UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

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

Registrant, State of Incorporation,

Address and Telephone Number

I.R.S. Employer

Identification No.

 

 

 

 

AMERCOlogo

 

 

 

 

1-11255

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

1325 Airmotive Way, Ste. 100

 

 

Reno, Nevada 89502-3239

 

 

Telephone (775) 688-6300

 

 

 

 

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 [x]  No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes [x] No [ ]

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

Large accelerated filer [x]   Accelerated filer [ ]  

Non-accelerated filer [ ] (Do not check if a smaller reporting company)    Smaller reporting company [ ]

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

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at August 1, 2014.


 


 

 

 

TABLE OF CONTENTS

 

 

Page 

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a) Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and March 31, 2014

1

 

b) Condensed Consolidated Statements of Operations for the Quarters ended June 30, 2014 and 2013 (unaudited)

2

 

c) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters ended June 30, 2014 and 2013 (unaudited)

3

 

d) Condensed Consolidated Statements of Cash Flows for the Quarters ended June 31, 2014 and 2013 (unaudited)

4

 

e) Notes to Condensed Consolidated Financial Statements (unaudited)

5

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

46

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

48


 

 


Part i Financial information

ITEM 1. Financial Statements

AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED balance sheets

 

 

June 30,

 

March 31,

 

 

2014

 

2014

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

692,585

$

495,112

Reinsurance recoverables and trade receivables, net

 

200,015

 

199,322

Inventories, net

 

69,341

 

67,020

Prepaid expenses

 

49,909

 

55,269

Investments, fixed maturities and marketable equities

 

1,213,312

 

1,138,275

Investments, other

 

244,557

 

248,850

Deferred policy acquisition costs, net

 

117,109

 

118,707

Other assets

 

106,834

 

97,588

Related party assets

 

159,721

 

169,624

 

 

2,853,383

 

2,589,767

Property, plant and equipment, at cost:

 

 

 

 

Land

 

425,953

 

405,177

Buildings and improvements

 

1,498,731

 

1,430,330

Furniture and equipment

 

323,906

 

322,088

Rental trailers and other rental equipment

 

391,823

 

373,325

Rental trucks

 

2,817,303

 

2,610,797

 

 

5,457,716

 

5,141,717

Less: Accumulated depreciation

 

(1,782,417)

 

(1,732,506)

Total property, plant and equipment

 

3,675,299

 

3,409,211

Total assets

$

6,528,682

$

5,998,978

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

450,972

$

357,954

Notes, loans and leases payable

 

2,185,365

 

1,942,359

Policy benefits and losses, claims and loss expenses payable

 

1,073,488

 

1,082,598

Liabilities from investment contracts

 

643,066

 

616,725

Other policyholders' funds and liabilities

 

9,815

 

7,988

Deferred income

 

39,121

 

31,390

Deferred income taxes

 

452,398

 

432,596

Total liabilities

 

4,854,225

 

4,471,610

 

 

 

 

 

Commitments and contingencies (notes 4, 7, 8 and 9)

 

 

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, 2014

 

 

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

 

 

 

 

issued and outstanding as of June 30 and March 31, 2014

 

 

Series common stock, with or without par value, 150,000,000 shares authorized:

 

 

 

 

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

 

 

 

 

none issued and outstanding as of June 30 and March 31, 2014

 

 

Common stock of $0.25 par value, 150,000,000 shares authorized; 41,985,700

 

 

 

 

issued and 19,607,788 outstanding as of June 30 and March 31, 2014

 

10,497

 

10,497

Additional paid-in capital

 

445,863

 

444,210

Accumulated other comprehensive loss

 

(33,048)

 

(53,923)

Retained earnings

 

1,929,927

 

1,805,453

Cost of common shares in treasury, net (22,377,912 shares as of June 30 and March 31, 2014)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of June 30 and March 31, 2014)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(1,132)

 

(1,219)

Total stockholders' equity

 

1,674,457

 

1,527,368

Total liabilities and stockholders' equity

$

6,528,682

$

5,998,978

 

 

 

 

 

 

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

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

580,708 

$

521,649 

Self-storage revenues

 

49,134 

 

42,099 

Self-moving and self-storage products and service sales

 

74,479 

 

70,691 

Property management fees

 

5,677 

 

5,161 

Life insurance premiums

 

37,930 

 

41,062 

Property and casualty insurance premiums

 

9,618 

 

7,966 

Net investment and interest income

 

21,046 

 

18,989 

Other revenue

 

45,596 

 

41,340 

Total revenues

 

824,188 

 

748,957 

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

355,207 

 

311,627 

Commission expenses

 

79,665 

 

68,627 

Cost of sales

 

41,628 

 

35,570 

Benefits and losses

 

40,784 

 

42,633 

Amortization of deferred policy acquisition costs

 

4,184 

 

3,683 

Lease expense

 

22,470 

 

27,007 

Depreciation, net of (gains) on disposals of (($22,959) and ($11,565), respectively)

 

61,051 

 

57,434 

Total costs and expenses

 

604,989 

 

546,581 

 

 

 

 

 

Earnings from operations

 

219,199 

 

202,376 

Interest expense

 

(24,148)

 

(23,328)

Pretax earnings

 

195,051 

 

179,048 

Income tax expense

 

(70,577)

 

(66,080)

Earnings available to common stockholders

$

124,474 

$

112,968 

Basic and diluted earnings per common share

$

6.36

$

5.78

Weighted average common shares outstanding: Basic and diluted

 

19,577,802

 

19,545,618

 

 

 

 

 

 

Related party revenues for the first quarter of fiscal 2015 and 2014, net of eliminations, were $8.7 million and $8.4 million, respectively.

Related party costs and expenses for the first quarter of fiscal 2015 and 2014, net of eliminations, were $15.0 million and $14.0 million, respectively.

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

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended June 30, 2014

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

195,051 

$

(70,577)

$

124,474 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

2,743 

 

 

 

2,743 

Unrealized net gain on investments

 

26,612 

 

(9,314)

 

17,298 

Change in fair value of cash flow hedges

 

1,345 

 

(511)

 

834 

Total comprehensive income

$

225,751 

$

(80,402)

$

145,349 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30, 2013

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

179,048 

$

(66,080)

$

112,968 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(3,762)

 

 

 

(3,762)

Unrealized net gain on investments

 

89 

 

(68)

 

21 

Change in fair value of cash flow hedges

 

10,196 

 

(3,874)

 

6,322 

Total comprehensive income

$

185,571 

$

(70,022)

$

115,549 

 

 

 

 

 

 

 

 

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

 

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of cash flows

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands)

Cash flow from operating activities:

 

 

 

 

Net earnings

$ 

124,474

$ 

112,968

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

84,010

 

68,999

Amortization of deferred policy acquisition costs

 

4,184

 

3,683

Change in allowance for losses on trade receivables

 

22

 

(14)

Change in allowance for inventory reserves

 

(1,760)

 

(935)

Net gain on sale of real and personal property

 

(22,959)

 

(11,565)

Net gain on sale of investments

 

(874)

 

(1,776)

Deferred income taxes

 

12,407

 

31,828

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

(717)

 

(22,715)

Inventories

 

(561)

 

(973)

Prepaid expenses

 

5,368

 

14,098

Capitalization of deferred policy acquisition costs

 

(6,575)

 

(7,808)

Other assets

 

(6,814)

 

(4,532)

Related party assets

 

8,089

 

24,878

Accounts payable and accrued expenses

 

94,004

 

18,162

Policy benefits and losses, claims and loss expenses payable

 

(9,878)

 

1,609

Other policyholders' funds and liabilities

 

1,827

 

(180)

Deferred income

 

7,683

 

7,584

Related party liabilities

 

1,878

 

5,962

Net cash provided by operating activities

 

293,808

 

239,273

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of:

 

 

 

 

Property, plant and equipment

 

(343,988)

 

(275,156)

Short term investments

 

(62,293)

 

(64,652)

Fixed maturities investments

 

(69,426)

 

(66,855)

Equity securities

 

(3,281)

 

(388)

Preferred stock

 

(2)

 

(634)

Real estate

 

(4,211)

 

(131)

Mortgage loans

 

(5,069)

 

(9,798)

Proceeds from sale of:

 

 

 

 

Property, plant and equipment

 

128,989

 

93,239

Short term investments

 

62,631

 

64,818

Fixed maturities investments

 

25,624

 

41,491

Equity securities

 

2,009

 

904

Preferred stock

 

1,000

 

3,295

Mortgage loans

 

12,069

 

20,152

Net cash used by investing activities

 

(255,948)

 

(193,715)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

207,152

 

88,182

Principal repayments on credit facilities

 

(52,464)

 

(61,996)

Debt issuance costs

 

(2,422)

 

(232)

Capital lease payments

 

(18,007)

 

(10,449)

Leveraged Employee Stock Ownership Plan - repayments from loan

 

87

 

127

Investment contract deposits

 

37,892

 

34,742

Investment contract withdrawals

 

(11,551)

 

(6,754)

Net cash provided by financing activities

 

160,687

 

43,620

 

 

 

 

 

Effects of exchange rate on cash

 

(1,074)

 

(335)

 

 

 

 

 

Increase in cash and cash equivalents

 

197,473

 

88,843

Cash and cash equivalents at the beginning of period

 

495,112

 

463,744

Cash and cash equivalents at the end of period

$ 

692,585

$ 

552,587

 

 

 

 

 

 

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


 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a first fiscal quarter that ends on the 30th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31st 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 financial position or results of operations. The Company discloses any material events occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2014 and 2013 correspond to fiscal 2015 and 2014 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, 2014 and the related condensed consolidated statements of operations, comprehensive income (loss) and cash flows for the first quarter of fiscal 2015 and 2014 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, 2014.

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 term “Company,” “we,” “us” or “our” refers to AMERCO and all of its legal subsidiaries.

Description of Operating Segments

AMERCO has three 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 mobile self-storage spaces 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.


 


AMERCO and consolidated entities

notes to condensed consolidatED financial statements (Continued)

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 across North America. 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 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 the moving and storage business.

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.

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 26,787 and 57,681 as of June 30, 2014 and June 30, 2013, respectively.

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 $16.8 million and $16.3 million at June 30, 2014 and March 31, 2014, respectively.

Available-for-Sale Investments

Available-for-sale investments at June 30, 2014 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

 

 

(Unaudited)

 

 

(In thousands)

U.S. treasury securities and government obligations

$

48,959

$

2,405

$

(261)

$

(83)

$

51,020

U.S. government agency mortgage-backed securities

 

34,679

 

2,754

 

(332)

 

(18)

 

37,083

Obligations of states and political subdivisions

 

167,039

 

7,955

 

(358)

 

(1,607)

 

173,029

Corporate securities

 

877,948

 

34,019

 

(5,028)

 

(9,838)

 

897,101

Mortgage-backed securities

 

15,335

 

296

 

(2)

 

(272)

 

15,357

Redeemable preferred stocks

 

17,447

 

426

 

 

(669)

 

17,204

Common stocks

 

18,570

 

3,970

 

(2)

 

(20)

 

22,518

 

$

1,179,977

$

51,825

$

(5,983)

$

(12,507)

$ 

1,213,312

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Available-for-sale investments at March 31, 2014 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

$

49,883

$

1,475

$

$

(1,004)

$

50,354

U.S. government agency mortgage-backed securities

 

36,258

 

2,558

 

(4)

 

(425)

 

38,387

Obligations of states and political subdivisions

 

166,311

 

4,834

 

(308)

 

(3,627)

 

167,210

Corporate securities

 

834,923

 

26,075

 

(3,794)

 

(25,875)

 

831,329

Mortgage-backed securities

 

12,425

 

279

 

(3)

 

(514)

 

12,187

Redeemable preferred stocks

 

18,445

 

283

 

(82)

 

(1,113)

 

17,533

Common stocks

 

17,299

 

3,987

 

(1)

 

(10)

 

21,275

 

$

1,135,544

$

39,491

$

(4,192)

$

(32,568)

$ 

1,138,275

The tables above include gross unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

We sold available-for-sale securities with a fair value of $26.4 million during the first quarter of fiscal 2015. The gross realized gains on these sales totaled $0.7 million. The gross realized losses on these sales totaled $0.1 million.

The unrealized losses of more than twelve months in the available-for-sale table are considered temporary declines. We track each investment with an unrealized loss and evaluate them on an individual basis for other-than-temporary impairments including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognized these write-downs through earnings. There were no write downs in the first quarter of fiscal 2015 and 2014.

The investment portfolio primarily consists of corporate securities and U.S. government securities. We believe we monitor our investments as appropriate. Our methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors including the length of time to maturity, the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. Nothing has come to management’s attention that would lead to the belief that each issuer would not have the ability to meet the remaining contractual obligations of the security, including payment at maturity. We have the ability and intent not to sell our fixed maturity and common stock investments for a period of time sufficient to allow us to recover our costs.

The portion of other-than-temporary impairment related to a credit loss is recognized in earnings. The significant inputs utilized in the evaluation of mortgage backed securities credit losses include ratings, delinquency rates, and prepayment activity. The significant inputs utilized in the evaluation of asset backed securities credit losses include the time frame for principal recovery and the subordination and value of the underlying collateral.

There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income (loss) for the first quarter of fiscal 2015.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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

 

 

June 30, 2014

 

March 31, 2014

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

 

 

(In thousands)

Due in one year or less

$

24,809

$

25,355

$

20,235

$

20,475

Due after one year through five years

 

205,496

 

216,743

 

185,447

 

194,563

Due after five years through ten years

 

484,926

 

499,837

 

350,048

 

350,953

Due after ten years

 

413,394

 

416,298

 

531,645

 

521,289

 

 

1,128,625

 

1,158,233

 

1,087,375

 

1,087,280

 

 

 

 

 

 

 

 

 

Mortgage backed securities

 

15,335

 

15,357

 

12,425

 

12,187

Redeemable preferred stocks

 

17,447

 

17,204

 

18,445

 

17,533

Common stocks

 

18,570

 

22,518

 

17,299

 

21,275

 

$

1,179,977

$

1,213,312

$

1,135,544

$

1,138,275

 

 

 

 

 

 

 

 

 

 

4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

June 30,

 

March 31,

 

2015 Rate (a)

 

Maturities

 

2014

 

2014

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

1.66% - 6.93%

 

2023

$

247,500

$

250,000

Real estate loan (revolving credit)

 

 

2015

 

 

Senior mortgages

2.15% - 5.75%

 

2015 - 2038

 

809,314

 

684,915

Working capital loan (revolving credit)

 

 

2016

 

 

Fleet loans (amortizing term)

1.95% - 5.57%

 

2015 - 2021

 

356,131

 

370,394

Fleet loans (securitization)

4.90%

 

2017

 

87,102

 

90,793

Fleet loans (revolving credit)

1.65% - 1.90%

 

2017 - 2018

 

139,632

 

89,632

Capital leases (rental equipment)

2.23% - 7.83%

 

2015 - 2021

 

504,779

 

416,750

Other obligations

3.00% - 8.00%

 

2014 - 2043

 

40,907

 

39,875

Total notes, loans and leases payable

 

 

 

$

2,185,365

$

1,942,359

 

 

 

 

 

 

 

 

(a) Interest rate as of June 30, 2014, including the effect of applicable hedging instruments.

 

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Amerco Real Estate Company and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a Real Estate Loan. As of June 30, 2014, the outstanding balance on the Real Estate Loan was $247.5 million. U-Haul International, Inc. is a guarantor of this 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 final maturity date of the term loan is April 2023.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. At June 30, 2014, the applicable LIBOR was 0.16% and the applicable margin was 1.50%, the sum of which was 1.66% which applied to $25.0 million of the Real Estate Loan. The rate on the remaining balance of $222.5 million of the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on current margin. 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.

Amerco Real Estate Company and U-Haul Company of Florida entered into a revolving credit agreement for $50.0 million. This agreement has a maturity of April 2015. As of June 30, 2014, we had the full $50.0 million available to be drawn. The interest rate is the applicable LIBOR plus a margin of 1.25%. AMERCO and U-Haul International, Inc. are guarantors of this facility. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Senior Mortgages

Various subsidiaries of Amerco Real Estate Company and U-Haul International, Inc. are borrowers under certain senior mortgages. These senior mortgage loan balances as of June 30, 2014 were in the aggregate amount of $809.3 million and mature between 2015 and 2038. The senior mortgages require monthly principal and interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. 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 4.79% and 5.75%. Additionally, $147.1 million of these loans have interest rates comprised of an applicable LIBOR between 0.15% and 0.16% plus margins between 2.00% and 2.50%, the sum of which was between 2.15% and 2.66%. Amerco Real Estate Company and U-Haul International, Inc. 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. 

Working Capital Loans

Amerco Real Estate Company is a borrower under an asset backed working capital loan. The maximum amount that can be drawn at any one time is $25.0 million. At June 30, 2014, the full $25.0 million was available to be drawn. This loan is secured by certain properties owned by the borrower. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This agreement has a maturity of April 2016. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. U-Haul International, Inc. and AMERCO are the guarantors of this loan. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. The interest rate, per the provision of this loan agreement, is the applicable LIBOR plus a margin of 1.25%.

Fleet Loans

Rental Truck Amortizing Loans

U-Haul International, Inc. and several of its subsidiaries are borrowers under amortizing term loans. The balance of the loans as of June 30, 2014 was $241.1 million with the final maturities between August 2015 and March 2021.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


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 the applicable LIBOR plus the applicable margins. At June 30, 2014, the applicable LIBOR was between 0.15% and 0.16% and applicable margins were between 1.35% and 2.50%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 5.57% based on current margins. Additionally, $105.2 million of these loans are carried at fixed rates ranging between 1.95% and 3.94%.

AMERCO and U-Haul International, Inc. are guarantors 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.

A subsidiary of U-Haul International, Inc. is a borrower under amortizing term loans with an aggregate balance of $115.0 million that were used to fund new truck acquisitions. The final maturity date of these notes is August 2016.  The agreements contain options to extend the maturity through May 2017. These notes are secured by the purchased equipment and the corresponding operating cash flows associated with their operation.  These notes have fixed interest rates between 3.52% and 3.53%. At June 30, 2014, the aggregate outstanding balance was $115.0 million.

AMERCO and U-Haul International, Inc. are guarantors 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 Securitizations

2010 U-Haul S Fleet and its subsidiaries (collectively, “2010 USF”) issued a $155.0 million asset-backed note (“2010 Box Truck Note”) on October 28, 2010. 2010 USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul International, Inc. The net proceeds from the securitized transaction were used to finance new box truck purchases. U.S. Bank, NA acts as the trustee for this securitization.

The 2010 Box Truck Note has a fixed interest rate of 4.90% with an expected final maturity of October 2017. At June 30, 2014, the outstanding balance was $87.1 million. The note is secured by the box trucks purchased and the corresponding operating cash flows associated with their operation.

The 2010 Box Truck Note is subject to certain covenants with respect to liens, additional indebtedness of the special purpose entity, the disposition of assets and other customary covenants of bankruptcy-remote special purpose entities. The default provisions of this note include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Rental Truck Revolvers

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $75 million, which can be increased to a maximum of $225 million. The loan matures in October 2018. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At June 30, 2014, the applicable LIBOR was 0.15% and the margin was 1.75%, the sum of which was 1.90%. Only interest is paid during the first four years of the loan with principal due monthly over the last nine months. As of June 30, 2014, we had $7.4 million available to be drawn.

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $100 million, which can be increased to a maximum of $125 million. The loan matures in October 2017. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At June 30, 2014, the applicable LIBOR was 0.15% and the margin was 1.50%, the sum of which was 1.65%. Only interest is paid during the first three years of the loan with principal due monthly over the last nine months. As of June 30, 2014, we had $28.0 million available to be drawn.

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $70 million. The loan matures in May 2019. This agreement contains an option to extend the maturity through February 2020. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin of 1.85%. Only interest is paid during the first five years of the loan with principal due upon maturity. As of June 30, 2014, we had the full $70 million available to be drawn.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Capital Leases

We entered into capital leases for new equipment between April 2008 and June 2014, with terms of the leases between 3 and 7 years. At June 30, 2014, the balance of these leases was $504.8 million. The net book value of the corresponding capitalized assets was $581.5 million at June 30, 2014.

Other Obligations

In February 2011, the Company and US Bank, National Association (the “Trustee”) entered into the
U-Haul Investors Club Indenture.  The Company 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 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.

At June 30, 2014, the aggregate outstanding principal balance of the U-Notes issued was $47.5 million of which $6.6 million is held by our insurance subsidiaries and eliminated in consolidations. Interest rates range between 3.00% and 8.00% and maturity dates between 2014 and 2043.

Annual Maturities of Notes, Loans and Leases Payable

The annual maturities of long-term debt, including capital leases, as of June 30, 2014 for the next five years and thereafter are as follows:

 

 

Year Ending June 30,

 

 

2015

 

2016

 

2017

 

2018

 

2019

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and leases payable, secured

$

185,435

$

605,189

$

438,630

$

262,702

$

220,352

$

473,057

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

19,921

$

17,814

Capitalized interest

 

(167)

 

(142)

Amortization of transaction costs

 

753

 

851

Interest expense resulting from derivatives

 

3,641

 

4,805

Total interest expense

$

24,148

$

23,328

Interest paid in cash, including payments related to derivative contracts, amounted to $23.4 million and $22.0 million for the first quarter of fiscal 2015 and 2014, respectively.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the quarter

 

1.76%

 

1.48%

Interest rate at the end of the quarter

 

1.77%

 

0.00%

Maximum amount outstanding during the quarter

$

164,632

$

25,000

Average amount outstanding during the quarter

$

142,170

$

24,176

Facility fees

$

117

$

92

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, 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.

 

Original variable rate debt amount

 

Agreement Date

 

Effective Date

 

Expiration Date

 

Designated cash flow hedge date

 

(Unaudited)

 

(In millions)

$

300.0

 

 

8/16/2006

 

8/18/2006

 

8/10/2018

 

8/4/2006

 

19.3

(a)

 

4/8/2008

 

8/15/2008

 

6/15/2015

 

3/31/2008

 

19.0

 

 

8/27/2008

 

8/29/2008

 

7/10/2015

 

4/10/2008

 

30.0

 

 

9/24/2008

 

9/30/2008

 

9/10/2015

 

9/24/2008

 

15.0

(a)

 

3/24/2009

 

3/30/2009

 

3/30/2016

 

3/25/2009

 

14.7

(a)

 

7/6/2010

 

8/15/2010

 

7/15/2017

 

7/6/2010

 

25.0

(a)

 

4/26/2011

 

6/1/2011

 

6/1/2018

 

6/1/2011

 

50.0

(a)

 

7/29/2011

 

8/15/2011

 

8/15/2018

 

7/29/2011

 

20.0

(a)

 

8/3/2011

 

9/12/2011

 

9/10/2018

 

8/3/2011

 

15.1

(b)

 

3/27/2012

 

3/28/2012

 

3/28/2019

 

3/26/2012

 

25.0

 

 

4/13/2012

 

4/16/2012

 

4/1/2019

 

4/12/2012

 

44.3

 

 

1/11/2013

 

1/15/2013

 

12/15/2019

 

1/11/2013

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

 

 

 

 

 

 

 

 

 

(b) operating lease

 

 

 

 

 

 

 

 

 

As of June 30, 2014, the total notional amount of our variable interest rate swaps on debt and an operating lease was $358.7 million and $12.0 million, respectively.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


The derivative fair values located in Accounts payable and accrued expenses in the balance sheets were as follows:

 

 

Net Liability Derivatives Fair Values as of

 

 

June 30, 2014

 

March 31, 2014

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments

$

31,365

$

32,716

 

 

 

The Effect of Interest Rate Contracts on the Statements of Operations

 

 

 

 

June 30, 2014

 

June 30, 2013

 

 

(Unaudited)

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

3,641

$

4,805

(Gain) loss recognized in AOCI on interest rate contracts (effective portion)

$

(1,345)

$

(10,196)

Loss reclassified from AOCI into income (effective portion)

$

3,647

$

4,410

(Gain) loss recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing)

$

(6)

$

395

Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. At June 30, 2014, we expect to reclassify $14.0 million of net losses on interest rate contracts from accumulated other comprehensive income to earnings as interest expense over the next twelve months. During the first quarter of fiscal 2015, we reclassified $3.6 million of net losses on interest rate contracts from accumulated other comprehensive income to interest expense.

6. 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, 2014

$

(39,287)

$

5,991

$

(20,321)

$

(306)

$

(53,923)

Foreign currency translation

 

2,743

 

 

 

 

2,743

Unrealized net gain on investments

 

 

17,298

 

 

 

17,298

Change in fair value of cash flow hedges

 

 

 

(2,813)

 

 

(2,813)

Amounts reclassified from AOCI

 

 

 

3,647

 

 

3,647

Other comprehensive income (loss)

 

2,743

 

17,298

 

834

 

 

20,875

Balance at June 30, 2014

$

(36,544)

$

23,289

$

(19,487)

$

(306)

$

(33,048)

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


7. Contingent Liabilities and Commitments

We lease a portion of our rental equipment and certain of our facilities under operating leases with terms that expire at various dates substantially through 2019. As of June 30, 2014, we have guaranteed $83.7 million of residual values for these rental equipment assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions. At the expiration of the lease, we have the option to renew the lease, purchase the asset for fair market value, or sell the asset to a third party on behalf of the lessor. We have been leasing equipment since 1987 and have experienced no material losses relating to these types of residual value guarantees.

Lease commitments for leases having terms of more than one year were as follows:

 

 

Property,

Plant and

Equipment

 

Rental

Equipment

 

Total

 

 

(Unaudited)

 

 

 

 

(In thousands)

 

 

Year-ended June 30:

 

 

 

 

 

 

2015

$

15,172

$

55,487

$

70,659

2016

 

14,730

 

22,977

 

37,707

2017

 

14,639

 

13,261

 

27,900

2018

 

14,156

 

10,892

 

25,048

2019

 

13,321

 

7,310

 

20,631

Thereafter

 

68,383

 

434

 

68,817

Total

$

140,401

$

110,361

$

250,762

 

 

 

 

 

 

 

 

8. Contingencies

PODS Enterprises, Inc. v. U-Haul International, Inc.

On July 3, 2012, PODS Enterprises, Inc. (“PEI”), filed a lawsuit against U-Haul International, Inc. (“U-Haul”), in the United States District Court for the Middle District of Florida, Tampa Division, alleging (1) Federal Trademark Infringement under Section 32 of the Lanham Act, (2) Federal Unfair Competition under Section 43(a) of the Lanham Act, (3) Federal Trademark dilution by blurring in violation of Section 43(c) of the Lanham Act, (4) common law trademark infringement under Florida law, (5) violation of the Florida Dilution; Injury to Business Reputation statute, (6) unfair competition and trade practices, false advertising and passing off under Florida common law, (7) violation of the Florida Deceptive and Unfair Trade Practices Act, and (8) unjust enrichment under Florida law. 

The claims arise from U-Haul’s use of the word “pod” and “pods” to describe its U-Box moving and storage product. PEI alleges that such use is an inappropriate use of its PODS mark.  Under the claims alleged in its Complaint, PEI seeks a Court Order permanently enjoining U-Haul from: (1) the use of the PODS mark, or any other trade name or trademark confusingly similar to the mark; and (2) the use of any false descriptions or representations or committing any acts of unfair competition by using the PODS mark or any trade name or trademark confusingly similar to the mark. PEI also seeks a Court Order (1) finding all of PEI’s trademarks valid and enforceable and (2) requiring U-Haul to alter all web pages to promptly remove the PODS mark from all websites owned or operated on behalf of U-Haul. Finally, PEI seeks an award of damages in an amount to be proven at trial, but which are alleged to be approximately $70 million. PEI also seeks prejudgment interest, trebled damages, and punitive damages.

U-Haul is vigorously defending the lawsuit and does not believe that PEI’s claims have merit.  In addition, on September 17, 2012, U-Haul filed its Counterclaims, seeking a Court Order declaring that: U-Haul’s use of the term “pods” or “pod” does not infringe or dilute PEI’s purported trademarks or violate any of PEI’s purported rights; (2) The purported mark “PODS” is not a valid, protectable, or registrable trademark; and (3) The purported mark “PODS PORTABLE ON DEMAND STORAGE” is not a valid, protectable, or registrable trademark. U-Haul also is seeking a Court Order cancelling the marks at issue in the case.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


The case is set for a jury trial beginning on September 8, 2014.

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.

9. Related Party Transactions

As set forth in the 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. 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 which 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. Management believes that the transactions described below and in the related notes were completed on terms substantially equivalent to those that would prevail in arm’s-length transactions.

SAC Holding Corporation and SAC Holding II Corporation, (collectively “SAC Holdings”) were established in order to acquire self-storage properties. These properties are being managed by us pursuant to management agreements. In the past, we have sold various self-storage properties to SAC Holdings, and such sales provided significant cash flows to the Company.

Related Party Revenue

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

1,704

$

1,919

U-Haul interest income revenue from Private Mini

 

1,326

 

1,337

U-Haul management fee revenue from SAC Holdings

 

4,523

 

4,074

U-Haul management fee revenue from Private Mini

 

636

 

594

U-Haul management fee revenue from Mercury

 

518

 

493

 

$

8,707

$

8,417

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


During the first quarter of fiscal 2015, subsidiaries of the Company held various junior unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Mark V. Shoen, a significant stockholder of AMERCO. We do not have an equity ownership interest in SAC Holdings. We received cash interest payments of $1.6 million and $12.3 million from SAC Holdings during the first quarter of fiscal 2015 and 2014, respectively. During the first quarter of fiscal 2014, SAC Holdings made a payment of $10.4 million to reduce its outstanding deferred interest payable to AMERCO. The largest aggregate amount of notes receivable outstanding during the first quarter of fiscal 2015 was $71.5 million and the aggregate notes receivable balance at June 30, 2014 was $71.2 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are between 2017 and 2019.

During the first quarter of fiscal 2015, AMERCO and U-Haul held various junior notes issued by Private Mini Storage Realty, L.P. (“Private Mini”). The equity interests of Private Mini are ultimately controlled by Blackwater. We received cash interest payments of $1.3 million and $1.4 million from Private Mini during the first quarters of fiscal 2015 and 2014, respectively. The largest aggregate amount outstanding during the first quarter of fiscal 2015 was $65.5 million and the aggregate notes receivable balance at June 30, 2014 was $65.4 million.

We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury Partners, L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini 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 $9.3 million and $10.3 million from the above mentioned entities during the first quarter of fiscal 2015 and 2014, respectively. This management fee is consistent with the fee received for other properties the Company previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Mercury is substantially controlled by Mark V. Shoen. James P. Shoen, a significant stockholder and director of AMERCO and an estate planning trust benefitting the Shoen children have an interest in Mercury.

Related Party Costs and Expenses

 

 

Quarter Ended June 30,

 

 

2014

 

2013

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

655

$

655

U-Haul commission expenses to SAC Holdings

 

13,484

 

12,520

U-Haul commission expenses to Private Mini

 

862

 

795

 

$

15,001

$

13,970

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of SAC Holdings, 5 SAC and Galaxy. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.

At June 30, 2014, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by the Company based upon equipment rental revenues

These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $8.2 million, expenses of $0.7 million and cash flows of $9.4 million during the first quarter of fiscal 2015. Revenues and commission expenses related to the Dealer Agreements were $65.6 million and $14.3 million, respectively during the first quarter of fiscal 2015.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Pursuant to the variable interest entity model under ASC 810 – Consolidation (“ASC 810”), Management determined that the junior notes of SAC Holdings and Private Mini as well as the management agreements with SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini represent potential variable interests for us. Management evaluated whether it should be identified as the primary beneficiary of one or more of these VIE’s using a two-step approach in which management (i) identified all other parties that hold interests in the VIE’s, and (ii) determined if any variable interest holder has the power to direct the activities of the VIE’s that most significantly impact their economic performance.

Management determined that they do not have a variable interest in the holding entities SAC Holding II Corporation, Mercury, 4 SAC, 5 SAC, or Galaxy based upon management agreements which are with the individual operating entities or through the issuance of junior debt; therefore, we are precluded from consolidating these entities.

We have junior debt with the holding entities SAC Holding Corporation and Private Mini which represents a variable interest in each individual entity. Though we have certain protective rights within these debt agreements, we have no present influence or control over these holding entities unless their protective rights become exercisable, which management considers unlikely based on their payment history. As a result, we have no basis under ASC 810 to consolidate these entities.

We do not have the power to direct the activities that most significantly impact the economic performance of the individual operating entities which have management agreements with U-Haul. There are no fees or penalties disclosed in the management agreement for termination of the agreement. Through control of the holding entities' assets, and its ability and history of making key decisions relating to the entity and its assets, Blackwater, and its owner, are the variable interest holder with the power to direct the activities that most significantly impact each of the individual holding entities and the individual operating entities’ performance.  As a result, we have no basis under ASC 810 to consolidate these entities.

We have not provided financial or other support explicitly or implicitly during the quarter ended June 30, 2014 to any of these entities that it was not previously contractually required to provide. In addition, we currently have no plan to provide any financial support to any of these entities in the future. The carrying amount and classification of the assets and liabilities in our balance sheets that relate to our variable interests in the aforementioned entities are as follows, which approximate the maximum exposure to loss as a result of our involvement with these entities:

Related Party Assets

 

 

June 30,

 

March 31,

 

 

2014

 

2014

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul notes, receivables and interest from Private Mini

$

68,010

$

68,451

U-Haul notes receivable from SAC Holdings

 

71,227

 

71,464

U-Haul interest receivable from SAC Holdings

 

4,444

 

4,376

U-Haul receivable from SAC Holdings

 

13,338

 

19,418

U-Haul receivable from Mercury

 

4,042

 

5,930

Other (a)

 

(1,340)

 

(15)

 

$

159,721

$

169,624

(a) Timing differences for intercompany balances with insurance subsidiaries.

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


10. 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 U-Haul 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.

 

 


amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


10. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of June 30, 2014 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

 

Cash and cash equivalents

$

396,548

$

270,875

$

3,282

$

 

$

670,705

$

12,529

$

9,351

$

 

$

692,585

Reinsurance recoverables and trade receivables, net

 

 

42,326

 

177

 

 

 

42,503

 

128,447

 

29,065

 

 

 

200,015

Inventories, net

 

 

69,341

 

 

 

 

69,341

 

 

 

 

 

69,341

Prepaid expenses

 

 

49,210

 

699

 

 

 

49,909

 

 

 

 

 

49,909

Investments, fixed maturities and marketable equities

 

 

 

 

 

 

 

205,328

 

1,007,984

 

 

 

1,213,312

Investments, other

 

 

 

28,415

 

 

 

28,415

 

48,771

 

167,371

 

 

 

244,557

Deferred policy acquisition costs, net

 

 

 

 

 

 

 

 

117,109

 

 

 

117,109

Other assets

 

161

 

59,228

 

44,389

 

 

 

103,778

 

1,268

 

1,788

 

 

 

106,834

Related party assets

 

1,156,564

 

106,333

 

9

 

(1,099,735)

(c)

 

163,171

 

14,019

 

522

 

(17,991)

(c)

 

159,721

 

 

1,553,273

 

597,313

 

76,971

 

(1,099,735)

 

 

1,127,822

 

410,362

 

1,333,190

 

(17,991)

 

 

2,853,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

625,792

 

 

 

(229,412)

(b)

 

396,380

 

 

 

(396,380)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

58,014

 

367,939

 

 

 

425,953

 

 

 

 

 

425,953

Buildings and improvements

 

 

224,676

 

1,274,055

 

 

 

1,498,731

 

 

 

 

 

1,498,731

Furniture and equipment

 

72

 

313,217

 

10,617

 

 

 

323,906

 

 

 

 

 

323,906

Rental trailers and other rental equipment

 

 

391,823

 

 

 

 

391,823

 

 

 

 

 

391,823

Rental trucks

 

 

2,817,303

 

 

 

 

2,817,303

 

 

 

 

 

2,817,303

 

 

72

 

3,805,033

 

1,652,611

 

 

 

5,457,716

 

 

 

 

 

5,457,716

Less:  Accumulated depreciation

 

(57)

 

(1,396,751)

 

(385,609)

 

 

 

(1,782,417)

 

 

 

 

 

(1,782,417)

Total property, plant and equipment

 

15

 

2,408,282

 

1,267,002

 

 

 

3,675,299

 

 

 

 

 

3,675,299

Total assets

$

2,179,080

$

3,005,595

$

1,343,973

$

(1,329,147)

 

$

5,199,501

$

410,362

$

1,333,190

$

(414,371)

 

$

6,528,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)


Consolidating balance sheets by industry segment as of June 30, 2014 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

36,988

$

404,907

$

5,048

$

 

$

446,943

$

$

4,029

$

 

$

450,972

Notes, loans and leases payable

 

 

1,185,524

 

999,841

 

 

 

2,185,365

 

 

 

 

 

2,185,365

Policy benefits and losses, claims and loss expenses payable

 

 

372,049

 

 

 

 

372,049

 

280,373

 

421,066

 

 

 

1,073,488

Liabilities from investment contracts

 

 

 

 

 

 

 

 

643,066

 

 

 

643,066

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

4,313

 

5,502

 

 

 

9,815

Deferred income

 

 

39,121

 

 

 

 

39,121

 

 

 

 

 

39,121

Deferred income taxes

 

466,503

 

 

 

 

 

466,503

 

(28,868)

 

14,763

 

 

 

452,398

Related party liabilities

 

 

640,777

 

474,021

 

(1,099,735)

(c)

 

15,063

 

2,438

 

490

 

(17,991)

(c)

 

Total liabilities

 

503,491

 

2,642,378

 

1,478,910

 

(1,099,735)

 

 

3,525,044

 

258,256

 

1,088,916

 

(17,991)

 

 

4,854,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity: