AMERCO (U-Haul) Form 10-Q Summary
Reporting period: The provided filing covers the quarter ended June 30, 2021, AMERCO’s first quarter of fiscal 2022, with comparison to June 30, 2020. This conflicts with the request metadata identifying “2019 Q1.” The filing is for AMERCO, the parent of U-Haul International, and reports Moving and Storage, Property and Casualty Insurance, and Life Insurance segments. The financial statements are unaudited.
Key Financial Metrics
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Revenue | $1.473 billion | $987.2 million | +49.2% |
| Earnings from operations | $494.2 million | $154.1 million | +220.7% |
| Pretax earnings | $454.8 million | $114.3 million | +297.8% |
| Net earnings available to common stockholders | $345.2 million | $87.7 million | +293.4% |
| Basic and diluted EPS | $17.60 | $4.47 | +293.7% |
| Cash flow from operations | $794.2 million | $330.1 million | +140.6% |
| Capital expenditures, net of equipment sales | $326.3 million | $173.3 million | +88.2% |
Margins: Earnings from operations were approximately 33.6% of revenue, compared with 15.6% in the prior-year quarter. Net earnings available to common stockholders were approximately 23.4% of revenue, compared with 8.9%.
Revenue drivers: Self-moving equipment rentals increased to $1.035 billion from $654.3 million. Self-storage revenue rose to $137.4 million from $109.0 million. Product and service sales increased to $104.9 million from $91.4 million. Other revenue increased to $106.2 million from $63.7 million. Life insurance premiums declined to $28.7 million from $30.9 million, while property and casualty insurance premiums increased to $16.9 million from $13.7 million.
Liquidity and balance sheet: Cash and cash equivalents were $1.520 billion at June 30, 2021, compared with $1.194 billion at March 31, 2021. Total assets were $15.115 billion and stockholders’ equity was $5.112 billion. Notes, loans and finance leases payable, net, were $4.673 billion, compared with $4.669 billion at March 31, 2021. The company reported $87.0 million of additional borrowing capacity under existing credit facilities.
Debt and market exposure: Gross notes, loans and finance leases payable were $4.702 billion before $28.7 million of debt issuance costs. The company had approximately $1.143 billion of variable-rate debt obligations. Management estimates that a 100-basis-point increase in LIBOR would reduce annual earnings and cash flow by approximately $9.1 million after consideration of interest-rate hedges.
Material Changes Versus the Prior Comparable Period
- Revenue growth was led by higher rental transactions, revenue per transaction, expanded locations and independent dealers, and a larger rental fleet. Management noted that the prior-year quarter was materially affected by COVID-19.
- Self-storage average monthly occupied units increased 26%, or approximately 89,373 units. The company added approximately 3.5 million net rentable square feet over the preceding twelve months, an increase of approximately 8%.
- Operating expenses increased by $121.9 million, including a $33.6 million increase in rental-fleet repair costs due to higher activity, preventative maintenance and fleet sales.
- Net gains on disposal of rental equipment increased by approximately $49.3 million because of higher auction activity.
- Net cash from operations benefited from stronger operating activity and receipt of approximately $159 million of federal tax refunds. The company also received approximately $84 million more in July 2021.
- Net capital expenditures increased as purchases of rental equipment rose to $310.4 million from $122.9 million and real estate, construction and renovation spending increased to $184.4 million from $102.6 million.
- Accumulated other comprehensive income declined to $31.1 million from $106.9 million, principally due to a $73.0 million after-tax unrealized investment loss and a $3.4 million foreign-currency translation loss.
Guidance, Outlook, Risks and Unusual Items
- Management expects approximately $550 million of fiscal 2022 reinvestment in the truck and trailer fleet, net of equipment sales and excluding lease buyouts. Approximately $128 million had been invested through the first quarter.
- Management expects continued investment in self-storage acquisitions, development, renovations and the U-Box program, subject to capital availability, project approvals, weather, equipment availability and COVID-19 effects.
- The company expects to focus on increasing transaction volume, pricing, product availability and equipment utilization, while expanding storage occupancy and capacity.
- COVID-19 remains a material uncertainty. The filing states that a continuing or worsening pandemic could adversely affect future operations, financial position and liquidity.
- CARES Act tax refund claims totaled approximately $366 million; approximately $243 million had been received by the filing date, with the remainder reflected in prepaid expenses. Future legislation could reduce or delay recoveries.
- The company reported no incremental investment impairment charges during the quarter. A condemnation contributed approximately $4.2 million of additional real estate disposal gains.
- Environmental compliance and remediation, litigation, insurance claims, reliance on a third-party dealer network, fleet maintenance costs, limited truck manufacturers, leverage, interest rates, competition, seasonality and regulatory changes remain material risks.
- Insurance-subsidiary assets are generally unavailable to satisfy obligations of the non-insurance operations because of regulatory restrictions on dividends.
- In July 2021, A.M. Best upgraded Oxford and Christian Fidelity Life Insurance Company’s financial strength rating to A from A-, with a stable outlook.
Important Facts for Investors to Verify
- Confirm the intended period: the supplied filing is for June 30, 2021, not 2019 Q1.
- Assess how much of the year-over-year earnings increase reflects recovery from the COVID-19-affected prior-year quarter versus sustainable rental volume, pricing and storage occupancy improvements.
- Reconcile operating cash flow growth with the approximately $159 million CARES Act tax refund and evaluate the timing of the remaining refund claims.
- Monitor fleet replacement spending, vehicle availability, used-equipment sale prices and the company’s ability to fund planned capital expenditures.
- Evaluate leverage, maturity obligations, variable-rate debt, LIBOR transition risk and the adequacy of the $87.0 million reported unused credit capacity.
- Review the liquidity restrictions and investment performance of the insurance subsidiaries separately from Moving and Storage.
- Review related-party transactions with Blackwater and other affiliated entities, including $108.6 million of revenue and $22.9 million of commission expense associated with dealer agreements during the quarter.
- Consider the sensitivity of results to COVID-19 developments, economic conditions, competition, regulatory and environmental matters, and insurance loss experience.