Filing Scope and Business Context
The supplied filing is AMERCO’s Form 10-K for the fiscal year ended March 31, 2021, filed May 26, 2021. It is not a 2018 Q4 filing; the request metadata and source document are inconsistent. AMERCO operates U-Haul, North America’s largest do-it-yourself moving and storage business, along with property and casualty insurance and life insurance businesses.
As of March 31, 2021, U-Haul operated more than 2,100 company retail stores, nearly 21,100 independent dealers, approximately 176,000 trucks, 126,000 trailers and 46,000 towing devices. Its self-storage platform included 1,784 locations, nearly 812,000 rentable units and 70.5 million rentable square feet.
Financial Performance and Position
| Metric | Fiscal 2021 | Fiscal 2020 | Change |
|---|---|---|---|
| Revenue | $4,542.0 million | $3,978.9 million | +14.2% |
| Earnings from operations | $961.1 million | $540.1 million | +77.9% |
| Pretax earnings | $796.7 million | $378.1 million | +110.7% |
| Earnings available to common shareholders | $610.9 million | $442.0 million | +38.2% |
| Diluted EPS | $31.15 | $22.55 | +38.1% |
| Operating margin | 21.2% | 13.6% | +7.6 percentage points |
| Net margin | 13.4% | 11.1% | +2.3 percentage points |
| Net cash from operating activities | $1,535.4 million | $1,075.5 million | +42.8% |
Revenue growth was led by self-moving equipment rentals of $3,083.3 million, self-storage revenue of $477.3 million and self-moving and self-storage product and service sales of $344.9 million. Self-storage revenue increased 14.0%, while average monthly occupied units increased 18% year over year. Moving and Storage generated $4,231.7 million of revenue and $906.9 million of operating earnings before equity in subsidiary earnings.
Cash and cash equivalents increased to $1,194.0 million from $494.4 million. Net cash used in investing activities was $1,129.5 million, including gross capital expenditures of $1,441.5 million. Net capital expenditures were $904.0 million, down from $1,622.0 million in fiscal 2020.
Total debt, including notes, loans and finance leases, was $4,698.6 million before debt issuance costs, and operating lease liabilities were $92.5 million. Available borrowing capacity under existing credit facilities was $105.0 million. Total assets were $14,651.6 million and stockholders’ equity was $4,851.9 million at year-end.
Material Changes Versus the Prior Comparable Period
- Self-moving equipment rental revenue increased $390.9 million. The first fiscal quarter declined 13% because of COVID-19, followed by a 25% increase over the subsequent nine months.
- Moving and Storage operating earnings increased from $472.0 million to $906.9 million before equity in insurance subsidiary earnings.
- Net gains on disposal of rental equipment increased $27.0 million, reflecting higher resale values, despite fewer trucks being sold. The first quarter included a $15.6 million net loss related to COVID-19 auction shutdowns.
- Rental-fleet depreciation declined $23.8 million because truck production was slowed by manufacturer delays, while depreciation on other assets increased $23.7 million.
- Capital investment was reduced because of manufacturer supply constraints, slower self-storage acquisitions and development, and management’s effort to preserve liquidity.
- Fiscal 2020 benefited from a $146.0 million CARES Act-related tax benefit. Fiscal 2021 reported income tax expense of $185.8 million and a 23.3% effective tax rate.
- Property and casualty insurance operating earnings declined to $32.5 million from $42.9 million, while life insurance operating earnings declined to $22.9 million from $26.4 million.
Outlook, Risks and Unusual Items
Management expects to focus on increasing transaction volume, pricing, product availability and fleet utilization. Fiscal 2022 net investment in the truck and trailer fleet was estimated at approximately $600 million, excluding lease buyouts, compared with approximately $326 million in fiscal 2021. Management also expected self-storage acquisitions and development spending to increase and continued investment in U-Box.
COVID-19 remained a material uncertainty. The company reported that its locations remained open as essential services, but warned that future outbreaks, government restrictions, workforce disruption and changes in customer behavior could adversely affect demand, operating cash flow, liquidity and access to financing.
- High leverage could constrain financial flexibility and require substantial cash flow for debt service and lease payments.
- LIBOR phaseout could affect variable-rate borrowings and require renegotiation of certain debt instruments.
- Fleet replacement depends on manufacturer availability, financing markets and used-equipment resale values.
- Competition may pressure rental prices, storage occupancy and storage rates.
- Environmental, transportation, insurance, safety, cyber and data-security regulations create compliance and liability risks.
- U-Haul self-insurance reserves were $427.1 million and depend on actuarial estimates; changes in claim frequency, severity, medical inflation or legal conditions could require additional reserves.
- Insurance subsidiary assets are generally restricted from supporting non-insurance operations, and dividends are subject to regulatory limits.
- AMERCO had approximately $366 million of CARES Act-related tax refund claims outstanding at March 31, 2021; the IRS had selected certain prior-year returns for limited-scope examination related to the NOL carryback claims.
The company adopted ASC Topic 326, Financial Instruments—Credit Losses, on April 1, 2020, resulting in a $2.9 million reduction to opening retained earnings. The filing also notes that BDO USA, LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting.
Investor Verification Checklist
- Confirm the intended reporting period: the supplied document covers fiscal 2021, not 2018 Q4.
- Review the audited financial statements and debt footnote for debt maturities, collateral, variable-rate exposure and covenant requirements.
- Assess whether COVID-19 effects, truck supply constraints and used-equipment resale values continue to affect fleet investment and margins.
- Evaluate the sustainability of fiscal 2021’s unusually strong rental demand, storage occupancy gains and operating margin expansion.
- Review the $366 million tax refund claims, related IRS examination and potential timing or legislative risks.
- Examine self-insurance and insurance policy reserves, including the potential for adverse actuarial development.
- Review related-party management, leasing and dealer arrangements involving entities associated with significant stockholders.
- Consider dividend capacity in light of the company’s non-formal dividend policy, leverage and regulatory restrictions on insurance subsidiary distributions.