Business Context and Reporting Period
This filing is AMERCO’s Form 10-Q for the quarter ended September 30, 2022, covering the second quarter and first six months of fiscal 2023. The request metadata identifies “2020 Q2,” but the filing text clearly reports 2022 results. AMERCO operates U-Haul’s moving and storage businesses and property and life insurance subsidiaries in the United States and Canada. Insurance subsidiaries report on a calendar-year basis and are consolidated using June 30, 2022 balances for this filing.
Key Financial Metrics
| Metric | Quarter Ended September 30 | Six Months Ended September 30 |
|---|---|---|
| Revenue | $1.703 billion, up 2.3% | $3.301 billion, up 5.2% |
| Earnings available to common stockholders | $352.0 million, down 14.1% | $686.0 million, down 9.1% |
| Basic and diluted EPS | $17.95, versus $20.90 | $34.99, versus $38.51 |
| Earnings from operations | $522.1 million, down 9.8% | $1.013 billion, down 5.6% |
| Operating margin | 30.7%, versus 34.8% | 30.7%, versus 34.2% |
| Net margin | 20.7%, versus 24.6% | 20.8%, versus 24.1% |
| Cash flow from operations | Not separately reported for the quarter | $1.188 billion, versus $1.519 billion |
Quarterly revenue growth was driven primarily by self-storage, other revenue and products and service sales. Self-moving equipment rental revenue declined $17.0 million, while self-storage revenue increased $32.1 million. For the six-month period, self-moving rental revenue increased $38.4 million and self-storage revenue increased $67.9 million.
Cash and cash equivalents were $3.065 billion at September 30, 2022, compared with $2.704 billion at March 31, 2022. Total assets were $18.143 billion and stockholders’ equity was $6.313 billion. Notes, loans and finance leases payable, net, increased to $6.299 billion from $6.022 billion. The filing reports $150.0 million of available borrowing capacity at September 30; capacity was increased to $465.0 million in October 2022.
Net cash used in investing activities was $1.105 billion, including $1.336 billion of property, plant and equipment purchases. Net capital expenditures were $1.006 billion, including $718.2 million for rental equipment and $583.9 million for real estate, construction and renovations, partially offset by $329.6 million of property and equipment sales. Net cash provided by financing activities was $291.4 million.
Material Changes Versus Prior Comparable Period
- Operating expenses increased $95.2 million in the quarter and $223.2 million in the first six months. Fleet repair costs increased $33.7 million for the quarter and $65.8 million year to date, reflecting higher activity, slower fleet rotation and equipment delivery delays.
- Higher resale values increased gains on rental equipment disposals by $28.3 million in the quarter and $42.3 million year to date, partially offsetting higher operating costs.
- Interest expense rose to $57.2 million from $39.5 million in the quarter and to $107.0 million from $78.7 million year to date, reflecting higher debt balances and interest rates.
- Property and casualty insurance earnings from operations declined to $5.7 million from $15.2 million in the quarter and to $14.0 million from $24.4 million year to date, primarily due to investment losses and unfavorable loss experience.
- Life insurance earnings from operations declined to $1.9 million from $7.9 million in the quarter and to $3.4 million from $10.3 million year to date, primarily due to lower premiums and investment results, including losses on derivatives used to hedge indexed annuities.
- Accumulated other comprehensive loss was $192.1 million at September 30, 2022, compared with accumulated other comprehensive income of $46.4 million at March 31, 2022, primarily due to unrealized investment losses.
Guidance, Outlook, Risks and Unusual Items
Management expects to continue focusing on transaction volume, pricing, product availability and utilization in self-moving rentals; increasing storage occupancy and capacity; expanding U-Box; and investing in the rental fleet and storage properties. Management estimates approximately $760 million of fiscal 2023 net rental-equipment reinvestment, excluding lease buyouts, with approximately $393 million invested through the first six months. Storage acquisitions, development and renovation spending is expected to increase, subject to capital availability, permitting, weather and acquisition opportunities.
Management cautions that inflation may pressure operating margins, equipment manufacturer delays may increase repair and maintenance costs, and adverse economic conditions or competition could reduce revenue. The company also identifies leverage, interest-rate exposure, fleet availability, used-equipment values, dealer reliance, liability claims, seasonality, environmental compliance, insurance claims, cybersecurity and litigation as material risks.
U-Haul disclosed a cybersecurity incident in which an unauthorized party accessed customer contracts containing names, dates of birth and driver’s-license or state-identification numbers between November 5, 2021 and April 8, 2022. Financial, payment-processing and email systems were not involved. Several class-action lawsuits have been filed, and the outcome cannot currently be predicted.
Subsequent events include authorization of Series N non-voting common stock, a nine-for-one stock dividend intended to have the general effect of a ten-for-one split, a planned company name change to U-Haul Holding Company, and a stated policy of a $0.04 quarterly dividend per Series N share beginning in the third quarter of fiscal 2023. The filing also notes a $1.9 million net investment impairment charge for the first six months and a $959,000 early debt-extinguishment fee.
Investor Verification Checklist
- Verify that the reporting period is fiscal 2023, not 2020 Q2, and reconcile the insurance subsidiaries’ June 30 reporting date with AMERCO’s September 30 quarter.
- Assess whether self-storage growth and occupancy gains can offset weaker one-way moving demand and rising fleet repair costs.
- Review debt maturities, variable-rate exposure, refinancing requirements and the October 2022 increase in credit capacity.
- Monitor fleet delivery delays, capital expenditures, used-equipment resale values and the sustainability of disposal gains.
- Evaluate the financial, regulatory and reputational consequences of the cybersecurity incident and related lawsuits.
- Confirm the implementation, trading liquidity and relative valuation of the Series N non-voting stock, the stock dividend and the subsequent name change.
- Review the effect of investment-market losses, interest-rate changes and insurance subsidiary capital restrictions on consolidated liquidity and equity.