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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to __________________

Commission File Number 001-11255

 

 

 

State or other jurisdiction of incorporation or organization

Registrant, State of Incorporation,

Address and Telephone Number

I.R.S. Employer

Identification No.

 

 

 

 

AMERCOLOGO

 

 

 

 

Nevada

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

5555 Kietzke Lane Suite 100

 

 

Reno , Nevada 89511

 

 

Telephone ( 775 ) 688-6300

 

 

 

 

 

N/A

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock , $0.25 par value

UHAL

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule   405 of Regulation   S-T (§232.405 of this chapter) during the preceding 12   months (or for such shorter period that the registrant was required to submit such files).   Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.  

Large Accelerated Filer Accelerated filer   

Non-accelerated filer   Smaller reporting company

Emerging growth company

 

 


 


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at August 3, 2020.

 

 


 

 

 


 

 

 

TABLE OF CONTENTS

 

 

Page

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and March 31, 2020

1

 

b) Condensed Consolidated Statements of Operations for the Quarters Ended June 30, 2020 and 2019 (unaudited)

2

 

c) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended June 30, 2020 and 2019 (unaudited)

3

 

d) Condensed Consolidated Statements of Stockholders' Equity for the Quarters Ended June 30, 2020 and 2019 (unaudited)

4

 

e) Condensed Consolidated Statements of Cash Flows for the Quarters Ended June 30, 2020 and 2019 (unaudited)

5

 

f) Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

40

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

52

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

53

Item 1A.

Risk Factors

53

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

53

 


 

part i financial information

 

Item 1. Financial information

 

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED balance sheets

 

 

June 30,

 

March 31,

 

 

2020

 

2020

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

825,074

$

494,352

Reinsurance recoverables and trade receivables, net

 

208,371

 

186,672

Inventories and parts, net

 

100,835

 

101,083

Prepaid expenses

 

585,879

 

562,904

Investments, fixed maturities and marketable equities

 

2,393,522

 

2,492,738

Investments, other

 

395,123

 

360,373

Deferred policy acquisition costs, net

 

117,123

 

103,118

Other assets

 

70,415

 

71,956

Right of use assets - financing, net

 

1,026,928

 

1,080,353

Right of use assets - operating

 

106,682

 

106,631

Related party assets

 

9,406

 

34,784

 

 

5,839,358

 

5,594,964

Property, plant and equipment, at cost:

 

 

 

 

Land

 

1,043,952

 

1,032,945

Buildings and improvements

 

4,752,816

 

4,663,461

Furniture and equipment

 

754,641

 

752,363

Rental trailers and other rental equipment

 

513,623

 

511,520

Rental trucks

 

3,619,718

 

3,595,933

 

 

10,684,750

 

10,556,222

Less: Accumulated depreciation

 

(2,811,749)

 

(2,713,162)

Total property, plant and equipment, net

 

7,873,001

 

7,843,060

Total assets

$

13,712,359

$

13,438,024

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

582,356

$

554,353

Notes, loans and finance/capital leases payable, net

 

4,777,963

 

4,621,291

Operating lease liability

 

106,614

 

106,443

Policy benefits and losses, claims and loss expenses payable

 

998,762

 

997,647

Liabilities from investment contracts

 

1,833,617

 

1,802,217

Other policyholders' funds and liabilities

 

6,764

 

10,190

Deferred income

 

42,789

 

31,620

Deferred income taxes, net

 

1,106,312

 

1,093,543

Total liabilities

 

9,455,177

 

9,217,304

 

 

 

 

 

Commitments and contingencies (notes 4, 8, 9 and 10)

 

 

 

 

Stockholders' equity:

 

 

 

 

Series preferred stock, with or without par value, 50,000,000 shares authorized:

 

 

 

 

Series A preferred stock, with no par value, 6,100,000 shares authorized;

 

 

 

 

6,100,000 shares issued and none outstanding as of June 30 and March 31, 2020

 

-

 

-

Series B preferred stock, with no par value, 100,000 shares authorized; none

 

 

 

 

issued and outstanding as of June 30 and March 31, 2020

 

-

 

-

Serial common stock, with or without par value, 250,000,000 shares authorized:

 

 

 

 

Serial common stock of $ 0.25 par value, 10,000,000 shares authorized;

 

 

 

 

none issued and outstanding as of June 30 and March 31, 2020

 

-

 

-

Common stock, with $ 0.25 par value, 250,000,000 shares authorized:

 

 

 

 

Common stock of $ 0.25 par value, 250,000,000 shares authorized; 41,985,700

 

 

 

 

issued and 19,607,788 outstanding as of June 30 and March 31, 2020

 

10,497

 

10,497

Additional paid-in capital

 

453,819

 

453,819

Accumulated other comprehensive income (loss)

 

(13,732)

 

34,652

Retained earnings

 

4,484,248

 

4,399,402

Cost of common stock in treasury, net ( 22,377,912 shares as of June 30 and March 31, 2020)

 

(525,653)

 

(525,653)

Cost of preferred stock in treasury, net ( 6,100,000 shares as of June 30 and March 31, 2020)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan stock

 

-

 

-

Total stockholders' equity

 

4,257,182

 

4,220,720

Total liabilities and stockholders' equity

$

13,712,359

$

13,438,024

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

 


 


AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

654,285

$

748,596

Self-storage revenues

 

108,955

 

98,274

Self-moving and self-storage products and service sales

 

91,350

 

80,026

Property management fees

 

7,347

 

7,156

Life insurance premiums

 

30,908

 

32,710

Property and casualty insurance premiums

 

13,734

 

13,424

Net investment and interest income

 

16,982

 

35,749

Other revenue

 

63,676

 

63,314

Total revenues

 

987,237

 

1,079,249

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

492,662

 

534,472

Commission expenses

 

69,175

 

80,899

Cost of sales

 

52,831

 

48,929

Benefits and losses

 

39,577

 

49,006

Amortization of deferred policy acquisition costs

 

6,888

 

6,064

Lease expense

 

6,603

 

7,036

Depreciation, net of gains on disposal of ($1,069 and $16,678, respectively)

 

165,671

 

140,600

Net gains on disposal of real estate

 

(256)

 

(1,622)

Total costs and expenses

 

833,151

 

865,384

 

 

 

 

 

Earnings from operations

 

154,086

 

213,865

Other components of net periodic benefit costs

 

(247)

 

(263)

Interest expense

 

(39,521)

 

(38,888)

Pretax earnings

 

114,318

 

174,714

Income tax expense

 

(26,592)

 

(42,292)

Earnings available to common stockholders

$

87,726

$

132,422

Basic and diluted earnings per common stock

$

4.47

$

6.76

Weighted average common stock outstanding: Basic and diluted

 

19,607,788

 

19,597,697

 

Related party revenues for the first quarter of fiscal 2021 and 2020, net of eliminations, were $7.3 million and $7.2 million, respectively.

Related party costs and expenses for the first quarter of fiscal 2021 and 2020, net of eliminations, were $16.0 million and $17.9 million, respectively.

Please see Note 10, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for more information on the related party revenues and costs and expenses.

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

 


 


AMERCO AND CONSOLIDATED SUBSIDIARIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended June 30, 2020

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

114,318

$

(26,592)

$

87,726

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(2,917)

 

-

 

(2,917)

Unrealized net loss on investments

 

(58,962)

 

13,463

 

(45,499)

Change in fair value of cash flow hedges

 

(705)

 

173

 

(532)

Amounts reclassified into earnings on hedging activities

 

747

 

(183)

 

564

Total other comprehensive income (loss)

 

(61,837)

 

13,453

 

(48,384)

 

 

 

 

 

 

 

Total comprehensive income

$

52,481

$

(13,139)

$

39,342

 

 

+

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2019

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

174,714

$

(42,292)

$

132,422

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

2,982

 

-

 

2,982

Unrealized net gain on investments

 

51,827

 

(11,039)

 

40,788

Change in fair value of cash flow hedges

 

(1,194)

 

293

 

(901)

Amounts reclassified into earnings on hedging activities

 

(59)

 

15

 

(44)

Total other comprehensive income

 

53,556

 

(10,731)

 

42,825

 

 

 

 

 

 

 

Total comprehensive income

$

228,270

$

(53,023)

$

175,247

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

 


 

 

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders' equity

Description

 

Common Stock

 

Additional Paid-In Capital

 

Accumulated Other Comprehensive

Income (Loss)

 

Retained Earnings

 

Less: Treasury Common Stock

 

Less: Treasury Preferred Stock

 

Less: Unearned Employee Stock Ownership Plan Shares

 

Total Stockholders' Equity

 

(Unaudited)

 

(In thousands)

Balance as of March 31, 2020

$

10,497

$

453,819

$

34,652

$

4,399,402

$

(525,653)

$

(151,997)

$

-

$

4,220,720

Adjustment for adoption of ASU 2016-13

 

-

 

-

 

-

 

(2,880)

 

-

 

-

 

-

 

(2,880)

Increase in market value of released ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Release of unearned ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Purchase of ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Foreign currency translation

 

-

 

-

 

(2,917)

 

-

 

-

 

-

 

-

 

(2,917)

Unrealized net loss on investments, net of tax

 

-

 

-

 

(45,499)

 

-

 

-

 

-

 

-

 

(45,499)

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

(532)

 

-

 

-

 

-

 

-

 

(532)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

564

 

-

 

-

 

-

 

-

 

564

Net earnings

 

-

 

-

 

-

 

87,726

 

-

 

-

 

-

 

87,726

Net activity

 

-

 

-

 

(48,384)

 

84,846

 

-

-

-

 

-

 

36,462

Balance as of June 30, 2020

$

10,497

$

453,819

$

(13,732)

$

4,484,248

$

(525,653)

 

(151,997)

$

-

$

4,257,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2019

$

10,497

$

453,326

$

(66,698)

$

3,976,962

$

(525,653)

$

(151,997)

$

(4,048)

$

3,692,389

Increase in market value of released ESOP shares

 

-

 

209

 

-

 

-

 

-

 

-

 

-

 

209

Release of unearned ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

1,309

 

1,309

Purchase of ESOP shares

 

-

 

-

 

-

 

-

 

-

 

-

 

(131)

 

(131)

Foreign currency translation

 

-

 

-

 

2,982

 

-

 

-

 

-

 

-

 

2,982

Unrealized net gain on investments, net of tax

 

-

 

-

 

40,788

 

-

 

-

 

-

 

-

 

40,788

Change in fair value of cash flow hedges, net of tax

 

-

 

-

 

(901)

 

-

 

-

 

-

 

-

 

(901)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

(44)

 

-

 

-

 

-

 

-

 

(44)

Net earnings

 

-

 

-

 

-

 

132,422

 

-

 

-

 

-

 

132,422

Net activity

 

-

 

209

 

42,825

 

132,422

 

-

 

-

 

1,178

 

176,634

Balance as of June 30, 2019

$

10,497

$

453,535

$

(23,873)

$

4,109,384

$

(525,653)

$

(151,997)

$

(2,870)

$

3,869,023

 

The accompanying notes are an integral part of these consolidated financial statements.

4

 


 

AMERCO AND CONSOLIDATED subsidiaries

Condensed consolidatED statements of cash flows

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net earnings

$

87,726

$

132,422

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

166,740

 

157,278

Amortization of deferred policy acquisition costs

 

6,888

 

6,064

Amortization of premiums and accretion of discounts related to investments, net

 

3,550

 

3,275

Amortization of debt issuance costs

 

1,297

 

1,053

Interest credited to policyholders

 

7,667

 

14,218

Change in allowance for losses on trade receivables

 

60

 

(162)

Change in allowance for inventories and parts reserves

 

(99)

 

367

Net gains on disposal of personal property

 

(1,069)

 

(16,678)

Net gains on disposal of real estate

 

(256)

 

(1,622)

Net (gains) losses on sales of investments

 

2,014

 

(4,267)

Net (gains) losses on equity investments

 

3,989

 

(2,215)

Deferred income taxes

 

27,534

 

29,763

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

(23,594)

 

(18,215)

Inventories and parts

 

350

 

2,110

Prepaid expenses

 

(22,831)

 

(15,720)

Capitalization of deferred policy acquisition costs

 

(7,308)

 

(5,090)

Other assets

 

74

 

3,337

Related party assets

 

7,329

 

(1,364)

Accounts payable and accrued expenses

 

58,273

 

89,716

Policy benefits and losses, claims and loss expenses payable

 

528

 

2,318

Other policyholders' funds and liabilities

 

(3,426)

 

(5,281)

Deferred income

 

14,898

 

8,527

Related party liabilities

 

(249)

 

1,092

Net cash provided by operating activities

 

330,085

 

380,926

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Escrow deposits

 

1,401

 

1,968

Purchases of:

 

 

 

 

Property, plant and equipment

 

(249,740)

 

(847,248)

Short term investments

 

(9,625)

 

(8,689)

Fixed maturities investments

 

(94,193)

 

(76,515)

Real estate

 

(192)

 

(328)

Mortgage loans

 

(33,300)

 

(9,410)

Proceeds from sales and paydowns of:

 

 

 

 

Property, plant and equipment

 

76,412

 

160,754

Short term investments

 

2,448

 

6,982

Fixed maturities investments

 

110,165

 

38,258

Real estate

 

-

 

311

Mortgage loans

 

1,432

 

1,678

Net cash used by investing activities

 

(195,192)

 

(732,239)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

377,051

 

333,700

Principal repayments on credit facilities

 

(154,089)

 

(61,104)

Payment of debt issuance costs

 

(1,677)

 

(5)

Finance/capital lease payments

 

(68,554)

 

(94,446)

Employee stock ownership plan stock

 

-

 

(131)

Common stock dividends paid

 

-

 

(9,796)

Net contribution from (to ) related party

 

18,599

 

-

Investment contract deposits

 

75,366

 

61,515

Investment contract withdrawals

 

(51,633)

 

(37,054)

Net cash provided by financing activities

 

195,063

 

192,679

 

 

 

 

 

Effects of exchange rate on cash

 

766

 

4,764

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

330,722

 

(153,870)

Cash and cash equivalents at the beginning of period

 

494,352

 

673,701

Cash and cash equivalents at the end of period

$

825,074

$

519,831

The accompanying notes are an integral part of these condensed consolidated financial statements

5

 


 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a first fiscal quarter that ends on the 30 th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies' financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries' years 2020 and 2019 correspond to fiscal 2021 and 2020 for AMERCO.

Accounts denominated in non-U.S. currencies have been translated into U.S. dollars. Certain amounts reported in previous years have been reclassified to conform to the current presentation.

The condensed consolidated balance sheet as of June 30, 2020 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for the first quarter of fiscal 2021 and 2020 are unaudited.

In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Intercompany accounts and transactions have been eliminated.

Description of Legal Entities

AMERCO is the holding company for:

U-Haul International, Inc. (“U-Haul”);

Amerco Real Estate Company (“Real Estate”);

Repwest Insurance Company (“Repwest”); and

Oxford Life Insurance Company (“Oxford”).

Unless the context otherwise requires, the terms “Company,” “we,” “us” or “our” refer to AMERCO and all of its legal subsidiaries.

Description of Operating Segments

AMERCO has three ( 3 ) reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.

The Moving and Storage operating segment (“Moving and Storage”) includes AMERCO, U-Haul and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, and the rental of fixed and portable moving and storage units to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.

The Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) includes Repwest and its wholly owned subsidiaries and ARCOA Risk Retention Group (“ARCOA”). Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul ® through regional offices in the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul-related programs. ARCOA is a group captive insurer owned by us and our wholly owned subsidiaries whose purpose is to provide insurance products related to our moving and storage business.

6

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

The Life Insurance operating segment (“Life Insurance”) includes Oxford and its wholly owned subsidiaries. Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Summary of Significant Accounting Polices

Refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 for a summary of significant accounting policies. At the beginning of the first quarter of fiscal 2021, we adopted Accounting Standards Update 2016-13 , Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In addition, new disclosures are required. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases   We adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost. We modified our policy on accounting for allowance for doubtful accounts on trade accounts receivable. We perform ongoing credit evaluations of our customers and assesses each customer's credit worthiness. We monitor collections and payments from our customers and maintains an allowance for doubtful accounts based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment to the opening balance of retained earnings of $2.9 million and did not have a material impact on our results of operations, financial condition or liquidity. Please see Note 16, Allowance for Credit Losses, of the Notes to Condensed Consolidated Financial Statements.

2. Earnings per Share

Our earnings per share is calculated by dividing our earnings available to common stockholders by the weighted average common shares outstanding, basic and diluted.

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 8,216 as of June 30, 2019.   As of June 20, 2020, all of these shares have been released.

3. Investments

Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $ 30.8 million as of June 30, 2020 and March 31, 2020.

7

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Available-for-Sale Investments

Available-for-sale investments as of June 30, 2020 were as follows:

 

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Allowance for Expected Credit Losses

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

U.S. treasury securities and government obligations

$

84,814

$

12,192

$

-

$

-

$

-

$

97,006

U.S. government agency mortgage-backed securities

 

126,599

 

3,458

 

(1)

 

(39)

 

-

 

130,017

Obligations of states and political subdivisions

 

270,476

 

21,364

 

(141)

 

(2)

 

-

 

291,697

Corporate securities

 

1,636,025

 

66,359

 

(1,759)

 

(37,168)

 

(5,407)

 

1,658,050

Mortgage-backed securities

 

197,599

 

2,485

 

(2)

 

(6,031)

 

-

 

194,051

Redeemable preferred stocks

 

1,493

 

14

 

-

 

(5)

 

-

 

1,502

 

$

2,317,006

$

105,872

$

(1,903)

$

(43,245)

$

(5,407)

$

2,372,323

 

Available-for-sale investments as of March 31, 2020 were as follows:

 

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

 

 

 

(In thousands)

U.S. treasury securities and government obligations

$

112,421

$

7,959

$

(1)

$

-

$

120,379

U.S. government agency mortgage-backed securities

 

88,449

 

759

 

(1)

 

(373)

 

88,834

Obligations of states and political subdivisions

 

287,643

 

20,664

 

(155)

 

-

 

308,152

Corporate securities

 

1,656,425

 

100,302

 

(919)

 

(812)

 

1,754,996

Mortgage-backed securities

 

187,784

 

6,011

 

(1)

 

(107)

 

193,687

Redeemable preferred stocks

 

1,493

 

72

 

-

 

-

 

1,565

 

$

2,334,215

$

135,767

$

(1,077)

$

(1,292)

$

2,467,613

 

We sold available-for-sale securities with a fair value of $ 109.6 million during the first quarter of fiscal 2021. The gross realized gains on these sales totaled $ 2.8 million.

We adopted   ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as of April 1, 2020. For available-for-sale debt securities in an unrealized loss position, we first assess whether the security is below investment grade.   For securities that are below investment grade, we evaluate whether the decline in fair value has resulted from credit losses or other factors such as the interest rate environment. Declines in value due to credit are recognized as an allowance. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse market conditions specifically related to the security, among other factors.   If this assessment indicates that a credit loss exists, cumulative default rates based on ratings are used to determine the potential cost of default, by year.   The present value of these potential costs is then compared to the amortized cost of the security to determine the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

8

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through accumulated other comprehensive income, net of applicable taxes. If we intend to sell a security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. There were no incremental impairment charges recorded during the quarter ended June 30, 2020.

The adjusted cost and estimated market value of available-for-sale investments by contractual maturity were as follows:

 

 

 

June 30, 2020

 

March 31, 2020

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

(In thousands)

Due in one year or less

$

141,789

$

141,448

$

128,747

$

129,420

Due after one year through five years

 

537,400

 

541,406

 

547,821

 

566,934

Due after five years through ten years

 

605,305

 

618,209

 

636,036

 

678,636

Due after ten years

 

833,420

 

875,707

 

832,334

 

897,371

 

 

2,117,914

 

2,176,770

 

2,144,938

 

2,272,361

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

197,599

 

194,051

 

187,784

 

193,687

Redeemable preferred stocks

 

1,493

 

1,502

 

1,493

 

1,565

 

$

2,317,006

$

2,372,323

$

2,334,215

$

2,467,613

 

As of June 30, 2020 and March 31, 2020, our common stock and non-redeemable preferred stock that are included in Investments, fixed maturities and marketable equities on our balance sheet are stated in the table below. The changes in the fair value of these equity investments are recognized through Net investment and interest income.

Equity investments of common stock and non-redeemable preferred stock were as follows:

 

 

 

June 30, 2020

 

March 31, 2020

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Common stocks

$

9,775

$

16,595

$

9,775

$

20,015

Non-redeemable preferred stocks

 

5,076

 

4,604

 

5,076

 

5,110

 

$

14,851

$

21,199

$

14,851

$

25,125

 

9

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

4. Borrowings

Long Term Debt

Long term debt was as follows:

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

2021 Rates (a)

 

 

Maturities

 

2020

 

2020

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

 

 

 

1.68

%

 

 

 

2023

$

90,413

$

92,913

Senior mortgages

3.11

%

-

6.62

%

 

2021

-

2038

 

2,015,495

 

2,029,878

Real estate loans (revolving credit)

1.58

%

-

3.25

%

 

2022

-

2025

 

535,000

 

519,000

Fleet loans (amortizing term)

2.04

%

-

4.66

%

 

2020

-

2027

 

200,983

 

224,089

Fleet loans (revolving credit)

 

 

 

1.32

%

 

2022

-

2024

 

570,000

 

567,000

Finance/capital leases (rental equipment)

1.92

%

-

5.04

%

 

2020

-

2026

 

666,316

 

734,870

Finance liability (rental equipment)

1.63

%

-

4.22

%

 

2020

 

2028

 

447,416

 

398,834

Other obligations

2.50

%

-

8.00

%

 

2020

-

2049

 

282,524

 

84,484

Notes, loans and finance/capital leases payable

 

 

 

 

 

 

 

 

 

4,808,147

 

4,651,068

Less: Debt issuance costs

 

 

 

 

 

 

 

 

 

 

(30,184)

 

(29,777)

Total notes, loans and finance/capital leases payable, net

 

 

 

 

$

4,777,963

$

4,621,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Interest rates as of June 30, 2020, including the effect of applicable hedging instruments.

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (the “Real Estate Loan”).   The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers.  

The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. As of June 30, 2020, the applicable LIBOR was 0.18 % and the applicable margin was 1.50 %, the sum of which was 1.68 %. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Senior Mortgages

Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 3.11 % and 6.62 %. Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

10

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Real Estate Loans (Revolving Credit)

Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $ 385.0 million. As of June 30, 2020, the outstanding balance of these loans in the aggregate was $ 385.0 million. These loans are secured by certain properties owned by the borrowers. The loan agreements provide for term loans, subject to the terms of the loan agreements. The final maturity of the loans is between June 2022 and March 2025 . The loans require monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of June 30, 2020, the applicable LIBOR was between 0.17 % and 0.18 % and the margin was between 1.25 % and 1.50 %, the sum of which was between 1.42 % and 1.67 %. Certain loans have interest rate swaps fixing the rate between 3.03 % and 3.14 % based on current margins. AMERCO is the guarantor of these loans. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $ 200.0 million, which can be increased to $ 300.0 million by bringing in other lenders. As of June 30, 2020, the outstanding balance was $ 150.0 million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. The final maturity of this loan is April 2023. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of June 30, 2020, the applicable LIBOR was 1.00 % and the margin was 2.25 %, the sum of which was 3.25 %. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30 % fee charged for unused capacity.

Fleet Loans

Rental Truck Amortizing Loans

The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the loan agreements, are carried at fixed rates ranging between 2.04 % and 4.66 %.

AMERCO, and in some cases U-Haul, is guarantor of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Rental Truck Revolvers

Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $ 590.0 million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of June 30, 2020, the applicable LIBOR was 0.17 % and the margin was 1.15 %, the sum of which was 1.32 %. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly.

Finance/Capital Leases

The Finance/Capital Lease balance represents our sale-leaseback transactions of rental equipment that were entered into and classified as capital leases prior to the adoption of ASC 842. The historical capital lease balance was reclassified to Right of use (“ROU”) assets-finance, net. The agreements are generally seven (7) year terms with interest rates ranging from 1.92 % to 5.04 %.   All of our finance leases and are collateralized by our rental fleet. There were no new financing leases, as assessed under the new leasing guidance, entered into during the quarter ended June 30, 2020.

11

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Finance Liabilities

Finance Liabilities represent our rental equipment financing transactions that have historically been accounted for as capital leases prior to the adoption of ASC 842, which substantially changed the accounting for sale-leasebacks going forward. In accordance with the new leasing guidance, we assess if sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs.   We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost.   Our finance liabilities have an average term of seven (7) years and interest rates ranging from 1.63 % to 4.22 %. These finance liabilities are collateralized by our rental fleet.  

Other Obligations

In May 2020, AMERCO, entered into a $ 200.0 million secured credit facility with PNC Bank, as agent and lead arranger of a syndicate of lenders.   The interest rate, per the provision of the loan agreement, is the applicable LIBOR plus the applicable margin.   As of June 30, 2020, the applicable LIBOR was 0.50 % and the margin was 2.00 %, the sum of which was 2.50 %. The LIBOR has a floor of 0.50 %. As of June 30, 2020 the balance of this note was $ 200.0 million. The final maturity of this loan is May 2021 and will be paid down as the Company receives federal income tax refunds.

In February 2011, AMERCO and U.S. Bank, NA (the “Trustee”) entered into the U-Haul Investors Club ® Indenture.   AMERCO and the Trustee entered into this indenture to provide for the issuance of notes by us directly to investors over our proprietary website, uhaulinvestorsclub.com (“U-Notes ® ”). The U-Notes ® are secured by various types of collateral, including, but not limited to, rental equipment and real estate.   U-Notes ® are issued in smaller series that vary as to principal amount, interest rate and maturity.   U-Notes ® are obligations of the Company and secured by the associated collateral; they are not guaranteed by any of the Company's affiliates or subsidiaries.

As of June 30, 2020, the aggregate outstanding principal balance of the U-Notes ® issued was $ 85.2 million, of which $ 2.7 million was held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 2.50 % and 8.00 % and maturity dates range between 2020 and 2049 .

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of March 31, 2020, the deposits had an aggregate balance of $ 60.0 million, for which Oxford pays fixed interest rates between 0.69 % and 2.95 % with maturities between September 28, 2020 and March 29, 2025. As of March 31, 2020, available-for-sale investments held with the FHLB totaled $ 191.4 million, of which $ 69.5 million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.

Annual Maturities of Notes, Loans and Finance/Capital Leases Payable

The annual maturities of our notes, loans and finance/capital leases payable, as of June 30, 2020 for the next five years and thereafter are as follows:

 

 

Year Ended June 30,

 

 

2021

 

2022

 

2023

 

2024

 

2025

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and finance/capital leases payable, secured

$

683,816

$

770,912

$

778,383

$

793,838

$

290,267

$

1,490,931

12

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

41,911

$

43,331

Capitalized interest

 

(4,434)

 

(5,499)

Amortization of transaction costs

 

1,297

 

1,053

Interest expense resulting from cash flow hedges

 

747

 

3

Total interest expense

$

39,521

$

38,888

Interest paid in cash, including payments related to derivative contracts, amounted to $ 39.4 million and $ 40.5 million for the first quarter of fiscal 2021 and 2020, respectively.

Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

 

Quarter Ended June 30,

 

 

 

2020

 

2019

 

 

 

(Unaudited)

 

 

 

(In thousands, except interest rates)

 

Weighted average interest rate during the quarter

 

2.02

%

3.73

%

Interest rate at the end of the quarter

 

1.67

%

3.69

%

Maximum amount outstanding during the quarter

$

1,175,000

$

990,000

 

Average amount outstanding during the quarter

$

1,161,385

$

967,358

 

Facility fees

$

4

$

62

 

5. Derivatives

We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates with the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes. These fair values are determined using pricing valuation models which include broker quotes for which significant inputs are observable. They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2 in the fair value hierarchy.

The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the balance sheet were as follows:

 

 

 

Derivatives Fair Values as of

 

 

June 30, 2020

 

March 31, 2020

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments:

 

 

 

 

Assets

$

-

$

-

Liabilities

$

8,170

$

8,214

Notional amount

$

235,000

$

235,000

13

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

 

 

The Effect of Interest Rate Contracts on the Statements of Operations for the Quarters Ended

 

 

 

 

June 30, 2020

 

June 30, 2019

 

 

(Unaudited)

 

 

(In thousands)

(Gain) loss recognized in AOCI on interest rate contracts

$

(42)

$

1,253

(Gain) loss reclassified from AOCI into income

$

747

$

3

 

Gains or losses recognized in income on derivatives are recorded as interest expense in the condensed consolidated statements of operations. During the first quarter of fiscal 2021, we recognized an increase in the fair value of our cash flow hedges of $0.5 million, net of taxes. During the first quarter of fiscal 2021, we reclassified $0.7 million from AOCI to interest expense. As of June 30, 2020, we expect to reclassify $ 3.7 million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.

6. Accumulated Other Comprehensive Income (Loss)

A summary of accumulated other comprehensive income (loss) components, net of tax, were as follows:

 

 

Foreign Currency Translation

 

Unrealized Net Gain on Investments

 

Fair Market Value of Cash Flow Hedges

 

Postretirement Benefit Obligation Net Loss

 

Accumulated Other Comprehensive Income (Loss)

 

 

(Unaudited)

 

 

(In thousands)

Balance at March 31, 2020

$

(47,235)

$

90,684

$

(6,196)

$

(2,601)

$

34,652

Foreign currency translation

 

(2,917)

 

-

 

-

 

-

 

(2,917)

Unrealized net gain on investments

 

-

 

(45,499)

 

-

 

-

 

(45,499)

Change in fair value of cash flow hedges

 

-

 

-

 

(532)

 

-

 

(532)

Amounts reclassified into earnings on hedging activities

 

-

 

-

 

564

 

-

 

564

Other comprehensive income (loss)

 

(2,917)

 

(45,499)

 

32

 

-

 

(48,384)

Balance at June 30, 2020

$

(50,152)

$

45,185

$

(6,164)

$

(2,601)

$

(13,732)

.

7. Stockholders' Equity

On June 8, 2016, our stockholders' approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of June 30, 2020 no awards had been issued under this plan.

8. Leases

Lessor

We have determined that revenues derived by providing self-moving equipment rentals, self-storage rentals and certain other revenues, including U-Box rentals, are within the scope of the accounting guidance contained in Topic 842. Our self-moving equipment rental related revenues have been accounted for under the revenue accounting standard Topic 606, until the adoption of Topic 842.

For the periods after April 1, 2019, we combined all lease and non-lease components of lease contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and account for them in accordance with Topic 842. The revenue streams accounted for in accordance with Topic 842 are recognized evenly over the period of rental. Please see Note 15, Revenue Recognition, to the Notes to Condensed Consolidated Financial Statements.

14

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Lessee

We determine if an arrangement is a lease at inception. Operating leases, which are comprised primarily of storage rental locations, are included in ROU assets - operating and operating lease liability in our condensed consolidated balance sheet dated June 30, 2020 and March 31, 2020. Finance leases, which are comprised primarily of rental equipment leases, are included in ROU assets - financing, net, and notes, loans and finance/capital leases payable, net in our balance sheet dated June 30, 2020 and March 31, 2020.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected remaining lease term. We use our incremental borrowing rate based on information available at commencement date including the rate for a fully collateralized loan that can either be fully amortizing or financed with a residual at the end of the lease term, for a borrower with similar credit quality in order to determine the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that we will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Additionally, for certain leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities as the leases are similar in nature and have nearly identical contract provisions.

The standard also changed the manner by which we account for our equipment sale/leaseback transactions.   Based on our assessment, the lease transactions are classified as financing leases, and therefore the transactions do not qualify as a sale.   Pursuant to the guidance, new sale leaseback transactions that fail to qualify as a sale will be accounted for as a financial liability.   Please see Note 4, Borrowings, of the Notes to Condendsed Consolidated Finanical Statements for additional information.

The following table shows the components of our ROU assets, net:

 

 

As of June 30, 2020

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Finance

 

Operating

 

Total

Buildings and improvements

$

-

$

130,241

$

130,241

Furniture and equipment

 

21,111

 

-

 

21,111

Rental trailers and other rental equipment

 

115,967

 

-

 

115,967

Rental trucks

 

1,697,339

 

-

 

1,697,339

Right-of-use assets, gross

 

1,834,417

 

130,241

 

1,964,658

Less: Accumulated depreciation

 

(807,489)

 

(23,559)

 

(831,048)

Right-of-use assets, net

$

1,026,928

$

106,682

$

1,133,610

 

 

 

Finance

 

Operating

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

4

 

14

 

Weighted average discount rate

 

3.5

%

4.6

%

 

For the quarter ended June 30, 2020, cash paid for leases included in our operating and financing cash flow activities were $ 7.0 million and $ 68.6 million, respectively.

15

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

The components of lease costs were as follows:

 

 

 

Three Months Ended

 

 

June 30, 2020

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

Operating lease costs

$

7,137

 

 

 

Finance lease cost:

 

 

Amortization of right-of-use assets

$

40,836

Interest on lease liabilities

 

6,282

Total finance lease cost

$

47,118

 

Maturities of lease liabilities were as follows:

 

 

 

Finance leases

 

Operating leases

 

 

(Unaudited)

Year ending June 30,

 

(In thousands)

 

 

 

 

 

2021

$

194,978

$

24,802

2022

 

154,457

 

22,598

2023

 

122,986

 

21,780

2024

 

92,915

 

20,791

2025

 

65,825

 

6,213

Thereafter

 

35,155

 

65,758

Total lease payments

 

666,316

 

161,942

Less: imputed interest

 

-

 

(55,328)

Present value of lease liabilities

$

666,316

$

106,614

 

9. Contingencies

COVID-19

In late 2019, COVID-19 was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures along with the threat the virus poses have adversely affected workforces, customers, consumer sentiment, economies and financial markets.

During the first quarter of fiscal 2021, the Company has been impacted by the spread of COVID-19. The extent to which COVID-19 impacts the Company's business, operations and financial results will continue to evolve in ways that the Company is not fully able to predict at this time.   We have experienced customer initiated changes in behavior, actions   by government entities, concerns from our workforce, and reactions from the capital markets.  

Although the Company cannot estimate the length or gravity of the impact of COVID-19 at this time, if the pandemic continues, it may have a material adverse effect on the Company's results of future operations, financial position and liquidity in fiscal 2021.

16

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

CARES Act

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. We have availed ourselves of the provisions related to deferring certain payroll taxes, carrybacks of net operating losses, and will utilize the technical corrections to tax depreciation methods.   We estimate that the net operating loss carrybacks combined with the depreciation adjustments for our fiscal 2020 federal income tax return will result in a refund of approximately $ 381 million, which are reflected in Prepaid expense. As refunds are received, they will reduce this amount. We have estimated and recorded the overall effects of the CARES Act and do not anticipate a material change. It is possible future legislation could reduce or delay our ability to carryback these losses.

Environmental

Compliance with environmental requirements of federal, state and local governments may significantly affect Real Estate's business operations. Among other things, these requirements regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on some of its properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws and has put in place a remedial plan at each site where it believes such a plan is necessary. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks.

Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to result in a material adverse effect on AMERCO's financial position or results of operations.

Other

We are named as a defendant in various other litigation and claims arising out of the normal course of business. In management's opinion, none of these other matters will have a material effect on our financial position and results of operations.

10. Related Party Transactions

As set forth in the Company's Audit Committee Charter and consistent with NASDAQ Listing Rules, our Audit Committee (the “Audit Committee”) reviews and maintains oversight over related party transactions, which are required to be disclosed under the Securities and Exchange Commission (“SEC”) rules and regulations and in accordance with generally accepted accounting principles (“GAAP”). Accordingly, all such related party transactions are submitted to the Audit Committee for ongoing review and oversight. Our internal processes are designed to ensure that our legal and finance departments identify and monitor potential related party transactions that may require disclosure and Audit Committee oversight.

AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below.

SAC Holding Corporation and SAC Holding II Corporation (collectively “SAC Holdings”) were established in order to acquire and develop self-storage properties. These properties are being managed by us pursuant to management agreements. In the past, we sold real estate and various self-storage properties to SAC Holdings, and such sales provided significant cash flows to us. SAC Holdings, Four SAC Self-Storage Corporation, Five SAC Self-Storage Corporation, Galaxy Investments, L.P. and 2015 SAC self-storage are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly owned by Willow Grove Holdings LP (“WGHLP”), which is owned by Mark V. Shoen (a significant stockholder), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant stockholder) and Mark V. Shoen

17

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Related Party Revenue

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul management fee revenue from Blackwater

$

6,148

$

6,249

U-Haul management fee revenue from Mercury

 

1,199

 

907

 

$

7,347

$

7,156

We currently manage the self-storage properties owned or leased by Blackwater and Mercury Partners, L.P. (“Mercury”), pursuant to a standard form of management agreement, under which we receive a management fee of between 4 % and 10 % of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $ 10.1 million and $ 9.2 million from the above-mentioned entities during the first quarter of fiscal 2021 and 2020, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are owned indirectly by James P. Shoen and various trusts benefitting Edward J. Shoen and James P. Shoen or their descendants.   Mercury holds the option to purchase a portfolio of properties currently leased by Mercury and a U-Haul subsidiary, which option is exercisable in 2024.

Related Party Costs and Expenses

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to Blackwater

$

657

$

658

U-Haul commission expenses to Blackwater

 

15,332

 

17,202

 

$

15,989

$

17,860

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.

As of June 30, 2020, subsidiaries of Blackwater acted as independent dealers. The financial and other terms of the dealership contracts are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues.

These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $ 6.1 million, expenses of $ 0.7 million and cash flows of $ 5.2 million during the first quarter of fiscal 2021. Revenues and commission expenses related to the Dealer Agreements were $ 63.0 million and $ 15.3 million, respectively, during the first quarter of fiscal 2021.

In June 2020, we purchased an airplane from SAC Holdings for $0.4 million.

18

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Management determined that we do not have a variable interest pursuant to the variable interest entity (“VIE”) model under Accounting Standards Codification (“ASC”) 810 - Consolidation (“ASC 810”) in the holding entities of Blackwater based upon management agreements which are with the individual operating entities; therefore, we are precluded from consolidating these entities.

Related Party Assets

 

 

 

June 30,

 

March 31,

 

 

2020

 

2020

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul receivable from Blackwater

$

22,897

$

25,293

U-Haul receivable from Mercury

 

5,555

 

9,893

Other (a)

 

(19,046)

 

(402)

 

$

9,406

$

34,784

(a)       Timing differences for intercompany balances with insurance subsidiaries resulting from the three-month difference in reporting periods. Our credit balance as of June 30, 2020, was due to a timing difference for a dividend paid by Oxford to AMERCO of $ 18.6 million.

 

19

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

11. Consolidating Financial Information by Industry Segment

 

AMERCO's three reportable segments are:

 

  • Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the subsidiaries of UHaul and Real Estate,

 

  • Property and Casualty Insurance, comprised of Repwest and its subsidiaries and ARCOA, and

 

  • Life Insurance, comprised of Oxford and its subsidiaries.

 

Management tracks revenues separately, but does not report any separate measure of the profitability for rental vehicles, rentals of self-storage spaces and sales of products that are required to be classified as a separate operating segment and accordingly does not present these as separate reportable segments. Deferred income taxes are shown as liabilities on the condensed consolidating statements. The information includes elimination entries necessary to consolidate AMERCO, the parent, with its subsidiaries. Investments in subsidiaries are accounted for by the parent using the equity method of accounting.

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 


 

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

11. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of June 30, 2020 are as follows:

 

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

Cash and cash equivalents

$

770,941

$

4,119

$

50,014

$

-

 

$

825,074

Reinsurance recoverables and trade receivables, net

 

83,795

 

87,403

 

37,173

 

-

 

 

208,371

Inventories and parts, net

 

100,835

 

-

 

-

 

-

 

 

100,835

Prepaid expenses

 

585,879

 

-

 

-

 

-

 

 

585,879

Investments, fixed maturities and marketable equities

 

-

 

270,083

 

2,123,439

 

-

 

 

2,393,522

Investments, other

 

20,988

 

96,738

 

277,397

 

-

 

 

395,123

Deferred policy acquisition costs, net

 

-

 

-

 

117,123

 

-

 

 

117,123

Other assets

 

67,047

 

1,094

 

2,274

 

-

 

 

70,415

Right of use assets - financing, net

 

1,026,928

 

-

 

-

 

-

 

 

1,026,928

Right of use assets - operating

 

106,202

 

262

 

218

 

-

 

 

106,682

Related party assets

 

34,035

 

7,024

 

13,474

 

(45,127)

(c)

 

9,406

 

 

2,796,650

 

466,723

 

2,621,112

 

(45,127)

 

 

5,839,358

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

599,538

 

-

 

-

 

(599,538)

(b)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

1,043,952

 

-

 

-

 

-

 

 

1,043,952

Buildings and improvements

 

4,752,816

 

-

 

-

 

-

 

 

4,752,816

Furniture and equipment

 

754,641

 

-

 

-

 

-

 

 

754,641

Rental trailers and other rental equipment

 

513,623

 

-

 

-

 

-

 

 

513,623

Rental trucks

 

3,619,718

 

-

 

-

 

-

 

 

3,619,718

 

 

10,684,750

 

-

 

-

 

-

 

 

10,684,750

Less:   Accumulated depreciation

 

(2,811,749)

 

-

 

-

 

-

 

 

(2,811,749)

Total property, plant and equipment, net

 

7,873,001

 

-

 

-

 

-

 

 

7,873,001

Total assets

$

11,269,189

$

466,723

$

2,621,112

$

(644,665)

 

$

13,712,359

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

21

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Consolidating balance sheets by industry segment as of June 30, 2020, continued

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

571,473

$

5,281

$

5,602

$

-

 

$

582,356

Notes, loans and finance/capital leases payable, net

 

4,766,564

 

-

 

11,399

 

-

 

 

4,777,963

Operating lease liability

 

106,114

 

271

 

229

 

-

 

 

106,614

Policy benefits and losses, claims and loss expenses payable

 

410,989

 

207,571

 

380,202

 

-

 

 

998,762

Liabilities from investment contracts

 

-

 

-

 

1,833,617

 

-

 

 

1,833,617

Other policyholders' funds and liabilities

 

-

 

1,662

 

5,102

 

-

 

 

6,764

Deferred income

 

42,789

 

-

 

-

 

-

 

 

42,789

Deferred income taxes, net

 

1,092,631

 

6,715

 

6,966

 

-

 

 

1,106,312

Related party liabilities

 

26,143

 

3,694

 

1,387

 

(31,224)

(c)

 

-

Total liabilities

 

7,016,703

 

225,194

 

2,244,504

 

(31,224)

 

 

9,455,177

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

-

 

-

 

-

 

-

 

 

-

Series B preferred stock

 

-

 

-

 

-

 

-

 

 

-

Series A common stock

 

-

 

-

 

-

 

-

 

 

-

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

454,029

 

91,120

 

26,271

 

(117,601)

(b)

 

453,819

Accumulated other comprehensive income (loss)

 

(18,428)

 

3,937

 

36,550

 

(35,791)

(b)

 

(13,732)

Retained earnings

 

4,484,038

 

143,171

 

311,287

 

(454,248)

(b)

 

4,484,248

Cost of common stock in treasury, net

 

(525,653)

 

-

 

-

 

-

 

 

(525,653)

Cost of preferred stock in treasury, net

 

(151,997)

 

-

 

-

 

-

 

 

(151,997)

Unearned employee stock ownership plan stock

 

-

 

-

 

-

 

-

 

 

-

Total stockholders' equity

 

4,252,486

 

241,529

 

376,608

 

(613,441)

 

 

4,257,182

Total liabilities and stockholders' equity

$

11,269,189

$

466,723

$

2,621,112

$

(644,665)

 

$

13,712,359

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

22

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)


Consolidating balance sheets by industry segment as of March 31, 2020 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

Assets:

 

(In thousands)

Cash and cash equivalents

$

459,078

$

4,794

$

30,480

$

-

 

$

494,352

Reinsurance recoverables and trade receivables, net

 

60,073

 

93,995

 

32,604

 

-

 

 

186,672

Inventories and parts, net

 

101,083

 

-

 

-

 

-

 

 

101,083

Prepaid expenses

 

562,904

 

-

 

-

 

-

 

 

562,904

Investments, fixed maturities and marketable equities

 

-

 

288,998

 

2,203,740

 

-

 

 

2,492,738

Investments, other

 

20,988

 

90,145

 

249,240

 

-

 

 

360,373

Deferred policy acquisition costs, net

 

-

 

-

 

103,118

 

-

 

 

103,118

Other assets

 

69,128

 

680

 

2,148

 

-

 

 

71,956

Right of use assets - financing, net

 

1,080,353

 

-

 

-

 

-

 

 

1,080,353

Right of use assets - operating

 

106,631

 

-

 

-

 

-

 

 

106,631

Related party assets

 

41,027

 

7,137

 

18,629

 

(32,009)

(c)

 

34,784

 

 

2,501,265

 

485,749

 

2,639,959

 

(32,009)

 

 

5,594,964

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

668,498

 

-

 

-

 

(668,498)

(b)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

1,032,945

 

-

 

-

 

-

 

 

1,032,945

Buildings and improvements

 

4,663,461

 

-

 

-

 

-

 

 

4,663,461

Furniture and equipment

 

752,363

 

-

 

-

 

-

 

 

752,363

Rental trailers and other rental equipment

 

511,520

 

-

 

-

 

-

 

 

511,520

Rental trucks

 

3,595,933

 

-

 

-

 

-

 

 

3,595,933

 

 

10,556,222

 

-

 

-

 

-

 

 

10,556,222

Less:   Accumulated depreciation

 

(2,713,162)

 

-

 

-

 

-

 

 

(2,713,162)

Total property, plant and equipment, net

 

7,843,060

 

-

 

-

 

-

 

 

7,843,060

Total assets

$

11,012,823

$

485,749

$

2,639,959

$

(700,507)

 

$

13,438,024

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

23

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Consolidating balance sheets by industry segment as of March 31, 2020, continued

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

545,685

$

5,530

$

3,138

$

-

 

$

554,353

Notes, loans and finance/capital leases payable, net

 

4,609,844

 

-

 

11,447

 

-

 

 

4,621,291

Operating lease liability

 

106,443

 

-

 

-

 

-

 

 

106,443

Policy benefits and losses, claims and loss expenses payable

 

410,107

 

210,341

 

377,199

 

-

 

 

997,647

Liabilities from investment contracts

 

-

 

-

 

1,802,217

 

-

 

 

1,802,217

Other policyholders' funds and liabilities

 

-

 

5,751

 

4,439

 

-

 

 

10,190

Deferred income

 

31,620

 

-

 

-

 

-

 

 

31,620

Deferred income taxes, net

 

1,063,681

 

8,447

 

21,415

 

-

 

 

1,093,543

Related party liabilities

 

24,275

 

4,616

 

2,670

 

(31,561)

(c)

 

-

Total liabilities

 

6,791,655

 

234,685

 

2,222,525

 

(31,561)

 

 

9,217,304

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

-

 

-

 

-

 

-

 

 

-

Series B preferred stock

 

-

 

-

 

-

 

-

 

 

-

Series A common stock

 

-

 

-

 

-

 

-

 

 

-

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

454,029

 

91,120

 

26,271

 

(117,601)

(b)

 

453,819

Accumulated other comprehensive income (loss)

 

35,100

 

12,581

 

78,550

 

(91,579)

(b)

 

34,652

Retained earnings

 

4,399,192

 

144,062

 

310,113

 

(453,965)

(b)

 

4,399,402

Cost of common stock in treasury, net

 

(525,653)

 

-

 

-

 

-

 

 

(525,653)

Cost of preferred stock in treasury, net

 

(151,997)

 

-

 

-

 

-

 

 

(151,997)

Unearned employee stock ownership plan stock

 

-

 

-

 

-

 

-

 

 

-

Total stockholders' equity

 

4,221,168

 

251,064

 

417,434

 

(668,946)

 

 

4,220,720

Total liabilities and stockholders' equity

$

11,012,823

$

485,749

$

2,639,959

$

(700,507)

 

$

13,438,024

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

24

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)


Consolidating statement of operations by industry segment for the quarter ended June 30, 2020 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

654,913

$

-

$

-

$

(628)

(c)

$

654,285

Self-storage revenues

 

108,955

 

-

 

-

 

-

 

 

108,955

Self-moving and self-storage products and service sales

 

91,350

 

-

 

-

 

-

 

 

91,350

Property management fees

 

7,347

 

-

 

-

 

-

 

 

7,347

Life insurance premiums

 

-

 

-

 

30,908

 

-

 

 

30,908

Property and casualty insurance premiums

 

-

 

14,507

 

-

 

(773)

(c)

 

13,734

Net investment and interest income

 

662

 

(873)

 

18,006

 

(813)

(b)

 

16,982

Other revenue

 

63,073

 

-

 

739

 

(136)

(b)

 

63,676

Total revenues

 

926,300

 

13,634

 

49,653

 

(2,350)

 

 

987,237

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

480,081

 

8,825

 

5,288

 

(1,532)

(b,c)

 

492,662

Commission expenses

 

69,175

 

-

 

-

 

-

 

 

69,175

Cost of sales

 

52,831

 

-

 

-

 

-

 

 

52,831

Benefits and losses

 

-

 

4,030

 

35,547

 

-

 

 

39,577

Amortization of deferred policy acquisition costs

 

-

 

-

 

6,888

 

-

 

 

6,888

Lease expense

 

7,137

 

1

 

10

 

(545)

(b)

 

6,603

Depreciation, net of gains on disposals

 

165,671

 

-

 

-

 

-

 

 

165,671

Net gains on disposal of real estate

 

(256)

 

-

 

-

 

-

 

 

(256)

Total costs and expenses

 

774,639

 

12,856

 

47,733

 

(2,077)

 

 

833,151

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

151,661

 

778

 

1,920

 

(273)

 

 

154,086

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

2,395

 

-

 

-

 

(2,395)

(d)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

154,056

 

778

 

1,920

 

(2,668)

 

 

154,086

Other components of net periodic benefit costs

 

(247)

 

-

 

-

 

-

 

 

(247)

Interest expense

 

(39,794)

 

-

 

-

 

273

(b)

 

(39,521)

Pretax earnings

 

114,015

 

778

 

1,920

 

(2,395)

 

 

114,318

Income tax expense

 

(26,289)

 

(162)

 

(141)

 

-

 

 

(26,592)

Earnings available to common stockholders

$

87,726

$

616

$

1,779

$

(2,395)

 

$

87,726

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances for the quarter ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

25

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)


Consolidating statements of operations by industry for the quarter ended June 30, 2019 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

749,136

$

-

$

-

$

(540)

(c)

$

748,596

Self-storage revenues

 

98,274

 

-

 

-

 

-

 

 

98,274

Self-moving and self-storage products and service sales

 

80,026

 

-

 

-

 

-

 

 

80,026

Property management fees

 

7,156

 

-

 

-

 

-

 

 

7,156

Life insurance premiums

 

-

 

-

 

32,710

 

-

 

 

32,710

Property and casualty insurance premiums

 

-

 

14,114

 

-

 

(690)

(c)

 

13,424

Net investment and interest income

 

3,267

 

6,191

 

26,701

 

(410)

(b)

 

35,749

Other revenue

 

62,539

 

-

 

910

 

(135)

(b)

 

63,314

Total revenues

 

1,000,398

 

20,305

 

60,321

 

(1,775)

 

 

1,079,249

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

522,524

 

8,081

 

5,228

 

(1,361)

(b,c)

 

534,472

Commission expenses

 

80,899

 

-

 

-

 

-

 

 

80,899

Cost of sales

 

48,929

 

-

 

-

 

-

 

 

48,929

Benefits and losses

 

-

 

3,758

 

45,248

 

-

 

 

49,006

Amortization of deferred policy acquisition costs

 

-

 

-

 

6,064

 

-

 

 

6,064

Lease expense

 

7,172

 

-

 

-

 

(136)

(b)

 

7,036

Depreciation, net of gains on disposals

 

140,600

 

-

 

-

 

-

 

 

140,600

Net gains on disposal of real estate

 

(1,622)

 

-

 

-

 

-

 

 

(1,622)

Total costs and expenses

 

798,502

 

11,839

 

56,540

 

(1,497)

 

 

865,384

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

201,896

 

8,466

 

3,781

 

(278)

 

 

213,865

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

9,831

 

-

 

-

 

(9,831)

(d)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

211,727

 

8,466

 

3,781

 

(10,109)

 

 

213,865

Other components of net periodic benefit costs

 

(263)

 

-

 

-

 

-

 

 

(263)

Interest expense

 

(39,166)

 

-

 

-

 

278

(b)

 

(38,888)

Pretax earnings

 

172,298

 

8,466

 

3,781

 

(9,831)

 

 

174,714

Income tax expense

 

(39,876)

 

(1,778)

 

(638)

 

-

 

 

(42,292)

Earnings available to common stockholders

$

132,422

$

6,688

$

3,143

$

(9,831)

 

$

132,422

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances for the quarter ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

26

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)


Consolidating cash flow statements by industry segment for the quarter ended June 30, 2020 are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from operating activities:

 

(In thousands)

Net earnings

$

87,726

$

616

$

1,779

$

(2,395)

 

$

87,726

Earnings from consolidated entities

 

(2,395)

 

-

 

-

 

2,395

 

 

-

Adjustments to reconcile net earnings to the cash provided by operations:

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

166,740

 

-

 

-

 

-

 

 

166,740

Amortization of deferred policy acquisition costs

 

-

 

-

 

6,888

 

-

 

 

6,888

Amortization of premiums and accretion of discounts related to investments, net

 

-

 

395

 

3,155

 

-

 

 

3,550

Amortization of debt issuance costs

 

1,297

 

-

 

-

 

-

 

 

1,297

Interest credited to policyholders

 

-

 

-

 

7,667

 

-

 

 

7,667

Change in allowance for losses on trade receivables

 

60

 

-

 

-

 

-

 

 

60

Change in allowance for inventories and parts reserve

 

(99)

 

-

 

-

 

-

 

 

(99)

Net gains on disposal of personal property

 

(1,069)

 

-

 

-

 

-

 

 

(1,069)

Net gains on disposal of real estate

 

(256)

 

-

 

-

 

-

 

 

(256)

Net (gains) losses on sales of investments

 

-

 

(13)

 

2,027

 

-

 

 

2,014

Net losses on equity investments

 

-

 

3,989

 

-

 

-

 

 

3,989

Deferred income taxes

 

28,939

 

1,070

 

(2,475)

 

-

 

 

27,534

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

(24,749)

 

5,725

 

(4,570)

 

-

 

 

(23,594)

Inventories and parts

 

350

 

-

 

-

 

-

 

 

350

Prepaid expenses

 

(22,831)

 

-

 

-

 

-

 

 

(22,831)

Capitalization of deferred policy acquisition costs

 

-

 

-

 

(7,308)

 

-

 

 

(7,308)

Other assets

 

758

 

(340)

 

(344)

 

-

 

 

74

Related party assets

 

7,302

 

27

 

-

 

-

 

 

7,329

Accounts payable and accrued expenses

 

56,522

 

(246)

 

1,997

 

-

 

 

58,273

Policy benefits and losses, claims and loss expenses payable

 

294

 

(2,769)

 

3,003

 

-

 

 

528

Other policyholders' funds and liabilities

 

-

 

(4,089)

 

663

 

-

 

 

(3,426)

Deferred income

 

11,238

 

-

 

3,660

 

-

 

 

14,898

Related party liabilities

 

1,867

 

(834)

 

(1,282)

 

-

 

 

(249)

Net cash provided by operating activities

 

311,694

 

3,531

 

14,860

 

-

 

 

330,085

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Escrow deposits

 

1,401

 

-

 

-

 

-

 

 

1,401

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(249,740)

 

-

 

-

 

-

 

 

(249,740)

Short term investments

 

-

 

(8,989)

 

(636)

 

-

 

 

(9,625)

Fixed maturities investments

 

-

 

(1,864)

 

(92,329)

 

-

 

 

(94,193)

Real estate

 

-

 

-

 

(192)

 

-

 

 

(192)

Mortgage loans

 

-

 

-

 

(33,300)

 

-

 

 

(33,300)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

76,412

 

-

 

-

 

-

 

 

76,412

Short term investments

 

-

 

1,980

 

468

 

-

 

 

2,448

Fixed maturities investments

 

-

 

4,402

 

105,763

 

-

 

 

110,165

Mortgage loans

 

-

 

265

 

1,167

 

-

 

 

1,432

Net cash used by investing activities

 

(171,927)

 

(4,206)

 

(19,059)

 

-

 

 

(195,192)

 

 

(page 1 of 2)

(a) Balance for the period ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

27

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Consolidating cash flow statements by industry segment for the quarter ended June 30, 2020, continued

 

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from financing activities:

 

(In thousands)

Borrowings from credit facilities

 

367,451

 

-

 

9,600

 

-

 

 

377,051

Principal repayments on credit facilities

 

(144,489)

 

-

 

(9,600)

 

-

 

 

(154,089)

Payments of debt issuance costs

 

(1,677)

 

-

 

-

 

-

 

 

(1,677)

Finance/capital lease payments

 

(68,554)

 

-

 

-

 

-

 

 

(68,554)

Net contribution from (to) related party

 

18,599

 

-

 

-

 

-

 

 

18,599

Investment contract deposits

 

-

 

-

 

75,366

 

-

 

 

75,366

Investment contract withdrawals

 

-

 

-

 

(51,633)

 

-

 

 

(51,633)

Net cash provided (used) by financing activities

 

171,330

 

-

 

23,733

 

-

 

 

195,063

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

766

 

-

 

-

 

-

 

 

766

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

311,863

 

(675)

 

19,534

 

-

 

 

330,722

Cash and cash equivalents at beginning of period

 

459,078

 

4,794

 

30,480

 

-

 

 

494,352

Cash and cash equivalents at end of period

$

770,941

$

4,119

$

50,014

$

-

 

$

825,074

 

 

(page 2 of 2)

(a) Balance for the period ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

28

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)


Consolidating cash flow statements by industry segment for the quarter ended June 30, 2019 are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from operating activities:

 

(In thousands)

Net earnings

$

132,422

$

6,688

$

3,143

$

(9,831)

 

$

132,422

Earnings from consolidated entities

 

(9,831)

 

-

 

-

 

9,831

 

 

-

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

157,278

 

-

 

-

 

-

 

 

157,278

Amortization of deferred policy acquisition costs

 

-

 

-

 

6,064

 

-

 

 

6,064

Amortization of premiums and accretion of discounts related to investments, net

 

-

 

374

 

2,901

 

-

 

 

3,275

Amortization of debt issuance costs

 

1,053

 

-

 

-

 

-

 

 

1,053

Interest credited to policyholders

 

-

 

-

 

14,218

 

-

 

 

14,218

Change in allowance for losses on trade receivables

 

(162)

 

-

 

-

 

-

 

 

(162)

Change in allowance for inventories and parts reserve

 

367

 

-

 

-

 

-

 

 

367

Net gains on disposal of personal property

 

(16,678)

 

-

 

-

 

-

 

 

(16,678)

Net gains on disposal of real estate

 

(1,622)

 

-

 

-

 

-

 

 

(1,622)

Net gains on sales of investments

 

-

 

(33)

 

(4,234)

 

-

 

 

(4,267)

Net gains on equity investments

 

-

 

(2,215)

 

-

 

-

 

 

(2,215)

Deferred income taxes

 

35,980

 

(2,564)

 

(3,653)

 

-

 

 

29,763

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

(23,033)

 

5,078

 

(260)

 

-

 

 

(18,215)

Inventories and parts

 

2,110

 

-

 

-

 

-

 

 

2,110

Prepaid expenses

 

(15,720)

 

-

 

-

 

-

 

 

(15,720)

Capitalization of deferred policy acquisition costs

 

-

 

-

 

(5,090)

 

-

 

 

(5,090)

Other assets

 

1,805

 

1,546

 

(14)

 

-

 

 

3,337

Related party assets

 

(925)

 

(439)

 

-

 

-

 

 

(1,364)

Accounts payable and accrued expenses

 

86,094

 

2,368

 

1,254

 

-

 

 

89,716

Policy benefits and losses, claims and loss expenses payable

 

8,802

 

(6,987)

 

503

 

-

 

 

2,318

Other policyholders' funds and liabilities

 

-

 

(414)

 

(4,867)

 

-

 

 

(5,281)

Deferred income

 

8,527

 

-

 

-

 

-

 

 

8,527

Related party liabilities

 

1,345

 

(315)

 

62

 

-

 

 

1,092

Net cash provided by operating activities

 

367,812

 

3,087

 

10,027

 

-

 

 

380,926

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Escrow deposits

 

1,968

 

-

 

-

 

-

 

 

1,968

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(847,248)

 

-

 

-

 

-

 

 

(847,248)

Short term investments

 

-

 

(8,689)

 

-

 

-

 

 

(8,689)

Fixed maturities investments

 

-

 

(5,149)

 

(71,366)

 

-

 

 

(76,515)

Real estate

 

-

 

(328)

 

-

 

-

 

 

(328)

Mortgage loans

 

-

 

-

 

(9,410)

 

-

 

 

(9,410)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

160,754

 

-

 

-

 

-

 

 

160,754

Short term investments

 

-

 

6,942

 

40

 

-

 

 

6,982

Fixed maturities investments

 

-

 

4,196

 

34,062

 

-

 

 

38,258

Real estate

 

311

 

-

 

-

 

-

 

 

311

Mortgage loans

 

-

 

245

 

1,433

 

-

 

 

1,678

Net cash used by investing activities

 

(684,215)

 

(2,783)

 

(45,241)

 

-

 

 

(732,239)

 

 

(page 1 of 2)

(a) Balance for the period ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

29

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

Consolidating cash flow statements by industry segment for the quarter ended June 30, 2019, continued

 

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from financing activities:

 

(In thousands)

Borrowings from credit facilities

 

331,200

 

-

 

2,500

 

-

 

 

333,700

Principal repayments on credit facilities

 

(58,604)

 

-

 

(2,500)

 

-

 

 

(61,104)

Payment of debt issuance costs

 

(5)

 

-

 

-

 

-

 

 

(5)

Finance/capital lease payments

 

(94,446)

 

-

 

-

 

-

 

 

(94,446)

Employee stock ownership plan stock

 

(131)

 

-

 

-

 

-

 

 

(131)

Common stock dividend paid

 

(9,796)

 

-

 

-

 

-

 

 

(9,796)

Investment contract deposits

 

-

 

-

 

61,515

 

-

 

 

61,515

Investment contract withdrawals

 

-

 

-

 

(37,054)

 

-

 

 

(37,054)

Net cash provided by financing activities

 

168,218

 

-

 

24,461

 

-

 

 

192,679

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

4,764

 

-

 

-

 

-

 

 

4,764

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(143,421)

 

304

 

(10,753)

 

-

 

 

(153,870)

Cash and cash equivalents at beginning of period

 

643,918

 

5,757

 

24,026

 

-

 

 

673,701

Cash and cash equivalents at end of period

$

500,497

$

6,061

$

13,273

$

-

 

$

519,831

 

 

(page 2 of 2)

(a) Balance for the period ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 


 

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

12. Industry Segment and Geographic Area Data

 

 

United States

 

Canada

 

Consolidated

 

 

(Unaudited)

 

 

(All amounts are in thousands of U.S. $'s)

Quarter Ended June 30, 2020

 

 

 

 

 

 

Total revenues

$

942,803

$

44,434

$

987,237

Depreciation and amortization, net of gains on disposal

 

168,526

 

3,777

 

172,303

Interest expense

 

38,654

 

867

 

39,521

Pretax earnings

 

111,949

 

2,369

 

114,318

Income tax expense

 

25,783

 

809

 

26,592

Identifiable assets

 

13,279,882

 

432,477

 

13,712,359

 

 

 

 

 

 

 

Quarter Ended June 30, 2019

 

 

 

 

 

 

Total revenues

$

1,028,574

$

50,675

$

1,079,249

Depreciation and amortization, net of gains on disposal

 

141,898

 

3,144

 

145,042

Interest expense

 

38,220

 

668

 

38,888

Pretax earnings

 

170,847

 

3,867

 

174,714

Income tax expense

 

41,114

 

1,178

 

42,292

Identifiable assets

 

12,076,714

 

398,030

 

12,474,744

13. Employee Benefit Plans

The components of the net periodic benefit costs with respect to postretirement benefits were as follows:

 

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

Service cost for benefits earned during the period

$

317

$

292

Other components of net periodic benefit costs:

 

 

 

 

Interest cost on accumulated postretirement benefit

 

230

 

241

Other components

 

17

 

22

Total other components of net periodic benefit costs

 

247

 

263

Net periodic postretirement benefit cost

$

564

$

555

 

14. Fair Value Measurements

Certain assets and liabilities are recorded at fair value on the consolidated balance sheets and are measured and classified based upon a three-tiered approach to valuation. Financial assets and liabilities are recorded at fair value and are classified and disclosed in one of the following three categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;  

Level 2 - Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management's assumptions about the assumptions a market participant would use in pricing the asset or liability.

31

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.

We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.

The carrying amount of long-term debt and short-term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.

Other investments, including short-term investments, are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.

The carrying values and estimated fair values for the financial instruments stated above and their placement in the fair value hierarchy are as follows:

 

 

 

Fair Value Hierarchy

 

 

Carrying

 

 

 

 

 

 

 

Total Estimated

As of June 30, 2020

 

Value

 

Level 1

 

Level 2

 

Level 3

 

Fair Value

 

 

(Unaudited)

Assets

 

(In thousands)

Reinsurance recoverables and trade receivables, net

$

208,371

$

-

$

-

$

208,371

$

208,371

Mortgage loans, net

 

294,551

 

-

 

-

 

294,551

 

294,551

Other investments

 

100,572

 

-

 

-

 

100,572

 

100,572

Total

$

603,494

$

-

$

-

$

603,494

$

603,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Notes, loans and finance/capital leases payable

 

4,808,147

 

-

 

4,808,147

 

-

 

4,510,021

Total

$

4,808,147

$

-

$

4,808,147

$

-

$

4,510,021

32

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

 

 

Fair Value Hierarchy

 

 

Carrying

 

 

 

 

 

 

 

Total Estimated

As of March 31, 2020

 

Value

 

Level 1

 

Level 2

 

Level 3

 

Fair Value

 

 

(In thousands)

Assets

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables, net

$

186,672

$

-

$

-

$

186,672

$

186,672

Mortgage loans, net

 

262,688

 

-

 

-

 

262,688

 

262,688

Other investments

 

97,685

 

-

 

-

 

97,685

 

97,685

Total

$

547,045

$

-

$

-

$

547,045

$

547,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Notes, loans and leases payable

 

4,651,068

 

-

 

4,651,068

 

-

 

4,342,308

Total

$

4,651,068

$

-

$

4,651,068

$

-

$

4,342,308

The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of June 30, 2020 and March 31, 2020 that are measured at fair value on a recurring basis and the level within the fair value hierarchy.

As of June 30, 2020

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

(Unaudited)

Assets

 

(In thousands)

Short-term investments

$

629,550

$

629,265

$

285

$

-

Fixed maturities - available for sale

 

2,370,821

 

7,614

 

2,363,047

 

160

Preferred stock

 

6,106

 

6,106

 

-

 

-

Common stock

 

16,595

 

16,595

 

-

 

-

Derivatives

 

1,763

 

1,763

 

-

 

-

Total

$

3,024,835

$

661,343

$

2,363,332

$

160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Derivatives

 

8,170

 

-

 

8,170

 

-

Total

$

8,170

$

-

$

8,170

$

-

 

As of March 31, 2020

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

(In thousands)

Assets

 

 

 

 

 

 

 

 

Short-term investments

$

369,279

$

368,968

$

311

$

-

Fixed maturities - available for sale

 

2,466,048

 

7,156

 

2,458,731

 

161

Preferred stock

 

6,675

 

6,675

 

-

 

-

Common stock

 

20,015

 

20,015

 

-

 

-

Derivatives

 

5,944

 

5,944

 

-

 

-

Total

$

2,867,961

$

408,758

$

2,459,042

$

161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Derivatives

 

8,214

 

-

 

8,214

 

-

Total

$

8,214

$

-

$

8,214

$

-

33

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

 

The fair value measurements for our assets using significant unobservable inputs (Level 3) were $ 0.2 million for both June 30, 2020 and March 31, 2020.

15. Revenue Recognition

Revenue Recognized in Accordance with Topic 606

ASC Topic 606, Revenue from Contracts with Customers (Topic 606) , outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.

We enter into contracts that may include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, and remitted to the applicable taxing authorities. We account for a contract under Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For contracts scoped into this standard, revenue is recognized when (or as) the performance obligations are satisfied by means of transferring goods or services to the customer as applicable to each revenue stream as discussed below. There were no material contract assets or liabilities as of June 30, 2020 and March 31, 2020.

Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. The performance obligations identified for this portfolio of contracts include moving and storage product sales, installation services and/or propane sales. Each of these performance obligations has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied at a point in time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. The basis for this conclusion is that the customer does not receive the product/propane or benefit from the installation services until the related performance obligation is satisfied. These products/services being provided have an alternative use as they are not customized and can be sold/provided to any customer. In addition, we only have the right to receive payment once the products have been transferred to the customer or the installation services have been completed. Although product sales have a right of return policy, our estimated obligation for future product returns is not material to the financial statements at this time.

Property management fees are recognized over the period that agreed-upon services are provided. The performance obligation for this portfolio of contracts is property management services, which represents a series of distinct days of service, each of which is comprised of activities that may vary from day to day. However, those tasks are activities to fulfill the property management services and are not separate promises in the contract. We determined that each increment of the promised service is distinct in accordance with paragraph 606-10-25-19. This is because the customer can benefit from each increment of service on its own and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity's ability to fulfill another day of service or the benefit to the customer of another day of service. As such, we concluded that the performance obligation is satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance for the Management Fee component of the compensation received in exchange for the service. Additionally, in certain contracts the Company has the ability to earn an incentive fee based on operational results. Historically, these fees have been recognized once fully determinable. Under Topic 606, we measure and recognize the progress toward completion of the performance obligation on a quarterly basis using the most likely amount method to determine an accrual for the incentive fee portion of the compensation received in exchange for the property management service. The variable consideration recognized is subject to constraints due to a range of possible consideration amounts based on actual operational results. The amount accrued in the first quarter of fiscal 2020 did not have a material effect on our financial statements.

34

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Other revenue consists of numerous services or rentals, of which U-Box contracts and service fees from Moving Help are the main components. The performance obligations identified for U-Box contracts are fees for rental, storage and shipping of U-Box containers to a specified location, each of which are distinct. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. The rental and storage obligations in U-Box contracts meet the definition of a lease in Topic 842, while the shipping obligation represents a contract with a customer accounted for under Topic 606. Therefore, we allocate the total transaction price between the performance obligations of storage fees and rental fees and the shipping fees on a standalone selling price basis. U-Box shipping fees are collected once the shipment is in transit. Shipping fees in U-Box contracts are set at the initiation of the contract based on the shipping origin and destination, and the performance obligation is satisfied over time under Topic 606 which is consistent with the timing of our revenue recognition under legacy guidance. U-Box shipping contracts span over a relatively short period of time, and the majority of these contracts begin and end within the same fiscal year. Moving Help services fees are recognized in accordance with Topic 606. Moving Help services are generated as we provide a neutral venue for the connection between the service provider and the customer for agreed upon services. We do not control the specified services provided by the service provider before that service is transferred to the customer.

Revenue Recognized in Accordance withTopic 842/840

The Company's self-moving rental revenues meet the definition of a lease pursuant to the guidance in ASU 2016-02, Leases (Topic 842) because those substitution rights do not provide an economic benefit to the Company that would exceed the cost of exercising the right.   Therefore, upon adoption of ASU 2016-02 on April 1, 2019, self-rental contracts are being accounted for as leases.   We do not expect this change to result in a change in the timing and pattern of recognition of the related revenues due to the short-term nature of the self-moving rental contracts. Please see Note 8, Leases, of the Notes to Consolidated Financial Statements.

Self-moving rentals are recognized over the contract period that trucks and moving equipment are rented. We offer two types of self-moving rental contracts, one-way rentals and in-town rentals, which have varying payment terms. Customer payment is received at the initiation of the contract for one-way rentals which covers an allowable limit for equipment usage. An estimated fee in the form of a deposit is received at the initiation of the contract for in-town rentals, and final payment is received upon the return of the equipment based on actual fees incurred. The contract price is estimated at the initiation of the contract, as there is variable consideration associated with ratable fees incurred based on the number of days the equipment is rented and the number of miles driven. Variable consideration is estimated using the most likely amount method which is based on the intended use of the rental equipment by the customer at the initiation of the contract. Historically, the variability in estimated transaction pricing compared to actual is not significant due to the relatively short duration of rental contracts. Each performance obligation has an observable stand-alone selling price. The input method of passage of time is appropriate as there is a direct relationship between our inputs and the transfer of benefit to the customer over the life of the contract. Self-moving rental contracts span a relatively short period of time, and the majority of these contracts began and ended within the same fiscal year.

Self-storage revenues are recognized as earned over the contract period based upon the number of paid storage contract days. Self-storage revenues are recognized in accordance with existing guidance in Topic 840 - Leases.

We lease portions of our operating properties to tenants under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers.

35

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

The following table summarizes the minimum lease payments due from our customers and operating property tenants on leases for the next five years and thereafter:

 

 

Year Ended March 31,

 

 

2021

 

2022

 

2023

 

2024

 

2025

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

4,531

$

-

$

-

$

-

$

-

$

-

Property lease revenues

 

21,223

 

14,785

 

11,960

 

8,422

 

6,746

 

58,195

Total

$

25,754

$

14,785

$

11,960

$

8,422

$

6,746

$

58,195

The amounts above do not reflect future rental revenue from the renewal or replacement of existing leases.

Revenue Recognized in Accordance with Other Topics

Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force. Life insurance premiums are recognized in accordance with existing guidance in Topic 944 - Financial Services - Insurance.

Property and casualty insurance premiums are recognized as revenue over the policy periods. Interest and investment income are recognized as earned. Property and casualty premiums are recognized in accordance with existing guidance in Topic 944 - Financial Services - Insurance.

Net investment and interest income has multiple components. Interest income from bonds and mortgage notes are recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date. Net investment and interest income is recognized in accordance with existing guidance in Topic 825 - Financial Instruments.

In the following table, revenue is disaggregated by timing of revenue recognition:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

Revenues recognized over time:

$

44,938

$

39,079

Revenues recognized at a point in time:

 

104,848

 

91,171

Total revenues recognized under ASC 606

 

149,786

 

130,250

 

 

 

 

 

Revenues recognized under ASC 842 or 840

 

774,694

 

865,204

Revenues recognized under ASC 944

 

45,775

 

48,046

Revenues recognized under ASC 320

 

16,982

 

35,749

Total revenues

$

987,237

$

1,079,249

 

In the above table, the revenues recognized over time include property management fees, the shipping fees associated with U-Box rentals and a portion of other revenues. Revenues recognized at a point in time include self-moving equipment rentals, self-moving and self-storage products and service sales and a portion of other revenues .

36

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

We recognized liabilities resulting from contracts with customers for self-moving equipment rentals, self-storage revenues, U-Box revenues and tenant revenue, in which the length of the contract goes beyond the reported period end, although rental periods of the equipment, storage and U-Box contract are generally short-term in nature. The timing of revenue recognition results in liabilities that are reflected in deferred income on the balance sheet.

16. Allowance for Credit Losses

Trade Receivables

Moving and Storage has two (2) primary components of trade receivables, receivables from corporate customers and credit card receivables from sales and rental of equipment.   For credit card receivable, the Company uses a trailing 13 months average historical chargeback percentage of total credit card receivable. The Company rents equipment to corporate customers in which payment terms are 30 days.

The Company performs ongoing credit evaluations of its customers and assesses each customer's credit worthiness. In addition, the Company monitors collections and payments from its customers and maintains an allowance based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote.

Management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables because the composition of trade receivables as of that date is consistent with that used in developing the historical credit-loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). However, management has determined that the current and reasonable and supportable forecasted economic conditions have declined as compared with the economic conditions included in the historical information partially as a result of COVID-19 during the first quarter of fiscal 2021. To adjust the historical loss rates to reflect the effects of these differences in current conditions and forecasted changes, management estimated the loss rate at approximately 5%. Management developed this estimate based on its knowledge of past experience for which there were similar improvements in the economy. As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses at June 30, 2020 was $ 2.7 million.

Available-for-Sale

For available-for-sale debt securities in an unrealized loss position, we first assess whether the security is below investment grade.   For securities that are below investment grade, we evaluate whether the decline in fair value has resulted from credit losses or other factors such as the interest rate environment.   In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse market conditions specifically related to the security, among other factors.   If this assessment indicates that a credit loss exists, cumulative default rates based on ratings are used to determine the potential cost of default, by year.   The present value of these potential costs is then compared to the amortized cost of the security to determine the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through accumulated other comprehensive income, net of applicable taxes. If we intend to sell a security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. There were no incremental impairment charges recorded during the quarter ended June 30, 2020.

37

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

Accrued Interest Receivable

Accrued interest receivables on available for sale securities totaled $ 25.8 million as of January 1, 2020 and are excluded from the estimate of credit losses.

Mortgage loans, net

The portfolio of mortgage loans are principally collateralized by self-storage facilities and commercial properties. Mortgage loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at amortized cost.   Modeling for our mortgage loans is based on inputs most highly correlated to defaults, including loan-to-value, occupancy, and payment history.   Historical credit loss experience provides additional support for the estimation of expected credit losses. In assessing the credit losses, the portfolio is reviewed on a collective basis, using loan-specific cash flows to determine the fair value of the collateral in the event of default.   Adjustments to this analysis are made to assess loans with a loan-to-value of 65% or greater.   Loans that fall under the >65% LTV are evaluated on an individual basis and loan specific risk characteristics such as occupancy levels, expense, income growth and other relevant available information from internal and external sources relating to post events, current conditions, and reasonable and supportable forecasts.

When management determines that foreclosure is probable, an allowance for expected credit losses based on the fair value of the collateral is recorded.

Reinsurance recoverable

Reinsurance recoverable on paid and unpaid benefits was less than 1 % of the total assets at January 1, 2020 which is immaterial based on historical loss experience and high credit rating of the reinsurers.

Premium receivable

Premiums receivable   were $ 3.0 million at January 1, 2020 in which the credit loss allowance is immaterial based on our ability to cancel the policy if the policyholder doesn't pay premiums.

The following details the changes in the Company's reserve allowance for credit losses for trade receivables, fixed maturities and investments, other:

 

 

Allowance for Credit Losses

 

 

Trade Receivables

 

Investments, Fixed Maturities

 

Investments, other

 

Total

 

 

(Unaudited)

 

 

(in thousands)

Balance as of March 31, 2020

$

2,680

$

503

$

501

$

3,684

Transition adjustment current expected credit losses

 

43

 

4,905

 

-

 

4,948

Write-offs against allowance

 

-

 

-

 

-

 

-

Recoveries

 

-

 

-

 

-

 

-

Balance as of June 30, 2020

$

2,723

$

5,408

$

501

$

8,632

17.   Accounting Pronouncements

Adoption of New Accounting Pronouncements

On April 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires the measurement and recognition of expected credit losses held at amortized cost. This new standard requires the use of forward-looking information to estimate credit losses and requires credit losses for available for sale debt securities to be recorded through an allowance for credit losses rather than a reduction in the amortized cost basis. We adopted ASU 2016-13 on April 1, 2020 using a modified retrospective approach. We recognized a cumulative-effect adjustment to our opening retained earnings balance in the period of adoption. Accordingly, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption to our beginning retained earnings was $ 2.9 million.

38

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements - (continued)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for the timing of such transfers. ASU 2018-13 expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of the standard did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”). The amendments in this update require insurance companies to annually review and update the assumptions used for measuring the liability under long-duration contracts, such as life insurance, disability income, and annuities. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2020. We are currently in the process of evaluating the impact of the adoption of this amendment on our financial statements; however, the adoption of ASU 2018-12 will impact the statements of operations because the effect of any update to the assumptions we used at the inception of the contracts will be recorded in net income.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General Subtopic 715-20 - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. We are currently evaluating the impact of this standard on our consolidated financial statements.

From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by us as of the specified effective date. Unless otherwise discussed, these ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore will have minimal, if any, impact on our financial position or results of operations upon adoption.

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Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

General

We begin Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with the overall strategy of AMERCO, followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020, which is followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources - Summary and Disclosures about Contractual Obligations and Commercial Commitments and a discussion of off-balance sheet arrangements. We conclude this MD&A by discussing our current outlook for the remainder of fiscal 2021.

This MD&A should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. The various sections of this MD&A contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing or in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2020. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements.

AMERCO, a Nevada corporation, has a first fiscal quarter that ends on the 30 th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31 st of March for each year that is referenced. They have been consolidated on that basis. Our insurance companies' financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries' years 2020 and 2019 correspond to fiscal 2021 and 2020 for AMERCO.

Overall Strategy

Our overall strategy is to maintain our leadership position in the United States and Canada “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence.

Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our eMove ® capabilities.

Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates.  

Life Insurance is focused on long term capital growth through direct writing and reinsuring of life insurance, Medicare supplement and annuity products in the senior marketplace.

Description of Operating Segments

AMERCO's three reportable segments are:

  • Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate;
  • Property and Casualty Insurance, comprised of Repwest and its wholly owned subsidiaries and ARCOA; and
  • Life Insurance, comprised of Oxford and its wholly owned subsidiaries.

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Moving and Storage

Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.

With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer network, which provides added convenience for our customers, and expanding the selection and availability of rental equipment to satisfy the needs of our customers.

U-Haul brand self-moving related products and services, such as boxes, pads and tape, allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind.

uhaul.com ® is an online marketplace that connects consumers to our operations as well as independent Moving Help ® service providers and thousands of independent Self-Storage Affiliates. Our network of customer rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market.

Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations, has helped us to reduce our impact on the environment.

Property and Casualty Insurance

Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul related programs.

Life Insurance

Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Critical Accounting Policies and Estimates

Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..

Impairment of Investments

Current expected credit loss (“CECL”) has replaced the previous other-than-temporary-impairment (“OTTI”) model. Under the OTTI model, credit losses were recognized as a reduction to the cost basis of the investment with recovery of an impairment loss recognized prospectively over time as interest income and reversals of impairment were not allowed. Under CECL, a valuation allowance is recognized in earnings for credit losses. If we intend to sell a debt security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.

There were no incremental impairment charges recorded during the quarter ended June 30, 2020.

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Results of Operations

AMERCO and Consolidated Entities

Quarter Ended June 30, 2020 compared with the Quarter Ended June 30, 2019

Listed below, on a consolidated basis, are revenues for our major product lines for the first quarter of fiscal 2021 and the first quarter of fiscal 2020:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

654,285

$

748,596

Self-storage revenues

 

108,955

 

98,274

Self-moving and self-storage products and service sales

 

91,350

 

80,026

Property management fees

 

7,347

 

7,156

Life insurance premiums

 

30,908

 

32,710

Property and casualty insurance premiums

 

13,734

 

13,424

Net investment and interest income

 

16,982

 

35,749

Other revenue

 

63,676

 

63,314

Consolidated revenue

$

987,237

$

1,079,249

Self-moving equipment rental revenues decreased $94.3 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   Either through force of government or personal caution, self-moving rental activity decreased as a result of COVID-19 during the first quarter of fiscal 2021.   The decline in equipment rental revenues, as compared to the same period the previous year, did improve throughout the quarter.   April, May and June revenues were down approximately 30%, 8% and 4%, respectively.   Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks and trailers in the rental fleet.  

Self-storage revenues increased $10.7 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   The average monthly number of occupied units increased by 15%, or 44,000 units during the first quarter of fiscal 2021 compared with the same period last year.   The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations and from the addition of new capacity to the portfolio. Over the last twelve months, we added approximately 5.2 million net rentable square feet, or a 14% increase, with approximately 1.3 million of that coming on during the first quarter of fiscal 2021.

Sales of self-moving and self-storage products and services increased $11.3 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   This is due to increased sales of hitches, moving supplies and propane.

Life insurance premiums decreased $1.8 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020 due primarily to decreased life and Medicare supplement premiums.

Property and casualty insurance premiums increased $0.3 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020 due to an increase in Safetow ® and Safestor ® sales, which is a reflection of the increased equipment and storage rental transactions. Sales decreased in the second half of March 2020 as self-moving transactions declined.

Net investment and interest income decreased $18.8 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020. Changes in the market value of unaffiliated common stocks held in our property and casualty insurance subsidiary accounted for $6.2 million of the decrease during the quarter. A $7.9 million realized loss in derivatives used as hedges for our fixed indexed annuities at our life insurance subsidiary also contributed to the decrease during the quarter. In addition, the adoption of ASU 2016-13 resulted in net credit loss expense of $4.4 million for the three months ended March 31, 2020.

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Listed below are revenues and earnings from operations at each of our operating segments for the first quarter of fiscal 2021 and the first quarter of fiscal 2020. The insurance companies' first quarters ended March 31, 2020 and 2019.

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Moving and storage

 

 

 

 

Revenues

$

926,300

$

1,000,398

Earnings from operations before equity in earnings of subsidiaries

 

151,661

 

201,896

Property and casualty insurance  

 

 

 

 

Revenues

 

13,634

 

20,305

Earnings from operations

 

778

 

8,466

Life insurance   

 

 

 

 

Revenues

 

49,653

 

60,321

Earnings from operations

 

1,920

 

3,781

Eliminations

 

 

 

 

Revenues

 

(2,350)

 

(1,775)

Earnings from operations before equity in earnings of subsidiaries

 

(273)

 

(278)

Consolidated results

 

 

 

 

Revenues

 

987,237

 

1,079,249

Earnings from operations

 

154,086

 

213,865

Total costs and expenses decreased $32.2 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020. Operating expenses for Moving and Storage decreased $42.4 million.   Repair costs associated with the rental fleet experienced a $27.8 million decrease during the quarter due to fewer trucks being prepped for sale and from a reduction in rental miles.   Other decreases included personnel, liability costs and payment processing costs. Net gains from the disposal of rental equipment decreased $15.6 million from a reduction in auction activity due to COVID-19.   Depreciation expense associated with our rental fleet increased $2.5 million to $124.9 million.   Depreciation expense on all other assets, largely from buildings and improvements, increased $7.0 million to $41.9 million. Net gains on the disposal of real estate decreased $1.4 million from the condemnation of a property in the first quarter of fiscal 2020.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $154.1 million for the first quarter of fiscal 2021, compared with $213.9 million for the first quarter of fiscal 2020.

Interest expense for the first quarter of fiscal 2021 was $39.5 million, compared with $38.9 million for the first quarter of fiscal 2020, due to increased borrowings.

Income tax expense was $26.6 million for the first quarter of fiscal 2021, compared with $42.3 million for the first quarter of fiscal 2020.

As a result of the above-mentioned items, earnings available to common stockholders were $87.7 million for the first quarter of fiscal 2021, compared with $132.4 million for the first quarter of fiscal 2020.

Basic and diluted earnings per share for the first quarter of fiscal 2021 were $4.47, compared with $6.76 for the first quarter of fiscal 2020.

The weighted average common shares outstanding basic and diluted were 19,607,788 for the first quarter of fiscal 2021, compared with 19,597,697 for the first quarter of fiscal 2020.

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Moving and Storage

Quarter Ended June 30, 2020 compared with the Quarter Ended June 30, 2019

Listed below are revenues for our major product lines at Moving and Storage for the first quarter of fiscal 2021 and the first quarter of fiscal 2020:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

654,913

$

749,136

Self-storage revenues

 

108,955

 

98,274

Self-moving and self-storage products and service sales

 

91,350

 

80,026

Property management fees

 

7,347

 

7,156

Net investment and interest income

 

662

 

3,267

Other revenue

 

63,073

 

62,539

Moving and Storage revenue

$

926,300

$

1,000,398

Self-moving equipment rental revenues decreased $94.2 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   Either through force of government or personal caution, self-moving rental activity decreased as a result of COVID-19 during the first quarter of fiscal 2021.   The decline in equipment rental revenues, as compared to the same period the previous year, did improve throughout the quarter.   April, May and June revenues were down approximately 30%, 8% and 4%, respectively.   Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks and trailers in the rental fleet.      

Self-storage revenues increased $10.7 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   The average monthly number of occupied units increased by 15%, or 44,000 units during the first quarter of fiscal 2021 compared with the same period last year.   The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations and from the addition of new capacity to the portfolio.   Over the last twelve months, we added approximately 5.2 million net rentable square feet, or a 14% increase, with approximately 1.3 million of that coming on during the first quarter of fiscal 2021.

We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands, except occupancy rate)

Unit count as of June 30

 

516

 

452

Square footage as of June 30

 

43,393

 

38,175

Average monthly number of units occupied

 

347

 

302

Average monthly occupancy rate based on unit count

 

67.6%

 

68.4%

Average monthly square footage occupied

 

31,010

 

27,421

Over the last twelve months we added approximately 5.2 million net rentable square feet of new storage to the system. This was a mix of existing storage locations we acquired and new development. On average, the occupancy rate of this new capacity on the date it was added was 2.5%.

Sales of self-moving and self-storage products and services increased $11.3 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   This is due to increased sales of hitches, moving supplies and propane.

Net investment and interest income decreased $2.6 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020.   

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Total costs and expenses decreased $23.9 million during the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020. Operating expenses decreased $42.4 million.   Repair costs associated with the rental fleet experienced a $27.8 million decrease during the quarter due to fewer trucks being prepped for sale and from a reduction in rental miles.   Other decreases included personnel, liability costs and payment processing costs. Net gains from the disposal of rental equipment decreased $15.6 million from a reduction in auction activity due to COVID-19.   Depreciation expense associated with our rental fleet increased $2.5 million to $124.9 million.   Depreciation expense on all other assets, largely from buildings and improvements, increased $7.0 million to $41.9 million. Net gains on the disposal of real estate decreased $1.4 million from the condemnation of a property in the first quarter of fiscal 2020.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries, decreased to $151.7 million for the first quarter of fiscal 2021, compared with $201.9 million for the first quarter of fiscal 2020.

Equity in the earnings of AMERCO's insurance subsidiaries was $2.4 million for the first quarter of fiscal 2021, compared with $9.8 million for the first quarter of fiscal 2020.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations increased to $154.1 million for the first quarter of fiscal 2021, compared with $211.7 million for the first quarter of fiscal 2020.

Property and Casualty Insurance

Quarter Ended March 31, 2020 compared with the Quarter Ended March 31, 2019

Net premiums were $14.5 million and $14.1 million for the quarters ended March 31, 2020 and 2019, respectively. A significant portion of Repwest's premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period. Sales decreased in the second half of March 2020 due to the COVID-19 related issues that affected self-moving equipment rental revenues.

Net investment and interest income was ($0.9) million and $6.2 million for the three months ended March 31, 2020 and 2019, respectively. The main driver of the change in net investment income was the decrease in the valuation of unaffiliated common stock of $6.2 million. In addition, the adoption of ASU 2016-13 resulted in net credit loss expense of $0.8 million for the three months ended March 31, 2020.

Net operating expenses were $8.8 million and $8.1 million for the three months ended March 31, 2020 and 2019, respectively. The change was due to an increase in commissions, decreased loss adjusting fees and subrogation income.

Benefits and losses incurred were $4.0 million and $3.8 million for the three months March 31, 2020 and 2019, respectively. The increase was due to unfavorable loss experience.

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $0.8 million and $8.5 million for the three months ended March 31, 2020 and 2019, respectively.

Life Insurance

Quarter Ended March 31, 2020 compared with the Quarter Ended March 31, 2019

Net premiums were $30.9 million and $32.7 million for the quarters ended March 31, 2020 and 2019, respectively. Medicare Supplement premiums decreased $2.6 million from the policy decrements offset by premium rate increases. This was partially offset by a $1.0 million increase in life premiums from the new sales.   Premiums on other lines of business decreased $0.2 million. Deferred annuity deposits were $60.4 million or $1.1 million below prior year and are accounted for on the balance sheet as deposits rather than premiums.

Net investment and interest income was $18.0 million and $26.7 million for the quarters ended March 31, 2020 and 2019, respectively. The decrease was primarily due to a $7.9 million realized loss in derivatives used as hedges for our fixed indexed annuities. In addition, the adoption of ASU 2016-13 resulted in net credit loss expense of $3.6 million. This was partially offset by a $1.6 million increase in realized capital gains on fixed maturities coupled with a net $1.2 million increase in investment income from the remaining invested assets on a larger assets base.

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Net operating expenses were $5.3 million and $5.2 million for both the quarters ended March 31, 2020 and 2019, respectively.

Benefits and losses incurred were $35.5 million and $45.2 million for the quarters ended March 31, 2020 and 2019, respectively. Interest credited to policyholders decreased $7.0 million from the reduction in the interest credited rates on fixed indexed annuities driven by market decline. Medicare supplement benefits decreased $2.6 million from the declined policies in force. Benefits on the remaining lines of business decreased $0.1 million.

Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $6.9 million and $6.1 million for the quarters ended March 31, 2020 and 2019, respectively. The increase in DAC amortization was primarily from a higher asset base supported by continuous sales of annuities

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $1.9 million and $3.8 million for the quarters ended March 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors that could affect our liquidity, including some which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.

As of June 30, 2020, cash and cash equivalents totaled $825.1 million, compared with $494.4 million at March 31, 2020. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of June 30, 2020 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were:

 

 

Moving & Storage

 

Property & Casualty Insurance (a)

 

Life Insurance (a)

 

 

(Unaudited)

 

 

(In thousands)

Cash and cash equivalents

$

770,941

$

4,119

$

50,014

Other financial assets

 

138,818

 

461,248

 

2,451,483

Debt obligations

 

4,766,564

 

-

 

11,399

 

 

 

 

 

 

 

(a) As of March 31, 2020

 

 

 

 

 

 

As of June 30, 2020, Moving and Storage had additional cash available under existing credit facilities of $70.0 million.   The majority of invested cash at the Moving and Storage segment is held in government money market funds.

During the first quarter of fiscal 2021 COVID-19 has negatively affected our operating cash flows through lower self-moving equipment rental revenues along with a significant reduction in equipment sales proceeds stemming from the closures of commercial auto auctions We believe that the Company has adequate liquidity to meet our obligations. However, there can be no assurance that market conditions resulting from COVID-19 will not worsen and have a material negative effect on our liquidity.

Net cash provided by operating activities decreased $50.8 million in the first quarter of fiscal 2021 compared with the first quarter of fiscal 2020 largely as a result of reduced equipment rental activity.

Net cash used in investing activities increased $537.0 million in the first quarter of fiscal 2021, compared with the first quarter of fiscal 2020. Purchases of property, plant and equipment, decreased $597.5 million. Cash from the sales of property, plant and equipment decreased $84.3 million largely due to reduced fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $24.8 million due to reduced investment purchases.  

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Net cash provided by financing activities increased $2.4 million in the first quarter of fiscal 2021, as compared with the first quarter of fiscal 2020. This was due to a combination of increased debt payments of $93.0 million, decreased finance/capital lease repayments of $25.9 million, an increase in cash from borrowings of $43.4 million, a decrease in common stock dividends of $9.8 million and a decrease in net annuity deposits from Life Insurance of $0.7 million.

Liquidity and Capital Resources and Requirements of Our Operating Segments

Moving and Storage

To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. In the future, we anticipate that our internally generated funds will be used to service the existing debt and fund operations. U-Haul estimates that during fiscal 2021 the Company will reinvest in its truck and trailer rental fleet approximately $460 million, net of equipment sales and excluding any lease buyouts. Through the first quarter of fiscal 2021, the Company invested, net of sales, approximately $49 million before any lease buyouts in its truck and trailer fleet. Fleet investments in fiscal 2021 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment and the used-truck sales market. We anticipate that the fiscal 2021 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options. Based upon interactions with our existing lenders, the Company does not believe that COVID-19 will materially inhibit our ability to obtain financing for the purchases of rental equipment in fiscal 2021. Should the situation severely worsen this belief could change.

Real Estate has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company's plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. The Company expects to fund these development projects through a combination of internally generated funds along with borrowings against existing properties as they operationally mature. For the first quarter of fiscal 2021, the Company invested $103 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2021, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, the identification and successful acquisition of target properties and any lingering effects of COVID-19. In the first quarter of fiscal 2021, the Company has opted to slow the development of new self-storage projects to preserve liquidity. We will calibrate our capital spending based in part upon the evolving effects of COVID-19. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital.

Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) were $173.3 million and $686.5 million for the first quarter of fiscal 2021 and 2020, respectively. The components of our net capital expenditures are provided in the following table:

 

 

Quarter Ended June 30,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

(In thousands)

Purchases of rental equipment

$

122,943

$

560,693

Equipment lease buyouts

 

11,477

 

34,030

Purchases of real estate, construction and renovations

 

102,590

 

217,911

Other capital expenditures

 

12,730

 

34,614

Gross capital expenditures

 

249,740

 

847,248

Less: Lease proceeds

 

-

 

-

Less: Sales of property, plant and equipment

 

(76,412)

 

(160,754)

Net capital expenditures

$

173,328

$

686,494

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Moving and Storage continues to hold significant cash and has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace or reduce existing indebtedness where possible.

Property and Casualty Insurance

State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance's assets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.

We believe that stockholders' equity at Property and Casualty Insurance remains sufficient, and we do not believe that its ability to pay ordinary dividends to AMERCO will be restricted per state regulations.

Property and Casualty Insurance's stockholder's equity was $241.5 million and $251.1 million at March 31, 2020 and December 31, 2019, respectively. The decrease resulted from net earnings of $0.6 million, a decrease in other comprehensive income of $8.7 million and a decrease of $1.5 million to beginning retained earnings due to the implementation of ASU 2016-13.   Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.

Life Insurance

Life Insurance manages its financial assets to meet policyholder and other obligations, including investment contract withdrawals and deposits. Life Insurance's net deposits for the quarter ended March 31, 2020 were $23.7 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance's assets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.

Life Insurance's stockholder's equity was $376.6 million and $417.4 million as of March 31, 2020 and December 31, 2019, respectively. The decrease resulted from net earnings of $1.8 million and a decrease in other comprehensive income of $42.0 million primarily due to the effect COVID-19 had on market prices for the fixed maturity portion of the investment portfolio and a decrease of $0.6 million to beginning retained earnings due to the implementation of ASU 2016-13. Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. However, as of March 31, 2020, Oxford had outstanding deposits of $60.0 million through its membership in the FHLB system.   For a more detailed discussion of this deposit, please see Note 4, Borrowings, of the Notes to Condensed Consolidated Financial Statements.

Cash Provided from Operating Activities by Operating Segments

Moving and Storage

Net cash provided from operating activities were $311.7 million and $367.8 million for the first quarter of fiscal 2021 and 2020, respectively largely as a result of reduced equipment rental activity.

Property and Casualty Insurance

Net cash provided by operating activities were $3.5 million and $3.1 million for the first quarters ended March 31, 2020 and 2019, respectively. The increase was the result of changes in intercompany balances and the timing of payables activity.

Property and Casualty Insurance's cash and cash equivalents and short-term investment portfolios amounted to $18.1 million and $11.8 million at March 31, 2020 and December 31, 2019, respectively. These balances reflect funds in transition from maturity proceeds to long term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds.

Life Insurance

Net cash provided by operating activities were $14.9 million and $10.0 million for the first quarter ended March 31, 2020 and 2019, respectively. The change was primarily due to an increase in the investment income received and a decrease in federal income tax payment.

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In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance's short-term portfolio and its membership in the FHLB. As of March 31, 2020 and December 31, 2019, cash and cash equivalents and short-term investments amounted to $50.0 million and $30.5 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs.

Liquidity and Capital Resources - Summary

We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs.

As a result of the federal income tax provisions of the CARES Act, we have filed applicable forms with the IRS to carryback net operating losses and requested refunds of previous deposits totaling approximately $235 million. We believe that upon the filing of our June 30, 2020 federal income tax return additional refunds in excess of $250 million will be due to the Company. These amounts are expected to provide us additional liquidity in fiscal 2021. It is possible future legislation could negatively impact our ability to receive these tax refunds.

Our borrowing strategy is primarily focused on asset-backed financing and rental equipment leases. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of June 30, 2020, we had available borrowing capacity under existing credit facilities of $70.0 million. It is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. We believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long term debt and borrowing capacity, please see Note 4, Borrowings, of the Notes to Condensed Consolidated Financial Statements.

Disclosures about Contractual Obligations and Commercial Commitments

Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Disclosures about Contractual Obligations and Commercial Commitments in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Off-Balance Sheet Arrangements

We use off-balance sheet arrangements in situations where management believes that the economics and sound business principles warrant their use.

Historically, we have used off-balance sheet arrangements in connection with the expansion of our self-storage business. For more information please see Note 10, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements. These arrangements were primarily used when our overall borrowing structure was more limited. We do not face similar limitations currently and off-balance sheet arrangements have not been utilized in our self-storage expansion in recent years. In the future, we will continue to identify and consider off-balance sheet opportunities to the extent such arrangements would be economically advantageous to us and our stockholders

Fiscal 2021 Outlook

We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals. Revenue in the U-Move ® program could be adversely impacted should we fail to execute in any of these areas. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control.

49

 


 

With respect to our storage business, we have added new locations and expanded at existing locations. In fiscal 2021, we are actively looking to acquire new locations, complete current projects and increase occupancy in our existing portfolio of locations. New projects and acquisitions will be considered and pursued if they fit our long term plans and meet our financial objectives. We will continue to invest capital and resources in the U-Box ® program throughout fiscal 2021.

In light of COVID-19 and its lingering effects, we may be challenged in our progress.

Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers.

Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.

Interest Rate Risk

The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter into these arrangements with counterparties that are significant financial institutions with whom we generally have other financial arrangements. We are exposed to credit risk should these counterparties not be able to perform on their obligations. Following is a summary of our interest rate swap agreements as of June 30, 2020:

 

Notional Amount

 

 

Fair Value

 

Effective Date

 

Expiration Date

 

Fixed Rate

 

Floating Rate

 

(Unaudited)

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

$

85,000

 

$

(2,761)

 

6/28/2019

 

6/15/2022

 

1.76%

 

1 Month LIBOR

 

75,000

 

 

(2,506)

 

6/28/2019

 

6/30/2022

 

1.78%

 

1 Month LIBOR

 

75,000

 

 

(2,903)

 

6/28/2019

 

10/31/2022

 

1.77%

 

1 Month LIBOR

As of June 30, 2020, we had $1,395.4 million of variable rate debt obligations. If LIBOR were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $9.6 million annually (after consideration of the effect of the above derivative contracts). Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule.

Additionally, our insurance subsidiaries' fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies' asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates.

We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholder based on the change in the value of the S&P 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair market value on our balance sheet. At June 30, 2020 and March 31, 2020, these derivative hedges had a net market value of $1.8 million and $5.9 million, with notional amounts of $289.1   million and $246.8   million, respectively. These derivative instruments are included in Investments, other, on the consolidated balance sheets.

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Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.

Foreign Currency Exchange Rate Risk

The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 4.5% of our revenue was generated in Canada during the first quarter of both fiscal 2021 and 2020. The result of a 10.0% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.

Additionally, our insurance subsidiaries' fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies' asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities, assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates.

Cautionary Statements Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” regarding future events and our future results of operations. We may make additional written or oral forward-looking statements from time to time in filings with the SEC or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements may include, but are not limited to, the risk associated with COVID-19 or similar events on employees or customers, impact on the economic environment or demand of our products and the cost and availability of debt and capital, estimates of capital expenditures, plans for future operations, products or services, financing needs, plans and strategies, our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us, liquidity and the availability of financial resources to meet our needs, goals and strategies, plans for new business, storage occupancy, growth rate assumptions, pricing, costs, and access to capital and leasing markets, the impact of our compliance with environmental laws and cleanup costs, our beliefs regarding our sustainable practices, our used vehicle disposition strategy, the sources and availability of funds for our rental equipment and self-storage expansion and replacement strategies and plans, our plan to expand our U-Haul storage affiliate program, that additional leverage can be supported by our operations and business, the availability of alternative vehicle manufacturers, our estimates of the residual values of our equipment fleet, our plans with respect to off-balance sheet arrangements, our plans to continue to invest in the U-Box ® program, the impact of interest rate and foreign currency exchange rate changes on our operations, the sufficiency of our capital resources and the sufficiency of capital of our insurance subsidiaries as well as assumptions relating to the foregoing. The words “believe,” “expect,” “anticipate,” “plan,” “may,” “will,” “could,” “estimate,” “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made.

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Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the degree and nature of our competition; our leverage; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; the limited number of manufacturers that supply our rental trucks; our ability to effectively hedge our variable interest rate debt; that we are controlled by a small contingent of stockholders; fluctuations in quarterly results and seasonality; changes in, and our compliance with, government regulations, particularly environmental regulations and regulations relating to motor carrier operations; outcomes of litigation; our reliance on our third party dealer network; liability claims relating to our rental vehicles and equipment; our ability to attract, motivate and retain key employees; reliance on our automated systems and the internet; our credit ratings; our ability to recover under reinsurance arrangements and other factors described in our Annual Report on Form 10-K in Item 1A, Risk Factors, and in this Quarterly Report or the other documents we file with the SEC. The above factors, as well as other statements in this Quarterly Report and in the Notes to Condensed Consolidated Financial Statements, could contribute to or cause such risks or uncertainties, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by law.

Item 4. Controls and Procedures

Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section titled Evaluation of Disclosure Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the most recently completed fiscal quarter covered by this Quarterly Report. Our Disclosure Controls are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based upon the controls evaluation, our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our Disclosure Controls were effective at a reasonable assurance level related to the above stated design purposes.

Inherent Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

52

 


 

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II Other information

Item 1. Legal Proceedings

The information regarding our legal proceedings in Note 9, Contingencies, of the Notes to Condensed Consolidated Financial Statements is incorporated by reference herein.

Item 1A. Risk Factors

We are not aware of any material updates to the risk factors described in our previously filed Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following documents are filed as part of this report:

Exhibit Number

Description

Page or Method of Filing

3.1

Amended and Restated Articles of Incorporation of AMERCO

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on June 9, 2016, file no. 1-11255

 

3.2

Restated Bylaws of AMERCO

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on September 5, 2013, file no. 1-11255

 

 

 

 

10.1

Credit Agreement, dated as of May 22, 2020 by and among AMERCO, as the Borrower, PNC Bank, N.A., as Agent for all Lenders, and the financial institutions party thereto, as Lenders.

 

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on May 27, 2020, file no. 1-11255

31.1

Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO

 

Filed herewith

31.2

Rule 13a-14(a)/15d-14(a) Certificate of Jason A. Berg, Chief Financial Officer of AMERCO

 

Filed herewith

32.1

Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Furnished herewith

53

 


 

32.2

Certificate of Jason A. Berg, Chief Financial Officer of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Furnished herewith

101.INS

Inline XBRL Instance Document

 

Filed herewith

101.SCH

Inline XBRL Taxonomy Extension Schema

 

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

 

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase

 

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

 

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

 

Filed herewith

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

Filed herewith

 

54

 


 

 

 


 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

AMERCO

 

Date:   August 5, 2020

 

/s/ Edward J. Shoen           

 

 

 

Edward J. Shoen

 

 

President and Chairman of the Board

 

 

(Principal Executive Officer)

 

 

 

 

 

 

 

 

 

Date:   August 5, 2020

 

/s/ Jason A. Berg                  

 

 

 

Jason A. Berg

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

 

 

 

 

 

 

 

Date: August 5, 2020

 

/s/ Maria L. Bell

 

 

 

Maria L. Bell

 

 

(Chief Accounting Officer)

 

 

 

 

 

 

 

 

 

 

55

 


EXHIBIT 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Edward J. Shoen, certify that:

  1. I have reviewed this quarterly report on Form 10-Q of AMERCO;
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
  4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
  1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  3. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  4. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
  1. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
  1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
  1. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
     

 

 

 

/s/  Edward J. Shoen

 

 

Edward J. Shoen

 

 

President and Chairman of the Board

Date: August 5, 2020

 

 

 


EXHIBIT 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Jason A. Berg, certify that:

  1. I have reviewed this quarterly report on Form 10-Q of AMERCO;
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
  4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
  1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  3. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  4. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
  1. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
  1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
  2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

 

 

/s/  Jason A. Berg

 

 

Jason A. Berg

Date: August 5, 2020

 

Chief Financial Officer

 


EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q for the quarter ended June 30, 2020 of AMERCO (the “Company”), as filed with the Securities and Exchange Commission on August 5, 2020 (the “Report”), I, Edward J. Shoen, President and Chairman of the Board of the Company, certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 

AMERCO

 

 

a Nevada corporation

 

 

 

 

 

/s/  Edward J. Shoen

 

 

 

 

 

Edward J. Shoen

Date: August 5, 2020

 

President and Chairman of the Board

 


EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q for the quarter ended June 30, 2020 of AMERCO (the “Company”), as filed with the Securities and Exchange Commission on August 5, 2020 (the “Report”), I, Jason A. Berg, Chief Financial Officer of the Company, certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 

AMERCO

 

 

a Nevada corporation

 

 

 

 

 

/s/  Jason A. Berg

 

 

 

 

 

Jason A. Berg

Date: August 5, 2020

 

Chief Financial Officer