| | | (All amounts are in thousands of U.S.
13. Employee Benefit Plans The components of the net periodic benefit costs with respect to postretirement benefits were as follows: | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | | | | | | | | | | Service cost for benefits earned during the period | $ | 277 | $ | 268 | $ | 292 | $ | 277 | Other components of net periodic benefit costs: | | | | | | | | | Interest cost on accumulated postretirement benefit | | 236 | | 217 | | 241 | | 236 | Other components | | 17 | | 15 | | 22 | | 17 | Total other components of net periodic benefit costs | | 253 | | 232 | | 263 | | 253 | Net periodic postretirement benefit cost | $ | 530 | $ | 500 | $ | 555 | $ | 530 |
14. Fair Value Measurements 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. 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 termshort-term investments, investments available-for-sale, long termlong-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 termlong-term debt and short termshort-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 termshort-term investments, are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value. Certain assetsThe carrying values and liabilities are recorded atestimated fair value onvalues for the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 - Fair Value Measurements and Disclosure (“ASC 820”) requires that financial assets and liabilities recorded at fair value be 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 measurementstated above and are unobservable. These reflect management’s assumptions about the assumptions a market participant would usetheir placement in pricing the asset or liability.
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. are as follows:
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | Quarter Ended June 30, 2019 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (Unaudited) | Assets | | (In thousands) | Reinsurance recoverables and trade receivables, net | $ | 243,235 | $ | 0 | $ | 0 | $ | 243,235 | $ | 243,235 | Mortgage loans, net | | 233,566 | | 0 | | 0 | | 233,566 | | 233,566 | Other investments | | 79,484 | | 0 | | 0 | | 79,484 | | 79,484 | Total | $ | 556,285 | $ | 0 | $ | 0 | $ | 556,285 | $ | 556,285 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance/capital leases payable | | 4,343,935 | | 0 | | 4,343,935 | | 0 | | 4,343,935 | Total | $ | 4,343,935 | $ | 0 | $ | 4,343,935 | $ | 0 | $ | 4,343,935 |
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | Year Ended March 31, 2019 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 224,785 | $ | 0 | $ | 0 | $ | 224,785 | $ | 224,785 | Mortgage loans, net | | 225,829 | | 0 | | 0 | | 225,829 | | 225,829 | Other investments | | 74,907 | | 0 | | 0 | | 74,907 | | 74,907 | Total | $ | 525,521 | $ | 0 | $ | 0 | $ | 525,521 | $ | 525,521 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and leases payable | | 4,192,243 | | 0 | | 4,192,243 | | 0 | | 4,192,243 | Total | $ | 4,192,243 | $ | 0 | $ | 4,192,243 | $ | 0 | $ | 4,192,243 |
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of June 30, 20182019 and March 31, 20182019 that are subject to ASC 820measured at fair value on a recurring basis and the valuation approach applied to each of these items.level within the fair value hierarchy. As of June 30, 2018 | | Total | | Level 1 | | Level 2 | | Level 3 | | | | (Unaudited) | | Year Ended June 30, 2019 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | | (Unaudited) | Assets | | | | | | | | | | (In thousands) | Short term investments | $ | 409,787 | $ | 409,787 | $ | – | $ | – | | Short-term investments | | $ | 365,801 | $ | 365,552 | $ | 249 | $ | 0 | Fixed maturities - available for sale | | 1,913,838 | | 7,372 | | 1,906,197 | | 269 | | 2,308,689 | | 7,333 | | 2,301,135 | | 221 | Preferred stock | | 10,186 | | 10,186 | | – | | – | | 8,861 | | 8,861 | | 0 | | 0 | Common stock | | 26,852 | | 26,852 | | – | | – | | 19,035 | | 19,035 | | 0 | | 0 | Derivatives | | 4,256 | | 3,834 | | 422 | | – | | 4,555 | | 4,491 | | 64 | | 0 | Total | $ | 2,364,919 | $ | 458,031 | $ | 1,906,619 | $ | 269 | $ | 2,706,941 | $ | 405,272 | $ | 2,301,448 | $ | 221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives | $ | 338 | $ | – | $ | 338 | $ | – | | 1,181 | | 0 | | 1,181 | | 0 | Total | $ | 338 | $ | – | $ | 338 | $ | – | $ | 1,181 | $ | 0 | $ | 1,181 | $ | 0 |
As of March 31, 2018 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | Assets | | | | | | | | | Short term investments | $ | 475,320 | $ | 475,320 | $ | – | $ | – | Fixed maturities - available for sale | | 1,881,137 | | 7,567 | | 1,873,293 | | 277 | Preferred stock | | 10,861 | | 10,861 | | – | | – | Common stock | | 27,862 | | 27,862 | | – | | – | Derivatives | | 4,825 | | 4,388 | | 437 | | – | Total | $ | 2,400,005 | $ | 525,998 | $ | 1,873,730 | $ | 277 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Derivatives | $ | 897 | $ | – | $ | 897 | $ | – | Total | $ | 897 | $ | – | $ | 897 | $ | – |
The following table represents the fair value measurements for our assets as of June 30, 2018 using significant unobservable inputs (Level 3). were $0.2 million for both June 30, 2019 and March 31, 2019. | | Fixed Maturities - Asset Backed Securities | | | (Unaudited) | | | (In thousands) | Balance as of March 31, 2018 | $ | 277 | | | | Fixed Maturities - Asset Backed Securities - redeemed | | (14) | Fixed Maturities - Asset Backed Securities - net gain (unrealized) | | 6 | Balance as of June 30, 2018 | $ | 269 |
15. Revenue Recognition Revenue Recognized in Accordance with Topic 606 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), an updated standard on revenue recognition. The standard 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 expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis. Due to insignificant changes in our revenue recognition pattern for applicable revenue streams as a result of the updated guidance, there was no cumulative effect recorded.Additionally, due to the relatively short duration of our equipment contracts, we elected to use the practical expedient for contracts that begin and end within the same reporting period in applying the updated guidance to our applicable revenue streams. We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance.The adoption of the standard did not have a material effect on our Consolidated Balance Sheets, Consolidated Statements of Operations, or Consolidated Statements of Cash Flows. 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. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. This is applicable to insurance premiums received in conjunction with equipment rentals, for which we allocate the transaction price relating to these distinct performance obligations covered by Topic 944 on a relative standalone selling price basis. There were no material contract assets or liabilities as of June 30, 20182019 and March 31, 2018.2019. 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. We concluded that the performance obligations identified are satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. 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 begin and end within the same fiscal year.
The Company’s self-moving rental revenues do not currently meet the definition of a lease under Topic 840 due to the existence of substitution rights, and thus are accounted for under Topic 606. However, the contracts are expected to 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 will be 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.
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.
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 Feeincentive 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 20192020 did not have a material effect on our financial statements. 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.
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 840,842, 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. In the following table, revenue is disaggregated by timing of revenue recognition: | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | | | | | | | | | | Revenues recognized over time: | $ | 757,736 | $ | 706,072 | $ | 39,079 | $ | 757,736 | Revenues recognized at a point in time: | | 90,190 | | 89,138 | | 91,171 | | 90,190 | Total revenues recognized under ASC 606 | | 847,926 | | 795,210 | | 130,250 | | 847,926 | | | | | | | | | | Revenues recognized under ASC 840 | | 95,857 | | 83,452 | | Revenues recognized under ASC 842 or 840 | | | 865,204 | | 95,857 | Revenues recognized under ASC 944 | | 51,189 | | 52,046 | | 48,046 | | 51,189 | Revenues recognized under ASC 320 | | 24,605 | | 27,217 | | 35,749 | | 24,605 | Total revenues | $ | 1,019,577 | $ | 957,925 | $ | 1,079,249 | $ | 1,019,577 | | | | | | |
In the above table, the revenues recognized over time include self-moving equipment rentals, property management fees, the shipping fees associated with U-Box rentals and a portion of other revenues whereasfor the quarter ended June 30, 2018. Whereas revenues recognized at a point in time include self-moving and self-storage products and service sales and a portion of other revenues.revenues. Self-moving equipment rentals are now in revenues recognized under ASC 842/840 as of April 1, 2019. 16. Income Taxes
The Tax Reform Act was enacted on December 22, 2017. The Tax Reform Act reducesWe recognized liabilities resulting from contracts with customers for self-moving equipment rentals, self-storage revenues, U-Box revenues and tenant revenue, in which the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and repeals the deferrallength of the phase three taxcontract 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.Accounting Pronouncements Adoption of New Accounting Pronouncements On April 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842)” along with related updates, which require a lessee to recognize all leases with terms greater than 12 months on their balance sheet as a liability for life insurance companies.its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term. The new leasing standard does not significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows. Additionally, Topic 842 aligns key aspects of lessor accounting with the new revenue recognition guidance in Topic 606 (see ASU 2014-09 on the previous page) and expands disclosure of key information about leasing arrangements in an attempt to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. We have determined portions of the vehicle rental contracts that convey the right to control the use of identified assets are within the scope of the accounting guidance contained in the new leasing standard. As we disclosed in our discussion of June 30, 2018, we have not completed ourASU 2014-09, the Company’s rental related revenues are accounted for under the revenue accounting standard Topic 606. Topic 842 maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease are split between amortization and interest expense, with operating leases reporting a single lease expense. Topic 842 substantially changed the accounting for sale-leasebacks going forward, where we are to assess if the tax effects of enactmentcontract qualifies as a sale under ASC 606. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the Tax Reform Act; however,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. As all existing sale-leasebacks have madebeen accounted for as a reasonable estimatesale, we did not reassess any existing sale-leaseback transactions. We adopted the new leasing standard using the Effective Date Approach, which allows entities to only apply the new lease standard in the year of adoption. We elected the available practical expedients for existing or expired contracts of lessees and lessors wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, we elected as accounting policies to not recognize right of use assets or lease liabilities for short-term leases (i.e. those with a term of 12 months or less) and to combine lease and non-lease components in the contract for both lessee and lessor arrangements.Adoption of this standard resulted in most of our operating lease commitments being recognized as operating lease liabilities and right-of-use assets. Please see Note 8, Leases, of the effectsNotes to Consolidated Financial Statements. In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Cost (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of all items affected by the Tax Reform Act.beginning of the fiscal year that includes the interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of the standard did not have a material impact on our consolidated financial statements. 17. Subsequent EventsRecent Accounting Pronouncements
In June 2016, FASB issued ASU 2016-13, Financial Strength RatingInstruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. 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. This update is effective for public companies for annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact of this standard on our consolidated financial statements. In August 2018, A.M. Best upgraded the financial strength rating (“FSR”)FASB adopted ASU 2018-12, Targeted Improvements to the Accounting for Repwest Insurance Company to A- from B++Long-Duration Contracts (“ASU 2018-12”). The FSR outlook remains stable. 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 addition, A.M. Best upgradedAugust 2018, the long-term issuer credit rating (“LTICR”)FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to a- from bbb. The LTICR outlook has been revisedthe Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosures on fair value measurements by removing the requirement to stable from positive. 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. We are currently evaluating the impact of this update on our disclosures in the Notes to Consolidated Financial Statements. 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.
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 2019,2020, compared with the first quarter of fiscal 2018,2019, 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 2019.2020. 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, 2018.2019. 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 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 presentation of financial position or results of operations. We disclose any material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 20182019 and 20172018 correspond to fiscal 20192020 and 20182019 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-Haulwith 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 roomsunits 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-ownedwholly owned subsidiaries of U-Haul and Real Estate,Estate; - Property and Casualty Insurance, comprised of Repwest and its
wholly-ownedwholly owned subsidiaries and ARCOA,ARCOA; and - Life Insurance, comprised of Oxford and its
wholly-ownedwholly owned subsidiaries.
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;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®andSafestor 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-Haulrelated 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 Our financial statements have been prepared in accordance with GAAP in the United States. The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements. Certain accounting policies require us to make difficult and subjective judgments and assumptions, often as a result of the need to estimate matters that are inherently uncertain. Following is a detailed description of the accounting policies that we deem most critical to us and that require management’s most difficult and subjective judgments. These estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions and such differences may be material. We also have other policies that we consider key accounting policies such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates because they do not generally require us to make estimates or judgments that are difficult or subjective. The accounting policies that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following: Principles of Consolidation We apply Accounting Standards Codification (“ASC”) 810 - Consolidation (“ASC 810”) in our principles of consolidation. ASC 810 addresses arrangements where a company does not hold a majority of the voting or similar interests of a variable interest entity (“VIE”). A company is required to consolidate a VIE if it has determined it is the primary beneficiary. ASC 810 also addresses the policy when a company owns a majority of the voting or similar rights and exercises effective control. As promulgated by ASC 810, a VIE is not self-supportive due to having one or both of the following conditions: (i) it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated financial support or (ii) its owners do not hold the typical risks and rights of equity owners. This determination is made upon the creation of a variable interest and is re-assessed on an on-going basis should certain changes in the operations of a VIE, or its relationship with the primary beneficiary, trigger a reconsideration under the provisions of ASC 810. After a triggeringreconsideration event occurs, the facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(ies) have a variable interest in the entity, and whether or not the company’s interest is such that it is the primary beneficiary. We will continue to monitor our relationships with the other entities regarding who is the primary beneficiary, which could change based on facts and circumstances of any triggeringreconsideration events. Recoverability of Property, Plant and Equipment Our property, plant and equipment is stated at cost. Interest expense incurred during the initial construction of buildings and rental equipment is considered part of cost. Depreciation is computed for financial reporting purposes using the straight-line or an accelerated method based on a declining balance formula over the following estimated useful lives: rental equipment 2-20 years and buildings and non-rental equipment 3-55 years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment other than real estate (“personal property”) are netted against depreciation expense when realized. Equipment depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., minimize gains or losses. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. As a result of the changes in IRS regulations regarding the capitalization of assets, beginning in the first quarter of fiscal 2017, the Company has changed its depreciation policy to raise the value threshold before certain assets are capitalized. This change in procedure results in the immediate recognition of reported operating costs with a lagging decrease in depreciation expense over the term that these assets would have been depreciated. Due to this change, we had additional operating expenses of $5.1$7.6 million and $6.3$5.1 million in the first quarter of fiscal 20192020 and 2018,2019, respectively. This change in procedure is expected to benefitbenefiting the Company through the immediate recognition of tax deductible costs. We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives. Management determined that additions to theFor our box truck fleet, resulting from purchases should be depreciated onwe utilize an accelerated method of depreciation based upon a declining formula. Under the declining balances method (2.4 times declining balance), the book value of a rental truck is reduced approximately 16%, 13%, 11%, 9%, 8%, 7%, and 6% during years one through seven, respectively, and then reduced on a straight-line basis to a salvage value of 15% by the end of year fifteen. Prior to October 2012, rental equipment subject to this depreciation schedule was depreciated to a salvage value of 20%. Comparatively, a standard straight-line approach would reduce the book value by approximately 5.7% per year over the life of the truck.
Although we intend to sell our used vehicles for prices approximating book value, the extent to which we realize a gain or loss on the sale of used vehicles is dependent upon various factors, including, but not limited to, the general state of the used vehicle market, the age and condition of the vehicle at the time of its disposal and the depreciation rates with respect to the vehicle. We typically sell our used vehicles at our sales centers throughout the United States and Canada, on our website at uhaul.com/trucksales or by phone at 1-866-404-0355. Additionally, we sell a large portion of our pickup and cargo van fleet at automobile dealer auctions. Insurance Reserves Liabilities for life insurance and certain annuity and health policies are established to meet the estimated future obligations of policies in force, and are based on mortality, morbidity and withdrawal assumptions from recognized actuarial tables, which contain margins for adverse deviation. In addition, liabilities for health, disability and other policies include estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported (“IBNR”). Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders. Insurance reserves for Property and Casualty Insurance and U-Haul take into account losses incurred based upon actuarial estimates and are management’s best approximation of future payments.These estimates are based upon past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation.These reserves consist of case reserves for reported losses and a provision for IBNR losses, both reduced by applicable reinsurance recoverables, resulting in a net liability. Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.As a result of the long-tailed nature of the excess workers’ compensation policies written by Repwest duringfrom 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled. On a regular basis management reviews insurance reserve adequacy to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including:including the following: - Claimant
longevitylongevity; - Cost trends associated with claimant
treatmentstreatments; - Changes in ceding entity and third party administrator reporting
practicespractices; - Changes in environmental factors including legal and
regulatoryregulatory; - Current conditions affecting claim settlements, and
- Future economic conditions including
inflationinflation.
We reserve each claim based upon the accumulation of claim costs projected through each claimant’s life expectancy, and then adjust for applicable reinsurance arrangements.Management reviews each claim at least bi-annually and when facts and circumstances change to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.We factor in an estimate of potential cost increases in our IBNR liability.We do not assume settlement of existing claims in calculating the reserve amount, unless it is in the final stages of completion. Continued increases in claim costs, including medical inflation and new treatments and medications, could lead to future adverse development resulting in additional reserve strengthening.Conversely, settlement of existing claims or injured workers returning to work or expiring prematurely could lead to future positive development. Impairment of Investments Investments are evaluated pursuant to guidance contained in ASC 320 - Investments - Debt and Equity Securities to determine if and when a decline in market value below amortized cost is other-than-temporary. Management makes certain assumptions or judgments in its assessment, including, but not limited to:to, our ability and intent to hold the security, quoted market prices, dealer quotes or discounted cash flows, industry factors, financial factors, and issuer specific information such as credit strength. Other-than-temporary impairment in value is recognized in the current period operating results. There were no write downs in the first quarter of fiscal 20192020 or 2018.2019. Income Taxes We file a consolidated tax return with all of our legal subsidiaries. Our tax returns are periodically reviewed by various taxing authorities. The final outcome of these audits may cause changes that could materially impact our financial results. Fair Values 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. Adoption of New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), an updated standard on revenue recognition. The standard 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 expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis. We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance. The adoption of the standard did not have a material effect on our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the new guidance requires the fair value measurement of investments in certain equity securities. For investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. All changes in measurement will be recognized in net income. The guidance was effective for interim periods and annual period beginning after December 15, 2017. Early adoption was not permitted, except for certain provisions relating to financial liabilities. We adopted this standard in the first quarter of fiscal 2019 and recorded an increase of approximately $9.7 million to retained earnings with a corresponding decrease to accumulated other comprehensive income (loss).
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The effective date of ASU 2016-15 was for interim and annual reporting periods beginning after December 15, 2017. Early adoption was permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This update was effective for fiscal years beginning after December 31, 2017, and interim periods within those fiscal years with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statements of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. This update became effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This update became effective for fiscal years beginning after December 15, 2017, including interim periods within those years. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes how companies that sponsor defined benefit pension plans present the related net periodic benefit cost in the income statement. The service cost component of the net periodic benefit cost will continue to be presented in the same income statement line items, however other components of the net periodic benefit cost will be presented as a component of other income and excluded from operating profit. ASU 2017-07 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. We report the current service cost component of net periodic benefit cost in Operating expenses on our condensed consolidated statements of operations and report the Other components of net periodic benefit cost as a separate item outside of earnings from operations. We have applied these changes in presentation retrospectively, which resulted in a decrease in earnings from operations of $0.2 million for the quarter ended June 30, 2017. These changes in presentation did not result in any changes to earnings available to common stockholders or earnings per common share. Details of the net periodic costs are provided inPlease see Note 13, Employee Benefit Plans,16, Accounting Pronouncements, of the Notes to Condensed Consolidated Financial Statements.
Statements for Adoption of New Accounting Pronouncements and Recent Accounting PronouncementsPronouncements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require lessees to recognize all leases with terms greater than 12 months on their balance sheet as lease liabilities with a corresponding right-of-use asset. This update maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees will classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease will be split between amortization and interest expense, with operating leases reporting a single lease expense. This update will also require both qualitative and quantitative disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; however, early adoption is permitted. We have determined that the provisions of ASU 2016-02 may result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities. We are still in the process of determining the impact on our consolidated financial statements. For the last ten years, we have reported a discounted estimate of the off-balance sheet lease obligations in our MD&A.
In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Cost (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. 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.
Results of Operations AMERCO and Consolidated Entities Quarter Ended June 30, 20182019 compared with the Quarter Ended June 30, 20172018 Listed below, on a consolidated basis, are revenues for our major product lines for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018:2019: | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 716,602 | $ | 669,858 | $ | 748,596 | $ | 716,602 | Self-storage revenues | | 86,212 | | 76,718 | | 98,274 | | 86,212 | Self-moving and self-storage products and service sales | | 79,241 | | 78,911 | | 80,026 | | 79,241 | Property management fees | | 7,416 | | 6,762 | | 7,156 | | 7,416 | Life insurance premiums | | 36,888 | | 39,091 | | 32,710 | | 36,888 | Property and casualty insurance premiums | | 12,781 | | 11,815 | | 13,424 | | 12,781 | Net investment and interest income | | 24,605 | | 27,217 | | 35,749 | | 24,605 | Other revenue | | 55,832 | | 47,553 | | 63,314 | | 55,832 | Consolidated revenue | $ | 1,019,577 | $ | 957,925 | $ | 1,079,249 | $ | 1,019,577 |
Self-moving equipment rental revenues increased $46.7$32.0 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. One-way2019. The improvements came from both truck and in-town transactions both increased leading to the improved revenue results. Sales of our Safemove® and related protection packages contributed to the revenue growth.trailer rentals. Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks, trailers and towing devices in the rental fleet. Self-storage revenues increased $9.5$12.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019.The average monthly amount of occupied square feet increased by 10.7%15.9% during the first quarter of fiscal 20192020 compared with the same period last year.The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 4.35.8 million net rentable square feet, or a 15.5%17.8% increase, with approximately 1.41.9 million of that coming on during the first quarter of fiscal 2019.2020. Sales of self-moving and self-storage products and services increased $0.3$0.8 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Life insurance premiums decreased $2.2$4.2 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 due primarily to decreased life and Medicare supplement premiums. Property and casualty insurance premiums increased $1.0$0.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 due to an increase in Safetow® and Safestor® sales, which is a reflection of the increased equipment and storage rental transactions. Net investment and interest income decreased $2.6increased $11.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. Updated accounting guidance now requires changes2019. Changes in the market value of equity securitiesunaffiliated common stocks held for investment atin our insurance subsidiaries to be recognized through income. Thissubsidiary accounted for $1.2$2.2 million of the decreaseincrease during the quarter. The remainder of the decrease was from gains recognized during the first quarter of fiscal 2018 from mortgage loan payoffs that did not recur in the first quarter of this year.Investment income increased due to a larger invested asset base and we had a $3.4 million gain on derivatives at our life insurance subsidiary. Other revenue increased $8.3$7.5 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018,2019, primarily coming from our U-Box® program. As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $1,019.6 million for the first quarter of fiscal 2019, compared with $957.9 million for the first quarter of fiscal 2018.
Listed below are revenues and earnings from operations at each of our operating segments for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018.2019. The insurance companies’ first quarters ended March 31, 20182019 and 2017.2018. | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Moving and storage | | | | | | | | | Revenues | $ | 947,885 | $ | 882,527 | $ | 1,000,398 | $ | 947,885 | Earnings from operations before equity in earnings of subsidiaries | | 200,395 | | 220,740 | | 201,896 | | 200,395 | Property and casualty insurance | | | | | | | | | Revenues | | 15,889 | | 16,106 | | 20,305 | | 15,889 | Earnings from operations | | 2,713 | | 5,436 | | 8,466 | | 2,713 | Life insurance | | | | | | | | | Revenues | | 57,863 | | 60,656 | | 60,321 | | 57,863 | Earnings from operations | | 1,881 | | 3,436 | | 3,781 | | 1,881 | Eliminations | | | | | | | | | Revenues | | (2,060) | | (1,364) | | (1,775) | | (2,060) | Earnings from operations before equity in earnings of subsidiaries | | (285) | | (349) | | (278) | | (285) | Consolidated results | | | | | | | | | Revenues | | 1,019,577 | | 957,925 | | 1,079,249 | | 1,019,577 | Earnings from operations | | 204,704 | | 229,263 | | 213,865 | | 204,704 |
Total costs and expenses increased $86.2$50.5 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Operating expenses for Moving and Storage increased $79.8$38.9 million, largely from increased equipment maintenance, personnel, liability costs, shipping costs associated with U-Box and property taxes. Repair costs accounted for $40.8 million of the increase with the majority of this associated with the portion ofrental fleet experienced a $2.5 million decrease during the fleet nearing resale.quarter. Net gains from the disposal of rental equipment increased $11.2$0.4 million. Compared with fiscal 2018, we have sold more used trucks and the average sales proceeds per truck were nominally better. Depreciation expense associated with our rental fleet increased $7.2$8.4 million to $114.0$122.4 million due to a larger fleet.Depreciation expense on all other assets, largely from buildings and improvements, increased $4.1$6.2 million to $28.7$34.9 million. Gains on the disposal of real estate increased $1.6 million from the condemnation of a property in the first quarter of fiscal 2020. As a result of the above mentionedabove-mentioned changes in revenues and expenses, earnings from operations decreasedincreased to $213.9 million for the first quarter of fiscal 2020, compared with $204.7 million for the first quarter of fiscal 2019, compared with $229.3 million for the first quarter of fiscal 2018.2019. Interest expense for the first quarter of fiscal 20192020 was $35.3$38.9 million, compared with $30.3$35.3 million for the first quarter of fiscal 2018, primarily2019, due to increased borrowings. Income tax expense was $42.3 million for the first quarter of fiscal 2020, compared with $41.3 million for the first quarter of fiscal 2019, compared with $72.52019. As a result of the above-mentioned items, earnings available to common stockholders were $132.4 million for the first quarter of fiscal 2018. Our effective tax rate was 24.4% of net income before taxes for fiscal 2019,2020, compared to 36.5% in the prior-year period. As a result of the above mentioned items, earnings available to common shareholders werewith $127.8 million for the first quarter of fiscal 2019, compared with $126.2 million for the first quarter of fiscal 2018.2019.
Basic and diluted earnings per share for the first quarter of fiscal 20192020 were $6.53,$6.76, compared with $6.44$6.53 for the first quarter of fiscal 2018.2019. The weighted average common shares outstanding basic and diluted were 19,597,697 for the first quarter of fiscal 2020, compared with 19,590,585 for the first quarter of fiscal 2019, compared with 19,587,891 for the first quarter of fiscal 2018. Moving and Storage Quarter Ended June 30, 20182019 compared with the Quarter Ended June 30, 20172018 Listed below are revenues for our major product lines at Moving and Storage for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018:2019: | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 717,542 | $ | 670,698 | $ | 749,136 | $ | 717,542 | Self-storage revenues | | 86,212 | | 76,718 | | 98,274 | | 86,212 | Self-moving and self-storage products and service sales | | 79,241 | | 78,911 | | 80,026 | | 79,241 | Property management fees | | 7,416 | | 6,762 | | 7,156 | | 7,416 | Net investment and interest income | | 2,563 | | 2,657 | | 3,267 | | 2,563 | Other revenue | | 54,911 | | 46,781 | | 62,539 | | 54,911 | Moving and Storage revenue | $ | 947,885 | $ | 882,527 | $ | 1,000,398 | $ | 947,885 |
Self-moving equipment rental revenues increased $46.8$31.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. One-way2019.The improvements came from both truck and in-town transactions both increased leading to the improved revenue results. Sales of our Safemove® and related protection packages contributed to the revenue growth.trailer rentals. Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks, trailers and towing devices in the rental fleet. Self-storage revenues increased $9.5$12.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019.The average monthly amount of occupied square feet increased by 10.7%15.9% during the first quarter of fiscal 20192020 compared with the same period last year.The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 4.35.8 million net rentable square feet, or a 15.5%17.8% increase, with approximately 1.41.9 million of that coming on during the first quarter of fiscal 2019.2020. Sales of self-moving and self-storage products and services increased $0.3$0.8 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Net investment and interest income decreased $0.1increased $0.7 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019. Other revenue increased $8.1$7.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 caused primarily by the U-Box® program.
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, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Room count as of June 30 | | 383 | | 328 | Square footage as of June 30 | | 32,394 | | 28,044 | Average monthly number of rooms occupied | | 262 | | 237 | Average monthly occupancy rate based on room count | | 69.6% | | 73.0% | Average monthly square footage occupied | | 23,666 | | 21,383 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of June 30 | | 452 | | 383 | Square footage as of June 30 | | 38,175 | | 32,394 | Average monthly number of units occupied | | 302 | | 262 | Average monthly occupancy rate based on unit count | | 68.4% | | 69.6% | Average monthly square footage occupied | | 27,421 | | 23,666 |
Over the last twelve months we added approximately 4.35.8 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 3.6%8.5%. Total costs and expenses increased $85.7$51.0 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Operating expenses increased $79.8$38.9 million largely from increased equipment maintenance, personnel, liability costs, shipping costs associated with U-Box and property taxes. Repair costs accounted for $40.8 million of the increase with the majority of this associated with the portion ofrental fleet experienced a $2.5 million decrease during the fleet nearing resale.quarter. Net gains from the disposal of rental equipment increased $11.2$0.4 million. Compared with fiscal 2018, we have sold more used trucks and the average sales proceeds per truck were nominally better. Depreciation expense associated with our rental fleet increased $7.2$8.4 million to $114.0$122.4 million due to a larger fleet.Depreciation expense on all other assets, largely from buildings and improvements, increased $4.1$6.2 million to $28.7$34.9 million. Gains on the disposal of real estate increased $1.6 million from the condemnation of a property in the first quarter of fiscal 2020. As a result of the above mentionedabove-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, decreasedincreased to $201.9 million for the first quarter of fiscal 2020, compared with $200.4 million for the first quarter of fiscal 2019, compared with $220.7 million for the first quarter of fiscal 2018.2019. Equity in the earnings of AMERCO’s insurance subsidiaries was $9.8 million for the first quarter of fiscal 2020, compared with $3.7 million for the first quarter of fiscal 2019, compared with $5.8 million for the first quarter of fiscal 2018.2019. As a result of the above mentionedabove-mentioned changes in revenues and expenses, earnings from operations decreasedincreased to $211.7 million for the first quarter of fiscal 2020, compared with $204.1 million for the first quarter of fiscal 2019, compared with $226.6 million for the first quarter of fiscal 2018.2019. Property and Casualty Insurance Quarter Ended March 31, 20182019 compared with the Quarter Ended March 31, 20172018 Net premiums were $13.3$14.1 million and $11.8$13.3 million for the quarters ended March 31, 20182019 and 2017,2018, 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. Net investment and interest income was $2.5$6.2 million and $4.3$2.5 million for the quartersthree months ended March 31, 2019 and 2018, and 2017, respectively. Updated accounting guidance now requires changesThe main driver of the change in net investment income was the increase in the market valuevaluation of equity securities heldunaffiliated common stock of $2.2 million for investment to be recognized through income. This accounted for $1.2 million of the decrease during the quarter.three months ended March 31, 2019. Net operating expenses were $8.7$8.1 million and $8.2$8.7 million for the quartersthree months ended March 31, 2019 and 2018, respectively. The change was due to an increase in commissions, decreased loss adjusting fees and 2017, respectively, primarily driven by larger commission spend from top line growth.subrogation income. Benefits and losses incurred were $4.5$3.8 million and $2.4$4.5 million for the quarters endedthree months March 31, 2019 and 2018, and 2017, respectively, with $1.0 million of the increase is associated with new business thatrespectively. The decrease was not in force for the prior year quarter.due to favorable loss experience. As a result of the above mentionedabove-mentioned changes in revenues and expenses, pretax earnings from operations were $8.5 million and $2.7 million for the three months ended March 31, 2019 and $5.42018, respectively.
Life Insurance Quarter Ended March 31, 2019 compared with the Quarter Ended March 31, 2018 Net premiums were $32.7 million and $36.9 million for the quarters ended March 31, 20182019 and 2017, respectively. Life Insurance
Quarter Ended March 31, 2018, compared with the Quarter Ended March 31, 2017
Net premiums were $36.9 million and $39.1 million for the quarters ended March 31, 2018 and 2017, respectively. Medicare Supplement premiums decreased by $3.3$3.0 million due to reductionsthe reduction in new sales and declined premiumspolicy decrements on the existing business partially offset by premium rate increasesincreases. Life premiums decreased by $0.8 million, primarily due to the termination of a reinsurance contract with one of our reinsurers in the fourth quarter of fiscal 2019. Premiums on renewal premiums. All other lines of business combined for a $1.1 million increase.decreased $0.4 million. Deferred annuity deposits were $61.3$61.5 million or $34.1$0.2 million belowabove prior year and are accounted for on the balance sheet as deposits rather than premiums.premiums
Net investment and interest income was $19.9$26.7 million and $20.7$19.9 million for the quarters ended March 31, 2019 and 2018, and 2017, respectively. Realized gainsInvestment income from fixed maturities and additionalincreased $4.0 million from a larger invested asset base. The increase in realized capital gains fromwas $1.0 million coupled with a $3.4 million gain on derivatives used as hedges for our mortgage loan portfolios decreased $1.6 million,fixed indexed annuities. This was partially offset by a $0.9$1.6 million increasedecrease in the investment and interest income due to a largerfrom other invested asset base.assets. Net operating expenses were $5.9$5.2 million and $5.6$5.9 million for the quarters ended March 31, 2019 and 2018, respectively. The decrease was primarily due to decreased commissions and 2017,general expenses. Benefits and losses incurred were $45.2 million and $44.1 million for the quarters ended March 31, 2019 and 2018, respectively. A minorInterest credited to policyholders increased $6.2 million from the increase in general expensesthe deposit base. This was partially offset by the decrease in incurred benefits on Medicare Supplement commissions from the reduced business in force. Benefitssupplement, life and losses incurred were $44.1 million and $45.3 million for the quarters ended March 31, 2018 and 2017, respectively. The decrease was primarily due to a $2.9 million reduction inother lines of business. Medicare supplement benefits decreased $3.5 million from the declineddeclining policies in force. All otherLife benefits decreased $1.0 million due to the termination of a reinsurance contract. Benefits on the remaining lines of business accounted for a $1.7 million increase.decreased $0.5 million.
Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $6.0$6.1 million and $6.3$6.0 million for the quarters ended March 31, 2019 and 2018, and 2017, respectively. The decrease was primarily due to additional DAC amortization in the first quarter of prior year generated by added gains on discounted mortgage loan investments and realized gains partially offset by the increased amortization from a larger DAC asset in the current quarter. As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $1.9$3.8 million and $3.4$1.9 million for the quarters ended March 31, 2019 and 2018, and 2017, 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 whichthat 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, 2018,2019, cash and cash equivalents totaled $650.1$519.8 million, compared with $759.4$673.7 million at March 31, 2018.2019. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of June 30, 20182019 (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) | | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Cash and cash equivalents | $ | 618,300 | $ | 5,119 | $ | 26,920 | $ | 500,497 | $ | 6,061 | $ | 13,273 | Other financial assets | | 137,664 | | 455,638 | | 2,025,150 | | 173,795 | | 472,122 | | 2,308,138 | Debt obligations | | 3,586,127 | | – | | – | | 4,343,935 | | – | | – | | | | | | | | | | | | | | (a) As of March 31, 2018 | | | | | | | | (a) As of March 31, 2019 | | | | | | | |
As of June 30, 2018,2019, Moving and Storage had additional cash available under existing credit facilities of $220.0$75.0 million.The majority of invested cash at the Moving and Storage segment is held in government money market funds. Net cash provided by operating activities decreased $7.0increased $11.3 million in the first quarter of fiscal 20192020 compared with the first quarter of fiscal 2018. The insurance subsidiaries accounted for $6.2 million of the decrease. Moving and Storage operating cash flows were negatively affected by the end of the month falling on a weekend; this pushed the receipt of credit card receipts into the following month. 2019. Net cash used in investing activities increased $36.4$286.1 million in the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Purchases of property, plant and equipment, which are reported net of cash from sales and lease-back transactions, increased $67.9$299.1 million. Cash from the sales of property, plant and equipment increased $45.2decreased $26.8 million largely due to reduced fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $16.0$33.0 million due to additionalreduced investment purchases. Net cash usedprovided by financing activities increased $165.3$220.9 million in the first quarter of fiscal 2019,2020, as compared with the first quarter of fiscal 2018.2019. This was due to a combination of decreased debt payments of $12.7 million, increased debt and finance/capital lease repayments of $36.9$10.1 million, a decreasean increase in cash from borrowings of $51.7$230.1 million, and a decrease in net annuity deposits from Life Insurance of $63.7 million, and a $9.8 million dividend payment in the first quarter of fiscal 2019. 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 2019,2020, we will reinvest in our truck and trailer rental fleet approximately $450$700 million, net of equipment sales excluding any lease buyouts. Through the first quarter of fiscal 2019,2020, we have invested, net of equipment sales, $254$403 million before any lease buyouts in our truck and trailer fleet of this projected amount. Fleet investments in fiscal 20192020 and beyond will be dependent upon several factors, including availability of capital, the truck rental environment and the used-truck sales market. We anticipate that the fiscal 20192020 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. Real Estate has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations and sales. Our 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. We are funding these development projects through construction loans and internally generated funds. For the first quarter of fiscal 2019,2020, we invested $219$218 million in real estate acquisitions, new construction and renovation and major repairs. For fiscal 2019,2020, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties. 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 $360.6$686.5 million and $337.9$360.6 million for the first quarter of fiscal 20192020 and 2018,2019, respectively. The components of our net capital expenditures are provided in the following table: | | Quarter Ended June 30, | | Quarter Ended June 30, | | | 2018 | | 2017 | | 2019 | | 2018 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Purchases of rental equipment | $ | 440,350 | $ | 396,068 | $ | 560,693 | $ | 440,350 | Equipment lease buyouts | | 2,633 | | – | | 34,030 | | 2,633 | Purchases of real estate, construction and renovations | | 219,196 | | 142,499 | | 217,911 | | 219,196 | Other capital expenditures | | 12,871 | | 29,083 | | 34,614 | | 12,871 | Gross capital expenditures | | 675,050 | | 567,650 | | 847,248 | | 675,050 | Less: Lease proceeds | | (126,903) | | (87,391) | | – | | (126,903) | Less: Sales of property, plant and equipment | | (187,546) | | (142,343) | | (160,754) | | (187,546) | Net capital expenditures | | 360,601 | | 337,916 | $ | 686,494 | $ | 360,601 |
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 market placemarketplace 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 stockholder’sstockholders’ 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 $208.3$236.4 million and $211.2$222.4 million at March 31, 20182019 and December 31, 2017,2018, respectively. The increase resulted from net earnings of $2.2$6.7 million a decreaseand an increase in other comprehensive income of $14.8 million, and a one-time reclass of $9.7 million between other comprehensive income and beginning retained earnings due to the implementation of ASU 2016-01. $7.2 million.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, 20182019 were $37.6$24.5 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s fundsassets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries. Life Insurance’s stockholder’s equity was $309.6$349.1 million and $332.9$311.7 million as of March 31, 20182019 and December 31, 2017,2018, respectively. The decreaseincrease resulted from a reductionnet earnings of $3.1 million and an increase in other comprehensive income of $24.8$34.3 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio, offset by net earnings of $1.5 million.portfolio. 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, 2018,2019, 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 $351.5$367.8 million and $352.3$351.5 million for the first quarter of fiscal 2020 and 2019, and 2018, respectively. Moving and Storage operating cash flows were negatively affected by the end of the month falling on a weekend; this pushed the receipt of credit card receipts into the following month. Property and Casualty Insurance Net cash provided by operating activities were $3.6$3.1 million and $2.7$4.0 million for the first quarters ended March 31, 20182019 and 2017,2018, respectively. The increasedecrease was the result of increased underwriting profit.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 $9.4$13.3 million and $11.6$11.2 million at March 31, 20182019 and December 31, 2017,2018, 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 $14.2$10.0 million and $21.3$14.2 million for the first quarter ended March 31, 20182019 and 2017,2018, respectively. The decrease was primarily due to the timing of settlement of payables, offset by an increase resulting from a reduction in paid commissions and federal income tax. 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, 20182019 and December 31, 2017,2018, cash and cash equivalents and short-term investments amounted to $27.1$13.3 million and $50.7$24.1 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. 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, 2018,2019, we had available borrowing capacity under existing credit facilities of $220.0$75.0 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. Fair Value of Financial Instruments Certain assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 requires that financial assets and liabilities recorded at fair value be classified and disclosed in a Level 1, Level 2 or Level 3 category. For more information, please see Note 14, Fair Value Measurements, of the Notes to Condensed Consolidated Financial Statements. The available-for-sale securities held by us are recorded at fair value. These values are determined primarily from actively traded markets where prices are based either on direct market quotes or observed transactions. Liquidity is a factor considered during the determination of the fair value of these securities. Market price quotes may not be readily available for certain securities or the market for them has slowed or ceased. In situations where the market is determined to be illiquid, fair value is determined based upon limited available information and other factors, including expected cash flows. As of June 30, 2018,2019, we had $0.3$0.2 million of available-for-sale assets classified in Level 3. The interest rate swaps held by us as hedges against interest rate risk for our variable rate debt are recorded at fair value. These 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. 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, 2018.2019. 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. We utilize operating leases for certain rental equipment and facilities with terms expiring substantially through 2024. In the event of a shortfall in proceeds from the sales of the underlying rental equipment assets, we have guaranteed $14.2 million of residual values as of June 30, 2018 for these assets at the end of their respective lease terms. We have been leasing rental equipment since 1987. To date, we have not experienced residual value shortfalls related to these leasing arrangements. Using the average cost of fleet related debt as the discount rate, the present value of our minimum lease payments and residual value guarantees were $21.5 million as of June 30, 2018.
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. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by WGHLP, which is owned by Mark V. Shoen (a significant shareholder) and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant shareholder) and Mark V. Shoen.stockholders We currently manage the self-storage properties owned or leased by Blackwater and 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 $10.3 million and $10.0 million from the above mentioned entities during the first quarter of fiscal 2019 and 2018, 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 indirectly owned by Mark V. Shoen, James P. Shoen (a significant shareholder) and a trust benefitting the children and grandchildren of Edward J. Shoen (our Chairman of the Board, President and a significant shareholder).Fiscal 2020 Outlook
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. Total lease payments pursuant to such leases were $0.7 million in the first quarters of both fiscal 2019 and 2018. 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, 2017, subsidiaries of Blackwater 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 us based on equipment rental revenues. We paid the above mentioned entities $16.5 million and $15.9 million in commissions pursuant to such dealership contracts during the first quarter of fiscal 2019 and 2018, respectively.
These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $6.2 million, expenses of $0.7 million and cash flows of $5.4 million during the first quarter of fiscal 2019. Revenues and commission expenses related to the Dealer Agreements were $75.4 million and $16.5 million, respectively during the first quarter of fiscal 2019.
Fiscal 2019 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. With respect to our storage business, we have added new locations and expanded at existing locations. In fiscal 2019,2020, 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 2019.2020. 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, 2018:2019: | Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 60,555 | | $ | (338) | | 8/18/2006 | | 8/10/2018 | | 5.43% | | 1 Month LIBOR | | 15,417 | (a) | | 5 | | 8/15/2011 | | 8/15/2018 | | 1.86% | | 1 Month LIBOR | | 6,200 | (a) | | 4 | | 9/12/2011 | | 9/10/2018 | | 1.75% | | 1 Month LIBOR | | 5,774 | (b) | | 35 | | 3/28/2012 | | 3/28/2019 | | 1.42% | | 1 Month LIBOR | | 8,542 | | | 62 | | 4/16/2012 | | 4/1/2019 | | 1.28% | | 1 Month LIBOR | | 16,650 | | | 316 | | 1/15/2013 | | 12/15/2019 | | 1.07% | | 1 Month LIBOR | | | | | | | | | | | | | | | (a) forward swap | | | | | | | | (b) operating lease | | | | | | |
| Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 14,625 | | $ | 64 | | 1/15/2013 | | 12/15/2019 | | 1.07% | | 1 Month LIBOR | | 85,000 | | | (394) | | 6/28/2019 | | 6/15/2022 | | 1.76% | | 1 Month LIBOR | | 75,000 | | | (389) | | 6/28/2019 | | 6/30/2022 | | 1.78% | | 1 Month LIBOR | | 75,000 | | | (398) | | 6/28/2019 | | 10/31/2022 | | 1.77% | | 1 Month LIBOR | | | | | | | | | | | | | |
As of June 30, 2018,2019, we had $703.4$1,104.6 million of variable rate debt obligations and $5.8 million of a variable rate operating lease.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 $6.0$8.6 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 March 31, 2019 and December 31, 2018, these derivative hedges had a net market value of $4.5 million and $1.5 million, with notional amounts of $276.7 million and $284.0 million, respectively. These derivative instruments are included in Investments, other, on the consolidated balance sheets. 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 4.7% of our revenue was generated in Canada during the first quarter of both fiscal 20192020 and 2018.2019. 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. 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, 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 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. 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 effectiveness 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. 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, 2018.2019. 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
| 31.14.1
| Thirty-sixth Supplemental Indenture and Pledge and Security Agreement dated May 3, 2019, by and between AMERCO and U.S. Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 3, 2019, 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 | 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 | XBRL Instance Document
| Filed herewith | 101.SCH | XBRL Taxonomy Extension Schema
| Filed herewith |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase
| Filed herewith | 101.LAB | XBRL Taxonomy Extension Label Linkbase
| Filed herewith | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase
| Filed herewith | 101.DEF | XBRL Taxonomy Extension Definition Linkbase
| Filed herewith |
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.
Date:August 8, 20187, 2019 |
| /s/ Edward J. Shoen |
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Edward J. Shoen |
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| President and Chairman of the Board |
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| (Duly Authorized Officer) |
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| Date:August 8, 20187, 2019 |
| /s/ Jason A. Berg |
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Jason A. Berg |
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| Chief Financial Officer |
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| (Principal Financial Officer) |
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| | Date: August 8, 2018
| | /s/ Mary K. Thompson
| | | Mary K. Thompson
| | | Chief Accounting Officer
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| | (All amounts are in thousands of U.S.
13. Employee Benefit Plans The components of the net periodic benefit costs with respect to postretirement benefits were as follows: | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 277 | $ | 268 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 236 | | 217 | Other components | | 17 | | 15 | Total other components of net periodic benefit costs | | 253 | | 232 | Net periodic postretirement benefit cost | $ | 530 | $ | 500 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 292 | $ | 277 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 241 | | 236 | Other components | | 22 | | 17 | Total other components of net periodic benefit costs | | 263 | | 253 | Net periodic postretirement benefit cost | $ | 555 | $ | 530 |
14. Fair Value Measurements 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. 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 termshort-term investments, investments available-for-sale, long termlong-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 termlong-term debt and short termshort-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 termshort-term investments, are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value. Certain assetsThe carrying values and liabilities are recorded atestimated fair value onvalues for the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 - Fair Value Measurements and Disclosure (“ASC 820”) requires that financial assets and liabilities recorded at fair value be 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 measurementstated above and are unobservable. These reflect management’s assumptions about the assumptions a market participant would usetheir placement in pricing the asset or liability.
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. are as follows:
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | Quarter Ended June 30, 2019 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (Unaudited) | Assets | | (In thousands) | Reinsurance recoverables and trade receivables, net | $ | 243,235 | $ | 0 | $ | 0 | $ | 243,235 | $ | 243,235 | Mortgage loans, net | | 233,566 | | 0 | | 0 | | 233,566 | | 233,566 | Other investments | | 79,484 | | 0 | | 0 | | 79,484 | | 79,484 | Total | $ | 556,285 | $ | 0 | $ | 0 | $ | 556,285 | $ | 556,285 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance/capital leases payable | | 4,343,935 | | 0 | | 4,343,935 | | 0 | | 4,343,935 | Total | $ | 4,343,935 | $ | 0 | $ | 4,343,935 | $ | 0 | $ | 4,343,935 |
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | Year Ended March 31, 2019 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 224,785 | $ | 0 | $ | 0 | $ | 224,785 | $ | 224,785 | Mortgage loans, net | | 225,829 | | 0 | | 0 | | 225,829 | | 225,829 | Other investments | | 74,907 | | 0 | | 0 | | 74,907 | | 74,907 | Total | $ | 525,521 | $ | 0 | $ | 0 | $ | 525,521 | $ | 525,521 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and leases payable | | 4,192,243 | | 0 | | 4,192,243 | | 0 | | 4,192,243 | Total | $ | 4,192,243 | $ | 0 | $ | 4,192,243 | $ | 0 | $ | 4,192,243 |
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of June 30, 20182019 and March 31, 20182019 that are subject to ASC 820measured at fair value on a recurring basis and the valuation approach applied to each of these items.level within the fair value hierarchy. As of June 30, 2018 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (Unaudited) | | | (In thousands) | Assets | | | | | | | | | Short term investments | $ | 409,787 | $ | 409,787 | $ | – | $ | – | Fixed maturities - available for sale | | 1,913,838 | | 7,372 | | 1,906,197 | | 269 | Preferred stock | | 10,186 | | 10,186 | | – | | – | Common stock | | 26,852 | | 26,852 | | – | | – | Derivatives | | 4,256 | | 3,834 | | 422 | | – | Total | $ | 2,364,919 | $ | 458,031 | $ | 1,906,619 | $ | 269 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Derivatives | $ | 338 | $ | – | $ | 338 | $ | – | Total | $ | 338 | $ | – | $ | 338 | $ | – |
Year Ended June 30, 2019 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (Unaudited) | Assets | | (In thousands) | Short-term investments | $ | 365,801 | $ | 365,552 | $ | 249 | $ | 0 | Fixed maturities - available for sale | | 2,308,689 | | 7,333 | | 2,301,135 | | 221 | Preferred stock | | 8,861 | | 8,861 | | 0 | | 0 | Common stock | | 19,035 | | 19,035 | | 0 | | 0 | Derivatives | | 4,555 | | 4,491 | | 64 | | 0 | Total | $ | 2,706,941 | $ | 405,272 | $ | 2,301,448 | $ | 221 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | Derivatives | | 1,181 | | 0 | | 1,181 | | 0 | Total | $ | 1,181 | $ | 0 | $ | 1,181 | $ | 0 |
As of March 31, 2018 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | Assets | | | | | | | | | Short term investments | $ | 475,320 | $ | 475,320 | $ | – | $ | – | Fixed maturities - available for sale | | 1,881,137 | | 7,567 | | 1,873,293 | | 277 | Preferred stock | | 10,861 | | 10,861 | | – | | – | Common stock | | 27,862 | | 27,862 | | – | | – | Derivatives | | 4,825 | | 4,388 | | 437 | | – | Total | $ | 2,400,005 | $ | 525,998 | $ | 1,873,730 | $ | 277 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Derivatives | $ | 897 | $ | – | $ | 897 | $ | – | Total | $ | 897 | $ | – | $ | 897 | $ | – |
The following table represents the fair value measurements for our assets as of June 30, 2018 using significant unobservable inputs (Level 3). were $0.2 million for both June 30, 2019 and March 31, 2019. | | Fixed Maturities - Asset Backed Securities | | | (Unaudited) | | | (In thousands) | Balance as of March 31, 2018 | $ | 277 | | | | Fixed Maturities - Asset Backed Securities - redeemed | | (14) | Fixed Maturities - Asset Backed Securities - net gain (unrealized) | | 6 | Balance as of June 30, 2018 | $ | 269 |
15. Revenue Recognition Revenue Recognized in Accordance with Topic 606 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), an updated standard on revenue recognition. The standard 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 expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis. Due to insignificant changes in our revenue recognition pattern for applicable revenue streams as a result of the updated guidance, there was no cumulative effect recorded.Additionally, due to the relatively short duration of our equipment contracts, we elected to use the practical expedient for contracts that begin and end within the same reporting period in applying the updated guidance to our applicable revenue streams. We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance.The adoption of the standard did not have a material effect on our Consolidated Balance Sheets, Consolidated Statements of Operations, or Consolidated Statements of Cash Flows. 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. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. This is applicable to insurance premiums received in conjunction with equipment rentals, for which we allocate the transaction price relating to these distinct performance obligations covered by Topic 944 on a relative standalone selling price basis. There were no material contract assets or liabilities as of June 30, 20182019 and March 31, 2018.2019. 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. We concluded that the performance obligations identified are satisfied over time under Topic 606, which is consistent with the timing of our revenue recognition under legacy guidance. 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 begin and end within the same fiscal year.
The Company’s self-moving rental revenues do not currently meet the definition of a lease under Topic 840 due to the existence of substitution rights, and thus are accounted for under Topic 606. However, the contracts are expected to 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 will be 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.
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.
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 Feeincentive 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 20192020 did not have a material effect on our financial statements. 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.
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 840,842, 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. In the following table, revenue is disaggregated by timing of revenue recognition: | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 757,736 | $ | 706,072 | Revenues recognized at a point in time: | | 90,190 | | 89,138 | Total revenues recognized under ASC 606 | | 847,926 | | 795,210 | | | | | | Revenues recognized under ASC 840 | | 95,857 | | 83,452 | Revenues recognized under ASC 944 | | 51,189 | | 52,046 | Revenues recognized under ASC 320 | | 24,605 | | 27,217 | Total revenues | $ | 1,019,577 | $ | 957,925 | | | | | |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 39,079 | $ | 757,736 | Revenues recognized at a point in time: | | 91,171 | | 90,190 | Total revenues recognized under ASC 606 | | 130,250 | | 847,926 | | | | | | Revenues recognized under ASC 842 or 840 | | 865,204 | | 95,857 | Revenues recognized under ASC 944 | | 48,046 | | 51,189 | Revenues recognized under ASC 320 | | 35,749 | | 24,605 | Total revenues | $ | 1,079,249 | $ | 1,019,577 |
In the above table, the revenues recognized over time include self-moving equipment rentals, property management fees, the shipping fees associated with U-Box rentals and a portion of other revenues whereasfor the quarter ended June 30, 2018. Whereas revenues recognized at a point in time include self-moving and self-storage products and service sales and a portion of other revenues.revenues. Self-moving equipment rentals are now in revenues recognized under ASC 842/840 as of April 1, 2019. 16. Income Taxes
The Tax Reform Act was enacted on December 22, 2017. The Tax Reform Act reducesWe recognized liabilities resulting from contracts with customers for self-moving equipment rentals, self-storage revenues, U-Box revenues and tenant revenue, in which the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and repeals the deferrallength of the phase three taxcontract 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.Accounting Pronouncements Adoption of New Accounting Pronouncements On April 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842)” along with related updates, which require a lessee to recognize all leases with terms greater than 12 months on their balance sheet as a liability for life insurance companies.its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term. The new leasing standard does not significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows. Additionally, Topic 842 aligns key aspects of lessor accounting with the new revenue recognition guidance in Topic 606 (see ASU 2014-09 on the previous page) and expands disclosure of key information about leasing arrangements in an attempt to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. We have determined portions of the vehicle rental contracts that convey the right to control the use of identified assets are within the scope of the accounting guidance contained in the new leasing standard. As we disclosed in our discussion of June 30, 2018, we have not completed ourASU 2014-09, the Company’s rental related revenues are accounted for under the revenue accounting standard Topic 606. Topic 842 maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease are split between amortization and interest expense, with operating leases reporting a single lease expense. Topic 842 substantially changed the accounting for sale-leasebacks going forward, where we are to assess if the tax effects of enactmentcontract qualifies as a sale under ASC 606. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the Tax Reform Act; however,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. As all existing sale-leasebacks have madebeen accounted for as a reasonable estimatesale, we did not reassess any existing sale-leaseback transactions. We adopted the new leasing standard using the Effective Date Approach, which allows entities to only apply the new lease standard in the year of adoption. We elected the available practical expedients for existing or expired contracts of lessees and lessors wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, we elected as accounting policies to not recognize right of use assets or lease liabilities for short-term leases (i.e. those with a term of 12 months or less) and to combine lease and non-lease components in the contract for both lessee and lessor arrangements.Adoption of this standard resulted in most of our operating lease commitments being recognized as operating lease liabilities and right-of-use assets. Please see Note 8, Leases, of the effectsNotes to Consolidated Financial Statements. In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Cost (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of all items affected by the Tax Reform Act.beginning of the fiscal year that includes the interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of the standard did not have a material impact on our consolidated financial statements. 17. Subsequent EventsRecent Accounting Pronouncements
In June 2016, FASB issued ASU 2016-13, Financial Strength RatingInstruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. 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. This update is effective for public companies for annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact of this standard on our consolidated financial statements. In August 2018, A.M. Best upgraded the financial strength rating (“FSR”)FASB adopted ASU 2018-12, Targeted Improvements to the Accounting for Repwest Insurance Company to A- from B++Long-Duration Contracts (“ASU 2018-12”). The FSR outlook remains stable. 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 addition, A.M. Best upgradedAugust 2018, the long-term issuer credit rating (“LTICR”)FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to a- from bbb. The LTICR outlook has been revisedthe Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosures on fair value measurements by removing the requirement to stable from positive. 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. We are currently evaluating the impact of this update on our disclosures in the Notes to Consolidated Financial Statements. 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.
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 2019,2020, compared with the first quarter of fiscal 2018,2019, 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 2019.2020. 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, 2018.2019. 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 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 presentation of financial position or results of operations. We disclose any material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 20182019 and 20172018 correspond to fiscal 20192020 and 20182019 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-Haulwith 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 roomsunits 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-ownedwholly owned subsidiaries of U-Haul and Real Estate,Estate; - Property and Casualty Insurance, comprised of Repwest and its
wholly-ownedwholly owned subsidiaries and ARCOA,ARCOA; and - Life Insurance, comprised of Oxford and its
wholly-ownedwholly owned subsidiaries.
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;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®andSafestor 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-Haulrelated 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 Our financial statements have been prepared in accordance with GAAP in the United States. The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements. Certain accounting policies require us to make difficult and subjective judgments and assumptions, often as a result of the need to estimate matters that are inherently uncertain. Following is a detailed description of the accounting policies that we deem most critical to us and that require management’s most difficult and subjective judgments. These estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions and such differences may be material. We also have other policies that we consider key accounting policies such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates because they do not generally require us to make estimates or judgments that are difficult or subjective. The accounting policies that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following: Principles of Consolidation We apply Accounting Standards Codification (“ASC”) 810 - Consolidation (“ASC 810”) in our principles of consolidation. ASC 810 addresses arrangements where a company does not hold a majority of the voting or similar interests of a variable interest entity (“VIE”). A company is required to consolidate a VIE if it has determined it is the primary beneficiary. ASC 810 also addresses the policy when a company owns a majority of the voting or similar rights and exercises effective control. As promulgated by ASC 810, a VIE is not self-supportive due to having one or both of the following conditions: (i) it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated financial support or (ii) its owners do not hold the typical risks and rights of equity owners. This determination is made upon the creation of a variable interest and is re-assessed on an on-going basis should certain changes in the operations of a VIE, or its relationship with the primary beneficiary, trigger a reconsideration under the provisions of ASC 810. After a triggeringreconsideration event occurs, the facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(ies) have a variable interest in the entity, and whether or not the company’s interest is such that it is the primary beneficiary. We will continue to monitor our relationships with the other entities regarding who is the primary beneficiary, which could change based on facts and circumstances of any triggeringreconsideration events. Recoverability of Property, Plant and Equipment Our property, plant and equipment is stated at cost. Interest expense incurred during the initial construction of buildings and rental equipment is considered part of cost. Depreciation is computed for financial reporting purposes using the straight-line or an accelerated method based on a declining balance formula over the following estimated useful lives: rental equipment 2-20 years and buildings and non-rental equipment 3-55 years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment other than real estate (“personal property”) are netted against depreciation expense when realized. Equipment depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., minimize gains or losses. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. As a result of the changes in IRS regulations regarding the capitalization of assets, beginning in the first quarter of fiscal 2017, the Company has changed its depreciation policy to raise the value threshold before certain assets are capitalized. This change in procedure results in the immediate recognition of reported operating costs with a lagging decrease in depreciation expense over the term that these assets would have been depreciated. Due to this change, we had additional operating expenses of $5.1$7.6 million and $6.3$5.1 million in the first quarter of fiscal 20192020 and 2018,2019, respectively. This change in procedure is expected to benefitbenefiting the Company through the immediate recognition of tax deductible costs. We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives. Management determined that additions to theFor our box truck fleet, resulting from purchases should be depreciated onwe utilize an accelerated method of depreciation based upon a declining formula. Under the declining balances method (2.4 times declining balance), the book value of a rental truck is reduced approximately 16%, 13%, 11%, 9%, 8%, 7%, and 6% during years one through seven, respectively, and then reduced on a straight-line basis to a salvage value of 15% by the end of year fifteen. Prior to October 2012, rental equipment subject to this depreciation schedule was depreciated to a salvage value of 20%. Comparatively, a standard straight-line approach would reduce the book value by approximately 5.7% per year over the life of the truck.
Although we intend to sell our used vehicles for prices approximating book value, the extent to which we realize a gain or loss on the sale of used vehicles is dependent upon various factors, including, but not limited to, the general state of the used vehicle market, the age and condition of the vehicle at the time of its disposal and the depreciation rates with respect to the vehicle. We typically sell our used vehicles at our sales centers throughout the United States and Canada, on our website at uhaul.com/trucksales or by phone at 1-866-404-0355. Additionally, we sell a large portion of our pickup and cargo van fleet at automobile dealer auctions. Insurance Reserves Liabilities for life insurance and certain annuity and health policies are established to meet the estimated future obligations of policies in force, and are based on mortality, morbidity and withdrawal assumptions from recognized actuarial tables, which contain margins for adverse deviation. In addition, liabilities for health, disability and other policies include estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported (“IBNR”). Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders. Insurance reserves for Property and Casualty Insurance and U-Haul take into account losses incurred based upon actuarial estimates and are management’s best approximation of future payments.These estimates are based upon past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation.These reserves consist of case reserves for reported losses and a provision for IBNR losses, both reduced by applicable reinsurance recoverables, resulting in a net liability. Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.As a result of the long-tailed nature of the excess workers’ compensation policies written by Repwest duringfrom 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled. On a regular basis management reviews insurance reserve adequacy to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including:including the following: - Claimant
longevitylongevity; - Cost trends associated with claimant
treatmentstreatments; - Changes in ceding entity and third party administrator reporting
practicespractices; - Changes in environmental factors including legal and
regulatoryregulatory; - Current conditions affecting claim settlements, and
- Future economic conditions including
inflationinflation.
We reserve each claim based upon the accumulation of claim costs projected through each claimant’s life expectancy, and then adjust for applicable reinsurance arrangements.Management reviews each claim at least bi-annually and when facts and circumstances change to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.We factor in an estimate of potential cost increases in our IBNR liability.We do not assume settlement of existing claims in calculating the reserve amount, unless it is in the final stages of completion. Continued increases in claim costs, including medical inflation and new treatments and medications, could lead to future adverse development resulting in additional reserve strengthening.Conversely, settlement of existing claims or injured workers returning to work or expiring prematurely could lead to future positive development. Impairment of Investments Investments are evaluated pursuant to guidance contained in ASC 320 - Investments - Debt and Equity Securities to determine if and when a decline in market value below amortized cost is other-than-temporary. Management makes certain assumptions or judgments in its assessment, including, but not limited to:to, our ability and intent to hold the security, quoted market prices, dealer quotes or discounted cash flows, industry factors, financial factors, and issuer specific information such as credit strength. Other-than-temporary impairment in value is recognized in the current period operating results. There were no write downs in the first quarter of fiscal 20192020 or 2018.2019. Income Taxes We file a consolidated tax return with all of our legal subsidiaries. Our tax returns are periodically reviewed by various taxing authorities. The final outcome of these audits may cause changes that could materially impact our financial results. Fair Values 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. Adoption of New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), an updated standard on revenue recognition. The standard 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 expanded disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 became effective for us on April 1, 2018 and was adopted on a modified retrospective basis. We performed an impact assessment by analyzing certain existing material revenue transactions and arrangements that are representative of our business segments and their revenue streams. Additionally, we assessed any potential impacts on our internal controls and processes related to both the implementation and ongoing compliance of the new guidance. The adoption of the standard did not have a material effect on our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other provisions, the new guidance requires the fair value measurement of investments in certain equity securities. For investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. All changes in measurement will be recognized in net income. The guidance was effective for interim periods and annual period beginning after December 15, 2017. Early adoption was not permitted, except for certain provisions relating to financial liabilities. We adopted this standard in the first quarter of fiscal 2019 and recorded an increase of approximately $9.7 million to retained earnings with a corresponding decrease to accumulated other comprehensive income (loss).
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The effective date of ASU 2016-15 was for interim and annual reporting periods beginning after December 15, 2017. Early adoption was permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This update was effective for fiscal years beginning after December 31, 2017, and interim periods within those fiscal years with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statements of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. This update became effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This update became effective for fiscal years beginning after December 15, 2017, including interim periods within those years. We adopted this standard in the first quarter of fiscal 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes how companies that sponsor defined benefit pension plans present the related net periodic benefit cost in the income statement. The service cost component of the net periodic benefit cost will continue to be presented in the same income statement line items, however other components of the net periodic benefit cost will be presented as a component of other income and excluded from operating profit. ASU 2017-07 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. We adopted this standard in the first quarter of fiscal 2019. We report the current service cost component of net periodic benefit cost in Operating expenses on our condensed consolidated statements of operations and report the Other components of net periodic benefit cost as a separate item outside of earnings from operations. We have applied these changes in presentation retrospectively, which resulted in a decrease in earnings from operations of $0.2 million for the quarter ended June 30, 2017. These changes in presentation did not result in any changes to earnings available to common stockholders or earnings per common share. Details of the net periodic costs are provided inPlease see Note 13, Employee Benefit Plans,16, Accounting Pronouncements, of the Notes to Condensed Consolidated Financial Statements.
Statements for Adoption of New Accounting Pronouncements and Recent Accounting PronouncementsPronouncements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require lessees to recognize all leases with terms greater than 12 months on their balance sheet as lease liabilities with a corresponding right-of-use asset. This update maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees will classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease will be split between amortization and interest expense, with operating leases reporting a single lease expense. This update will also require both qualitative and quantitative disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; however, early adoption is permitted. We have determined that the provisions of ASU 2016-02 may result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities. We are still in the process of determining the impact on our consolidated financial statements. For the last ten years, we have reported a discounted estimate of the off-balance sheet lease obligations in our MD&A.
In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Cost (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. 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.
Results of Operations AMERCO and Consolidated Entities Quarter Ended June 30, 20182019 compared with the Quarter Ended June 30, 20172018 Listed below, on a consolidated basis, are revenues for our major product lines for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018:2019: | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 716,602 | $ | 669,858 | Self-storage revenues | | 86,212 | | 76,718 | Self-moving and self-storage products and service sales | | 79,241 | | 78,911 | Property management fees | | 7,416 | | 6,762 | Life insurance premiums | | 36,888 | | 39,091 | Property and casualty insurance premiums | | 12,781 | | 11,815 | Net investment and interest income | | 24,605 | | 27,217 | Other revenue | | 55,832 | | 47,553 | Consolidated revenue | $ | 1,019,577 | $ | 957,925 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 748,596 | $ | 716,602 | Self-storage revenues | | 98,274 | | 86,212 | Self-moving and self-storage products and service sales | | 80,026 | | 79,241 | Property management fees | | 7,156 | | 7,416 | Life insurance premiums | | 32,710 | | 36,888 | Property and casualty insurance premiums | | 13,424 | | 12,781 | Net investment and interest income | | 35,749 | | 24,605 | Other revenue | | 63,314 | | 55,832 | Consolidated revenue | $ | 1,079,249 | $ | 1,019,577 |
Self-moving equipment rental revenues increased $46.7$32.0 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. One-way2019. The improvements came from both truck and in-town transactions both increased leading to the improved revenue results. Sales of our Safemove® and related protection packages contributed to the revenue growth.trailer rentals. Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks, trailers and towing devices in the rental fleet. Self-storage revenues increased $9.5$12.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019.The average monthly amount of occupied square feet increased by 10.7%15.9% during the first quarter of fiscal 20192020 compared with the same period last year.The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 4.35.8 million net rentable square feet, or a 15.5%17.8% increase, with approximately 1.41.9 million of that coming on during the first quarter of fiscal 2019.2020. Sales of self-moving and self-storage products and services increased $0.3$0.8 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Life insurance premiums decreased $2.2$4.2 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 due primarily to decreased life and Medicare supplement premiums. Property and casualty insurance premiums increased $1.0$0.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 due to an increase in Safetow® and Safestor® sales, which is a reflection of the increased equipment and storage rental transactions. Net investment and interest income decreased $2.6increased $11.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. Updated accounting guidance now requires changes2019. Changes in the market value of equity securitiesunaffiliated common stocks held for investment atin our insurance subsidiaries to be recognized through income. Thissubsidiary accounted for $1.2$2.2 million of the decreaseincrease during the quarter. The remainder of the decrease was from gains recognized during the first quarter of fiscal 2018 from mortgage loan payoffs that did not recur in the first quarter of this year.Investment income increased due to a larger invested asset base and we had a $3.4 million gain on derivatives at our life insurance subsidiary. Other revenue increased $8.3$7.5 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018,2019, primarily coming from our U-Box® program. As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $1,019.6 million for the first quarter of fiscal 2019, compared with $957.9 million for the first quarter of fiscal 2018.
Listed below are revenues and earnings from operations at each of our operating segments for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018.2019. The insurance companies’ first quarters ended March 31, 20182019 and 2017.2018. | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 947,885 | $ | 882,527 | Earnings from operations before equity in earnings of subsidiaries | | 200,395 | | 220,740 | Property and casualty insurance | | | | | Revenues | | 15,889 | | 16,106 | Earnings from operations | | 2,713 | | 5,436 | Life insurance | | | | | Revenues | | 57,863 | | 60,656 | Earnings from operations | | 1,881 | | 3,436 | Eliminations | | | | | Revenues | | (2,060) | | (1,364) | Earnings from operations before equity in earnings of subsidiaries | | (285) | | (349) | Consolidated results | | | | | Revenues | | 1,019,577 | | 957,925 | Earnings from operations | | 204,704 | | 229,263 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 1,000,398 | $ | 947,885 | Earnings from operations before equity in earnings of subsidiaries | | 201,896 | | 200,395 | Property and casualty insurance | | | | | Revenues | | 20,305 | | 15,889 | Earnings from operations | | 8,466 | | 2,713 | Life insurance | | | | | Revenues | | 60,321 | | 57,863 | Earnings from operations | | 3,781 | | 1,881 | Eliminations | | | | | Revenues | | (1,775) | | (2,060) | Earnings from operations before equity in earnings of subsidiaries | | (278) | | (285) | Consolidated results | | | | | Revenues | | 1,079,249 | | 1,019,577 | Earnings from operations | | 213,865 | | 204,704 |
Total costs and expenses increased $86.2$50.5 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Operating expenses for Moving and Storage increased $79.8$38.9 million, largely from increased equipment maintenance, personnel, liability costs, shipping costs associated with U-Box and property taxes. Repair costs accounted for $40.8 million of the increase with the majority of this associated with the portion ofrental fleet experienced a $2.5 million decrease during the fleet nearing resale.quarter. Net gains from the disposal of rental equipment increased $11.2$0.4 million. Compared with fiscal 2018, we have sold more used trucks and the average sales proceeds per truck were nominally better. Depreciation expense associated with our rental fleet increased $7.2$8.4 million to $114.0$122.4 million due to a larger fleet.Depreciation expense on all other assets, largely from buildings and improvements, increased $4.1$6.2 million to $28.7$34.9 million. Gains on the disposal of real estate increased $1.6 million from the condemnation of a property in the first quarter of fiscal 2020. As a result of the above mentionedabove-mentioned changes in revenues and expenses, earnings from operations decreasedincreased to $213.9 million for the first quarter of fiscal 2020, compared with $204.7 million for the first quarter of fiscal 2019, compared with $229.3 million for the first quarter of fiscal 2018.2019. Interest expense for the first quarter of fiscal 20192020 was $35.3$38.9 million, compared with $30.3$35.3 million for the first quarter of fiscal 2018, primarily2019, due to increased borrowings. Income tax expense was $42.3 million for the first quarter of fiscal 2020, compared with $41.3 million for the first quarter of fiscal 2019, compared with $72.52019. As a result of the above-mentioned items, earnings available to common stockholders were $132.4 million for the first quarter of fiscal 2018. Our effective tax rate was 24.4% of net income before taxes for fiscal 2019,2020, compared to 36.5% in the prior-year period. As a result of the above mentioned items, earnings available to common shareholders werewith $127.8 million for the first quarter of fiscal 2019, compared with $126.2 million for the first quarter of fiscal 2018.2019.
Basic and diluted earnings per share for the first quarter of fiscal 20192020 were $6.53,$6.76, compared with $6.44$6.53 for the first quarter of fiscal 2018.2019. The weighted average common shares outstanding basic and diluted were 19,597,697 for the first quarter of fiscal 2020, compared with 19,590,585 for the first quarter of fiscal 2019, compared with 19,587,891 for the first quarter of fiscal 2018. Moving and Storage Quarter Ended June 30, 20182019 compared with the Quarter Ended June 30, 20172018 Listed below are revenues for our major product lines at Moving and Storage for the first quarter of fiscal 20192020 and the first quarter of fiscal 2018:2019: | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 717,542 | $ | 670,698 | Self-storage revenues | | 86,212 | | 76,718 | Self-moving and self-storage products and service sales | | 79,241 | | 78,911 | Property management fees | | 7,416 | | 6,762 | Net investment and interest income | | 2,563 | | 2,657 | Other revenue | | 54,911 | | 46,781 | Moving and Storage revenue | $ | 947,885 | $ | 882,527 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 749,136 | $ | 717,542 | Self-storage revenues | | 98,274 | | 86,212 | Self-moving and self-storage products and service sales | | 80,026 | | 79,241 | Property management fees | | 7,156 | | 7,416 | Net investment and interest income | | 3,267 | | 2,563 | Other revenue | | 62,539 | | 54,911 | Moving and Storage revenue | $ | 1,000,398 | $ | 947,885 |
Self-moving equipment rental revenues increased $46.8$31.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. One-way2019.The improvements came from both truck and in-town transactions both increased leading to the improved revenue results. Sales of our Safemove® and related protection packages contributed to the revenue growth.trailer rentals. Compared to the same period last year, we increased the number of retail locations, independent dealers, box trucks, trailers and towing devices in the rental fleet. Self-storage revenues increased $9.5$12.1 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019.The average monthly amount of occupied square feet increased by 10.7%15.9% during the first quarter of fiscal 20192020 compared with the same period last year.The growth in revenues and square feet rented comes from a combination of improved rates per square foot, occupancy gains at existing locations and from the addition of new facilities to the portfolio. Over the last twelve months, we added approximately 4.35.8 million net rentable square feet, or a 15.5%17.8% increase, with approximately 1.41.9 million of that coming on during the first quarter of fiscal 2019.2020. Sales of self-moving and self-storage products and services increased $0.3$0.8 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Net investment and interest income decreased $0.1increased $0.7 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018. 2019. Other revenue increased $8.1$7.6 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 20182019 caused primarily by the U-Box® program.
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, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Room count as of June 30 | | 383 | | 328 | Square footage as of June 30 | | 32,394 | | 28,044 | Average monthly number of rooms occupied | | 262 | | 237 | Average monthly occupancy rate based on room count | | 69.6% | | 73.0% | Average monthly square footage occupied | | 23,666 | | 21,383 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of June 30 | | 452 | | 383 | Square footage as of June 30 | | 38,175 | | 32,394 | Average monthly number of units occupied | | 302 | | 262 | Average monthly occupancy rate based on unit count | | 68.4% | | 69.6% | Average monthly square footage occupied | | 27,421 | | 23,666 |
Over the last twelve months we added approximately 4.35.8 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 3.6%8.5%. Total costs and expenses increased $85.7$51.0 million during the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Operating expenses increased $79.8$38.9 million largely from increased equipment maintenance, personnel, liability costs, shipping costs associated with U-Box and property taxes. Repair costs accounted for $40.8 million of the increase with the majority of this associated with the portion ofrental fleet experienced a $2.5 million decrease during the fleet nearing resale.quarter. Net gains from the disposal of rental equipment increased $11.2$0.4 million. Compared with fiscal 2018, we have sold more used trucks and the average sales proceeds per truck were nominally better. Depreciation expense associated with our rental fleet increased $7.2$8.4 million to $114.0$122.4 million due to a larger fleet.Depreciation expense on all other assets, largely from buildings and improvements, increased $4.1$6.2 million to $28.7$34.9 million. Gains on the disposal of real estate increased $1.6 million from the condemnation of a property in the first quarter of fiscal 2020. As a result of the above mentionedabove-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, decreasedincreased to $201.9 million for the first quarter of fiscal 2020, compared with $200.4 million for the first quarter of fiscal 2019, compared with $220.7 million for the first quarter of fiscal 2018.2019. Equity in the earnings of AMERCO’s insurance subsidiaries was $9.8 million for the first quarter of fiscal 2020, compared with $3.7 million for the first quarter of fiscal 2019, compared with $5.8 million for the first quarter of fiscal 2018.2019. As a result of the above mentionedabove-mentioned changes in revenues and expenses, earnings from operations decreasedincreased to $211.7 million for the first quarter of fiscal 2020, compared with $204.1 million for the first quarter of fiscal 2019, compared with $226.6 million for the first quarter of fiscal 2018.2019. Property and Casualty Insurance Quarter Ended March 31, 20182019 compared with the Quarter Ended March 31, 20172018 Net premiums were $13.3$14.1 million and $11.8$13.3 million for the quarters ended March 31, 20182019 and 2017,2018, 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. Net investment and interest income was $2.5$6.2 million and $4.3$2.5 million for the quartersthree months ended March 31, 2019 and 2018, and 2017, respectively. Updated accounting guidance now requires changesThe main driver of the change in net investment income was the increase in the market valuevaluation of equity securities heldunaffiliated common stock of $2.2 million for investment to be recognized through income. This accounted for $1.2 million of the decrease during the quarter.three months ended March 31, 2019. Net operating expenses were $8.7$8.1 million and $8.2$8.7 million for the quartersthree months ended March 31, 2019 and 2018, respectively. The change was due to an increase in commissions, decreased loss adjusting fees and 2017, respectively, primarily driven by larger commission spend from top line growth.subrogation income. Benefits and losses incurred were $4.5$3.8 million and $2.4$4.5 million for the quarters endedthree months March 31, 2019 and 2018, and 2017, respectively, with $1.0 million of the increase is associated with new business thatrespectively. The decrease was not in force for the prior year quarter.due to favorable loss experience. As a result of the above mentionedabove-mentioned changes in revenues and expenses, pretax earnings from operations were $8.5 million and $2.7 million for the three months ended March 31, 2019 and $5.42018, respectively.
Life Insurance Quarter Ended March 31, 2019 compared with the Quarter Ended March 31, 2018 Net premiums were $32.7 million and $36.9 million for the quarters ended March 31, 20182019 and 2017, respectively. Life Insurance
Quarter Ended March 31, 2018, compared with the Quarter Ended March 31, 2017
Net premiums were $36.9 million and $39.1 million for the quarters ended March 31, 2018 and 2017, respectively. Medicare Supplement premiums decreased by $3.3$3.0 million due to reductionsthe reduction in new sales and declined premiumspolicy decrements on the existing business partially offset by premium rate increasesincreases. Life premiums decreased by $0.8 million, primarily due to the termination of a reinsurance contract with one of our reinsurers in the fourth quarter of fiscal 2019. Premiums on renewal premiums. All other lines of business combined for a $1.1 million increase.decreased $0.4 million. Deferred annuity deposits were $61.3$61.5 million or $34.1$0.2 million belowabove prior year and are accounted for on the balance sheet as deposits rather than premiums.premiums
Net investment and interest income was $19.9$26.7 million and $20.7$19.9 million for the quarters ended March 31, 2019 and 2018, and 2017, respectively. Realized gainsInvestment income from fixed maturities and additionalincreased $4.0 million from a larger invested asset base. The increase in realized capital gains fromwas $1.0 million coupled with a $3.4 million gain on derivatives used as hedges for our mortgage loan portfolios decreased $1.6 million,fixed indexed annuities. This was partially offset by a $0.9$1.6 million increasedecrease in the investment and interest income due to a largerfrom other invested asset base.assets. Net operating expenses were $5.9$5.2 million and $5.6$5.9 million for the quarters ended March 31, 2019 and 2018, respectively. The decrease was primarily due to decreased commissions and 2017,general expenses. Benefits and losses incurred were $45.2 million and $44.1 million for the quarters ended March 31, 2019 and 2018, respectively. A minorInterest credited to policyholders increased $6.2 million from the increase in general expensesthe deposit base. This was partially offset by the decrease in incurred benefits on Medicare Supplement commissions from the reduced business in force. Benefitssupplement, life and losses incurred were $44.1 million and $45.3 million for the quarters ended March 31, 2018 and 2017, respectively. The decrease was primarily due to a $2.9 million reduction inother lines of business. Medicare supplement benefits decreased $3.5 million from the declineddeclining policies in force. All otherLife benefits decreased $1.0 million due to the termination of a reinsurance contract. Benefits on the remaining lines of business accounted for a $1.7 million increase.decreased $0.5 million.
Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $6.0$6.1 million and $6.3$6.0 million for the quarters ended March 31, 2019 and 2018, and 2017, respectively. The decrease was primarily due to additional DAC amortization in the first quarter of prior year generated by added gains on discounted mortgage loan investments and realized gains partially offset by the increased amortization from a larger DAC asset in the current quarter. As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $1.9$3.8 million and $3.4$1.9 million for the quarters ended March 31, 2019 and 2018, and 2017, 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 whichthat 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, 2018,2019, cash and cash equivalents totaled $650.1$519.8 million, compared with $759.4$673.7 million at March 31, 2018.2019. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of June 30, 20182019 (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 | $ | 618,300 | $ | 5,119 | $ | 26,920 | Other financial assets | | 137,664 | | 455,638 | | 2,025,150 | Debt obligations | | 3,586,127 | | – | | – | | | | | | | | (a) As of March 31, 2018 | | | | | | |
| | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | | (Unaudited) | | | (In thousands) | Cash and cash equivalents | $ | 500,497 | $ | 6,061 | $ | 13,273 | Other financial assets | | 173,795 | | 472,122 | | 2,308,138 | Debt obligations | | 4,343,935 | | – | | – | | | | | | | | (a) As of March 31, 2019 | | | | | | |
As of June 30, 2018,2019, Moving and Storage had additional cash available under existing credit facilities of $220.0$75.0 million.The majority of invested cash at the Moving and Storage segment is held in government money market funds. Net cash provided by operating activities decreased $7.0increased $11.3 million in the first quarter of fiscal 20192020 compared with the first quarter of fiscal 2018. The insurance subsidiaries accounted for $6.2 million of the decrease. Moving and Storage operating cash flows were negatively affected by the end of the month falling on a weekend; this pushed the receipt of credit card receipts into the following month. 2019. Net cash used in investing activities increased $36.4$286.1 million in the first quarter of fiscal 2019,2020, compared with the first quarter of fiscal 2018.2019. Purchases of property, plant and equipment, which are reported net of cash from sales and lease-back transactions, increased $67.9$299.1 million. Cash from the sales of property, plant and equipment increased $45.2decreased $26.8 million largely due to reduced fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $16.0$33.0 million due to additionalreduced investment purchases. Net cash usedprovided by financing activities increased $165.3$220.9 million in the first quarter of fiscal 2019,2020, as compared with the first quarter of fiscal 2018.2019. This was due to a combination of decreased debt payments of $12.7 million, increased debt and finance/capital lease repayments of $36.9$10.1 million, a decreasean increase in cash from borrowings of $51.7$230.1 million, and a decrease in net annuity deposits from Life Insurance of $63.7 million, and a $9.8 million dividend payment in the first quarter of fiscal 2019. 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 2019,2020, we will reinvest in our truck and trailer rental fleet approximately $450$700 million, net of equipment sales excluding any lease buyouts. Through the first quarter of fiscal 2019,2020, we have invested, net of equipment sales, $254$403 million before any lease buyouts in our truck and trailer fleet of this projected amount. Fleet investments in fiscal 20192020 and beyond will be dependent upon several factors, including availability of capital, the truck rental environment and the used-truck sales market. We anticipate that the fiscal 20192020 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. Real Estate has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations and sales. Our 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. We are funding these development projects through construction loans and internally generated funds. For the first quarter of fiscal 2019,2020, we invested $219$218 million in real estate acquisitions, new construction and renovation and major repairs. For fiscal 2019,2020, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties. 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 $360.6$686.5 million and $337.9$360.6 million for the first quarter of fiscal 20192020 and 2018,2019, respectively. The components of our net capital expenditures are provided in the following table: | | Quarter Ended June 30, | | | 2018 | | 2017 | | | (Unaudited) | | | (In thousands) | Purchases of rental equipment | $ | 440,350 | $ | 396,068 | Equipment lease buyouts | | 2,633 | | – | Purchases of real estate, construction and renovations | | 219,196 | | 142,499 | Other capital expenditures | | 12,871 | | 29,083 | Gross capital expenditures | | 675,050 | | 567,650 | Less: Lease proceeds | | (126,903) | | (87,391) | Less: Sales of property, plant and equipment | | (187,546) | | (142,343) | Net capital expenditures | | 360,601 | | 337,916 |
| | Quarter Ended June 30, | | | 2019 | | 2018 | | | (Unaudited) | | | (In thousands) | Purchases of rental equipment | $ | 560,693 | $ | 440,350 | Equipment lease buyouts | | 34,030 | | 2,633 | Purchases of real estate, construction and renovations | | 217,911 | | 219,196 | Other capital expenditures | | 34,614 | | 12,871 | Gross capital expenditures | | 847,248 | | 675,050 | Less: Lease proceeds | | – | | (126,903) | Less: Sales of property, plant and equipment | | (160,754) | | (187,546) | Net capital expenditures | $ | 686,494 | $ | 360,601 |
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 market placemarketplace 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 stockholder’sstockholders’ 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 $208.3$236.4 million and $211.2$222.4 million at March 31, 20182019 and December 31, 2017,2018, respectively. The increase resulted from net earnings of $2.2$6.7 million a decreaseand an increase in other comprehensive income of $14.8 million, and a one-time reclass of $9.7 million between other comprehensive income and beginning retained earnings due to the implementation of ASU 2016-01. $7.2 million.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, 20182019 were $37.6$24.5 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s fundsassets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries. Life Insurance’s stockholder’s equity was $309.6$349.1 million and $332.9$311.7 million as of March 31, 20182019 and December 31, 2017,2018, respectively. The decreaseincrease resulted from a reductionnet earnings of $3.1 million and an increase in other comprehensive income of $24.8$34.3 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio, offset by net earnings of $1.5 million.portfolio. 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, 2018,2019, 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 $351.5$367.8 million and $352.3$351.5 million for the first quarter of fiscal 2020 and 2019, and 2018, respectively. Moving and Storage operating cash flows were negatively affected by the end of the month falling on a weekend; this pushed the receipt of credit card receipts into the following month. Property and Casualty Insurance Net cash provided by operating activities were $3.6$3.1 million and $2.7$4.0 million for the first quarters ended March 31, 20182019 and 2017,2018, respectively. The increasedecrease was the result of increased underwriting profit.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 $9.4$13.3 million and $11.6$11.2 million at March 31, 20182019 and December 31, 2017,2018, 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 $14.2$10.0 million and $21.3$14.2 million for the first quarter ended March 31, 20182019 and 2017,2018, respectively. The decrease was primarily due to the timing of settlement of payables, offset by an increase resulting from a reduction in paid commissions and federal income tax. 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, 20182019 and December 31, 2017,2018, cash and cash equivalents and short-term investments amounted to $27.1$13.3 million and $50.7$24.1 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. 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, 2018,2019, we had available borrowing capacity under existing credit facilities of $220.0$75.0 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. Fair Value of Financial Instruments Certain assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 requires that financial assets and liabilities recorded at fair value be classified and disclosed in a Level 1, Level 2 or Level 3 category. For more information, please see Note 14, Fair Value Measurements, of the Notes to Condensed Consolidated Financial Statements. The available-for-sale securities held by us are recorded at fair value. These values are determined primarily from actively traded markets where prices are based either on direct market quotes or observed transactions. Liquidity is a factor considered during the determination of the fair value of these securities. Market price quotes may not be readily available for certain securities or the market for them has slowed or ceased. In situations where the market is determined to be illiquid, fair value is determined based upon limited available information and other factors, including expected cash flows. As of June 30, 2018,2019, we had $0.3$0.2 million of available-for-sale assets classified in Level 3. The interest rate swaps held by us as hedges against interest rate risk for our variable rate debt are recorded at fair value. These 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. 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, 2018.2019. 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. We utilize operating leases for certain rental equipment and facilities with terms expiring substantially through 2024. In the event of a shortfall in proceeds from the sales of the underlying rental equipment assets, we have guaranteed $14.2 million of residual values as of June 30, 2018 for these assets at the end of their respective lease terms. We have been leasing rental equipment since 1987. To date, we have not experienced residual value shortfalls related to these leasing arrangements. Using the average cost of fleet related debt as the discount rate, the present value of our minimum lease payments and residual value guarantees were $21.5 million as of June 30, 2018.
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. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by WGHLP, which is owned by Mark V. Shoen (a significant shareholder) and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant shareholder) and Mark V. Shoen.stockholders We currently manage the self-storage properties owned or leased by Blackwater and 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 $10.3 million and $10.0 million from the above mentioned entities during the first quarter of fiscal 2019 and 2018, 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 indirectly owned by Mark V. Shoen, James P. Shoen (a significant shareholder) and a trust benefitting the children and grandchildren of Edward J. Shoen (our Chairman of the Board, President and a significant shareholder).Fiscal 2020 Outlook
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of Blackwater. Total lease payments pursuant to such leases were $0.7 million in the first quarters of both fiscal 2019 and 2018. 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, 2017, subsidiaries of Blackwater 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 us based on equipment rental revenues. We paid the above mentioned entities $16.5 million and $15.9 million in commissions pursuant to such dealership contracts during the first quarter of fiscal 2019 and 2018, respectively.
These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $6.2 million, expenses of $0.7 million and cash flows of $5.4 million during the first quarter of fiscal 2019. Revenues and commission expenses related to the Dealer Agreements were $75.4 million and $16.5 million, respectively during the first quarter of fiscal 2019.
Fiscal 2019 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. With respect to our storage business, we have added new locations and expanded at existing locations. In fiscal 2019,2020, 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 2019.2020. 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, 2018:2019: | Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 60,555 | | $ | (338) | | 8/18/2006 | | 8/10/2018 | | 5.43% | | 1 Month LIBOR | | 15,417 | (a) | | 5 | | 8/15/2011 | | 8/15/2018 | | 1.86% | | 1 Month LIBOR | | 6,200 | (a) | | 4 | | 9/12/2011 | | 9/10/2018 | | 1.75% | | 1 Month LIBOR | | 5,774 | (b) | | 35 | | 3/28/2012 | | 3/28/2019 | | 1.42% | | 1 Month LIBOR | | 8,542 | | | 62 | | 4/16/2012 | | 4/1/2019 | | 1.28% | | 1 Month LIBOR | | 16,650 | | | 316 | | 1/15/2013 | | 12/15/2019 | | 1.07% | | 1 Month LIBOR | | | | | | | | | | | | | | | (a) forward swap | | | | | | | | (b) operating lease | | | | | | |
| Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 14,625 | | $ | 64 | | 1/15/2013 | | 12/15/2019 | | 1.07% | | 1 Month LIBOR | | 85,000 | | | (394) | | 6/28/2019 | | 6/15/2022 | | 1.76% | | 1 Month LIBOR | | 75,000 | | | (389) | | 6/28/2019 | | 6/30/2022 | | 1.78% | | 1 Month LIBOR | | 75,000 | | | (398) | | 6/28/2019 | | 10/31/2022 | | 1.77% | | 1 Month LIBOR | | | | | | | | | | | | | |
As of June 30, 2018,2019, we had $703.4$1,104.6 million of variable rate debt obligations and $5.8 million of a variable rate operating lease.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 $6.0$8.6 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 March 31, 2019 and December 31, 2018, these derivative hedges had a net market value of $4.5 million and $1.5 million, with notional amounts of $276.7 million and $284.0 million, respectively. These derivative instruments are included in Investments, other, on the consolidated balance sheets. 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 4.7% of our revenue was generated in Canada during the first quarter of both fiscal 20192020 and 2018.2019. 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. 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, 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 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. 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 effectiveness 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. 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, 2018.2019. 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
| 31.14.1
| Thirty-sixth Supplemental Indenture and Pledge and Security Agreement dated May 3, 2019, by and between AMERCO and U.S. Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 3, 2019, 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 | 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 | XBRL Instance Document
| Filed herewith | 101.SCH | XBRL Taxonomy Extension Schema
| Filed herewith |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase
| Filed herewith | 101.LAB | XBRL Taxonomy Extension Label Linkbase
| Filed herewith | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase
| Filed herewith | 101.DEF | XBRL Taxonomy Extension Definition Linkbase
| Filed herewith |
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.
Date:August 8, 20187, 2019 |
| /s/ Edward J. Shoen |
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Edward J. Shoen |
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| President and Chairman of the Board |
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| (Duly Authorized Officer) |
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| Date:August 8, 20187, 2019 |
| /s/ Jason A. Berg |
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Jason A. Berg |
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| Chief Financial Officer |
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| (Principal Financial Officer) |
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| | Date: August 8, 2018
| | /s/ Mary K. Thompson
| | | Mary K. Thompson
| | | Chief Accounting Officer
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