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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to __________________

Commission File Number 001-11255

 

 

 

State or other jurisdiction of incorporation or organization

Registrant, State of Incorporation,

Address and Telephone Number

I.R.S. Employer

Identification No.

 

 

 

 

AMERCOLOGO

 

 

 

 

Nevada

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

5555 Kietzke Lane Suite 100

 

 

Reno , Nevada 89511

 

 

Telephone ( 775 ) 688-6300

 

 

 

 

 

N/A

 

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock , $0.25 par value

UHAL

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule   405 of Regulation   S-T (§232.405 of this chapter) during the preceding 12   months (or for such shorter period that the registrant was required to submit such files).  

Yes     No  

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

Large Accelerated Filer    Accelerated Filer

 

 


Non-Accelerated Filer   Smaller Reporting Company

Emerging Growth Company

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

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

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at February 1, 2021.

 

 


 

 

 


                                                                                                                                                                                                                                                              

 

TABLE OF CONTENTS

 

 

Page

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of December 31, 2020 (unaudited) and March 31, 2020

 

1

 

 

b) Condensed Consolidated Statements of Operations for the Quarters Ended December 31, 2020 and 2019 (unaudited)

 

2

 

 

c) Condensed Consolidated Statements of Operations for the Nine Months Ended December 31, 2020 and 2019 (unaudited)

 

3

 

 

d) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters and Nine Months Ended December 31, 2020 and 2019 (unaudited)

 

4

 

 

e) Condensed Consolidated Statements of Changes in Stockholders' Equity for the Quarters Ended December 31, 2020 and 2019 (unaudited)

 

5

 

 

f) Condensed Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended December 31, 2020 and 2019 (unaudited)

 

6

 

 

g) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2020 and 2019 (unaudited)

 

7

 

 

h) Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

Item 2

 

.

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

 

46

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4.

Controls and Procedures

63

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

64

Item 1A.

Risk Factors

64

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

66

Item 4.

Mine Safety Disclosures

66

Item 5.

Other Information

66

Item 6.

Exhibits

66

 

 


Part i Financial information

Item 1. Financial Statements

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED balance sheets

 

 

December 31,

 

March 31,

 

 

2020

 

2020

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

1,398,840

$

494,352

Reinsurance recoverables and trade receivables, net

 

224,447

 

186,672

Inventories and parts, net

 

104,180

 

101,083

Prepaid expenses

 

450,889

 

562,904

Investments, fixed maturities and marketable equities

 

2,606,953

 

2,492,738

Investments, other

 

447,902

 

360,373

Deferred policy acquisition costs, net

 

92,139

 

103,118

Other assets

 

44,261

 

71,956

Right of use assets - financing, net

 

920,321

 

1,080,353

Right of use assets - operating

 

97,186

 

106,631

Related party assets

 

34,963

 

34,784

 

 

6,422,081

 

5,594,964

Property, plant and equipment, at cost:

 

 

 

 

Land

 

1,059,177

 

1,032,945

Buildings and improvements

 

4,996,900

 

4,663,461

Furniture and equipment

 

778,732

 

752,363

Rental trailers and other rental equipment

 

552,892

 

511,520

Rental trucks

 

3,629,888

 

3,595,933

 

 

11,017,589

 

10,556,222

Less: Accumulated depreciation

 

(2,992,365)

 

(2,713,162)

Total property, plant and equipment, net

 

8,025,224

 

7,843,060

Total assets

$

14,447,305

$

13,438,024

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

608,765

$

554,353

Notes, loans and finance/capital leases payable, net

 

4,678,227

 

4,621,291

Operating lease liability

 

97,224

 

106,443

Policy benefits and losses, claims and loss expenses payable

 

1,013,582

 

997,647

Liabilities from investment contracts

 

1,997,936

 

1,802,217

Other policyholders' funds and liabilities

 

34,867

 

10,190

Deferred income

 

37,005

 

31,620

Deferred income taxes, net

 

1,222,544

 

1,093,543

Total liabilities

 

9,690,150

 

9,217,304

 

 

 

 

 

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

 

 

 

 

Stockholders' equity:

 

 

 

 

Series preferred stock, with or without par value, 50,000,000 shares authorized:

 

 

 

 

Series A preferred stock, with no par value, 6,100,000 shares authorized;

 

 

 

 

6,100,000 shares issued and none outstanding as of December 31 and March 31, 2020

 

-

 

-

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

 

 

 

 

issued and outstanding as of December 31 and March 31, 2020

 

-

 

-

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 December 31 and March 31, 2020

 

-

 

-

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 December 31 and March 31, 2020

 

10,497

 

10,497

Additional paid-in capital

 

453,819

 

453,819

Accumulated other comprehensive income

 

85,910

 

34,652

Retained earnings

 

4,884,579

 

4,399,402

Cost of common stock in treasury, net ( 22,377,912 shares as of December 31 and March 31, 2020)

 

(525,653)

 

(525,653)

Cost of preferred stock in treasury, net ( 6,100,000 shares as of December 31 and March 31, 2020)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

-

 

-

Total stockholders' equity

 

4,757,155

 

4,220,720

Total liabilities and stockholders' equity

$

14,447,305

$

13,438,024

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

1

 



AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

808,215

$

621,471

Self-storage revenues

 

123,024

 

106,701

Self-moving and self-storage products and service sales

 

74,586

 

54,454

Property management fees

 

8,765

 

9,098

Life insurance premiums

 

29,993

 

31,164

Property and casualty insurance premiums

 

19,933

 

19,267

Net investment and interest income

 

35,580

 

33,782

Other revenue

 

69,886

 

51,943

Total revenues

 

1,169,982

 

927,880

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

539,942

 

517,453

Commission expenses

 

86,891

 

66,542

Cost of sales

 

45,752

 

35,318

Benefits and losses

 

45,631

 

42,864

Amortization of deferred policy acquisition costs

 

6,572

 

8,046

Lease expense

 

7,522

 

6,490

Depreciation, net of (gains)/losses on disposal of (($ 10,952 ) and $ 2,151 , respectively)

 

152,602

 

170,074

Net losses on disposal of real estate

 

1,124

 

528

Total costs and expenses

 

886,036

 

847,315

 

 

 

 

 

Earnings from operations

 

283,946

 

80,565

Other components of net periodic benefit costs

 

(247)

 

(263)

Interest expense

 

(42,128)

 

(39,973)

Pretax earnings

 

241,571

 

40,329

Income tax expense

 

(58,586)

 

(9,397)

Earnings available to common stockholders

$

182,985

$

30,932

Basic and diluted earnings per common stock

$

9.33

$

1.58

Weighted average common stock outstanding: Basic and diluted

 

19,607,788

 

19,607,788

 

Related party revenues for the third quarter of fiscal 2021 and 2020, net of eliminations, were $8.8 million and $9.1 million, respectively.

Related party costs and expenses for the third quarter of fiscal 2021 and 2020, net of eliminations, were $18.8 million and $14.8 million, respectively.

Please see Note 10, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for more information on the related party revenues and costs and expenses.

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

2

 


AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Nine Months Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

2,393,530

$

2,174,392

Self-storage revenues

 

347,252

 

309,940

Self-moving and self-storage products and service sales

 

264,564

 

207,601

Property management fees

 

23,952

 

23,487

Life insurance premiums

 

91,958

 

96,229

Property and casualty insurance premiums

 

49,536

 

51,056

Net investment and interest income

 

85,895

 

102,629

Other revenue

 

225,440

 

192,009

Total revenues

 

3,482,127

 

3,157,343

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

1,606,687

 

1,617,338

Commission expenses

 

255,431

 

233,540

Cost of sales

 

159,516

 

128,177

Benefits and losses

 

130,660

 

137,695

Amortization of deferred policy acquisition costs

 

19,012

 

20,625

Lease expense

 

20,995

 

19,882

Depreciation, net of gains on disposal of ($ 40,083 and $ 32,526 , respectively)

 

455,711

 

462,227

Net (gains) losses on disposal of real estate

 

4,293

 

(1,311)

Total costs and expenses

 

2,652,305

 

2,618,173

 

 

 

 

 

Earnings from operations

 

829,822

 

539,170

Other components of net periodic benefit costs

 

(740)

 

(790)

Interest expense

 

(122,174)

 

(117,983)

Pretax earnings

 

706,908

 

420,397

Income tax expense

 

(169,832)

 

(100,717)

Earnings available to common stockholders

$

537,076

$

319,680

Basic and diluted earnings per common stock

$

27.39

$

16.31

Weighted average common stock outstanding: Basic and diluted

 

19,607,788

 

19,602,484

 

Related party revenues for the first nine months of fiscal 2021 and 2020, net of eliminations, were $24.0 million and $23.5 million, respectively.

Related party costs and expenses for the first nine months of fiscal 2021 and 2020, net of eliminations, were $55.9 million and $51.9 million, respectively.

Please see Note 10, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for more information on the related party revenues and costs and expenses.

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

3

 



AMERCO AND CONSOLIDATED SUBSIDIARIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended December 31, 2020

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

241,571

$

(58,586)

$

182,985

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(2,566)

 

-

 

(2,566)

Unrealized net gain on investments

 

12,074

 

(2,514)

 

9,560

Change in fair value of cash flow hedges

 

35

 

(9)

 

26

Amounts reclassified into earnings on hedging activities

 

972

 

(238)

 

734

Total other comprehensive income (loss)

 

10,515

 

(2,761)

 

7,754

 

 

 

 

 

 

 

Total comprehensive income

$

252,086

$

(61,347)

$

190,739

Quarter Ended December 31, 2019

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

40,329

$

(9,397)

$

30,932

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(692)

 

-

 

(692)

Unrealized net gain on investments

 

28,568

 

(6,190)

 

22,378

Change in fair value of cash flow hedges

 

479

 

(118)

 

361

Amounts reclassified into earnings on hedging activities

 

422

 

(103)

 

319

Total other comprehensive income (loss)

 

28,777

 

(6,411)

 

22,366

 

 

 

 

 

 

 

Total comprehensive income

$

69,106

$

(15,808)

$

53,298

 

Nine Months Ended December 31, 2020

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

706,908

$

(169,832)

$

537,076

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(5,193)

 

-

 

(5,193)

Unrealized net gain on investments

 

68,298

 

(13,398)

 

54,900

Change in fair value of cash flow hedges

 

(624)

 

153

 

(471)

Amounts reclassified into earnings on hedging activities

 

2,680

 

(658)

 

2,022

Total other comprehensive income (loss)

 

65,161

 

(13,903)

 

51,258

 

 

 

 

 

 

 

Total comprehensive income

$

772,069

$

(183,735)

$

588,334

Nine Months Ended December 31, 2019

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

420,397

$

(100,717)

$

319,680

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

2,919

 

-

 

2,919

Unrealized net gain on investments

 

133,046

 

(28,575)

 

104,471

Change in fair value of cash flow hedges

 

(1,555)

 

382

 

(1,173)

Amounts reclassified into earnings on hedging activities

 

(3)

 

1

 

(2)

Total other comprehensive income (loss)

 

134,407

 

(28,192)

 

106,215

 

 

 

 

 

 

 

Total comprehensive income

$

554,804

$

(128,909)

$

425,895

 

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

4

 


Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders' equity

 

 

 

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

 

(Unaudited)

 

(In thousands, except per share amounts)

Balance as of September 30, 2020

$

10,497

$

453,819

$

78,156

$

4,740,809

$

(525,653)

$

(151,997)

$

-

$

4,605,631

Foreign currency translation

 

-

 

-

 

(2,566)

 

-

 

-

 

-

 

-

 

(2,566)

Unrealized net gain on investments, net of tax

 

-

 

-

 

9,560

 

-

 

-

 

-

 

-

 

9,560

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

26

 

-

 

-

 

-

 

-

 

26

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

734

 

-

 

-

 

-

 

-

 

734

Net earnings

 

-

 

-

 

-

 

182,985

 

-

 

-

 

-

 

182,985

Common stock dividends: ($ 2.00 per share for fiscal 2021)

 

-

 

-

 

-

 

(39,215)

 

-

 

-

 

-

 

(39,215)

Net activity

 

-

 

-

 

7,754

 

143,770

 

-

 

-

 

-

 

151,524

Balance as of December 31, 2020

$

10,497

$

453,819

$

85,910

$

4,884,579

$

(525,653)

$

(151,997)

$

-

$

4,757,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2019

$

10,497

$

453,761

$

17,151

$

4,255,906

$

(525,653)

$

(151,997)

$

(1,597)

$

4,058,068

Increase in market value of released ESOP shares

 

-

 

58

 

-

 

-

 

-

 

-

 

-

 

58

Release of unearned ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

1,597

 

1,597

Foreign currency translation

 

-

 

-

 

(692)

 

-

 

-

 

-

 

-

 

(692)

Unrealized net gain on investments, net of tax

 

-

 

-

 

22,378

 

-

 

-

 

-

 

-

 

22,378

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

361

 

-

 

-

 

-

 

-

 

361

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

319

 

-

 

-

 

-

 

-

 

319

Net earnings

 

-

 

-

 

-

 

30,932

 

-

 

-

 

-

 

30,932

Common stock dividends: ($ 0.50 per share for fiscal 2020)

 

-

 

-

 

-

 

(9,804)

 

-

 

-

 

-

 

(9,804)

Net activity

 

-

 

58

 

22,366

 

21,128

 

-

 

-

 

1,597

 

45,149

Balance as of December 31, 2019

$

10,497

$

453,819

$

39,517

$

4,277,034

$

(525,653)

$

(151,997)

$

-

$

4,103,217

 

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

 

 

 

 

 

5

 


 

 

 

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders' equity

 

 

 

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

 

(Unaudited)

 

(In thousands, except per share amounts)

Balance as of March 31, 2020

$

10,497

$

453,819

$

34,652

$

4,399,402

$

(525,653)

$

(151,997)

$

-

$

4,220,720

Adjustment for adoption of ASU 2016 - 13

 

-

 

-

 

-

 

(2,880)

 

-

 

-

 

-

 

(2,880)

Purchase of ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Foreign currency translation

 

-

 

-

 

(5,193)

 

-

 

-

 

-

 

-

 

(5,193)

Unrealized net gain on investments, net of tax

 

-

 

-

 

54,900

 

-

 

-

 

-

 

-

 

54,900

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

(471)

 

-

 

-

 

-

 

-

 

(471)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

2,022

 

-

 

-

 

-

 

-

 

2,022

Net earnings

 

-

 

-

 

-

 

537,076

 

-

 

-

 

-

 

537,076

Common stock dividends: ($ 2.50 per share for fiscal 2021)

 

-

 

-

 

-

 

(49,019)

 

-

 

-

 

-

 

(49,019)

Net activity

 

-

 

-

 

51,258

 

485,177

 

-

 

-

 

-

 

536,435

Balance as of December 31, 2020

$

10,497

$

453,819

$

85,910

$

4,884,579

$

(525,653)

$

(151,997)

$

-

$

4,757,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2019

$

10,497

$

453,326

$

(66,698)

$

3,976,962

$

(525,653)

$

(151,997)

$

(4,048)

$

3,692,389

Increase in market value of released ESOP shares

 

-

 

493

 

-

 

-

 

-

 

-

 

-

 

493

Release of unearned ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

4,253

 

4,253

Purchase of ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

(205)

 

(205)

Foreign currency translation

 

-

 

-

 

2,919

 

-

 

-

 

-

 

-

 

2,919

Unrealized net gain on investments, net of tax

 

-

 

-

 

104,471

 

-

 

-

 

-

 

-

 

104,471

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

(1,173)

 

-

 

-

 

-

 

-

 

(1,173)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

(2)

 

-

 

-

 

-

 

-

 

(2)

Net earnings

 

-

 

-

 

-

 

319,680

 

-

 

-

 

-

 

319,680

Common stock dividends: ($ 1.00 per share for fiscal 2020)

 

-

 

-

 

-

 

(19,608)

 

-

 

-

 

-

 

(19,608)

Net activity

 

-

 

493

 

106,215

 

300,072

 

-

 

-

 

4,048

 

410,828

Balance as of December 31, 2019

$

10,497

$

453,819

$

39,517

$

4,277,034

$

(525,653)

$

(151,997)

$

-

$

4,103,217

 

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

6

 


AMERCO AND CONSOLIDATED subsidiaries

Condensed consolidatED statements of cash flows

 

 

Nine Months Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net earnings

$

537,076

$

319,680

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

495,794

 

494,753

Amortization of deferred policy acquisition costs

 

19,012

 

20,625

Amortization of premiums and accretion of discounts related to investments, net

 

10,197

 

9,848

Amortization of debt issuance costs

 

4,645

 

3,275

Interest credited to policyholders

 

38,672

 

38,169

Change in allowance for losses on trade receivables

 

(574)

 

(76)

Change in allowance for inventories and parts reserves

 

3,259

 

(85)

Net gains on disposal of personal property

 

(40,083)

 

(32,526)

Net (gains) losses on disposal of real estate

 

4,293

 

(1,311)

Net gains on sales of investments

 

(5,644)

 

(8,777)

Net (gains) losses on equity investments

 

669

 

(3,749)

Deferred income taxes

 

117,025

 

87,805

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

(39,499)

 

24,759

Inventories and parts

 

(6,349)

 

589

Prepaid expenses

 

112,428

 

(16,402)

Capitalization of deferred policy acquisition costs

 

(24,903)

 

(17,530)

Other assets

 

30,120

 

(293)

Related party assets

 

(20,794)

 

(17,507)

Accounts payable and accrued expenses

 

97,151

 

51,754

Policy benefits and losses, claims and loss expenses payable

 

14,096

 

3,974

Other policyholders' funds and liabilities

 

24,677

 

(2,123)

Deferred income

 

6,851

 

(2,317)

Related party liabilities

 

(1,566)

 

446

Net cash provided by operating activities

 

1,376,553

 

952,981

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Escrow deposits

 

(1,978)

 

7,153

Purchases of:

 

 

 

 

Property, plant and equipment

 

(961,995)

 

(1,917,862)

Short term investments

 

(38,790)

 

(47,457)

Fixed maturities investments

 

(352,307)

 

(267,909)

Equity securities

 

(838)

 

(83)

Preferred stock

 

(16,144)

 

-

Real estate

 

(274)

 

(484)

Mortgage loans

 

(92,281)

 

(43,085)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

434,860

 

599,797

Short term investments

 

38,830

 

46,859

Fixed maturities investments

 

331,407

 

193,196

Equity securities

 

72

 

185

Preferred stock

 

1,200

 

-

Real estate

 

-

 

311

Mortgage loans

 

4,744

 

9,052

Net cash used by investing activities

 

(653,494)

 

(1,420,327)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

790,532

 

867,862

Principal repayments on credit facilities

 

(568,068)

 

(225,332)

Payment of debt issuance costs

 

(5,020)

 

(3,671)

Finance/capital lease payments

 

(173,520)

 

(247,188)

Employee stock ownership plan stock

 

-

 

(206)

Common stock dividends paid

 

(49,019)

 

(19,600)

Net contribution from related party

 

22,600

 

-

Investment contract deposits

 

326,055

 

171,465

Investment contract withdrawals

 

(169,008)

 

(122,948)

Net cash provided by financing activities

 

174,552

 

420,382

 

 

 

 

 

Effects of exchange rate on cash

 

6,877

 

5,214

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

904,488

 

(41,750)

Cash and cash equivalents at the beginning of period

 

494,352

 

673,701

Cash and cash equivalents at the end of period

$

1,398,840

$

631,951

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

7

 


 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a third fiscal quarter that ends on the 31st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 30 th of September for each year that is referenced. They have been consolidated on that basis. Our insurance companies' financial reporting processes conform to calendar year reporting as required by state insurance departments. 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 material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries' years 2020 and 2019 correspond to fiscal 2021 and 2020 for AMERCO.

Accounts denominated in non-U.S. currencies have been translated into U.S. dollars.

The condensed consolidated balance sheet as of December 31, 2020 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders' equity for the third quarter and first nine months of fiscal 2021 and 2020 and cash flows for the first nine months of fiscal 2021 and 2020 are unaudited.

In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

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 ( 3 ) reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.

The Moving and Storage operating segment (“Moving and Storage”) includes 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.

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

8

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

The Life Insurance operating segment (“Life Insurance”) includes Oxford and its wholly owned subsidiaries. Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Summary of Significant Accounting Polices

 

Refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 for a summary of significant accounting policies. At the beginning of the first quarter of fiscal 2021, we adopted Accounting Standards Update 2016-13 , Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In addition, new disclosures are required. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. We adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost. We modified our policy on accounting for allowance for doubtful accounts on trade accounts receivable. We perform ongoing credit evaluations of our customers and assess each customer's credit worthiness. We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment to the opening balance of retained earnings of $2.9 million and did not have a material impact on our results of operations, financial condition or liquidity. Please see Note 16, Allowance for Credit Losses, of the Notes to Condensed Consolidated Financial Statements.

2. Earnings per Share

Our earnings per share is calculated by dividing our earnings available to common stockholders by the weighted average common shares outstanding, basic and diluted.

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. As of December 31, 2020 and 2019, all of these shares have been released.

3. Investments

Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $ 32.4 million and $ 30.8 million as of December 31, 2020 and March 31, 2020, respectively.

9

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Available-for-Sale Investments

Available-for-sale investments as of December 31, 2020 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Allowance for Expected Credit Losses

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

U.S. treasury securities and government obligations

$

92,300

$

13,787

$

-

$

-

$

-

$

106,087

U.S. government agency mortgage-backed securities

 

88,190

 

1,208

 

(1)

 

(53)

 

-

 

89,344

Obligations of states and political subdivisions

 

241,299

 

25,533

 

(63)

 

(26)

 

-

 

266,743

Corporate securities

 

1,725,211

 

169,856

 

(613)

 

(5,459)

 

(2,315)

 

1,886,680

Mortgage-backed securities

 

202,753

 

13,896

 

(1)

 

(209)

 

-

 

216,439

Redeemable preferred stocks

 

1,493

 

27

 

-

 

-

 

-

 

1,520

 

$

2,351,246

$

224,307

$

(678)

$

(5,747)

$

-

$

2,566,813

 

Available-for-sale investments as of March 31, 2020 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

$

112,421

$

7,959

$

(1)

$

-

$

120,379

U.S. government agency mortgage-backed securities

 

88,449

 

759

 

(1)

 

(373)

 

88,834

Obligations of states and political subdivisions

 

287,643

 

20,664

 

(155)

 

-

 

308,152

Corporate securities

 

1,656,425

 

100,302

 

(919)

 

(812)

 

1,754,996

Mortgage-backed securities

 

187,784

 

6,011

 

(1)

 

(107)

 

193,687

Redeemable preferred stocks

 

1,493

 

72

 

-

 

-

 

1,565

 

$

2,334,215

$

135,767

$

(1,077)

$

(1,292)

$

2,467,613

 

We sold available-for-sale securities with a fair value of $ 327.3 million during the first nine months of fiscal 2021. The gross realized gains on these sales totaled $ 6.6 million. The gross realized losses on these sales totaled $ 1.5 million.

We adopted ASU 2016-13 as of April 1, 2020. For available-for-sale debt securities in an unrealized loss position, we first assess whether the security is below investment grade. For securities that are below investment grade, we evaluate whether the decline in fair value has resulted from credit losses or other factors such as the interest rate environment. Declines in value due to credit are recognized as an allowance. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse market conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, cumulative default rates based on ratings are used to determine the potential cost of default, by year. The present value of these potential costs is then compared to the amortized cost of the security to determine the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

10

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through accumulated other comprehensive income, net of applicable taxes. If we intend to sell a security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. There were no incremental impairment charges recorded during the first nine months as of December 31, 2020.

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

 

 

December 31, 2020

 

March 31, 2020

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

(In thousands)

Due in one year or less

$

113,929

$

114,681

$

128,747

$

129,420

Due after one year through five years

 

555,675

 

590,071

 

547,821

 

566,934

Due after five years through ten years

 

656,915

 

726,982

 

636,036

 

678,636

Due after ten years

 

820,481

 

917,120

 

832,334

 

897,371

 

 

2,147,000

 

2,348,854

 

2,144,938

 

2,272,361

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

202,753

 

216,439

 

187,784

 

193,687

Redeemable preferred stocks

 

1,493

 

1,520

 

1,493

 

1,565

 

$

2,351,246

$

2,566,813

$

2,334,215

$

2,467,613

 

As of December 31, 2020 and March 31, 2020, 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:

 

 

December 31, 2020

 

March 31, 2020

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Common stocks

$

9,775

$

19,445

$

9,775

$

20,015

Non-redeemable preferred stocks

 

20,034

 

20,695

 

5,076

 

5,110

 

$

29,809

$

40,140

$

14,851

$

25,125

 

11

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

March 31,

 

2020 Rates (a)

 

 

Maturities

 

2020

 

2020

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

 

 

 

1.65

%

 

 

 

2023

$

85,413

$

92,913

Senior mortgages

2.80

%

-

6.62

%

 

2021

-

2038

 

2,143,383

 

2,029,878

Real estate loans (revolving credit)

1.55

%

-

3.25

%

 

2022

-

2025

 

535,000

 

519,000

Fleet loans (amortizing term)

2.04

%

-

4.66

%

 

2021

-

2027

 

169,840

 

224,089

Fleet loans (revolving credit)

 

 

 

1.30

%

 

2022

-

2024

 

547,000

 

567,000

Finance/capital leases (rental equipment)

1.92

%

-

5.04

%

 

2021

-

2026

 

561,351

 

734,870

Finance liability (rental equipment)

1.60

%

-

4.22

%

 

2024

-

2028

 

581,594

 

398,834

Other obligations

2.50

%

-

8.00

%

 

2021

-

2049

 

84,877

 

84,484

Notes, loans and finance/capital leases payable

 

 

 

 

 

 

 

 

 

4,708,458

 

4,651,068

Less: Debt issuance costs

 

 

 

 

 

 

 

 

 

 

(30,231)

 

(29,777)

Total notes, loans and finance/capital leases payable, net

 

 

 

 

$

4,678,227

$

4,621,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Interest rates as of December 31, 2020, including the effect of applicable hedging instruments.

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (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 December 31, 2020, the applicable LIBOR was 0.15 % and the applicable margin was 1.50 %, the sum of which was 1.65 %. 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 2.80 % and 6.62 %. The weighted average interest rate of these loans as of December 31, 2020 was 4.28 %.   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.

12

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Real Estate Loans (Revolving Credit)

Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $ 385.0 million. As of December 31, 2020, the outstanding balance of these loans in the aggregate was $ 385.0 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 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 December 31, 2020, the applicable LIBOR was 0.15 % and the margin was between 1.25 % and 1.50 %, the sum of which was between 1.40 % and 1.65 %. Certain loans have interest rate swaps fixing the rate between 3.03 % and 3.14 % based on current margins. 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 $ 200.0 million, which can be increased to $ 300.0 million by bringing in other lenders. As of December 31, 2020, the outstanding balance was $ 150.0 million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of December 31, 2020, the applicable LIBOR was 1.00 % and the margin was 2.25 %, the sum of which was 3.25 %. 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 carried at fixed rates ranging between 2.04 % 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 $ 590.0 million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of December 31, 2020, the applicable LIBOR was 0.15 % and the margin was 1.15 %, the sum of which was 1.30 %. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly.

Finance/Capital Leases

The Finance/Capital Lease balance represents our sale-leaseback transactions of rental equipment that were entered into and classified as capital leases prior to the adoption of ASC 842. The historical capital lease balance was reclassified to Right-of-Use (“ROU”) assets-finance, net. The agreements are generally seven (7) year terms with interest rates ranging from 1.92 % to 5.04 %.   All of our finance leases are collateralized by our rental fleet. There were no new financing leases, as assessed under the new leasing guidance, entered into during the nine months ended December 31, 2020.

13

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Finance Liabilities

Finance liabilities represent our rental equipment financing transactions that have historically been accounted for as capital leases prior to the adoption of Accounting Standards Codification (“ASC”) 842 which substantially changed the accounting for sale-leasebacks going forward. In accordance with the new leasing guidance, we assess if sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs.   We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost.     Our finance liabilities have an average term of seven (7) years and interest rates ranging from 1.60 % to 4.22 %. These finance liabilities are collateralized by our rental fleet.  

Other Obligations

In May 2020, AMERCO, entered into a $ 200.0 million secured credit facility with PNC Bank, as agent and lead arranger of a syndicate of lenders.   The interest rate, per the provision of the loan agreement, was the applicable LIBOR plus the applicable margin.   This loan was paid off in October 2020.

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 December 31, 2020, the aggregate outstanding principal balance of the U-Notes ® issued was $ 87.4 million, of which $ 2.5 million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 2.50 % and 8.00 % and maturity dates range between 2021 and 2049 .

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of September 30, 2020, the deposits had an aggregate balance of $ 76.5 million, for which Oxford pays fixed interest rates between 0.00 % and 2.67 % with maturities between December 8, 2020 and September 29, 2025. As of September 30, 2020, available-for-sale investments held with the FHLB totaled $ 174.4 million, of which $ 85.1 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 Finance/Capital Leases Payable

The annual maturities of our notes, loans and finance/capital leases payable, as of December 31, 2020 for the next five years and thereafter are as follows:

 

 

Year Ending December 31,

 

 

2021

 

2022

 

2023

 

2024

 

2025

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and finance/capital leases payable, secured

$

512,946

$

868,852

$

852,538

$

612,298

$

262,023

$

1,599,801

14

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Interest on Borrowings

Interest Expense

Components of interest expense were as follows:

 

 

Quarter Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

41,371

$

45,037

Capitalized interest

 

(2,105)

 

(5,775)

Amortization of transaction costs

 

1,890

 

1,176

Interest expense effect resulting from cash flow hedges

 

972

 

(465)

Total interest expense

$

42,128

$

39,973

 

 

 

Nine Months Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

124,882

$

133,111

Capitalized interest

 

(10,033)

 

(17,943)

Amortization of transaction costs

 

4,645

 

3,276

Interest expense effect resulting from cash flow hedges

 

2,680

 

(461)

Total interest expense

$

122,174

$

117,983

 

Interest paid in cash, including payments related to derivative contracts, amounted to $ 38.4 million and $ 41.9 million for the third quarter of fiscal 2021 and 2020, respectively, and $ 116.9 million and $ 127.8 million for the first nine months of fiscal 2021 and 2020, respectively.

Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

 

Quarter Ended December 31,

 

 

 

2020

 

2019

 

 

 

(Unaudited)

 

 

 

(In thousands, except interest rates)

 

Weighted average interest rate during the period

 

1.66

%

3.09

%

Interest rate at the end of the period

 

1.65

%

2.95

%

Maximum amount outstanding during the period

$

1,082,000

$

1,025,000

 

Average amount outstanding during the period

$

1,057,380

$

1,014,511

 

Facility fees

$

91

$

40

 

15

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

 

Revolving Credit Activity

 

 

 

Nine Months Ended December 31,

 

 

 

2020

 

2019

 

 

 

(Unaudited)

 

 

 

(In thousands, except interest rates)

 

Weighted average interest rate during the period

 

1.65

%

3.44

%

Interest rate at the end of the period

 

1.65

%

2.95

%

Maximum amount outstanding during the period

$

1,175,000

$

1,025,000

 

Average amount outstanding during the period

$

1,092,382

$

995,508

 

Facility fees

$

185

$

147

 

5. Derivatives

We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates 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 our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.   These fair values are determined using pricing valuation models which include broker quotes for which significant inputs are observable. They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2 in the fair value hierarchy.

The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the condensed consolidated balance sheet were as follows:

 

 

 

Derivatives Fair Values as of

 

 

December 31, 2020

 

March 31, 2020

 

 

(Unaudited)

 

 

(In thousands)

Interest rate contracts designated as hedging instruments:

 

 

 

 

Assets

$

-

$

-

Liabilities

$

6,158

$

8,214

Notional amount

$

235,000

$

235,000

 

 

 

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

 

 

 

 

December 31, 2020

 

December 31, 2019

 

 

(Unaudited)

 

 

(In thousands)

Gain recognized in AOCI on interest rate contracts

$

(1,007)

$

(901)

Gain reclassified from AOCI into income

$

(972)

$

(422)

 

Gains or losses recognized in income on derivatives are recorded as interest expense in the condensed consolidated statements of operations. During the first nine months of fiscal 2021, we recognized a decrease in the fair value of our cash flow hedges of $ 0.5 million, net of taxes. During the first nine months of fiscal 2021, we reclassified $ 2.7 million from accumulated other comprehensive income (loss) (“AOCI”) to interest expense. As of December 31, 2020, we expect to reclassify $ 3.8 million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.

16

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

6. Accumulated Other Comprehensive Income (Loss)

A summary of AOCI components, net of tax, were as follows:

 

 

Foreign Currency Translation

 

Unrealized Net Gain on Investments

 

Fair Market Value of Cash Flow Hedges

 

Postretirement Benefit Obligation Net Loss

 

Accumulated Other Comprehensive Income (Loss)

 

 

(Unaudited)

 

 

(In thousands)

Balance as of March 31, 2020

$

(47,235)

$

90,684

$

(6,196)

$

(2,601)

$

34,652

Foreign currency translation

 

(5,193)

 

-

 

-

 

-

 

(5,193)

Unrealized net gain on investments

 

-

 

54,900

 

-

 

-

 

54,900

Change in fair value of cash flow hedges

 

-

 

-

 

(471)

 

-

 

(471)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

2,022

 

-

 

2,022

Other comprehensive income (loss)

 

(5,193)

 

54,900

 

1,551

 

-

 

51,258

Balance as of December 31, 2020

$

(52,428)

$

145,584

$

(4,645)

$

(2,601)

$

85,910

 

7. Stockholders' Equity

The dividends declared or paid during the first nine months of fiscal 2021 were as follows:

Common Stock Dividends

Declared Date

 

Per Share Amount

 

Record Date

 

Dividend Date

 

 

 

 

 

 

 

August 20, 2020

$

0.50

 

September 7, 2020

 

September 21, 2020

December 9, 2020

$

2.00

 

December 21, 2020

 

December 30, 2020

 

As of December 31, 2020, no awards had been issued under the 2016 AMERCO Stock Option Plan.

 

8. Leases

Lessor

We have determined that revenues derived by providing self-moving equipment rentals, self-storage rentals and certain other revenues, including U-Box rentals, are within the scope of the accounting guidance contained in Topic 842. Our self-moving equipment rental related revenues have been accounted for under the revenue accounting standard Topic 606, until the adoption of Topic 842.

For the periods after April 1, 2019, we combined all lease and non-lease components of lease contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and account for them in accordance with Topic 842. The revenue streams accounted for in accordance with Topic 842 are recognized evenly over the period of rental. Please see Note 15, Revenue Recognition, of the Notes to Condensed Consolidated Financial Statements.

Lessee

We determine if an arrangement is a lease at inception. Operating leases, which are comprised primarily of storage rental locations, are included in ROU assets - operating and operating lease liability in our condensed consolidated balance sheets. Finance leases, which are comprised primarily of rental equipment leases, are included in ROU assets - financing, net, and notes, loans and finance/capital leases payable, net in our condensed consolidated balance sheets.

17

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected remaining lease term. We use our incremental borrowing rate based on information available at commencement date including the rate for a fully collateralized loan that can either be fully amortized or financed with a residual at the end of the lease term, for a borrower with similar credit quality in order to determine the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that we will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Additionally, for certain leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities as the leases are similar in nature and have nearly identical contract provisions.

The standard also changed the manner by which we account for our equipment sale/leaseback transactions.   Based on our assessment, the lease transactions are classified as financing leases, and therefore the transactions do not qualify as a sale.   New sale leaseback transactions that fail to qualify as a sale are accounted for as a financial liability.   Please see Note 4, Borrowings, of the Notes to Condendsed Consolidated Finanical Statements for additional information.

The following table shows the components of our ROU assets:

 

 

As of December 31, 2020

 

 

Finance

 

Operating

 

Total

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

 

 

Buildings and improvements

$

-

$

132,011

$

132,011

Furniture and equipment

 

20,966

 

-

 

20,966

Rental trailers and other rental equipment

 

106,961

 

-

 

106,961

Rental trucks

 

1,614,194

 

-

 

1,614,194

Right-of-use assets, gross

 

1,742,121

 

132,011

 

1,874,132

Less: Accumulated depreciation

 

(821,800)

 

(34,825)

 

(856,625)

Right-of-use assets, net

$

920,321

$

97,186

$

1,017,507

 

 

 

Finance

 

Operating

 

 

 

(Unaudited)

 

Weighted average remaining lease term (years)

 

4

 

14.5

 

Weighted average discount rate

 

3.5

%

4.6

%

For the first nine months ended December 31, 2020, cash paid for leases included in our operating and financing cash flow activities were $ 10.2 million and $ 173.5 million, respectively. Non-cash activities for ROU assets in exchange for lease liabilities were $ 5.9 million for the nine months ended December 31, 2020

18

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

The components of lease costs were as follows:

 

 

Nine Months Ended

 

 

December 31, 2020

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

Operating lease costs

$

22,564

 

 

 

Finance lease cost:

 

 

Amortization of ROU assets

$

116,002

Interest on lease liabilities

 

17,448

Total finance lease cost

$

133,450

 

Maturities of lease liabilities were as follows:

 

 

Finance leases

 

Operating leases

 

 

(Unaudited)

Year ending December 31,

 

(In thousands)

 

 

 

 

 

2021

$

190,770

$

24,267

2022

 

144,558

 

22,367

2023

 

123,094

 

21,339

2024

 

86,571

 

13,767

2025

 

48,711

 

4,809

Thereafter

 

12,389

 

63,677

Total lease payments

 

606,093

 

150,226

Less: imputed interest

 

(44,742)

 

(53,002)

Present value of lease liabilities

$

561,351

$

97,224

 

9. Contingencies

COVID-19

In late 2019, COVID-19 was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures along with the threat the virus poses have adversely affected workforces, customers, consumer sentiment, economies and financial markets.

During the nine months of fiscal 2021, the Company has been impacted by the spread of COVID-19. The extent to which COVID-19 impacts the Company's business, operations and financial results will continue to evolve in ways that the Company is not fully able to predict at this time. We have experienced customer initiated changes in behavior, actions by government entities, concerns from our workforce, and reactions from the capital markets.

Although the Company cannot estimate the length or gravity of the impact of COVID-19 at this time, if the pandemic continues, it may have a material adverse effect on the Company's results of future operations, financial position and liquidity in fiscal 2021 and beyond.

19

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

CARES Act

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. We have availed ourselves of the provisions related to deferring certain payroll taxes, carrybacks of net operating losses, and will utilize the technical corrections to tax depreciation methods. We estimate that the net operating loss carrybacks combined with the depreciation adjustments for our fiscal 2020 federal income tax return will result in a refund of approximately $ 381 million, which are reflected in Prepaid expense. As refunds are received, they will reduce this amount. We have estimated and recorded the overall effects of the CARES Act and do not anticipate a material change. It is possible future legislation could reduce or delay our ability to carryback these losses.

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 litigation and claims arising out of the normal course of business. In management's opinion, none of these other matters will have a material effect on our financial position and results of operations.

10. Related Party Transactions

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

AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below.

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. SAC Holdings, Four SAC Self-Storage Corporation, Five SAC Self-Storage Corporation, Galaxy Investments, L.P. and 2015 SAC self-storage are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly owned by Willow Grove Holdings LP (“WGHLP”), which is owned by Mark V. Shoen (a significant stockholder), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant stockholder) and Mark V. Shoen.

20

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Related Party Revenue

 

 

Quarter Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul management fee revenue from Blackwater

$

6,350

$

5,763

U-Haul management fee revenue from Mercury

 

2,415

 

3,335

 

$

8,765

$

9,098

 

 

 

Nine Months Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul management fee revenue from Blackwater

$

19,142

$

18,330

U-Haul management fee revenue from Mercury

 

4,810

 

5,157

 

$

23,952

$

23,487

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 $ 24.5 million and $ 22.7 million from the above-mentioned entities during the first nine months of fiscal 2021 and 2020, 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 owned indirectly by James P. Shoen and various trusts benefitting Edward J. Shoen and James P. Shoen or their descendants.   Mercury holds the option to purchase a portfolio of properties currently leased by Mercury and a U-Haul subsidiary, which option is exercisable in 2024.

Related Party Costs and Expenses

 

 

Quarter Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to Blackwater

$

658

$

658

U-Haul commission expenses to Blackwater

 

18,099

 

14,140

 

$

18,757

$

14,798

 

 

 

Nine Months Ended December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to Blackwater

$

1,973

$

1,974

U-Haul commission expenses to Blackwater

 

53,964

 

49,959

 

$

55,937

$

51,933

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.

As of December 31, 2020, subsidiaries of Blackwater acted as independent dealers. The financial and other terms of the dealership contracts are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues.

21

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $ 19.1 million, expenses of $ 2.0 million and cash flows of $ 17.0 million during the first nine months of fiscal 2021. Revenues and commission expenses related to the Dealer Agreements were $ 252.6 million and $ 54.0 million, respectively, during the first nine months of fiscal 2021.

In June 2020, we purchased an airplane from SAC Holdings for $ 0.4 million.

In December 2020, AMERCO contributed $12.0 million to Oxford in the form of a surplus note with an interest rate of 4.0%. This note will be repaid to AMERCO with interest over the next seven years.

Management determined that we do not have a variable interest pursuant to the variable interest entity (“VIE”) model under ASC 810 - Consolidation (“ASC 810”) 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.

Related Party Assets

 

 

December 31,

 

March 31,

 

 

2020

 

2020

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul receivable from Blackwater

$

36,171

$

25,293

U-Haul receivable from Mercury

 

9,765