U-Haul Holding Company — Form 10-Q Summary
Period clarification: The request identifies “2021 Q3,” but the supplied filing is for the quarter ended December 31, 2023, representing U-Haul Holding Company’s fiscal third quarter of fiscal 2024. Comparative periods are December 31, 2022. The interim financial statements are unaudited.
Business Context and Reporting Period
U-Haul Holding Company operates three reportable segments: Moving and Storage, Property and Casualty Insurance, and Life Insurance. Moving and Storage includes truck, trailer, portable storage and self-storage rentals, moving supplies, related services and real estate operations in the United States and Canada. The insurance subsidiaries report on a calendar-quarter basis and are consolidated using September 30, 2023 results for the third quarter and nine months ended December 31, 2023.
Key Financial Metrics
| Metric | Q3 FY2024 | Q3 FY2023 | 9M FY2024 | 9M FY2023 |
|---|---|---|---|---|
| Total revenue | $1,339.5 million | $1,375.3 million | $4,529.7 million | $4,676.0 million |
| Earnings from operations | $197.6 million | $320.0 million | $1,019.6 million | $1,335.5 million |
| Pretax earnings | $129.8 million | $260.6 million | $826.5 million | $1,167.5 million |
| Net earnings available to common stockholders | $99.2 million | $198.9 million | $629.6 million | $887.1 million |
| Common-stock EPS | $0.46 | $0.98 | $3.09 | $5.39 |
| Series N EPS | $0.51 | $1.02 | $3.22 | $4.43 |
| Operating margin | 14.7% | 23.3% | 22.5% | 28.6% |
| Net margin | 7.4% | 14.5% | 13.9% | 19.0% |
Revenue was supported by self-storage growth and higher investment income, but these benefits were more than offset by lower self-moving rental revenue. Self-moving equipment rental revenue declined $59.0 million in the quarter and $243.2 million year to date. Self-storage revenue increased $20.0 million in the quarter and $69.1 million year to date.
For the nine months, net cash provided by operating activities was $1,240.0 million, compared with $1,515.7 million in the prior-year period. Investing activities used $1,709.9 million, including $2,400.9 million of property, plant and equipment purchases. Financing activities provided $211.2 million. Cash and cash equivalents declined to $1,806.0 million from $2,060.5 million at March 31, 2023.
At December 31, 2023, total assets were $19.0 billion and stockholders’ equity was $7.1 billion. Notes, loans and finance leases payable were $6.4 billion net, or $6.5 billion before debt issuance costs. The company reported $475.0 million of additional borrowing capacity under existing credit facilities. Moving and Storage held $1,736.3 million of cash and had substantially all consolidated debt obligations.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue declined 2.6%; nine-month revenue declined 3.1%.
- Quarterly earnings from operations fell 38.3%; nine-month earnings from operations fell 23.7%.
- Quarterly net earnings available to common stockholders declined 50.1%; nine-month net earnings declined 29.0%.
- Moving and Storage operating earnings declined $124.3 million in the quarter and $332.4 million before insurance-subsidiary equity earnings for the nine months.
- Self-moving demand weakened, particularly one-way rentals, with lower transactions, revenue and average miles per transaction.
- Self-storage occupied units increased 5.7% in the quarter and 7.9% year to date, while average revenue per occupied foot improved 3.8% and 4.7%, respectively.
- Operating expenses, fleet depreciation and other property costs increased. Rental-equipment resale gains declined as used-equipment values fell and average unit costs increased.
- Interest expense increased to $67.5 million from $59.0 million in the quarter and to $192.0 million from $166.0 million year to date, reflecting higher average debt costs.
- Net investment and interest income increased $5.2 million in the quarter and $70.4 million year to date, primarily due to higher interest rates and derivative or equity-security results.
- The company paid $22.9 million of Series N dividends during the first nine months, compared with $7.1 million in the prior-year period; no common-stock dividends were paid in the current period.
Guidance, Outlook, Risks and Unusual Items
Management expects fiscal 2024 fleet reinvestment of approximately $930 million, net of equipment sales and excluding lease buyouts. Approximately $755 million had been invested through the first nine months. Net capital expenditures were $1.803 billion, including $1.350 billion for rental equipment and $969 million for real estate acquisitions, construction, renovations and repairs.
Management intends to increase transaction volume, improve pricing and utilization, expand the rental fleet, raise self-storage occupancy, complete storage projects and continue investing in U-Box. Management cautions that inflation, adverse economic conditions, competition, equipment availability, used-truck values, repair costs and access to financing could pressure revenue and margins.
The company has interest-rate exposure from variable-rate debt. As of December 31, 2023, $749.4 million of variable-rate debt was outstanding, of which $449.4 million was not fixed through swaps. A 100-basis-point increase in SOFR would reduce annual earnings and cash flow by approximately $4.5 million after hedging effects.
The company adopted ASU 2018-12 for long-duration insurance contracts on April 1, 2023. Management stated that adoption had no economic or cash-flow impact and was expected to have an immaterial fiscal 2024 earnings effect, although it materially changed insurance measurement and disclosures.
A cybersecurity incident involving customer names, dates of birth and driver’s-license or state-identification numbers occurred between November 5, 2021 and April 8, 2022. Claims were consolidated in federal court; all claims except those under the California Consumer Privacy Act were dismissed with prejudice on October 27, 2023. The remaining claims cannot be predicted with certainty.
Disclosure controls were not effective as of December 31, 2023 because of a continuing material weakness in general information-technology controls involving program changes, user access, segregation of duties and cybersecurity. The previously disclosed EPS-related material weakness was reported as remediated.
Most Important Facts for Investors to Verify
- Confirm the reporting-period mismatch: the supplied filing is fiscal Q3 2024, not Q3 2021.
- Assess whether lower self-moving transactions and one-way rental demand are temporary or structural.
- Monitor used-truck resale values, fleet depreciation, repair costs and the effect on operating margins.
- Evaluate whether self-storage occupancy and pricing growth can offset weaker moving-rental revenue.
- Review debt maturities, refinancing requirements, variable-rate exposure and the $475.0 million stated unused credit capacity.
- Reconcile operating cash flow with substantial capital spending and the decline in cash balances.
- Track remediation of the IT-control material weakness and any related cybersecurity costs, disruptions or litigation exposure.
- Review insurance-subsidiary liquidity and dividend restrictions because their assets are generally unavailable to support non-insurance operations.