AMERCO (U-Haul Holding Co.) — Form 10-Q Summary
Reporting period: Quarter ended June 30, 2022, AMERCO’s first quarter of fiscal 2023. The requested metadata identifies “2020 Q1,” but the supplied filing is clearly the June 30, 2022 Form 10-Q, filed August 3, 2022. Results include Moving and Storage, Property and Casualty Insurance, and Life Insurance. The financial statements are unaudited.
Business Context
AMERCO operates U-Haul’s do-it-yourself moving and storage businesses in the United States and Canada, including truck and trailer rentals, self-storage, U-Box, moving supplies, related services, and insurance products. The company also operates property and casualty and life insurance subsidiaries. Insurance subsidiaries report on calendar-year quarters, creating a three-month reporting-period difference from AMERCO’s fiscal quarter.
Key Financial Metrics
| Metric | Q1 FY2023 | Q1 FY2022 | Change |
|---|---|---|---|
| Total revenue | $1.598 billion | $1.473 billion | 8.5% increase |
| Earnings from operations | $491.2 million | $494.2 million | 0.6% decrease |
| Pretax earnings | $441.1 million | $454.8 million | 3.0% decrease |
| Net earnings available to common stockholders | $334.0 million | $345.2 million | 3.2% decrease |
| Basic and diluted EPS | $17.03 | $17.60 | 3.2% decrease |
| Operating margin | 30.7% | 33.6% | Approximately 290 bps lower |
| Net margin | 20.9% | 23.4% | Approximately 250 bps lower |
| Operating cash flow | $651.4 million | $794.2 million | 18.0% decrease |
| Capital expenditures | $646.1 million | $508.4 million | 27.1% increase |
| Net capital expenditures | $487.0 million | $326.3 million | 49.2% increase |
At June 30, 2022, cash and cash equivalents were $3.098 billion, compared with $2.704 billion at March 31, 2022. Total assets were $17.832 billion and stockholders’ equity was $6.074 billion.
Notes, loans and finance leases payable were $6.233 billion net of debt issuance costs, up from $6.022 billion at March 31, 2022. Gross debt was $6.269 billion. Available borrowing capacity under existing credit facilities was $105.0 million.
The company declared and paid a quarterly common-stock dividend of $0.50 per share, totaling $9.8 million. Weighted-average basic and diluted shares outstanding remained 19,607,788.
Material Changes Versus the Prior Comparable Period
- Revenue growth: Self-moving equipment rental revenue increased $55.4 million, or approximately 5.3%, supported by higher revenue per transaction and expansion in locations, dealers, trucks, trailers, and towing devices.
- Self-storage: Revenue increased $35.8 million, or approximately 26.1%. Average monthly occupied units increased 19%, and the average occupancy rate rose to 84.5% from 79.7%. The company added approximately 5.0 million net rentable square feet over the preceding twelve months.
- U-Box and other revenue: Other revenue increased $29.9 million, primarily due to U-Box growth. Products and services revenue increased $4.5 million.
- Cost pressure: Operating expenses increased $118.6 million, including a $32.1 million increase in rental-fleet repair costs. Management cited higher fleet activity, slower equipment rotation, personnel and liability costs, and U-Box shipping costs.
- Fleet supply constraints: Delays from original equipment manufacturers limited new-equipment deliveries and slowed fleet rotation.
- Interest expense: Interest expense increased $10.6 million to $49.8 million, reflecting higher debt outstanding and higher rates.
- Cash flow: Operating cash flow declined primarily because Q1 FY2022 benefited from approximately $159 million of federal income-tax refund receipts.
- Investment losses: Unrealized investment losses reduced other comprehensive income by $135.6 million after tax, compared with a $75.7 million reduction in the prior-year quarter. Accumulated other comprehensive income declined to a loss of $89.2 million.
Guidance, Outlook, Risks and Unusual Items
- Management expects fiscal 2023 fleet reinvestment of approximately $850 million, net of equipment sales and excluding lease buyouts. Approximately $195 million had been invested through the first quarter.
- Management expects to continue investing in self-storage acquisitions, development, renovations, the U-Box program, and fleet expansion. First-quarter real-estate acquisitions, construction, renovations, and repairs totaled $278.2 million.
- The company expects fiscal 2023 capital spending to be funded primarily through operating cash flow, debt financing, and external lease financing.
- Management warned that inflationary pressures may challenge the ability to maintain or improve operating margins.
- Key operating risks include equipment availability and manufacturer delays, repair and maintenance costs, competition, economic conditions, seasonality, leverage, interest-rate changes, liability claims, environmental compliance, litigation, reliance on independent dealers, and access to capital markets.
- At June 30, 2022, variable-rate debt totaled $1.182 billion. A 100-basis-point increase in applicable rates was estimated to reduce annual earnings and cash flow by approximately $8.9 million after hedging effects.
- The company reported approximately $366 million of federal tax refund claims related to net operating-loss carrybacks, of which approximately $243 million had been received. Future legislation could affect the remaining claims.
- A $17,000 net impairment charge was recorded on investments. Environmental and other litigation matters were not expected by management to have a material adverse effect.
- Management stated that disclosure controls were effective at a reasonable-assurance level and that no material changes occurred in internal control over financial reporting.
Investor Verification Items
- Verify the applicable reporting period: the filing is for June 30, 2022, not 2020 Q1.
- Assess whether higher self-moving and self-storage revenue can offset rising repair, labor, shipping, inflation, and financing costs.
- Review debt maturities, variable-rate exposure, available borrowing capacity, and the effect of further interest-rate increases.
- Monitor manufacturer delays, fleet age and rotation, fleet utilization, repair costs, and planned capital expenditures.
- Evaluate the sustainability of self-storage occupancy growth and the economics of new acquisitions and development.
- Review investment-portfolio unrealized losses, insurance subsidiary capital restrictions, and policyholder obligations.
- Confirm the timing and collectability of the remaining federal tax refund claims.
- Review related-party transactions, including management fees, leases, and dealer commissions involving entities associated with significant stockholders.