the two-class method in accordance with ASC Topic 260, Earnings Per Share. The two-class method allocates the undistributed earnings available to common stockholders to the Company’s outstanding common stock, $0.25 par value (the “Voting Common Stock”) and the Series N Non-Voting Common Stock, $0.001 par value (the “Non-Voting Common Stock”) based on each share’s percentage of total weighted average shares outstanding. The Voting Common Stock and Non-Voting Common Stock are allocated 10% and 90%, respectively, of our undistributed earnings
10
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
available to common stockholders. This represents earnings available to common stockholders less the dividends declared for both the Voting Common Stock and Non-Voting Common Stock.
Our undistributed earnings per share is calculated by taking the undistributed earnings available to common stockholders and dividing this number by the weighted average shares outstanding for the respective stock. If there was a dividend declared for that period, the dividend per share is added to the undistributed earnings per share to calculate the basic and diluted earnings per share. The process is used for both Voting Common Stock and Non-Voting Common Stock.
The calculation of basic and diluted earnings per share for the quarters ended September 30, 2023 and 2022 for our Voting Common Stock and Non-Voting Common Stock were as follows:
|
| For the Quarters Ended | ||
|
| September 30, | ||
|
| 2023 | 2022 | |
|
| (Unaudited) | ||
|
| (In thousands, except share and per share amounts) | ||
|
|
|
|
|
Weighted average shares outstanding of Voting Common Stock |
| 19,607,788 |
| 19,607,788 |
Total weighted average shares outstanding for Voting Common Stock and Non-Voting Common Stock |
| 196,077,880 |
| 196,077,880 |
Percent of weighted average shares outstanding of Voting Common Stock |
| 10% |
| 10% |
|
|
|
|
|
Net earnings available to common stockholders | $ | 273,508 | $ | 349,866 |
Voting Common Stock dividends declared and paid |
| – |
| (9,804) |
Non-Voting Common Stock dividends declared and paid |
| (7,059) |
| – |
Undistributed earnings available to common stockholders | $ | 266,449 | $ | 340,062 |
Undistributed earnings available to common stockholders allocated to Voting Common Stock | $ | 26,645 | $ | 34,006 |
|
|
|
|
|
Undistributed earnings per share of Voting Common Stock | $ | 1.36 | $ | 1.73 |
Dividends declared per share of Voting Common Stock | $ | – | $ | 0.50 |
Basic and diluted earnings per share of Voting Common Stock | $ | 1.36 | $ | 2.23 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Non-Voting Common Stock |
| 176,470,092 |
| 176,470,092 |
Total weighted average shares outstanding for Voting Common Stock and Non-Voting Common Stock |
| 196,077,880 |
| 196,077,880 |
Percent of weighted average shares outstanding of Non-Voting Common Stock |
| 90% |
| 90% |
|
|
|
|
|
Net earnings available to common stockholders | $ | 273,508 | $ | 349,866 |
Voting Common Stock dividends declared and paid |
| – |
| (9,804) |
Non-Voting Common Stock dividends declared and paid |
| (7,059) |
| – |
Undistributed earnings available to common stockholders | $ | 266,449 | $ | 340,062 |
Undistributed earnings available to common stockholders allocated to Non-Voting Common Stock | $ | 239,804 | $ | 306,056 |
|
|
|
|
|
Undistributed earnings per share of Non-Voting Common Stock | $ | 1.36 | $ | 1.73 |
Dividends declared per share of Non-Voting Common Stock | $ | 0.04 | $ | – |
Basic and diluted earnings per share of Non-Voting Common Stock | $ | 1.40 | $ | 1.73 |
11
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The calculation of basic and diluted earnings per share for the six months ended September 30, 2023 and 2022 for our Voting Common Stock and Non-Voting Common Stock were as follows:
|
| For Six Months Ended | ||
|
| September 30, | ||
|
| 2023 | 2022 | |
|
| (Unaudited) | ||
|
| (In thousands, except share and per share amounts) | ||
|
|
|
|
|
Weighted average shares outstanding of Voting Common Stock |
| 19,607,788 |
| 19,607,788 |
Total weighted average shares outstanding for Voting Common Stock and Non-Voting Common Stock |
| 196,077,880 |
| 196,077,880 |
Percent of weighted average shares outstanding of Voting Common Stock |
| 10% |
| 10% |
|
|
|
|
|
Net earnings available to common stockholders | $ | 530,346 | $ | 688,211 |
Voting Common Stock dividends declared and paid |
| – |
| (19,608) |
Non-Voting Common Stock dividends declared and paid |
| (14,118) |
| – |
Undistributed earnings available to common stockholders | $ | 516,228 | $ | 668,603 |
Undistributed earnings available to common stockholders allocated to Voting Common Stock | $ | 51,623 | $ | 66,860 |
|
|
|
|
|
Undistributed earnings per share of Voting Common Stock | $ | 2.63 | $ | 3.41 |
Dividends declared per share of Voting Common Stock | $ | – | $ | 1.00 |
Basic and diluted earnings per share of Voting Common Stock | $ | 2.63 | $ | 4.41 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Non-Voting Common Stock |
| 176,470,092 |
| 176,470,092 |
Total weighted average shares outstanding for Voting Common Stock and Non-Voting Common Stock |
| 196,077,880 |
| 196,077,880 |
Percent of weighted average shares outstanding of Non-Voting Common Stock |
| 90% |
| 90% |
|
|
|
|
|
Net earnings available to common stockholders | $ | 530,346 | $ | 688,211 |
Voting Common Stock dividends declared and paid |
| – |
| (19,608) |
Non-Voting Common Stock dividends declared and paid |
| (14,118) |
| – |
Undistributed earnings available to common stockholders | $ | 516,228 | $ | 668,603 |
Undistributed earnings available to common stockholders allocated to Non-Voting Common Stock | $ | 464,605 | $ | 601,743 |
|
|
|
|
|
Undistributed earnings per share of Non-Voting Common Stock | $ | 2.63 | $ | 3.41 |
Dividends declared per share of Non-Voting Common Stock | $ | 0.08 | $ | – |
Basic and diluted earnings per share of Non-Voting Common Stock | $ | 2.71 | $ | 3.41 |
3. Investments
We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $21.2 million and $23.4 million as of September 30, 2023 and March 31, 2023, respectively.
12
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Available-for-Sale Investments
Available-for-sale investments as of September 30, 2023 were as follows:
|
| Amortized Cost |
| Gross Unrealized Gains |
| Gross Unrealized Losses More than 12 Months |
| Gross Unrealized Losses Less than 12 Months |
| Allowance for Expected Credit Losses |
| Fair Market Value |
|
| (Unaudited) | ||||||||||
|
| (In thousands) | ||||||||||
U.S. treasury securities and government obligations | $ | 172,987 | $ | 335 | $ | (2,315) | $ | (116) | $ | – | $ | 170,891 |
U.S. government agency mortgage-backed securities |
| 99,230 |
| 1 |
| (3,703) |
| (5,009) |
| – |
| 90,519 |
Obligations of states and political subdivisions |
| 154,547 |
| 441 |
| (4,261) |
| (5,064) |
| – |
| 145,663 |
Corporate securities |
| 1,817,003 |
| 983 |
| (154,177) |
| (47,305) |
| (1,697) |
| 1,614,807 |
Mortgage-backed securities |
| 514,679 |
| 206 |
| (40,394) |
| (24,243) |
| – |
| 450,248 |
| $ | 2,758,446 | $ | 1,966 | $ | (204,850) | $ | (81,737) | $ | (1,697) | $ | 2,472,128 |
Available-for-sale investments as of March 31, 2023 were as follows:
|
| Amortized Cost |
| Gross Unrealized Gains |
| Gross Unrealized Losses More than 12 Months |
| Gross Unrealized Losses Less than 12 Months |
| Allowance for Expected Credit Losses |
| Fair Market Value |
|
|
| ||||||||||
|
| (In thousands) | ||||||||||
U.S. treasury securities and government obligations | $ | 353,189 | $ | 3,061 | $ | (7,639) | $ | (3,935) | $ | – | $ | 344,676 |
U.S. government agency mortgage-backed securities |
| 34,126 |
| 40 |
| (6,707) |
| (228) |
| – |
| 27,231 |
Obligations of states and political subdivisions |
| 161,960 |
| 649 |
| (4,014) |
| (8,090) |
| – |
| 150,505 |
Corporate securities |
| 2,086,432 |
| 1,491 |
| (60,224) |
| (156,365) |
| (2,101) |
| 1,869,233 |
Mortgage-backed securities |
| 370,880 |
| 78 |
| (40,359) |
| (13,207) |
| – |
| 317,392 |
| $ | 3,006,587 | $ | 5,319 | $ | (118,943) | $ | (181,825) | $ | (2,101) | $ | 2,709,037 |
We sold available-for-sale securities with a fair value of $165.4 million and $105.5 million during the first six months of fiscal 2024 and 2023, respectively. The gross realized gains on these sales totaled $1.5 million and $0.8 million during the first six months of fiscal 2024 and 2023, respectively. The gross realized losses on these sales totaled $1.1 million and $0.3 million during the first six months of fiscal 2024 and 2023, respectively. In the first six months of fiscal 2024, we received $225.0 million from the Moving and Storage Treasuries that matured.
For available-for-sale debt securities in an unrealized loss position, we first assess whether the security is below investment grade. For securities that are below investment grade, we evaluate whether the decline in fair value has resulted from credit losses or other factors such as the interest rate environment. Declines in value due to credit are recognized as an allowance. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse market conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, cumulative default rates based on ratings are used to determine the potential cost of default, by year. The present value of these potential costs is then compared to the amortized cost of the security to determine the credit loss, limited by the amount that the fair value is less than the amortized cost basis.
Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through accumulated other comprehensive income, net of applicable taxes. If we intend to sell a security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental
13
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. There was a ($0.4) million and $1.9 million net impairment charge recorded in the first six months ended September 30, 2023 and 2022, respectively.
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.
The adjusted cost and estimated market value of available-for-sale investments by contractual maturity were as follows:
|
| September 30, 2023 |
| March 31, 2023 | ||||
|
| Amortized Cost |
| Fair Market Value |
| Amortized Cost |
| Fair Market Value |
|
| (Unaudited) |
|
| ||||
|
| (In thousands) | ||||||
Due in one year or less | $ | 251,106 | $ | 249,366 | $ | 354,875 | $ | 354,184 |
Due after one year through five years |
| 599,626 |
| 569,012 |
| 754,175 |
| 717,552 |
Due after five years through ten years |
| 659,400 |
| 590,567 |
| 736,089 |
| 665,708 |
Due after ten years |
| 733,486 |
| 612,788 |
| 790,568 |
| 654,201 |
|
| 2,243,618 |
| 2,021,733 |
| 2,635,707 |
| 2,391,645 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
| 514,828 |
| 450,395 |
| 370,880 |
| 317,392 |
| $ | 2,758,446 | $ | 2,472,128 | $ | 3,006,587 | $ | 2,709,037 |
Equity investments of common stock and non-redeemable preferred stock were as follows:
|
| September 30, 2023 |
| March 31, 2023 | ||||
|
| Amortized Cost |
| Fair Market Value |
| Amortized Cost |
| Fair Market Value |
|
| (Unaudited) |
|
|
|
| ||
|
| (In thousands) | ||||||
|
|
|
|
|
|
|
|
|
Common stocks | $ | 29,602 | $ | 42,045 | $ | 29,577 | $ | 39,375 |
Non-redeemable preferred stocks |
| 25,144 |
| 19,991 |
| 26,054 |
| 21,982 |
| $ | 54,746 | $ | 62,036 | $ | 55,631 | $ | 61,357 |
Investments, other
The carrying value of the other investments was as follows:
|
| September 30, |
| March 31, |
|
| 2023 |
| 2023 |
|
| (Unaudited) |
|
|
|
| (In thousands) | ||
|
|
|
|
|
Mortgage loans, net | $ | 550,913 | $ | 466,531 |
Short-term investments |
| – |
| 15,921 |
Real estate |
| 72,036 |
| 72,178 |
Policy loans |
| 10,986 |
| 10,921 |
Other equity investments |
| 16,216 |
| 9,989 |
| $ | 650,151 | $ | 575,540 |
14
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes, Loans and Finance Leases Payable, net
Long Term Debt
Long term debt was as follows:
| Fiscal Year 2024 Interest Rates |
|
| Maturities |
| Weighted Avg Interest Rates (c) |
| September 30, 2023 |
| March 31, 2023 | ||||||
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
|
| |||
|
|
|
|
|
|
|
|
|
|
| (In thousands) | |||||
Real estate loans (amortizing term) (a) | 4.30 | % | - | 6.80 | % |
| 2027 | - | 2037 |
| 5.89 | % | $ | 283,707 | $ | 289,647 |
Senior mortgages | 2.70 | % | - | 5.66 | % |
| 2024 | - | 2042 |
| 4.18 | % |
| 2,487,320 |
| 2,371,231 |
Real estate loans (revolving credit) | - | % | - | - | % |
| - | - | 2027 |
| - | % |
| – |
| – |
Fleet loans (amortizing term) | 1.61 | % | - | 5.68 | % |
| 2024 | - | 2029 |
| 3.76 | % |
| 90,071 |
| 111,856 |
Fleet loans (revolving credit) (b) | 2.36 | % | - | 6.68 | % |
| 2026 | - | 2028 |
| 5.97 | % |
| 593,889 |
| 615,000 |
Finance leases (rental equipment) | 2.39 | % | - | 5.01 | % |
| 2023 | - | 2026 |
| 4.00 | % |
| 163,453 |
| 223,205 |
Finance liabilities (rental equipment) | 1.60 | % | - | 6.48 | % |
| 2024 | - | 2031 |
| 4.38 | % |
| 1,544,608 |
| 1,255,763 |
Private placements | 2.43 | % | - | 2.88 | % |
| 2029 | - | 2035 |
| 2.65 | % |
| 1,200,000 |
| 1,200,000 |
Other obligations | 1.50 | % | - | 8.00 | % |
| 2023 | - | 2049 |
| 6.10 | % |
| 73,752 |
| 76,648 |
Notes, loans and finance leases payable |
|
|
|
|
|
|
|
|
|
|
|
| 6,436,800 |
| 6,143,350 | |
Less: Debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
| (35,901) |
| (35,308) |
Total notes, loans and finance leases payable, net |
|
|
|
|
|
|
| $ | 6,400,899 | $ | 6,108,042 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Certain loans have interest rate swaps fixing the rate for the relevant loans between 2.72% and 2.86% based on current margin. The weighted average interest rate calculation for these loans was 4.10% using the swap adjusted interest rate. |
| |||||||||||||||
(b) A loan has an interest rate swap fixing the rate $100 million of the relevant loan at 4.71% based on current margin. The weighted average interest rate calculation for these loans was 5.87% using the swap adjusted interest rate. |
| |||||||||||||||
(c) Weighted average rates as of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Backed Loans
Real Estate Loans (Amortizing Term)
Certain subsidiaries of Real Estate and U-Haul Company of Florida are borrowers under real estate loans. These loans require monthly or quarterly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans are secured by various properties owned by the borrowers. The interest rates, per the provisions of $202.1 million of these loans, are the applicable Secured Overnight Funding Rate (“SOFR”) plus the applicable margins and a credit spread adjustment of 0.10%. As of September 30, 2023, the applicable SOFR was 5.33% and applicable margin was between 0.65% and 1.38%, the sum of which, including the credit spread, was between 6.08% and 6.80%. The remaining $81.6 million of these loans was fixed with an interest rate of 4.30%. The default provisions of these real estate loans include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023.
Senior Mortgages
Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. 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. 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. We are in compliance with the covenants as of September 30, 2023. There are limited restrictions regarding our use
15
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the funds.
Real Estate Loans (Revolving Credit)
U-Haul Holding Company is a borrower under a multi-bank syndicated real estate loan. As of September 30, 2023, the maximum credit commitment is $465.0 million. As of September 30, 2023, the full capacity was available to borrow. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. If there was a loan outstanding as of September 30, 2023, the applicable SOFR would be 5.33% and applicable margin would be 1.55% the sum of which would be 6.88% This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023. There is a 0.30% fee charged for unused capacity.
Fleet Loans
Rental Truck Amortizing Loans
The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates are fixed rates. All of our rental truck amortizing loans are collateralized by the rental equipment purchased. The majority of these loans are funded at 70%, but some may be funded at 100%. U-Haul Holding Company, and in some cases U-Haul, is guarantor of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023. The net book value of the corresponding rental equipment was $202.6 million and $213.1 million as of September 30, 2023 and March 31, 2023, respectively.
Rental Truck Revolvers
Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $615.0 million. The interest rates are SOFR plus the applicable margin and a credit spread adjustment of 0.10%. As of September 30, 2023, SOFR was between 5.31% and 5.33% and the margin was between 1.15% and 1.25%, the sum of which, including the credit spread, was between 6.56% and 6.68%. Of the $593.9 million outstanding, $88.9 million was fixed with an interest rate of 2.36%. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023. These fleet loans are collateralized by the rental equipment purchased. The net book value of the corresponding rental equipment was $772.3 million and $822.0 million as of September 30, 2023 and March 31, 2023, respectively.
Finance Leases
The Finance Lease balance represents our sale-leaseback transactions of rental equipment. The agreements are generally seven (7) year terms. All of our finance leases are collateralized by our rental fleet. The net book value of the corresponding rental equipment was $377.7 million and $474.8 million as of September 30, 2023 and March 31, 2023, respectively. There were no new financing leases entered into during the first six months of fiscal 2024. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023.
16
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Finance Liabilities
Finance liabilities represent our rental equipment financing transactions, and we assess if these sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, these sale-leasebacks are accounted for as a financial liability and the leased assets are capitalized at cost. Our finance liabilities have an average term of seven (7) years. These finance liabilities are collateralized by the related assets of our rental fleet. The net book value of the corresponding rental equipment was $1,815.2 million and $1,499.1 million as of September 30, 2023 and March 31, 2023, respectively. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023.
Private Placements
In September 2021, U-Haul Holding Company entered into a note purchase agreement to issue $600.0 million of fixed rate senior unsecured notes in a private placement offering. These notes consist of four tranches each totaling $150.0 million and funded in September 2021. The fixed interest rates range between 2.43% and 2.78% with maturities between 2029 and 2033. Interest is payable semiannually. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023.
In December 2021, U-Haul Holding Company entered into a note purchase agreement to issue $600.0 million of fixed rate senior unsecured notes in a private placement offering. These notes consist of three tranches each totaling $100.0 million and two tranches each totaling $150.0 million. The fixed interest rates range between 2.55% and 2.88% with maturities between 2030 and 2035. Interest is payable semiannually. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. We are in compliance with the covenants as of September 30, 2023.
Other Obligations
In February 2011, U-Haul Holding Company and U.S. Bank Trust Company, NA, as successor in interest to U.S. Bank National Association (the “Trustee”), entered into the U-Haul Investors Club® Indenture. U-Haul Holding 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, but not limited to, certain 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 September 30, 2023, the aggregate outstanding principal balance of the U-Notes® issued was $75.4 million, of which $1.7 million is held by our insurance subsidiaries and eliminated in consolidation.
Annual Maturities of Notes, Loans and Finance Leases Payable
The annual maturities of our notes, loans and finance leases payable, before debt issuance costs, as of September 30, 2023 for the next five years and thereafter are as follows:
|
| Year Ending September 30, | ||||||||||||
|
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter |
| Total |
|
| (Unaudited) |
|
| ||||||||||
|
| (In thousands) |
|
| ||||||||||
Notes, loans and finance leases payable | $ | 657,998 | $ | 487,551 | $ | 829,219 | $ | 1,023,289 | $ | 513,160 | $ | 2,925,583 | $ | 6,436,800 |
17
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest on Borrowings
Interest Expense
Components of interest expense included the following:
|
| Quarter Ended September 30, | ||
|
| 2023 |
| 2022 |
|
| (Unaudited) | ||
|
| (In thousands) | ||
Interest expense | $ | 67,524 | $ | 57,604 |
Capitalized interest |
| (3,669) |
| (2,248) |
Amortization of transaction costs |
| 1,432 |
| 1,814 |
Interest expense resulting from cash flow hedges |
| (1,344) |
| 23 |
Total interest expense | $ | 63,943 | $ | 57,193 |
|
| Six Months Ended September 30, | ||
|
| 2023 |
| 2022 |
|
| (Unaudited) | ||
|
| (In thousands) | ||
Interest expense | $ | 131,924 | $ | 108,009 |
Capitalized interest |
| (7,732) |
| (4,866) |
Amortization of transaction costs |
| 2,843 |
| 3,260 |
Interest expense resulting from cash flow hedges |
| (2,494) |
| 589 |
Total interest expense | $ | 124,541 | $ | 106,992 |
Interest paid in cash was $74.2 million and $63.1 million for the second quarter of fiscal 2024 and 2023, respectively, and $129.7 million and $104.8 million for the first six months of fiscal 2024 and 2023, respectively. Interest paid (received) in cash on derivative contracts was ($1.3) million and $0.0 million for the second quarter of fiscal 2024 and 2023, respectively. Interest paid (received) in cash on derivative contracts was ($2.3) million and $0.6 million for the first six months of fiscal 2024 and 2023, respectively.
Interest Rates
Interest rates and Company borrowings related to our revolving credit facilities were as follows:
|
| Revolving Credit Activity |
| ||
|
| Quarter Ended September 30, |
| ||
|
| 2023 |
| 2022 |
|
|
| (Unaudited) |
| ||
|
| (In thousands, except interest rates) |
| ||
Weighted average interest rate during the quarter |
| 6.51 | % | 3.32 | % |
Interest rate at the end of the quarter |
| 6.61 | % | 3.80 | % |
Maximum amount outstanding during the quarter | $ | 605,000 | $ | 1,102,000 |
|
Average amount outstanding during the quarter | $ | 596,322 | $ | 877,522 |
|
Facility fees | $ | 306 | $ | 111 |
|
18
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| Revolving Credit Activity |
| ||
|
| Six Months Ended September 30, |
| ||
|
| 2023 |
| 2022 |
|
|
| (Unaudited) |
| ||
|
| (In thousands, except interest rates) |
| ||
Weighted average interest rate during the period |
| 6.38 | % | 2.66 | % |
Interest rate at the end of the period |
| 6.61 | % | 3.80 | % |
Maximum amount outstanding during the period | $ | 715,000 | $ | 1,105,000 |
|
Average amount outstanding during the period | $ | 628,151 | $ | 984,464 |
|
Facility fees | $ | 571 | $ | 169 |
|
5. Derivatives
We manage exposure to changes in market interest rates. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in 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 SOFR swap rates with the designated benchmark interest rate being hedged on certain of our SOFR indexed variable rate debt. The interest rate swaps effectively fix our interest payments on certain SOFR indexed variable rate debt through July 2032. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes. These fair values are determined using pricing valuation models which include broker quotes for which significant inputs are observable. They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2 in the fair value hierarchy.
The derivative fair values reflected in prepaid expense in the consolidated balance sheet were as follows:
|
| Derivatives Fair Values as of | ||
|
| September 30, 2023 |
| March 31, 2023 |
|
| (Unaudited) |
|
|
|
| (In thousands) | ||
Interest rate swaps designated as cash flow hedges: | ||||
Assets | $ | 12,328 | $ | 5,311 |
Notional amount | $ | 302,107 | $ | 206,347 |
|
| The Effect of Interest Rate Contracts on the Statements of Operations for the Quarters Ended | ||
|
| |||
|
| September 30, 2023 |
| September 30, 2022 |
|
| (Unaudited) | ||
|
| (In thousands) | ||
Gain recognized in AOCI on interest rate contracts | $ | (3,073) | $ | (8,360) |
(Gain) loss reclassified from AOCI into income | $ | 1,345 | $ | (24) |
(Gains) or losses recognized in income on interest rate derivatives are recorded as interest expense in the consolidated statements of operations. During the first six months of fiscal 2024 and 2023, we recognized an increase in the fair value of our cash flow hedges of $7.2 million and $6.4 million, respectively, net of taxes. During the first six months of fiscal 2024 and 2023, we reclassified $1.9 million and $0.4 million, respectively, from accumulated other comprehensive income (loss) (“AOCI”) to interest expense, net of tax. As of September 30, 2023, we expect to reclassify $5.7 million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.
19
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We use derivatives to economically hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contract holder based on the change in the value of the S&P 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair value on our balance sheet. These derivative instruments are included in Investments, other on the consolidated balance sheets. The fair values of these call options are determined based on quoted market prices from the relevant exchange and are classified as Level 1 in the fair value hierarchy. Net (gains) losses recognized in net investment and interest income for the first six months of June 30, 2023 and 2022 were ($4.7) million and $7.8 million, respectively.
|
| Derivatives Fair Values as of | ||
|
| September 30, 2023 |
| March 31, 2023 |
|
| (Unaudited) |
| |