Business Context and Reporting Period
U-Haul Holding Company, formerly AMERCO, operates through Moving and Storage, Property and Casualty Insurance, and Life Insurance segments. Its businesses include truck and trailer rentals, self-storage, moving products and services, property management, and insurance products in the United States and Canada.
The filing is a Form 10-Q for the quarter ended December 31, 2022, representing the third quarter of fiscal 2023, and the nine months then ended. The provided request metadata identifies “2020 Q3,” but the filing text clearly relates to fiscal 2023. Insurance subsidiaries report on a September 30 quarter-end and are consolidated on that basis.
Financial Performance and Position
| Metric | Quarter Ended December 31, 2022 | Quarter Ended December 31, 2021 | Change |
|---|---|---|---|
| Revenue | $1.375 billion | $1.404 billion | Down 2.1% |
| Earnings from operations | $320.4 million | $416.7 million | Down 23.1% |
| Pretax earnings | $261.0 million | $371.4 million | Down 29.7% |
| Earnings available to common stockholders | $199.2 million | $281.5 million | Down 29.2% |
| Voting Common Stock EPS | $0.98 | $1.89 | Down 48.1% |
| Series N Non-Voting Common Stock EPS | $1.02 | $1.39 | Down 26.6% |
Quarterly operating margin was approximately 23.3%, compared with 29.7% in the prior-year quarter. Net margin attributable to common stockholders was approximately 14.5%, compared with 20.0%.
| Metric | Nine Months Ended December 31, 2022 | Nine Months Ended December 31, 2021 | Change |
|---|---|---|---|
| Revenue | $4.676 billion | $4.541 billion | Up 3.0% |
| Earnings from operations | $1.334 billion | $1.490 billion | Down 10.5% |
| Pretax earnings | $1.166 billion | $1.365 billion | Down 14.6% |
| Earnings available to common stockholders | $885.3 million | $1.037 billion | Down 14.6% |
| Voting Common Stock EPS | $5.38 | $6.64 | Down 19.0% |
| Series N Non-Voting Common Stock EPS | $4.42 | $5.14 | Down 14.0% |
Nine-month operating margin was approximately 28.5%, compared with 32.8% in the prior-year period. Net margin attributable to common stockholders was approximately 18.9%, compared with 22.8%.
- Self-moving equipment rental revenue declined to $898.8 million in the quarter from $975.6 million and to $3.152 billion for nine months from $3.190 billion.
- Self-storage revenue increased to $190.5 million in the quarter from $159.4 million and to $549.2 million for nine months from $450.3 million. Average occupied units increased 12% in the quarter and 15% year to date.
- Net investment and interest income rose to $52.3 million in the quarter from $31.2 million, primarily due to higher yields and invested cash.
- Operating expenses increased $75.4 million in the quarter and $309.5 million for nine months, including higher fleet repair, personnel, liability, maintenance, professional-fee, utility, and shipping costs.
- Interest expense increased to $59.0 million in the quarter from $44.0 million and to $166.0 million for nine months from $122.8 million, reflecting higher debt and interest rates.
Cash Flow, Debt, Liquidity, and Capital Allocation
- Cash provided by operating activities was $1.516 billion for the first nine months, compared with $1.789 billion in the prior-year period.
- Cash used in investing activities was $1.872 billion, including $2.076 billion of property, plant and equipment purchases.
- Net capital expenditures were $1.546 billion, including $1.016 billion for rental equipment and $1.003 billion for real estate, construction, renovations, and repairs, partially offset by $533.6 million of equipment sales.
- Cash and cash equivalents were $2.511 billion at December 31, 2022, compared with $2.704 billion at March 31, 2022.
- Notes, loans, and finance leases payable, net, were $6.200 billion, compared with $6.022 billion at March 31, 2022. Debt before issuance costs was $6.237 billion.
- Moving and Storage had $465.0 million of available borrowing capacity under existing credit facilities.
- The company expects approximately $625 million of fiscal 2023 net reinvestment in rental equipment, excluding lease buyouts. Through nine months, approximately $489 million had been invested net of equipment sales.
- The company paid $19.6 million of Voting Common Stock dividends and $7.1 million of Series N Non-Voting Common Stock dividends during the first nine months. The Non-Voting Common Stock dividend policy began at $0.04 per share quarterly.
Material Changes Versus the Prior Comparable Period
- Revenue growth from self-storage, investment income, property and casualty premiums, and U-Box activity was more than offset in the quarter by lower truck rental revenue.
- Profitability declined materially because fleet repair and maintenance costs increased while rental transactions and disposal values weakened.
- Higher interest rates and approximately $805.5 million of additional debt versus the comparable prior-year period increased interest expense.
- The company added approximately 6.2 million net rentable square feet of storage capacity over the preceding twelve months, including approximately 1.7 million square feet during the quarter.
- On October 24, 2022, the company created Series N Non-Voting Common Stock and distributed nine shares for each outstanding Voting Common Stock share. The new shares began trading on November 10, 2022, and both classes moved to the NYSE on December 19, 2022.
- Accumulated other comprehensive loss was $284.1 million at December 31, 2022, compared with accumulated other comprehensive income of $46.4 million at March 31, 2022, primarily due to unrealized investment losses.
Guidance, Outlook, Risks, and Unusual Items
- Management intends to focus on increasing transaction volume, pricing, product availability, and utilization in self-moving rentals, while expanding self-storage capacity and occupancy and continuing investment in U-Box.
- Management expects fiscal 2023 storage acquisitions and development spending to increase, subject to capital availability, permitting, weather, property availability, and financial returns.
- Truck availability remains constrained by original equipment manufacturer delays. Management warns that insufficient fleet rotation could cause repair and maintenance costs to remain elevated.
- Inflation, adverse economic conditions, competition, used-equipment values, interest rates, leverage, insurance claims, environmental compliance, and foreign exchange movements could adversely affect results.
- A cybersecurity incident allowed access between November 5, 2021 and April 8, 2022 to customer contracts containing names, dates of birth, and driver’s license or state identification numbers. The company stated that financial, payment-processing, and email systems were not involved. Related class-action litigation has been consolidated in federal court, and the outcome cannot be predicted.
- Management disclosed a material weakness in disclosure controls and internal control over financial reporting related to the implementation and review of the two-class earnings-per-share calculation following the issuance of UHAL.B shares. Remediation is underway but is not complete until controls operate effectively and are tested.
- The company recorded a $2.2 million net investment impairment charge during the first nine months. Available-for-sale investments had $325.3 million of gross unrealized losses at December 31, 2022.
- The company reported $823.5 million of variable-rate debt. A 100-basis-point increase in SOFR would reduce annual earnings and cash flow by an estimated $6.2 million after hedging effects.
Important Facts for Investors to Verify
- Confirm that the applicable period is fiscal third quarter and nine months ended December 31, 2022, rather than 2020 Q3.
- Assess whether lower truck rental demand and elevated fleet repairs are temporary or indicate a more persistent margin-pressure trend.
- Review debt maturities, variable-rate exposure, credit-facility availability, and the funding needs of planned fleet and storage investments.
- Evaluate the effect of unrealized investment losses on insurance subsidiary capital, liquidity, and dividend capacity.
- Monitor the cybersecurity litigation, potential remediation costs, and any regulatory or customer consequences.
- Track remediation of the material weakness in EPS-related financial reporting controls.
- Consider the liquidity, trading-market development, dividend policy, and voting-right differences between UHAL and UHAL.B.