SEC Filing Summary: AMERCO (U-Haul Holding Co.)
Reporting period: Annual report on Form 10-K for the fiscal year ended March 31, 2020, filed May 27, 2020. The request metadata identifies “2017 Q4,” but the supplied filing is not a 2017 quarterly filing; it is AMERCO’s fiscal 2020 annual report.
Business Context
AMERCO operates U-Haul, North America’s largest do-it-yourself moving and storage business, with truck, trailer, towing, self-storage, portable storage, moving-supply and related protection products. Reportable segments are Moving and Storage, Property and Casualty Insurance, and Life Insurance. As of March 31, 2020, the Company operated 2,065 company-managed retail locations, used more than 20,100 independent dealers, maintained approximately 176,000 trucks and 127,000 trailers, and operated 1,745 self-storage locations with 66.7 million rentable square feet.
Financial Performance and Liquidity
| Metric | Fiscal 2020 | Fiscal 2019 | Change |
|---|---|---|---|
| Total revenue | $3,978.9 million | $3,768.7 million | +5.6% |
| Earnings from operations | $540.1 million | $621.0 million | -13.0% |
| Operating margin | 13.6% | 16.5% | Down 2.9 percentage points |
| Pretax earnings | $378.1 million | $477.5 million | -20.8% |
| Earnings available to common shareholders | $442.0 million | $370.9 million | +19.2% |
| Basic and diluted EPS | $22.55 | $18.93 | +19.1% |
| Net cash from operating activities | $1,075.5 million | $975.6 million | +10.2% |
| Cash and cash equivalents | $494.4 million | $673.7 million | -26.6% |
| Debt, gross | $4,651.1 million | $4,192.2 million | +10.9% |
| Stockholders’ equity | $4,220.7 million | $3,692.4 million | +14.3% |
Net margin was approximately 11.1% in fiscal 2020, compared with 9.8% in fiscal 2019. The improvement in net earnings and EPS was substantially influenced by a $146.0 million tax benefit associated with carrying federal net operating losses back to higher-tax prior years under the CARES Act. Excluding the CARES Act benefit, management reported a fiscal 2020 effective tax rate of 21.7%, compared with 22.3% in fiscal 2019.
- Self-moving equipment rental revenue increased $38.9 million, or approximately 1.5%.
- Self-storage revenue increased $51.5 million, or approximately 14.0%; average occupied units increased 16%, or approximately 45,000 units.
- Property and Casualty Insurance revenue increased to $89.1 million from $75.8 million, while operating earnings increased to $42.9 million from $27.4 million.
- Life Insurance revenue increased to $241.5 million from $154.7 million, primarily because the prior year reflected a $76.0 million reduction related to termination of a reinsurance agreement.
- Net capital expenditures were $1,622.0 million, including $1,374.1 million for rental equipment and $751.4 million for real estate, construction and renovations, partially offset by equipment-sale proceeds.
- Cash used in investing activities was $1,766.6 million, exceeding operating cash flow and contributing to the decline in cash balances.
Material Changes Versus the Prior Comparable Period
- Revenue growth was offset by higher operating costs, fleet repairs, personnel costs, property expenses and depreciation. Fleet depreciation increased $55.1 million to $510.5 million.
- Consolidated operating earnings declined $80.9 million despite higher revenue.
- Interest expense increased $18.5 million to $161.0 million as borrowings increased.
- Moving and Storage operating earnings before equity in insurance subsidiary earnings decreased to $472.0 million from $569.2 million.
- The Company adopted ASC Topic 842, Leases, on April 1, 2019. Adoption added approximately $105.4 million of operating lease assets and liabilities and reclassified approximately $948.2 million of vehicle financing leases to right-of-use financing assets.
- Common dividends declared decreased to $1.00 per share for fiscal 2020 from $2.00 per share in fiscal 2019.
Guidance, Outlook, Risks and Unusual Items
Management planned to increase moving transaction volume, improve pricing and fleet utilization, expand storage occupancy and locations, continue investing in U-Box, and complete or selectively pursue storage projects. Management estimated approximately $460 million of net truck and trailer fleet reinvestment in fiscal 2021, excluding lease buyouts. New storage development was slowed in April and May 2020 to preserve liquidity.
COVID-19 was the principal near-term uncertainty. The Company’s locations were considered essential services, but management reported an unaudited approximately 30% decline in self-moving rental income in April 2020 and a $39.5 million decline in rental-equipment sales proceeds compared with April 2019. Management warned that prolonged pandemic effects could materially adversely affect fiscal 2021 results, financial position and liquidity.
- At March 31, 2020, total debt outstanding was $4.651 billion and operating lease liabilities were $106.4 million. The Company identified high leverage, refinancing risk and debt-service requirements as significant risks.
- Available borrowing capacity at March 31, 2020 was $39.0 million. The Company subsequently drew on its revolver, expanded it by $50.0 million, and entered into additional term loans totaling $225 million in April and May 2020.
- The Company estimated approximately $381 million of federal tax refunds from CARES Act NOL carrybacks and depreciation adjustments, subject to possible legislative or administrative changes.
- Variable-rate debt totaled approximately $1.179 billion; a 100-basis-point LIBOR increase was estimated to reduce annual earnings and cash flow by approximately $9.4 million after hedging effects.
- U-Haul self-insurance reserves were $410.1 million. Repwest property and casualty reserves were $209.1 million, and Oxford future policy benefit liabilities were approximately $377 million. These amounts depend on actuarial assumptions and may develop adversely.
- Environmental remediation, litigation, regulatory compliance, cyber and systems disruption, equipment manufacturers, used-fleet resale values, competition and related-party transactions were identified as additional risks.
- Edward J. Shoen and Mark V. Shoen, directly and through controlled entities, held approximately 42.8% of common shares, creating significant concentrated voting influence.
Important Facts for Investors to Verify
- Confirm that the intended reporting period is fiscal 2020 rather than 2017 Q4, because the supplied document is a fiscal 2020 Form 10-K.
- Evaluate recurring earnings excluding the $146.0 million CARES Act tax benefit and the prior-year reinsurance-related comparison effects.
- Assess whether operating cash flow can sustainably fund high fleet and real-estate capital requirements while servicing approximately $4.651 billion of gross debt.
- Review post-year-end borrowing, revolver capacity, tax-refund timing and the impact of COVID-19 on rental volumes and used-equipment sales.
- Analyze self-storage occupancy and returns on the substantial capacity added during fiscal 2020.
- Review actuarial assumptions supporting self-insurance, property-and-casualty reserves and life-policy liabilities.
- Review related-party management, dealership, lease and commission arrangements with entities associated with the Shoen family.