Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
We begin this MD&A with the overall strategy of AMERCO, followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for fiscal 2019 compared with fiscal 2018, and for fiscal 2018 compared with fiscal 2017, which are followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources and Disclosures about Contractual Obligations and Commercial Commitments. We conclude this MD&A by discussing our outlook for fiscal 2020.
This MD&A should be read in conjunction with the other sections of this Annual Report, including Item 1: Business, Item 6: Selected Financial Data and Item 8: Financial Statements and Supplementary Data. The various sections of this MD&A contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report and particularly under the section Item 1A: Risk Factors. Our actual results may differ materially from these forward-looking statements.
AMERCO has a fiscal year that ends on the 31
st
of March for each year that is referenced. Our insurance company subsidiaries have fiscal years that end on the 31
st
of December 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 all material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2018, 2017 and 2016 correspond to fiscal 2019, 2018 and 2017 for AMERCO.
Overall Strategy
Our overall strategy is to maintain our leadership position in the North American “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul
with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence.
Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities and portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our eMove capabilities.
Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates.
Life Insurance is focused on long-term capital growth through direct writing and reinsuring of life, Medicare supplement and annuity products in the senior marketplace.
Description of Operating Segments
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.
See Note 1, Basis of Presentation, Note 21, Financial Information by Geographic Area, and Note 21A, Consolidating Financial Information by Industry Segment, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report.
Moving and Storage Operating Segment
Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul
®
throughout the United States and Canada.
With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer network, which provides added convenience for our customers and expanding the selection and availability of rental equipment to satisfy the needs of our customers.
U-Haul
®
brand self-moving related products and services, such as boxes, pads and tape allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind.
uhaul.com
®
is an online marketplace that connects consumers to our operations as well as independent Moving Help
®
service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market.
Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations has helped us to reduce our impact on the environment.
Property and Casualty Insurance Operating Segment
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. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty products in other U-Haul
®
related programs.
Life Insurance Operating Segment
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.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with the generally accepted accounting principles (“GAAP”) in the United States. The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements. Note 3, Accounting Policies, of the Notes to Consolidated Financial Statements in Item 8: Financial Statements and Supplementary Data, in this Annual Report summarizes the significant accounting policies and methods used in the preparation of our consolidated financial statements and related disclosures. Certain accounting policies require us to make difficult and subjective judgments and assumptions, often as a result of the need to estimate matters that are inherently uncertain.
Following is a detailed description of the accounting policies that we deem most critical to us and that require management’s most difficult and subjective judgments. These estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions, and such differences may be material.
We also have other policies that we consider key accounting policies, such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective. The accounting policies that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following:
Principles of Consolidation
We apply Accounting Standards Codification (“ASC”) 810 -
Consolidation
(“ASC 810”) in our principles of consolidation. ASC 810 addresses arrangements where a company does not hold a majority of the voting or similar interests of a variable interest entity (“VIE”). A company is required to consolidate a VIE if it has determined it is the primary beneficiary. ASC 810 also addresses the policy when a company owns a majority of the voting or similar rights and exercises effective control.
A VIE is not self-supportive due to having one or both of the following conditions: (i) it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated financial support or (ii) its owners do not hold the typical risks and rights of equity owners. This determination is made upon the creation of a variable interest and is re-assessed on an on-going basis should certain changes in the operations of a VIE, or its relationship with the primary beneficiary trigger a reconsideration. After a reconsideration event occurs the facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(ies) have a variable interest in the entity, and whether or not the company’s interest is such that it is the primary beneficiary. Determination of the primary beneficiary, if any, is based on a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, and b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
We will continue to monitor our relationships with the other entities regarding who is the primary beneficiary, which could change based on facts and circumstances of any reconsideration events.
Recoverability of Property, Plant and Equipment
Our property, plant and equipment is stated at cost. Interest expense, if any, incurred during the initial construction of buildings is considered part of cost. Depreciation is computed for financial reporting purposes using the straight-line or an accelerated method based on a declining balance formula over the following estimated useful lives: rental equipment 2-20 years and buildings and non-rental equipment 3-55 years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment, other than real estate (“personal property”), are netted against depreciation expense when realized. Equipment depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., minimize gains or losses. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. As a result of changes in IRS regulations regarding the capitalization of assets, beginning in the first quarter of fiscal 2017, we raised the value threshold before certain assets are capitalized within our depreciation policy. This change in threshold, results in the immediate recognition of reported operating costs with a lagging decrease in depreciation expense over the term that these assets would have been depreciated. This change in threshold benefited us through the immediate recognition of tax deductible costs.
We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the remaining life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives.
For our box truck fleet we utilize an accelerated method of depreciation based upon a declining formula. Under the declining balances method (2.4 times declining balance), the book value of a rental truck is reduced by approximately 16%, 13%, 11%, 9%, 8%, 7%, and 6% of cost during years one through seven, respectively, and then reduced on a straight line basis to a salvage value of 15% by the end of year fifteen. Comparatively, a standard straight line approach would reduce the book value by approximately 5.7% per year over the life of the truck.
Although we intend to sell our used vehicles for prices approximating book value, the extent to which we realize a gain or loss on the sale of used vehicles is dependent upon various factors including but not limited to, the general state of the used vehicle market, the age and condition of the vehicle at the time of its disposal and the depreciation rates with respect to the vehicle
.
We typically sell our used vehicles at our sales centers throughout the United States and Canada, on our website at uhaul.com/trucksales or by phone at 1-866-404-0355. Additionally, we sell a large portion of our pickup and cargo van fleet at automobile dealer auctions.
Insurance Reserves
Liabilities for life insurance and certain annuity and health policies are established to meet the estimated future obligations of policies in force, and are based on mortality, morbidity and withdrawal assumptions from recognized actuarial tables which contain margins for adverse deviation. In addition, liabilities for health, disability and other policies include estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported (“IBNR”). Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders.
Insurance reserves for Property and Casualty Insurance and U-Haul take into account losses incurred based upon actuarial estimates and are management’s best approximation of future payments.
These estimates are based upon past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation.
These reserves consist of case reserves for reported losses and a provision for IBNR losses, both reduced by applicable reinsurance recoverables, resulting in a net liability.
Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.
As a result of the long-tailed nature of the excess workers’ compensation policies written by Repwest from 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled.
On a regular basis insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including the following:
-
Claimant longevity,
-
Cost trends associated with claimant treatments,
-
Changes in ceding entity and third party administrator reporting practices,
-
Changes in environmental factors including legal and regulatory,
-
Current conditions affecting claim settlements, and
-
Future economic conditions including inflation.
We have reserved each claim based upon the accumulation of current claim costs projected through each claimant’s life expectancy, and then adjusted for applicable reinsurance arrangements.
Management reviews each claim bi-annually or more frequently, if there are changes in facts or circumstances to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.
We have factored in an estimate of what the potential cost increases could be in our IBNR liability.
We have not assumed settlement of the existing claims in calculating the reserve amount, unless it is in the final stages of completion.
Continued increases in claim costs, including medical inflation and new treatments and medications could lead to future adverse development resulting in additional reserve strengthening.
Conversely, settlement of existing claims or if injured workers return to work or expire prematurely, could lead to future positive development.
Impairment of Investments
Investments are evaluated pursuant to guidance contained in ASC 320 -
Investments - Debt and Equity Securities
to determine if and when a decline in market value below amortized cost is other-than-temporary. Management makes certain assumptions or judgments in its assessment including but not limited to: our ability and intent to hold the security, quoted market prices, dealer quotes or discounted cash flows, industry factors, financial factors, and issuer specific information such as credit strength. Other-than-temporary impairment in value is recognized in the current period operating results. There were no write downs in fiscal 2019, 2018 and 2017.
Income Taxes
We file a consolidated tax return with all of our legal subsidiaries.
Our tax returns are periodically reviewed by various taxing authorities. The final outcome of these audits may cause changes that could materially impact our financial results. Please see Note 13, Provision for Taxes, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information.
Fair Values
Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.
Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.
We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.
The carrying amount of long-term debt and short-term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.
Other investments including short-term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.
Subsequent Events
Please see Note 22, Subsequent Events, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
Recent Accounting Pronouncements
Please see Note 3, Accounting Policies, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
AMERCO and Consolidated Subsidiaries
Fiscal 2019 Compared with Fiscal 2018
Listed below, on a consolidated basis, are revenues for our major product lines for fiscal 2019 and fiscal 2018:
|
|
Year Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Self-moving equipment rentals
|
$
|
2,653,497
|
$
|
2,479,742
|
Self-storage revenues
|
|
367,276
|
|
323,903
|
Self-moving and self-storage products and service sales
|
|
264,146
|
|
261,557
|
Property management fees
|
|
29,148
|
|
29,602
|
Life insurance premiums
|
|
63,488
|
|
154,703
|
Property and casualty insurance premiums
|
|
60,853
|
|
57,100
|
Net investment and interest income
|
|
110,934
|
|
110,473
|
Other revenue
|
|
219,365
|
|
184,034
|
Consolidated revenue
|
$
|
3,768,707
|
$
|
3,601,114
|
Self-moving equipment rental revenues increased $173.8 million during fiscal 2019, compared with fiscal 2018. During fiscal 2019 we expanded the number of Company-owned locations along with independent dealers, and increased the number of trucks, trailers and towing devices in our rental fleet.
In the third and fourth quarters we saw revenue improvements in our corporate account business.
Revenue and transactions for both the One-way and in-town markets improved compared to fiscal 2018.
Self-storage revenues increased $43.4 million during fiscal 2019, compared with fiscal 2018.
The average monthly amount of occupied square feet increased by 12.0% during fiscal 2019 compared with the same period last year.
The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 5.3 million net rentable square feet, a 17.0% increase, with approximately 1.5 million of that occurring on during the fourth quarter of fiscal 2019.
Sales of self-moving and self-storage products and services increased $2.6 million during fiscal 2019, compared with fiscal 2018, primarily from the sales of moving supplies and propane.
Life insurance premiums decreased $91.2 million during fiscal 2019, compared with fiscal 2018. In the fourth quarter of fiscal 2019, Oxford agreed to terminate a reinsurance contract with one of our reinsurers (“Reinsurance contract termination”). As a result there was a one-time decrease in life insurance premiums of $78.4 million due to the transfer of liabilities to the reinsurer for termination of the contract, along with decreased Medicare supplement premiums.
Property and casualty insurance premiums increased $3.8 million during fiscal 2019, compared with fiscal 2018 due to an increase in Safetow
®
and Safestor
®
sales which corresponds with increased equipment and storage rental transactions.
Net investment and interest income increased $0.5 million during fiscal 2019, compared with fiscal 2018 due to a larger invested asset base at our life insurance subsidiary. Updated accounting guidance now requires changes in the market value of equity securities held for investment at our insurance subsidiaries to be recognized through income. This accounted for a $5.7 million decrease in fiscal 2019.
Other revenue increased $35.3 million during fiscal 2019, compared with fiscal 2018, caused primarily by growth in our U-Box
®
program.
Listed below are revenues and earnings from operations at each of our operating segments for fiscal 2019 and 2018. The insurance companies’ years ended December 31, 2018 and 2017.
|
|
Year Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Moving and storage
|
|
|
|
|
Revenues
|
$
|
3,545,809
|
$
|
3,290,667
|
Earnings from operations before equity in earnings of subsidiaries
|
|
569,241
|
|
712,700
|
Property and casualty insurance
|
|
|
|
|
Revenues
|
|
75,837
|
|
74,571
|
Earnings from operations
|
|
27,406
|
|
25,878
|
Life insurance
|
|
|
|
|
Revenues
|
|
154,714
|
|
243,862
|
Earnings from operations
|
|
25,481
|
|
27,959
|
Eliminations
|
|
|
|
|
Revenues
|
|
(7,653)
|
|
(7,986)
|
Earnings from operations before equity in earnings of subsidiaries
|
|
(1,141)
|
|
(1,291)
|
Consolidated Results
|
|
|
|
|
Revenues
|
|
3,768,707
|
|
3,601,114
|
Earnings from operations
|
|
620,987
|
|
765,246
|
Total costs and expenses increased $116.5 million during fiscal 2019, compared with fiscal 2018, excluding changes to net (gains) losses on disposal of real estate. The Moving and Storage segment accounted for a $203.2 million increase and our insurance segments total costs and expenses decreased $86.9 million largely due to a one-time decrease of $76.4 million in life benefits due to the Reinsurance contract termination. Operating expenses for Moving and Storage increased $180.0 million, largely from increased personnel, maintenance repairs, shipping costs associated with U-Box
®
, building maintenance and property taxes. Repair costs accounted for $45.6 million of the increase. Net gains from the disposal of rental equipment increased $15.1 million.
Compared with fiscal 2018, we sold more used trucks and the average sales proceeds per truck improved.
Depreciation expense associated with our rental fleet increased $13.2 million due to a larger fleet.
Depreciation expense on all other assets, largely from buildings and improvements, increased $17.9 million.
Net gains on disposal of real estate decreased $195.4 million.
The decrease was caused by the sale of a portion of our Chelsea, New York property in October 2017, which resulted in a pre-tax gain of $190.7 million in fiscal 2018.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $621.0 million for fiscal 2019, compared with $765.2 million for fiscal 2018.
Interest expense for fiscal 2019 was $142.4 million, compared with $126.7 million for fiscal 2018 due to an increase in borrowings in fiscal 2019.
Income tax benefit (expense) was ($106.7) million for fiscal 2019, compared with $153.0 million for fiscal 2018 due to the effects of the Tax Reform Act as enacted on December 22, 2017. Our effective tax rate was 22.3% of net income before taxes for fiscal 2019, compared to (24.0%) in the prior-year period. The decrease in our deferred tax liability in fiscal 2018 resulting from the application of the new federal income tax rate accounted for a $371.5 million decrease, partially offset by a $10.7 million one-time increase resulting from the deemed repatriation of foreign earnings and a $4.2 million one-time increase resulting from Phase Three tax on our Life Insurance subsidiary. Excluding the one-time benefits and charges mentioned above, our effective tax rate for all of fiscal 2018, post Tax Reform Act, was 31.8%. See Note 13, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information on income taxes.
As a result of the above-mentioned items, earnings available to common shareholders were $370.9 million for fiscal 2019, compared with $790.6 million for fiscal 2018.
Basic and diluted earnings per common share for fiscal 2019 were $18.93, compared with $40.36 for fiscal 2018.
The weighted average common shares outstanding basic and diluted were 19,592,048 for fiscal 2019, compared with 19,588,889 for fiscal 2018.
AMERCO and Consolidated Subsidiaries
Fiscal 2018 Compared with Fiscal 2017
Listed below, on a consolidated basis, are revenues for our major product lines for fiscal 2018 and fiscal 2017:
|
|
Year Ended March 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Self-moving equipment rentals
|
$
|
2,479,742
|
$
|
2,362,833
|
Self-storage revenues
|
|
323,903
|
|
286,886
|
Self-moving and self-storage products and service sales
|
|
261,557
|
|
253,073
|
Property management fees
|
|
29,602
|
|
29,075
|
Life insurance premiums
|
|
154,703
|
|
163,579
|
Property and casualty insurance premiums
|
|
57,100
|
|
52,334
|
Net investment and interest income
|
|
110,473
|
|
102,276
|
Other revenue
|
|
184,034
|
|
171,711
|
Consolidated revenue
|
$
|
3,601,114
|
$
|
3,421,767
|
Self-moving equipment rental revenues increased $116.9 million during fiscal 2018, compared with fiscal 2017 largely due to growth in both one-way and In-Town
®
transactions. Over the course of fiscal 2018 we added new Company-owned locations to our retail network and increased the number of trucks, trailers, and towing devices in our rental fleet.
Self-storage revenues increased $37.0 million during fiscal 2018, compared with fiscal 2017.
The average monthly amount of occupied square feet increased by 8.9% during fiscal 2018, compared with the same period last year.
The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. During fiscal 2018, we added approximately 3.7 million net rentable square feet, or a 13.4% increase, with approximately 1.2 million of that coming on during the fourth quarter of fiscal 2018.
Sales of self-moving and self-storage products and services increased $8.5 million during fiscal 2018, compared with fiscal 2017. Increases were recognized in the sales of moving supplies, propane and towing accessories and related installations.
Life insurance premiums decreased $8.9 million during fiscal 2018, compared with fiscal 2017 primarily due to decreased Medicare supplement premiums.
Property and casualty insurance premiums increased $4.8 million during fiscal 2018, compared with fiscal 2017 due to an increase in Safetow
®
and Safestor
®
sales, which is a reflection of the increased equipment and storage rental transactions.
Net investment and interest income increased $8.2 million during fiscal 2018, compared with fiscal 2017 due to a larger invested asset base at our insurance companies.
Other revenue increased $12.3 million during fiscal 2018, compared with fiscal 2017, caused primarily by growth in our U-Box
®
program.
Listed below are revenues and earnings from operations at each of our operating segments for fiscal 2018 and 2017. The insurance companies’ years ended December 31, 2017 and 2016.
|
|
Year Ended March 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Moving and storage
|
|
|
|
|
Revenues
|
$
|
3,290,667
|
$
|
3,113,000
|
Earnings from operations before equity in earnings of subsidiaries
|
|
712,700
|
|
689,815
|
Property and casualty insurance
|
|
|
|
|
Revenues
|
|
74,571
|
|
68,986
|
Earnings from operations
|
|
25,878
|
|
27,161
|
Life insurance
|
|
|
|
|
Revenues
|
|
243,862
|
|
245,599
|
Earnings from operations
|
|
27,959
|
|
27,646
|
Eliminations
|
|
|
|
|
Revenues
|
|
(7,986)
|
|
(5,818)
|
Earnings from operations before equity in earnings of subsidiaries
|
|
(1,291)
|
|
(1,457)
|
Consolidated Results
|
|
|
|
|
Revenues
|
|
3,601,114
|
|
3,421,767
|
Earnings from operations
|
|
765,246
|
|
743,165
|
Total costs and expenses increased $157.3 million during fiscal 2018, compared with fiscal 2017. Our insurance segments accounted for $4.8 million of the increase.
Excluding net gains on the disposal of real estate, total costs and expenses increased $349.1 million during fiscal 2018, compared with fiscal 2017. Operating expenses at Moving and Storage increased $238.2 million.
In the second quarter of fiscal 2017, we recognized the difference between the accrued amount and actual settlement amount of the PODS Enterprises, Inc. (“PEI”) case as a $24.6 million reduction of operating expenses. Excluding this effect in the prior year, operating expenses for Moving and Storage increased $213.6 million.
This was primarily due to increased personnel costs, equipment maintenance, payment processing fees, new facility related costs and property tax.
Repair costs, primarily associated with the portion of the fleet nearing resale, accounted for $72.9 million of the increase for fiscal 2018.
Personnel bonuses associated with tax reform for the entire workforce combined with bonuses for our field management team accounted for $31.1 million of the increase.
Lease expense decreased $3.4 million as a result of our shift in financing new equipment on the balance sheet versus through operating leases.
Net gains from the disposal of rental equipment decreased $20.7 million.
Compared with fiscal 2017, we sold more used trucks, however on average the trucks sold in fiscal 2018 had a higher average cost than in fiscal 2017 and average sales proceeds per truck were lower in fiscal 2018.
Depreciation expense associated with our rental fleet increased $56.5 million due to a larger fleet.
Depreciation expense on all other assets, largely from buildings and improvements increased $17.0 million. Net gains on disposal of real estate increased $191.8 million.
The increase resulted from the sale of a portion of our Chelsea, New York property which resulted in a pre-tax gain of $190.7 million.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations increased to $765.2 million for fiscal 2018, compared with $743.2 million for fiscal 2017.
Interest expense for fiscal 2018 was $126.7 million, compared with $113.4 million for fiscal 2017 due to an increase in borrowings in fiscal 2018 partially offset by lower borrowing costs. In addition, we incurred costs associated with the early extinguishment of debt during the third quarter of fiscal 2017 of $0.5 million for the write-off of unamortized transaction costs related to defeased debt.
Income tax benefit (expense) was $153.0 million for fiscal 2018, compared with ($229.9) million for fiscal 2017 due to the effects of the Tax Reform Act as enacted on December 22, 2017. Our effective tax rate was (24.0%) of net income before taxes for fiscal 2018, compared to 36.6% in the prior-year period. The decrease in our deferred tax liability resulting from the application of the new federal income tax rate accounted for a $371.5 million decrease, partially offset by a $10.7 million one-time increase resulting from the deemed repatriation of foreign earnings and a $4.2 million one-time increase resulting from Phase Three tax on our Life Insurance subsidiary. Excluding the one-time benefits and charges mentioned above, our effective tax rate for all of fiscal 2018, post Tax Reform Act, was 31.8%, compared with 36.6% for fiscal 2017. See Note 13, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information on income taxes.
As a result of the above-mentioned items, earnings available to common shareholders were $790.6 million for fiscal 2018, compared with $398.4 million for fiscal 2017.
Basic and diluted earnings per common share for fiscal 2018 were $40.36, compared with $20.34 for fiscal 2017.
The weighted average common shares outstanding basic and diluted were 19,588,889 for fiscal 2018, compared with 19,586,606 for fiscal 2017.
Moving and Storage
Fiscal 2019 Compared with Fiscal 2018
Listed below are revenues for the major product lines at Moving and Storage for fiscal 2019 and fiscal 2018:
|
|
Year Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Self-moving equipment rentals
|
$
|
2,656,327
|
$
|
2,483,956
|
Self-storage revenues
|
|
367,276
|
|
323,903
|
Self-moving and self-storage products and service sales
|
|
264,146
|
|
261,557
|
Property management fees
|
|
29,148
|
|
29,602
|
Net investment and interest income
|
|
13,857
|
|
12,232
|
Other revenue
|
|
215,055
|
|
179,417
|
Moving and Storage revenue
|
$
|
3,545,809
|
$
|
3,290,667
|
Self-moving equipment rental revenues increased $172.4 million during fiscal 2019, compared with fiscal 2018. During fiscal 2019 we expanded the number of Company-owned locations along with independent dealers, and increased the number of trucks, trailers and towing devices in our rental fleet.
In the third and fourth quarters we saw revenue improvements in our corporate account business.
Revenue and transactions for both the One-way and in-town markets improved compared to fiscal 2018.
Self-storage revenues increased $43.4 million during fiscal 2019, compared with fiscal 2018.
The average monthly amount of occupied square feet increased by 12.0% during fiscal 2019 compared with the same period last year.
The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 5.3 million net rentable square feet, a 17.0% increase, with approximately 1.5 million of that coming on during the fourth quarter of fiscal 2019.
The Company owns and manages self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:
|
|
Year Ended March 31,
|
|
|
2019
|
|
2018
|
|
(In thousands, except occupancy rate)
|
Unit count as of March 31
|
|
428
|
|
366
|
Square footage as of March 31
|
|
36,237
|
|
30,974
|
Average monthly number of units occupied
|
|
275
|
|
246
|
Average monthly occupancy rate based on unit count
|
|
68.7%
|
|
71.6%
|
Average monthly square footage occupied
|
|
24,862
|
|
22,203
|
Over the last twelve months we added approximately 5.3 million net rentable square feet of new storage to the system. This was a mix of existing storage locations we acquired and new development. On average, the occupancy rate of this new capacity on the date it was added was 9.5%.
Sales of self-moving and self-storage products and services increased $2.6 million during fiscal 2019, compared with fiscal 2018 primarily from the sales of moving supplies and propane.
Other revenue increased $35.6 million during fiscal 2019, compared with fiscal 2018, caused primarily by growth in our U-Box
®
program.
Total costs and expenses increased $203.2 million during fiscal 2019, compared with fiscal 2018, excluding changes to net (gains) losses on disposal of real estate. Operating expenses for Moving and Storage increased $179.6 million, largely from increased personnel, maintenance repairs, shipping costs associated with U-Box
®
, building maintenance and property taxes. Repair costs accounted for $45.6 million of the increase. Net gains from the disposal of rental equipment increased $15.1 million.
Compared with fiscal 2018, we sold more used trucks and the average sales proceeds per truck improved.
Depreciation expense associated with our rental fleet increased $13.2 million due to a larger fleet.
Depreciation expense on all other assets, largely from buildings and improvements increased $17.9 million.
Net gains on disposal of real estate decreased $195.4 million.
The decrease was caused by the sale of a portion of our Chelsea, New York property in October 2017 which resulted in a pre-tax gain of $190.7 million in fiscal 2018.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries decreased to $569.2 million for fiscal 2019 as compared with $712.7 million for fiscal 2018.
Equity in the earnings of AMERCO’s insurance subsidiaries decreased $5.2 million for fiscal 2019, compared with fiscal 2018.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $611.1 million for fiscal 2019, compared with $759.7 million
for fiscal 2018.
Moving and Storage
Fiscal 2018 Compared with Fiscal 2017
Listed below are revenues for the major product lines at Moving and Storage for fiscal 2018 and fiscal 2017:
|
|
Year Ended March 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Self-moving equipment rentals
|
$
|
2,483,956
|
$
|
2,366,526
|
Self-storage revenues
|
|
323,903
|
|
286,886
|
Self-moving and self-storage products and service sales
|
|
261,557
|
|
253,073
|
Property management fees
|
|
29,602
|
|
29,075
|
Net investment and interest income
|
|
12,232
|
|
9,688
|
Other revenue
|
|
179,417
|
|
167,752
|
Moving and Storage revenue
|
$
|
3,290,667
|
$
|
3,113,000
|
Self-moving equipment rental revenues increased $117.4 million during fiscal 2018, compared with fiscal 2017, largely due to growth in both one-way and In-Town
®
transactions. Over the course of fiscal 2018 we added new Company-owned locations to our retail network and increased the number of trucks, trailers, and towing devices in our rental fleet.
Self-storage revenues increased $37.0 million during fiscal 2018, compared with fiscal 2017.
The average monthly amount of occupied square feet increased by 8.9% during fiscal 2018, compared with the same period last year.
The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. During fiscal 2018, we added approximately 3.7 million net rentable square feet, or a 13.4% increase, with approximately 1.2 million of that coming on during the fourth quarter of fiscal 2018.
The Company owns and manages self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:
|
|
Year Ended March 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands, except occupancy rate)
|
Unit count as of March 31
|
|
366
|
|
318
|
Square footage as of March 31
|
|
30,974
|
|
27,305
|
Average monthly number of units occupied
|
|
246
|
|
226
|
Average monthly occupancy rate based on unit count
|
|
71.6%
|
|
75.8%
|
Average monthly square footage occupied
|
|
22,203
|
|
20,386
|
The approximately 3.7 million net rentable square feet that we’ve added during fiscal 2018 was a mix of existing storage locations we acquired and new development. On average, the occupancy rate of this new capacity on the date it was added was approximately 5%.
Sales of self-moving and self-storage products and services increased $8.5 million during fiscal 2018, compared with fiscal 2017. Increases were recognized in the sales of moving supplies, propane and towing accessories and related installations.
Other revenue increased $11.7 million during fiscal 2018, compared with fiscal 2017, primarily coming from growth in our U-Box
®
program.
Excluding net gains on the disposal of real estate, total costs and expenses increased $346.6 million during fiscal 2018, compared with fiscal 2017. Operating expenses at Moving and Storage increased $238.2 million.
In the second quarter of fiscal 2017, we recognized the difference between the accrued amount and actual settlement amount of the PEI case as a $24.6 million reduction of operating expenses. Excluding this effect in fiscal 2017, operating expenses for Moving and Storage increased $213.6 million.
This was primarily due to increased personnel costs, equipment maintenance, payment processing fees, new facility related costs and property tax.
Repair costs, primarily associated with the portion of the fleet nearing resale, accounted for $72.9 million of the increase for fiscal 2018.
Personnel bonuses associated with tax reform for the entire workforce combined with bonuses for our field management team accounted for $31.1 million of the increase.
Lease expense decreased $3.3 million as a result of our shift in financing new equipment on the balance sheet versus through operating leases.
Net gains from the disposal of rental equipment decreased $20.7 million.
Compared with fiscal 2017, we sold more used trucks, however on average the trucks sold in fiscal 2018 had a higher average cost than in fiscal 2017 and the average sales proceeds per truck were lower in fiscal 2018.
Depreciation expense associated with our rental fleet increased $56.5 million due to a larger fleet.
Depreciation expense on all other assets, largely from buildings and improvements increased $17.0 million. Net gains on disposal of real estate increased $191.8 million.
The increase was caused by the sale of a portion of our Chelsea, New York property which resulted in a pre-tax gain of $190.7 million.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries increased to $712.7 million for fiscal 2018 as compared with $689.8 million for fiscal 2017.
Equity in the earnings of AMERCO’s insurance subsidiaries increased $11.2 million for fiscal 2018, compared with fiscal 2017.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations increased to $759.7 million for fiscal 2018, compared with $725.6 million for fiscal 2017.
Property and Casualty Insurance
2018 Compared with 2017
Net premiums were $63.5 million and $58.8 million for the years ended December 31, 2018 and 2017, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium growth corresponded with the increased moving and storage transactions at U-Haul.
Net investment and interest income was $12.3 million and $15.8 million for the years ended December 31, 2018 and 2017, respectively. The main driver of the change in net investment income was the increase in realized losses of $5.7 million due to market changes in our equity securities for the twelve months ended December 31, 2018. Updated accounting guidance now requires changes in the market value of equity securities held for investment to be recognized through income.
Net operating expenses were $34.2 million and $32.7 million for the years ended December 31, 2018 and 2017, respectively. The change was due to an increase in commissions, decreased loss adjusting fees and subrogation income.
Benefits and losses expenses were $14.2 million and $16.0 million for the years
ended December 31, 2018 and 2017, respectively. The decrease resulted from favorable loss experience.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $27.4 million and $25.9 million for the years ended December 31, 2018 and 2017, respectively.
Property and Casualty Insurance
2017 Compared with 2016
Net premiums were $58.8 million and $52.3 million for the years ended December 31, 2017 and 2016, respectively. The premium growth corresponded with the increased moving and storage transactions at U-Haul.
Net investment and interest income was $15.8 million and $16.7 million for the years ended December 31, 2017 and 2016, respectively. The change was primarily due to a decrease in realized capital gains of $0.9 million. The December 31, 2016 results were impacted by above average early pay-offs within the mortgage loan portfolio.
Net operating expenses were $32.7 million and $28.4 million for the years ended December 31, 2017 and 2016, respectively. This was due to an increase in commissions and loss adjusting fees.
Benefits and losses expenses were $16.0 million and $13.4 million for the years
ended December 31, 2017 and 2016, respectively. The increase was due to an increase in policies sold and related claims activity.
As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $25.9 million and $27.2 million for the years ended December 31, 2017 and 2016, respectively.
Life Insurance
2018 Compared with 2017
Net premiums were $63.5 million and $154.7 million for the years ended December 31, 2018 and 2017, respectively. There was a one-time decrease in life insurance premiums of $78.4 million due to the transfer of liabilities as a result of the Reinsurance contract termination, effective November 30, 2018. Medicare Supplement premiums decreased by $12.6 million due to the reduction in new sales and policy decrements on the existing business offset by premium rate increases. Premiums on other lines of business increased $0.2 million. Deferred annuity deposits were $370.1 million or $73.8 million above the prior year and are accounted for on the balance sheet as deposits rather than premiums.
Net investment and interest income was $86.4 million and $84.2 million for the years ended December 31, 2018 and 2017, respectively. Investment income from fixed maturities and other invested assets increased $10.1 million from a larger invested asset base, partially offset by a $2.8 million decrease in realized losses and a $5.1 million loss on derivatives.
Net operating expenses were $14.6 million and $22.1 million for the years ended December 31, 2018 and 2017, respectively. The decrease was due to a one-time commission allowance of $6.8 million received on the reinsurance agreement termination which was recorded as a reduction to commission expense and a reduction in commission expense from the decreased Medicare supplement premiums.
Benefits and losses expenses were $86.1 million and $169.3 million for the years ended December 31, 2018 and 2017, respectively. There was a one-time decrease of $76.4 million in Life benefits due to the transfer of liabilities for the Reinsurance contract termination. Medicare supplement and other health benefits decreased $9.8 million from the declined policies in force. Partially offsetting this was a $3.2 million increase in interest credited to policyholders on a larger annuity deposit base.
Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA“) and the value of business acquired (“VOBA”) was $28.6 million and $24.5 million for the years ended December 31, 2018 and 2017, respectively.
The increase was primarily due to a one-time $3.3 million VOBA write-off as a result of the Reinsurance contract termination. In addition, there was an increase in annuity DAC amortization due to the increased amount of annuity business sold over the last year
. Conversely, DAC amortization associated with Medicare Supplement has decreased as a result of the declining business inforce.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $25.5 million and $28.0 million for the years ended December 31, 2018 and 2017, respectively.
Life Insurance
2017 Compared with 2016
Net premiums were $154.7 million and $163.6 million for the years ended December 31, 2017 and 2016, respectively.
Medicare Supplement premiums decreased by $9.3 million due to the reduction in new sales and declined premiums on the existing business offset by rate increases on renewal premiums. The remaining lines of business had a net increase of $0.4 million. Deferred annuity deposits were $296.8 million or $93.7 million above the prior year and are accounted for on the balance sheet as deposits rather than premiums.
Net investment and interest income was $84.2 million and $77.5 million for the years ended December 31, 2017 and 2016, respectively. Investment income and realized gains from fixed maturities increased $10.9 million from a larger invested asset base, partially offset by a $4.3 million decrease in gains from our mortgage loan portfolio.
Net operating expenses were $22.1 million and $22.4 million for the years ended December 31, 2017 and 2016, respectively. The decrease was primarily due to a reduction in commission expense from decreased Medicare Supplement premiums.
Benefits and losses expenses were flat at $169.3 million for both the years ended December 31, 2017 and 2016. A decrease of $9.2 million in Medicare supplement benefits from an improved benefit to premium ratio was offset by an increase in the remaining lines of business. Life insurance benefits increased $1.6 million with increased mortality while interest credited to policyholders increased by $7.3 million from a larger annuity base. Other benefits increased $0.3 million.
Amortization of DAC, SIA and VOBA was $24.5 million and $26.2 million for the years December 31, 2017 and 2016, respectively. The decrease was primarily due to additional DAC amortization in the prior year generated by added gains on discounted mortgage loan investments partially offset by the increased amortization from a larger DAC asset in fiscal 2018.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $28.0 million and $27.6 million for the years ended December 31, 2017 and 2016, respectively.
Liquidity and Capital Resources
We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors which could affect our liquidity, including some which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.
At March 31, 2019, cash and cash equivalents totaled $673.7 million, compared with $759.4 million at March 31, 2018. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (AMERCO, U-Haul and Real Estate). As of March 31, 2019 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were:
|
|
Moving & Storage
|
|
Property and Casualty Insurance (a)
|
|
Life Insurance (a)
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
643,918
|
$
|
5,757
|
$
|
24,026
|
Other financial assets
|
|
149,842
|
|
463,079
|
|
2,207,099
|
Debt obligations
|
|
4,163,323
|
|
–
|
|
–
|
|
|
|
|
|
|
|
(a) As of December 31, 2018
|
|
|
|
|
|
|
At March 31, 2019, Moving and Storage had available borrowing capacity under existing credit facilities of $80.6 million.
A summary of our consolidated cash flows for fiscal 2019, 2018 and 2017 is shown in the table below:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Net cash provided by operating activities
|
$
|
975,583
|
$
|
937,684
|
$
|
1,059,455
|
Net cash used by investing activities
|
|
(1,571,136)
|
|
(898,304)
|
|
(1,183,908)
|
Net cash provided by financing activities
|
|
514,582
|
|
16,604
|
|
223,753
|
Effects of exchange rate on cash
|
|
(4,716)
|
|
5,598
|
|
(2,140)
|
Net increase (decrease) in cash flow
|
|
(85,687)
|
|
61,582
|
|
97,160
|
Cash at the beginning of the period
|
|
759,388
|
|
697,806
|
|
600,646
|
Cash at the end of the period
|
$
|
673,701
|
$
|
759,388
|
$
|
697,806
|
Net cash provided by operating activities increased $37.9 million in fiscal 2019, compared with fiscal 2018 from reduced federal income tax payments in fiscal 2019 compared with fiscal 2018, a $64.6 million cash transfer as a result of the Reinsurance contract termination in our Life Insurance segment during fiscal 2019 and the repayment of $53.0 million in notes and interest from Blackwater in fiscal 2018.
Net cash used by investing activities increased $672.8 million in fiscal 2019, compared with fiscal 2018. Purchases of property, plant and equipment, which are reported net of cash from sales and lease-back transactions, increased $506.2 million. Cash from the sales of property, plant and equipment decreased $93.5 million largely due to reduced fleet sales. Net cash deposited in real estate acquisitions escrow accounts decreased $27.1 million. For our insurance subsidiaries, net cash used in investing activities increased $45.7 million compared with the same period last year.
Net cash provided by financing activities increased $498.0 million in fiscal 2019, compared with fiscal 2018. This was due to a combination of decreased debt and capital lease repayments of $49.6 million, an increase in cash from borrowings of $398.8 million, an increase in net annuity deposits from Life Insurance of $48.0 million and an increase in common stock dividends paid of $9.8 million.
Liquidity and Capital Resources and Requirements of Our Operating Segments
Moving and Storage
To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. In the future, we anticipate that our internally generated funds will be used to service the existing debt and fund operations. U-Haul estimates that during fiscal 2020 the Company will reinvest in its truck and trailer rental fleet approximately $700 million, net of equipment sales and excluding any lease buyouts. For fiscal 2019, the Company invested, net of sales, approximately $560 million before any lease buyouts in its truck and trailer fleet. Fleet investments in fiscal 2020 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment and the used-truck sales market. We anticipate that the fiscal 2020 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options.
Real Estate has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. The Company expects to fund these development projects through a combination of internally generated funds along with borrowings against existing properties as they operationally mature. For fiscal 2019, the Company invested $1,003 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2020, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the
identification and successful acquisition of target properties. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital.
Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) were $1,263.7 million, $663.9 million and $932.0 million for fiscal 2019, 2018 and 2017, respectively. The components of our net capital expenditures are provided in the following table:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Purchases of rental equipment
|
$
|
1,162,909
|
$
|
1,006,503
|
$
|
1,178,908
|
Equipment lease buyouts
|
|
30,566
|
|
6,594
|
|
63,505
|
Purchases of real estate, construction and renovations
|
|
1,003,030
|
|
606,990
|
|
484,487
|
Other capital expenditures
|
|
21,831
|
|
140,627
|
|
139,448
|
Gross capital expenditures
|
|
2,218,336
|
|
1,760,714
|
|
1,866,348
|
Less: Lease proceeds
|
|
(348,368)
|
|
(396,969)
|
|
(446,843)
|
Less: Sales of property, plant and equipment
|
|
(606,271)
|
|
(699,803)
|
|
(487,475)
|
Net capital expenditures
|
|
1,263,697
|
|
663,942
|
|
932,030
|
Moving and Storage continues to hold significant cash and we believe has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace, pay dividends or reduce existing indebtedness where possible.
Property and Casualty Insurance
State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance's assets are generally not available to satisfy the claims of AMERCO, or its legal subsidiaries.
We believe that stockholders’ equity at the Property and Casualty operating segment remains sufficient and we do not believe that its ability to pay ordinary dividends to AMERCO will be restricted per state regulations.
Our Property and Casualty operating segment stockholders’ equity was $222.4 million, $211.2 million, and $180.9 million as of December 31, 2018, 2017, and 2016, respectively. The increase in 2018 compared with 2017 resulted from net earnings of $21.7 million, a reduction in accumulated other comprehensive income of $20.2 million and an increase due to a one-time reclass of $9.7 million between other comprehensive income and beginning retained earnings due to the implementation of ASU 2016-01. Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.
Life Insurance
Life Insurance manages its financial assets to meet policyholder and other obligations including investment contract withdrawals and deposits. Life Insurance's net deposit increase for the year ended December 31, 2018 was $267.3 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance's assets are generally not available to satisfy the claims of AMERCO
®
or its legal subsidiaries.
Our Life Insurance operating segment stockholders’ equity was $311.7 million, $332.9 million, and $296.1 million as of December 31, 2018, 2017 and 2016, respectively. The decrease in 2018 compared with 2017 resulted from earnings of $20.1 million and a reduction in accumulated other comprehensive income of $41.3 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. However, as of December 31, 2018, Oxford had outstanding deposits of $60.0 million through its membership in the Federal Home Loan Bank (“FHLB”). For a more detailed discussion of this deposit, please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements.
Cash Provided from Operating Activities by Operating Segments
Moving and Storage
Net cash provided by operating activities was $958.9 million, $858.6 million and $983.6 million in fiscal 2018, 2017 and 2016 from operations, reduced federal income tax payments in fiscal 2019 and the repayment of $53.0 million in notes and interest from Blackwater in fiscal 2018.
Property and Casualty Insurance
Net cash provided by operating activities was $19.8 million, $21.9 million, and $19.6 million for the years ended December 31, 2018, 2017, and 2016, respectively.
The decrease was the result of changes in intercompany balances and the timing of payables activity
.
Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $11.2 million, $17.0 million, and $20.7 million as of December 31, 2018, 2017, and 2016, respectively. These balances reflect funds in transition from maturity proceeds to long-term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds.
Life Insurance
Net cash provided (used) by operating activities was ($3.2) million, $57.2 million and $56.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. The decrease in operating cash flows was primarily due to a $64.6 million cash transfer as a result of the Reinsurance contract termination, offset by an increase in investment income along with a decrease in benefits and commissions.
In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance's short-term portfolio and its membership in the FHLB. As of December 31, 2018, 2017 and 2016, cash and cash equivalents and short-term investments amounted to $24.1 million, $50.7 million and $20.6 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs.
Liquidity and Capital Resources - Summary
We believe we have the financial resources needed to meet our business plans including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs.
Our borrowing strategy is primarily focused on asset-backed financing and rental equipment leases. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of March 31, 2019, we had available borrowing capacity under existing credit facilities of $80.6 million. It is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. We believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long-term debt and borrowing capacity, please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report.
Fair Value of Financial Instruments
Certain assets and liabilities are recorded at fair value on the consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 requires that financial assets and liabilities recorded at fair value be classified and disclosed in a Level 1, Level 2 or Level 3 category. For more information, please see Note 15, Fair Value Measurements, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
The available-for-sale securities held by the Company are recorded at fair value. These values are determined primarily from actively traded markets where prices are based either on direct market quotes or observed transactions. Liquidity is a factor considered during the determination of the fair value of these securities. Market price quotes may not be readily available for certain securities or the market for them has slowed or ceased. In situations where the market is determined to be illiquid, fair value is determined based upon limited available information and other factors including expected cash flows. As of March 31, 2019, we had $0.2 million of available-for-sale assets classified in Level 3.
The interest rate swaps held by us as hedges against interest rate risk for our variable rate debt are recorded at fair value. These 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.
Disclosures about Contractual Obligations and Commercial Commitments
The following table provides contractual commitments and contingencies as of March 31, 2019:
|
|
|
|
Payment due by Period (as of March 31, 2019)
|
Contractual Obligations
|
|
Total
|
|
04/01/19 - 03/31/20
|
|
04/01/20 - 03/31/22
|
|
04/01/22 - 03/31/24
|
|
Thereafter
|
|
|
(In thousands)
|
Notes and loans payable - Principal
|
$
|
2,190,191
|
$
|
174,812
|
|
277,063
|
$
|
504,119
|
$
|
1,234,197
|
Notes and loans payable - Interest
|
|
698,905
|
|
93,723
|
|
169,906
|
|
138,891
|
|
296,385
|
Revolving credit agreements - Principal
|
|
959,400
|
|
–
|
|
630,556
|
|
328,844
|
|
–
|
Revolving credit agreements - Interest
|
|
101,307
|
|
35,928
|
|
53,696
|
|
11,683
|
|
–
|
Capital leases - Principal
|
|
1,042,652
|
|
301,086
|
|
386,458
|
|
232,703
|
|
122,405
|
Capital leases - Interest
|
|
93,942
|
|
31,030
|
|
39,138
|
|
18,697
|
|
5,077
|
Operating leases
|
|
94,288
|
|
25,042
|
|
33,191
|
|
29,991
|
|
6,064
|
Ground leases
|
|
53,758
|
|
1,024
|
|
2,054
|
|
2,061
|
|
48,619
|
Property and casualty obligations (a)
|
|
134,050
|
|
12,845
|
|
14,930
|
|
9,317
|
|
96,958
|
Life, health and annuity obligations (b)
|
|
3,414,305
|
|
400,914
|
|
570,992
|
|
527,739
|
|
1,914,660
|
Self insurance accruals (c)
|
|
406,640
|
|
116,950
|
|
159,216
|
|
75,059
|
|
55,415
|
Post retirement benefit liability
|
|
19,143
|
|
1,037
|
|
2,672
|
|
3,571
|
|
11,863
|
Total contractual obligations
|
$
|
9,208,581
|
$
|
1,194,391
|
$
|
2,339,872
|
$
|
1,882,675
|
$
|
3,791,643
|
(a) These estimated obligations for unpaid losses and loss adjustment expenses include case reserves for reported claims and IBNR claims estimates and are net of expected reinsurance recoveries. The ultimate amount to settle both the case reserves and IBNR is an estimate based upon historical experience and current trends and such estimates could materially differ from actual results. The assumptions do not include future premiums. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results.
(b) These estimated obligations are based on mortality, morbidity, withdrawal and lapse assumptions drawn from our historical experience and adjusted for any known trends. These obligations include expected interest crediting but no amounts for future annuity deposits or premiums for life and Medicare supplement policies.
The cash flows shown above are undiscounted for interest and as a result total outflows for all years shown significantly exceed the corresponding liabilities of $2,039.4 million included in our consolidated balance sheet as of March 31, 2019. Life Insurance expects to fully fund these obligations from their invested asset portfolio. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results.
(c) These estimated obligations are primarily the Company’s self insurance accruals for portions of the liability coverage for our rental equipment. The estimates for future settlement are based upon historical experience and current trends. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results.
As presented above, contractual obligations on debt and guarantees represent principal payments while contractual obligations for operating leases represent the notional payments under the lease arrangements.
ASC 740 -
Income Taxes
liabilities and interest of $46.7 million is not included above due to uncertainty surrounding ultimate settlements, if any.
Off Balance Sheet Arrangements
The Company uses off-balance sheet arrangements in situations where management believes that the economics and sound business principles warrant their use.
We utilize operating leases for certain rental equipment and facilities with terms expiring substantially through 2024. In the event of a shortfall in proceeds from the sales of the underlying rental equipment assets, AMERCO has guaranteed $5.2 million of residual values as of March 31, 2019 for these assets at the end of their respective lease terms. AMERCO has been leasing rental equipment since 1987. To date, we have not experienced residual value shortfalls related to these leasing arrangements. Using the average cost of fleet related debt as the discount rate, the present value of AMERCO’s minimum lease payments and residual value guarantees was $6.4 million as of March 31, 2019.
During the 1990s, we used certain off-balance sheet arrangements in connection with the expansion of our self-storage business. For more information please see Note 19, Related Party Transactions, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report. These arrangements were primarily used when our overall borrowing structure was more limited. We do not face similar limitations currently and off-balance sheet arrangements have not been utilized in our self-storage expansion in recent years. In the future, we will continue to identify and consider off-balance sheet opportunities to the extent such arrangements would be economically advantageous to us and our stockholders. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by 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.
We currently manage the self-storage properties owned or leased by Blackwater and 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 $30.0 million, $29.5 million and $27.8 million from the above mentioned entities during fiscal 2019, 2018 and 2017, 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, and a trust benefitting the children and grandchildren of Edward J. Shoen.
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. Total lease payments pursuant to such leases were $2.7 million for fiscal years 2019, 2018 and 2017. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased by us.
As of March 31, 2019, 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 on equipment rental revenues. We paid the above mentioned entities $61.4 million, $58.6 million and $57.1 million in commissions pursuant to such dealership contracts during fiscal 2019, 2018 and 2017, respectively.
These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $24.0 million, expenses of $2.7 million and cash flows of $21.3 million during fiscal 2019. Revenues and commission expenses related to the Dealer Agreements were $288.2 million and $61.4 million, respectively during fiscal 2019.
Fiscal 2020 Outlook
We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals.
Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals. Revenue in the U-Move
®
program could be adversely impacted should we fail to execute in any of these areas. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control.
With respect to our storage business, in fiscal 2019 we have added new locations and expanded existing locations. In fiscal 2020, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. We will continue to invest capital and resources in the U-Box
®
program throughout fiscal 2020.
Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove
®
, Safetow
®
, Safemove Plus
®
, Safestor
®
, and Safestor Mobile
®
protection packages to U-Haul customers.
Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.
Quarterly Results (unaudited)
The quarterly results shown below are derived from unaudited financial statements for the eight quarters beginning April 1, 2017 and ending March 31, 2019. We believe that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with GAAP, such results. Moving and Storage operations are seasonal and proportionally more of the Company’s revenues and net earnings from its Moving and Storage operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period.
|
|
Quarter Ended
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
|
(In thousands, except for share and per share data)
|
Total revenues
|
$
|
725,532
|
$
|
919,091
|
$
|
1,104,507
|
$
|
1,019,577
|
Earnings from operations
|
|
27,237
|
|
138,102
|
|
250,944
|
|
204,704
|
Earnings available to common
shareholders
|
|
831
|
|
78,635
|
|
163,542
|
|
127,849
|
Basic and diluted earnings
per common share
|
$
|
0.04
|
$
|
4.01
|
$
|
8.35
|
$
|
6.53
|
Weighted average common shares
outstanding: basic and diluted
|
|
19,594,008
|
|
19,591,963
|
|
19,591,312
|
|
19,590,585
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
|
(In thousands, except for share and per share data)
|
Total revenues
|
$
|
757,621
|
$
|
842,882
|
$
|
1,042,686
|
$
|
957,925
|
Earnings from operations
|
|
3,002
|
|
303,368
|
|
229,613
|
|
229,263
|
Earnings available to common
shareholders
|
|
10,843
|
|
528,894
|
|
124,639
|
|
126,207
|
Basic and diluted earnings
per common share
|
$
|
0.56
|
$
|
27.00
|
$
|
6.36
|
$
|
6.44
|
Weighted average common shares
outstanding: basic and diluted
|
|
19,589,871
|
|
19,589,218
|
|
19,588,571
|
|
19,587,891
|
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
AMERCO
Reno, Nevada
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of AMERCO and consolidated subsidiaries’ (the “Company”) as of March 31, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income (loss) and cash flows for each of the three years in the period ended March 31, 2019, and the related notes and schedules (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at March 31, 2019 and 2018, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2019
,
in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of March 31, 2019, based on criteria established in
Internal Control – Integrated Framework
(2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated May 29, 2019, expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2003.
Phoenix, Arizona
May 29, 2019
Amerco and consolidated subsidiaries
Consolidated balance sheets
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands, except share data)
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
$
|
673,701
|
$
|
759,388
|
Reinsurance recoverables and trade receivables, net
|
|
224,785
|
|
193,538
|
Inventories and parts, net
|
|
103,504
|
|
89,877
|
Prepaid expenses
|
|
174,100
|
|
166,129
|
Investments, fixed maturities and marketable equities
|
|
2,235,397
|
|
1,919,860
|
Investments, other
|
|
300,736
|
|
399,064
|
Deferred policy acquisition costs, net
|
|
136,276
|
|
124,767
|
Other assets
|
|
78,354
|
|
244,782
|
Related party assets
|
|
30,889
|
|
33,276
|
|
|
3,957,742
|
|
3,930,681
|
Property, plant and equipment, at cost:
|
|
|
|
|
Land
|
|
976,454
|
|
827,649
|
Buildings and improvements
|
|
4,003,726
|
|
3,140,713
|
Furniture and equipment
|
|
689,780
|
|
632,803
|
Rental trailers and other rental equipment
|
|
590,039
|
|
545,968
|
Rental trucks
|
|
4,762,028
|
|
4,390,750
|
|
|
11,022,027
|
|
9,537,883
|
Less: Accumulated depreciation
|
|
(3,088,056)
|
|
(2,721,142)
|
Total property, plant and equipment
|
|
7,933,971
|
|
6,816,741
|
Total assets
|
$
|
11,891,713
|
$
|
10,747,422
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
556,873
|
$
|
511,115
|
Notes, loans and leases payable, net
|
|
4,163,323
|
|
3,513,076
|
Policy benefits and losses, claims and loss expenses payable
|
|
1,011,183
|
|
1,248,033
|
Liabilities from investment contracts
|
|
1,666,742
|
|
1,364,066
|
Other policyholders' funds and liabilities
|
|
15,047
|
|
10,040
|
Deferred income
|
|
35,186
|
|
34,276
|
Deferred income taxes, net
|
|
750,970
|
|
658,108
|
Total liabilities
|
|
8,199,324
|
|
7,338,714
|
|
|
|
|
|
Commitments and contingencies (notes 9, 16, 17, and 18)
|
|
|
|
|
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 March 31, 2019 and 2018
|
|
–
|
|
–
|
Series B preferred stock, with no par value, 100,000 shares authorized; none
|
|
|
|
|
issued and outstanding as of March 31, 2019 and 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 March 31, 2019 and 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 March 31, 2019 and 2018
|
|
10,497
|
|
10,497
|
Additional paid-in capital
|
|
453,326
|
|
452,746
|
Accumulated other comprehensive loss
|
|
(66,698)
|
|
(4,623)
|
Retained earnings
|
|
3,976,962
|
|
3,635,561
|
Cost of common shares in treasury, net (22,377,912 shares as of March 31, 2019 and 2018)
|
|
(525,653)
|
|
(525,653)
|
Cost of preferred shares in treasury, net (6,100,000 shares as of March 31, 2019 and 2018)
|
|
(151,997)
|
|
(151,997)
|
Unearned employee stock ownership plan shares
|
|
(4,048)
|
|
(7,823)
|
Total stockholders' equity
|
|
3,692,389
|
|
3,408,708
|
Total liabilities and stockholders' equity
|
$
|
11,891,713
|
$
|
10,747,422
|
The accompanying notes are an integral part of these consolidated financial statements.
amerco and consolidated subsidiaries
Consolidated statements of operations
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands, except share and per share data)
|
Revenues:
|
|
|
|
|
|
|
Self-moving equipment rentals
|
$
|
2,653,497
|
$
|
2,479,742
|
$
|
2,362,833
|
Self-storage revenues
|
|
367,276
|
|
323,903
|
|
286,886
|
Self-moving and self-storage products and service sales
|
|
264,146
|
|
261,557
|
|
253,073
|
Property management fees
|
|
29,148
|
|
29,602
|
|
29,075
|
Life insurance premiums
|
|
63,488
|
|
154,703
|
|
163,579
|
Property and casualty insurance premiums
|
|
60,853
|
|
57,100
|
|
52,334
|
Net investment and interest income
|
|
110,934
|
|
110,473
|
|
102,276
|
Other revenue
|
|
219,365
|
|
184,034
|
|
171,711
|
Total revenues
|
|
3,768,707
|
|
3,601,114
|
|
3,421,767
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
Operating expenses
|
|
1,981,180
|
|
1,807,056
|
|
1,567,181
|
Commission expenses
|
|
288,408
|
|
276,705
|
|
267,230
|
Cost of sales
|
|
162,142
|
|
160,489
|
|
152,485
|
Benefits and losses
|
|
100,277
|
|
185,311
|
|
182,710
|
Amortization of deferred policy acquisition costs
|
|
28,556
|
|
24,514
|
|
26,218
|
Lease expense
|
|
33,158
|
|
33,960
|
|
37,343
|
Depreciation, net gains on disposals of ($26,982, $11,822 and $32,495, respectively)
|
|
554,043
|
|
543,247
|
|
449,025
|
Net gains on disposal of real estate
|
|
(44)
|
|
(195,414)
|
|
(3,590)
|
Total costs and expenses
|
|
3,147,720
|
|
2,835,868
|
|
2,678,602
|
|
|
|
|
|
|
|
Earnings from operations
|
|
620,987
|
|
765,246
|
|
743,165
|
Other components of net periodic benefit costs
|
|
(1,013)
|
|
(927)
|
|
(902)
|
Interest expense
|
|
(142,445)
|
|
(126,706)
|
|
(113,406)
|
Fees and amortization on early extinguishment of debt
|
|
–
|
|
–
|
|
(499)
|
Pretax earnings
|
|
477,529
|
|
637,613
|
|
628,358
|
Income tax benefit (expense)
|
|
(106,672)
|
|
152,970
|
|
(229,934)
|
Earnings available to common stockholders
|
$
|
370,857
|
$
|
790,583
|
$
|
398,424
|
Basic and diluted earnings per common share
|
$
|
18.93
|
$
|
40.36
|
$
|
20.34
|
Weighted average common shares outstanding: Basic and diluted
|
|
19,592,048
|
|
19,588,889
|
|
19,586,606
|
Related party revenues for fiscal 2019, 2018 and 2017, net of eliminations, were $29.1 million, $32.9 million and $34.0 million, respectively.
Related party costs and expenses for fiscal 2019, 2018, and 2017, net of eliminations, were $64.1 million, $61.3 million and $59.9 million, respectively.
Please see Note 19, 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.
Amerco and Consolidated Subsidiaries
Consolidated statements of comprehensive income (loss)
Fiscal Year Ended March 31, 2019
|
|
Pre-tax
|
|
Tax
|
|
Net
|
|
|
(In thousands)
|
Comprehensive income:
|
|
|
|
|
|
|
Net earnings
|
$
|
477,529
|
$
|
(106,672)
|
$
|
370,857
|
Other comprehensive income:
|
|
|
|
|
|
|
Foreign currency translation
|
|
(1,759)
|
|
–
|
|
(1,759)
|
Unrealized net loss on investments
|
|
(76,124)
|
|
16,356
|
|
(59,768)
|
Change in fair value of cash flow hedges
|
|
633
|
|
(156)
|
|
477
|
Change in postretirement benefit obligations
|
|
(1,359)
|
|
334
|
|
(1,025)
|
Total comprehensive income
|
$
|
398,920
|
$
|
(90,138)
|
$
|
308,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31, 2018
|
|
Pre-tax
|
|
Tax
|
|
Net
|
|
|
(In thousands)
|
Comprehensive income:
|
|
|
|
|
|
|
Net earnings
|
$
|
637,613
|
$
|
152,970
|
$
|
790,583
|
Other comprehensive income:
|
|
|
|
|
|
|
Foreign currency translation
|
|
14,652
|
|
–
|
|
14,652
|
Unrealized net gain on investments
|
|
30,929
|
|
(10,825)
|
|
20,104
|
Change in fair value of cash flow hedges
|
|
4,445
|
|
(1,363)
|
|
3,082
|
Change in postretirement benefit obligations
|
|
288
|
|
(253)
|
|
35
|
Total comprehensive income
|
$
|
687,927
|
$
|
140,529
|
$
|
828,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31, 2017
|
|
Pre-tax
|
|
Tax
|
|
Net
|
|
|
(In thousands)
|
Comprehensive income:
|
|
|
|
|
|
|
Net earnings
|
$
|
628,358
|
$
|
(229,934)
|
$
|
398,424
|
Other comprehensive income:
|
|
|
|
|
|
|
Foreign currency translation
|
|
(5,862)
|
|
–
|
|
(5,862)
|
Unrealized net gain on investments
|
|
13,822
|
|
(4,838)
|
|
8,984
|
Change in fair value of cash flow hedges
|
|
9,916
|
|
(3,767)
|
|
6,149
|
Change in postretirement benefit obligations
|
|
28
|
|
(10)
|
|
18
|
Total comprehensive income
|
$
|
646,262
|
$
|
(238,549)
|
$
|
407,713
|
The accompanying notes are an integral part of these consolidated financial statements
.
Amerco and consolidated subsidiaries
consolidated statements of changes in stockholders’ equity
Description
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive
Income (Loss)
|
|
Retained Earnings
|
|
Less: Treasury Common Stock
|
|
Less: Treasury Preferred Stock
|
|
Less: Unearned Employee Stock Ownership Plan Shares
|
|
Total Stockholders' Equity
|
|
(In thousands)
|
Balance as of March 31, 2016
|
$
|
10,497
|
$
|
451,629
|
$
|
(60,525)
|
$
|
2,533,641
|
$
|
(525,653)
|
$
|
(151,997)
|
$
|
(6,186)
|
$
|
2,251,406
|
Increase in market value of released ESOP shares
|
|
–
|
|
543
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
543
|
Release of unearned ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
10,360
|
|
10,360
|
Purchase of ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(11,106)
|
|
(11,106)
|
Foreign currency translation
|
|
–
|
|
–
|
|
(5,862)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(5,862)
|
Unrealized net gain on investments, net of tax
|
|
–
|
|
–
|
|
8,984
|
|
–
|
|
–
|
|
–
|
|
–
|
|
8,984
|
Change in fair value of cash flow hedges, net of tax
|
|
–
|
|
–
|
|
6,149
|
|
–
|
|
–
|
|
–
|
|
–
|
|
6,149
|
Change in postretirement benefit obligations
|
|
–
|
|
–
|
|
18
|
|
–
|
|
–
|
|
–
|
|
–
|
|
18
|
Net earnings
|
|
–
|
|
–
|
|
–
|
|
398,424
|
|
–
|
|
–
|
|
–
|
|
398,424
|
Common stock dividends: ($2.00 per share for fiscal 2017)
|
|
–
|
|
–
|
|
–
|
|
(39,172)
|
|
–
|
|
–
|
|
–
|
|
(39,172)
|
Net activity
|
|
–
|
|
543
|
|
9,289
|
|
359,252
|
|
–
|
|
–
|
|
(746)
|
|
368,338
|
Balance as of March 31, 2017
|
$
|
10,497
|
$
|
452,172
|
$
|
(51,236)
|
$
|
2,892,893
|
$
|
(525,653)
|
|
(151,997)
|
$
|
(6,932)
|
$
|
2,619,744
|
Adjustment for adoption of ASU 2018 - 02
|
|
–
|
|
–
|
|
8,740
|
|
(8,740)
|
|
–
|
|
–
|
|
–
|
|
–
|
Increase in market value of released ESOP shares
|
|
–
|
|
574
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
574
|
Release of unearned ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
10,749
|
|
10,749
|
Purchase of ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(11,640)
|
|
(11,640)
|
Foreign currency translation
|
|
–
|
|
–
|
|
14,652
|
|
–
|
|
–
|
|
–
|
|
–
|
|
14,652
|
Unrealized net gain on investments, net of tax
|
|
–
|
|
–
|
|
20,104
|
|
–
|
|
–
|
|
–
|
|
–
|
|
20,104
|
Change in fair value of cash flow hedges, net of tax
|
|
–
|
|
–
|
|
3,082
|
|
–
|
|
–
|
|
–
|
|
–
|
|
3,082
|
Change in postretirement benefit obligations
|
|
–
|
|
–
|
|
35
|
|
–
|
|
–
|
|
–
|
|
–
|
|
35
|
Net earnings
|
|
–
|
|
–
|
|
–
|
|
790,583
|
|
–
|
|
–
|
|
–
|
|
790,583
|
Common stock dividends: ($2.00 per share for fiscal 2018)
|
|
–
|
|
–
|
|
–
|
|
(39,175)
|
|
–
|
|
–
|
|
–
|
|
(39,175)
|
Net activity
|
|
–
|
|
574
|
|
46,613
|
|
742,668
|
|
–
|
|
–
|
|
(891)
|
|
788,964
|
Balance as of March 31, 2018
|
$
|
10,497
|
$
|
452,746
|
$
|
(4,623)
|
$
|
3,635,561
|
$
|
(525,653)
|
$
|
(151,997)
|
$
|
(7,823)
|
$
|
3,408,708
|
Adjustment for adoption of ASU 2016 - 01
|
|
–
|
|
–
|
|
(9,724)
|
|
9,724
|
|
–
|
|
–
|
|
–
|
|
–
|
Increase in market value of released ESOP shares
|
|
–
|
|
580
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
580
|
Release of unearned ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
9,392
|
|
9,392
|
Purchase of ESOP shares
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(5,617)
|
|
(5,617)
|
Foreign currency translation
|
|
–
|
|
–
|
|
(1,759)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,759)
|
Unrealized net loss on investments, net of tax
|
|
–
|
|
–
|
|
(50,044)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(50,044)
|
Change in fair value of cash flow hedges, net of tax
|
|
–
|
|
–
|
|
477
|
|
–
|
|
–
|
|
–
|
|
–
|
|
477
|
Change in postretirement benefit obligations
|
|
–
|
|
–
|
|
(1,025)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,025)
|
Net earnings
|
|
–
|
|
–
|
|
–
|
|
370,857
|
|
–
|
|
–
|
|
–
|
|
370,857
|
Common stock dividends: ($2.00 per share for fiscal 2019)
|
|
–
|
|
–
|
|
–
|
|
(39,180)
|
|
–
|
|
–
|
|
–
|
|
(39,180)
|
Net activity
|
|
–
|
|
580
|
|
(62,075)
|
|
341,401
|
|
–
|
|
–
|
|
3,775
|
|
283,681
|
Balance as of March 31, 2019
|
$
|
10,497
|
$
|
453,326
|
$
|
(66,698)
|
$
|
3,976,962
|
$
|
(525,653)
|
$
|
(151,997)
|
$
|
(4,048)
|
$
|
3,692,389
|
The accompanying notes are an integral part of these consolidated financial statements.
amerco and consolidated subsidiaries
consolidated statements of cash flows
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net earnings
|
$
|
370,857
|
$
|
790,583
|
$
|
398,424
|
Adjustments to reconcile net earnings to cash provided by operations:
|
|
|
|
|
|
|
Depreciation
|
|
581,025
|
|
555,069
|
|
481,520
|
Amortization of deferred policy acquisition costs
|
|
28,556
|
|
24,514
|
|
26,218
|
Amortization of premiums and accretion of discounts related to investments, net
|
|
13,107
|
|
12,790
|
|
11,828
|
Amortization of debt issuance costs
|
|
3,923
|
|
3,868
|
|
4,062
|
Interest credited to policyholders
|
|
35,387
|
|
32,302
|
|
25,020
|
Change in allowance for losses on trade receivables
|
|
52
|
|
(120)
|
|
(46)
|
Change in allowance for inventories and parts reserves
|
|
(146)
|
|
5,065
|
|
1,330
|
Net gains on disposal of personal property
|
|
(26,982)
|
|
(11,822)
|
|
(32,495)
|
Net gains on disposal of real estate
|
|
(44)
|
|
(195,414)
|
|
(3,590)
|
Net gains on sales of investments
|
|
(2,663)
|
|
(6,269)
|
|
(5,284)
|
Net losses on equity investments
|
|
5,739
|
|
–
|
|
–
|
Deferred income taxes
|
|
106,811
|
|
(193,434)
|
|
173,112
|
Net change in other operating assets and liabilities:
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables
|
|
(31,365)
|
|
(15,329)
|
|
(2,890)
|
Inventories and parts
|
|
(13,492)
|
|
(12,384)
|
|
(4,072)
|
Prepaid expenses
|
|
(8,620)
|
|
(40,765)
|
|
9,386
|
Capitalization of deferred policy acquisition costs
|
|
(25,957)
|
|
(27,350)
|
|
(27,111)
|
Other assets
|
|
157,152
|
|
(165,968)
|
|
(2,488)
|
Related party assets
|
|
4,194
|
|
53,408
|
|
343
|
Accounts payable and accrued expenses
|
|
10,263
|
|
(36,980)
|
|
(15,548)
|
Policy benefits and losses, claims and loss expenses payable
|
|
(236,120)
|
|
161,121
|
|
15,378
|
Other policyholders' funds and liabilities
|
|
5,007
|
|
(109)
|
|
1,499
|
Deferred income
|
|
966
|
|
5,524
|
|
5,921
|
Related party liabilities
|
|
(2,067)
|
|
(616)
|
|
(1,062)
|
Net cash provided by operating activities
|
|
975,583
|
|
937,684
|
|
1,059,455
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Escrow deposits
|
|
4,299
|
|
31,362
|
|
(38,058)
|
Purchase of:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(1,869,968)
|
|
(1,363,745)
|
|
(1,419,505)
|
Short term investments
|
|
(54,048)
|
|
(63,556)
|
|
(635,847)
|
Fixed maturity investments
|
|
(540,045)
|
|
(390,900)
|
|
(355,101)
|
Equity securities
|
|
(957)
|
|
(662)
|
|
(489)
|
Preferred stock
|
|
–
|
|
(1,000)
|
|
–
|
Real estate
|
|
(635)
|
|
(1,939)
|
|
(32,807)
|
Mortgage loans
|
|
(63,611)
|
|
(83,507)
|
|
(154,310)
|
Proceeds from sales and paydowns of:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
606,271
|
|
699,803
|
|
487,475
|
Short term investments
|
|
66,037
|
|
67,790
|
|
655,726
|
Fixed maturity investments
|
|
123,551
|
|
163,469
|
|
189,242
|
Equity securities
|
|
8,608
|
|
–
|
|
–
|
Preferred stock
|
|
1,625
|
|
4,208
|
|
4,181
|
Real estate
|
|
–
|
|
2,783
|
|
8,753
|
Mortgage loans
|
|
147,737
|
|
37,590
|
|
106,832
|
Net cash used by investing activities
|
|
(1,571,136)
|
|
(898,304)
|
|
(1,183,908)
|
|
|
Page 1 of 2
|
The accompanying notes are an integral part of these consolidated financial statements.
amerco and consolidated subsidiaries
consolidated statements of cash flows (continued)
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Borrowings from credit facilities
|
$
|
897,311
|
$
|
498,464
|
$
|
742,625
|
Principal repayments on credit facilities
|
|
(299,748)
|
|
(356,451)
|
|
(367,844)
|
Payment of debt issuance costs
|
|
(7,243)
|
|
(5,111)
|
|
(5,055)
|
Capital lease payments
|
|
(303,431)
|
|
(296,363)
|
|
(212,545)
|
Employee stock ownership plan shares
|
|
(418)
|
|
(11,640)
|
|
(11,106)
|
Securitization deposits
|
|
–
|
|
(2,180)
|
|
446
|
Common stock dividends paid
|
|
(39,179)
|
|
(29,380)
|
|
(58,757)
|
Investment contract deposits
|
|
400,123
|
|
401,814
|
|
285,148
|
Investment contract withdrawals
|
|
(132,833)
|
|
(182,549)
|
|
(149,159)
|
Net cash provided by financing activities
|
|
514,582
|
|
16,604
|
|
223,753
|
|
|
|
|
|
|
|
Effects of exchange rate on cash
|
|
(4,716)
|
|
5,598
|
|
(2,140)
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
(85,687)
|
|
61,582
|
|
97,160
|
Cash and cash equivalents at the beginning of period
|
|
759,388
|
|
697,806
|
|
600,646
|
Cash and cash equivalents at the end of period
|
$
|
673,701
|
$
|
759,388
|
$
|
697,806
|
|
|
|
|
|
|
|
|
|
Page 2 of 2
|
amerco and consolidated subsidiaries
notes to consolidated financial statements
Note 1. Basis of Presentation
AMERCO, a Nevada Corporation (“AMERCO”), has a fiscal year that ends on the 31
st
of March for each year that is referenced. Our insurance company subsidiaries have fiscal years that end on the 31
st
of December 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 financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2018, 2017 and 2016 correspond to fiscal 2019, 2018 and 2017 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. Please see Note 3, Accounting Policies –
Adoption of New Accounting Pronouncements
, of the Notes to Consolidated Financial Statements.
Note 2. Principles of Consolidation
We apply Accounting Standards Codification (“ASC”) 810 -
Consolidation
(“ASC 810”) in our principles of consolidation. ASC 810 addresses arrangements where a company does not hold a majority of the voting or similar interests of a variable interest entity (“VIE”). A company is required to consolidate a VIE if it has determined it is the primary beneficiary. ASC 810 also addresses the policy when a company owns a majority of the voting or similar rights and exercises effective control.
A VIE is not self-supportive due to having one or both of the following conditions: (i) it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated financial support or (ii) its owners do not hold the typical risks and rights of equity owners. This determination is made upon the creation of a variable interest and is re-assessed on an on-going basis should certain changes in the operations of a VIE, or its relationship with the primary beneficiary trigger a reconsideration. After a reconsideration event occurs the most recent facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(ies) have a variable interest in the entity, and whether or not the company’s interest is such that it is the primary beneficiary.
We will continue to monitor our relationships with the other entities regarding who is the primary beneficiary, which could change based on facts and circumstances of any reconsideration events. Please see Note 19, Related Party Transactions, of the Notes to Consolidated Financial Statements.
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. 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.
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.
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 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.
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.
Note 3.
Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting policies that we deem most critical to us and that require management’s most difficult and subjective judgments include the principles of consolidation, the recoverability of property, plant and equipment, the adequacy of insurance reserves, the recognition and measurement of impairments for investments accounted for under ASC 320 -
Investments
-
Debt and Equity Securities
and the recognition and measurement of income tax assets and liabilities. The actual results experienced by us may materially differ from management’s estimates.
Cash and Cash Equivalents
We consider cash equivalents to be highly liquid debt securities with insignificant interest rate risk with original maturities from the date of purchase of three months or less.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash deposits. Accounts at each United States financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Accounts at each Canadian financial institution are insured by the Canada Deposit Insurance Corporation up to $100,000 CAD per account. As of March 31, 2019 and March 31, 2018, we held cash equivalents in excess of these insured limits. To mitigate this risk, we select financial institutions based on their credit ratings and financial strength.
Investments
Fixed Maturities and Marketable Equities.
Fixed maturity investments consist of either marketable debt, equity or redeemable preferred stocks. As of the balance sheet dates, all of our investments in these securities were classified as available-for-sale. Available-for-sale investments are reported at fair value, with unrealized gains or losses recorded net of taxes and applicable adjustments to deferred policy acquisition costs in stockholders’ equity. Changes in the market value of common stocks are recognized in earnings. Fair value for these investments is based on quoted market prices, dealer quotes or discounted cash flows. The cost of investments sold is based on the specific identification method.
In determining if and when a decline in market value below carrying value is an other-than-temporary impairment, management makes certain assumptions or judgments in its assessment including but not limited to: our ability to hold the security, quoted market prices, dealer quotes, discounted cash flows, industry factors, financial factors, and issuer specific information. Other-than-temporary impairments, to the extent of the decline, as well as realized gains or losses on the sale or exchange of investments are recognized in the current period operating results.
Mortgage Loans and Notes on Real Estate.
Mortgage loans and notes on real estate are reported at their unpaid balance, net of any allowance for possible losses and any unamortized premium or discount.
Recognition of Investment Income.
Interest income from bonds and mortgage notes is recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date.
Derivative Financial Instruments
Our objective for holding derivative financial instruments is to manage interest rate risk exposure primarily through entering interest rate swap agreements. An interest rate swap is a contractual exchange of interest payments between two parties. A standard interest rate swap involves the payment of a fixed rate times a notional amount by one party in exchange for a receiving floating rate times the same notional amount from another party. As interest rates change, the difference to be paid or received is accrued and recognized as interest expense or income over the life of the agreement.
We do not enter into these instruments for trading purposes. Counterparties to the interest rate swap agreements are major financial institutions. Interest rate swap agreements are recognized at fair value on the balance sheet and are classified as prepaid expenses (asset) or accrued expenses (liability). Derivatives that are not designated as cash flow hedges for accounting purposes must be adjusted to fair value through income. If the derivative qualifies and is designated as a cash flow hedge, changes in its fair value will be recorded in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. See Note 11, Derivatives, of the Notes to Consolidated Financial Statements.
Inventories and parts, net
Inventories and parts, net were as follows:
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Truck and trailer parts and accessories (a)
|
$
|
94,344
|
$
|
83,335
|
Hitches and towing components (b)
|
|
20,113
|
|
18,627
|
Moving supplies and propane (b)
|
|
10,356
|
|
9,370
|
Subtotal
|
|
124,813
|
|
111,332
|
Less: LIFO reserves
|
|
(18,987)
|
|
(16,126)
|
Less: excess and obsolete reserves
|
|
(2,322)
|
|
(5,329)
|
Total
|
$
|
103,504
|
$
|
89,877
|
|
|
|
|
|
(a) Primarily held for internal usage, including equipment manufacturing and repair
|
(b) Primarily held for retail sales
|
|
|
|
|
Inventories consist primarily of truck and trailer parts and accessories used to manufacture and repair rental equipment as well as products and accessories available for retail sale. Inventory is held at our owned locations; our independent dealers do not hold any of our inventory. Inventories are stated at the lower cost or net realizable value.
Inventory cost is primarily determined using the last-in first-out method (“LIFO”). Inventories valued using LIFO consisted of approximately 96% of the total inventories for March 31, 2019 and 2018. Had we utilized the first-in first-out method (“FIFO”), stated inventory balances would have been $19.0 million and $16.1 million higher as of March 31, 2019 and 2018, respectively. In fiscal 2018, the negative effect on income due to liquidation of a portion of the LIFO inventory was $0.1 million.
Property, Plant and Equipment
Our Property, plant and equipment is stated at cost. Interest expense, if any, incurred during the initial construction of buildings is considered part of cost. Depreciation is computed for financial reporting purposes using the straight line or an accelerated method based on a declining balance formula over the following estimated useful lives: rental equipment 2-20 years and buildings and non-rental equipment 3-55 years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment, other than real estate (“personal property”), are netted against depreciation expense when realized. The net amount of gains, netted against depreciation expense, were $27.0 million, $11.8 million and $32.5 million during fiscal 2019, 2018 and 2017, respectively. Equipment depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., minimize gains or losses. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. As a result of changes in IRS regulations regarding the capitalization of assets, beginning in the first quarter of fiscal 2017, we raised the value threshold before certain assets are capitalized within our depreciation policy. This change in threshold, results in the immediate recognition of reported operating costs with a lagging decrease in depreciation expense over the term that these assets would have been depreciated. Due to this change, we had operating expenses of $21.0 million and $23.1 million in fiscal 2019 and 2018, respectively. This change in threshold benefited us through the immediate recognition of tax deductible costs.
We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the remaining life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives.
For our box truck fleet we utilize an accelerated method of depreciation based upon a declining formula. Under the declining balances method (2.4 times declining balance), the book value of a rental truck is reduced approximately 16%, 13%, 11%, 9%, 8%, 7%, and 6% during years one through seven, respectively and then reduced on a straight line basis to a salvage value of 15% by the end of year fifteen. Comparatively, a standard straight line approach would reduce the book value by approximately 5.7% per year over the life of the truck.
Although we intend to sell our used vehicles for prices approximating book value, the extent to which we realize a gain or loss on the sale of used vehicles is dependent upon various factors including, but not limited to, the general state of the used vehicle market, the age and condition of the vehicle at the time of its disposal and the depreciation rates with respect to the vehicle
.
We typically sell our used vehicles at our sales centers throughout the United States and Canada, on our website at uhaul.com/trucksales or by phone at 1-866-404-0355. Additionally, we sell a large portion of our pickup and cargo van fleet at automobile dealer auctions.
In addition to our property, plant and equipment, we had real estate held for investment of $53.5 million and $53.8 million for fiscal 2019 and 2018, respectively and is included in Investments, other.
Receivables
Trade receivables include trade accounts from moving and self-storage customers and dealers, insurance premiums and amounts due from re-insurers, less management’s estimate of uncollectible accounts.
Insurance premiums receivable for policies that are billed through contracted agents are recorded net of commissions payable. A commission payable is recorded as a separate liability for those premiums that are billed direct.
Reinsurance recoverables include case reserves and actuarial estimates of claims incurred but not reported ("IBNR"). These receivables are not expected to be collected until after the associated claim has been adjudicated and billed to the re-insurer. The reinsurance recoverables may have little or no allowance for doubtful accounts due to the fact that reinsurance is typically procured from carriers with strong credit ratings. Furthermore, we do not cede losses to a re-insurer if the carrier is deemed financially unable to perform on the contract. Reinsurance recoverables also include insurance ceded to other insurance companies.
Notes and mortgage receivables include accrued interest and are reduced by discounts and amounts considered by management to be uncollectible.
Policy Benefits and Losses, Claims and Loss Expenses Payable
Life Insurance’s liabilities for life insurance and certain annuity and health policies are established to meet the estimated future obligations of policies in force, and are based on mortality, morbidity and withdrawal assumptions from recognized actuarial tables which contain margins for adverse deviation. Liabilities for health, disability and other policies include estimates of payments to be made on insurance claims for reported losses and estimates of IBNR losses. Oxford’s liabilities for deferred annuity contracts consist of contract account balances that accrue to the benefit of the policyholders.
Property and Casualty Insurance’s liability for reported and unreported losses is based on Repwest’s historical data along with industry averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from re-insurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the re-insured policy. Adjustments to the liability for unpaid losses and loss expenses as well as amounts recoverable from re-insurers on unpaid losses are charged or credited to expense in the periods in which they are made.
Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.
As a result of the long-tailed nature of the excess workers’ compensation policies written by Repwest during 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled.
On a regular basis insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including the following:
-
Claimant longevity
-
Cost trends associated with claimant treatments
-
Changes in ceding entity and third party administrator reporting practices
-
Changes in environmental factors including legal and regulatory
-
Current conditions affecting claim settlements
-
Future economic conditions including inflation
We have reserved each claim based upon the accumulation of current claim costs projected through each claimant’s life expectancy and then adjusted for applicable reinsurance arrangements.
Management reviews each claim bi-annually or more frequently, if there are changes in facts or circumstances to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.
We have factored in an estimate of what the potential cost increases could be in our IBNR liability.
We have not assumed settlement of the existing claims in calculating the reserve amount, unless it is in the final stages of completion.
Continued increases in claim costs, including medical inflation and new treatments and medications could lead to future adverse development resulting in additional reserve strengthening.
Conversely, settlement of existing claims or if injured workers return to work or expire prematurely, could lead to future positive development.
Self-Insurance Reserves
U-Haul retains the risk for certain public liability and property damage programs related to our rental equipment. The consolidated balance sheets include $407.9 million and $408.5 million of liabilities related to these programs as of March 31, 2019 and 2018, respectively. These liabilities are recorded in Policy benefits and losses, claims and loss expenses payable. Management takes into account losses incurred based upon actuarial estimates, past experience, current claim trends, as well as social and economic conditions. This liability is subject to change in the future based upon changes in the underlying assumptions including claims experience, frequency of incidents, and severity of incidents.
Additionally, as of March 31, 2019 and 2018, the consolidated balance sheets include liabilities of $15.6 million and $15.2 million, respectively, related to medical plan benefits we provide for eligible employees. We estimate this liability based on actual claims outstanding as of the balance sheet date as well as an actuarial estimate of IBNR claims. These amounts are recorded in Accounts payable and accrued expenses on the consolidated balance sheets.
Revenue Recognition
Self-moving rentals are recognized for the period that trucks and moving equipment are rented. Self-storage revenues, based upon the number of paid storage contract days, are recognized as earned during the period.
Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery.
Property and casualty insurance premiums are recognized as revenue over the policy periods. Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force.
Interest and investment income are recognized as earned.
Amounts collected from customers for sales tax are recorded on a net basis. Please see Note 22, Revenue Recognition, of the Notes to Consolidated Financial Statements.
Advertising
All advertising costs are expensed as incurred. Advertising expense was $10.6 million, $8.1 million and $8.7 million in fiscal 2019, 2018 and 2017, respectively.
Deferred Policy Acquisition Costs
Commissions and other costs that fluctuate with and are primarily related to the acquisition or renewal of certain insurance premiums are deferred. For our Life Insurance’s life and health insurance products, these costs are amortized, with interest, in relation to revenue such that costs are realized as a constant percentage of revenue. For its annuity insurance products the costs are amortized, with interest, in relation to the present value of actual and expected gross profits.
Starting in fiscal 2014, new annuity contract holders were provided with a sales inducement in the form of a premium bonus (the “Sales Inducement Asset”).
Sales inducements are recognized as an asset with a corresponding increase to the policyholder liability and are amortized in a similar manner to Deferred Policy Acquisition Costs.
As of December 31, 2018 and 2017, the Sales Inducement Asset included with Deferred Policy Acquisition Costs amounted to $19.1 million and $21.2 million, respectively on the consolidated balance sheet and amortization expense totaled $3.7 million, $3.7 million and $3.3 million for the periods ended December 31, 2018, 2017 and 2016, respectively.
Environmental Costs
Liabilities are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs can be reasonably estimated. The amount of the liability is based on management’s best estimate of undiscounted future costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and amortized over the estimated useful lives of the properties. These costs are capitalized if they improve the safety or efficiency of the property or are incurred in preparing the property for sale.
Income Taxes
AMERCO files a consolidated tax return with all of its legal subsidiaries. The provision for income taxes reflects deferred income taxes resulting from changes in temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net earnings, foreign currency translation adjustments, unrealized gains and losses on investments, the change in fair value of cash flow hedges and the change in postretirement benefit obligations.
Debt Issuance Costs
We defer costs directly associated with acquiring third-party financing. Debt issuance costs are deferred and amortized. Debt issuance costs related to our long-term debt are reflected as a direct deduction from the carrying amount of the debt. Please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements.
Adoption of New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), which provided an updated standard on revenue recognition.
The standard outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis.
We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance.
The adoption of the standard did not have a material impact on our consolidated financial statements. Please see Note 22, Revenue Recognition, of the Notes to Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
(“ASU 2016-01”), which addressed certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the new guidance requires the fair value measurement of investments in certain equity securities. During fiscal 2019 changes in certain equity securities were recognized in earnings. For investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. All changes in measurement will be recognized in net income. The guidance was effective for interim and annual reporting periods beginning after December 15, 2017. We adopted this standard in the first quarter of fiscal 2019 and recorded an increase of approximately $9.7 million to retained earnings with a corresponding decrease to accumulated other comprehensive income (loss). Please see Note 6, Investments, of the Notes to Consolidated Financial Statements.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
(“ASU 2016-15”). This update addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice.
The effective date of ASU 2016-15 was for interim and annual reporting periods beginning after December 15, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16,
Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory
, which required an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.
This update was effective for fiscal years beginning after December 31, 2017, and interim periods within those fiscal years.
We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07,
Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
(“ASU 2017-07”), which changed how companies that sponsor defined benefit pension plans present the related net periodic benefit cost in the income statement. The service cost component of the net periodic benefit cost continues to be presented in the same income statement line items, however other components of the net periodic benefit cost are presented as a component of other income and excluded from operating profit. ASU 2017-07 became effective for public companies during interim and annual reporting periods beginning after December 15, 2017. We adopted this standard in the first quarter of fiscal 2019. We report the current service cost component of net periodic benefit cost in Operating expenses on our condensed consolidated statements of operations and report the Other components of net periodic benefit cost as a separate item outside of earnings from operations. We have applied these changes in presentation retrospectively, which resulted in a decrease in earnings from operations of $1.0 million, $0.9 million and $0.9 million for fiscal 2019, 2018 and 2017, respectively. These changes in presentation did not result in any changes to earnings available to common stockholders or earnings per common share. Details of the net periodic costs are provided in Note 13, Employee Benefit Plans, of the Notes to Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements
On April 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842)” along with related updates, which require a lessee to recognize all
leases with terms greater than 12 months on their balance sheet as
a liability for its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term.
The new leasing standard does not significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows. Additionally, Topic 842
aligns key aspects of lessor accounting with the new revenue recognition guidance in Topic 606 (see
ASU 2014-09 on the previous page)
and expands disclosure of key information about leasing arrangements
in an attempt to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases
.
We have determined portions of the vehicle rental contracts that convey the right to control the use of identified assets are within the scope of the accounting guidance contained in the new leasing standard. As we disclosed in our discussion of ASU 2014-09, the Company’s rental related revenues are accounted for under the revenue accounting standard Topic 606.
Topic 842 maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease are split between amortization and interest expense, with operating leases reporting a single lease expense.
Topic 842 substantially changed the accounting for sale-leasebacks going forward, where the Company is to assess if the contract qualifies as a sale under ASC 606. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost. As all existing sale-leasebacks have been accounted for as a sale, the Company did not reassess any existing sale-leaseback transactions.
The Company adopted the new leasing standard using the Effective Date Approach, which allows entities to only apply the new lease standard in the year of adoption. The Company elected the available practical expedients for existing or expired contracts of lessees and lessors wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, the Company elected as accounting policies to not recognize right of use assets or lease liabilities for short-term leases (i.e. those with a term of 12 months or less) and to combine lease and non-lease components in the contract for both lessee and lessor arrangements.
Adoption of this standard will result in most of the Company’s operating lease commitments being recognized as operating lease liabilities and right-of-use assets, which will increase total assets by $111.2 million and total liabilities by $109.6 million.
In June 2016, FASB issued ASU 2016-13,
Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments
. This standard requires the measurement and recognition of expected credit losses held at amortized cost. This new standard requires the use of forward-looking information to estimate credit losses and requires credit losses for available for sale debt securities to be recorded through an allowance for credit losses rather than a reduction in the amortized cost basis. This update is effective for public companies for annual reporting periods beginning after December 15, 2019.
We are currently evaluating the impact of this standard on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-08,
Receivables – Nonrefundable Fees and Other Cost (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.
These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact of this standard on our consolidated financial statements.
In August 2018, the FASB adopted ASU 2018-12,
Targeted Improvements to the Accounting for Long-Duration Contracts
(“ASU 2018-12”). The amendments in this update require insurance companies to annually review and update the assumptions used for measuring the liability under long-duration contracts, such as life insurance, disability income, and annuities. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2020. We are currently in the process of evaluating the impact of the adoption of this amendment on our financial statements; however, the adoption of ASU 2018-12 will impact the statements of operations because the effect of any update to the assumptions we used at the inception of the contracts will be recorded in net income.
In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
(“ASU 2018-13”), which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for the timing of such transfers. ASU 2018-13 expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of this update on our disclosures in the Notes to Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-14,
Compensation - Retirement Benefits - Defined Benefit Plans - General Subtopic 715-20 - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans
(“ASU 2018-14”),
which amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. We are currently evaluating the impact of this standard on our consolidated financial statements.
From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by us as of the specified effective date. Unless otherwise discussed, these ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore will have minimal, if any, impact on our financial position or results of operations upon adoption.
Note 4.
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 11,949; 17,581; and 20,226 as of March 31, 2019, 2018, and 2017, respectively.
Note 5.
Reinsurance Recoverables and Trade Receivables, Net
Reinsurance recoverables and trade receivables, net were as follows:
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Reinsurance recoverable
|
$
|
99,615
|
$
|
100,335
|
Trade accounts receivable
|
|
90,786
|
|
65,001
|
Paid losses recoverable
|
|
2,333
|
|
1,078
|
Accrued investment income
|
|
25,142
|
|
21,549
|
Premiums and agents' balances
|
|
1,545
|
|
1,702
|
Independent dealer receivable
|
|
390
|
|
85
|
Other receivables
|
|
5,523
|
|
4,284
|
|
|
225,334
|
|
194,034
|
Less: Allowance for doubtful accounts
|
|
(549)
|
|
(496)
|
|
$
|
224,785
|
$
|
193,538
|
Note 6.
Investments
Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $30.8 million and $32.4 million as of December 31, 2018 and 2017, respectively.
Available-for-Sale Investments
Available-for-sale investments as of March 31, 2019 were as follows:
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses More than 12 Months
|
|
Gross
Unrealized
Losses Less than 12 Months
|
|
Estimated
Market
Value
|
|
|
|
|
|
(In thousands)
|
U.S. treasury securities and government obligations
|
$
|
136,010
|
$
|
2,409
|
$
|
(2,104)
|
$
|
(447)
|
$
|
135,868
|
U.S. government agency mortgage-backed securities
|
|
31,101
|
|
433
|
|
(146)
|
|
(19)
|
|
31,369
|
Obligations of states and political subdivisions
|
|
298,955
|
|
8,079
|
|
(233)
|
|
(905)
|
|
305,896
|
Corporate securities
|
|
1,613,199
|
|
14,777
|
|
(14,257)
|
|
(24,986)
|
|
1,588,733
|
Mortgage-backed securities
|
|
148,203
|
|
880
|
|
(285)
|
|
(903)
|
|
147,895
|
Redeemable preferred stocks
|
|
1,493
|
|
20
|
|
–
|
|
(45)
|
|
1,468
|
|
$
|
2,228,961
|
$
|
26,598
|
$
|
(17,025)
|
$
|
(27,305)
|
$
|
2,211,229
|
Available-for-sale investments as of 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
|
|
15,941
|
|
572
|
|
–
|
|
(93)
|
|
16,420
|
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
|
|
114,581
|
|
2,451
|
|
(1)
|
|
(153)
|
|
116,878
|
Redeemable preferred stocks
|
|
2,118
|
|
129
|
|
–
|
|
–
|
|
2,247
|
|
$
|
1,823,199
|
$
|
66,741
|
$
|
(4,263)
|
$
|
(2,293)
|
$
|
1,883,384
|
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 $114.8 million, $163.7 million and $190.2 million in fiscal 2019, 2018 and 2017, respectively. The gross realized gains on these sales totaled $2.0 million, $5.4 million and $5.1 million in fiscal 2019, 2018 and 2017, respectively. We realized gross losses on these sales of $0.2 million, $0.3 million and $2.2 million in fiscal 2019, 2018 and 2017, respectively.
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 recognized these write-downs through earnings. There were no write downs in fiscal 2019, 2018 and 2017.
The investment portfolio primarily consists of corporate securities and U.S. government securities. We believe we monitor our investments as appropriate. Our methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors, including the length of time to maturity, the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. Nothing has come to management’s attention that would lead to the belief that 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 loss for fiscal 2019, 2018 or 2017.
The adjusted cost and estimated market value of available-for-sale investments by contractual maturity, were as follows:
|
|
March 31, 2019
|
|
March 31, 2018
|
|
|
Amortized
Cost
|
|
Estimated
Market
Value
|
|
Amortized
Cost
|
|
Estimated
Market
Value
|
|
|
(In thousands)
|
Due in one year or less
|
$
|
71,987
|
$
|
71,954
|
$
|
36,446
|
$
|
36,674
|
Due after one year through five years
|
|
541,195
|
|
540,658
|
|
441,159
|
|
450,749
|
Due after five years through ten years
|
|
621,031
|
|
614,485
|
|
607,075
|
|
625,282
|
Due after ten years
|
|
845,052
|
|
834,769
|
|
621,820
|
|
651,554
|
|
|
2,079,265
|
|
2,061,866
|
|
1,706,500
|
|
1,764,259
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities
|
|
148,203
|
|
147,895
|
|
114,581
|
|
116,878
|
Redeemable preferred stocks
|
|
1,493
|
|
1,468
|
|
2,118
|
|
2,247
|
|
$
|
2,228,961
|
$
|
2,211,229
|
$
|
1,823,199
|
$
|
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
, on April 1, 2018, the updated guidance eliminated the available-for-sale balance sheet classification for equity investments. As of March 31, 2019 and 2018, our common stock and non-redeemable preferred stock that are included in Investments, fixed maturities and marketable equities on our balance sheet are stated in the table below. The changes in the fair value of these equity investments are recognized through Net investment and interest income.
Equity investments of common stock and non-redeemable preferred stock were as follows:
|
|
March 31, 2019
|
|
March 31, 2018
|
|
|
Amortized
Cost
|
|
Estimated
Market
Value
|
|
Amortized
Cost
|
|
Estimated
Market
Value
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Common stocks
|
$
|
10,123
|
$
|
17,379
|
$
|
15,732
|
$
|
27,862
|
Non-redeemable preferred stocks
|
|
7,451
|
|
6,789
|
|
8,491
|
|
8,614
|
|
$
|
17,574
|
$
|
24,168
|
$
|
24,223
|
$
|
36,476
|
Investments, other
The carrying value of other investments was as follows:
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Mortgage loans, net
|
$
|
225,829
|
$
|
309,952
|
Short-term investments
|
|
5,546
|
|
10,350
|
Real estate
|
|
53,519
|
|
53,776
|
Policy loans
|
|
10,491
|
|
17,677
|
Other equity investments
|
|
5,351
|
|
7,309
|
|
$
|
300,736
|
$
|
399,064
|
Mortgage loans are carried at the unpaid balance, less an allowance for probable losses net of any unamortized premium or discount. The portfolio of mortgage loans is principally collateralized by self-storage facilities and commercial properties. The interest rate range on the mortgage loans is 4.1% to 8.2% with maturities between 2019 and 2036. The allowance for probable losses was $0.5 million and $0.5 million as of March 31, 2019 and 2018, respectively. The estimated fair value of these loans as of March 31, 2019 and 2018 approximated the carrying value. These loans represent first lien mortgages held by us. Mortgage loans are reviewed on an ongoing basis and analysis may include market analysis, estimated valuations of the underlying collateral, loan to value ratios, tenant creditworthiness and other factors. For our mortgage loans, no specifically identified loans were impaired as of March 31, 2019. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area.
Short-term investments consist primarily of investments in money market funds, mutual funds and any other investments with short-term characteristics that have original maturities of less than one year at acquisition. These investments are recorded at cost, which approximates fair value.
Real estate held for investment is carried at the lower of fair value at time of acquisition or current estimated fair value less cost to sell. Other equity investments are carried at cost and assessed for impairment.
Insurance policy loans are carried at their unpaid balance.
Note 7.
Other Assets
Other assets were as follows:
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Deposits (debt-related)
|
$
|
30,408
|
$
|
33,546
|
Cash surrender value of life insurance policies
|
|
30,985
|
|
31,904
|
Deposits (real estate related)
|
|
16,961
|
|
19,332
|
Insurance recoveries
|
|
–
|
|
160,000
|
|
$
|
78,354
|
$
|
244,782
|
Note 8.
Net Investment and Interest Income
Net investment and interest income, were as follows:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Fixed maturities
|
$
|
99,348
|
$
|
84,476
|
$
|
73,041
|
Real estate
|
|
5,538
|
|
5,344
|
|
5,189
|
Insurance policy loans
|
|
1,305
|
|
1,212
|
|
1,212
|
Mortgage loans
|
|
16,674
|
|
17,783
|
|
20,617
|
Short-term, amounts held by ceding reinsurers, net and other investments
|
|
(7,429)
|
|
3,098
|
|
1,157
|
Investment income
|
|
115,436
|
|
111,913
|
|
101,216
|
Less: investment expenses
|
|
(4,502)
|
|
(4,766)
|
|
(3,820)
|
Investment income - related party, net eliminations
|
|
–
|
|
3,326
|
|
4,880
|
Net investment and interest income
|
$
|
110,934
|
$
|
110,473
|
$
|
102,276
|
Note 9.
Borrowings
Long-Term Debt
Long-term debt was as follows:
|
|
|
|
|
March 31,
|
|
2019 Rate (a)
|
|
Maturities
|
|
2019
|
|
2018
|
|
|
|
|
|
(In thousands)
|
Real estate loan (amortizing term)
|
3.99%
|
|
2023
|
$
|
102,913
|
$
|
135,287
|
Senior mortgages
|
3.72% - 6.62%
|
|
2021 - 2038
|
|
1,741,652
|
|
1,487,645
|
Real estate loans (revolving credit)
|
3.74% - 3.99%
|
|
2021 - 2024
|
|
429,400
|
|
55,000
|
Fleet loans (amortizing term)
|
1.95% - 4.66%
|
|
2019 - 2025
|
|
263,209
|
|
342,971
|
Fleet loans (revolving credit)
|
3.64%
|
|
2021 - 2023
|
|
530,000
|
|
460,000
|
Capital leases (rental equipment)
|
1.92% - 5.04%
|
|
2019 - 2026
|
|
1,042,652
|
|
984,217
|
Other obligations
|
2.75% - 8.00%
|
|
2019 - 2048
|
|
82,417
|
|
73,579
|
Notes, loans and leases payable
|
|
|
|
$
|
4,192,243
|
$
|
3,538,699
|
Less: Debt issuance costs
|
|
|
|
|
(28,920)
|
|
(25,623)
|
Total notes, loans and leases payable, net
|
|
|
|
$
|
4,163,323
|
$
|
3,513,076
|
|
|
|
|
|
|
|
|
(a) Interest rate as of March 31, 2019, taking into account the effect of applicable hedging instruments
|
Real Estate Backed Loans
Real Estate Loan
Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (the “Real Estate Loan”).
The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers..
The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. As of March 31, 2019, the applicable LIBOR was 2.49% and the applicable margin was 1.50%, the sum of which was 3.99%. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.
Senior Mortgages
Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 3.72% 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.
Real Estate Loans (Revolving Credit)
Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of 335.0 million. As of March 31, 2019, the outstanding balance of these loans in the aggregate was $329.4 million. These loans are secured by certain properties owned by the borrowers. The loan agreements provide for term loans, subject to the terms of the loan agreements. The final maturity of the loans is between June 2021 and February 2024. The loans require monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of March 31, 2019, the applicable LIBOR was between 2.49% and 2.50% and the margin was between 1.25% and 1.50%, the sum of which was between 3.74% and 3.99%. AMERCO is the guarantor of these loans. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.
AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $150.0 million, which can be increased to $300.0 million by bringing in other lenders. As of March 31, 2019, the outstanding balance was $100.0 million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. The final maturity of this loan is September 2021. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of March 31, 2019, the applicable LIBOR was 2.49% and the margin was 1.38%, the sum of which was 3.87%. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30% fee charged for unused capacity.
Fleet Loans
Rental Truck Amortizing Loans
The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margins. As of March 31, 2019, the applicable LIBOR was between 2.48% and 2.49% and applicable margins were between 1.72% and 1.75%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 3.00% based on current margins. Additionally, $241.4 million of these loans are carried at fixed rates ranging between 1.95% and 4.66%.
AMERCO, and in some cases U-Haul, is guarantor of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.
Rental Truck Revolvers
Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $555.0 million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of March 31, 2019, the applicable LIBOR was 2.49%, and the margin was 1.15%, the sum of which was 3.64%. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly. In April 2019, the rental truck revolving loan that was scheduled to mature in January 2021 was extended to May 2024 and availability increased by $10.0 million.
Capital Leases
We regularly enter into capital leases for new equipment with the terms of the leases between five and seven years. During fiscal 2019, we entered into $348.4 million of new capital leases. As of March 31, 2019 the interest rates were between 1.92% and 5.04%. The net book value of the corresponding capitalized assets was $1,574.0 million and $1,407.6 million as of March 31, 2019 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 March 31, 2019, the aggregate outstanding principal balance of the U-Notes
®
issued was $85.6 million, of which $3.2 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 2019 and 2048.
Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of December 31, 2018, the deposits had an aggregate balance of $60.0 million, for which Oxford pays fixed interest rates between 1.67% and 2.95% with maturities between September 29, 2019 and March 29, 2021. As of December 31, 2018, available-for-sale investments held with the FHLB totaled $124.4 million, of which $69.8 million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.
Annual Maturities of Notes, Loans and Leases Payable
The annual maturities of our notes, loans and leases payable as of March 31, 2019 for the next five years and thereafter are as follows:
|
|
Years Ended March 31,
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
|
(In thousands)
|
Notes, loans and leases payable, secured
|
$
|
475,898
|
$
|
544,868
|
$
|
749,209
|
$
|
540,888
|
$
|
524,778
|
$
|
1,356,602
|
$
|
4,192,243
|
Note 10.
Interest on Borrowings
Interest Expense
Components of interest expense include the following:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Interest expense
|
$
|
150,609
|
$
|
125,412
|
$
|
106,221
|
Capitalized interest
|
|
(12,733)
|
|
(6,466)
|
|
(4,863)
|
Amortization of transaction costs
|
|
3,745
|
|
3,867
|
|
3,445
|
Interest expense resulting from cash flow hedges
|
|
824
|
|
3,893
|
|
8,603
|
Total interest expense
|
|
142,445
|
|
126,706
|
|
113,406
|
Amortization on early extinguishment of debt
|
|
–
|
|
–
|
|
499
|
Total
|
$
|
142,445
|
$
|
126,706
|
$
|
113,905
|
Interest paid in cash, including payments related to derivative contracts, amounted to $149.8 million, $129.3 million and $113.7 million for fiscal 2019, 2018 and 2017, respectively.
Interest Rates
Interest rates and our revolving credit borrowings were as follows:
|
|
Revolving Credit Activity
|
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands, except interest rates)
|
Weighted average interest rate during the year
|
|
3.39%
|
|
2.48%
|
|
1.83%
|
Interest rate at year end
|
|
3.60%
|
|
2.84%
|
|
2.06%
|
Maximum amount outstanding during the year
|
$
|
959,400
|
$
|
538,000
|
$
|
597,000
|
Average amount outstanding during the year
|
$
|
699,415
|
$
|
517,997
|
$
|
477,888
|
Facility fees
|
$
|
374
|
$
|
410
|
$
|
158
|
Note 11.
Derivatives
We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates, with the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of its counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.
The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the balance sheets were as follows:
|
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
|
(In thousands)
|
Interest rate contracts designated as hedging instruments
|
|
|
|
|
Assets
|
$
|
139
|
$
|
437
|
Liabilities
|
|
–
|
|
(897)
|
Notional amount (debt)
|
|
22,792
|
|
123,779
|
Notional amount (lease)
|
|
–
|
|
6,182
|
|
|
The Effect of Interest Rate
|
|
|
Contracts on the Statements of Operations
|
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Loss recognized in income on interest rate contracts
|
$
|
824
|
$
|
3,893
|
$
|
8,603
|
Gain recognized in AOCI on interest rate contracts (effective portion)
|
$
|
(633)
|
$
|
(4,445)
|
$
|
(9,916)
|
Loss reclassified from AOCI into income (effective portion)
|
$
|
789
|
$
|
3,893
|
$
|
8,628
|
(Gain) loss recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing)
|
$
|
35
|
$
|
–
|
$
|
(25)
|
Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During fiscal 2019, we recognized an increase in the fair value of our cash flows hedges of $0.5 million, net of taxes.
Embedded in this change was $0.8 million of losses reclassified from accumulated other comprehensive income (loss) to interest expense during the year. As of March 31, 2019, we expect to reclassify $0.2 million of net gains on interest rate contracts from accumulated other comprehensive income (loss) (“AOCI”) to earnings as interest expense over the next twelve months. Please see Note 3, Accounting Policies, in the Notes to Consolidated Financial Statements.
We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholder 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 market value on our balance sheet. At March 31, 2019 and 2018, these derivative hedges had a net market value of $1.5 million and $4.4 million, with notional amounts of $284.0
million and $227.4
million, respectively. These derivative instruments are included in Investments, other; on the consolidated balance sheets.
Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.
Note 12. Stockholders’ Equity
The following table lists the dividends that have been declared and issued since July 2017.
Common Stock Dividends
|
Declared Date
|
|
Per Share Amount
|
|
Record Date
|
|
Dividend Date
|
|
|
|
|
|
|
|
March 6, 2019
|
$
|
0.50
|
|
March 21, 2019
|
|
April 4, 2019
|
December 5, 2018
|
|
0.50
|
|
December 20, 2018
|
|
January 7, 2019
|
August 23, 2018
|
|
0.50
|
|
September 10, 2018
|
|
September 24, 2018
|
June 6, 2018
|
|
0.50
|
|
June 21, 2018
|
|
July 5, 2018
|
March 8, 2018
|
|
0.50
|
|
March 23, 2018
|
|
April 6, 2018
|
December 6, 2017
|
|
0.50
|
|
December 21, 2017
|
|
January 5, 2018
|
July 5, 2017
|
|
1.00
|
|
July 20, 2017
|
|
August 3, 2017
|
On June 8, 2016, our stockholders’ approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of March 31, 2019, no awards had been issued under this plan.
Note 13.
Provision for Taxes
Earnings before taxes and the provision for taxes consisted of the following:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Pretax earnings:
|
|
|
|
|
|
|
U.S.
|
$
|
466,175
|
$
|
628,901
|
$
|
609,589
|
Non-U.S.
|
|
11,354
|
|
8,712
|
|
18,769
|
Total pretax earnings
|
$
|
477,529
|
$
|
637,613
|
$
|
628,358
|
|
|
|
|
|
|
|
Current provision (benefit)
|
|
|
|
|
|
|
Federal
|
$
|
(6,114)
|
$
|
21,780
|
$
|
38,723
|
State
|
|
3,420
|
|
6,471
|
|
10,818
|
Non-U.S.
|
|
1,375
|
|
1,412
|
|
3,334
|
|
|
(1,319)
|
|
29,663
|
|
52,875
|
Deferred provision (benefit)
|
|
|
|
|
|
|
Federal
|
|
94,961
|
|
(199,415)
|
|
160,527
|
State
|
|
11,311
|
|
15,479
|
|
15,210
|
Non-U.S.
|
|
1,719
|
|
1,303
|
|
1,322
|
|
|
107,991
|
|
(182,633)
|
|
177,059
|
|
|
|
|
|
|
|
Provision for income tax expense (benefit)
|
$
|
106,672
|
$
|
(152,970)
|
$
|
229,934
|
|
|
|
|
|
|
|
Income taxes paid (net of income tax refunds received)
|
$
|
4,255
|
$
|
68,671
|
$
|
36,880
|
The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
Statutory federal income tax rate
|
|
21.00%
|
|
31.55%
|
|
35.00%
|
Increase (reduction) in rate resulting from:
|
|
|
|
|
|
|
Deferred tax liability revaluation
|
|
0.00%
|
|
(58.25)%
|
|
0.00%
|
State taxes, net of federal benefit
|
|
2.41%
|
|
2.33%
|
|
2.66%
|
Foreign rate differential
|
|
0.15%
|
|
0.00%
|
|
(0.31)%
|
Federal tax credits
|
|
(0.15)%
|
|
(0.32)%
|
|
(0.41)%
|
Transition tax
|
|
(0.20)%
|
|
1.83%
|
|
0.00%
|
Dividend received deduction
|
|
(0.01)%
|
|
(0.03)%
|
|
(0.03)%
|
Phase III tax
|
|
0.00%
|
|
0.63%
|
|
0.00%
|
Other
|
|
(0.86)%
|
|
(1.73)%
|
|
(0.32)%
|
Actual tax expense (benefit) of operations
|
|
22.34%
|
|
(23.99)%
|
|
36.59%
|
Significant components of our deferred tax assets and liabilities were as follows:
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Deferred tax assets:
|
|
|
|
|
Net operating loss and credit carry forwards
|
$
|
90,061
|
$
|
3,136
|
Accrued expenses
|
|
105,727
|
|
104,309
|
Policy benefit and losses, claims and loss expenses payable, net
|
|
16,515
|
|
11,148
|
Total deferred tax assets
|
$
|
212,303
|
$
|
118,593
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property, plant and equipment
|
$
|
940,433
|
$
|
741,607
|
Deferred policy acquisition costs
|
|
14,191
|
|
12,995
|
Unrealized gains
|
|
4,223
|
|
18,863
|
Other
|
|
4,426
|
|
3,236
|
Total deferred tax liabilities
|
|
963,273
|
|
776,701
|
Net deferred tax liability
|
$
|
750,970
|
$
|
658,108
|
The net operating loss (“NOL”) and credit carry-forwards in the above table are primarily attributable to $358.9 million of federal NOLs and $172.3 million of state NOLs.
The federal NOL consists of $266.8 million as of March 31, 2019, and $92.1 million as of March 31, 2018
.
The federal NOL as of March 31, 2019 has an indefinite life, but is subject to the single tax year limitation under section 172 (a) equal to the lesser of available NOL carryover or 80% of a taxpayer's pre-NOL deduction taxable income (the "80% limitation").
The federal NOL as of March 31, 2018 is not limited and can be carried forward to offset taxable income for 20 years.
As of March 31, 2019 and March 31, 2018, AMERCO had state NOLs of $172.3 million and $45.3 million, respectively, that will begin to expire March 31, 2020, if not utilized.
The Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted on December 22, 2017. The Tax Reform Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and repealed the deferral of the phase three tax for life insurance companies. The blended statutory Federal Tax Rate for our full fiscal year ended March 31, 2018 was 31.55%.
As of December 22, 2018, we have completed our accounting for the tax effects of enactment of the Tax Reform Act. For the fiscal year ended March 31, 2018, we recognized a benefit amount of $356.6 million which was included as a component of income tax expense from continuing operations.
For the fiscal year ended March 31, 2018, we re-measured certain tax deferred assets and liabilities based on the rates they are expected to reverse in the future, which is generally 21%. The amount recorded related to the re-measurement of our deferred tax balance was a benefit of $371.5 million for the fiscal year ended March 31, 2018.
As of December 31, 2017, we elected to reclassify the income tax effects of the Tax Reform Act in the amount of $8.7 million from accumulated other comprehensive income to retained earnings under ASU 2018-02. In addition, we have adopted the “investment by investment” approach with regard to releasing disproportionate income tax effects from accumulated other comprehensive income.
For the fiscal year ended March 31, 2018, we calculated and recorded a one-time transition tax on earnings from foreign subsidiaries based on the post 1986 earnings and profits (“E&P”) of our Canadian subsidiaries that were previously deferred from U.S. income taxes. The effect of this one-time transition tax liability for our foreign subsidiaries resulted in an increase in income tax expense of $10.7 million for the fiscal year ended March 31, 2018. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.
The Tax Reform Act repeals the special rules with regard to distribution to shareholders from pre-1984 policyholders surplus account. This one-time tax was based on the balance of our pre-1984 policyholder surplus account. We reported the amount of our one-time tax liability for Phase Three Tax, resulting in an increase in income tax expense of $4.2 million for the fiscal year ended March 31, 2018.
ASC 740 prescribes a minimum recognition and measurement methodology that a tax position is required to meet before being recognized in the financial statements. A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:
|
|
Unrecognized Tax Benefits
|
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
|
|
|
|
Unrecognized tax benefits beginning balance
|
$
|
35,739
|
$
|
26,720
|
Revaluation based on change in after tax benefit
|
|
–
|
|
5,755
|
Additions based on tax positions related to the current year
|
|
1,887
|
|
4,139
|
Reductions for tax positions of prior years
|
|
(46)
|
|
(96)
|
Settlements
|
|
(379)
|
|
(779)
|
Unrecognized tax benefits ending balance
|
$
|
37,201
|
$
|
35,739
|
We recognize interest related to unrecognized tax benefits as interest expense, and penalties as operating expenses. At March 31, 2019 and 2018, the amount of interest and penalties accrued on unrecognized tax benefits was $9.5 million and $8.5 million, net of tax. During the current year we recorded expense from interest and penalties in the amount of $1.0 million, net of tax.
We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With some exceptions, we are no longer subject to audit for years prior to the fiscal year ended March 31, 2016.
Note 14.
Employee Benefit Plans
Profit Sharing Plans
We provide tax-qualified profit sharing retirement plans for the benefit of eligible employees, former employees and retirees in the United States and Canada. The plans are designed to provide employees with an accumulation of funds for retirement on a tax-deferred basis and provide for annual discretionary employer contributions. Amounts to be contributed are determined by the President and Chairman of the Board of Directors (the “Board”) of the Company under the delegation of authority from the Board, pursuant to the terms of the Profit Sharing Plan. No contributions were made to the profit sharing plan during fiscal 2019, 2018 or 2017.
We also provide an employee savings plan which allows participants to defer income under Section 401(k) of the Internal Revenue Code of 1986.
ESOP Plan
We sponsor a leveraged ESOP that generally covers all employees with one year or more of service. The ESOP shares initially were pledged as collateral for its debt which was originally funded by U-Haul. We make annual contributions to the ESOP equal to the ESOP’s debt service. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year. ESOP shares are committed to be released monthly and ESOP compensation expense is recorded based on the current market price at the end of the month. These shares then become outstanding for the earnings per share computations. ESOP compensation expense was $11.3 million, $11.4 million and $10.7 million for fiscal 2019, 2018 and 2017, respectively.
Listed below is a summary of these financing arrangements as of fiscal year-end:
|
|
Outstanding as of
|
|
Interest Payments
|
Financing Date
|
|
March 31, 2019
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
June, 1991
|
$
|
–
|
$
|
1
|
$
|
1
|
$
|
2
|
July, 2009
|
|
233
|
|
17
|
|
26
|
|
36
|
February, 2016
|
|
4,966
|
|
190
|
|
242
|
|
–
|
Leveraged contributions to the Plan Trust during fiscal 2019, 2018 and 2017 were $1.0 million, $1.0 million and $0.2 million, respectively. In fiscal 2019, 2018 and 2017, the Company made non-leveraged contributions of $5.0 million, $11.0 and $11.0 million, respectively to the Plan Trust. In both fiscal 2018 and 2017, $0.1 million of dividends from unallocated shares were applied to debt.
Shares held by the Plan were as follows:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Allocated shares
|
|
1,069
|
|
1,112
|
Unreleased shares - leveraged
|
|
16
|
|
19
|
Fair value of unreleased shares - leveraged
|
$
|
6,019
|
$
|
6,448
|
Unreleased shares - non-leveraged
|
|
–
|
|
13
|
Fair value of unreleased shares - non-leveraged
|
$
|
–
|
$
|
4,557
|
The fair value of unreleased shares issued prior to 1992 is defined as the historical cost of such shares. The fair value of unreleased shares issued subsequent to December 31, 1992 is defined as the trading value of such shares as of March 31, 2019 and March 31, 2018, respectively. During fiscal 2019, we released for allocation 3,661 leveraged shares and 27,969 non-leveraged shares. As of December 31, 2019, it is estimated there will be 16,260 shares committed to be released.
Post Retirement and Post Employment Benefits
We provide medical and life insurance benefits to our eligible employees and their dependents upon retirement from the Company. The retirees must have attained age sixty-five and earned twenty years of full-time service upon retirement for coverage under the medical plan. The medical benefits are capped at a $20,000 lifetime maximum per covered person. The benefits are coordinated with Medicare and any other medical policies in force. Retirees who have attained age sixty-five and earned at least ten years of full-time service upon retirement from the Company are entitled to group term life insurance benefits. The life insurance benefit is $2,000 plus $100 for each year of employment over ten years. The plan is not funded and claims are paid as they are incurred. We use a March 31 measurement date for our post retirement benefit disclosures.
The components of net periodic post retirement benefit cost were as follows:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Service cost for benefits earned during the period
|
$
|
1,108
|
$
|
1,073
|
$
|
1,026
|
Other components of net periodic benefit costs:
|
|
|
|
|
|
|
Interest cost on accumulated postretirement benefit
|
|
943
|
|
869
|
|
814
|
Other components
|
|
70
|
|
58
|
|
88
|
Total other components of net periodic benefit costs
|
|
1,013
|
|
927
|
|
902
|
Net periodic postretirement benefit cost
|
$
|
2,121
|
$
|
2,000
|
$
|
1,928
|
The fiscal 2019 and fiscal 2018 post retirement benefit liability included the following components:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
Beginning of year
|
$
|
23,316
|
$
|
22,247
|
Service cost for benefits earned during the period
|
|
1,108
|
|
1,073
|
Interest cost on accumulated post retirement benefit
|
|
943
|
|
869
|
Net benefit payments and expense
|
|
(979)
|
|
(644)
|
Actuarial (gain) loss
|
|
1,429
|
|
(229)
|
Accumulated postretirement benefit obligation
|
|
25,817
|
|
23,316
|
|
|
|
|
|
Current liabilities
|
|
1,037
|
|
802
|
Non-current liabilities
|
|
24,780
|
|
22,514
|
|
|
|
|
|
Total post retirement benefit liability recognized in statement of financial position
|
|
25,817
|
|
23,316
|
Components included in accumulated other comprehensive income (loss):
|
|
|
|
|
Unrecognized net loss
|
|
(3,890)
|
|
(2,530)
|
Cumulative net periodic benefit cost (in excess of employer contribution)
|
$
|
21,927
|
$
|
20,786
|
The discount rate assumptions in computing the information above were as follows:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In percentages)
|
Accumulated postretirement benefit obligation
|
|
3.83%
|
|
3.98%
|
|
3.94%
|
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 became law. Net periodic post retirement benefit cost above includes the effect of the subsidy. The discount rate represents the expected yield on a portfolio of high grade (AA to AAA rated or equivalent) fixed income investments with cash flow streams sufficient to satisfy benefit obligations under the plan when due. Fluctuations in the discount rate assumptions primarily reflect changes in U.S. interest rates. The assumed health care cost trend rate used to measure the accumulated postretirement benefit obligation as of the end of fiscal 2019 was 6.7% in the initial year and was projected to decline annually to an ultimate rate of 4.5% in fiscal 2038. The assumed health care cost trend rate used to measure the accumulated post retirement benefit obligation as of the end of fiscal 2018 (and used to measure the fiscal 2019 net periodic benefit cost) was 6.9% in the initial year and was projected to decline annually to an ultimate rate of 4.5% in fiscal 2038.
If the estimated health care cost trend rate assumptions were increased by one percent, the accumulated post retirement benefit obligation as of fiscal year-end would increase by $274 thousand and the total of the service cost and interest cost components would increase by $27 thousand. A decrease in the estimated health care cost trend rate assumption of one percent would decrease the accumulated post retirement benefit obligation as of fiscal year-end by $309 thousand and the total of the service cost and interest cost components would decrease by $31 thousand.
Post employment benefits provided by us, other than upon retirement, are not material.
Future net benefit payments are expected as follows:
|
|
Future Net Benefit Payments
|
|
|
(In thousands)
|
Year-ended:
|
|
|
2020
|
$
|
1,037
|
2021
|
|
1,227
|
2022
|
|
1,445
|
2023
|
|
1,665
|
2024
|
|
1,906
|
2025 through 2028
|
|
11,863
|
Total
|
$
|
19,143
|
Note 15.
Fair Value Measurements
Assets and liabilities are recorded at fair value on the consolidated balance sheets and are measured and classified based upon a three-tiered approach to valuation. Financial assets and liabilities recorded at fair value and are classified and disclosed in one of the following three categories:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded
value.
Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.
We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.
The carrying amount of long-term debt and short-term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.
Other investments including short-term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.
The carrying values and estimated fair values for the financial instruments stated above and their placement in the fair value hierarchy are as follows:
|
|
Fair Value Hierarchy
|
|
|
Carrying
|
|
|
|
|
|
|
|
Total Estimated
|
Year Ended March 31, 2019
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables, net
|
$
|
224,785
|
$
|
–
|
$
|
–
|
$
|
224,785
|
$
|
224,785
|
Mortgage loans, net
|
|
225,829
|
|
–
|
|
–
|
|
225,829
|
|
225,829
|
Other investments
|
|
74,907
|
|
–
|
|
–
|
|
74,907
|
|
74,907
|
Total
|
$
|
525,521
|
$
|
–
|
$
|
–
|
$
|
525,521
|
$
|
525,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Notes, loans and leases payable
|
|
4,192,243
|
|
–
|
|
4,192,243
|
|
–
|
|
4,192,243
|
Total
|
$
|
4,192,243
|
$
|
–
|
$
|
4,192,243
|
$
|
–
|
$
|
4,192,243
|
|
|
Fair Value Hierarchy
|
|
|
Carrying
|
|
|
|
|
|
|
|
Total Estimated
|
Year Ended March 31, 2018
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables, net
|
$
|
193,538
|
$
|
–
|
$
|
–
|
$
|
193,538
|
$
|
193,538
|
Mortgage loans, net
|
|
309,952
|
|
–
|
|
–
|
|
309,952
|
|
309,952
|
Other investments
|
|
89,112
|
|
–
|
|
–
|
|
89,112
|
|
89,112
|
Total
|
$
|
592,602
|
$
|
–
|
$
|
–
|
$
|
592,602
|
$
|
592,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Notes, loans and leases payable
|
|
3,538,699
|
|
–
|
|
3,538,699
|
|
–
|
|
3,538,699
|
Total
|
$
|
3,538,699
|
$
|
–
|
$
|
3,538,699
|
$
|
–
|
$
|
3,538,699
|
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of March 31, 2019 and 2018, that are measured at fair value on a recurring basis and the level within the fair value hierarchy.
Year Ended March 31, 2019
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
Short-term investments
|
$
|
463,847
|
$
|
463,599
|
$
|
248
|
$
|
–
|
Fixed maturities - available for sale
|
|
2,209,761
|
|
7,327
|
|
2,202,213
|
|
221
|
Preferred stock
|
|
8,257
|
|
8,257
|
|
–
|
|
–
|
Common stock
|
|
17,379
|
|
17,379
|
|
–
|
|
–
|
Derivatives
|
|
1,607
|
|
1,468
|
|
139
|
|
–
|
Total
|
$
|
2,700,851
|
$
|
498,030
|
$
|
2,202,600
|
$
|
221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
|
|
–
|
|
–
|
|
–
|
|
–
|
Total
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
Year Ended March 31, 2018
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
Short-term investments
|
$
|
475,320
|
$
|
475,320
|
$
|
–
|
$
|
–
|
Fixed maturities - available for sale
|
|
1,881,137
|
|
7,567
|
|
1,873,293
|
|
277
|
Preferred stock
|
|
10,861
|
|
10,861
|
|
–
|
|
–
|
Common stock
|
|
27,862
|
|
27,862
|
|
–
|
|
–
|
Derivatives
|
|
4,825
|
|
4,388
|
|
437
|
|
–
|
Total
|
$
|
2,400,005
|
$
|
525,998
|
$
|
1,873,730
|
$
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
|
|
897
|
|
–
|
|
897
|
|
–
|
Total
|
$
|
897
|
$
|
–
|
$
|
897
|
$
|
–
|
The following tables represent the fair value measurements for our assets as of March 31, 2019 using significant unobservable inputs (Level 3).
|
|
Fixed Maturities - Asset Backed Securities
|
|
|
(In thousands)
|
Balance at March 31, 2017
|
$
|
330
|
|
|
|
Fixed Maturities - Asset Backed Securities - redeemed
|
|
(91)
|
Fixed Maturities - Asset Backed Securities - net gain (unrealized)
|
|
38
|
Balance at March 31, 2018
|
$
|
277
|
|
|
|
Fixed Maturities - Asset Backed Securities - redeemed
|
|
(96)
|
Fixed Maturities - Asset Backed Securities - net gain (unrealized)
|
|
40
|
Balance at March 31, 2019
|
$
|
221
|
Note 16.
Reinsurance and Policy Benefits and Losses, Claims and Loss Expenses Payable
During their normal course of business, our insurance subsidiaries assume and cede reinsurance on both a coinsurance and a risk premium basis. They also obtain reinsurance for that portion of risks exceeding their retention limits. The maximum amount of life insurance retained on any one life is $125,000.
|
|
Direct
Amount (a)
|
|
Ceded to
Other
Companies
|
|
Assumed
from Other
Companies
|
|
Net
Amount (a)
|
|
Percentage of
Amount
Assumed to Net
|
|
|
(In thousands)
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Life insurance in force
|
$
|
941,822
|
$
|
207
|
$
|
548,152
|
$
|
1,489,767
|
|
37%
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Life
|
$
|
51,691
|
$
|
(1)
|
$
|
(69,616)
|
$
|
(17,924)
|
|
388%
|
Accident and health
|
|
77,813
|
|
267
|
|
1,851
|
|
79,397
|
|
2%
|
Annuity
|
|
1,221
|
|
–
|
|
794
|
|
2,015
|
|
39%
|
Property and casualty
|
|
60,848
|
|
–
|
|
–
|
|
60,848
|
|
0%
|
Total
|
$
|
191,573
|
$
|
266
|
$
|
(66,971)
|
$
|
124,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Life insurance in force
|
$
|
947,720
|
$
|
248
|
$
|
876,865
|
$
|
1,824,337
|
|
48%
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Life
|
$
|
51,227
|
$
|
4
|
$
|
9,880
|
$
|
61,103
|
|
16%
|
Accident and health
|
|
90,396
|
|
295
|
|
1,977
|
|
92,078
|
|
2%
|
Annuity
|
|
728
|
|
–
|
|
794
|
|
1,522
|
|
52%
|
Property and casualty
|
|
57,161
|
|
69
|
|
8
|
|
57,100
|
|
0%
|
Total
|
$
|
199,512
|
$
|
368
|
$
|
12,659
|
$
|
211,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Life insurance in force
|
$
|
937,779
|
$
|
249
|
$
|
915,769
|
$
|
1,853,299
|
|
49%
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Life
|
$
|
50,251
|
$
|
–
|
$
|
10,626
|
$
|
60,877
|
|
17%
|
Accident and health
|
|
99,450
|
|
310
|
|
2,263
|
|
101,403
|
|
2%
|
Annuity
|
|
505
|
|
–
|
|
794
|
|
1,299
|
|
61%
|
Property and casualty
|
|
52,329
|
|
–
|
|
5
|
|
52,334
|
|
0%
|
Total
|
$
|
202,535
|
$
|
310
|
$
|
13,688
|
$
|
215,913
|
|
|
(a)
Balances are reported net of inter-segment transactions.
To the extent that a reinsurer is unable to meet its obligation under the related reinsurance agreements, Repwest would remain liable for the unpaid losses and loss expenses. Pursuant to certain of these agreements, Repwest holds letters of credit as of December 31, 2017 in the amount of $0.1 million from re-insurers and has issued letters of credit in the amount of $1.9 million in favor of certain ceding companies.
Policy benefits and losses, claims and loss expenses payable for Property and Casualty Insurance were as follows:
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Unpaid losses and loss adjustment expense
|
$
|
228,970
|
$
|
233,554
|
Reinsurance losses payable
|
|
988
|
|
805
|
Total
|
$
|
229,958
|
$
|
234,359
|
Activity in the liability for unpaid losses and loss adjustment expenses for Property and Casualty Insurance is summarized as follows:
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
(In thousands)
|
Balance at January 1
|
$
|
233,554
|
$
|
244,400
|
$
|
251,964
|
Less: reinsurance recoverable
|
|
94,490
|
|
103,952
|
|
107,311
|
Net balance at January 1
|
|
139,064
|
|
140,448
|
|
144,653
|
Incurred related to:
|
|
|
|
|
|
|
Current year
|
|
19,579
|
|
15,749
|
|
13,297
|
Prior years
|
|
(5,365)
|
|
233
|
|
107
|
Total incurred
|
|
14,214
|
|
15,982
|
|
13,404
|
Paid related to:
|
|
|
|
|
|
|
Current year
|
|
8,838
|
|
8,969
|
|
7,777
|
Prior years
|
|
10,390
|
|
8,397
|
|
9,832
|
Total paid
|
|
19,228
|
|
17,366
|
|
17,609
|
Net balance at December 31
|
|
134,050
|
|
139,064
|
|
140,448
|
Plus: reinsurance recoverable
|
|
94,920
|
|
94,490
|
|
103,952
|
Balance at December 31
|
$
|
228,970
|
$
|
233,554
|
$
|
244,400
|
Prior year incurred losses were impacted by favorable development on numerous Excess Workers Compensation claims. The liability for incurred losses and loss adjustment expenses (net of reinsurance recoverable of $94.9 million) decreased by $5.1 million as of December 31, 2018.
The information about property and casualty incurred and paid loss and loss adjustment expense development for the years end December 31, 2012 through 2018, and the average annual percentage payout of incurred claims by age as of December 31, 2018, is presented as supplementary information. Claims data for 2012 through 2017 is unaudited. Claims data for 2018 is audited.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred-but-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not-Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Plus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
Number of
|
Accident
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on Reported
|
|
Reported
|
Year
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Claims
|
|
Claims
|
|
|
|
|
(In thousands, except claim counts)
|
|
|
2012
|
$
|
8,971
|
$
|
8,903
|
$
|
8,831
|
$
|
8,788
|
$
|
8,753
|
$
|
8,735
|
$
|
8,735
|
$
|
–
|
|
6,889
|
2013
|
|
|
|
9,861
|
|
9,853
|
|
9,914
|
|
9,741
|
|
9,576
|
|
9,595
|
|
–
|
|
7,663
|
2014
|
|
|
|
|
|
11,691
|
|
10,907
|
|
10,720
|
|
10,759
|
|
10,748
|
|
323
|
|
9,648
|
2015
|
|
|
|
|
|
|
|
12,214
|
|
12,459
|
|
12,460
|
|
12,464
|
|
1,821
|
|
10,719
|
2016
|
|
|
|
|
|
|
|
|
|
13,297
|
|
13,011
|
|
13,056
|
|
1,300
|
|
11,146
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
15,749
|
|
16,109
|
|
1,218
|
|
11,496
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,580
|
|
7,932
|
|
11,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
12,594
|
|
|
The following table presents paid claims development as of December 31, 2018, net of reinsurance. Claims data for 2012 through 2017 are unaudited. Claims data for 2018 is audited.
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
|
|
|
|
|
(In thousands)
|
Accident
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
2012
|
$
|
4,415
|
$
|
6,345
|
$
|
8,179
|
$
|
8,410
|
$
|
8,734
|
$
|
8,734
|
$
|
8,734
|
2013
|
|
|
|
5,227
|
|
7,608
|
|
8,718
|
|
9,462
|
|
9,576
|
|
9,595
|
2014
|
|
|
|
|
|
6,154
|
|
8,087
|
|
9,270
|
|
9,293
|
|
10,325
|
2015
|
|
|
|
|
|
|
|
7,509
|
|
9,601
|
|
9,730
|
|
10,343
|
2016
|
|
|
|
|
|
|
|
|
|
7,777
|
|
10,665
|
|
11,643
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
8,969
|
|
11,638
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,838
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Total
|
|
71,116
|
All outstanding liabilities before 2012, net of reinsurance
|
|
|
|
114,877
|
Liabilities for claims and claim adjustment expenses, net of reinsurance
|
|
|
|
134,050
|
The reconciliation of the net incurred and paid claims development tables for the liability for claims and claims adjustment expenses is as follows:
|
|
December 31, 2018
|
|
|
(In thousands)
|
Liabilities for unpaid Property and Casualty claims
|
|
|
and claim adjustment expenses, net of reinsurance
|
$
|
134,050
|
|
|
|
Total reinsurance recoverable on unpaid
|
|
|
Property and Casualty claims
|
$
|
94,920
|
|
|
|
Total gross liability for unpaid Property and Casualty
|
|
|
claims and claim adjustment expense
|
$
|
228,970
|
The following is supplementary information about average historical claims duration as of December 31, 2018.
Average Annual Percentage Payout of Incurred Claims by Age, net of Reinsurance
|
Years
|
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
|
|
|
|
|
|
|
|
|
Property and Casualty Insurance
|
|
54.7%
|
20.1%
|
10.4%
|
3.9%
|
4.8%
|
0.1%
|
0.0%
|
Note 17.
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 March 31, 2019, we have guaranteed $5.2 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.
Lease expenses were as follows:
|
|
|
|
Years Ended March 31,
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
(In thousands)
|
Lease expense
|
|
|
$
|
33,158
|
$
|
33,960
|
$
|
37,343
|
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
|
|
|
(In thousands)
|
Year-ended March 31:
|
|
|
|
|
|
|
|
|
2020
|
$
|
1,024
|
$
|
18,536
|
$
|
1,292
|
$
|
20,852
|
2021
|
|
1,024
|
|
17,471
|
|
–
|
|
18,495
|
2022
|
|
1,030
|
|
15,720
|
|
–
|
|
16,750
|
2023
|
|
1,030
|
|
15,287
|
|
–
|
|
16,317
|
2024
|
|
1,031
|
|
14,705
|
|
–
|
|
15,736
|
Thereafter
|
|
48,619
|
|
6,064
|
|
–
|
|
54,683
|
Total
|
$
|
53,758
|
$
|
87,783
|
$
|
1,292
|
$
|
142,833
|
Note 18.
Contingencies
Litigation
On July 1, 2014, a 100-pound propane cylinder exploded while in use on a food truck in Philadelphia, Pennsylvania. The explosion killed two people and injured eleven. Following the incident, the injured parties and their estates filed a number of lawsuits in the Philadelphia Court of Common Pleas against U-Haul and its subsidiary, U-Haul Co. of Pennsylvania (“UHPA”), alleging that UHPA improperly filled propane cylinders that were overdue for periodic requalification and offered such cylinders for transportation, which allegedly caused the deaths and injuries. One plaintiff also sued AMERCO.
All U-Haul defendants denied the allegations. The parties reached agreements to settle the civil cases by April 2018.
We have paid a total of $27.9 million, representing our self-insured retention and attorney’s fees for all related civil matters.
In June 2018, following the resolution of the civil claims, the United States Attorney's Office for the Eastern District of Pennsylvania filed an initial 6-count indictment and a superseding 7-count indictment against UHPA.
In January 2019, the U.S. Attorney's Office agreed to dismiss Counts 1 through 5 alleging UHPA improperly filled propane cylinders that were overdue for periodic requalification and offering such cylinders for transportation.
UHPA entered a guilty plea with respect to Counts 6 and 7 relating to a failure to properly train UHPA employees dispensing propane and documentation thereof.
On May 7, 2019, the United States District Court for the Eastern District of Pennsylvania accepted the plea agreement and imposed a $1 million fine and two years of probation on UHPA.
UHPA was also ordered to pay $800 in associated court fees.
Environmental
Compliance with environmental requirements of federal, state and local governments may significantly affect Real Estate’s business operations. Among other things, these requirements regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on some of its properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws and has put in place a remedial plan at each site where it believes such a plan is necessary. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks.
Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to result in a material adverse effect on AMERCO’s financial position or results of operations.
Other
We are named as a defendant in various other litigation and claims arising out of the normal course of business. In management’s opinion, none of these other matters will have a material effect on our financial position and results of operations.
Note 19.
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 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, and various trusts associated with Edward J. Shoen and Mark V. Shoen.
Related Party Revenues
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
U-Haul interest income revenue from Blackwater
|
$
|
–
|
$
|
3,326
|
$
|
4,880
|
U-Haul management fee revenue from Blackwater
|
|
23,986
|
|
23,577
|
|
23,130
|
U-Haul management fee revenue from Mercury
|
|
5,162
|
|
6,025
|
|
5,945
|
|
$
|
29,148
|
$
|
32,928
|
$
|
33,955
|
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 $30.0 million, $29.5 million and $27.8 million from the above-mentioned entities during fiscal 2019, 2018 and 2017, 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, and a trust benefitting the children and grandchildren of Edward J. Shoen.
Related Party Costs and Expenses
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
U-Haul lease expenses to Blackwater
|
$
|
2,678
|
$
|
2,684
|
$
|
2,740
|
U-Haul commission expenses to Blackwater
|
|
61,434
|
|
58,595
|
|
57,113
|
|
$
|
64,112
|
$
|
61,279
|
$
|
59,853
|
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.
At March 31, 2019, 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 and notes with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $24.0 million, expenses of $2.7 million and cash flows of $21.3 million during fiscal 2019. Revenues and commission expenses related to the Dealer Agreements were $288.2 million and $61.4 million, respectively for fiscal 2019.
Management determined that 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 to consolidate these entities.
We have not provided financial or other support explicitly or implicitly during the fiscal years ended March 31, 2019 and 2018, respectively to any of these entities that it was not previously contractually required to provide. In addition, we currently have no plan to provide any financial support to any of these entities in the future. The carrying amount and classification of the assets and liabilities in our balance 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
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
U-Haul receivable from Blackwater
|
|
25,158
|
|
24,034
|
U-Haul receivable from Mercury
|
|
7,234
|
|
10,357
|
Other (a)
|
|
(1,503)
|
|
(1,115)
|
|
$
|
30,889
|
$
|
33,276
|
(a) Timing differences for intercompany balances with insurance subsidiaries resulting from the three month difference in reporting periods.
Note 20.
Statutory Financial Information of Insurance Subsidiaries
Applicable laws and regulations of the States of Arizona and Nevada require Property and Casualty Insurance and Life Insurance to maintain minimum capital and surplus determined in accordance with statutory accounting principles. Audited statutory net income and statutory capital and surplus for the years ended are listed below:
|
|
Years Ended December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
(In thousands)
|
Repwest:
|
|
|
|
|
|
|
Audited statutory net income
|
$
|
23,960
|
$
|
16,328
|
$
|
19,580
|
Audited statutory capital and surplus
|
|
216,763
|
|
197,375
|
|
176,009
|
ARCOA:
|
|
|
|
|
|
|
Audited statutory net income
|
|
1,612
|
|
1,190
|
|
1,451
|
Audited statutory capital and surplus
|
|
9,390
|
|
7,991
|
|
6,798
|
Oxford:
|
|
|
|
|
|
|
Audited statutory net income
|
|
11,367
|
|
10,350
|
|
17,473
|
Audited statutory capital and surplus
|
|
203,723
|
|
195,931
|
|
189,279
|
CFLIC:
|
|
|
|
|
|
|
Audited statutory net income
|
|
8,735
|
|
8,062
|
|
8,139
|
Audited statutory capital and surplus
|
|
27,232
|
|
26,653
|
|
28,011
|
NAI:
|
|
|
|
|
|
|
Audited statutory net income
|
|
1,436
|
|
1,594
|
|
1,039
|
Audited statutory capital and surplus
|
|
12,817
|
|
12,674
|
|
12,691
|
The amount of dividends that can be paid to shareholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. The statutory surplus for Repwest at December 31, 2018 that could be distributed as ordinary dividends was $21.7 million. The statutory surplus for Oxford at December 31, 2018 that could be distributed as ordinary dividends was $11.4 million. Neither Oxford nor Repwest paid a dividend to AMERCO in fiscal 2019, 2018 or 2017.
For our insurance subsidiaries, statutory accounting principles (“SAP”) differ from GAAP primarily in that: (i) premiums from deferred annuities are recognized as revenue under SAP, while they are accounted for as liabilities from investment contracts under GAAP; (ii) policy acquisition costs are expensed as incurred under SAP, while they are deferred and amortized over the effective period of the related life insurance policies or the present value of actual and expected gross profits from annuity deposits; (iii) policy benefits and losses are established using different actuarial assumptions; and (iv) investments are valued on a different basis and valuation allowances attributable to investments are different. In addition, certain assets are not admitted under SAP and are charged directly to surplus.
Note 21.
Financial Information by Geographic Area
|
|
United States
|
|
Canada
|
|
Consolidated
|
|
|
(All amounts are in thousands U.S. $'s)
|
Fiscal Year Ended March 31, 2019
|
|
|
|
|
|
|
Total revenues
|
$
|
3,597,285
|
$
|
171,422
|
$
|
3,768,707
|
Depreciation and amortization, net of gains on disposal
|
|
575,134
|
|
7,421
|
|
582,555
|
Interest expense
|
|
139,573
|
|
2,872
|
|
142,445
|
Pretax earnings
|
|
466,175
|
|
11,354
|
|
477,529
|
Income tax expense
|
|
103,578
|
|
3,094
|
|
106,672
|
Identifiable assets
|
|
11,526,876
|
|
364,837
|
|
11,891,713
|
|
|
United States
|
|
Canada
|
|
Consolidated
|
|
|
(All amounts are in thousands U.S. $'s)
|
Fiscal Year Ended March 31, 2018
|
|
|
|
|
|
|
Total revenues
|
$
|
3,435,821
|
$
|
165,293
|
$
|
3,601,114
|
Depreciation and amortization, net of gains on disposal
|
|
363,826
|
|
8,521
|
|
372,347
|
Interest expense
|
|
123,777
|
|
2,929
|
|
126,706
|
Pretax earnings
|
|
628,901
|
|
8,712
|
|
637,613
|
Income tax expense (benefit)
|
|
(155,685)
|
|
2,715
|
|
(152,970)
|
Identifiable assets
|
|
10,425,299
|
|
322,123
|
|
10,747,422
|
|
|
United States
|
|
Canada
|
|
Consolidated
|
|
|
(All amounts are in thousands U.S. $'s)
|
Fiscal Year Ended March 31, 2017
|
|
|
|
|
|
|
Total revenues
|
$
|
3,271,563
|
$
|
150,204
|
$
|
3,421,767
|
Depreciation and amortization, net of gains on disposal
|
|
466,378
|
|
5,275
|
|
471,653
|
Interest expense
|
|
112,834
|
|
572
|
|
113,406
|
Pretax earnings
|
|
609,589
|
|
18,769
|
|
628,358
|
Income tax expense
|
|
225,278
|
|
4,656
|
|
229,934
|
Identifiable assets
|
|
9,030,528
|
|
375,312
|
|
9,405,840
|
Note 21A.
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, net are shown as liabilities on the 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.
Note 21A. Financial Information by Consolidating Industry Segment:
Consolidating balance sheets by industry segment as of March
31, 2019 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty Insurance (a)
|
|
Life
Insurance (a)
|
|
Eliminations
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
643,918
|
$
|
5,757
|
$
|
24,026
|
$
|
–
|
|
$
|
673,701
|
Reinsurance recoverables and trade receivables, net
|
|
90,832
|
|
102,120
|
|
31,833
|
|
–
|
|
|
224,785
|
Inventories and parts, net
|
|
103,504
|
|
–
|
|
–
|
|
–
|
|
|
103,504
|
Prepaid expenses
|
|
174,100
|
|
–
|
|
–
|
|
–
|
|
|
174,100
|
Investments, fixed maturities and marketable equities
|
|
–
|
|
279,641
|
|
1,955,756
|
|
–
|
|
|
2,235,397
|
Investments, other
|
|
23,013
|
|
74,679
|
|
203,044
|
|
–
|
|
|
300,736
|
Deferred policy acquisition costs, net
|
|
–
|
|
–
|
|
136,276
|
|
–
|
|
|
136,276
|
Other assets
|
|
72,768
|
|
2,456
|
|
3,130
|
|
–
|
|
|
78,354
|
Related party assets
|
|
35,997
|
|
6,639
|
|
16,466
|
|
(28,213)
|
(c)
|
|
30,889
|
|
|
1,144,132
|
|
471,292
|
|
2,370,531
|
|
(28,213)
|
|
|
3,957,742
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
534,157
|
|
–
|
|
–
|
|
(534,157)
|
(b)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost:
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
976,454
|
|
–
|
|
–
|
|
–
|
|
|
976,454
|
Buildings and improvements
|
|
4,003,726
|
|
–
|
|
–
|
|
–
|
|
|
4,003,726
|
Furniture and equipment
|
|
689,780
|
|
–
|
|
–
|
|
–
|
|
|
689,780
|
Rental trailers and other rental equipment
|
|
590,039
|
|
–
|
|
–
|
|
–
|
|
|
590,039
|
Rental trucks
|
|
4,762,028
|
|
–
|
|
–
|
|
–
|
|
|
4,762,028
|
|
|
11,022,027
|
|
–
|
|
–
|
|
–
|
|
|
11,022,027
|
Less:
Accumulated depreciation
|
|
(3,088,056)
|
|
–
|
|
–
|
|
–
|
|
|
(3,088,056)
|
Total property, plant and equipment
|
|
7,933,971
|
|
–
|
|
–
|
|
–
|
|
|
7,933,971
|
Total assets
|
$
|
9,612,260
|
$
|
471,292
|
$
|
2,370,531
|
$
|
(562,370)
|
|
$
|
11,891,713
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Balances as of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany receivables and payables
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating balance sheets by industry segment as of March
31, 2019 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty Insurance (a)
|
|
Life
Insurance (a)
|
|
Eliminations
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
548,099
|
$
|
2,844
|
$
|
5,930
|
$
|
–
|
|
$
|
556,873
|
Notes, loans and leases payable, net
|
|
4,163,323
|
|
–
|
|
–
|
|
–
|
|
|
4,163,323
|
Policy benefits and losses, claims and loss expenses payable
|
|
407,934
|
|
229,958
|
|
373,291
|
|
–
|
|
|
1,011,183
|
Liabilities from investment contracts
|
|
–
|
|
–
|
|
1,666,742
|
|
–
|
|
|
1,666,742
|
Other policyholders' funds and liabilities
|
|
–
|
|
5,259
|
|
9,788
|
|
–
|
|
|
15,047
|
Deferred income
|
|
35,186
|
|
–
|
|
–
|
|
–
|
|
|
35,186
|
Deferred income taxes, net
|
|
741,644
|
|
6,961
|
|
2,365
|
|
–
|
|
|
750,970
|
Related party liabilities
|
|
25,446
|
|
3,836
|
|
692
|
|
(29,974)
|
(c)
|
|
–
|
Total liabilities
|
|
5,921,632
|
|
248,858
|
|
2,058,808
|
|
(29,974)
|
|
|
8,199,324
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
453,536
|
|
91,120
|
|
26,271
|
|
(117,601)
|
(b)
|
|
453,326
|
Accumulated other comprehensive income (loss)
|
|
(68,459)
|
|
(3,721)
|
|
(5,300)
|
|
10,782
|
(b)
|
|
(66,698)
|
Retained earnings
|
|
3,976,752
|
|
131,734
|
|
288,252
|
|
(419,776)
|
(b)
|
|
3,976,962
|
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
|
|
(4,048)
|
|
–
|
|
–
|
|
–
|
|
|
(4,048)
|
Total stockholders' equity
|
|
3,690,628
|
|
222,434
|
|
311,723
|
|
(532,396)
|
|
|
3,692,389
|
Total liabilities and stockholders' equity
|
$
|
9,612,260
|
$
|
471,292
|
$
|
2,370,531
|
$
|
(562,370)
|
|
$
|
11,891,713
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Balances as of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate investment in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany receivables and payables
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating statements of operations by industry segment for period ending March 31, 2019 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty Insurance (a)
|
|
Life
Insurance (a)
|
|
Eliminations
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals
|
$
|
2,656,327
|
$
|
–
|
$
|
–
|
$
|
(2,830)
|
(c)
|
$
|
2,653,497
|
Self-storage revenues
|
|
367,276
|
|
–
|
|
–
|
|
–
|
|
|
367,276
|
Self-moving & self-storage products & service sales
|
|
264,146
|
|
–
|
|
–
|
|
–
|
|
|
264,146
|
Property management fees
|
|
29,148
|
|
–
|
|
–
|
|
–
|
|
|
29,148
|
Life insurance premiums
|
|
–
|
|
–
|
|
63,488
|
|
–
|
|
|
63,488
|
Property and casualty insurance premiums
|
|
–
|
|
63,488
|
|
–
|
|
(2,635)
|
(c)
|
|
60,853
|
Net investment and interest income
|
|
13,857
|
|
12,349
|
|
86,395
|
|
(1,667)
|
(b)
|
|
110,934
|
Other revenue
|
|
215,055
|
|
–
|
|
4,831
|
|
(521)
|
(b)
|
|
219,365
|
Total revenues
|
|
3,545,809
|
|
75,837
|
|
154,714
|
|
(7,653)
|
|
|
3,768,707
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
1,938,317
|
|
34,218
|
|
14,613
|
|
(5,968)
|
(b,c)
|
|
1,981,180
|
Commission expenses
|
|
288,408
|
|
–
|
|
–
|
|
–
|
|
|
288,408
|
Cost of sales
|
|
162,142
|
|
–
|
|
–
|
|
–
|
|
|
162,142
|
Benefits and losses
|
|
–
|
|
14,213
|
|
86,064
|
|
–
|
|
|
100,277
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
28,556
|
|
–
|
|
|
28,556
|
Lease expense
|
|
33,702
|
|
–
|
|
–
|
|
(544)
|
(b)
|
|
33,158
|
Depreciation, net gains on disposals
|
|
554,043
|
|
–
|
|
–
|
|
–
|
|
|
554,043
|
Net gains on disposal of real estate
|
|
(44)
|
|
–
|
|
–
|
|
–
|
|
|
(44)
|
Total costs and expenses
|
|
2,976,568
|
|
48,431
|
|
129,233
|
|
(6,512)
|
|
|
3,147,720
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations before equity in earnings of subsidiaries
|
|
569,241
|
|
27,406
|
|
25,481
|
|
(1,141)
|
|
|
620,987
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
|
41,811
|
|
–
|
|
–
|
|
(41,811)
|
(d)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
611,052
|
|
27,406
|
|
25,481
|
|
(42,952)
|
|
|
620,987
|
Other components of net periodic benefit costs
|
|
(1,013)
|
|
–
|
|
–
|
|
–
|
|
|
(1,013)
|
Interest expense
|
|
(143,586)
|
|
–
|
|
–
|
|
1,141
|
(b)
|
|
(142,445)
|
Pretax earnings
|
|
466,453
|
|
27,406
|
|
25,481
|
|
(41,811)
|
|
|
477,529
|
Income tax benefit (expense)
|
|
(95,596)
|
|
(5,698)
|
|
(5,378)
|
|
–
|
|
|
(106,672)
|
Earnings available to common shareholders
|
$
|
370,857
|
$
|
21,708
|
$
|
20,103
|
$
|
(41,811)
|
|
$
|
370,857
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Balances for the year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate intercompany lease / interest income
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany premiums
|
|
|
|
|
|
|
|
|
|
|
|
(d) Eliminate equity in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating statements of operations by industry segment for period ending March 31, 2018 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty Insurance (a)
|
|
Life
Insurance (a)
|
|
Eliminations
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals
|
$
|
2,483,956
|
$
|
–
|
$
|
–
|
$
|
(4,214)
|
(c)
|
$
|
2,479,742
|
Self-storage revenues
|
|
323,903
|
|
–
|
|
–
|
|
–
|
|
|
323,903
|
Self-moving & self-storage products & service sales
|
|
261,557
|
|
–
|
|
–
|
|
–
|
|
|
261,557
|
Property management fees
|
|
29,602
|
|
–
|
|
–
|
|
–
|
|
|
29,602
|
Life insurance premiums
|
|
–
|
|
–
|
|
154,703
|
|
–
|
|
|
154,703
|
Property and casualty insurance premiums
|
|
–
|
|
58,800
|
|
–
|
|
(1,700)
|
(c)
|
|
57,100
|
Net investment and interest income
|
|
12,232
|
|
15,771
|
|
84,158
|
|
(1,688)
|
(b)
|
|
110,473
|
Other revenue
|
|
179,417
|
|
–
|
|
5,001
|
|
(384)
|
(b)
|
|
184,034
|
Total revenues
|
|
3,290,667
|
|
74,571
|
|
243,862
|
|
(7,986)
|
|
|
3,601,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
1,758,697
|
|
32,710
|
|
22,061
|
|
(6,412)
|
(b,c)
|
|
1,807,056
|
Commission expenses
|
|
276,705
|
|
–
|
|
–
|
|
–
|
|
|
276,705
|
Cost of sales
|
|
160,489
|
|
–
|
|
–
|
|
–
|
|
|
160,489
|
Benefits and losses
|
|
–
|
|
15,983
|
|
169,328
|
|
–
|
|
|
185,311
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
24,514
|
|
–
|
|
|
24,514
|
Lease expense
|
|
34,243
|
|
–
|
|
–
|
|
(283)
|
(b)
|
|
33,960
|
Depreciation, net gains on disposals
|
|
543,247
|
|
–
|
|
–
|
|
–
|
|
|
543,247
|
Net gains on disposal of real estate
|
|
(195,414)
|
|
–
|
|
–
|
|
–
|
|
|
(195,414)
|
Total costs and expenses
|
|
2,577,967
|
|
48,693
|
|
215,903
|
|
(6,695)
|
|
|
2,835,868
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations before equity in earnings of subsidiaries
|
|
712,700
|
|
25,878
|
|
27,959
|
|
(1,291)
|
|
|
765,246
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
|
46,990
|
|
–
|
|
–
|
|
(46,990)
|
(d)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
759,690
|
|
25,878
|
|
27,959
|
|
(48,281)
|
|
|
765,246
|
Other components of net periodic benefit costs
|
|
(927)
|
|
–
|
|
–
|
|
–
|
|
|
(927)
|
Interest expense
|
|
(127,997)
|
|
–
|
|
–
|
|
1,291
|
(b)
|
|
(126,706)
|
Pretax earnings
|
|
630,766
|
|
25,878
|
|
27,959
|
|
(46,990)
|
|
|
637,613
|
Income tax expense
|
|
159,817
|
|
(2,989)
|
|
(3,858)
|
|
–
|
|
|
152,970
|
Earnings available to common shareholders
|
$
|
790,583
|
$
|
22,889
|
$
|
24,101
|
$
|
(46,990)
|
|
$
|
790,583
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Balances for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate intercompany lease/interest income
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany premiums
|
|
|
|
|
|
|
|
|
|
|
|
(d) Eliminate equity in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating statements of operations by industry segment for period ending March 31, 2017 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty Insurance (a)
|
|
Life
Insurance (a)
|
|
Eliminations
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving equipment rentals
|
$
|
2,366,526
|
$
|
–
|
$
|
–
|
$
|
(3,693)
|
(c)
|
$
|
2,362,833
|
Self-storage revenues
|
|
286,886
|
|
–
|
|
–
|
|
–
|
|
|
286,886
|
Self-moving & self-storage products & service sales
|
|
253,073
|
|
–
|
|
–
|
|
–
|
|
|
253,073
|
Property management fees
|
|
29,075
|
|
–
|
|
–
|
|
–
|
|
|
29,075
|
Life insurance premiums
|
|
–
|
|
–
|
|
163,579
|
|
–
|
|
|
163,579
|
Property and casualty insurance premiums
|
|
–
|
|
52,334
|
|
–
|
|
–
|
|
|
52,334
|
Net investment and interest income
|
|
9,688
|
|
16,652
|
|
77,540
|
|
(1,604)
|
(b)
|
|
102,276
|
Other revenue
|
|
167,752
|
|
–
|
|
4,480
|
|
(521)
|
(b)
|
|
171,711
|
Total revenues
|
|
3,113,000
|
|
68,986
|
|
245,599
|
|
(5,818)
|
|
|
3,421,767
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
1,520,506
|
|
28,421
|
|
22,429
|
|
(4,175)
|
(b,c)
|
|
1,567,181
|
Commission expenses
|
|
267,230
|
|
–
|
|
–
|
|
–
|
|
|
267,230
|
Cost of sales
|
|
152,485
|
|
–
|
|
–
|
|
–
|
|
|
152,485
|
Benefits and losses
|
|
–
|
|
13,404
|
|
169,306
|
|
–
|
|
|
182,710
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
26,218
|
|
–
|
|
|
26,218
|
Lease expense
|
|
37,529
|
|
–
|
|
–
|
|
(186)
|
(b)
|
|
37,343
|
Depreciation, net gains on disposals
|
|
449,025
|
|
–
|
|
–
|
|
–
|
|
|
449,025
|
Net (gains) losses on disposal of real estate
|
|
(3,590)
|
|
–
|
|
–
|
|
–
|
|
|
(3,590)
|
Total costs and expenses
|
|
2,423,185
|
|
41,825
|
|
217,953
|
|
(4,361)
|
|
|
2,678,602
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations before equity in earnings of subsidiaries
|
|
689,815
|
|
27,161
|
|
27,646
|
|
(1,457)
|
|
|
743,165
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
|
35,797
|
|
–
|
|
–
|
|
(35,797)
|
(d)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
725,612
|
|
27,161
|
|
27,646
|
|
(37,254)
|
|
|
743,165
|
Other components of net periodic benefit costs
|
|
(902)
|
|
–
|
|
–
|
|
–
|
|
|
(902)
|
Interest expense
|
|
(114,863)
|
|
–
|
|
–
|
|
1,457
|
(b)
|
|
(113,406)
|
Amortization on early extinguished of debt
|
|
(499)
|
|
|
|
|
|
|
|
|
(499)
|
Pretax earnings
|
|
609,348
|
|
27,161
|
|
27,646
|
|
(35,797)
|
|
|
628,358
|
Income tax expense
|
|
(210,924)
|
|
(9,346)
|
|
(9,664)
|
|
–
|
|
|
(229,934)
|
Earnings available to common shareholders
|
$
|
398,424
|
$
|
17,815
|
$
|
17,982
|
$
|
(35,797)
|
|
$
|
398,424
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Balances for the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
(b) Eliminate intercompany lease/interest income
|
|
|
|
|
|
|
|
|
|
|
|
(c) Eliminate intercompany premiums
|
|
|
|
|
|
|
|
|
|
|
|
(d) Eliminate equity in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating cash flow statements by industry segment for the year ended March 31, 2019, are as follows:
|
|
Moving & Storage Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
370,857
|
$
|
21,708
|
$
|
20,103
|
$
|
(41,811)
|
|
$
|
370,857
|
Earnings from consolidated subsidiaries
|
|
(41,811)
|
|
–
|
|
–
|
|
41,811
|
|
|
–
|
Adjustments to reconcile net earnings to cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
581,025
|
|
–
|
|
–
|
|
–
|
|
|
581,025
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
28,556
|
|
–
|
|
|
28,556
|
Amortization of premiums and accretion of discounts related to investments, net
|
|
–
|
|
1,361
|
|
11,746
|
|
–
|
|
|
13,107
|
Amortization of debt issuance costs
|
|
3,923
|
|
–
|
|
–
|
|
–
|
|
|
3,923
|
Interest credited to policyholders
|
|
–
|
|
–
|
|
35,387
|
|
–
|
|
|
35,387
|
Change in allowance for losses on trade receivables
|
|
57
|
|
–
|
|
(5)
|
|
–
|
|
|
52
|
Change in allowance for inventories and parts reserve
|
|
(146)
|
|
–
|
|
–
|
|
–
|
|
|
(146)
|
Net gains on disposal of personal property
|
|
(26,982)
|
|
–
|
|
–
|
|
–
|
|
|
(26,982)
|
Net gains on disposal of real estate
|
|
(44)
|
|
–
|
|
–
|
|
–
|
|
|
(44)
|
Net (gains) losses on sales of investments
|
|
–
|
|
(2,971)
|
|
308
|
|
–
|
|
|
(2,663)
|
Net losses on equity securities
|
|
–
|
|
5,739
|
|
–
|
|
–
|
|
|
5,739
|
Deferred income taxes
|
|
112,434
|
|
830
|
|
(6,453)
|
|
–
|
|
|
106,811
|
Net change in other operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables
|
|
(26,160)
|
|
(2,438)
|
|
(2,767)
|
|
–
|
|
|
(31,365)
|
Inventories and parts
|
|
(13,492)
|
|
–
|
|
–
|
|
–
|
|
|
(13,492)
|
Prepaid expenses
|
|
(8,620)
|
|
–
|
|
–
|
|
–
|
|
|
(8,620)
|
Capitalization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
(25,957)
|
|
–
|
|
|
(25,957)
|
Other assets
|
|
159,126
|
|
(1,449)
|
|
(525)
|
|
–
|
|
|
157,152
|
Related party assets
|
|
3,857
|
|
339
|
|
(2)
|
|
–
|
|
|
4,194
|
Accounts payable and accrued expenses
|
|
6,454
|
|
257
|
|
3,552
|
|
–
|
|
|
10,263
|
Policy benefits and losses, claims and loss expenses payable
|
|
(159,793)
|
|
(4,400)
|
|
(71,927)
|
|
–
|
|
|
(236,120)
|
Other policyholders' funds and liabilities
|
|
–
|
|
(117)
|
|
5,124
|
|
–
|
|
|
5,007
|
Deferred income
|
|
966
|
|
–
|
|
–
|
|
–
|
|
|
966
|
Related party liabilities
|
|
(2,711)
|
|
944
|
|
(300)
|
|
–
|
|
|
(2,067)
|
Net cash provided (used) by operating activities
|
|
958,940
|
|
19,803
|
|
(3,160)
|
|
–
|
|
|
975,583
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Escrow deposits
|
|
4,299
|
|
–
|
|
–
|
|
–
|
|
|
4,299
|
Purchases of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(1,869,968)
|
|
–
|
|
–
|
|
–
|
|
|
(1,869,968)
|
Short term investments
|
|
–
|
|
(53,878)
|
|
(170)
|
|
–
|
|
|
(54,048)
|
Fixed maturities investments
|
|
–
|
|
(33,775)
|
|
(506,270)
|
|
–
|
|
|
(540,045)
|
Equity securities
|
|
–
|
|
–
|
|
(957)
|
|
–
|
|
|
(957)
|
Preferred stock
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
–
|
Real estate
|
|
(236)
|
|
(187)
|
|
(212)
|
|
–
|
|
|
(635)
|
Mortgage loans
|
|
–
|
|
(20,031)
|
|
(43,580)
|
|
–
|
|
|
(63,611)
|
Proceeds from sales and paydowns of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
606,271
|
|
–
|
|
–
|
|
–
|
|
|
606,271
|
Short term investments
|
|
–
|
|
58,767
|
|
7,270
|
|
–
|
|
|
66,037
|
Fixed maturities investments
|
|
–
|
|
12,305
|
|
111,246
|
|
–
|
|
|
123,551
|
Equity securities
|
|
–
|
|
8,608
|
|
–
|
|
–
|
|
|
8,608
|
Preferred stock
|
|
–
|
|
1,625
|
|
–
|
|
–
|
|
|
1,625
|
Real estate
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
–
|
Mortgage loans
|
|
–
|
|
5,881
|
|
141,856
|
|
–
|
|
|
147,737
|
Net cash used by investing activities
|
|
(1,259,634)
|
|
(20,685)
|
|
(290,817)
|
|
–
|
|
|
(1,571,136)
|
|
|
(page 1 of 2)
|
(a) Balance for the period ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2019, are as follows:
|
|
Moving & Storage Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from credit facilities
|
|
897,311
|
|
–
|
|
–
|
|
–
|
|
|
897,311
|
Principal repayments on credit facilities
|
|
(299,748)
|
|
–
|
|
–
|
|
–
|
|
|
(299,748)
|
Payment of debt issuance costs
|
|
(7,243)
|
|
–
|
|
–
|
|
–
|
|
|
(7,243)
|
Capital lease payments
|
|
(303,431)
|
|
–
|
|
–
|
|
–
|
|
|
(303,431)
|
Employee stock ownership plan shares
|
|
(418)
|
|
–
|
|
–
|
|
–
|
|
|
(418)
|
Securitization deposits
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
–
|
Common stock dividends paid
|
|
(39,179)
|
|
–
|
|
–
|
|
–
|
|
|
(39,179)
|
Investment contract deposits
|
|
–
|
|
–
|
|
400,123
|
|
–
|
|
|
400,123
|
Investment contract withdrawals
|
|
–
|
|
–
|
|
(132,833)
|
|
–
|
|
|
(132,833)
|
Net cash provided by financing activities
|
|
247,292
|
|
–
|
|
267,290
|
|
–
|
|
|
514,582
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate on cash
|
|
(4,716)
|
|
–
|
|
–
|
|
–
|
|
|
(4,716)
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
(58,118)
|
|
(882)
|
|
(26,687)
|
|
–
|
|
|
(85,687)
|
Cash and cash equivalents at beginning of period
|
|
702,036
|
|
6,639
|
|
50,713
|
|
–
|
|
|
759,388
|
Cash and cash equivalents at end of period
|
$
|
643,918
|
$
|
5,757
|
$
|
24,026
|
$
|
–
|
|
$
|
673,701
|
|
|
(page 2 of 2)
|
(a) Balance for the period ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating cash flow statements by industry segment for the year ended March 31, 2018, are as follows:
|
|
Moving & Storage Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
790,583
|
$
|
22,889
|
$
|
24,101
|
$
|
(46,990)
|
|
$
|
790,583
|
Earnings from consolidated subsidiaries
|
|
(46,990)
|
|
–
|
|
–
|
|
46,990
|
|
|
–
|
Adjustments to reconcile net earnings to cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
555,069
|
|
–
|
|
–
|
|
–
|
|
|
555,069
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
24,514
|
|
–
|
|
|
24,514
|
Amortization of premiums and accretion of discounts related to investments, net
|
|
–
|
|
1,356
|
|
11,434
|
|
–
|
|
|
12,790
|
Amortization of debt issuance costs
|
|
3,868
|
|
–
|
|
–
|
|
–
|
|
|
3,868
|
Interest credited to policyholders
|
|
–
|
|
–
|
|
32,302
|
|
–
|
|
|
32,302
|
Change in allowance for losses on trade receivables
|
|
(31)
|
|
–
|
|
(89)
|
|
–
|
|
|
(120)
|
Change in allowance for inventories and parts reserve
|
|
5,065
|
|
–
|
|
–
|
|
–
|
|
|
5,065
|
Net gains on disposal of personal property
|
|
(11,822)
|
|
–
|
|
–
|
|
–
|
|
|
(11,822)
|
Net gains on disposal of real estate
|
|
(195,414)
|
|
–
|
|
–
|
|
–
|
|
|
(195,414)
|
Net gains on sales of investments
|
|
–
|
|
(1,703)
|
|
(4,566)
|
|
–
|
|
|
(6,269)
|
Net (gains) losses on equity securities
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
–
|
Deferred income taxes
|
|
(182,358)
|
|
(6,596)
|
|
(4,480)
|
|
–
|
|
|
(193,434)
|
Net change in other operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables
|
|
(23,444)
|
|
8,075
|
|
40
|
|
–
|
|
|
(15,329)
|
Inventories and parts
|
|
(12,384)
|
|
–
|
|
–
|
|
–
|
|
|
(12,384)
|
Prepaid expenses
|
|
(40,765)
|
|
–
|
|
–
|
|
–
|
|
|
(40,765)
|
Capitalization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
(27,350)
|
|
–
|
|
|
(27,350)
|
Other assets
|
|
(167,579)
|
|
1,810
|
|
(199)
|
|
–
|
|
|
(165,968)
|
Related party assets
|
|
48,855
|
|
4,553
|
|
–
|
|
–
|
|
|
53,408
|
Accounts payable and accrued expenses
|
|
(36,384)
|
|
648
|
|
(1,244)
|
|
–
|
|
|
(36,980)
|
Policy benefits and losses, claims and loss expenses payable
|
|
168,687
|
|
(10,623)
|
|
3,057
|
|
–
|
|
|
161,121
|
Other policyholders' funds and liabilities
|
|
–
|
|
1,194
|
|
(1,303)
|
|
–
|
|
|
(109)
|
Deferred income
|
|
5,524
|
|
–
|
|
–
|
|
–
|
|
|
5,524
|
Related party liabilities
|
|
(1,884)
|
|
318
|
|
950
|
|
–
|
|
|
(616)
|
Net cash provided by operating activities
|
|
858,596
|
|
21,921
|
|
57,167
|
|
–
|
|
|
937,684
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Escrow deposits
|
|
31,362
|
|
–
|
|
–
|
|
–
|
|
|
31,362
|
Purchases of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(1,363,745)
|
|
–
|
|
–
|
|
–
|
|
|
(1,363,745)
|
Short term investments
|
|
–
|
|
(63,556)
|
|
–
|
|
–
|
|
|
(63,556)
|
Fixed maturities investments
|
|
–
|
|
(51,273)
|
|
(339,627)
|
|
–
|
|
|
(390,900)
|
Equity securities
|
|
–
|
|
–
|
|
(662)
|
|
–
|
|
|
(662)
|
Preferred stock
|
|
–
|
|
(1,000)
|
|
–
|
|
–
|
|
|
(1,000)
|
Real estate
|
|
(1,365)
|
|
(440)
|
|
(134)
|
|
–
|
|
|
(1,939)
|
Mortgage loans
|
|
–
|
|
(14,409)
|
|
(69,098)
|
|
–
|
|
|
(83,507)
|
Proceeds from sales and paydowns of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
699,803
|
|
–
|
|
–
|
|
–
|
|
|
699,803
|
Short term investments
|
|
–
|
|
61,133
|
|
6,657
|
|
–
|
|
|
67,790
|
Fixed maturities investments
|
|
–
|
|
21,670
|
|
141,799
|
|
–
|
|
|
163,469
|
Preferred stock
|
|
–
|
|
4,208
|
|
–
|
|
–
|
|
|
4,208
|
Real estate
|
|
2,783
|
|
–
|
|
–
|
|
–
|
|
|
2,783
|
Mortgage loans
|
|
–
|
|
15,660
|
|
21,930
|
|
–
|
|
|
37,590
|
Net cash used by investing activities
|
|
(631,162)
|
|
(28,007)
|
|
(239,135)
|
|
–
|
|
|
(898,304)
|
|
|
(page 1 of 2)
|
(a) Balance for the period ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2018, are as follows:
|
|
Moving & Storage Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from credit facilities
|
|
498,464
|
|
–
|
|
–
|
|
–
|
|
|
498,464
|
Principal repayments on credit facilities
|
|
(356,451)
|
|
–
|
|
–
|
|
–
|
|
|
(356,451)
|
Payment of debt issuance costs
|
|
(5,111)
|
|
–
|
|
–
|
|
–
|
|
|
(5,111)
|
Capital lease payments
|
|
(296,363)
|
|
–
|
|
–
|
|
–
|
|
|
(296,363)
|
Employee stock ownership plan shares
|
|
(11,640)
|
|
–
|
|
–
|
|
–
|
|
|
(11,640)
|
Securitization deposits
|
|
(2,180)
|
|
–
|
|
–
|
|
–
|
|
|
(2,180)
|
Common stock dividends paid
|
|
(29,380)
|
|
–
|
|
–
|
|
–
|
|
|
(29,380)
|
Investment contract deposits
|
|
–
|
|
–
|
|
401,814
|
|
–
|
|
|
401,814
|
Investment contract withdrawals
|
|
–
|
|
–
|
|
(182,549)
|
|
–
|
|
|
(182,549)
|
Net cash provided (used) by financing activities
|
|
(202,661)
|
|
–
|
|
219,265
|
|
–
|
|
|
16,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate on cash
|
|
5,598
|
|
–
|
|
–
|
|
–
|
|
|
5,598
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
30,371
|
|
(6,086)
|
|
37,297
|
|
–
|
|
|
61,582
|
Cash and cash equivalents at beginning of period
|
|
671,665
|
|
12,725
|
|
13,416
|
|
–
|
|
|
697,806
|
Cash and cash equivalents at end of period
|
$
|
702,036
|
$
|
6,639
|
$
|
50,713
|
$
|
–
|
|
$
|
759,388
|
|
|
(page 2 of 2)
|
(a) Balance for the period ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating cash flow statements by industry segment for the year ended March 31, 2017 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
398,424
|
$
|
17,815
|
$
|
17,982
|
$
|
(35,797)
|
|
$
|
398,424
|
Earnings from consolidated subsidiaries
|
|
(35,797)
|
|
–
|
|
–
|
|
35,797
|
|
|
–
|
Adjustments to reconcile net earnings to cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
481,520
|
|
–
|
|
–
|
|
–
|
|
|
481,520
|
Amortization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
26,218
|
|
–
|
|
|
26,218
|
Amortization of premiums and accretion of discounts related to investments, net
|
|
–
|
|
1,336
|
|
10,492
|
|
–
|
|
|
11,828
|
Amortization of debt issuance costs
|
|
4,062
|
|
–
|
|
–
|
|
–
|
|
|
4,062
|
Interest credited to policyholders
|
|
–
|
|
–
|
|
25,020
|
|
–
|
|
|
25,020
|
Change in allowance for losses on trade receivables
|
|
31
|
|
–
|
|
(77)
|
|
–
|
|
|
(46)
|
Change in allowance for inventories and parts reserve
|
|
1,330
|
|
–
|
|
–
|
|
–
|
|
|
1,330
|
Net gains on disposal of personal property
|
|
(32,495)
|
|
–
|
|
–
|
|
–
|
|
|
(32,495)
|
Net gains on disposal of real estate
|
|
(3,590)
|
|
–
|
|
–
|
|
–
|
|
|
(3,590)
|
Net gains on sales of investments
|
|
–
|
|
(2,636)
|
|
(2,648)
|
|
–
|
|
|
(5,284)
|
Net (gains) losses on equity securities
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
–
|
Deferred income taxes
|
|
173,059
|
|
2,340
|
|
(2,287)
|
|
–
|
|
|
173,112
|
Net change in other operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables
|
|
(6,806)
|
|
4,221
|
|
(305)
|
|
–
|
|
|
(2,890)
|
Inventories and parts
|
|
(4,072)
|
|
–
|
|
–
|
|
–
|
|
|
(4,072)
|
Prepaid expenses
|
|
9,386
|
|
–
|
|
–
|
|
–
|
|
|
9,386
|
Capitalization of deferred policy acquisition costs
|
|
–
|
|
–
|
|
(27,111)
|
|
–
|
|
|
(27,111)
|
Other assets
|
|
(3,827)
|
|
1,341
|
|
(2)
|
|
–
|
|
|
(2,488)
|
Related party assets
|
|
(872)
|
|
1,215
|
|
–
|
|
–
|
|
|
343
|
Accounts payable and accrued expenses
|
|
(14,793)
|
|
392
|
|
(1,147)
|
|
–
|
|
|
(15,548)
|
Policy benefits and losses, claims and loss expenses payable
|
|
13,283
|
|
(7,838)
|
|
9,933
|
|
–
|
|
|
15,378
|
Other policyholders' funds and liabilities
|
|
–
|
|
1,167
|
|
332
|
|
–
|
|
|
1,499
|
Deferred income
|
|
5,921
|
|
–
|
|
–
|
|
–
|
|
|
5,921
|
Related party liabilities
|
|
(1,170)
|
|
226
|
|
(118)
|
|
–
|
|
|
(1,062)
|
Net cash provided by operating activities
|
|
983,594
|
|
19,579
|
|
56,282
|
|
–
|
|
|
1,059,455
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Escrow deposits
|
|
(38,058)
|
|
–
|
|
–
|
|
–
|
|
|
(38,058)
|
Purchases of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(1,419,505)
|
|
–
|
|
–
|
|
–
|
|
|
(1,419,505)
|
Short term investments
|
|
–
|
|
(77,693)
|
|
(558,154)
|
|
–
|
|
|
(635,847)
|
Fixed maturities investments
|
|
–
|
|
(42,628)
|
|
(312,473)
|
|
–
|
|
|
(355,101)
|
Equity securities
|
|
–
|
|
–
|
|
(489)
|
|
–
|
|
|
(489)
|
Real estate
|
|
(19,406)
|
|
(4,648)
|
|
(8,753)
|
|
–
|
|
|
(32,807)
|
Mortgage loans
|
|
–
|
|
(21,021)
|
|
(133,289)
|
|
–
|
|
|
(154,310)
|
Proceeds from sales and paydowns of:
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
487,475
|
|
–
|
|
–
|
|
–
|
|
|
487,475
|
Short term investments
|
|
–
|
|
80,225
|
|
575,501
|
|
–
|
|
|
655,726
|
Fixed maturities investments
|
|
–
|
|
30,791
|
|
158,451
|
|
–
|
|
|
189,242
|
Preferred stock
|
|
–
|
|
4,181
|
|
–
|
|
–
|
|
|
4,181
|
Real estate
|
|
6,275
|
|
–
|
|
2,478
|
|
–
|
|
|
8,753
|
Mortgage loans
|
|
–
|
|
9,890
|
|
96,942
|
|
–
|
|
|
106,832
|
Net cash used by investing activities
|
|
(983,219)
|
|
(20,903)
|
|
(179,786)
|
|
–
|
|
|
(1,183,908)
|
|
|
(page 1 of 2)
|
(a) Balance for the period ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2017 are as follows:
|
|
Moving & Storage
Consolidated
|
|
Property & Casualty
Insurance (a)
|
|
Life
Insurance (a)
|
|
Elimination
|
|
|
AMERCO
Consolidated
|
|
|
(In thousands)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from credit facilities
|
|
715,625
|
|
–
|
|
27,000
|
|
–
|
|
|
742,625
|
Principal repayments on credit facilities
|
|
(340,844)
|
|
–
|
|
(27,000)
|
|
–
|
|
|
(367,844)
|
Payment of debt issuance costs
|
|
(5,055)
|
|
–
|
|
–
|
|
–
|
|
|
(5,055)
|
Capital lease payments
|
|
(212,545)
|
|
–
|
|
–
|
|
–
|
|
|
(212,545)
|
Employee stock ownership plan shares
|
|
(11,106)
|
|
–
|
|
–
|
|
–
|
|
|
(11,106)
|
Securitization deposits
|
|
446
|
|
–
|
|
–
|
|
–
|
|
|
446
|
Common stock dividends paid
|
|
(58,757)
|
|
–
|
|
–
|
|
–
|
|
|
(58,757)
|
Investment contract deposits
|
|
–
|
|
–
|
|
285,148
|
|
–
|
|
|
285,148
|
Investment contract withdrawals
|
|
–
|
|
–
|
|
(149,159)
|
|
–
|
|
|
(149,159)
|
Net cash provided by financing activities
|
|
87,764
|
|
–
|
|
135,989
|
|
–
|
|
|
223,753
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate on cash
|
|
(2,140)
|
|
–
|
|
–
|
|
–
|
|
|
(2,140)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
85,999
|
|
(1,324)
|
|
12,485
|
|
–
|
|
|
97,160
|
Cash and cash equivalents at beginning of period
|
|
585,666
|
|
14,049
|
|
931
|
|
–
|
|
|
600,646
|
Cash and cash equivalents at end of period
|
$
|
671,665
|
$
|
12,725
|
$
|
13,416
|
$
|
–
|
|
$
|
697,806
|
|
|
(page 2 of 2)
|
(a) Balance for the period ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
amerco and consolidated subsidiaries
notes to consolidated financial statements – (continued)
Note 22.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), which provided an updated standard on revenue recognition. The standard outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis. Due to insignificant changes in our revenue recognition pattern for applicable revenue streams as a result of the updated guidance, there was no cumulative effect recorded.
Additionally, due to the relatively short duration of our equipment contracts, we elected to use the practical expedient for contracts that begin and end within the same reporting period in applying the updated guidance to our applicable revenue streams. We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance.
The adoption of the standard did not have a material impact on our consolidated financial statements.
We enter into contracts that may include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, and remitted to the applicable taxing authorities. We account for a contract under Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For contracts scoped into this standard, revenue is recognized when (or as) the performance obligations are satisfied by means of transferring goods or services to the customer as applicable to each revenue stream as discussed below. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. This is applicable to insurance premiums received in conjunction with equipment rentals, for which we allocate the transaction price relating to these distinct performance obligations covered by Topic 944 on a relative standalone selling price basis.
There were no material contract assets or liabilities as of March 31, 2019 and March 31, 2018.
Self-moving rentals are recognized over the contract period that trucks and moving equipment are rented. We offer two types of self-moving rental contracts, one-way rentals and in-town rentals, which have varying payment terms. Customer payment is received at the initiation of the contract for one-way rentals which covers an allowable limit for equipment usage. An estimated fee in the form of a deposit is received at the initiation of the contract for in-town rentals, and final payment is received upon the return of the equipment based on actual fees incurred. The contract price is estimated at the initiation of the contract, as there is variable consideration associated with ratable fees incurred based on the number of days the equipment is rented and the number of miles driven. Variable consideration is estimated using the most likely amount method which is based on the intended use of the rental equipment by the customer at the initiation of the contract. Historically, the variability in estimated transaction pricing compared to actual is not significant due to the relatively short duration of rental contracts. Each performance obligation has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. The input method of passage of time is appropriate as there is a direct relationship between our inputs and the transfer of benefit to the customer over the life of the contract. Self-moving rental contracts span a relatively short period of time, and the majority of these contracts began and ended within the same fiscal year.
amerco and consolidated subsidiaries
notes to consolidated financial statements – (continued)
The Company’s self-moving rental revenues do not currently meet the definition of a lease under Topic 840 - Leases due to the existence of substitution rights, and thus are accounted for under Topic 606.
However, the contracts are expected to meet the definition of a lease pursuant to the guidance in ASU 2016-02,
Leases (Topic 842)
(“ASU 2016-02”) because those substitution rights do not provide an economic benefit to the Company that would exceed the cost of exercising the right.
Therefore, upon adoption of ASU 2016-02 on April 1, 2019, self-rental contracts will be accounted for as leases.
We do not expect this change to result in a change in the timing and pattern of recognition of the related revenues due to the short-term nature of the self-moving rental contracts.
Self-storage revenues are recognized as earned over the contract period based upon the number of paid storage contract days. Self-storage revenues are recognized in accordance with existing guidance in Topic 840 – Leases.
Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. The performance obligations identified for this portfolio of contracts include moving and storage product sales, installation services and/or propane sales. Each of these performance obligations has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied at a point in time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. The basis for this conclusion is that the customer does not receive the product/propane or benefit from the installation services until the related performance obligation is satisfied. These products/services being provided have an alternative use as they are not customized and can be sold/provided to any customer. In addition, we only have the right to receive payment once the products have been transferred to the customer or the installation services have been completed. Although product sales have a right of return policy, our estimated obligation for future product returns is not material to the financial statements at this time.
Property management fees are recognized over the period that agreed-upon services are provided. The performance obligation for this portfolio of contracts is property management services, which represents a series of distinct days of service, each of which is comprised of activities that may vary from day to day. However, those tasks are activities to fulfill the property management services and are not separate promises in the contract. We determined that each increment of the promised service is distinct in accordance with paragraph 606-10-25-19 of Topic 606. This is because the customer can benefit from each increment of service on its own and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity’s ability to fulfill another day of service or the benefit to the customer of another day of service. As such, we concluded that the performance obligation is satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance for the Management Fee component of the compensation received in exchange for the service. Additionally, in certain contracts the Company has the ability to earn an incentive fee based on operational results. Historically these fees have been recognized once fully determinable. Under Topic 606, we measure and recognize the progress toward completion of the performance obligation on a quarterly basis using the most likely amount method to determine an accrual for the Incentive Fee portion of the compensation received in exchange for the property management service. The variable consideration recognized is subject to constraints due to a range of possible consideration amounts based on actual operational results. The amount accrued in the fourth quarter fiscal 2019 did not have a material effect on our financial statements.
Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force. Life insurance premiums are recognized in accordance with existing guidance in Topic 944 – Financial Services – Insurance.
Property and casualty insurance premiums are recognized as revenue over the policy periods. Interest and investment income are recognized as earned. Property and casualty premiums are recognized in accordance with existing guidance in Topic 944 – Financial Services – Insurance.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Net investment and interest income has multiple components. Interest income from bonds and mortgage notes are recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date. Net investment and interest income is recognized in accordance with existing guidance in Topic 825 – Financial Instruments.
Other revenue consists of numerous services or rentals, of which U-Box contracts and service fees from Moving Help are the main components. The performance obligations identified for U-Box contracts are fees for rental, storage and shipping of U-Box containers to a specified location, each of which are distinct.
A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. The rental and storage obligations in U-Box contracts meet the definition of a lease in Topic 840, while the shipping obligation represents a contract with a customer accounted for under Topic 606.
Therefore, we allocate the total transaction price between the performance obligations of storage fees and rental fees and the shipping fees on a standalone selling price basis.
U-Box shipping fees are collected once the shipment is in transit. Shipping fees in U-Box contracts are set at the initiation of the contract based on the shipping origin and destination, and the performance obligation is satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. U-Box shipping contracts span over a relatively short period of time, and the majority of these contracts begin and end within the same fiscal year. Moving Help services fees are generated as we provide a neutral venue for the connection between the service provider and the customer for agreed upon services. We do not control the specified services provided by the service provider before that service is transferred to the customer.
In the following tables, the revenue is disaggregated by timing of revenue recognition:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Revenues recognized over time
|
$
|
2,814,732
|
$
|
2,617,990
|
$
|
2,494,060
|
Revenues recognized at a point in time
|
|
305,408
|
|
301,152
|
|
291,886
|
Total revenues recognized under ASC 606
|
|
3,120,140
|
|
2,919,142
|
|
2,785,946
|
|
|
|
|
|
|
|
Revenues recognized under ASC 840
|
|
406,070
|
|
353,924
|
|
311,403
|
Revenues recognized under ASC 944
|
|
131,563
|
|
217,575
|
|
222,142
|
Revenues recognized under ASC 320
|
|
110,934
|
|
110,473
|
|
102,276
|
Total revenues
|
$
|
3,768,707
|
$
|
3,601,114
|
$
|
3,421,767
|
In the above tables, the revenues recognized over time include self-moving equipment rentals, property management fees, the shipping fees associated with U-Box rentals and a portion of other revenues, whereas revenues recognized at a point in time include self-moving and self-storage products and service sales and a portion of other revenues.
We recognize liabilities resulting from contracts with customers for self-moving equipment rentals and self-storage revenues in which the length of the contract goes beyond the reported period end, although rental periods of the contract are generally short-term in nature. The timing of revenue recognition results in contract liabilities that are reflected in deferred income on the balance sheet. The deferred income balances associated with equipment rentals and storage revenues as of March 31, 2018 were recognized as revenue during the fiscal year ended March 31, 2019.
Note 23.
Subsequent Events
Our management has evaluated subsequent events occurring after March 31, 2019. We do not believe any other subsequent events have occurred that would require further disclosure or adjustment to our financial statements other than as stated below.
On March 6, 2019, we declared a cash dividend on our Common Stock of $0.50 per share to holders of record on March 21, 2019. The dividend was paid on April 4, 2019.
SCHEDULE
I
CONDENSED FINANCIAL INFORMATION OF AMERCO
BALANCE SHEETS
|
|
March 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
ASSETS
|
Cash and cash equivalents
|
$
|
428,950
|
$
|
469,209
|
Investment in subsidiaries
|
|
2,474,671
|
|
2,244,867
|
Related party assets
|
|
1,424,274
|
|
1,227,491
|
Other assets
|
|
120,896
|
|
114,568
|
Total assets
|
$
|
4,448,791
|
$
|
4,056,135
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
Liabilities:
|
|
|
|
|
Other liabilities
|
$
|
754,115
|
$
|
639,604
|
|
|
754,115
|
|
639,604
|
Stockholders' equity:
|
|
|
|
|
Preferred stock
|
|
–
|
|
–
|
Common stock
|
|
10,497
|
|
10,497
|
Additional paid-in capital
|
|
453,536
|
|
452,956
|
Accumulated other comprehensive loss
|
|
(68,459)
|
|
(4,623)
|
Retained earnings:
|
|
|
|
|
Beginning of period
|
|
3,635,351
|
|
2,883,943
|
Adjustment for adoption of ASU 2016-01
|
|
9,724
|
|
–
|
Net earnings
|
|
370,857
|
|
790,583
|
Dividends
|
|
(39,180)
|
|
(39,175)
|
End of period
|
|
3,976,752
|
|
3,635,351
|
|
|
|
|
|
Cost of common shares in treasury
|
|
(525,653)
|
|
(525,653)
|
Cost of preferred shares in treasury
|
|
(151,997)
|
|
(151,997)
|
Total stockholders' equity
|
|
3,694,676
|
|
3,416,531
|
Total liabilities and stockholders' equity
|
$
|
4,448,791
|
$
|
4,056,135
|
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED FINANCIAL INFORMATION OF AMERCO
STATEMENTS OF OPERATIONS
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands, except share and per share data)
|
Revenues:
|
|
|
|
|
|
|
Net interest income and other revenues
|
$
|
8,601
|
$
|
4,606
|
$
|
1,912
|
Expenses:
|
|
|
|
|
|
|
Operating expenses
|
|
8,840
|
|
7,003
|
|
7,115
|
Other expenses
|
|
93
|
|
91
|
|
109
|
Total expenses
|
|
8,933
|
|
7,094
|
|
7,224
|
Equity in earnings of subsidiaries
|
|
279,589
|
|
681,786
|
|
327,773
|
Interest income
|
|
112,649
|
|
120,549
|
|
103,211
|
Pretax earnings
|
|
391,906
|
|
799,847
|
|
425,672
|
Income tax expense
|
|
(21,049)
|
|
(9,264)
|
|
(27,248)
|
Earnings available to common shareholders
|
$
|
370,857
|
$
|
790,583
|
$
|
398,424
|
Basic and diluted earnings per common share
|
$
|
18.93
|
$
|
40.36
|
$
|
20.34
|
Weighted average common shares outstanding: Basic and diluted
|
|
19,592,048
|
|
19,588,889
|
|
19,586,606
|
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED FINANCIAL INFORMATION OF AMERCO
STATEMENTS OF comprehensive income
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Net earnings
|
$
|
370,857
|
$
|
790,583
|
$
|
398,424
|
Other comprehensive income (loss)
|
|
(62,075)
|
|
37,873
|
|
9,289
|
Total comprehensive income
|
$
|
308,782
|
$
|
828,456
|
$
|
407,713
|
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED FINANCIAL INFORMATION OF AMERCO
STATEMENTS OF CASH FLOW
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net earnings
|
$
|
370,857
|
$
|
790,583
|
$
|
398,424
|
Change in investments in subsidiaries
|
|
(279,589)
|
|
(681,786)
|
|
(327,773)
|
Adjustments to reconcile net earnings to cash provided by operations:
|
|
|
|
|
|
|
Depreciation
|
|
1
|
|
3
|
|
10
|
Net loss on sale of real and personal property
|
|
–
|
|
–
|
|
13
|
Deferred income taxes
|
|
112,434
|
|
(182,358)
|
|
173,059
|
Net change in other operating assets and liabilities:
|
|
|
|
|
|
|
Reinsurance recoverables and trade receivables
|
|
–
|
|
–
|
|
–
|
Prepaid expenses
|
|
(6,289)
|
|
(36,516)
|
|
16,021
|
Other assets
|
|
(40)
|
|
65
|
|
(20)
|
Related party assets
|
|
–
|
|
–
|
|
1
|
Accounts payable and accrued expenses
|
|
2,260
|
|
278
|
|
(297)
|
Net cash provided (used) by operating activities
|
|
199,634
|
|
(109,731)
|
|
259,438
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(1)
|
|
(1)
|
|
(55)
|
Proceeds of property, plant and equipment
|
|
–
|
|
–
|
|
39
|
Net cash used by investing activities
|
|
(1)
|
|
(1)
|
|
(16)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from (repayments) of intercompany loans
|
|
(196,382)
|
|
250,214
|
|
(221,124)
|
Common stock dividends paid
|
|
(39,179)
|
|
(29,380)
|
|
(58,757)
|
Net cash provided (used) by financing activities
|
|
(235,561)
|
|
220,834
|
|
(279,881)
|
|
|
|
|
|
|
|
Effects of exchange rate on cash
|
|
(4,331)
|
|
(3,124)
|
|
–
|
Increase (decrease) in cash and cash equivalents
|
|
(40,259)
|
|
107,978
|
|
(20,459)
|
Cash and cash equivalents at beginning of period
|
|
469,209
|
|
361,231
|
|
381,690
|
Cash and cash equivalents at end of period
|
$
|
428,950
|
$
|
469,209
|
$
|
361,231
|
Income taxes paid, net of income taxes refunds received, amounted to $4.3 million, $68.7 million and $36.9 million for fiscal 2019, 2018 and 2017, respectively.
The accompanying notes are an integral part of these condensed financial statements.
CONDENSED FINANCIAL INFORMATION OF AMERCO
NOTES TO CONDENSED FINANCIAL INFORMATION
March 31, 2019, 2018, and 2017
1.
Summary of Significant Accounting Policies
AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the holding Company for U-Haul International, Inc., Amerco Real Estate Company, Repwest Insurance Company and Oxford Life Insurance Company. The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Annual Report.
AMERCO is included in a consolidated Federal income tax return with all of its U.S. subsidiaries. Accordingly, the provision for income taxes has been calculated for Federal income taxes of AMERCO and subsidiaries included in the consolidated return of AMERCO. State taxes for all subsidiaries are allocated to the respective subsidiaries.
The financial statements include only the accounts of AMERCO, which include certain of the corporate operations of AMERCO. The interest in AMERCO’s majority owned subsidiaries is accounted for on the equity method. The intercompany interest income and expenses are eliminated in the Consolidated Financial Statements.
2.
Guarantees
AMERCO has guaranteed performance of certain long-term leases and other obligations. See Note 17, Contingent Liabilities and Commitments, and Note 19, Related Party Transactions, of the Notes to Consolidated Financial Statements.
SCHEDULE II
AMERCO AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
|
|
Balance at Beginning of Year
|
|
Additions Charged to Costs and Expenses
|
|
Additions Charged to Other Accounts
|
|
Deductions
|
|
Balance at Year End
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2019
|
|
(In thousands)
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
(deducted from trade receivable)
|
$
|
496
|
$
|
1,550
|
$
|
–
|
$
|
(1,497)
|
$
|
549
|
Allowance for obsolescence
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
5,329
|
$
|
–
|
$
|
–
|
$
|
(3,007)
|
$
|
2,322
|
Allowance for LIFO
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
16,126
|
$
|
2,861
|
$
|
–
|
$
|
–
|
$
|
18,987
|
Allowance for probable losses
|
|
|
|
|
|
|
|
|
|
|
(deducted from mortgage loans)
|
$
|
618
|
$
|
–
|
$
|
–
|
$
|
(125)
|
$
|
493
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2018
|
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
(deducted from trade receivable)
|
$
|
539
|
$
|
886
|
$
|
–
|
$
|
(929)
|
$
|
496
|
Allowance for obsolescence
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
2,050
|
$
|
3,279
|
$
|
–
|
$
|
–
|
$
|
5,329
|
Allowance for LIFO
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
14,340
|
$
|
1,786
|
$
|
–
|
$
|
–
|
$
|
16,126
|
Allowance for probable losses
|
|
|
|
|
|
|
|
|
|
|
(deducted from mortgage loans)
|
$
|
493
|
$
|
125
|
$
|
–
|
$
|
–
|
$
|
618
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
(deducted from trade receivable)
|
$
|
585
|
$
|
913
|
$
|
–
|
$
|
(959)
|
$
|
539
|
Allowance for obsolescence
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
1,597
|
$
|
1,218
|
$
|
–
|
$
|
(765)
|
$
|
2,050
|
Allowance for LIFO
|
|
|
|
|
|
|
|
|
|
|
(deducted from inventory)
|
$
|
13,463
|
$
|
877
|
$
|
–
|
$
|
–
|
$
|
14,340
|
Allowance for probable losses
|
|
|
|
|
|
|
|
|
|
|
(deducted from mortgage loans)
|
$
|
368
|
$
|
125
|
$
|
–
|
$
|
–
|
$
|
493
|
SCHEDULE V
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION (FOR PROPERTY-CASUALTY INSURANCE Operations)
Years Ended December 31, 2018, 2017, AND 2016
Fiscal Year
|
|
Affiliation with Registrant
|
|
Deferred Policy Acquisition Cost
|
|
Reserves for Unpaid Claims and Adjustment Expenses
|
|
Discount if any, Deducted
|
|
Unearned Premiums
|
|
Net Earned Premiums (1)
|
|
Net Investment Income (2)
|
|
Claim and Claim Adjustment Expenses Incurred Related to Current Year
|
|
Claim and Claim Adjustment Expenses Incurred Related to Prior Year
|
|
Amortization of Deferred Policy Acquisition Costs
|
|
Paid Claims and Claim Adjustment Expense
|
|
Net Premiums Written (1)
|
(In thousands)
|
2019
|
|
Consolidated property
casualty entity
|
$
|
–
|
$
|
228,970
|
$
|
N/A
|
$
|
239
|
$
|
60,853
|
$
|
9,373
|
$
|
19,579
|
$
|
(5,365)
|
$
|
–
|
$
|
19,228
|
$
|
61,022
|
2018
|
|
Consolidated property
casualty entity
|
|
–
|
|
233,554
|
|
N/A
|
|
70
|
|
57,100
|
|
14,079
|
|
15,749
|
|
233
|
|
–
|
|
17,366
|
|
57,123
|
2017
|
|
Consolidated property
casualty entity
|
|
–
|
|
244,400
|
|
N/A
|
|
49
|
|
52,334
|
|
14,015
|
|
13,297
|
|
107
|
|
–
|
|
17,609
|
|
52,324
|
(1)The earned and written premiums are reported net of intersegment transactions. There were $2.8 million and $2.3 million in written premiums and $2.6 million and $1.7 million in earned premiums eliminated for the year ended December 31, 2018 and 2017, respectively and no written or earned premiums eliminated for the year ended December 31, 2016.
(2) Net Investment Income excludes net realized (gains) losses
on investments of ($3.0) million, ($1.7) million and ($2.6) million for the years ended December 31, 2018, 2017 and 2016, respectively
.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERCO
Date:
May 29, 2019
|
|
/s/ Edward J. Shoen
|
|
|
Edward J. Shoen
|
|
|
President and Chairman of the Board
|
|
|
(Duly Authorized Officer)
|
|
|
|
|
|
|
|
|
|
Date:
May 29, 2019
|
|
/s/ Jason A. Berg
|
|
|
Jason A. Berg
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS,
that each person whose signature appears below constitutes and appoints Edward J. Shoen his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form
10-K, and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act or things requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
/s/ Jason A. Berg
|
Chief Financial Officer
|
May 29, 2019
|
Jason A. Berg
|
|
|
/s/ James E. Acridge
|
Director
|
May 29, 2019
|
James E. Acridge
|
|
|
/s/ John P. Brogan
|
Director
|
May 29, 2019
|
John P. Brogan
|
|
|
/s/ John M. Dodds
|
Director
|
May 29, 2019
|
John M. Dodds
|
|
|
/s/ James J. Grogan
|
Director
|
May 29, 2019
|
James J. Grogan
|
|
|
/s/ Richard J. Herrera
|
Director
|
May 29, 2019
|
Richard J. Herrera
|
|
|
/s/ Karl A. Schmidt
|
Director
|
May 29, 2019
|
Karl A. Schmidt
|
|
|
/s/ Samuel J. Shoen
|
Director
|
May 29, 2019
|
Samuel J. Shoen
|
|
|
Amerco (NASDAQ:UHAL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Amerco (NASDAQ:UHAL)
Historical Stock Chart
From Sep 2023 to Sep 2024