UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 2018
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________________ to __________________
|
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Commission File Number |
Registrant, State of Incorporation, Address and Telephone Number |
I.R.S. Employer Identification No. |
|
|
|
|
|
|
|
|
|
1-11255 |
AMERCO |
88-0106815 |
|
(A Nevada Corporation) |
|
|
5555 Kietzke Lane, Ste. 100 |
|
|
Reno, Nevada 89511 |
|
|
Telephone (775) 688-6300 |
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|
|
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N/A |
|
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically 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 [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [x] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at February 1, 2019.
|
PART I FINANCIAL INFORMATION |
|
Item 1. |
Financial Statements |
|
|
a) Condensed Consolidated Balance Sheets as of December 31, 2018 (unaudited) and March 31, 2018 |
1 |
|
b) Condensed Consolidated Statements of Operations for the Quarters Ended December 31, 2018 and 2017 (unaudited) |
2 |
|
c) Condensed Consolidated Statements of Operations for the Nine Months Ended December 31, 2018 and 2017 (unaudited) |
3 |
|
d) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters and Nine Months Ended December 31, 2018 and 2017 (unaudited) |
4 |
|
e) Condensed Consolidated Statements of Stockholders’ Equity for the Quarter and Nine Months Ended December 31, 2018 |
5 |
|
f) Condensed Consolidated Statements of Stockholders’ Equity for the Quarter and Nine Months Ended December 31, 2017 |
6 |
|
g) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2018 and 2017 (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 |
45 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
63 |
Item 4. |
Controls and Procedures |
65 |
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|
|
|
PART II OTHER INFORMATION |
|
Item 1. |
Legal Proceedings |
66 |
Item 1A. |
Risk Factors |
66 |
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, |
|
|
|
2018 |
|
2018 |
|
|
(Unaudited) |
|
|
|
|
(In thousands, except share data) |
||
ASSETS |
|
|
|
|
Cash and cash equivalents |
$ |
984,385 |
$ |
759,388 |
Reinsurance recoverables and trade receivables, net |
|
191,764 |
|
193,538 |
Inventories and parts, net |
|
96,187 |
|
89,877 |
Prepaid expenses |
|
177,918 |
|
166,129 |
Investments, fixed maturities and marketable equities |
|
2,127,342 |
|
1,919,860 |
Investments, other |
|
332,532 |
|
399,064 |
Deferred policy acquisition costs, net |
|
140,673 |
|
124,767 |
Other assets |
|
83,839 |
|
244,782 |
Related party assets |
|
38,156 |
|
33,276 |
|
|
4,172,796 |
|
3,930,681 |
Property, plant and equipment, at cost: |
|
|
|
|
Land |
|
910,919 |
|
827,649 |
Buildings and improvements |
|
3,762,491 |
|
3,140,713 |
Furniture and equipment |
|
674,535 |
|
632,803 |
Rental trailers and other rental equipment |
|
572,645 |
|
545,968 |
Rental trucks |
|
4,532,134 |
|
4,390,750 |
|
|
10,452,724 |
|
9,537,883 |
Less: Accumulated depreciation |
|
(2,979,760) |
|
(2,721,142) |
Total property, plant and equipment |
|
7,472,964 |
|
6,816,741 |
Total assets |
$ |
11,645,760 |
$ |
10,747,422 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Liabilities: |
|
|
|
|
Accounts payable and accrued expenses |
$ |
517,360 |
$ |
511,115 |
Notes, loans and leases payable, net |
|
3,975,764 |
|
3,513,076 |
Policy benefits and losses, claims and loss expenses payable |
|
1,087,742 |
|
1,248,033 |
Liabilities from investment contracts |
|
1,583,885 |
|
1,364,066 |
Other policyholders' funds and liabilities |
|
12,907 |
|
10,040 |
Deferred income |
|
29,226 |
|
34,276 |
Deferred income taxes, net |
|
746,836 |
|
658,108 |
Total liabilities |
|
7,953,720 |
|
7,338,714 |
|
|
|
|
|
Commitments and contingencies (notes 4, 8 and 9) |
|
|
|
|
Stockholders' equity: |
|
|
|
|
Series preferred stock, with or without par value, 50,000,000 shares authorized: |
|
|
|
|
Series A preferred stock, with no par value, 6,100,000 shares authorized; |
|
|
|
|
6,100,000 shares issued and none outstanding as of December 31 and March 31, 2018 |
|
– |
|
– |
Series B preferred stock, with no par value, 100,000 shares authorized; none |
|
|
|
|
issued and outstanding as of December 31 and March 31, 2018 |
|
– |
|
– |
Serial common stock, with or without par value, 250,000,000 shares authorized: |
|
|
|
|
Serial common stock of $0.25 par value, 10,000,000 shares authorized; |
|
|
|
|
none issued and outstanding as of December 31 and March 31, 2018 |
|
– |
|
– |
Common stock, with $0.25 par value, 250,000,000 shares authorized: |
|
|
|
|
Common stock of $0.25 par value, 250,000,000 shares authorized; 41,985,700 |
|
|
|
|
issued and 19,607,788 outstanding as of December 31 and March 31, 2018 |
|
10,497 |
|
10,497 |
Additional paid-in capital |
|
453,116 |
|
452,746 |
Accumulated other comprehensive loss |
|
(74,707) |
|
(4,623) |
Retained earnings |
|
3,985,927 |
|
3,635,561 |
Cost of common shares in treasury, net (22,377,912 shares as of December 31 and March 31, 2018) |
|
(525,653) |
|
(525,653) |
Cost of preferred shares in treasury, net (6,100,000 shares as of December 31 and March 31, 2018) |
|
(151,997) |
|
(151,997) |
Unearned employee stock ownership plan shares |
|
(5,143) |
|
(7,823) |
Total stockholders' equity |
|
3,692,040 |
|
3,408,708 |
Total liabilities and stockholders' equity |
$ |
11,645,760 |
$ |
10,747,422 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO AND CONSOLIDATED subsidiaries
CONDENSED CONSOLIDATED Statements of operations
|
Quarter Ended December 31, |
|||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands, except share and per share amounts) |
||
Revenues: |
|
|
|
|
Self-moving equipment rentals |
$ |
626,136 |
$ |
574,801 |
Self-storage revenues |
|
93,392 |
|
82,127 |
Self-moving and self-storage products and service sales |
|
55,665 |
|
53,130 |
Property management fees |
|
7,899 |
|
9,881 |
Life insurance premiums |
|
34,778 |
|
38,957 |
Property and casualty insurance premiums |
|
17,668 |
|
16,093 |
Net investment and interest income |
|
32,211 |
|
28,821 |
Other revenue |
|
51,342 |
|
39,072 |
Total revenues |
|
919,091 |
|
842,882 |
|
|
|
|
|
Costs and expenses: |
|
|
|
|
Operating expenses |
|
478,461 |
|
437,840 |
Commission expenses |
|
67,493 |
|
63,487 |
Cost of sales |
|
34,149 |
|
33,995 |
Benefits and losses |
|
42,869 |
|
45,168 |
Amortization of deferred policy acquisition costs |
|
6,654 |
|
5,952 |
Lease expense |
|
7,890 |
|
8,415 |
Depreciation, net of gains on disposal of ($796) and ($4,235), respectively |
|
143,473 |
|
137,061 |
Net (gains) losses on disposal of real estate |
|
– |
|
(192,404) |
Total costs and expenses |
|
780,989 |
|
539,514 |
|
|
|
|
|
Earnings from operations |
|
138,102 |
|
303,368 |
Other components of net periodic benefit costs |
|
(253) |
|
(231) |
Interest expense |
|
(34,827) |
|
(31,558) |
Pretax earnings |
|
103,022 |
|
271,579 |
Income tax (expense) benefit |
|
(24,387) |
|
257,315 |
Earnings available to common stockholders |
$ |
78,635 |
$ |
528,894 |
Basic and diluted earnings per common share |
$ |
4.01 |
$ |
27.00 |
Weighted average common shares outstanding: Basic and diluted |
|
19,591,963 |
|
19,589,218 |
Related party revenues for the third quarter of fiscal 2019 and 2018, net of eliminations, were $7.9 million and $10.8 million, respectively.
Related party costs and expenses for the third quarter of fiscal 2019 and 2018, net of eliminations, were $14.9 million and $14.1 million, respectively.
Please see Note 10, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for more information on the related party revenues and costs and expenses.
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO AND CONSOLIDATED subsidiaries
CONDENSED CONSOLIDATED Statements of operations
|
Nine Months Ended December 31, |
|||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands, except share and per share amounts) |
||
Revenues: |
|
|
|
|
Self-moving equipment rentals |
$ |
2,124,451 |
$ |
1,985,217 |
Self-storage revenues |
|
271,097 |
|
239,317 |
Self-moving and self-storage products and service sales |
|
207,819 |
|
205,309 |
Property management fees |
|
22,507 |
|
23,474 |
Life insurance premiums |
|
107,586 |
|
116,910 |
Property and casualty insurance premiums |
|
46,732 |
|
42,934 |
Net investment and interest income |
|
85,043 |
|
82,507 |
Other revenue |
|
177,940 |
|
147,825 |
Total revenues |
|
3,043,175 |
|
2,843,493 |
|
|
|
|
|
Costs and expenses: |
|
|
|
|
Operating expenses |
|
1,504,365 |
|
1,346,782 |
Commission expenses |
|
232,084 |
|
222,203 |
Cost of sales |
|
130,432 |
|
124,456 |
Benefits and losses |
|
137,196 |
|
139,997 |
Amortization of deferred policy acquisition costs |
|
18,584 |
|
18,217 |
Lease expense |
|
24,229 |
|
25,277 |
Depreciation, net of gains on disposal of ($29,127) and ($14,260), respectively |
|
402,525 |
|
396,540 |
Net (gains) losses on disposal of real estate |
|
10 |
|
(192,223) |
Total costs and expenses |
|
2,449,425 |
|
2,081,249 |
|
|
|
|
|
Earnings from operations |
|
593,750 |
|
762,244 |
Other components of net periodic benefit costs |
|
(760) |
|
(695) |
Interest expense |
|
(105,111) |
|
(93,926) |
Pretax earnings |
|
487,879 |
|
667,623 |
Income tax (expense) benefit |
|
(117,853) |
|
112,117 |
Earnings available to common stockholders |
$ |
370,026 |
$ |
779,740 |
Basic and diluted earnings per common share |
$ |
18.89 |
$ |
39.81 |
Weighted average common shares outstanding: Basic and diluted |
|
19,591,282 |
|
19,588,558 |
Related party revenues for the first nine months of fiscal 2019 and 2018, net of eliminations, were $22.5 million and $26.8 million, respectively.
Related party costs and expenses for the first nine months of fiscal 2019 and 2018, net of eliminations, were $51.1 million and $48.9 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.
AMERCO AND CONSOLIDATED subsidiaries
Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)
|
Pre-tax |
|
Tax |
|
Net |
|
|
|
(Unaudited) |
||||
|
|
(In thousands) |
||||
Comprehensive income: |
|
|
|
|||
Net earnings |
$ |
103,022 |
$ |
(24,387) |
$ |
78,635 |
Other comprehensive income (loss): |
|
|
|
|
|
|
Foreign currency translation |
|
(4,101) |
|
– |
|
(4,101) |
Unrealized net loss on investments |
|
1,827 |
|
(384) |
|
1,443 |
Change in fair value of cash flow hedges |
|
(115) |
|
28 |
|
(87) |
Total comprehensive income |
$ |
100,633 |
$ |
(24,743) |
$ |
75,890 |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December 31, 2017 |
|
Pre-tax |
|
Tax |
|
Net |
|
|
(Unaudited) |
||||
|
|
(In thousands) |
||||
Comprehensive income: |
|
|
|
|||
Net earnings |
$ |
271,579 |
$ |
257,315 |
$ |
528,894 |
Other comprehensive income (loss): |
|
|
|
|
|
|
Foreign currency translation |
|
(1,794) |
|
– |
|
(1,794) |
Unrealized net gain on investments |
|
4,388 |
|
(1,536) |
|
2,852 |
Change in fair value of cash flow hedges |
|
911 |
|
(346) |
|
565 |
Total comprehensive income |
$ |
275,084 |
$ |
255,433 |
$ |
530,517 |
|
Pre-tax |
|
Tax |
|
Net |
|
|
|
(Unaudited) |
||||
|
|
(In thousands) |
||||
Comprehensive income: |
|
|
|
|||
Net earnings |
$ |
487,879 |
$ |
(117,853) |
$ |
370,026 |
Other comprehensive income (loss): |
|
|
|
|
|
|
Foreign currency translation |
|
(5,081) |
|
– |
|
(5,081) |
Unrealized net loss on investments |
|
(70,671) |
|
14,841 |
|
(55,830) |
Change in fair value of cash flow hedges |
|
731 |
|
(180) |
|
551 |
Total comprehensive income |
$ |
412,858 |
$ |
(103,192) |
$ |
309,666 |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended December 31, 2017 |
|
Pre-tax |
|
Tax |
|
Net |
|
|
(Unaudited) |
||||
|
|
(In thousands) |
||||
Comprehensive income: |
|
|
|
|||
Net earnings |
$ |
667,623 |
$ |
112,117 |
$ |
779,740 |
Other comprehensive income (loss): |
|
|
|
|
|
|
Foreign currency translation |
|
19,240 |
|
– |
|
19,240 |
Unrealized net gain on investments |
|
30,492 |
|
(10,672) |
|
19,820 |
Change in fair value of cash flow hedges |
|
3,655 |
|
(1,390) |
|
2,265 |
Total comprehensive income |
$ |
721,010 |
$ |
100,055 |
$ |
821,065 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO AND CONSOLIDATED subsidiaries
Condensed consolidatED statements of 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) |
|||||||||||||||
Balance as of September 30, 2018 |
$ |
10,497 |
$ |
453,006 |
$ |
(62,238) |
$ |
3,917,087 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(7,535) |
$ |
3,633,167 |
Increase in market value of released ESOP shares |
|
– |
|
110 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
110 |
Release of unearned ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
2,695 |
|
2,695 |
Purchase of ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
(303) |
|
(303) |
Foreign currency translation |
|
– |
|
– |
|
(4,101) |
|
– |
|
– |
|
– |
|
– |
|
(4,101) |
Unrealized net gain on investments, net of tax |
|
– |
|
– |
|
(8,281) |
|
– |
|
– |
|
– |
|
– |
|
(8,281) |
Change in fair value of cash flow hedges, net of tax |
|
– |
|
– |
|
(87) |
|
– |
|
– |
|
– |
|
– |
|
(87) |
Net earnings |
|
– |
|
– |
|
– |
|
78,635 |
|
– |
|
– |
|
– |
|
78,635 |
Common stock dividends: ($0.50 per share for fiscal 2019) |
|
– |
|
– |
|
– |
|
(9,795) |
|
– |
|
– |
|
– |
|
(9,795) |
Net activity |
|
– |
|
110 |
|
(12,469) |
|
68,840 |
|
– |
|
– |
|
2,392 |
|
58,873 |
Balance as of December 31, 2018 |
$ |
10,497 |
$ |
453,116 |
$ |
(74,707) |
$ |
3,985,927 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(5,143) |
$ |
3,692,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018 |
$ |
10,497 |
$ |
452,746 |
$ |
(4,623) |
$ |
3,635,561 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(7,823) |
$ |
3,408,708 |
Increase in market value of released ESOP shares |
|
– |
|
370 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
370 |
Release of unearned ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
8,083 |
|
8,083 |
Purchase of ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
(5,403) |
|
(5,403) |
Foreign currency translation |
|
– |
|
– |
|
(5,081) |
|
– |
|
– |
|
– |
|
– |
|
(5,081) |
Unrealized net gain on investments, net of tax |
|
– |
|
– |
|
(55,830) |
|
– |
|
– |
|
– |
|
– |
|
(55,830) |
Change in fair value of cash flow hedges, net of tax |
|
– |
|
– |
|
551 |
|
– |
|
– |
|
– |
|
– |
|
551 |
Adjustment for adoption of ASU 2016-01 |
|
– |
|
– |
|
(9,724) |
|
9,724 |
|
– |
|
– |
|
– |
|
– |
Net earnings |
|
– |
|
– |
|
– |
|
370,026 |
|
– |
|
– |
|
– |
|
370,026 |
Common stock dividends: ($1.50 per share for fiscal 2019) |
|
– |
|
– |
|
– |
|
(29,384) |
|
– |
|
– |
|
– |
|
(29,384) |
Net activity |
|
– |
|
370 |
|
(70,084) |
|
350,366 |
|
– |
|
– |
|
2,680 |
|
283,332 |
Balance as of December 31, 2018 |
$ |
10,497 |
$ |
453,116 |
$ |
(74,707) |
$ |
3,985,927 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(5,143) |
$ |
3,692,040 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO AND CONSOLIDATED subsidiaries
Condensed consolidatED statements of 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) |
|||||||||||||||
Balance as of September 30, 2017 |
$ |
10,497 |
$ |
452,474 |
$ |
(11,534) |
$ |
3,124,152 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(5,517) |
$ |
2,892,422 |
Increase in market value of released ESOP shares |
|
– |
|
145 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
145 |
Release of unearned ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
2,680 |
|
2,680 |
Purchase of ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
(2,804) |
|
(2,804) |
Foreign currency translation |
|
– |
|
– |
|
(1,794) |
|
– |
|
– |
|
– |
|
– |
|
(1,794) |
Unrealized net gain on investments, net of tax |
|
– |
|
– |
|
2,852 |
|
– |
|
– |
|
– |
|
– |
|
2,852 |
Change in fair value of cash flow hedges, net of tax |
|
– |
|
– |
|
565 |
|
– |
|
– |
|
– |
|
– |
|
565 |
Net earnings |
|
– |
|
– |
|
– |
|
528,894 |
|
– |
|
– |
|
– |
|
528,894 |
Common stock dividends: ($0.50 per share for fiscal 2018) |
|
– |
|
– |
|
– |
|
(9,793) |
|
– |
|
– |
|
– |
|
(9,793) |
Net activity |
|
– |
|
145 |
|
1,623 |
|
519,101 |
|
– |
|
– |
|
(124) |
|
520,745 |
Balance as of December 31, 2017 |
$ |
10,497 |
$ |
452,619 |
$ |
(9,911) |
$ |
3,643,253 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(5,641) |
$ |
3,413,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017 |
$ |
10,497 |
$ |
452,172 |
$ |
(51,236) |
$ |
2,892,893 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(6,932) |
$ |
2,619,744 |
Increase in market value of released ESOP shares |
|
– |
|
447 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
447 |
Release of unearned ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
8,055 |
|
8,055 |
Purchase of ESOP shares |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
(6,764) |
|
(6,764) |
Foreign currency translation |
|
– |
|
– |
|
19,240 |
|
– |
|
– |
|
– |
|
– |
|
19,240 |
Unrealized net gain on investments, net of tax |
|
– |
|
– |
|
19,820 |
|
– |
|
– |
|
– |
|
– |
|
19,820 |
Change in fair value of cash flow hedges, net of tax |
|
– |
|
– |
|
2,265 |
|
– |
|
– |
|
– |
|
– |
|
2,265 |
Net earnings |
|
– |
|
– |
|
– |
|
779,740 |
|
– |
|
– |
|
– |
|
779,740 |
Common stock dividends: ($1.50 per share for fiscal 2018) |
|
– |
|
– |
|
– |
|
(29,380) |
|
– |
|
– |
|
– |
|
(29,380) |
Net activity |
|
– |
|
447 |
|
41,325 |
|
750,360 |
|
– |
|
– |
|
1,291 |
|
793,423 |
Balance as of December 31, 2017 |
$ |
10,497 |
$ |
452,619 |
$ |
(9,911) |
$ |
3,643,253 |
$ |
(525,653) |
$ |
(151,997) |
$ |
(5,641) |
$ |
3,413,167 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO AND CONSOLIDATED subsidiaries
Condensed consolidatED statements of cash flows
|
Nine Months Ended December 31, |
|||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands) |
||
Cash flows from operating activities: |
||||
Net earnings |
370,026 |
779,740 |
||
Adjustments to reconcile net earnings to cash provided by operations: |
|
|
||
Depreciation |
431,652 |
410,800 |
||
Amortization of deferred policy acquisition costs |
18,584 |
18,217 |
||
Amortization of debt issuance costs |
2,922 |
2,910 |
||
Interest credited to policyholders |
28,540 |
23,250 |
||
Change in allowance for losses on trade receivables |
124 |
(25) |
||
Change in allowance for inventories and parts reserves |
2,539 |
4,334 |
||
Net gains on disposal of personal property |
(29,127) |
(14,260) |
||
Net (gains) losses on disposal of real estate |
10 |
(192,223) |
||
Net gains on sales of investments |
(3,594) |
(4,250) |
||
Deferred income taxes |
108,614 |
(179,047) |
||
Net change in other operating assets and liabilities: |
|
|
||
Reinsurance recoverables and trade receivables |
1,601 |
(27,659) |
||
Inventories and parts |
(8,858) |
(17,410) |
||
Prepaid expenses |
(12,533) |
(22,220) |
||
Capitalization of deferred policy acquisition costs |
(19,994) |
(21,501) |
||
Other assets |
159,125 |
6,279 |
||
Related party assets |
(1,838) |
47,804 |
||
Accounts payable and accrued expenses |
(5,420) |
26,764 |
||
Policy benefits and losses, claims and loss expenses payable |
(159,285) |
2,767 |
||
Other policyholders' funds and liabilities |
2,867 |
590 |
||
Deferred income |
(4,982) |
(1,297) |
||
Related party liabilities |
(3,269) |
(4,542) |
||
Net cash provided by operating activities |
877,704 |
839,021 |
||
|
|
|
||
Cash flows from investing activities: |
|
|
||
Escrow deposits |
(3,292) |
19,707 |
||
Purchases of: |
|
|
||
Property, plant and equipment |
(1,325,365) |
(970,472) |
||
Short term investments |
(39,494) |
(48,743) |
||
Fixed maturities investments |
(394,266) |
(274,283) |
||
Equity securities |
(957) |
(662) |
||
Preferred stock |
(81) |
(1,000) |
||
Real estate |
(505) |
(1,783) |
||
Mortgage loans |
(56,892) |
(80,707) |
||
Proceeds from sales and paydowns of: |
|
|
||
Property, plant and equipment |
561,848 |
591,040 |
||
Short term investments |
47,012 |
54,319 |
||
Fixed maturities investments |
83,767 |
102,404 |
||
Equity securities |
8,608 |
– |
||
Preferred stock |
1,625 |
3,188 |
||
Real estate |
– |
5,348 |
||
Mortgage loans |
116,800 |
23,726 |
||
Net cash used by investing activities |
(1,001,192) |
(577,918) |
||
|
|
|
||
Cash flows from financing activities: |
|
|
||
Borrowings from credit facilities |
|
693,132 |
426,262 |
|
Principal repayments on credit facilities |
|
(255,123) |
(303,212) |
|
Payment of debt issuance costs |
|
(5,097) |
(4,581) |
|
Capital lease payments |
|
(236,683) |
(219,623) |
|
Employee stock ownership plan shares |
|
(203) |
(6,764) |
|
Securitization deposits |
|
– |
(2,181) |
|
Common stock dividends paid |
|
(29,385) |
(19,587) |
|
Investment contract deposits |
|
300,920 |
347,695 |
|
Investment contract withdrawals |
|
(109,641) |
(163,499) |
|
Net cash provided by financing activities |
357,920 |
54,510 |
||
|
|
|
||
Effects of exchange rate on cash |
(9,435) |
9,468 |
||
|
|
|
||
Increase in cash and cash equivalents |
224,997 |
325,081 |
||
Cash and cash equivalents at the beginning of period |
759,388 |
|
697,806 |
|
Cash and cash equivalents at the end of period |
984,385 |
1,022,887 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AMERCO and consolidated subsidiaries
notes to condensed consolidatED financial statements
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 30th 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 2018 and 2017 correspond to fiscal 2019 and 2018 for AMERCO.
Accounts denominated in non-U.S. currencies have been translated into U.S. dollars. Certain amounts reported in previous years have been reclassified to conform to the current presentation.
The condensed consolidated balance sheet as of December 31, 2018 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity for the third quarter and first nine months and cash flows for the first nine months of fiscal 2019 and 2018 are unaudited.
In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.
Intercompany accounts and transactions have been eliminated.
Description of Legal Entities
AMERCO is the holding company for:
U-Haul International, Inc. (“U-Haul”);
Amerco Real Estate Company (“Real Estate”);
Repwest Insurance Company (“Repwest”); and
Oxford Life Insurance Company (“Oxford”).
Unless the context otherwise requires, the terms “Company,” “we,” “us” or “our” refer to AMERCO and all of its legal subsidiaries.
Description of Operating Segments
AMERCO has three reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.
The Moving and Storage operating segment (“Moving and Storage”) includes AMERCO, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane and the rental of fixed and portable moving and storage units to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.
AMERCO and consolidated subsidiaries
notes to condensed consolidatED financial statements (Continued)
The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Repwest and its wholly owned subsidiaries and ARCOA Risk Retention Group (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul® through regional offices in the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove®, Safetow®, Safemove Plus®, Safestor® and Safestor Mobile® protection packages to U-Haul customers. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul related programs. ARCOA is a group captive insurer owned by us and our wholly owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.
The Life Insurance operating segment (“Life Insurance”) includes Oxford and its wholly owned subsidiaries. Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.
2. Earnings per Share
Our earnings per share is calculated by dividing our earnings available to common stockholders by the weighted average common shares outstanding, basic and diluted.
The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 15,559 and 18,279 as of December 31, 2018 and 2017, respectively.
3. Investments
Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $31.0 million and $30.2 million as of December 31, 2018 and March 31, 2018, respectively.
Available-for-Sale Investments
Available-for-sale investments as of December 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 |
|
|
|
(Unaudited) |
||||||||
|
|
(In thousands) |
||||||||
U.S. treasury securities and government obligations |
$ |
128,934 |
$ |
1,140 |
$ |
(2,319) |
$ |
(2,462) |
125,293 |
|
U.S. government agency mortgage-backed securities |
|
61,243 |
|
526 |
|
(44) |
|
(1,558) |
60,167 |
|
Obligations of states and political subdivisions |
|
238,243 |
|
5,203 |
|
(251) |
|
(2,456) |
240,739 |
|
Corporate securities |
|
1,576,170 |
|
14,898 |
|
(8,033) |
|
(26,956) |
1,556,079 |
|
Mortgage-backed securities |
|
119,006 |
|
541 |
|
(212) |
|
(1,384) |
117,951 |
|
Redeemable preferred stocks |
|
1,493 |
|
37 |
|
– |
|
(20) |
1,510 |
|
|
$ |
2,125,089 |
$ |
22,345 |
$ |
(10,859) |
$ |
(34,836) |
2,101,739 |
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 |
|
36,416 |
|
951 |
|
(1) |
|
(93) |
37,273 |
|
Obligations of states and political subdivisions |
|
178,702 |
|
9,938 |
|
(217) |
|
(18) |
188,405 |
|
Corporate securities |
|
1,388,300 |
|
50,056 |
|
(3,009) |
|
(1,826) |
1,433,521 |
|
Mortgage-backed securities |
|
94,106 |
|
2,072 |
|
– |
|
(153) |
96,025 |
|
Preferred stocks |
|
10,609 |
|
321 |
|
(29) |
|
(40) |
10,861 |
|
Common stocks |
|
15,732 |
|
12,329 |
|
(10) |
|
(189) |
27,862 |
|
|
$ |
1,847,422 |
$ |
79,262 |
$ |
(4,302) |
$ |
(2,522) |
1,919,860 |
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 $76.0 million during the first nine months of fiscal 2019. The gross realized gains on these sales totaled $0.9 million. The gross realized losses on these sales totaled $0.1 million.
The unrealized losses of more than twelve months in the available-for-sale tables are considered temporary declines. We track each investment with an unrealized loss and evaluate it on an individual basis for other-than-temporary impairments including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognize these write-downs, if any, through earnings. There were no write downs for the first nine months of fiscal 2019 or 2018.
The investment portfolio primarily consists of corporate securities and obligations of states and political subdivisions. We believe we monitor our investments as appropriate. Our methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors including the length of time to maturity, the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. Nothing has come to management’s attention that would lead to the belief that any issuer would not have the ability to meet the remaining contractual obligations of the security, including payment at maturity. We have the ability and intent not to sell our fixed maturity and common stock investments for a period of time sufficient to allow us to recover our costs.
The portion of other-than-temporary impairment related to a credit loss is recognized in earnings. The significant inputs utilized in the evaluation of mortgage-backed securities credit losses include ratings, delinquency rates, and prepayment activity. The significant inputs utilized in the evaluation of asset backed securities credit losses include the time frame for principal recovery and the subordination and value of the underlying collateral.
There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income (loss) (“AOCI”) for first nine months of fiscal 2019 and fiscal 2018.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The adjusted cost and estimated market value of available-for-sale investments by contractual maturity were as follows:
|
December 31, 2018 |
|
March 31, 2018 |
|||||
|
|
Amortized Cost |
|
Estimated Market Value |
|
Amortized Cost |
|
Estimated Market Value |
|
|
(Unaudited) |
|
|
||||
|
|
(In thousands) |
||||||
Due in one year or less |
$ |
58,311 |
$ |
58,532 |
$ |
36,446 |
$ |
36,674 |
Due after one year through five years |
503,227 |
502,343 |
441,223 |
450,816 |
||||
Due after five years through ten years |
648,241 |
639,629 |
607,895 |
626,174 |
||||
Due after ten years |
794,811 |
781,774 |
641,411 |
671,448 |
||||
|
2,004,590 |
1,982,278 |
1,726,975 |
1,785,112 |
||||
|
|
|
|
|
||||
Mortgage-backed securities |
119,006 |
117,951 |
94,106 |
96,025 |
||||
Redeemable preferred stocks |
1,493 |
1,510 |
2,118 |
2,247 |
||||
Equity securities |
– |
– |
24,223 |
36,476 |
||||
|
$ |
2,125,089 |
$ |
2,101,739 |
$ |
1,847,422 |
$ |
1,919,860 |
As of March 31, 2018, equity investments were classified as available-for-sale on our balance sheet. However, upon adoption of Accounting Standards Update (“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 December 31, 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:
|
Estimated Market Value as of |
|
|
|
December 31, 2018 |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
Common stocks |
$ |
18,298 |
Non-redeemable preferred stocks |
|
7,305 |
|
$ |
25,603 |
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Long Term Debt
Long term debt was as follows:
|
|
|
|
December 31, |
|
March 31, |
|
|
2019 Rate (a) |
|
Maturities |
|
2018 |
|
2018 |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
(In thousands) |
||
Real estate loan (amortizing term) |
3.89% |
|
2023 |
$ |
105,413 |
$ |
135,287 |
Senior mortgages |
3.72% - 6.62% |
|
2021 - 2038 |
|
1,659,930 |
|
1,487,645 |
Working capital loans (revolving credit) |
3.59% - 3.72% |
|
2021 |
|
335,000 |
|
55,000 |
Fleet loans (amortizing term) |
1.95% - 4.66% |
|
2019 - 2025 |
|
281,329 |
|
342,971 |
Fleet loans (revolving credit) |
3.49% - 3.50% |
|
2021 - 2023 |
|
530,000 |
|
460,000 |
Capital leases (rental equipment) |
1.92% - 5.04% |
|
2019 - 2025 |
|
1,012,791 |
|
984,217 |
Other obligations |
2.75% - 8.00% |
|
2019 - 2048 |
|
79,064 |
|
73,579 |
Notes, loans and leases payable |
|
|
|
|
4,003,527 |
|
3,538,699 |
Less: Debt issuance costs |
|
|
|
|
(27,763) |
|
(25,623) |
Total notes, loans and leases payable, net |
|
|
$ |
3,975,764 |
$ |
3,513,076 |
|
|
|
|
|
|
|
|
|
(a) Interest rate as of December 31, 2018, including the effect of applicable hedging instruments. |
|
|
|
|
Real Estate Backed Loans
Real Estate Loan
Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (the “Real Estate Loan”). As of December 31, 2018, the outstanding balance on the Real Estate Loan was $105.4 million. The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers. The final maturity of the term loan is April 2023.
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, 2018, the applicable LIBOR was 2.39% and the applicable margin was 1.50%, the sum of which was 3.89%. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.
Senior Mortgages
Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. These senior mortgage loan balances as of December 31, 2018 were in the aggregate amount of $1,659.9 million and mature between 2021 and 2038. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 3.72% and 6.62%. Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Various subsidiaries of Real Estate are borrowers under asset-backed working capital loans. As of December 31, 2018, the outstanding balance of these loans in the aggregate was $235.0 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 final maturity of the loans is between June 2021 and October 2021. 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, 2018, the applicable LIBOR was 2.34% and the margin was between 1.25% and 1.38%, the sum of which was between 3.59% and 3.72%. 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 working capital loan. The current maximum credit commitment is $150.0 million, which can be increased to $300.0 million by bringing in other lenders. As of December 31, 2018, 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 December 31, 2018, the applicable LIBOR was 2.32% and the margin was 1.38%, the sum of which was 3.70%. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30% fee charged for unused capacity.
Fleet Loans
Rental Truck Amortizing Loans
U-Haul and several of its subsidiaries are borrowers under amortizing term loans. The aggregate balance of the loans as of December 31, 2018 was $281.3 million with the final maturities between April 2019 and November 2025.
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 December 31, 2018, the applicable LIBOR was between 2.35% and 2.46% 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, $258.6 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. These loans mature between January 2021 and April 2023. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of December 31, 2018, the applicable LIBOR was between 2.34% and 2.35%, and the margin was 1.15%, the sum of which was between 3.49% and 3.50%. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly. As of December 31, 2018, the aggregate outstanding balance of the loans was $530.0 million.
Capital Leases
We regularly enter into capital leases for new equipment with the terms of the leases between five and seven years. During the first nine months of fiscal 2019, we entered into $255.3 million of new capital leases. As of December 31, 2018 and March 31, 2018, the balance of our capital leases was $1,012.8 million and $984.2 million, respectively. As of December 31, 2018 the interest rates were between 1.92% and 5.04%. The net book value of the corresponding capitalized assets was $1,479.9 million and $1,407.6 million as of December 31, 2018 and March 31, 2018, respectively.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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, 2018, the aggregate outstanding principal balance of the U-Notes® issued was $82.3 million, of which $3.3 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 September 30, 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 September 30, 2018, available-for-sale investments held with the FHLB totaled $122.1 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 long-term debt, including capital leases, as of December 31, 2018 for the next five years and thereafter are as follows:
|
Twelve Months Ending December 31, |
|||||||||||
|
|
2019 |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
Thereafter |
|
|
(Unaudited) |
||||||||||
|
|
(In thousands) |
||||||||||
Notes, loans and leases payable, secured |
$ |
444,230 |
$ |
537,017 |
$ |
701,960 |
$ |
550,082 |
$ |
421,537 |
$ |
1,348,701 |
Interest on Borrowings
Interest Expense
Components of interest expense include the following:
|
Quarter Ended December 31, |
|||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands) |
||
Interest expense |
$ |
38,825 |
$ |
31,983 |
Capitalized interest |
|
(5,055) |
|
(2,075) |
Amortization of transaction costs |
|
909 |
|
963 |
Interest expense resulting from derivatives |
|
148 |
|
687 |
Total interest expense |
|
34,827 |
|
31,558 |
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
Nine Months Ended December 31, |
|||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands) |
||
Interest expense |
$ |
109,241 |
$ |
93,475 |
Capitalized interest |
|
(7,701) |
|
(5,769) |
Amortization of transaction costs |
|
2,751 |
|
2,909 |
Interest expense resulting from derivatives |
|
820 |
|
3,311 |
Total interest expense |
|
105,111 |
|
93,926 |
Interest paid in cash, including payments related to derivative contracts, amounted to $38.5 million and $32.7 million for the third quarter of fiscal 2019 and 2018, respectively, and $109.6 million and $96.1 million for the first nine months of fiscal 2019 and 2018, respectively.
Interest Rates
Interest rates and Company borrowings were as follows:
|
Revolving Credit Activity |
|||
|
|
Quarter Ended December 31, |
||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands, except interest rates) |
||
Weighted average interest rate during the quarter |
|
3.52% |
|
2.47% |
Interest rate at the end of the quarter |
|
3.57% |
|
2.56% |
Maximum amount outstanding during the quarter |
$ |
865,000 |
$ |
535,000 |
Average amount outstanding during the quarter |
$ |
812,174 |
$ |
532,261 |
Facility fees |
$ |
41 |
$ |
159 |
|
Revolving Credit Activity |
|||
|
|
Nine Months Ended December 31, |
||
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
||
|
|
(In thousands, except interest rates) |
||
Weighted average interest rate during the period |
|
3.31% |
|
2.38% |
Interest rate at the end of the period |
|
3.57% |
|
2.56% |
Maximum amount outstanding during the period |
$ |
865,000 |
$ |
538,000 |
Average amount outstanding during the period |
$ |
632,509 |
$ |
516,349 |
Facility fees |
$ |
313 |
$ |
284 |
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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. The following is a summary of our interest rate swap agreements as of December 31, 2018.
Original variable rate debt amount |
|
Agreement Date |
|
Effective Date |
|
Expiration Date |
|
Designated cash flow hedge date |
||
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
$ |
15.1 |
(a) |
|
3/27/2012 |
|
3/28/2012 |
|
3/28/2019 |
|
3/26/2012 |
|
25.0 |
|
|
4/13/2012 |
|
4/16/2012 |
|
4/1/2019 |
|
4/12/2012 |
|
44.3 |
|
|
1/11/2013 |
|
1/15/2013 |
|
12/15/2019 |
|
1/11/2013 |
As of December 31, 2018, the total notional amount of our variable interest rate swaps on debt and an operating lease was $23.7 million and $4.9 million, respectively.
The derivative fair values were as follows:
|
Derivatives Fair Values as of |
|||
|
|
December 31, 2018 |
|
March 31, 2018 |
|
|
(Unaudited) |
|
|
|
|
(In thousands) |
||
Interest rate contracts designated as hedging instruments |
|
|
|
|
Assets |
$ |
240 |
$ |
437 |
Liabilities |
|
– |
|
(897) |
|
The Effect of Interest Rate Contracts on the Statements of Operations for the Nine Months Ended |
|||
|
|
|||
|
|
December 31, 2018 |
|
December 31, 2017 |
|
|
(Unaudited) |
||
|
|
(In thousands) |
||
Loss recognized in income on interest rate contracts |
$ |
820 |
$ |
3,311 |
Gain recognized in AOCI on interest rate contracts (effective portion) |
$ |
(731) |
$ |
(3,655) |
Loss reclassified from AOCI into income (effective portion) |
$ |
789 |
$ |
3,308 |
(Gain) loss recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing) |
$ |
31 |
$ |
3 |
Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During the first nine months of fiscal 2019, we recognized a net increase in the fair value of our cash flow hedges of $0.6 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 first nine months of fiscal 2019. As of December 31, 2018, we expect to reclassify $0.2 million of net gains on interest rate contracts from accumulated other comprehensive income (loss) to earnings as interest expense over the next twelve months.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. Accumulated Other Comprehensive Income (Loss)
A summary of the components of AOCI, net of tax, were as follows:
|
Foreign Currency Translation |
|
Unrealized Net Gain (Loss) 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, 2018 |
$ |
(54,853) |
$ |
52,509 |
$ |
(370) |
$ |
(1,909) |
$ |
(4,623) |
Foreign currency translation |
|
(5,081) |
|
– |
|
– |
|
– |
|
(5,081) |
Adjustment for adoption of ASU 2016-01 |
|
– |
|
(9,724) |
|
– |
|
– |
|
(9,724) |
Unrealized net loss on investments |
|
– |
|
(55,830) |
|
– |
|
– |
|
(55,830) |
Change in fair value of cash flow hedges |
|
– |
|
– |
|
1,340 |
|
– |
|
1,340 |
Amounts reclassified from AOCI |
|
– |
|
– |
|
(789) |
|
– |
|
(789) |
Other comprehensive income (loss) |
|
(5,081) |
|
(65,554) |
|
551 |
|
– |
|
(70,084) |
Balance as of December 31, 2018 |
$ |
(59,934) |
$ |
(13,045) |
$ |
181 |
$ |
(1,909) |
$ |
(74,707) |
7. Stockholders’ Equity
The following table summarizes dividends declared and/or paid during fiscal 2019:
Declared Date |
|
Per Share Amount |
|
Record Date |
|
Dividend Paid Date |
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 |
On June 8, 2016, our stockholders approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of December 31, 2018, no awards had been issued under this plan.
AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. Contingent Liabilities and Commitments
We lease a portion of our rental equipment and certain of our facilities under operating leases with terms that expire at various dates substantially through 2024. As of December 31, 2018, we have guaranteed $11.1 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.
Operating and ground lease commitments for leases having terms of more than one year were as follows:
|