AMERCO Form 10-Q Summary
Period covered: Quarter and six months ended September 30, 2021. The source filing is for AMERCO, the parent company of U-Haul, and compares fiscal 2022 with fiscal 2021. The request metadata identifies “2019 Q2,” which does not match the filing period provided.
Business Context and Reporting Period
AMERCO operates three reportable segments: Moving and Storage, Property and Casualty Insurance, and Life Insurance. Moving and Storage includes U-Haul truck, trailer, portable storage and self-storage rentals, moving supplies, towing accessories, propane and related services. The insurance subsidiaries report on calendar-year periods and are consolidated using June 30, 2021 and June 30, 2020 balances for the comparable interim periods.
Financial Performance and Position
| Metric | Quarter ended September 30, 2021 | Quarter ended September 30, 2020 |
|---|---|---|
| Revenue | $1.664 billion | $1.325 billion |
| Earnings from operations | $578.7 million | $391.8 million |
| Pretax earnings | $538.9 million | $351.0 million |
| Earnings available to common stockholders | $409.9 million | $266.4 million |
| Basic and diluted EPS | $20.90 | $13.58 |
| Operating margin | 34.8% | 29.6% |
| Net margin | 24.6% | 20.1% |
- Quarterly revenue increased 25.6%, while earnings available to common stockholders increased 53.9%.
- Self-moving equipment rental revenue increased 27% to $1.179 billion. Self-storage revenue increased 33% to $153.5 million.
- For the six months, revenue was $3.137 billion versus $2.312 billion, operating earnings were $1.073 billion versus $545.9 million, and earnings available to common stockholders were $755.1 million versus $354.1 million.
- Six-month EPS was $38.51 versus $18.06, with 19.6 million weighted-average shares outstanding in both periods.
- Six-month operating cash flow was $1.519 billion versus $1.002 billion. The increase included improved operations and approximately $243 million of federal income tax refunds.
- Six-month capital expenditures were $1.040 billion, including $564.3 million for rental equipment and $444.3 million for real estate, construction, renovations and repairs. Net capital expenditures were $732.7 million.
- Cash and cash equivalents increased to $2.430 billion at September 30, 2021 from $1.194 billion at March 31, 2021. Moving and Storage held $2.394 billion of cash; insurance-company assets are generally unavailable for non-insurance obligations.
- Notes, loans and finance leases payable, net, increased to $5.335 billion from $4.669 billion. In September 2021, AMERCO issued $600 million of fixed-rate senior unsecured notes with rates ranging from 2.43% to 2.78% and maturities from 2029 to 2033.
- Available borrowing capacity under existing credit facilities was $92.0 million at September 30, 2021.
- Stockholders’ equity increased to $5.555 billion from $4.852 billion. The company paid quarterly dividends of $0.50 per share.
Material Changes Versus the Prior Comparable Period
- Moving and Storage revenue increased to $1.577 billion from $1.245 billion for the quarter, and segment earnings before equity in insurance subsidiaries increased to $556.0 million from $374.0 million.
- Average monthly occupied self-storage units increased 28% for the quarter and 27% for the six months. The company added approximately 3.9 million net rentable square feet over the preceding twelve months, an increase of approximately 9%.
- Operating expenses increased substantially, driven by personnel, fleet repair and maintenance, property taxes, payment processing and U-Box shipping costs. Rental-fleet repair costs increased $28.5 million in the quarter and $62.0 million in the six months.
- Higher used-equipment resale values increased net gains on disposal of rental equipment by $8.0 million for the quarter and $57.3 million for the six months.
- Property and casualty insurance revenue increased with higher U-Haul rental activity, while Life Insurance premiums declined due primarily to lower Medicare supplement premiums.
- Interest expense declined modestly to $39.5 million for the quarter and $78.7 million for the six months, reflecting lower borrowing costs.
Guidance, Outlook, Risks and Unusual Items
- Management expects to focus on increasing transaction volume, pricing, product availability and utilization in self-moving rentals; expanding storage occupancy and capacity; and continuing investment in U-Box.
- U-Haul estimated approximately $550 million of fiscal 2022 net truck and trailer fleet reinvestment, excluding lease buyouts; approximately $248 million had been invested through six months.
- Management expects storage acquisitions and new development spending may increase, subject to capital availability, entitlements, weather, acquisition opportunities and lingering COVID-19 effects.
- COVID-19-related manufacturer delays continued to affect fleet replacement and may adversely affect operations, financing access, liquidity and future results if conditions worsen.
- The company identified potential COVID-19 vaccination or testing mandates and possible changes to federal tax laws as updated risk factors.
- Federal tax refund claims under the CARES Act totaled approximately $366 million, of which approximately $243 million had been received by the end of the six-month period. Future legislation could reduce or delay remaining refunds.
- Environmental compliance and remediation obligations exist at certain real estate properties, although management does not expect a material adverse effect based on currently available information.
- A 100-basis-point increase in LIBOR was estimated to reduce annual earnings and cash flow by approximately $9.0 million after hedging effects. Variable-rate debt was approximately $1.137 billion.
- No incremental impairment charges were recorded on investments during the quarter. The filing also reports favorable real estate disposal activity, including a $4.9 million condemnation gain during the six-month period.
- Management concluded that disclosure controls were effective at a reasonable assurance level and reported no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm the correct reporting period: the filing provided is for September 30, 2021, not 2019 Q2.
- Assess the sustainability of unusually strong moving and storage demand and the extent to which results benefited from pandemic-related behavior and favorable pricing.
- Monitor fleet availability, manufacturer delays, repair costs, used-equipment resale values and planned capital expenditures.
- Reconcile the increase in debt with cash growth, the $600 million private placement and the company’s stated $92 million unused credit capacity.
- Evaluate the liquidity restrictions on insurance-subsidiary cash and investments and the potential impact of policyholder withdrawals, claims and regulatory capital requirements.
- Track COVID-19 developments, labor availability, vaccination or testing mandates, tax-law changes and the receipt of remaining CARES Act tax refunds.
- Review related-party arrangements, including management fees and dealer commissions involving entities associated with significant stockholders.