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U-Haul Holding Co /NV/ - Annual Report: 2016 (Form 10-K)


United States Securities and exchange commission

Washington, D.C. 20549

Form 10-K

(Mark One)

[X]Annual Report Pursuant to Section 13 or 15(d) of the securities exchange act of 1934.

For the fiscal year ended March 31, 2016

or

[ ]Transition report pursuant to section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to _________________         

 

 

 

Commission
File Number

Registrant, State of  Incorporation Address and Telephone Number

I.R.S. Employer Identification No.

 

 

 

 

 

 

 

 

 

1-11255

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

5555 Kietzke Lane, Ste. 100

 

 

Reno, Nevada 89511

 

 

Telephone (775) 688-6300

 

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

Title of each class

Name of each exchange on which registered

Common stock, $0.25 par value

NASDAQ Global Selection Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [X]  No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act.  Yes [ ]  No  [X]

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]  


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

Large accelerated filer [X]   Accelerated filer [ ]  

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

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

The aggregate market value of AMERCO common stock held by non-affiliates on September 30, 2015 was $2,392,872,853. The aggregate market value was computed using the closing price for the common stock trading on NASDAQ on such date. Shares held by executive officers, directors and persons owning directly or indirectly more than 5% of the outstanding common stock have been excluded from the preceding number because such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at May 20, 2016.

Documents incorporated by reference: portions of AMERCO’s definitive proxy statement for the 2016 annual meeting of stockholders, to be filed within 120 days after AMERCO’s fiscal year ended March 31, 2016, are incorporated by reference into Part III of this report.


TABLE OF CONTENTS

 

 

Page 

 

PART I

 

Item 1.

Business

1

Item 1A.

Risk Factors

6

Item 1B.

Unresolved Staff Comments

11

Item 2.

Properties

11

Item 3.

Legal Proceedings

11

Item 4. 

Mine Safety Disclosures

14

 

 

 

 

PART II

 

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities

14

Item 6.

Selected Financial Data

16

Item 7. 

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

17

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 8.

Financial Statements and Supplementary Data

39

Item 9. 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

39

Item 9A.

Controls and Procedures

39

Item 9B.

Other Information

42

 

 

 

 

PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance

42

Item 11.

Executive Compensation

42

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


42

Item 13.

Certain Relationships and Related Transactions, and Director Independence

42

Item 14.

Principal Accounting Fees and Services

42

 

 

 

 

PART IV

 

Item 15.

Exhibits and Financial Statement Schedules

42

 


 


Part i

Item 1. Business

Company Overview

We are North America’s largest “do-it-yourself” moving and storage operator through our subsidiary U-Haul International, Inc. (“U-Haul”). U-Haul is synonymous with “do-it-yourself” moving and storage and is a leader in supplying products and services to help people move and store their household and commercial goods. Our primary service objective is to provide a better and better product or service to more and more people at a lower and lower cost. Unless the context otherwise requires, the term “AMERCO,” “Company,” “we,” “us,” or “our” refers to AMERCO, a Nevada corporation, and all of its legal subsidiaries, on a consolidated basis.

We were founded in 1945 as a sole proprietorship under the name "U-Haul Trailer Rental Company" and have rented trailers ever since. Starting in 1959, we rented trucks on a one-way and in-town basis exclusively through independent U-Haul dealers. In 1974, we began developing our network of U-Haul managed retail stores, through which we rent our trucks and trailers, self-storage rooms and portable moving and storage units and sell moving and self-storage products and services to complement our independent dealer network.

We rent our distinctive orange and white U-Haul trucks and trailers as well as offer self-storage rooms through a network of approximately 1,700 Company operated retail moving stores and approximately 19,500 independent U-Haul dealers. We also sell U-Haul brand boxes, tape and other moving and self-storage products and services to “do-it-yourself” moving and storage customers at all of our distribution outlets and through our uhaul.com and eMove® web sites.

We believe U-Haul is the most convenient supplier of products and services addressing the needs of North America’s “do-it-yourself” moving and storage market. Our broad geographic coverage throughout the United States and Canada and our extensive selection of U-Haul brand moving equipment rentals, self-storage rooms, portable moving and storage units and related moving and storage products and services provide our customers with convenient “one-stop” shopping.

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.

Through Repwest Insurance Company (“Repwest”) and ARCOA Risk Retention Group ("ARCOA"), our property and casualty insurance subsidiaries, we manage the property, liability and related insurance claims processing for U-Haul. Oxford Life Insurance Company (“Oxford”), our life insurance subsidiary, sells life insurance, Medicare supplement insurance, annuities and other related products to the senior market.

Available Information

AMERCO and U-Haul are each incorporated in Nevada. U-Haul’s internet address is uhaul.com. On AMERCO’s investor relations web site, amerco.com, we post the following filings as soon as practicable after they are electronically filed with or furnished to the United States Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statement related to our annual meeting of stockholders, and any amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We also use our investor relations web site as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. All such filings on our web site are available free of charge. Additionally, you will find these materials on the SEC’s website at sec.gov.

 


Products and Rental Equipment

Our customers are primarily “do-it-yourself” household movers. U-Haul moving equipment is specifically designed, engineered and manufactured for the “do-it-yourself” household mover. These “do-it-yourself” movers include individuals and families moving their belongings from one home to another, college students moving their belongings, vacationers and sports enthusiasts needing extra space or having special towing needs, people trying to save on home furniture and home appliance delivery costs, and “do-it-yourself” home remodeling and gardening enthusiasts who need to transport materials.

As of March 31, 2016, our rental fleet consisted of approximately 139,000 trucks, 108,000 trailers and 38,000 towing devices. This equipment and our U-Haul brand of self-moving products and services are available through our network of managed retail moving stores and independent U-Haul dealers. Independent U-Haul dealers receive rental equipment from the Company, act as rental agents and are paid a commission based on gross revenues generated from their U-Haul rentals.

Our rental truck chassis are engineered by domestic truck manufacturers. These chassis are joined with the U-Haul designed and manufactured van boxes primarily at U-Haul operated manufacturing and assembly facilities strategically located throughout the United States. U-Haul rental trucks feature our proprietary Lowest DeckSM, which provides our customers with extra ease of loading. The loading ramps on our trucks are the widest in the industry, which reduce the effort needed to move belongings. Our trucks are fitted with convenient, padded rub rails with tie downs on every interior wall. Our Gentle Ride SuspensionSM helps our customers safely move delicate and prized possessions. Also, the engineers at our U-Haul Technical Center determined that the softest ride in our trucks was at the front of the van box. Consequently, we designed the part of the van box that hangs over the front cab of the truck to be the location for our customers to place their most fragile items during their move. We call this area Mom’s AtticSM.

Our distinctive trailers are also manufactured at these same U-Haul operated manufacturing and assembly facilities. These trailers are well suited to the low profile of many of today’s newly manufactured automobiles. Our engineering staff is committed to making our trailers easy to tow, safe, aerodynamic and fuel efficient.

To provide our self-move customers with added value, our rental trucks and trailers are designed with fuel efficiency in mind. Many of our trucks are fitted with fuel economy gauges, another tool that assists our customers in conserving fuel. To help make our rental equipment more reliable, we routinely perform extensive preventive maintenance and repairs.

We also provide customers with equipment to transport their vehicles. We provide two towing options; auto transport, in which all four wheels are off the ground, and a tow dolly, in which the front wheels of the towed vehicle are off the ground.

To help our customers load their boxes and larger household appliances and furniture, we offer several accessory rental items. Our utility dolly has a lightweight design and is easy to maneuver. Another rental accessory is our four wheel dolly, which provides a large, flat surface for moving dressers, wall units, pianos and other large household items. U-Haul appliance dollies provide the leverage needed to move refrigerators, freezers, washers and dryers easily and safely. These utility, furniture and appliance dollies, along with the low decks and the wide loading ramps on U-Haul trucks and trailers, are designed for easy loading and unloading of our customers’ belongings.

The total package U-Haul offers to the “do-it-yourself” household mover doesn’t end with trucks, trailers and accessory rental items. Our moving supplies include a wide array of affordably priced U-Haul brand boxes, tape and packing materials. We also provide specialty boxes for dishes, computers and sensitive electronic equipment, as well as tape, security locks, and packing supplies. U-Haul brand boxes are specifically sized to make loading easier.

We estimate that U-Haul is North America’s largest seller and installer of hitches and towing systems. In addition to towing U-Haul equipment, these hitching and towing systems can tow jet skis, motorcycles, boats, campers and horse trailers. Each year, more than one million customers visit our locations for expertise on complete towing systems, trailer rentals and the latest in towing accessories.

 


U-Haul has one of North America’s largest propane refilling networks, with over 1,100 locations providing this convenient service. We employ trained, certified personnel to refill propane cylinders and alternative fuel vehicles. Our network of propane dispensing locations is one of the largest automobile alternative refueling networks in North America.

Our self-storage business was a natural outgrowth of our self-moving operations. Conveniently located U-Haul self-storage rental facilities provide clean, dry and secure space for storage of household and commercial goods. Storage units range in size from 6 square feet to over 1,000 square feet. As of March 31, 2016, we operate nearly 1,360 self-storage locations in North America, with over 536,000 rentable rooms comprising 47.9 million square feet of rentable storage space. Our self-storage centers feature a wide array of security measures, ranging from electronic property access control gates to individually alarmed storage units. At many centers, we offer climate controlled storage rooms to protect temperature sensitive goods such as video tapes, albums, photographs and precious wood furniture.

Another extension of our strategy to make “do-it-yourself” moving and storage easier is our U-Box® program.  A U-Box portable moving and storage unit is delivered to a location of our customer’s choosing either by the customers themselves through the use of a U-Box trailer, with the assistance of a Moving Helper or by Company personnel. Once the U-Box portable moving and storage unit is filled, it can be stored at the customer’s location, or taken to one of our Company operated locations, a participating independent dealer, or moved to a location of the customer’s choice.

Additionally, we offer moving and storage protection packages such as Safemove and Safetow. These programs provide moving and towing customers with a damage waiver, cargo protection and medical and life insurance coverage. Safestor provides protection for storage customers from loss on their goods in storage. Safestor Mobile provides protection for customers stored belongings when using our U-Box portable and moving storage units. For our customers who desire additional coverage over and above the standard Safemove protection, we also offer our Safemove Plus product. This package provides the rental customer with a layer of primary liability protection.

We believe that through our web site, uhaul.com, we have aggregated the largest network of customers and independent businesses in the self-moving and self-storage industry. In particular, our Moving Helper program connects “do-it-yourself” movers with thousands of independent service providers across North America to assist our customers in packing, loading, unloading, cleaning, driving and performing other services.

Through the U-Haul Storage Affiliate Program, independent storage businesses can join the world’s largest self-storage reservation system. Self-storage customers making a reservation through uhaul.com can access all of the U-Haul self-storage centers and all of our independent storage affiliate partners for even greater convenience to meet their self-storage needs. For the independent storage operator, our network gives them access to products and services allowing them to compete with larger operators more cost effectively.

We own the registered trademarks or service marks “U-Haul®”, AMERCO®, In-Town®, eMove®”, “C.A.R.D.®”, “Safemove®”, “WebSelfStorage®”, “webselfstorage.com(SM)”, “uhaul.com®”, “Lowest Decks(SM)”, “Gentle Ride Suspension(SM)”, “Mom’s Attic®”, U-Box®”, Moving Help®”, “Safestor®, “U-Haul Investors Club™”, “uhaulinvestorsclub.com(SM)”, “U-Note™”, among others, for use in connection with the moving and storage business.

Description of Operating Segments

AMERCO’s three reportable segments are:

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

Financial information for each of our operating segments is included in the Notes to Consolidated Financial Statements as part of Item 8: Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

 


Moving and Storage Operating Segment

Moving and Storage operating segment (“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.

Net revenue from Moving and Storage was approximately 91.0%, 91.0% and 90.6% of consolidated net revenue in fiscal 2016, 2015 and 2014, respectively.

During fiscal 2016, the Company placed over 38,000 new trucks in service. These additions and replacements to the fleet were a combination of U-Haul manufactured vehicles and purchases. Typically as new trucks are added to the fleet the Company removes older trucks from the fleet. The total number of rental trucks in the fleet increased during fiscal 2016 as the pace of new additions was greater than those trucks removed for retirement and sale.

Within our truck and trailer rental operation we are focused on expanding our independent dealer network to provide added convenience for our customers. U-Haul maximizes vehicle utilization by managing distribution of the truck and trailer fleets among the approximately 1,700 Company operated stores and approximately 19,500 independent dealers. Utilizing its proprietary reservations management system, the Company’s centers and dealers electronically report their inventory in real-time, which facilitates matching equipment to customer demand. Approximately 53% of all U-Move rental revenue originates from the Company operated centers.

At our owned and operated retail stores we are implementing new initiatives to improve customer service. These initiatives include improving management of our rental equipment to provide our retail centers with the right type of rental equipment, at the right time and at the most convenient location for our customers, effective marketing of our broad line of self-moving related products and services, expanding accessibility to provide more convenience to our customers, and enhancing our ability to properly staff locations during our peak hours of operations by attracting and retaining “moonlighters” (part-time U-Haul employees with full-time jobs elsewhere) during our peak hours of operation.

Our self-moving related products and services, such as boxes, pads and insurance, help our customers have a better moving experience and help them to 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.

Our self-storage business operations consist of the rental of self-storage rooms, portable moving and storage units, sales of self-storage related products, the facilitation of sales of services, and the management of self-storage facilities owned by others.

U-Haul is one of the largest North American operators of self-storage and has been a leader in the self-storage industry since 1974. U-Haul operates over 536,000 storage rooms, comprising 47.9 million square feet of storage space with locations in 49 states and 10 Canadian provinces. U-Haul’s owned and managed self-storage facility locations range in size up to 172,000 square feet of storage space, with individual storage units in sizes ranging from 6 square feet to over 1,000 square feet.

The primary market for storage rooms is the storage of household goods. We believe that our self-storage services provide a competitive advantage through such things as Max Security, an electronic system that monitors the storage facility 24 hours a day, climate control in select units, individually alarmed rooms, extended hours access, and an internet-based customer reservation and account management system.

Moving Help and U-Haul Storage Affiliates on uhaul.com are online marketplaces that connect consumers to independent Moving Help™ service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated Moving Help and affiliates provide pack and load help, cleaning help, self-storage and similar services all over North America. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market.

 


Moving and Storage business is seasonal and our results of operations and cash flows fluctuate significantly from quarter to quarter. Historically, revenues have been stronger in the first and second fiscal quarters due to the overall increase in moving activity during the spring and summer months. The fourth fiscal quarter is generally our weakest.

Property and Casualty Insurance Operating Segment

Our Property and Casualty Insurance operating segment (“Property and Casualty Insurance”) provides loss adjusting and claims handling for U-Haul through regional offices across North America. Property and Casualty Insurance also underwrites components of the Safemove, Safetow, Safemove Plus, Safestore Mobile and Safestor protection packages to U-Haul customers. We attempt to price our products to be a good value to our customers. The business plan for Property and Casualty Insurance includes offering property and casualty products in other U-Haul related programs.

Net revenue from Property and Casualty Insurance was approximately 2.0%, 1.9% and 1.8% of consolidated net revenue in fiscal 2016, 2015 and 2014, respectively.

Life Insurance Operating Segment

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.

Net revenue from Life Insurance was approximately 7.0%, 7.1% and 7.6% of consolidated net revenue in fiscal 2016, 2015 and 2014, respectively.

Employees

As of March 31, 2016, we employed nearly 26,400 people throughout North America with approximately 98% of these employees working within Moving and Storage and approximately 55% of these employees working on a part-time basis.

Sales and Marketing

We promote U-Haul brand awareness through direct and co-marketing arrangements. Our direct marketing activities consist of web based initiatives, print and social media as well as trade events, movie cameos of our rental fleet and boxes, and industry and consumer communications. We believe that our rental equipment is our best form of advertisement. We support our independent U-Haul dealers through marketing U-Haul moving and self-storage rentals, products and services.

Our marketing plan focuses on maintaining our leadership position in the “do-it-yourself” moving and storage industry by continually improving the ease of use and economy of our rental equipment, by providing added convenience to our retail centers, through independent U-Haul dealers, and by expanding the capabilities of our U-Haul web sites.

A significant driver of U-Haul’s rental transaction volume is our utilization of an online reservation and sales system, through uhaul.com and our 24-hour 1-800-GO-U-HAUL telephone reservations system. These points of contact are prominently featured and are a major driver of customer lead sources.

Competition

Moving and Storage Operating Segment

The truck rental industry is highly competitive and includes a number of significant national, regional and local competitors. Generally speaking, we consider there to be two distinct users of rental trucks: commercial and “do-it-yourself” residential users. We primarily focus on the “do-it-yourself” residential user. Within this segment, we believe the principal competitive factors are convenience of rental locations, availability of quality rental moving equipment, breadth of essential products and services, and total cost to the user. Our major national competitors in both the In-Town and one-way moving equipment rental market are Avis Budget Group, Inc. and Penske Truck Leasing. Additionally, we have numerous competitors throughout North America who compete with us in the In-Town market.

The self-storage market is large and very fragmented. We believe the principal competitive factors in this industry are convenience of storage rental locations, cleanliness, security and price. Our largest competitors in the self-storage market are Public Storage Inc., Extra Space Storage, Inc., Cubesmart and Sovran Self-Storage Inc.

 


Insurance Operating Segments

The insurance industry is highly competitive. In addition, the marketplace includes financial services firms offering both insurance and financial products. Some of the insurance companies are owned by stockholders and others are owned by policyholders. Many competitors have been in business for a longer period of time or possess substantially greater financial resources and broader product portfolios than our insurance companies. We compete in the insurance business based upon price, product design, and services rendered to agents and policyholders.

Financial Data of Segment and Geographic Areas

For financial data of our segments and geographic areas please see Note 21, Financial Information by Geographic Area and Note 21A, Consolidating Financial Information by Industry Segment to our Notes to Consolidated Financial Statements.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K (“Annual 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 Exchange Act. Such statements may include, but are not limited to, estimates of capital expenditures, plans for future operations, products or services, financing needs and plans, our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us, liquidity, 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 risk factors enumerated below under the heading “Risk Factors” and other factors described in this Annual Report or the other documents we file with the SEC. These factors, the following disclosures, as well as other statements in this Annual Report and in the Notes to 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.

Item 1A. Risk Factors

The following discussion of risk factors should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the Consolidated Financial Statements and related notes.  These risk factors may be important in understanding this Annual Report or elsewhere.

 


We operate in a highly competitive industry.

The truck rental industry is highly competitive and includes a number of significant national, regional and local competitors. We believe the principal competitive factors in this industry are convenience of rental locations, availability of quality rental moving equipment, breadth of essential services and products and total cost. Financial results for the Company can be adversely impacted by aggressive pricing from our competitors. Some of our competitors may have greater financial resources than we have. We cannot assure you that we will be able to maintain existing rental prices or implement price increases. Moreover, if our competitors reduce prices and we are not able or willing to do so as well, we may lose rental volume, which would likely have a materially adverse affect on our results of operations.

The self-storage industry is large and highly fragmented. We believe the principal competitive factors in this industry are convenience of storage rental locations, cleanliness, security and price. Competition in the market areas in which we operate is significant and affects the occupancy levels, rental rates and operating expenses of our facilities. Competition might cause us to experience a decrease in occupancy levels, limit our ability to raise rental rates or require us to offer discounted rates that would have a material affect on results of operations and financial condition. Entry into the self-storage business may be accomplished through the acquisition of existing facilities by persons or institutions with the required initial capital. Development of new self-storage facilities is more difficult however, due to land use, zoning, environmental and other regulatory requirements. The self-storage industry has in the past experienced overbuilding in response to perceived increases in demand. We cannot assure you that we will be able to successfully compete in existing markets or expand into new markets.

We are highly leveraged.

As of March 31, 2016, we had total debt outstanding of $2,688.8 million and total undiscounted operating lease commitments of $157.0 million. Although we believe, based on existing information, that additional leverage can be supported by our operations and revenues, our existing debt could impact us in the following ways among other considerations:

  • require us to allocate a considerable portion of cash flows from operations to debt service and operating lease payments;
  • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
  • limit our ability to obtain additional financing; and
  • place us at a disadvantage compared to our competitors who may have less debt.

Our ability to make payments on our debt and operating leases depends upon our ability to maintain and improve our operating performance and generate cash flow. To some extent, this is subject to prevailing economic and competitive conditions and to certain financial, business and other factors, some of which are beyond our control. If we are unable to generate sufficient cash flow from operations to service our debt and meet our other cash needs, including our operating leases, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. If we must sell our assets, it may negatively affect our ability to generate revenue. In addition, we may incur additional debt or leases that would exacerbate the risks associated with our indebtedness.

Economic conditions, including those related to the credit markets, may adversely affect our industry, business and results of operations.

Consumer and commercial spending is generally affected by the health of the economy, which places some of the factors affecting the success of our business beyond our control. Our businesses, although not as traditionally cyclical as some, could experience significant downturns in connection with or in anticipation of, declines, or sustained lack of recovery, in general economic conditions. In times of declining consumer spending we may be driven, along with our competitors, to reduce pricing which would have a negative impact on gross profit.  We cannot predict if another downturn, or sustained lack of recovery, in the economy will occur, which could result in reduced revenues and working capital.

 


Should credit markets in the United States tighten or if interest rates increase significantly, we may not be able to refinance existing debt or find additional financing on favorable terms, if at all.  If one or more of the financial institutions that support our existing credit facilities fails, we may not be able to find a replacement, which would negatively impact our ability to borrow under credit facilities.  If our operating results were to worsen significantly and our cash flows or capital resources prove inadequate, or if interest rates increase significantly, we could face liquidity problems that could materially and adversely affect our results of operations and financial condition.

Our fleet rotation program can be adversely affected by financial market conditions.

To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Our rental truck fleet rotation program is funded internally through operations and externally from debt and lease financing. Our ability to fund our routine fleet rotation program could be adversely affected if financial market conditions limit the general availability of external financing. This could lead us to operate trucks longer than initially planned and/or reduce the size of the fleet, either of which could materially and negatively affect our results of operations.

Another important aspect of our fleet rotation program is the sale of used rental equipment. The sale of used equipment provides us with funds that can be used to purchase new equipment. Conditions may arise that could lead to the decrease in demand and/or resale values for our used equipment. This could have a material adverse effect on our financial results, which could result in substantial losses on the sale of equipment and decreases in cash flows from the sales of equipment.

We obtain our rental trucks from a limited number of manufacturers.

Over the last twenty years, we purchased the majority of our rental trucks from Ford Motor Company and General Motors Corporation. Our fleet can be negatively affected by issues our manufacturers may face within their own supply chain. Also, it is possible that our suppliers may face financial difficulties or organizational changes which could negatively impact their ability to accept future orders or fulfill existing orders. The cost of acquiring new rental trucks could increase materially and negatively affect our ability to rotate new equipment into the fleet. Although we believe that we could contract with alternative manufacturers for our rental trucks, we cannot guarantee or predict how long that would take. In addition, termination of our existing relationship with these suppliers could have a material adverse effect on our business, financial condition or results of operations for an indefinite period of time.

We may not be able to effectively hedge against interest rate changes in our variable debt.

In certain instances, the Company seeks to manage its exposure to interest rate risk through the use of hedging instruments including interest rate swap agreements and forward swaps. 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. Additionally, a failure on our part to effectively hedge against interest rate changes may adversely affect our financial condition and results of operations. We are required to record these financial instruments at their fair value. Changes in interest rates can significantly impact the valuation of the instruments resulting in non-cash changes to our financial position.

A substantial amount of our shares is owned by a small contingent of stockholders.

Willow Grove Holdings LP, James P. Shoen, David L. Holmes as trustee, Rosemarie T. Donovan as trustee, Mark V. Shoen and Edward J. Shoen, directly and through controlled entities as applicable (collectively, the “Reporting Persons”) are parties to a stockholder agreement (the “Stockholder Agreement”) in which the Reporting Persons have agreed to vote their collective 10,898,124 shares (approximately 55.6%) of AMERCO common stock as one group, as provided in the Stockholder Agreement.  Pursuant to the Stockholder Agreement, all such 10,898,124 shares are required to be voted at the direction of a majority in interest of the Reporting Persons.  For additional information, refer to the Schedule 13Ds filed on July 13, 2006, March 9, 2007, June 26, 2009, May 1, 2013, December 17, 2015 and on February 12, 2016 with the SEC.

 


In December 2015, each of James P. Shoen, Rosemarie Donovan as trustee, and David L. Holmes as trustee provided written notice that they intend to withdraw their shares, constituting a total of 2,538,622 shares, from the Stockholder Agreement on June 30, 2016. James P. Shoen, Rosemarie T. Donovan and David L. Holmes shall remain subject to the Stockholder Agreement until the effective date of such withdrawal, which is expected to occur before our next annual meeting of stockholders. The withdrawal of such shares from the Stockholder Agreement will result in us no longer being a “controlled company” pursuant to the Nasdaq listing rules as of July 1, 2016. However, Willow Grove Holdings, LP, directly and through controlled entities, owns 8,307,584 shares of AMERCO common stock, and together with Edward J. Shoen and Mark V. Shoen, owns 8,359,502 shares (approximately 42.6%) of AMERCO common stock.  Accordingly, Edward J. Shoen and Mark V. Shoen, brothers, are in a position to significantly influence our business and policies, including the approval of certain significant transactions, the election of the members of our Board of Directors and other matters submitted to our stockholders. There can be no assurance that their interests will not conflict with the interests of our other stockholders.

In addition, 1,232,753 shares (approximately 6.3%) of AMERCO common stock is owned under our Employee Stock Ownership Plan (“ESOP”).  Each ESOP participant is entitled to vote the shares allocated to himself or herself in their discretion.  In the event an ESOP participant does not vote his or her shares, such shares shall be voted by the ESOP trustee, in the ESOP trustee’s discretion. 

We bear certain risks related to our notes receivable from SAC Holding.

At March 31, 2016, we held a $49.3 million note receivable from SAC Holding, which consists of a junior unsecured note. This entity is highly leveraged with significant indebtedness to others. If SAC Holding is unable to meet its obligations to its senior lenders, it could trigger a default of its obligation to us. In such an event of default, we could suffer a loss to the extent the value of the underlying collateral of SAC Holding is inadequate to repay its senior lenders and our junior unsecured note. We cannot assure you that SAC Holding will not default on its loans to their senior lenders or that the value of its assets upon liquidation would be sufficient to repay us in full.

Our quarterly results of operations fluctuate due to seasonality and other factors associated with our industry.

Our business is seasonal and our results of operations and cash flows fluctuate significantly from quarter to quarter. Historically, revenues have been stronger in the first and second fiscal quarters due to the overall increase in moving activity during the spring and summer months. The fourth fiscal quarter is generally weakest, due to a greater potential for adverse weather conditions and other factors that are not necessarily seasonal. As a result, our operating results for any given quarterly period are not necessarily indicative of operating results for an entire year.

Our operations subject us to numerous environmental regulations and the possibility that environmental liability in the future could adversely affect our operations.

Compliance with environmental requirements of federal, state and local governments significantly affects our business. Among other things, these requirements regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances. Under environmental laws or common law principles, we can be held liable for hazardous substances that are found on real property we have owned or operated. We are aware of issues regarding hazardous substances on some of our real estate and we have put in place a remediation plan at each site where we believe such a plan is necessary. See Note 18, Contingencies of the Notes to Consolidated Financial Statements. We regularly make capital and operating expenditures to stay in compliance with environmental laws. In particular, we have managed a testing and removal program since 1988 for our underground storage tanks.  Despite these compliance efforts, we believe that risk of environmental liability is part of the nature of our business.

Environmental laws and regulations are complex, change frequently and could become more stringent in the future. We cannot assure you that future compliance with these regulations, future environmental liabilities, the cost of defending environmental claims, conducting any environmental remediation or generally resolving liabilities caused by us or related third parties will not have a material adverse effect on our business, financial condition or results of operations.

 


We operate in a highly regulated industry and changes in existing regulations or violations of existing or future regulations could have a material adverse effect on our operations and profitability.

Our truck and trailer rental business is subject to regulation by various federal, state and foreign governmental entities. Specifically, the U.S. Department of Transportation and various state, federal and Canadian agencies exercise broad powers over our motor carrier operations, safety, and the generation, handling, storage, treatment and disposal of waste materials. In addition, our storage business is also subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. The failure to adhere to these laws and regulations may adversely affect our ability to sell or rent such property or to use the property as collateral for future borrowings. Compliance with changing regulations could substantially impair real property and equipment productivity and increase our costs. In addition, the Federal government may institute some regulation that limits carbon emissions by setting a maximum amount of carbon entities can emit without penalty. This would likely affect everyone who uses fossil fuels and would disproportionately affect users in the highway transportation industries. While there are too many variables at this time to assess the impact of the various proposed federal and state regulations that could affect carbon emissions, many experts believe these proposed rules could significantly affect the way companies operate in their industries.

Our operations can be limited by land-use regulations.  Zoning choices enacted by individual municipalities across North America may limit our ability to serve certain markets with our products and services.

Our insurance companies are heavily regulated by state insurance departments and the NAIC. These insurance regulations are primarily in place to protect the interests of our policyholders and not our investors. Changes in these laws and regulations could increase our costs, inhibit new sales, or limit our ability to implement rate increases.

A significant portion of our revenues are generated through third-parties.

Our business plan relies upon a network of independent dealers strategically placed throughout North America.  As of March 31, 2016 we had approximately 19,500 independent equipment rental dealers.  In fiscal 2016, approximately 47% of our equipment rental revenues were generated through this network.

Our inability to maintain this network or its current cost structure could inhibit our ability to adequately serve our customers and may negatively affect our results of operations and financial position.

We face liability risks associated with the operation of our rental fleet. 

The business of renting moving and storage equipment to customers exposes us to liability claims including property damage, personal injury and even death.  We seek to limit the occurrence of such events through the design of our equipment, communication of its proper use and exhaustive repair and maintenance schedules.  Regardless, accidents still occur and we manage the financial risk of these events through third party insurance carriers.   While these excess loss insurance policies are available today at reasonable costs, this could change and could negatively affect our results of operations and financial position.

Our ability to attract and retain qualified employees, and changes in laws or other labor issues could adversely affect our business and our results of operations.

The success of our business is predicated upon our workforce providing excellent customer service. Our ability to attract and retain this employee base may be inhibited due to prevailing wage rates, benefit costs and the adoption of new or revised employment and labor laws and regulations. Should this occur we may be unable to provide service in certain areas or we may experience significantly increased costs of labor that could adversely affect our results of operations and financial condition.

We are highly dependent upon our automated systems and the Internet for managing our business.

Our information systems are largely Internet-based, including our point-of-sale reservation system, payment processing and telephone systems.  While our reliance on this technology lowers our cost of providing service and expands our abilities to better serve customers, it exposes us to various risks including natural and man-made disasters and cyber-attacks.  We have put into place extensive security protocols, backup systems and alternative procedures to mitigate these risks.  However, disruptions or

 


breaches, detected or undetected by us, for any period of time in any portion of these systems could adversely affect our results of operations and financial condition, inflict reputational damage and result in litigation with third parties.

A.M. Best financial strength ratings are crucial to our life insurance business.

In May 2015, A.M. Best affirmed the financial strength rating for Oxford and Christian Fidelity Life Insurance Company (“CFLIC”) to A- with a stable outlook and affirmed the financial strength rating for North American Insurance Company (“NAI”) of B++ with a stable outlook. Financial strength ratings are important external factors that can affect the success of Oxford’s business plans. Accordingly, if Oxford’s ratings, relative to its competitors, are not maintained or do not continue to improve, Oxford may not be able to retain and attract business as currently planned, which could adversely affect our results of operations and financial condition.

We may incur losses due to our reinsurers’ or counterparties’ failure to perform under existing contracts or we may be unable to secure sufficient reinsurance or hedging protection in the future.

We use reinsurance and derivative contracts to mitigate our risk of loss in various circumstances; primarily at Repwest and for Moving and Storage. These agreements do not release us from our primary obligations and therefore we remain ultimately responsible for these potential costs. We cannot provide assurance that these reinsurers or counterparties will fulfill their obligations. Their inability or unwillingness to make payments to us under the terms of the contracts may have a material adverse effect on our financial condition and results of operations.

At December 31, 2015, Repwest reported $1.7 million of reinsurance recoverables, net of allowances and $107.3 million of reserves and liabilities ceded to reinsurers. Of this, Repwest’s largest exposure to a single reinsurer was $60.5 million.

Item 1B. Unresolved Staff Comments

To our knowledge, we have no unresolved staff comments as of March 31, 2016.

Item 2. Properties

The Company, through its legal subsidiaries, owns property, plant and equipment that are utilized in the manufacturing, repair and rental of U-Haul equipment and storage space, as well as providing office space for us. Such facilities exist throughout the United States and Canada. We also manage storage facilities owned by others. We operate approximately 1,700 U-Haul retail centers of which approximately 480 are managed for other owners, and 11 manufacturing and assembly facilities. We also operate over 130 fixed-site repair facilities located throughout the United States and Canada. These facilities are used primarily for the benefit of Moving and Storage.

Item 3. Legal Proceedings

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

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

 


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

U-Haul does not believe that PEI’s claims have merit and vigorously defended the lawsuit.  On September 17, 2012, U-Haul filed its Counterclaims, seeking a Court Order declaring that: (1) U-Haul’s use of the term “pods” or “pod” does not infringe or dilute PEI’s purported trademarks or violate any of PEI’s purported rights; (2) the purported mark “PODS” is not a valid, protectable, or registrable trademark; and (3) the purported mark “PODS PORTABLE ON DEMAND STORAGE” is not a valid, protectable, or registrable trademark. U-Haul also sought a Court Order cancelling the marks at issue in the case.

The case was tried to a jury, beginning on September 8, 2014. On September 19, 2014, the Court granted U-Haul’s motion for directed verdict on the issue of punitive damages.  The Court deferred ruling on U-Haul’s motion for directed verdict on its defense that the words “pod” and “pods” were generic terms for a container used for the moving and storage of goods at the time PEI obtained its trademark (“genericness defense”).  Closing arguments were on September 22, 2014.

On September 25, 2014, the jury returned a unanimous verdict, finding in favor of PEI and against U-Haul on all claims and counterclaims.  The jury awarded PEI $45 million in actual damages and $15.7 million in U-Haul’s alleged profits attributable to its use of the term “pod” or “pods.” 

On October 1, 2014, the Court ordered briefing on U-Haul’s oral motion for directed verdict on its genericness defense, the motion on which the Court had deferred ruling during trial.  Pursuant to the Court’s order, the parties’ briefing on that motion was completed by October 21, 2014.

On March 11, 2015, the Court denied U-Haul’s Renewed Motion for Directed Verdict, For Judgment as a Matter of Law, Or in the Alternative, Motion for a New Trial. Also on March 11, 2015, the Court entered Judgment on the jury verdict in favor of PEI and against U-Haul in the amount of $60.7 million. This was recorded as an accrual in our financial statements.

The parties have filed a series of post-Judgment motions: 

On March 25, 2015, PEI filed a motion for an award of attorneys’ fees and expenses in the amount of $6.5 million.  On April 27, 2015, U-Haul filed its opposition brief to that motion. 

On March 25, 2015, PEI filed a Proposed Bill of Costs in the amount of $186,411.  On April 14, 2015, U-Haul filed an opposition to PEI’s Proposed Bill of Costs.  On May 1, 2015, PEI filed an amended bill of costs in the amount of $196,133.

On April 6, 2015, U-Haul filed, with PEI’s consent, a motion to stay execution of the Judgment, pending the trial court’s rulings on U-Haul’s post-Judgment motions.  That motion was supported by a supersedeas bond in the amount of $60.9 million, which represents 100% of the Judgment plus post-Judgment interest at the rate of 0.25% per year for 18 months. PEI and U-Haul both reserved the right to modify the amount of the bond in the event the Judgment is modified by the Court’s rulings on the parties’ post-Judgment motions (described below).  On April 7, 2015, the Court granted U-Haul’s motion on consent, staying the Judgment pending rulings on U-Haul’s post-Judgment motions.

On April 8, 2015, U-Haul filed its Renewed Motion for Judgment As Matter of Law, or in the Alternative, Motion for New Trial, or to Alter the Judgment.  U-Haul argued that it is entitled to judgment as a matter of law because even when all evidence is viewed in PEI’s favor, it was legally insufficient for the jury to find for PEI.  Alternatively, U-Haul argued that it is entitled to a new trial because the verdict is against the weight of the evidence. Alternatively, U-Haul argued that the Court should reduce the damages and profits award under principles of equity.  On April, 27, 2015, PEI filed its opposition brief.

 


On April 8, 2015, PEI filed a Motion to Amend the Judgment pursuant to Fed. R. Civ. P. 59(e), in which it asked that the Judgment be amended to include (i) the entry of a permanent injunction; (ii) an award of pre-Judgment interest in the amount of $4.9 million; (iii) an award of post-Judgment interest in the amount of $11,441 and continuing to accrue at the rate of 0.25% while the case proceeds; (iv) doubling of the damages award to $121.4 million; and (v) the entry of an order directing the Patent and Trademark Office to dismiss the cancellation proceedings that U-Haul filed, which sought cancellation of the PODS trademarks.  On April 27, 2015, U-Haul filed its opposition brief arguing, among other things, that (1) PEI is not entitled to recover double the windfall the jury incorrectly awarded it; (2) PEI is not entitled to the overreaching injunction it seeks; (3) PEI is not entitled to pre-judgment interest; (4) PEI has overstated the amount of post-Judgment interest to which it is entitled; and (5) PEI’s request that the Court order the Trademark Trial and Appeal Board to dismiss U-Haul’s cancellation proceeding is premature.

On April 9, 2015, U-Haul filed a protective Notice of Appeal.  We expect that this notice of appeal will be automatically stayed and will become effective upon the disposition of (1) U-Haul’s renewed motion for judgment or a new trial or alteration of the Judgment or (2) PEI’s motion to alter or amend the Judgment, whichever comes later.

On August 24, 2015, the trial court entered two orders resolving the parties' post-trial motions.  In short, U-Haul’s efforts at setting aside the judgment, getting a new trial or reducing the amount of the jury award were denied, PEI’s motions to enhance (i.e., double) the jury award and receive an award for attorneys’ fees were denied, but the Court entered a permanent injunction, and awarded PEI $4.9 million in pre-judgment interest, $82,727 in costs, and post-judgment interest at the rate of 0.25%, beginning March 11, 2015, computed daily and compounded annually. This was recorded as an accrual of $5.0 million in our financial statements during fiscal 2016.

On September 4, 2015, U-Haul filed in the trial court its (i) amended notice of appeal, (ii) motion on consent of PEI to approve the bond and stay execution of the judgment pending appeal, and (iii) motion to stay or modify the injunction.

On September 8, 2015, the trial court entered an Order granting U-Haul’s Motion on Consent to Approve Bond and Stay Execution of Judgment.  The Judgment, as amended by the trial court’s orders adding an award of costs and pre-judgment interest, is stayed pending resolution of appeals.  

On October 15, 2015, the trial court denied U-Haul’s motion to modify or stay the injunction pending appeal. But in the process, the Court clarified that (i) the reach of the injunction is limited to “advertising, promoting, marketing, or describing any products or services” and (ii) use of the terms “pod” and “pods” in comparative advertising is not prohibited, thereby allowing “nominative fair use" and truthful communications in customer dialogue and making clear that “nothing in the injunction mandates censorship with respect to consumer comments.

PEI’s deadline for filing a notice of cross-appeal was September 23, 2015, and PEI did not file a notice of cross-appeal. 

On September 23, 2015, the Eleventh Circuit Court of Appeals granted the parties’ joint motion for an extension of time for filing their respective briefs on appeal.  U-Haul’s initial brief was due on December 17, 2015, PEI’s response brief was due on March 16, 2016, and U-Haul’s reply was due on April 29, 2016.

On September 24, 2015, the Eleventh Circuit Court of Appeals issued a Notice setting a telephonic mediation for November 16, 2015, beginning at 2:00 p.m., Eastern Time. The mediation was unsuccessful.

U-Haul filed its opening brief on appeal with the Eleventh Circuit Court of Appeals on December 17, 2015. PEI filed its response brief on March 16, 2016. U-Haul filed its reply brief on April 29, 2016.  U-Haul has requested oral argument, PEI did not oppose that request, and the Eleventh Circuit Court of Appeals has not yet acted on that request.

 


Environmental

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

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

Other

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

Item 4. Mine Safety Disclosure

Not applicable.

Part ii

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As of May 2, 2016, there were approximately 2,900 holders of record of our common stock. We derived the number of our stockholders using internal stock ledgers and utilizing Mellon Investor Services Stockholder listings. AMERCO’s common stock is listed on the NASDAQ Global Select Market under the trading symbol “UHAL”.

The following table sets forth the high and the low sales price of the common stock of AMERCO for the periods indicated:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

 

High

 

Low

 

High

 

Low

First quarter

$

338.41

$

318.55

$

297.08

$

224.71

Second quarter

 

414.13

 

321.47

 

294.45

 

255.97

Third quarter

 

436.89

 

375.00

 

291.54

 

231.53

Fourth quarter

 

389.00

 

305.66

 

335.00

 

266.26

 

Dividends

AMERCO does not have a formal dividend policy. The Board periodically considers the advisability of declaring and paying dividends to common stockholders in light of existing circumstances.

Common Stock Dividends

Declared Date

 

Per Share Amount

 

Record Date

 

Dividend Date

 

 

 

 

 

 

 

March 15, 2016

$

1.00

 

April 5, 2016

 

April 21, 2016

August 28, 2015

 

3.00

 

September 16, 2015

 

October 2, 2015

June 4, 2015

 

1.00

 

June 19, 2015

 

July 1, 2015

February 4, 2015

 

1.00

 

March 6, 2015

 

March 17, 2015

December 4, 2013

 

1.00

 

January 10, 2014

 

February 14, 2014

See Note 20, Statutory Financial Information of Insurance Subsidiaries of the Notes to Consolidated Financial Statements for a discussion of certain statutory restrictions on the ability of the insurance subsidiaries to pay dividends to AMERCO.

 


Performance Graph

The following graph compares the cumulative total stockholder return on the Company’s common stock for the period March 31, 2011 through March 31, 2016 with the cumulative total return on the Dow Jones US Total Market and the Dow Jones US Transportation Average. The comparison assumes that $100 was invested on March 31, 2011 in the Company’s common stock and in each of the comparison indices. The graph reflects the value of the investment based on the closing price of the common stock trading on NASDAQ on March 31, 2012, 2013, 2014, 2015 and 2016.

 

Fiscal years ended March 31:

 

2011

 

2012

 

2013

 

2014

 

2015

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

AMERCO

$

100

$

110

$

189

$

254

$

363

$

396

Dow Jones US Total Market

 

100

 

107

 

118

 

134

 

144

 

144

Dow Jones US Transportation Average

 

100

 

99

 

118

 

143

 

165

 

150

 


Item 6.Selected Financial Data

The following selected financial data should be read in conjunction with the MD&A, and the Consolidated Financial Statements and related notes in this Annual Report.

Listed below is selected financial data for AMERCO and consolidated subsidiaries for each of the last five years:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

2013

 

2012

 

 

(In thousands, except share and per share data)

Summary of Operations:

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

2,297,980

$

2,146,391

$

1,955,423

$

1,767,520

$

1,678,256

Self-storage revenues

 

247,944

 

211,136

 

181,794

 

152,660

 

134,376

Self-moving and self-storage products and service sales

 

251,541

 

244,177

 

234,187

 

221,117

 

213,854

Property management fees

 

26,533

 

25,341

 

24,493

 

24,378

 

23,266

Life insurance premiums

 

162,662

 

156,103

 

157,919

 

178,115

 

277,562

Property and casualty insurance premiums

 

50,020

 

46,456

 

41,052

 

34,342

 

32,631

Net investment and interest income

 

86,805

 

84,728

 

79,591

 

82,903

 

73,552

Other revenue

 

152,171

 

160,199

 

160,793

 

97,552

 

78,530

Total revenues

 

3,275,656

 

3,074,531

 

2,835,252

 

2,558,587

 

2,512,027

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

1,470,047

 

1,479,409

 

1,313,674

 

1,193,934

 

1,115,126

Commission expenses

 

262,627

 

249,642

 

227,332

 

204,758

 

190,254

Cost of sales

 

144,990

 

146,072

 

127,270

 

107,216

 

116,542

Benefits and losses

 

167,436

 

158,760

 

156,702

 

180,676

 

320,191

Amortization of deferred policy acquisition costs

 

23,272

 

19,661

 

19,982

 

17,376

 

13,791

Lease expense

 

49,780

 

79,798

 

100,466

 

117,448

 

131,215

Depreciation, net of (gains) losses on disposals (b)

 

290,690

 

278,165

 

259,612

 

237,996

 

208,901

Total costs and expenses

 

2,408,842

 

2,411,507

 

2,205,038

 

2,059,404

 

2,096,020

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

866,814

 

663,024

 

630,214

 

499,183

 

416,007

Interest expense

 

(97,903)

 

(97,525)

 

(92,692)

 

(90,696)

 

(90,371)

Fees and amortization on early extinguishment of debt

 

 

(4,081)

 

 

 

Pretax earnings

 

768,911

 

561,418

 

537,522

 

408,487

 

325,636

Income tax expense

 

(279,910)

 

(204,677)

 

(195,131)

 

(143,779)

 

(120,269)

Net earnings

 

489,001

 

356,741

 

342,391

 

264,708

 

205,367

Less: Excess of redemption value over carrying value of preferred shares redeemed

 

 

 

 

 

(5,908)

Less:  Preferred stock dividends (a)

 

 

 

 

 

(2,913)

Earnings available to common shareholders

$

489,001

$

356,741

$

342,391

$

264,708

$

196,546

Basic and diluted earnings per common share

$

24.95

$

18.21

$

17.51

$

13.56

$

10.09

Weighted average common shares outstanding: Basic and diluted

 

19,596,110

 

19,586,633

 

19,558,758

 

19,518,779

 

19,476,187

Cash dividends declared and accrued Preferred stock (a)

$

$

$

$

$

2,913

Cash dividends declared and accrued Common stock

 

97,960

 

19,594

 

19,568

 

97,421

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

$

5,017,511

$

4,107,637

$

3,409,211

$

2,755,054

$

2,372,365

Total assets

 

8,150,725

 

6,872,175

 

5,998,978

 

5,306,601

 

4,654,051

Notes, loans and leases payable

 

2,688,758

 

2,190,869

 

1,942,359

 

1,661,845

 

1,486,211

Stockholders' equity

 

2,251,406

 

1,884,359

 

1,527,368

 

1,229,259

 

1,035,820

 

 

 

 

 

 

 

 

 

 

 

(a) Fiscal 2012 reflects the elimination of $0.3 million paid to affiliates.

(b) (Gains) losses were ($98.7) million, ($74.6) million, ($33.6) million, ($22.5) million and ($20.9) million for fiscal 2016, 2015, 2014, 2013 and 2012, respectively.

 

 


Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

We begin this 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 fiscal 2016 compared with fiscal 2015, and for fiscal 2015 compared with fiscal 2014 which are followed by an analysis of changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources and Disclosures about Contractual Obligations and Commercial Commitments. We conclude this MD&A by discussing our outlook for fiscal 2017.

This MD&A should be read in conjunction with the other sections of this Annual Report, including Item 1: Business, Item 6: Selected Financial Data and Item 8: Financial Statements and Supplementary Data. 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 risk factors described throughout this Annual Report and particularly under the section Item 1A: Risk Factors. Our actual results may differ materially from these forward-looking statements.

AMERCO has a fiscal year that ends on the 31st of March for each year that is referenced. Our insurance company subsidiaries have fiscal years that end on the 31st of December 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 all material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2015, 2014 and 2013 correspond to fiscal 2016, 2015 and 2014 for AMERCO.

Overall Strategy

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

Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities and 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 rooms 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, 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 subsidiaries of U-Haul and Real Estate,
  • Property and Casualty Insurance, comprised of Repwest and its subsidiaries and ARCOA, and
  • Life Insurance, comprised of Oxford and its subsidiaries.

See Note 1, Basis of Presentation, Note 21, Financial Information by Geographic Area and Note 21A, Consolidating Financial Information by Industry Segment of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data of this Annual Report.

 


Moving and Storage Operating Segment

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

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

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

uhaul.com is an online marketplace that connects consumers to our operations as well as independent Moving Help® service providers and thousands of independent Self-Storage Affiliates. Our network of customer rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services, all over North America. 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 Operating Segment

Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across North America. Property and Casualty Insurance also underwrites components of the Safemove, Safetow, Safemove Plus, Safestor and Safestor Mobile protection packages to U-Haul customers. 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 products in other U-Haul related programs.

Life Insurance Operating Segment

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 the generally accepted accounting principles (“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. Note 3, Accounting Policies of the Notes to Consolidated Financial Statements in Item 8: Financial Statements and Supplementary Data in this Annual Report summarizes the significant accounting policies and methods used in the preparation of our consolidated financial statements and related disclosures. 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; 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 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 triggering event occurs the facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(s) 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 reconsideration 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. We follow the deferral method of accounting based on ASC 908 - Airlines for major overhauls in which engine and transmission overhauls are currently capitalized and amortized over three years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment 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.

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 remaining 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 the fleet resulting from purchases should be depreciated on an accelerated method based upon a declining formula. Under the declining balances method (2.4 times declining balance), the book value of a rental truck is reduced by 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 20% by the end of year fifteen. Beginning in October 2012, new purchased rental equipment subject to this depreciation schedule is depreciated to a salvage value of 15%. 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 North America, on our web site 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. 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 losses incurred but not reported (“IBNR”), 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 during 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled.

On a regular basis insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers compensation reserves, management considers multiple factors including the following:

  • Claimant longevity
  • Cost trends associated with claimant treatments
  • Changes in ceding entity and third party administrator reporting practices
  • Changes in environmental factors including legal and regulatory
  • Current conditions affecting claim settlements
  • Future economic conditions including inflation

We have reserved each claim based upon the accumulation of current claim costs projected through each claimants life expectancy, and then adjusted for applicable reinsurance arrangements.  Management reviews each claim bi-annually to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.  We have factored in an estimate of what the potential cost increases could be in our IBNR liability.  We have not assumed settlement of the 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 if injured workers return to work or expire 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: 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 fiscal 2016, 2015 and 2014, respectively.

Income Taxes

AMERCO files a consolidated tax return with all of its 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. Please see Note 13, Provision for Taxes for more information.

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.

 


Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The standard requires expanded disclosure surrounding revenue recognition. Early application is not permitted. The standard is effective for fiscal periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective adoption. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, Deferral of Effective Date, which delays the effective date of ASU 2014-09 by one year to fiscal periods beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as requirements in ASU 2015-14. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

In March 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The guidance is effective for interim periods and annual period beginning after December 15, 2015; however early adoption is permitted. The adoption of this standard is not expected to have a material impact 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 is effective for interim periods and annual period beginning after December 15, 2017. Early adoption is not permitted, except for certain provisions relating to financial liabilities. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

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 a single lease expense reported for operating leases. This update also will require both qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for interim periods and annual period beginning after December 15, 2018; however early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. For the last nine years, we have reported a discounted estimate of the off-balance sheet lease obligations in our MD&A.

From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by the Company as of the specified effective date. Unless otherwise discussed, these ASU’s 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.

 


AMERCO and Consolidated Subsidiaries

Fiscal 2016 Compared with Fiscal 2015

Listed below, on a consolidated basis, are revenues for our major product lines for fiscal 2016 and fiscal 2015:

 

 

Year Ended March 31,

 

 

2016

 

2015

 

 

(In thousands)

Self-moving equipment rentals

$

2,297,980

$

2,146,391

Self-storage revenues

 

247,944

 

211,136

Self-moving and self-storage products and service sales

 

251,541

 

244,177

Property management fees

 

26,533

 

25,341

Life insurance premiums

 

162,662

 

156,103

Property and casualty insurance premiums

 

50,020

 

46,456

Net investment and interest income

 

86,805

 

84,728

Other revenue

 

152,171

 

160,199

Consolidated revenue

$

3,275,656

$

3,074,531

Self-moving equipment rental revenues increased $151.6 million during fiscal 2016, compared with the fiscal 2015We continue to focus on enhancing our convenience to our customers by expanding our retail distribution system and growing our rental equipment fleet.  During fiscal 2016, we added both independent dealers and Company-owned locations further extending our network reach.  Our truck, trailer and towing device fleets experienced net additions during fiscal 2016.  These activities, combined with operational improvements resulted in increases in both our one-way and In-Town rental transactions compared with last year.  Revenue increased primarily from these transaction gains.

Self-storage revenues increased $36.8 million during fiscal 2016, compared with fiscal 2015.  The average monthly amount of occupied square feet increased by 13.8% during fiscal 2016 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. During fiscal 2016, we added approximately 3.6 million net rentable square feet or a 17.9% increase, with approximately 0.8 million of that coming during the fourth quarter.

Sales of self-moving and self-storage products and services increased $7.4 million during fiscal 2016, compared with fiscal 2015. Increases were recognized in the sales of moving supplies and towing accessories and related installations. 

Life insurance premiums increased $6.6 million during fiscal 2016, compared with fiscal 2015 due primarily to increased life and Medicare supplement premiums.

Property and casualty insurance premiums increased $3.6 million during fiscal 2016, compared with fiscal 2015 due to an increase in Safestor and Safetow sales, which is a reflection of the increased equipment and storage rental transactions.

Net investment and interest income increased $2.1 million during fiscal 2016, compared with fiscal 2015, due to a larger invested asset base at our insurance companies.  This was partially offset by decreased interest income at Moving and Storage resulting from reduced note balances due from SAC Holding and Private Mini Storage Realty (“Private Mini”).  

Other revenue decreased $8.0 million during fiscal 2016, compared with fiscal 2015 caused primarily by lower U-BoxTM program rentals.

As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $3,275.7 million for fiscal 2016 as compared with $3,074.5 million for fiscal 2015.

 


Listed below are revenues and earnings from operations at each of our operating segments for fiscal 2016 and 2015. The insurance companies’ years ended December 31, 2015 and 2014.

 

 

Year Ended March 31,

 

 

2016

 

2015

 

 

(In thousands)

Moving and storage

 

 

 

 

Revenues

$

2,984,504

$

2,800,438

Earnings from operations before equity in earnings of subsidiaries

 

813,124

 

610,430

Property and casualty insurance 

 

 

 

 

Revenues

 

64,803

 

59,275

Earnings from operations

 

24,547

 

23,477

Life insurance  

 

 

 

 

Revenues

 

231,220

 

219,656

Earnings from operations

 

29,773

 

29,755

Eliminations

 

 

 

 

Revenues

 

(4,871)

 

(4,838)

Earnings from operations before equity in earnings of subsidiaries

 

(630)

 

(638)

Consolidated Results

 

 

 

 

Revenues

 

3,275,656

 

3,074,531

Earnings from operations

 

866,814

 

663,024

Total costs and expenses decreased $2.7 million during fiscal 2016, compared with fiscal 2015.  Total costs at Moving and Storage decreased $18.6 million. The largest component of the decrease was related to our accruals for expenses associated with the PEI litigation which were $5.0 million and $60.7 million for fiscal 2016 and 2015, respectively. Personnel and overhead cost increases were partially offset by decreased direct operating costs associated with the U-Box program. Depreciation expense increased $36.6 million; however, gains from the disposal of property, plant and equipment increased $24.1 million. This resulted in a net increase of $12.5 million in depreciation expense, net. We have increased the number of trucks sold compared with the same period last year and the resale market for these trucks remained relatively strong.  Lease expense decreased $30.0 million as a result of our shift in financing new equipment on the balance sheet versus through operating leases.  Total costs and expenses in the insurance segments increased $15.9 million primarily due to expenses associated with additional new business written.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $866.8 million for fiscal 2016, compared with $663.0 million for fiscal 2015.

Interest expense for fiscal 2016 was $97.9 million, compared with $97.5 million for fiscal 2015 due to an increase in average borrowings partially offset by a decrease in average borrowing costs.

Income tax expense was $279.9 million for fiscal 2016, compared with $204.7 million for fiscal 2015. The increase was due to higher pretax earnings for fiscal 2016. The effective tax rate was 36.4% and 36.5% for fiscal 2016 and 2015, respectively.

As a result of the above mentioned items, earnings available to common shareholders were $489.0 million for fiscal 2016, compared with $356.7 million for fiscal 2015.

Basic and diluted earnings per common share for fiscal 2016 were $24.95, compared with $18.21 for fiscal 2015.

The weighted average common shares outstanding basic and diluted were 19,596,110 for fiscal 2016, compared with 19,586,633 for fiscal 2015.

 


Fiscal 2015 Compared with Fiscal 2014

Listed below, on a consolidated basis, are revenues for our major product lines for fiscal 2015 and fiscal 2014:

 

 

Year Ended March 31,

 

 

2015

 

2014

 

 

(In thousands)

Self-moving equipment rentals

$

2,146,391

$

1,955,423

Self-storage revenues

 

211,136

 

181,794

Self-moving and self-storage products and service sales

 

244,177

 

234,187

Property management fees

 

25,341

 

24,493

Life insurance premiums

 

156,103

 

157,919

Property and casualty insurance premiums

 

46,456

 

41,052

Net investment and interest income

 

84,728

 

79,591

Other revenue

 

160,199

 

160,793

        Consolidated revenue

$

3,074,531

$

2,835,252

Self-moving equipment rental revenues increased $191.0 million for fiscal 2015, compared with fiscal 2014During fiscal 2015, we continued to broaden our retail distribution network through the expansion of our independent dealer network combined with the acquisition and development of new Company owned and operated locations.  Our rental equipment fleet expanded as we increased the number of trucks, trailers and towing devices available for customer use.  These initiatives, in tandem with our continued focus improving the rental process through the use of technology resulted in our ability to facilitate the increase in both our In-Town and one-way rental transactions.  These additional transactions account for the majority of the improvement in revenues during fiscal 2015.    

Self-storage revenues increased $29.3 million for fiscal 2015, compared with fiscal 2014.  The improvement in revenue comes from an increase in the number of rooms rented at both new and existing locations along with an improvement in overall rental rates across our portfolio.  During fiscal 2015, we added approximately 2.1 million net rentable square feet or nearly a 12% increase, with approximately 0.7 million of that coming during the fourth quarter.  Meanwhile, the average monthly amount of occupied square feet increased by 13% compared with fiscal 2014.

Sales of self-moving and self-storage products and services increased $10.0 million for fiscal 2015, compared with fiscal 2014.  We earned increases from the sale of moving supplies, towing accessories and installation.

Life insurance premiums decreased $1.8 million for fiscal 2015, compared with fiscal 2014, primarily attributable to reduced life and Medicare supplement premiums.

Property and casualty insurance premiums increased $5.4 million for fiscal 2015, compared with fiscal 2014, primarily from policies sold in conjunction with U-Haul rental transactions. As moving transactions increased this year so did the sales of insurance products related to these transactions.

Net investment and interest income increased $5.1 million for fiscal 2015, compared with fiscal 2014Increases at our Life Insurance and Property and Casualty Insurance segments were due to a larger invested asset base along with realized gains.  Conversely, interest income from Moving and Storage has decreased since SAC Holding and Private Mini repaid a combined $29.1 million of their junior note debt due to the Company in October 2014. 

Other revenue decreased $0.6 million for fiscal 2015, compared with fiscal 2014 due in large part to our U-Box program performing below expectations.

As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $3,074.5 million for fiscal 2015 as compared with $2,835.3 million for fiscal 2014.

 


Listed below are revenues and earnings from operations at each of our operating segments for fiscal 2015 and 2014. The insurance companies’ years ended December 31, 2014 and 2013.

 

 

Year Ended March 31,

 

 

2015

 

2014

 

 

(In thousands)

Moving and storage

 

 

 

 

Revenues

$

2,800,438

$

2,571,950

Earnings from operations before equity in earnings of subsidiaries

 

610,430

 

584,681

Property and casualty insurance 

 

 

 

 

Revenues

 

59,275

 

51,644

Earnings from operations

 

23,477

 

19,332

Life insurance  

 

 

 

 

Revenues

 

219,656

 

215,528

Earnings from operations

 

29,755

 

26,671

Eliminations

 

 

 

 

Revenues

 

(4,838)

 

(3,870)

Earnings from operations before equity in earnings of subsidiaries

 

(638)

 

(470)

Consolidated Results

 

 

 

 

Revenues

 

3,074,531

 

2,835,252

Earnings from operations

 

663,024

 

630,214

Total costs and expenses increased $206.5 million for fiscal 2015 as compared with fiscal 2014. The Moving and Storage operating segment accounted for $202.7 million of the total increase for fiscal 2015 as compared with fiscal 2014. Operating expenses increased $165.7 million primarily from spending on personnel, rental equipment maintenance and operating costs associated with the U-Box program. Commission expenses increased in relation to the associated revenues. Depreciation expense, net, increased $18.6 million while lease expense decreased $20.7 million as a result of the Company’s continued focus in financing new equipment on the balance sheet versus through operating leases. During the fourth quarter of fiscal 2015 the Company recorded an accrual related to the PEI litigation resulting in an increase in operating expenses of $60.7 million.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $663.0 million for fiscal 2015, compared with $630.2 million for fiscal 2014.

Interest expense for fiscal 2015 was $97.5 million, compared with $92.7 million for fiscal 2014 due to an increase in average borrowings partially offset by a decrease in average borrowing costs.  In addition, we incurred costs associated with the early extinguishment of debt during the second quarter of fiscal 2015, which included $3.8 million of fees and $0.3 million of transaction cost amortization related to defeased debt.

Income tax expense was $204.7 million for fiscal 2015, compared with $195.1 million for fiscal 2014. The increase was due to higher pretax earnings for fiscal 2015.

As a result of the above mentioned items, earnings available to common shareholders were $356.7 million for fiscal 2015, compared with $342.4 million for fiscal 2014.

Basic and diluted earnings per common share for fiscal 2015 were $18.21, compared with $17.51 for fiscal 2014.

The weighted average common shares outstanding basic and diluted were 19,586,633 for fiscal 2015, compared with 19,558,758 for fiscal 2014.

 


Moving and Storage

Fiscal 2016 Compared with Fiscal 2015

Listed below are revenues for the major product lines at Moving and Storage for fiscal 2016 and fiscal 2015:

 

 

Year Ended March 31,

 

 

2016

 

2015

 

 

(In thousands)

Self-moving equipment rentals

$

2,301,586

$

2,149,986

Self-storage revenues

 

247,944

 

211,136

Self-moving and self-storage products and service sales

 

251,541

 

244,177

Property management fees

 

26,533

 

25,341

Net investment and interest income

 

8,801

 

13,644

Other revenue

 

148,099

 

156,154

Moving and Storage revenue

$

2,984,504

$

2,800,438

Self-moving equipment rental revenues increased $151.6 million during fiscal 2016, compared with fiscal 2015We continue to focus on enhancing our convenience to our customers by expanding our retail distribution system and growing our rental equipment fleet.  During fiscal 2016, we added both independent dealers and Company-owned locations further extending our network reach.  Our truck, trailer and towing device fleets experienced net additions during fiscal 2016.  These activities, combined with operational improvements resulted in increases in both our one-way and In-Town rental transactions compared with last year.  Revenue increased primarily from these transaction gains.     

Self-storage revenues increased $36.8 million during fiscal 2016, compared with fiscal 2015. The average monthly amount of occupied square feet increased by 13.8% during fiscal 2016 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. During fiscal 2016, we added approximately 3.6 million net rentable square feet or a 17.9% increase, with approximately 0.8 million of that coming during the fourth quarter.

Sales of self-moving and self-storage products and services increased $7.4 million during fiscal 2016, compared with fiscal 2015Increases were recognized in the sales of moving supplies and towing accessories and related installations.  

Net investment and interest income decreased $4.8 million during fiscal 2016, compared with fiscal 2015. Reduced note balances due from SAC Holding and Private Mini resulted in decreased interest income.

Other revenue decreased $8.1 million during fiscal 2016, compared with fiscal 2015 caused primarily by lower U-BoxTM program rentals.

The Company owns and manages 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:

 

 

Year Ended March 31,

 

 

2016

 

2015

 

(In thousands, except occupancy rate)

Room count as of March 31

 

275

 

232

Square footage as of March 31

 

23,951

 

20,318

Average monthly number of rooms occupied

 

203

 

180

Average monthly occupancy rate based on room count

 

80.1%

 

81.7%

Average monthly square footage occupied

 

18,231

 

16,021

 

 


Total costs and expenses decreased $18.6 million for fiscal 2016 as compared with fiscal 2015. The largest component of the decrease was related to our accruals for expenses associated with the PEI litigation which were $5.0 million and $60.7 million for fiscal 2016 and 2015, respectively. Personnel and overhead cost increases were partially offset by decreased direct operating costs associated with the U-Box program. Depreciation expense increased $36.6 million; however, gains from the disposal of property, plant and equipment increased $24.1 million. This resulted in a net increase of $12.5 million in depreciation expense, net. We have increased the number of trucks sold compared with the same period last year and the resale market for these trucks remained relatively strong.  Lease expense decreased $30.0 million as a result of our shift in financing new equipment on the balance sheet versus through operating leases.

As a result of the above mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries increased to $813.1 million for fiscal 2016 as compared with $610.4 million for fiscal 2015.

Equity in the earnings of AMERCO’s insurance subsidiaries increased $0.7 million for fiscal 2016, compared with fiscal 2015.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $848.6 million for fiscal 2016, compared with $645.2 million for fiscal 2015.

Fiscal 2015 Compared with Fiscal 2014

Listed below are revenues for the major product lines at Moving and Storage for fiscal 2015 and fiscal 2014:

 

 

Year Ended March 31,

 

 

2015

 

2014

 

 

(In thousands)

Self-moving equipment rentals

$

2,149,986

$

1,958,209

Self-storage revenues

 

211,136

 

181,794

Self-moving and self-storage products and service sales

 

244,177

 

234,187

Property management fees

 

25,341

 

24,493

Net investment and interest income

 

13,644

 

15,212

Other revenue

 

156,154

 

158,055

Moving and Storage revenue

$

2,800,438

$

2,571,950

Self-moving equipment rental revenues increased $191.8 million for fiscal 2015, compared with fiscal 2014.  During fiscal 2015 we continued to broaden our retail distribution network through the expansion of our independent dealer network combined with the acquisition and development of new Company owned and operated locations.  Our rental equipment fleet expanded as we increased the number of trucks, trailers and towing devices available for customer use.  These initiatives, in tandem with our continued focus on improving the rental process through the use of technology resulted in our ability to facilitate the increase in both our In-Town and one-way rental transactions.  These additional transactions account for the majority of the improvement in revenues during fiscal 2015.

Self-storage revenues increased $29.3 million for fiscal 2015, compared with fiscal 2014. The improvement in revenue comes from an increase in the number of rooms rented at both new and existing locations along with an improvement in overall rental rates across our portfolio.  During fiscal 2015, we added approximately 2.1 million net rentable square feet or nearly a 12% increase, with approximately 0.7 million of that coming during the fourth quarter.  Meanwhile, the average monthly amount of occupied square feet increased by 13% compared with fiscal 2014.

Sales of self-moving and self-storage products and services increased $10.0 million for fiscal 2015, compared with fiscal 2014.  We earned increases from the sale of moving supplies, towing accessories and installations.

Net investment and interest income decreased $1.6 million for fiscal 2015, compared with fiscal 2014SAC Holding and Private Mini repaid a combined $29.1 million of their junior note debt due to the Company in October 2014 resulting in reduced interest income earned by the Company.

Other revenue decreased $1.9 million for fiscal 2015, compared with fiscal 2014 due in large part to our U-Box program performing below expectations.

 


The Company owns and manages 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:

 

 

Year Ended March 31,

 

 

2015

 

2014

 

 

(In thousands, except occupancy rate)

Room count as of March 31

 

232

 

207

Square footage as of March 31

 

20,318

 

18,164

Average monthly number of rooms occupied

 

180

 

160

Average monthly occupancy rate based on room count

 

81.7%

 

80.5%

Average monthly square footage occupied

 

16,021

 

14,148

Total costs and expenses increased $202.7 million for fiscal 2015 as compared with fiscal 2014. Operating expenses increased $163.7 million primarily from spending on personnel, rental equipment maintenance and operating costs associated with the U-Box program. Commission expenses increased in relation to the associated revenues. Depreciation expense increased $59.6 million and gains from the disposal of property, plant and equipment increased by $41.1 million. Lease expense decreased $20.7 million as a result of the Company’s continued focus towards financing new equipment on the balance sheet versus through operating leases. During the fourth quarter of fiscal 2015 the Company recorded an accrual related to the PEI litigation resulting in an increase in operating expenses of $60.7 million.

As a result of the above mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries increased to $610.4 million for fiscal 2015 as compared with $584.7 million for fiscal 2014.

Equity in the earnings of AMERCO’s insurance subsidiaries increased $4.8 million for fiscal 2015, compared with fiscal 2014.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $645.2 million for fiscal 2015, compared with $614.7 million for fiscal 2014.

Property and Casualty Insurance

2015 Compared with 2014

Net premiums were $50.0 million and $46.5 million for the years ended December 31, 2015 and 2014, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium growth corresponded with the increased moving and storage transactions at U-Haul.

Net investment income was $14.8 million and $12.8 million for the years ended December 31, 2015 and 2014, respectively. The increase came from the real estate and fixed maturity portfolios that both grew in size compared to 2014.

Net operating expenses were $28.0 million and $24.8 million for the years ended December 31, 2015 and 2014, respectively. The increase was due largely to additional commission expenses and higher loss adjusting expenses. 

Benefits and losses incurred were $12.3 million and $11.0 million for the years ended December 31, 2015 and 2014, respectively. The increase was due to claims activity coming from additional new business.

As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $24.5 million and $23.5 million for the years ended December 31, 2015 and 2014, respectively.

Property and Casualty Insurance

2014 Compared with 2013

Net premiums were $46.5 million and $41.1 million for the years ended December 31, 2014 and 2013, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium growth corresponded with the increased moving and storage transactions at U-Haul.

 


Net investment income was $12.8 million and $10.6 million for the years ended December 31, 2014 and 2013, respectively. The increase was due to a $0.3 million gain on disposals in 2014, $0.4 million in real estate rental income and a $1.4 million increase in fixed maturity income due to an increase in invested assets.

Net operating expenses were $24.8 million and $20.8 million for the years ended December 31, 2014 and 2013, respectively. The increase was primarily due to a $3.7 million increase in commission expense.

Benefits and losses incurred were $11.0 million and $11.5 million for the years ended December 31, 2014 and 2013, respectively. 

As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $23.5 million and $19.3 million for the years ended December 31, 2014 and 2013, respectively.

Life Insurance

2015 Compared with 2014

Net premiums were $162.7 million and $156.1 million for the years ended December 31, 2015 and 2014, respectively.  Medicare supplement premiums increased $5.8 million from new sales offset by a reduction in renewal premiums due to reduction in the in force business on older blocks. Medicare supplement first year premiums were $16.9 million, an increase of $7.5 million over prior year. Life premiums increased by $0.8 million primarily as a result of final expense renewals. Annuity deposits, which are accounted for on the balance sheet as deposits rather than premiums, increased $195.8 million over prior year. Included in the deposit increase is a $30.0 million deposit relating to a funding agreement with Federal Home Loan Bank system (“FHLB”).

Net investment income was $64.0 million and $59.1 million for the years ended December 31, 2015 and 2014, respectively. Investment income increased $4.3 million due to a larger invested asset base while $0.7 million came from realized gains from sales of investments.

Net operating expenses were $23.0 million and $22.5 million for the years ended December 31, 2015 and 2014, respectively. The moderate increase was primarily due to the increased administrative expenses supporting new sales.

Benefits and losses incurred were $155.1 million and $147.8 million for the years ended December 31, 2015 and 2014, respectively. Medicare supplement benefits increased by $4.6 million primarily as a result of the increase in incurred benefits from new sales partially offset by a decrease in Medicare supplement active life reserve from the change in reserve valuation basis. Life insurance benefits increased $2.5 million due to higher mortality exposure while other benefits decreased $1.0 million.  Interest credited to policyholders increased $1.2 million reflecting the increase in annuity deposits.

Amortization of deferred acquisition costs (“DAC”), sales inducement asset (SIA) and the value of business acquired (“VOBA”) was $23.3 million and $19.7 million for the years ended December 31, 2015 and 2014, respectively. The increase over prior year was a result of an increased amortization on annuity and Medicare Supplement DAC due to the increased DAC asset base. This was partially offset by the decrease in life amortization due to a prior year DAC balance write off on older blocks.  

As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $29.8 million for both years ended December 31, 2015 and 2014.

Life Insurance

2014 Compared with 2013

Net premiums were $156.1 million and $157.9 million for the years ended December 31, 2014 and 2013, respectively. Medicare supplement premiums decreased by $2.4 million due to a reduction in the in force business offset by new sales. Medicare Supplement first year premiums were $9.4 million, or a $6.4 million increase above prior year.  Other product lines experienced a $0.6 million increase.  Annuity deposits, which are accounted for on our balance sheet as deposits rather than premiums, decreased by $16.9 million compared with the prior year. 

Net investment income was $59.1 million and $54.4 million for the years ended December 31, 2014 and 2013, respectively. Investment income increased $3.8 million due to a larger invested asset base while approximately $0.8 million came from realized gains.

 


Net operating expenses were $22.5 million and $23.7 million for the years ended December 31, 2014 and 2013, respectively. The variance was due to a reduction in commission expenses on declining earned premiums.

Benefits and losses incurred were $147.8 million and $145.2 million for the years ended December 31, 2014 and 2013, respectively. Life benefits increased $2.5 million resulting from higher mortality exposure. Medicare supplement benefits decreased $1.1 million from a reduction in the in force on the existing blocks offset by the increased benefits from new sales. Annuity benefits decreased $1.3 million due to the reserve reduction in single premium annuities and guaranteed life withdrawal benefit rider. Supplementary contract payments increased $0.2 million. Increase in interest credited to policyholders was $2.2 million as a result of a larger annuity account value

Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $19.7 million and $20.0 million for the years ended December 31, 2014 and 2013, respectively.   

As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $29.8 million and $26.7 million for the year ended December 31, 2014 and 2013, 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 which 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.

At March 31, 2016, cash and cash equivalents totaled $600.6 million, compared with $441.9 million on March 31, 2015. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (AMERCO, U-Haul and Real Estate). As of March 31, 2016 (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 and Casualty Insurance (a)

 

Life Insurance (a)

 

 

(In thousands)

 

 

 

 

 

 

 

Cash and cash equivalents

$

585,666

$

14,049

$

931

Other financial assets

 

143,904

 

410,387

 

1,542,629

Debt obligations

 

2,688,758

 

 

 

 

 

 

 

 

 

(a) As of December 31, 2015

 

 

 

 

 

 

At March 31, 2016, Moving and Storage had available borrowing capacity under existing credit facilities of $48.0 million.

A summary of our consolidated cash flows for fiscal 2016, 2015 and 2014 is shown in the table below:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Net cash provided by operating activities

$

1,041,063

$

759,099

$

733,966

Net cash used by investing activities

 

(1,273,399)

 

(755,261)

 

(846,631)

Net cash provided (used) by financing activities

 

406,872

 

(46,338)

 

144,210

Effects of exchange rate on cash

 

(15,740)

 

(10,762)

 

(177)

Net cash flow

 

158,796

 

(53,262)

 

31,368

Cash at the beginning of the period

 

441,850

 

495,112

 

463,744

Cash at the end of the period

$

600,646

$

441,850

$

495,112

 


Net cash provided by operating activities increased $282.0 million in fiscal 2016, compared with fiscal 2015, primarily due to an improvement in earnings, lower federal income tax payments, combined with $56.8 million of note and interest repayments from Private Mini.

Net cash used in investing activities increased $518.1 million in fiscal 2016, compared with fiscal 2015. Purchases of property, plant and equipment, which are reported net of cash from sales and lease-back transactions, increased $467.2 million. Cash from the sales of property, plant and equipment increased $127.6 million largely due to an increase in fleet sales. Life Insurance had an increase in net cash used for investing of $186.9 million due to additional investment purchases.

Net cash provided by financing activities increased $453.2 million in fiscal 2016, as compared with fiscal 2015 due to an increase in borrowings of $198.4 million, net decrease in repayments of debt and capital leases of $117.8 million, an increase in annuity deposits, net of withdrawals, by Life Insurance of $194.4 million and an increase in dividends paid of $58.8 million.

Liquidity and Capital Resources and Requirements of Our Operating Segments

Moving and Storage

To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. In the future, we anticipate that our internally generated funds will be used to service the existing debt and fund operations. U-Haul estimates that during fiscal 2017 the Company will reinvest in its truck and trailer rental fleet approximately $600 million, net of equipment sales and excluding any lease buyouts. For fiscal 2016, the Company invested, net of sales, approximately $365 million before any lease buyouts in its truck and trailer fleet. Fleet investments in fiscal 2017 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 2017 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. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. The Company expects to fund these development projects through construction loans and internally generated funds. For fiscal 2016, the Company invested $592.4 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2017, 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 $969.9 million, $630.3 million and $730.2 million for fiscal 2016, 2015 and 2014, respectively. The components of our net capital expenditures are provided in the following table:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Purchases of rental equipment

$

881,331

$

898,420

$

782,463

Equipment lease buyouts

 

81,718

 

40,448

 

36,552

Purchases of real estate, construction and renovations

 

592,363

 

368,257

 

315,160

Other capital expenditures

 

90,788

 

41,761

 

62,976

Gross capital expenditures

 

1,646,200

 

1,348,886

 

1,197,151

Less: Lease proceeds

 

(137,046)

 

(306,955)

 

(196,908)

Less: Sales of property, plant and equipment

 

(539,256)

 

(411,629)

 

(270,053)

Net capital expenditures

 

969,898

 

630,302

 

730,190

Moving and Storage continues to hold significant cash and we believe 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 place, or reduce existing indebtedness where possible.

Property and Casualty Insurance

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

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

Our Property and Casualty operating segment stockholder’s equity was $160.6 million, $169.3 million, and $146.8 million at December 31, 2015, 2014, and 2013, respectively. The decrease in 2015 compared with 2014 resulted from net earnings of $16.2 million, a decrease in accumulated other comprehensive income of $5.3 million and a non-cash dividend paid to AMERCO of $19.6 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 deposit increase for the year ended December 31, 2015 was $245.3 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance's funds are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.

Our Life Insurance operating segment stockholder’s equity was $271.7 million, $274.2 million, and $226.7 million at December 31, 2015, 2014 and 2013, respectively. The decrease in 2015 compared with 2014 resulted from earnings of $19.4 million and a decrease in accumulated other comprehensive income of $21.9 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Life Insurance has not historically used debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio. However, as of December 31, 2015, Oxford has outstanding deposits of $30.0 million through their membership in the FHLB.

 


Cash Provided (Used) from Operating Activities by Operating Segments

Moving and Storage

Net cash provided by operating activities was $971.6 million, $700.3 million and $662.0 million in fiscal 2016, 2015 and 2014, respectively primarily due to an improvement in earnings, lower federal income tax payments, combined with $56.8 million of note and interest repayments from Private Mini.

Property and Casualty Insurance

Net cash provided by operating activities was $19.0 million, $16.6 million, and $23.6 million for the years ended December 31, 2015, 2014, and 2013, respectively. The increases were consistent with typical claims activity.

Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $24.3 million, $18.7 million, and $35.5 million at December 31, 2015, 2014, and 2013, 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 was $50.4 million, $42.3 million and $48.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. The increase in cash provided during the year ended December 31, 2015 was primarily due to the decrease in receivable for securities and an increase in short term current liabilities from cash overdrafts offset by the increase in paid commissions and administrative expenses exceeding premium and investment income revenue.

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. At December 31, 2015, 2014 and 2013, cash and cash equivalents and short-term investments amounted to $25.5 million, $39.0 million and $39.6 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 hedge floating rate loans through the use of interest rate swaps. 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. At March 31, 2016, we had available borrowing capacity under existing credit facilities of $48.0 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 9, Borrowings of the Notes to Consolidated Financial Statements.

Fair Value of Financial Instruments

Certain assets and liabilities are recorded at fair value on the consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. 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 15, Fair Value Measurements of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K

 


The available-for-sale securities held by the Company 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. At March 31, 2016, we had $0.3 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

The following table provides contractual commitments and contingencies as of March 31, 2016:

 

 

 

 

Payment due by Period (as of March 31, 2016)

Contractual Obligations

 

Total

 

04/01/16 - 03/31/17

 

04/01/17 - 03/31/19

 

04/01/19 - 03/31/21

 

Thereafter

 

 

(In thousands)

Notes and loans payable - Principal

$

1,668,933

$

215,344

 

336,609

$

156,920

$

960,060

Notes and loans payable - Interest

 

566,309

 

72,402

 

113,627

 

92,069

 

288,211

Revolving credit agreements - Principal

 

347,000

 

 

57,000

 

178,887

 

111,113

Revolving credit agreements - Interest

 

24,268

 

6,300

 

11,560

 

5,755

 

653

Capital leases - Principal

 

672,825

 

138,463

 

252,909

 

236,212

 

45,241

Capital leases - Interest

 

50,275

 

17,712

 

23,805

 

7,904

 

854

Operating leases

 

179,844

 

36,622

 

61,064

 

34,685

 

47,473

Property and casualty obligations (a)

 

144,652

 

12,275

 

16,638

 

12,779

 

102,960

Life, health and annuity obligations (b)

 

2,925,140

 

219,492

 

397,441

 

364,409

 

1,943,798

Self insurance accruals (c)

 

384,921

 

108,008

 

160,212

 

63,384

 

53,317

Post retirement benefit liability

 

13,850

 

658

 

1,687

 

2,336

 

9,169

       Total contractual obligations

$

6,978,017

$

827,276

$

1,432,552

$

1,155,340

$

3,562,849

(a) These estimated obligations for unpaid losses and loss adjustment expenses include case reserves for reported claims and IBNR claims estimates and are net of expected reinsurance recoveries. The ultimate amount to settle both the case reserves and IBNR is an estimate based upon historical experience and current trends and such estimates could materially differ from actual results. The assumptions do not include future premiums. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results.

(b) These estimated obligations are based on mortality, morbidity, withdrawal and lapse assumptions drawn from our historical experience and adjusted for any known trends. These obligations include expected interest crediting but no amounts for future annuity deposits or premiums for life and Medicare supplement policies.  The cash flows shown are undiscounted for interest and as a result total outflows for all years shown significantly exceed the corresponding liabilities of $1,383.7 million included in our consolidated balance sheet as of March 31, 2016. Life Insurance expects to fully fund these obligations from their invested asset portfolio. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results. 

(c) These estimated obligations are primarily the Company’s self insurance accruals for portions of the liability coverage for our rental equipment. The estimates for future settlement are based upon historical experience and current trends. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results.

As presented above, contractual obligations on debt and guarantees represent principal payments while contractual obligations for operating leases represent the notional payments under the lease arrangements.

ASC 740 - Income Taxes liabilities and interest of $29.8 million is not included above due to uncertainty surrounding ultimate settlements, if any.

Off Balance Sheet Arrangements

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

 


AMERCO utilizes operating leases for certain rental equipment and facilities with terms expiring substantially through 2019. In the event of a shortfall in proceeds from the sales of the underlying rental equipment assets, AMERCO has guaranteed $22.3 million of residual values at March 31, 2016 for these assets at the end of their respective lease terms. AMERCO has 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 AMERCO’s minimum lease payments and residual value guarantees was $55.5 million at March 31, 2016.

Historically, we have used off-balance sheet arrangements in connection with the expansion of our self-storage business. For more information please see Note 19, Related Party Transactions of the Notes to 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.

We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury Partners, L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $27.1 million, $25.8 million and $25.8 million from the above mentioned entities during fiscal 2016, 2015 and 2014, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by Willow Grove, which is owned by Mark V. Shoen (a significant shareholder), and various trusts associated with Edward J. Shoen and Mark V. Shoen. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are indirectly owned by James P. Shoen (a significant shareholder), Mark V. Shoen and a trust benefitting the children and grandchild of Edward J. Shoen (our Chairman of the Board, President and a significant shareholder).

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of SAC Holdings, 5 SAC and Galaxy. Total lease payments pursuant to such leases were $2.6 million for each of fiscal years 2016, 2015 and 2014, respectively. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased by us.

At March 31, 2016, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based on equipment rental revenues. We paid the above mentioned entities $54.7 million, $52.1 million and $49.9 million in commissions pursuant to such dealership contracts during fiscal 2016, 2015 and 2014, respectively.

During fiscal 2016, subsidiaries of ours held various junior unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater. We do not have an equity ownership interest in SAC Holdings. We recorded interest income of $5.0 million, $5.9 million and $7.1 million and received cash interest payments of $4.6 million, $5.7 million and $17.2 million from SAC Holdings during fiscal 2016, 2015 and 2014, respectively. The largest aggregate amount of notes receivable outstanding during fiscal 2016 was $50.4 million and the aggregate notes receivable balance at March 31, 2016 was $49.3 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are 2017.

These agreements along with notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $28.1 million, expenses of $2.6 million and cash flows of $83.8 million during fiscal 2016. Revenues and commission expenses related to the Dealer Agreements were $254.7 million and $54.7 million, respectively during fiscal 2016.

 


Fiscal 2017 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 the continuation of 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 2017, 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 2017.

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.

Quarterly Results (unaudited)

The quarterly results shown below are derived from unaudited financial statements for the eight quarters beginning April 1, 2014 and ending March 31, 2016. We believe that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with GAAP, such results. Moving and Storage operations are seasonal and proportionally more of the Company’s revenues and net earnings from its Moving and Storage operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period.

 

 

Quarter Ended

 

 

March 31, 2016

 

December 31, 2015

 

September 30, 2015

 

June 30, 2015

 

 

(In thousands, except for share and per share data)

Total revenues

$

683,197

$

744,751

$

962,903

$

884,805

Earnings from operations

 

106,736

 

157,902

 

311,068

 

291,108

Earnings available to common

      shareholders

 

52,568

 

81,769

 

183,379

 

171,285

Basic and diluted earnings

      per common share

$

2.68

$

4.17

$

9.36

$

8.74

Weighted average common shares

      outstanding: basic and diluted

 

19,593,071

 

19,599,352

 

19,597,717

 

19,596,129

 

 

 

Quarter Ended

 

 

March 31, 2015

 

December 31, 2014

 

September 30, 2014

 

June 30, 2014

 

 

(In thousands, except for share and per share data)

Total revenues

$

642,730

$

706,355

$

906,491

$

818,955

Earnings from operations

 

34,837

 

133,152

 

275,836

 

219,199

Earnings available to common

      shareholders

 

9,480

 

66,540

 

156,247

 

124,474

Basic and diluted earnings

      per common share

$

0.47

$

3.40

$

7.98

$

6.36

Weighted average common shares

      outstanding: basic and diluted

 

19,594,530

 

19,590,555

 

19,584,194

 

19,577,802

 

 


Item 7A. 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 swaps agreements at March 31, 2016:

 

Notional Amount

 

 

Fair Value

 

Effective Date

 

Expiration Date

 

Fixed Rate

 

Floating Rate

 

(In thousands)

 

 

 

 

 

 

 

 

$

204,166

 

$

(13,322)

 

8/18/2006

 

8/10/2018

 

5.43%

 

1 Month LIBOR

 

5,450

(a)

 

(101)

 

8/15/2010

 

7/15/2017

 

2.15%

 

1 Month LIBOR

 

10,313

(a)

 

(328)

 

6/1/2011

 

6/1/2018

 

2.38%

 

1 Month LIBOR

 

20,542

(a)

 

(485)

 

8/15/2011

 

8/15/2018

 

1.86%

 

1 Month LIBOR

 

8,300

(a)

 

(181)

 

9/12/2011

 

9/10/2018

 

1.75%

 

1 Month LIBOR

 

9,338

(b)

 

(142)

 

3/28/2012

 

3/28/2019

 

1.42%

 

1 Month LIBOR

 

11,458

 

 

(142)

 

4/16/2012

 

4/1/2019

 

1.28%

 

1 Month LIBOR

 

21,825

 

 

(144)

 

1/15/2013

 

12/15/2019

 

1.07%

 

1 Month LIBOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

 

 

 

 

 

 

 

 

 

 

 

(b) operating lease

 

 

 

 

 

 

As of March 31, 2016, we had $770.0 million of variable rate debt obligations and $9.3 million of a variable rate operating lease. If the London Inter-Bank Offer Rate were to increase 100 basis points, the increase in interest expense on the variable rate debt and a variable rate operating lease would decrease future earnings and cash flows by $3.6 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.

Foreign Currency Exchange Rate Risk

The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 4.4%, 5.2% and 5.4% of our revenue was generated in Canada in fiscal 2016, 2015 and 2014, respectively. The result of a 10% 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.

 


Item 8.   Financial Statements and Supplementary Data

The Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements of AMERCO and its consolidated subsidiaries including the notes to such statements and the related schedules are set forth on the “F” pages hereto and are incorporated by reference herein.

Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.   Controls and Procedures

Attached as exhibits to this Annual Report are certifications of our Chief Executive Officer (“CEO”) and Chief Accounting Officer (“CAO”), 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 Evaluation of Disclosure Controls and Procedures.

Following this discussion is the report of BDO USA, LLP, our independent registered public accounting firm, regarding its audit of AMERCO’s internal control over financial reporting as set forth below in this section. This section should be read in conjunction with the certifications of our CEO and CAO and the BDO USA, LLP report for a more complete understanding of the topics presented.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the CEO and CAO, conducted an evaluation of the effectiveness of the design and operation of the Company’s "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 period covered by this Annual Report. Our Disclosure Controls are designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual 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 reasonably assure that such information is accumulated and communicated to our management, including the CEO and CAO, as appropriate to allow timely decisions regarding required disclosure. Based upon the controls evaluation, our CEO and CAO have concluded that as of the end of the period covered by this Annual Report, our Disclosure Controls were effective related to the above stated design purposes.

Inherent Limitations on Effectiveness of Controls

The Company's management, including the CEO and CAO, 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 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 has not been any change in the Company’s internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management assessed our internal control over financial reporting as of March 31, 2016, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. This assessment is supported by testing and monitoring performed both by our Internal Audit organization and our Finance organization.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year 2016. We reviewed the results of management's assessment with the Audit Committee of our Board.

Our independent registered public accounting firm, BDO USA, LLP, has audited the Company's internal control over financial reporting and has issued their report, which is included on the following page.

 


Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

AMERCO

Reno, Nevada

We have audited AMERCO and consolidated subsidiaries’ (the “Company”) internal control over financial reporting as of March 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of March 31, 2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income (loss), and cash flows for each of the three years in the period ended March 31, 2016 and our report dated May 25, 2016 expressed an unqualified opinion thereon.

/s/BDO USA, LLP

Phoenix, Arizona

May 25, 2016

 


Item 9B.   Other Information

Not applicable.

PART III

Item 10.   Directors, Executive Officers and Corporate Governance  

The information required to be disclosed under this Item 10 is incorporated herein by reference to AMERCO’s definitive proxy statement, in connection with its 2016 annual meeting of stockholders (the “Proxy Statement”), which will be filed with the SEC within 120 days after the close of the 2016 fiscal year.

The Company has adopted a Code of Ethics that applies to all directors, officers and employees of the Company, including the Company’s principal executive officer and principal accounting officer. A copy of our Code of Ethics is posted on AMERCO’s web site at amerco.com/governance.aspx.  We intend to satisfy the disclosure requirements of Current Report on Form 8-K regarding any amendment to, or waiver from, a provision of our Code of Ethics by posting such information on the Company’s website, at the web address and location specified above, unless otherwise required to file a Current Report on Form 8-K by NASDAQ rules and regulations.

Item 11.   Executive Compensation

The information required to be disclosed under this Item 11 is incorporated herein by reference to the Proxy Statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required to be disclosed under this Item 12 is incorporated herein by reference to the Proxy Statement.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required to be disclosed under this Item 13 is incorporated herein by reference to the Proxy Statement.

Item 14.   Principal Accounting Fees and Services

The information required to be disclosed under this Item 14 is incorporated herein by reference to the Proxy Statement.

PART IV

Item 15.   Exhibits and Financial Statement Schedules

The following documents are filed as part of this Report:

 

 

 

Page

1

Financial Statements:

 

 

Report of Independent Registered Public Accounting Firm

F-1

 

Consolidated Balance Sheets - March 31, 2016 and 2015

F-2

 

Consolidated Statements of Operations - Years Ended March 31, 2016, 2015, and 2014

F-3

 

Consolidated Statements of Comprehensive Income (Loss) - Years Ended March 31, 2016, 2015 and 2014

F-4

 

Consolidated Statements of Changes in Stockholders' Equity - Years Ended March 31, 2016, 2015, and 2014

F-5

 

Consolidated Statements of Cash Flows - Years Ended March 31, 2016, 2015 and 2014

F-6

 

Notes to Consolidated Financial Statements

F-7

2

Financial Statement Schedules required to be filed by Item 8:

 

 

Schedule I - Condensed Financial Information of AMERCO

F-53

 

Schedule II - AMERCO and Consolidated Subsidiaries Valuation and Qualifying Accounts

F-57

 

Schedule V - AMERCO and Consolidated Subsidiaries Supplemental Information (For Property-Casualty Insurance Operations)

F-58

 


All other schedules are omitted because they are not required, inapplicable, or the information is otherwise shown in the financial statements or notes thereto.

Exhibits:

Exhibit Number

Description

Page or Method of Filing

3.1

Restated Articles of Incorporation of AMERCO

Incorporated by reference to AMERCO’s Current Report on Form 8-K filed on September 5, 2013, 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

4.1

Termination of Rights Agreement, dated as of March 5, 2008

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on March 11, 2008, file no. 1-11255

4.2

U-Haul Investors Club Base Indenture, dated February 12, 2011 by and between AMERCO and U. S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on February 22, 2011, file no. 1-11255

4.3

Second Supplemental Indenture, dated February 17, 2011, by and among AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on February 22, 2011, file no. 1-11255

4.4

Fourth Supplemental Indenture, dated March 15, 2011, by and among AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on March 22, 2011, file no. 1-11255

4.5

Seventh Supplemental Indenture, dated March 29, 2011, by and among AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on April 1, 2011, file no. 1-11255

4.6

Tenth Supplemental Indenture, dated June 7, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on June 23, 2011, file no. 1-11255

4.7

Eleventh Supplemental Indenture dated June 7, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 31, 2011, file no. 1-11255

4.8

Twelfth Supplemental Indenture dated June 14, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on June 23, 2011, file no. 1-11255

4.9

Fourteenth Supplemental Indenture dated July 20, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on August 17, 2011, file no. 1-11255

4.10

Fifteenth Supplemental Indenture dated July 27, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on August 17, 2011, file no. 1-11255

4.11

Sixteenth Supplemental Indenture dated August 31, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 28, 2011, file no. 1-11255

4.12

Seventeenth Supplemental Indenture dated November 8, 2011 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on January 18, 2012, file no. 1-11255

 


4.13

Eighteenth Supplemental Indenture dated January 7, 2012 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on March 26, 2012, file no. 1-11255

4.14

Nineteenth Supplemental Indenture dated May 14, 2012 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on May 15, 2012, file no. 1-11255

4.15

Eighth Supplemental Indenture, dated April 12, 2011, by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year end March 31, 2012, file no. 1-11255

4.16

Twentieth Supplemental Indenture dated September 4, 2012 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 4, 2012, file no. 1-11255

4.17

Twenty-first Supplemental Indenture dated January 15, 2013 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on January 15, 2013, file no. 1-11255

4.18

Twenty-second Supplemental Indenture, dated May 28, 2013 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on May 30, 2013, file no. 1-11255

4.19

Twenty-third Supplemental Indenture, dated November 26, 2013 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on November 26, 2013, file no. 1-11255

4.20

Twenty-fourth Supplemental Indenture, dated April 22, 2014 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on April 22, 2014, file no. 1-11255

4.21

Twenty-fifth Supplemental Indenture, dated July 7, 2015 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on July 7, 2015, file no. 1-11255

4.22

Twenty-sixth Supplemental Indenture, dated September 29, 2015 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on September 29, 2015, file no. 1-11255

4.23

Twenty-seventh Supplemental Indenture, dated December 15, 2015 by and between AMERCO and U.S. Bank National Association

Incorporated by reference to AMERCO's Current Report on Form 8-K, filed on December 15, 2015, file no. 1-11255

10.1

U-Haul Dealership Contract

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year end March 31, 1993, file no. 1-11255

10.2

ESOP Loan Credit Agreement

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255

10.3

ESOP Loan Agreement

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255

10.4

Trust Agreement for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255

10.5

Amended Indemnification Agreement

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255

 


10.6

Indemnification Trust Agreement

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255

10.7

Management Agreement between Four SAC Self-Storage Corporation and subsidiaries of AMERCO

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1997, file no. 1-11255

10.8

Management Agreement between Five SAC Self-Storage Corporation and subsidiaries of AMERCO

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 1999, file no. 1-11255

10.9

Property Management Agreement

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2004, file no. 1-11255

10.10

U-Haul Dealership Contract between U-Haul Leasing & Sales Co., and U-Haul Moving Partners, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, file no. 1-11255

10.11

Property Management Agreement between Mercury Partners, LP, Mercury 99, LLC and U-Haul Self-Storage Management (WPC), Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, file no. 1-11255

10.12

Amended and Restated Credit Agreement, dated June 8, 2005, among Amerco Real Estate Company, Amerco Real Estate Company of Texas, Inc., Amerco Real Estate Company of Alabama Inc., U-Haul Co. of Florida, Inc., U-Haul International, Inc. and Merrill Lynch Commercial Finance Corp.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed June 14, 2005, file no. 1-11255

10.13

Security Agreement dated June 8, 2005, by Amerco Real Estate Company, Amerco Real Estate Company of Texas, Inc., Amerco Real Estate Company of Alabama, Inc., U-Haul Co. of Florida, Inc., U-Haul International, Inc. and the Marketing Grantors named therein in favor of Merrill Lynch Commercial Finance Corp.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed June 14, 2005, file no. 1-11255

10.14

Guarantee, dated June 8, 2005, by U-Haul International, Inc. in favor of Merrill Lynch Commercial Finance Corp.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed June 14, 2005, file no. 1-11255

10.15

Promissory Note, dated June 8, 2005 by Amerco Real Estate Company, Amerco Real Estate Company of Texas, Inc., Amerco Real Estate Company of Alabama, Inc., U-Haul Co. of Florida, Inc. and U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed June 14, 2005, file no. 1-11255

 


10.16

Amendment No. 1 to the Amended and Restated Credit Agreement and Security Agreement, dated as of August 18, 2006, to the Amended and Restated Credit Agreement, dated as of June 8, 2005, among Amerco Real Estate Company of Texas, Inc., Amerco Real Estate Company of Alabama, Inc., U-Haul Co. of Florida, Inc., U-Haul International, Inc. and the Marketing Grantors named therein in favor of Merrill Lynch Commercial Financial Corp.

Incorporated by reference to AMERCO’s Current Report on Form 8-K filed August 23, 2006, file no. 1-11255

10.17

Amended and Restated Property Management Agreement among Six-A SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.18

Amended and Restated Property Management Agreement among Six-B SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.19

Amended and Restated Property Management Agreement among Six-C SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.20

Amended and Restated Property Management Agreement among Eight SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.21

Amended and Restated Property Management Agreement among Nine SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.22

Amended and Restated Property Management Agreement among Ten SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.23

Amended and Restated Property Management Agreement among Eleven SAC Self-Storage Corporation and Eleven SAC Self-Storage Odenton, Inc. and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.24

Amended and Restated Property Management Agreement among Twelve SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.25

Amended and Restated Property Management Agreement among Thirteen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

 


10.26

Amended and Restated Property Management Agreement among Fourteen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.27

Amended and Restated Property Management Agreement among Fifteen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.28

Amended and Restated Property Management Agreement among Sixteen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.29

Amended and Restated Property Management Agreement among Seventeen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, file no. 1-11255

10.30

2010-1 BOX TRUCK BASE INDENTURE, dated as of October 1, 2010, among 2010 U-HAUL S FLEET, LLC, 2010 TM-1, LLC, 2010 DC-1, LLC, and 2010 TT-1, LLC, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, file number 1-11255

10.31

Schedule I to 2010-1 Base Indenture – Definitions List

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, file number 1-11255

10.32

SERIES 2010-1 SUPPLEMENT, dated as of October 1, 2010, among 2010 U-HAUL S FLEET, LLC, 2010 TM-1, LLC, 2010 DC-1, LLC, and 2010 TT-1, LLC, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee.

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, file number 1-11255

10.33

Pledge and Security Agreement, dated February 17, 2011, by and among AMERCO, U-Haul Leasing and Sales Co. and U.S. Bank National Association

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on February 22, 2011, file no. 1-11255

10.34

Amended and Restated Property Management Agreement among Eighteen SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.35

Amended and Restated Property Management Agreement among Twenty SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.36

Amended and Restated Property Management Agreement among Twenty-One SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.37

Amended and Restated Property Management Agreement among Twenty-Two SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

 


10.38

Amended and Restated Property Management Agreement among Twenty-Three SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.39

Amended and Restated Property Management Agreement among Twenty-Four SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.40

Amended and Restated Property Management Agreement among Twenty-Five SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.41

Amended and Restated Property Management Agreement among Twenty-Six SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.42

Amended and Restated Property Management Agreement among Twenty-Seven SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.43

Amended and Restated Property Management Agreement among Three-A SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 4, 2013, file no. 1-11255

10.44

Amended and Restated Property Management Agreement among Three-B SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 4, 2013, file no. 1-11255

10.45

Amended and Restated Property Management Agreement among Three-C SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 4, 2013, file no. 1-11255

10.46

Amended and Restated Property Management Agreement among Three-D SAC Self-Storage Corporation and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 4, 2013, file no. 1-11255

10.47

Amended and Restated Property Management Agreement among Galaxy Storage One, LP and subsidiaries of U-Haul International, Inc.

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on October 4, 2013, file no. 1-11255

10.48

U-Haul Dealership Contract Addendum

Incorporated by reference to AMERCO’s Annual Report on Form 10-K for the year ended March 31, 2012, file no. 1-11255

10.49

Stockholder Agreement dated February 1, 2016, between Edward J. Shoen, Mark V. Shoen, Blackwater Investments, Inc., SAC Holdings Corporation, Willow Grove Holdings LP, Foster Road LLC, James P. Shoen,  Rosmarie T. Donovan, as Trustee, and David Holmes, as Trustee

Incorporated by reference to Exhibit 99.1, filed with the Schedule 13-D, filed on February 12, 2016, file number 5-39669

 


10.50

Amendment to the Amended and Restated AMERCO Employee Savings and Profit and Sharing Plan*

Incorporated by reference to AMERCO’s Quarterly Report on Form 10-Q, for the year ended December 31, 2012, file no. 1-11255

10.51

Loan Agreement, dated as of August 12, 2015 among U-Haul Co of Florida 8, LLC, U-Haulo Co. of Florida 9, LLC, U-Haul Co. of Florida 10, UHIL 8, LLC, UHIL 9, LLC, UHIL 10, LLC, UHIL 13, LLC, AREC 8, LLC, AREC 9, LLC, AREC 10, LLC and AREC 13, LLC, each a Delaware limitied liability company, collectively as Borrower, and Morgan Stanley Bank, N.A. and JP Morgan Chage Bank, National Association, collectively as Lender

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on August 24, 2015, file no. 1-11255

10.52

Property Management Agreement dated December 11, 2014 between Three SAC Self-Storage Corporation and U-Haul Co. (Canada), Ltd

Filed herewith

10.53

Property Management Agreement dated December 16, 2014 among Galaxy Storage Two, L.P. and certain subsidiaries of AMERCO

Filed herewith

10.54

Property Management Agreement dated June 25, 2015 among 2015 SAC Self-Storage, LLC and certain subsidiaries of AMERCO

Filed herewith

10.55

Property Management Agreement dated March 21, 2016 among Five SAC RW, LLC and certain subsidiaries of AMERCO

Filed herewith

10.56

Amended and Restated AMERCO Employee Savings and Profit and Sharing Plan*

Filed herewith

10.57

Amended and Restated AMERCO Employee Stock Ownership Plan*

Filed herewith

10.58

ESOP Loan Agreement

Filed herewith

14

Code of Ethics

Incorporated by reference to AMERCO’s Quarterly Report on Form 8-K, filed on April 15, 2014, file no. 1-11255

21

Subsidiaries of AMERCO

Filed herewith

23.1

Consent of BDO USA, LLP

Filed herewith

24

Power of Attorney

Refer to signature page

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, Principal Financial Officer and Chief Accounting 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, Principal Financial Officer and Chief Accounting Officer of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

101.INS

XBRL Instance Document

Furnished herewith

101.SCH

XBRL Taxonomy Extension Schema

Furnished herewith

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

Furnished herewith

101.LAB

XBRL Taxonomy Extension Label Linkbase

Furnished herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

Furnished herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase

Furnished herewith

* Indicates management plan or compensatory arrangement.

 


 


Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

AMERCO

Reno, Nevada

 

We have audited the accompanying consolidated balance sheets of AMERCO and consolidated subsidiaries (the “Company”) as of March 31, 2016 and 2015 and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income (loss), and cash flows for each of the three years in the period ended March 31, 2016. In connection with our audits of the financial statements, we have also audited the financial statement schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at March 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of March 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 25, 2016 expressed an unqualified opinion thereon.

 

/s/ BDO USA, LLP

 

Phoenix, Arizona

 

May 25, 2016

 


Amerco and consolidated subsidiaries

Consolidated balance sheets

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

600,646

$

441,850

Reinsurance recoverables and trade receivables, net

 

175,210

 

189,869

Inventories, net

 

79,756

 

69,472

Prepaid expenses

 

134,300

 

126,296

Investments, fixed maturities and marketable equities

 

1,510,538

 

1,304,962

Investments, other

 

310,072

 

268,720

Deferred policy acquisition costs, net

 

136,386

 

115,422

Other assets

 

100,572

 

106,157

Related party assets

 

85,734

 

141,790

 

 

3,133,214

 

2,764,538

Property, plant and equipment, at cost:

 

 

 

 

Land

 

587,347

 

467,482

Buildings and improvements

 

2,187,400

 

1,728,033

Furniture and equipment

 

399,943

 

355,349

Rental trailers and other rental equipment

 

462,379

 

436,642

Rental trucks

 

3,514,175

 

3,059,987

 

 

7,151,244

 

6,047,493

Less: Accumulated depreciation

 

(2,133,733)

 

(1,939,856)

Total property, plant and equipment

 

5,017,511

 

4,107,637

Total assets

$

8,150,725

$

6,872,175

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

502,613

$

496,370

Notes, loans and leases payable

 

2,688,758

 

2,190,869

Policy benefits and losses, claims and loss expenses payable

 

1,071,412

 

1,062,188

Liabilities from investment contracts

 

951,490

 

685,745

Other policyholders' funds and liabilities

 

8,650

 

7,764

Deferred income

 

22,784

 

18,081

Deferred income taxes, net

 

653,612

 

526,799

Total liabilities

 

5,899,319

 

4,987,816

 

 

 

 

 

Commitments and contingencies (notes 9, 16, 17, and 18)

 

 

 

 

Stockholders' equity:

 

 

 

 

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

 

 

 

 

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

 

 

 

 

6,100,000 shares issued and none outstanding as of March 31, 2016 and 2015

 

 

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

 

 

 

 

issued and outstanding as of March 31, 2016 and 2015

 

 

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

 

 

 

 

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

 

 

 

 

none issued and outstanding as of March 31, 2016 and 2015

 

 

Common stock, with 0.25 par value, 150,000,000 shares authorized:

 

 

 

 

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

 

 

 

 

issued and 19,607,788 outstanding as of March 31, 2016 and 2015

 

10,497

 

10,497

Additional paid-in capital

 

451,629

 

449,668

Accumulated other comprehensive loss

 

(60,525)

 

(34,365)

Retained earnings

 

2,533,641

 

2,142,600

Cost of common shares in treasury, net (22,377,912 shares as of March 31, 2016 and 2015)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of March 31, 2016 and 2015)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,186)

 

(6,391)

Total stockholders' equity

 

2,251,406

 

1,884,359

Total liabilities and stockholders' equity

$

8,150,725

$

6,872,175

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

 


 

amerco and consolidated subsidiaries

Consolidated statements of operations

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands, except share and per share data)

Revenues:

 

 

 

 

 

 

Self-moving equipment rentals

$

2,297,980

$

2,146,391

$

1,955,423

Self-storage revenues

 

247,944

 

211,136

 

181,794

Self-moving and self-storage products and service sales

 

251,541

 

244,177

 

234,187

Property management fees

 

26,533

 

25,341

 

24,493

Life insurance premiums

 

162,662

 

156,103

 

157,919

Property and casualty insurance premiums

 

50,020

 

46,456

 

41,052

Net investment and interest income

 

86,805

 

84,728

 

79,591

Other revenue

 

152,171

 

160,199

 

160,793

Total revenues

 

3,275,656

 

3,074,531

 

2,835,252

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

Operating expenses

 

1,470,047

 

1,479,409

 

1,313,674

Commission expenses

 

262,627

 

249,642

 

227,332

Cost of sales

 

144,990

 

146,072

 

127,270

Benefits and losses

 

167,436

 

158,760

 

156,702

Amortization of deferred policy acquisition costs

 

23,272

 

19,661

 

19,982

Lease expense

 

49,780

 

79,798

 

100,466

Depreciation, net of (gains) losses on disposals of (($98,703), ($74,631) and ($33,557), respectively)

 

290,690

 

278,165

 

259,612

Total costs and expenses

 

2,408,842

 

2,411,507

 

2,205,038

 

 

 

 

 

 

 

Earnings from operations

 

866,814

 

663,024

 

630,214

Interest expense

 

(97,903)

 

(97,525)

 

(92,692)

Fees and amortization on early extinguishment of debt

 

 

(4,081)

 

Pretax earnings

 

768,911

 

561,418

 

537,522

Income tax expense

 

(279,910)

 

(204,677)

 

(195,131)

Earnings available to common stockholders

$

489,001

$

356,741

$

342,391

Basic and diluted earnings per common share

$

24.95

$

18.21

$

17.51

Weighted average common shares outstanding: Basic and diluted

 

19,596,110

 

19,586,633

 

19,558,758

Related party revenues for fiscal 2016, 2015 and 2014, net of eliminations, were $32.6 million, $36.2 million and $36.9 million, respectively.

Related party costs and expenses for fiscal 2016, 2015, and 2014, net of eliminations, were $57.4 million, $54.7 million and $52.6 million, respectively.

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

 


Amerco and Consolidated Subsidiaries

Consolidated statements of comprehensive income (loss)

Fiscal Year Ended March 31, 2016

 

Pre-tax

 

Tax

 

Net

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

768,911

$

(279,910)

$

489,001

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation

 

(4,473)

 

 

(4,473)

Unrealized net loss on investments

 

(41,639)

 

14,573

 

(27,066)

Change in fair value of cash flow hedges

 

9,721

 

(3,694)

 

6,027

Postretirement benefit obligations loss

 

(1,029)

 

381

 

(648)

Total comprehensive income

$

731,491

$

(268,650)

$

462,841

 

Fiscal Year Ended March 31, 2015

 

Pre-tax

 

Tax

 

Net

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

561,418

$

(204,677)

$

356,741

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation

 

(19,883)

 

 

(19,883)

Unrealized net gain on investments

 

54,139

 

(18,949)

 

35,190

Change in fair value of cash flow hedges

 

8,203

 

(3,117)

 

5,086

Postretirement benefit obligations loss

 

(1,325)

 

490

 

(835)

Total comprehensive income

$

602,552

$

(226,253)

$

376,299

 

Fiscal Year Ended March 31, 2014

 

Pre-tax

 

Tax

 

Net

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

537,522

$

(195,131)

$

342,391

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation

 

(9,134)

 

 

(9,134)

Unrealized net loss on investments

 

(51,590)

 

17,936

 

(33,654)

Change in fair value of cash flow hedges

 

19,317

 

(7,340)

 

11,977

Postretirement benefit obligations loss

 

(697)

 

265

 

(432)

Total comprehensive income

$

495,418

$

(184,270)

$

311,148

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


 


Amerco and consolidated subsidiaries

consolidated statements of changes in stockholders’ equity

Description

 

Common Stock

 

Additional Paid-In Capital

 

Accumulated Other Comprehensive

Income (Loss)

 

Retained Earnings

 

Less: Treasury Common Stock

 

Less: Treasury Preferred Stock

 

Less: Unearned Employee Stock Ownership Plan Shares

 

Total Stockholders' Equity

 

(In thousands)

Balance as of March 31, 2013

$

10,497

$

438,168

$

(22,680)

$

1,482,630

$

(525,653)

$

(151,997)

$

(1,706)

$

1,229,259

Increase in market value of released ESOP shares

 

 

6,042

 

 

 

 

 

 

6,042

Release of unearned ESOP shares

 

 

 

 

 

 

 

694

 

694

Purchase of ESOP shares

 

 

 

 

 

 

 

(207)

 

(207)

Foreign currency translation

 

 

 

(9,134)

 

 

 

 

 

(9,134)

Unrealized net loss on investments, net of tax

 

 

 

(33,654)

 

 

 

 

 

(33,654)

Fair market value of cash flow hedges, net of tax

 

 

 

11,977

 

 

 

 

 

11,977

Adjustment to post retirement benefit obligation

 

 

 

(432)

 

 

 

 

 

(432)

Net earnings

 

 

 

 

342,391

 

 

 

 

342,391

Common stock dividend: ($1.00 per share for fiscal 2014)

 

 

 

 

(19,568)

 

 

 

 

(19,568)

Net activity

 

 

6,042

 

(31,243)

 

322,823

 

 

 

487

 

298,109

Balance as of March 31, 2014

$

10,497

$

444,210

$

(53,923)

$

1,805,453

$

(525,653)

 

(151,997)

$

(1,219)

$

1,527,368

Increase in market value of released ESOP shares

 

 

5,458

 

 

 

 

 

 

5,458

Release of unearned ESOP shares

 

 

 

 

 

 

 

2,767

 

2,767

Purchase of ESOP shares

 

 

 

 

 

 

 

(7,939)

 

(7,939)

Foreign currency translation

 

 

 

(19,883)

 

 

 

 

 

(19,883)

Unrealized net gain on investments, net of tax

 

 

 

35,190

 

 

 

 

 

35,190

Fair market value of cash flow hedges, net of tax

 

 

 

5,086

 

 

 

 

 

5,086

Adjustment to post retirement benefit obligation

 

 

 

(835)

 

 

 

 

 

(835)

Net earnings

 

 

 

 

356,741

 

 

 

 

356,741

Common stock dividends: ($1.00 per share for fiscal 2015)

 

 

 

 

(19,594)

 

 

 

 

(19,594)

Net activity

 

 

5,458

 

19,558

 

337,147

 

 

 

(5,172)

 

356,991

Balance as of March 31, 2015

$

10,497

$

449,668

$

(34,365)

$

2,142,600

$

(525,653)

$

(151,997)

$

(6,391)

$

1,884,359

Increase in market value of released ESOP shares

 

 

1,961

 

 

 

 

 

 

1,961

Release of unearned ESOP shares

 

 

 

 

 

 

 

9,507

 

9,507

Purchase of ESOP shares

 

 

 

 

 

 

 

(9,302)

 

(9,302)

Foreign currency translation

 

 

 

(4,473)

 

 

 

 

 

(4,473)

Unrealized net loss on investments, net of tax

 

 

 

(27,066)

 

 

 

 

 

(27,066)

Fair market value of cash flow hedges, net of tax

 

 

 

6,027

 

 

 

 

 

6,027

Adjustment to post retirement benefit obligation

 

 

 

(648)

 

 

 

 

 

(648)

Net earnings

 

 

 

 

489,001

 

 

 

 

489,001

Common stock dividends: ($5.00 per share for fiscal 2016)

 

 

 

 

(97,960)

 

 

 

 

(97,960)

Net activity

 

 

1,961

 

(26,160)

 

391,041

 

 

 

205

 

367,047

Balance as of March 31, 2016

$

10,497

$

451,629

$

(60,525)

$

2,533,641

$

(525,653)

$

(151,997)

$

(6,186)

$

2,251,406

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


 


amerco and consolidated subsidiaries

consolidated statements of cash flows

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

$

489,001

$

356,741

$

342,391

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

 

 

Depreciation

 

389,393

 

352,796

 

293,169

Amortization of deferred policy acquisition costs

 

23,272

 

19,661

 

19,982

Interest credited to policyholders

 

20,465

 

18,110

 

22,890

Change in allowance for losses on trade receivables

 

(205)

 

(168)

 

(36)

Change in allowance for inventory reserves

 

(1,343)

 

(872)

 

871

Net gain on sale of real and personal property

 

(98,703)

 

(74,631)

 

(33,557)

Net gain on sale of investments

 

(4,491)

 

(3,925)

 

(6,411)

Deferred income taxes

 

138,075

 

76,500

 

46,371

Net change in other operating assets and liabilities:

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

14,765

 

9,632

 

62,506

Inventories

 

(9,009)

 

(1,579)

 

(11,495)

Prepaid expenses

 

(10,338)

 

(65,720)

 

2,186

Capitalization of deferred policy acquisition costs

 

(32,590)

 

(27,084)

 

(32,611)

Other assets

 

15,322

 

3,735

 

7,667

Related party assets

 

56,644

 

27,706

 

7,554

Accounts payable and accrued expenses

 

37,387

 

98,877

 

36,365

Policy benefits and losses, claims and loss expenses payable

 

9,626

 

(17,621)

 

(30,496)

Other policyholders' funds and liabilities

 

(349)

 

988

 

631

Deferred income

 

4,757

 

(13,181)

 

1,259

Related party liabilities

 

(616)

 

(866)

 

4,730

Net cash provided by operating activities

 

1,041,063

 

759,099

 

733,966

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

Purchase of:

 

 

 

 

 

 

Property, plant and equipment

 

(1,509,154)

 

(1,041,931)

 

(1,000,243)

Short term investments

 

(515,899)

 

(290,379)

 

(270,690)

Fixed maturity investments

 

(417,062)

 

(214,371)

 

(282,424)

Equity securities

 

(1,315)

 

(3,759)

 

(1,562)

Preferred stock

 

(1,005)

 

(2,006)

 

(640)

Real estate

 

(75)

 

(15,399)

 

(532)

Mortgage loans

 

(102,588)

 

(42,683)

 

(52,419)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

Property, plant and equipment

 

539,256

 

411,629

 

270,053

Short term investments

 

528,180

 

287,883

 

269,052

Fixed maturity investments

 

154,536

 

107,867

 

138,401

Equity securities

 

2,044

 

3,082

 

29,139

Preferred stock

 

1,126

 

2,427

 

6,004

Real estate

 

 

396

 

544

Mortgage loans

 

48,557

 

41,983

 

48,686

Net cash used by investing activities

 

(1,273,399)

 

(755,261)

 

(846,631)

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

Borrowings from credit facilities

 

855,972

 

657,535

 

431,029

Principal repayments on credit facilities

 

(428,403)

 

(593,722)

 

(293,068)

Debt issuance costs

 

(10,184)

 

(12,327)

 

(3,943)

Capital lease payments

 

(168,661)

 

(121,202)

 

(53,079)

Purchases of Employee Stock Ownership Plan Shares

 

(9,302)

 

(7,939)

 

(207)

Securitization deposits

 

544

 

 

Common stock dividends paid

 

(78,374)

 

(19,594)

 

(19,568)

Investment contract deposits

 

298,237

 

105,019

 

117,723

Investment contract withdrawals

 

(52,957)

 

(54,108)

 

(34,677)

Net cash provided (used) by financing activities

 

406,872

 

(46,338)

 

144,210

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

(15,740)

 

(10,762)

 

(177)

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

158,796

 

(53,262)

 

31,368

Cash and cash equivalents at the beginning of period

 

441,850

 

495,112

 

463,744

Cash and cash equivalents at the end of period

$

600,646

$

441,850

$

495,112

 

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

 


amerco and consolidated subsidiaries

notes to consolidated financial statements

Note 1. Basis of Presentation

AMERCO, a Nevada Corporation (“AMERCO”), has a fiscal year that ends on the 31st of March for each year that is referenced. Our insurance company subsidiaries have fiscal years that end on the 31st of December for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the financial position or results of operations. We disclose any material events occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2015, 2014 and 2013 correspond to fiscal 2016, 2015 and 2014 for AMERCO.

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

Note 2. Principles of Consolidation

We apply 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 triggering event occurs the most recent facts and circumstances are utilized in determining whether or not a company is a VIE, which other company(s) 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 reconsideration events.

Intercompany accounts and transactions have been eliminated.

Description of Legal Entities

AMERCO is the holding company for:

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

Amerco Real Estate Company (“Real Estate”),

Repwest Insurance Company (“Repwest”), and

Oxford Life Insurance Company (“Oxford”).

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

Description of Operating Segments

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

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

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


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

Life Insurance includes Oxford and its wholly-owned subsidiaries. Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Note 3.  Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting policies that we deem most critical to us and that require management’s most difficult and subjective judgments include the principles of consolidation, the recoverability of property, plant and equipment, the adequacy of insurance reserves, the recognition and measurement of impairments for investments accounted for under ASC 320 - Investments - Debt and Equity Securities and the recognition and measurement of income tax assets and liabilities. The actual results experienced by us may differ from management’s estimates.

Cash and Cash Equivalents

We consider cash equivalents to be highly liquid debt securities with insignificant interest rate risk with original maturities from the date of purchase of three months or less.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash deposits. Accounts at each United States financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Accounts at each Canadian financial institution are insured by the Canada Deposit Insurance Corporation up to $100,000 CAD per account. At March 31, 2016 and March 31, 2015, we held cash equivalents in excess of these insured limits. To mitigate this risk, we select financial institutions based on their credit ratings and financial strength.

Investments

Fixed Maturities and Marketable Equities. Fixed maturity investments consist of either marketable debt, equity or redeemable preferred stocks. As of the balance sheet dates, all of our investments in these securities were classified as available-for-sale. Available-for-sale investments are reported at fair value, with unrealized gains or losses recorded net of taxes and applicable adjustments to deferred policy acquisition costs in stockholders’ equity. Fair value for these investments is based on quoted market prices, dealer quotes or discounted cash flows. The cost of investments sold is based on the specific identification method.

In determining if and when a decline in market value below carrying value is an other-than-temporary impairment, management makes certain assumptions or judgments in its assessment including but not limited to: our ability to hold the security, quoted market prices, dealer quotes, discounted cash flows, industry factors, financial factors, and issuer specific information. Other-than-temporary impairments, to the extent of the decline, as well as realized gains or losses on the sale or exchange of investments are recognized in the current period operating results.

Mortgage Loans and Notes on Real Estate. Mortgage loans and notes on real estate are reported at their unpaid balance, net of any allowance for possible losses and any unamortized premium or discount.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Recognition of Investment Income. Interest income from bonds and mortgage notes is 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.

Derivative Financial Instruments

Our objective for holding derivative financial instruments is to manage interest rate risk exposure primarily through entering interest rate swap agreements. An interest rate swap is a contractual exchange of interest payments between two parties. A standard interest rate swap involves the payment of a fixed rate times a notional amount by one party in exchange for a floating rate times the same notional amount from another party. As interest rates change, the difference to be paid or received is accrued and recognized as interest expense or income over the life of the agreement.  We do not enter into these instruments for trading purposes. Counterparties to the interest rate swap agreements are major financial institutions. In accordance with ASC 815 - Derivatives and Hedging, we recognize interest rate swap agreements on the balance sheet at fair value, which is classified as prepaid expenses (asset) or accrued expenses (liability). Derivatives that are not designated as cash flow hedges for accounting purposes must be adjusted to fair value through income. If the derivative qualifies and is designated as a cash flow hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recorded in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. See Note 11, Derivatives of the Notes to Consolidated Financial Statements.

Inventories, net

Inventories, net were as follows:

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

Truck and trailer parts and accessories (a)

$

68,665

$

62,701

Hitches and towing components (b)

 

17,483

 

15,308

Moving supplies and propane (b)

 

8,668

 

7,866

Subtotal

 

94,816

 

85,875

Less: LIFO reserves

 

(13,463)

 

(15,019)

Less: excess and obsolete reserves

 

(1,597)

 

(1,384)

Total

$

79,756

$

69,472

 

 

 

 

 

(a) Primarily held for internal usage, including equipment manufacturing and repair

(b) Primarily held for retail sales

 

 

 

 

Inventories consist primarily of truck and trailer parts and accessories used to manufacture and repair rental equipment as well as products and accessories available for retail sale. Inventory is held at our owned locations; our independent dealers do not hold any of our inventory.

Inventory cost is primarily determined using the last-in first-out method (“LIFO”). Inventories valued using LIFO consisted of approximately 97% of the total inventories for both March 31, 2016 and 2015. Had we utilized the first-in first-out method (“FIFO”), stated inventory balances would have been $13.5 million and $15.0 million higher at March 31, 2016 and 2015, respectively. In fiscal 2016, the negative effect on income due to liquidation of a portion of the LIFO inventory was $0.1 million.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


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. We follow the deferral method of accounting based on ASC 908 - Airlines for major overhauls in which engine and transmission overhauls are capitalized and amortized over three years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized. The net amount of (gains) or losses netted against depreciation expense were ($98.7) million, ($74.6) million and ($33.6) million during fiscal 2016, 2015 and 2014, respectively. 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.

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 remaining 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 the fleet resulting from purchases should be depreciated on an accelerated method 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 20% by the end of year fifteen. Beginning in October 2012, new purchased rental equipment subject to this depreciation schedule is depreciated to a salvage value of 15%. 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 North America, on our web site at uhaul.com/trucksales or by phone at 866-404-0355. Additionally, we sell a large portion of our pickup and cargo van fleet at automobile dealer auctions.

The carrying value of surplus real estate, which is lower than market value at the balance sheet date, was $14.1 million for both fiscal 2016 and 2015 and is included in Investments, other.

Receivables

Trade receivables include trade accounts from moving and self-storage customers and dealers, insurance premiums and amounts due from re-insurers, less management’s estimate of uncollectible accounts.

Insurance premiums receivable for policies that are billed through contracted agents are recorded net of commissions payable. A commission payable is recorded as a separate liability for those premiums that are billed direct.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Reinsurance recoverables include case reserves and actuarial estimates of claims incurred but not reported ("IBNR"). These receivables are not expected to be collected until after the associated claim has been adjudicated and billed to the re-insurer. The reinsurance recoverables may have little or no allowance for doubtful accounts due to the fact that reinsurance is typically procured from carriers with strong credit ratings. Furthermore, we do not cede losses to a re-insurer if the carrier is deemed financially unable to perform on the contract. Reinsurance recoverables also include insurance ceded to other insurance companies.

Notes and mortgage receivables include accrued interest and are reduced by discounts and amounts considered by management to be uncollectible.

Policy Benefits and Losses, Claims and Loss Expenses Payable

Life Insurance’s 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. 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. Oxford’s liabilities for deferred annuity contracts consist of contract account balances that accrue to the benefit of the policyholders.

Property and Casualty Insurance’s liability for reported and unreported losses is based on Repwest’s historical data along with industry averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from re-insurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the re-insured policy. Adjustments to the liability for unpaid losses and loss expenses as well as amounts recoverable from re-insurers on unpaid losses are charged or credited to expense in the periods in which they are made.

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 during 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled.

On a regular basis insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including the following:

  • Claimant longevity
  • Cost trends associated with claimant treatments
  • Changes in ceding entity and third party administrator reporting practices
  • Changes in environmental factors including legal and regulatory
  • Current conditions affecting claim settlements
  • Future economic conditions including inflation

We have reserved each claim based upon the accumulation of current claim costs projected through each claimant’s life expectancy and then adjusted for applicable reinsurance arrangements.  Management reviews each claim bi-annually to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.  We have factored in an estimate of what the potential cost increases could be in our IBNR liability.  We have not assumed settlement of the 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 if injured workers return to work or expire prematurely, could lead to future positive development.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Self-Insurance Reserves

U-Haul retains the risk for certain public liability and property damage programs related to our rental equipment. The consolidated balance sheets include $386.4 million and $363.6 million of liabilities related to these programs as of March 31, 2016 and 2015, respectively. These liabilities are recorded in Policy benefits and losses, claims and loss expenses payable. Management takes into account losses incurred based upon actuarial estimates, past experience, current claim trends, as well as social and economic conditions. This liability is subject to change in the future based upon changes in the underlying assumptions including claims experience, frequency of incidents, and severity of incidents.

Additionally, as of March 31, 2016 and 2015, the consolidated balance sheets include liabilities of $9.5 million and $8.7 million, respectively, related to our provided medical plan benefits for eligible employees. We estimate this liability based on actual claims outstanding as of the balance sheet date as well as an actuarial estimate of claims incurred but not reported. This liability is reported net of estimated recoveries from excess loss reinsurance policies with unaffiliated insurers of $0.2 million and $0.3 million for fiscal 2016 and 2015, respectively. These amounts are recorded in Accounts payable and accrued expenses on the consolidated balance sheets.

Revenue Recognition

Self-moving rentals are recognized for the period that trucks and moving equipment are rented. Self-storage revenues, based upon the number of paid storage contract days, are recognized as earned during the period.  Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. Property and casualty, traditional life and Medicare supplement insurance premiums are recognized as revenue over the policy periods. 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. Interest and investment income are recognized as earned.

Amounts collected from customers for sales tax are recorded on a net basis.

Advertising

All advertising costs are expensed as incurred. Advertising expense was $9.6 million, $7.5 million and $7.1 million in fiscal 2016, 2015 and 2014, respectively.

Deferred Policy Acquisition Costs

Commissions and other costs that fluctuate with and are primarily related to the acquisition or renewal of certain insurance premiums are deferred. For our Life Insurance’s life and health insurance products, these costs are amortized, with interest, in relation to revenue such that costs are realized as a constant percentage of revenue. For its annuity insurance products the costs are amortized, with interest, in relation to the present value of actual and expected gross profits.

Starting in fiscal 2014, new annuity contract holders were provided with a sales inducement in the form of a premium bonus.  Sales inducements are recognized as an asset with a corresponding increase to the policyholder liability and are amortized in a similar manner to Deferred Acquisition Cost.  As of December 31, 2015 and 2014, the Sales Inducement Asset included with Deferred Acquisition Costs amounted to $24.6 million and $24.8 million, respectively on the consolidated balance sheet and amortization expense totaled $3.0 million $2.4 million and $2.1 million for the periods ended December 31, 2015, 2014 and 2013, respectively .

Environmental Costs

Liabilities are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs can be reasonably estimated. The amount of the liability is based on management’s best estimate of undiscounted future costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and amortized over the estimated useful lives of the properties. These costs improve the safety or efficiency of the property or are incurred in preparing the property for sale.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Income Taxes

AMERCO files a consolidated tax return with all of its legal subsidiaries. In accordance with ASC 740 - Income Taxes (“ASC 740”), the provision for income taxes reflects deferred income taxes resulting from changes in temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net earnings, foreign currency translation adjustments, unrealized gains and losses on investments, the change in fair value of cash flow hedges and the change in postretirement benefit obligations.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The standard requires expanded disclosure surrounding revenue recognition. Early application is not permitted. The standard is effective for fiscal periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective adoption. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, Deferral of Effective Date, which delays the effective date of ASU 2014-09 by one year to fiscal periods beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as requirements in ASU 2015-14. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

In March 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The guidance is effective for interim periods and annual period beginning after December 15, 2015; however early adoption is permitted. The adoption of this standard is not expected to have a material impact 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 is effective for interim periods and annual period beginning after December 15, 2017. Early adoption is not permitted, except for certain provisions relating to financial liabilities. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


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 a single lease expense reported for operating leases. This update also will require both qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. . The guidance is effective for interim periods and annual period beginning after December 15, 2018; however early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. For the last nine years, we have reported a discounted estimate of the off-balance sheet lease obligations in our MD&A.

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 ASU’s 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.

Note 4.  Earnings Per Share

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

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 21,883; 12,470; and 33,173 as of March 31, 2016, 2015, and 2014, respectively.

Note 5.  Reinsurance Recoverables and Trade Receivables, Net

Reinsurance recoverables and trade receivables, net were as follows:

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

Reinsurance recoverable

$

115,653

$

130,734

Trade accounts receivable

 

34,350

 

32,493

Paid losses recoverable

 

1,697

 

1,690

Accrued investment income

 

18,797

 

15,609

Premiums and agents' balances

 

1,163

 

1,082

Independent dealer receivable

 

390

 

154

Other receivables

 

3,745

 

8,897

 

 

175,795

 

190,659

Less: Allowance for doubtful accounts

 

(585)

 

(790)

 

$

175,210

$

189,869

Note 6.  Investments

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

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $17.3 million and $16.4 million at December 31, 2015 and 2014, respectively.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Available-for-Sale Investments

Available-for-sale investments at March 31, 2016 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

(In thousands)

U.S. treasury securities and government obligations

$

85,861

$

3,791

$

$

(193)

$

89,459

U.S. government agency mortgage-backed securities

 

21,845

 

1,596

 

(6)

 

(39)

 

23,396

Obligations of states and political subdivisions

 

166,725

 

10,660

 

(81)

 

(414)

 

176,890

Corporate securities

 

1,143,125

 

26,861

 

(8,013)

 

(28,181)

 

1,133,792

Mortgage-backed securities

 

42,991

 

475

 

 

(62)

 

43,404

Redeemable preferred stocks

 

17,977

 

556

 

 

(105)

 

18,428

Common stocks

 

17,732

 

7,822

 

(10)

 

(375)

 

25,169

 

$

1,496,256

$

51,761

$

(8,110)

$

(29,369)

$

1,510,538

Available-for-sale investments at March 31, 2015 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

(In thousands)

U.S. treasury securities and government obligations

$

99,722

$

5,658

$

(64)

$

$

105,316

U.S. government agency mortgage-backed securities

 

30,569

 

2,614

 

(39)

 

(3)

 

33,141

Obligations of states and political subdivisions

 

165,724

 

13,052

 

(298)

 

(10)

 

178,468

Corporate securities

 

885,470

 

44,426

 

(2,522)

 

(2,966)

 

924,408

Mortgage-backed securities

 

19,874

 

806

 

(1)

 

 

20,679

Redeemable preferred stocks

 

18,052

 

521

 

(253)

 

(24)

 

18,296

Common stocks

 

17,975

 

6,719

 

 

(40)

 

24,654

 

$

1,237,386

$

73,796

$

(3,177)

$

(3,043)

$

1,304,962

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

We sold available-for-sale securities with a fair value of $150.7 million, $109.1 million and $170.0 million in fiscal 2016, 2015 and 2014, respectively. The gross realized gains on these sales totaled $4.2 million, $4.6 million and $5.0 million in fiscal 2016, 2015 and 2014, respectively. We realized gross losses on these sales of $0.6 million, $0.7 million and $1.4 million in fiscal 2016, 2015 and 2014, respectively. 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


The unrealized losses of more than twelve months in the available-for-sale tables are considered temporary declines. We track each investment with an unrealized loss and evaluate them on an individual basis for other-than-temporary impairments including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognized these write-downs through earnings. There were no write downs in fiscal 2016, 2015 and 2014.

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

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

There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive loss for fiscal 2016 or 2015.

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

 

 

March 31, 2016

 

March 31, 2015

 

 

Amortized

Cost

 

Estimated

Market

Value

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(In thousands)

Due in one year or less

$

48,679

$

49,146

$

36,355

$

37,055

Due after one year through five years

 

250,576

 

256,597

 

198,488

 

209,404

Due after five years through ten years

 

557,984

 

557,961

 

474,639

 

492,782

Due after ten years

 

560,317

 

559,833

 

472,003

 

502,092

 

 

1,417,556

 

1,423,537

 

1,181,485

 

1,241,333

 

 

 

 

 

 

 

 

 

Mortgage backed securities

 

42,991

 

43,404

 

19,874

 

20,679

Redeemable preferred stocks

 

17,977

 

18,428

 

18,052

 

18,296

Equity securities

 

17,732

 

25,169

 

17,975

 

24,654

 

$

1,496,256

$

1,510,538

$

1,237,386

$

1,304,962

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Investments, other

The carrying value of other investments was as follows:

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

Mortgage loans, net

$

217,198

$

161,851

Short-term investments

 

34,798

 

47,739

Real estate

 

34,416

 

34,597

Policy loans

 

17,091

 

16,431

Other equity investments

 

6,569

 

8,102

 

$

310,072

$

268,720

Mortgage loans are carried at the unpaid balance, less an allowance for probable losses net of any unamortized premium or discount. The allowance for probable losses was $0.4 million as of March 31, 2016 and 2015. The estimated fair value of these loans as of March 31, 2016 and 2015 approximated the carrying value. These loans represent first lien mortgages held by us.

Short-term investments consist primarily of investments in money market funds, mutual funds and any other investments with short-term characteristics that have original maturities of less than one year at acquisition. These investments are recorded at cost, which approximates fair value.

Real estate obtained through foreclosure and held for sale is carried at the lower of fair value at time of foreclosure or current estimated fair value less cost to sell. Other equity investments are carried at cost and assessed for impairment.

Insurance policy loans are carried at their unpaid balance.

Note 7.  Other Assets

Other assets were as follows:

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

Deposits (debt-related)

$

30,660

$

49,467

Cash surrender value of life insurance policies

 

31,619

 

30,563

Deferred charges (debt-related)

 

23,362

 

16,575

Other

 

14,931

 

9,552

 

$

100,572

$

106,157

Note 8. Net Investment and Interest Income

Net investment and interest income, were as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Fixed maturities

$

63,641

$

58,716

$

53,634

Real estate

 

3,775

 

2,669

 

1,118

Insurance policy loans

 

1,188

 

1,072

 

1,159

Mortgage loans

 

14,631

 

10,677

 

9,450

Short-term, amounts held by ceding reinsurers, net and other investments

 

208

 

2,724

 

3,440

Investment income

 

83,443

 

75,858

 

68,801

Less: investment expenses

 

(2,724)

 

(1,962)

 

(1,629)

Investment income - related party

 

6,086

 

10,832

 

12,419

Net investment and interest income

$

86,805

$

84,728

$

79,591

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 9. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

March 31,

 

2016 Rate (a)

 

Maturities

 

2016

 

2015

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

6.93%

 

2023

$

205,000

$

240,000

Senior mortgages

2.44% - 5.50%

 

2016 - 2038

 

1,121,897

 

717,512

Working capital loan (revolving credit)

-

 

2018

 

 

Fleet loans (amortizing term)

1.95% - 4.76%

 

2016 - 2022

 

218,998

 

202,784

Fleet loans (term)

3.52% - 3.53%

 

2016

 

 

115,000

Fleet loan (securitization)

4.90%

 

2017

 

62,838

 

75,846

Fleet loans (revolving credit)

1.59% - 2.28%

 

2018 - 2021

 

347,000

 

190,000

Capital leases (rental equipment)

2.18% - 7.75%

 

2016 - 2023

 

672,825

 

602,470

Other obligations

3.00% - 8.00%

 

2016 - 2045

 

60,200

 

47,257

Total notes, loans and leases payable

 

 

 

$

2,688,758

$

2,190,869

 

 

 

 

 

 

 

 

(a) Interest rate as of March 31, 2016, including the effect of applicable hedging instruments

Real Estate Backed Loans

Real Estate Loan

Amerco Real Estate Company and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a Real Estate Loan. As of March 31, 2016, the outstanding balance on the Real Estate Loan was $205.0 million. U-Haul International, Inc. is a guarantor of this loan.  The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers. The final maturity of the term loan is April 2023

The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. At March 31, 2016, the applicable LIBOR was 0.45% and the applicable margin was 1.50%, the sum of which was 1.95%. The rate on the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on current margin. The interest rate swap expires in August 2018, after which date the remaining balance will incur interest at a rate of LIBOR plus a margin of 1.50%. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Senior Mortgages

Various subsidiaries of Amerco Real Estate Company and U-Haul International, Inc. are borrowers under certain senior mortgages. These senior mortgage loan balances as of March 31, 2016 were in the aggregate amount of $1,121.9 million and mature between 2016 and 2038. The senior mortgages require monthly principal and interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 4.20% and 5.50%. 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, $136.6 million of these loans have variable interest rates comprised of applicable LIBOR base rate of 0.44% plus margins between 2.00% and 2.50%, the sum of which was between 2.44% and 2.94%. Amerco Real Estate Company and U-Haul International, Inc. have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Working Capital Loans

Amerco Real Estate Company is a borrower under an asset backed working capital loan. The maximum amount that can be drawn at any one time is $25.0 million. At March 31, 2016 the full $25.0 million was available to be drawn. This loan is secured by certain properties owned by the borrower. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This agreement was amended on April 30, 2016. As part of the amendment the maximum amount that can be borrowed was increased to $50 million and the maturity date was extended to September 2018. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. U-Haul International, Inc. and AMERCO are the guarantors of this loan. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. The interest rate is the applicable LIBOR plus a margin of 1.25%.

Fleet Loans

Rental Truck Amortizing Loans

U-Haul International, Inc. and several of its subsidiaries are borrowers under amortizing term loans. The balance of the loans as of March 31, 2016 was $219.0 million with the final maturities between April 2016 and July 2022.

The Amortizing Loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the Loan Agreements, are the applicable LIBOR plus the applicable margins. At March 31, 2016, the applicable LIBOR was between 0.44% and 0.45% and applicable margins were between 1.72% and 2.50%. The interest rates are hedged with interest rate swaps fixing the rates between 2.82% and 4.76% based on current margins. Additionally, $137.6 million of these loans are carried at fixed rates ranging between 1.95% and 3.94%.

AMERCO and U-Haul International, Inc. are guarantors of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Rental Truck Securitizations

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

The 2010 Box Truck Note has a fixed interest rate of 4.90% with an expected final maturity of October 2017. At March 31, 2016, the outstanding balance was $62.8 million. The note is secured by the box trucks purchased and the corresponding operating cash flows associated with their operation.

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

Rental Truck Revolvers

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $75 million, which can be increased to a maximum of $225 million. The loan matures in September 2018. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At March 31, 2016, the applicable LIBOR was 0.44% and the margin was 1.75%, the sum of which was 2.19%. Only interest is paid during the first four years of the loan with principal due monthly over the last nine months. As of March 31, 2016, the outstanding balance was $57.0 million.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $100 million, which can be increased to a maximum of $125 million. This loan was amended in February 2016 pursuant to which the maturity was extended to March 2020. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At March 31, 2016, the applicable LIBOR was 0.44% and the margin was 1.15%, the sum of which was 1.59%. Only interest is paid during the first three years of the loan with principal due monthly over the last nine months. As of March 31, 2016, the outstanding balance was $100.0 million.

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $70 million. The loan matures in May 2019. This agreement contains an option to extend the maturity through January 2020. At March 31, 2016, the applicable LIBOR was 0.43% and the margin was 1.85%, the sum of which was 2.28%. Only interest is paid during the first five years of the loan with principal due upon maturity. As of March 31, 2016, the outstanding balance was $65.0 million.

Various subsidiaries of U-Haul International, Inc. entered into a revolving fleet loan for $125 million. The loan matures in November 2021. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus the applicable margin. At March 31, 2016, the applicable LIBOR was 0.44% and the margin was 1.15%, the sum of which was 1.59%. Only interest is paid during the first five years of the loan with principal due monthly over the last nine months. As of March 31, 2016, the outstanding balance was $125.0 million.

Capital Leases

We regularly enter into capital leases for new equipment with the terms of the leases between 5 and 7 years. During fiscal 2016, we entered into $241.7 million of capial leases. At March 31, 2016, the balance of our capital leases was $672.8 million. The net book value of the corresponding capitalized assets was $900.6 million at March 31, 2016.

Other Obligations

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

At March 31, 2016, the aggregate outstanding principal balance of the U-Notes issued was $65.8 million of which $5.6 million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 3.00% and 8.00% and maturity dates range between 2016 and 2045.

Our Life Insurance subsidiary is a member of the FHLB and as such has a deposit with the FHLB. As of December 31, 2015, they have a deposit of $30.0 million which carried a rate of 0.39%. The rate is calculated daily based upon a spread of the overnight FED funds benchmark and is payable monthly. The deposit does not have a scheduled maturity date. The balance of the deposit is included within the balance of Liabilities from investment contracts on the consolidated balance sheet.

Annual Maturities of Notes, Loans and Leases Payable

The annual maturities of long-term debt as of March 31, 2016 for the next five years and thereafter are as follows:

 

 

Year Ended March 31,

 

 

2017

 

2018

 

2019

 

2020

 

2021

 

Thereafter

 

 

(In thousands)

Notes, loans and leases payable, secured

$

353,807

$

348,984

$

297,534

$

416,616

$

155,403

$

1,116,414

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 10. Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Interest expense

$

85,592

$

80,905

$

72,538

Capitalized interest

 

(3,623)

 

(1,204)

 

(571)

Amortization of transaction costs

 

3,235

 

3,495

 

3,551

Interest expense resulting from derivatives

 

12,699

 

14,329

 

17,174

Total interest expense

 

97,903

 

97,525

 

92,692

Write-off of transaction costs related to early extinguishment of debt

 

 

298

 

Fees on early extinguishment of debt

 

 

3,783

 

Fees and amortization on early extinguishment of debt

 

 

4,081

 

Total

$

97,903

$

101,606

$

92,692

Interest paid in cash, including payments related to derivative contracts, amounted to $95.1 million, $95.0 million and $87.8 million for fiscal 2016, 2015 and 2014, respectively. In addition, during fiscal 2015, we paid $3.8 million of fees associated with the early extinguishment of debt.

Interest Rates

Interest rates and our revolving credit borrowings were as follows:

 

 

Revolving Credit Activity

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands, except interest rates)

Weighted average interest rate during the year

 

1.67%

 

1.70%

 

1.10%

Interest rate at year end

 

1.82%

 

1.65%

 

1.78%

Maximum amount outstanding during the year

$

347,000

$

232,000

$

89,632

Average amount outstanding during the year

$

237,372

$

187,004

$

18,658

Facility fees

$

201

$

336

$

301

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 11.  Derivatives

We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates, the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of its counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.

 

Original variable rate debt and lease amount

 

Agreement Date

 

Effective Date

 

Expiration Date

 

Designated cash flow hedge date

 

(In millions)

 

 

 

 

 

 

 

 

$

300.0

 

 

8/16/2006

 

8/18/2006

 

8/10/2018

 

8/4/2006

 

14.7

(a)

 

7/6/2010

 

8/15/2010

 

7/15/2017

 

7/6/2010

 

25.0

(a)

 

4/26/2011

 

6/1/2011

 

6/1/2018

 

6/1/2011

 

50.0

(a)

 

7/29/2011

 

8/15/2011

 

8/15/2018

 

7/29/2011

 

20.0

(a)

 

8/3/2011

 

9/12/2011

 

9/10/2018

 

8/3/2011

 

15.1

(b)

 

3/27/2012

 

3/28/2012

 

3/28/2019

 

3/26/2012

 

25.0

 

 

4/13/2012

 

4/16/2012

 

4/1/2019

 

4/12/2012

 

44.3

 

 

1/11/2013

 

1/15/2013

 

12/15/2019

 

1/11/2013

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

(b) operating lease

As of March 31, 2016, the total notional amount of our variable interest rate swaps on debt and an operating lease was $282.1 million and $9.3 million, respectively.

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

 

 

Liability Derivative Fair Value as of

 

 

March 31, 2016

 

March 31, 2015

 

 

(In thousands)

Interest rate contracts designated as hedging instruments

$

14,845

$

24,484

 

 

 

The Effect of Interest Rate

 

 

Contracts on the Statements of Operations

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

12,699

$

14,329

$

17,174

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

$

(9,721)

$

(8,203)

$

(19,317)

Loss reclassified from AOCI into income (effective portion)

$

12,616

$

14,358

$

16,691

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

$

83

$

(29)

$

483

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During fiscal 2016, we recognized an increase in the fair value of our cash flows hedges of $6.0 million, net of taxes.  Embedded in this change was $12.6 million of losses reclassified from accumulated other comprehensive income to interest expense during the year, net of taxes. At March 31, 2016, we expect to reclassify $9.0 million of net losses on interest rate contracts from accumulated other comprehensive income (loss) to earnings as interest expense over the next twelve months. Please see Note 3, Accounting Policies in the Notes to Consolidated Financial Statements.

Note 12. Stockholders’ Equity

Common Stock Dividends

Declared Date

 

Per Share Amount

 

Record Date

 

Dividend Date

 

 

 

 

 

 

 

March 15, 2016

$

1.00

 

April 5, 2016

 

April 21, 2016

August 28, 2015

 

3.00

 

September 16, 2015

 

October 2, 2015

June 4, 2015

 

1.00

 

June 19, 2015

 

July 1, 2015

February 4, 2015

 

1.00

 

March 6, 2015

 

March 17, 2015

December 4, 2013

 

1.00

 

January 10, 2014

 

February 14, 2014

 

 

 

 

 

 

 

Note 13.  Provision for Taxes

Earnings before taxes and the provision for taxes consisted of the following:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Pretax earnings:

 

 

 

 

 

 

U.S.

$

745,194

$

541,371

$

516,207

Non-U.S.

 

23,717

 

20,047

 

21,315

Total pretax earnings

$

768,911

$

561,418

$

537,522

 

 

 

 

 

 

 

Current provision (benefit)

 

 

 

 

 

 

Federal

$

118,974

$

112,634

$

131,246

State

 

15,988

 

14,248

 

12,641

Non-U.S.

 

3,303

 

2,599

 

3,787

 

 

138,265

 

129,481

 

147,674

Deferred provision (benefit)

 

 

 

 

 

 

Federal

 

125,950

 

67,306

 

37,979

State

 

12,561

 

5,256

 

7,553

Non-U.S.

 

3,134

 

2,634

 

1,925

 

 

141,645

 

75,196

 

47,457

 

 

 

 

 

 

 

Provision for income tax expense

$

279,910

$

204,677

$

195,131

 

 

 

 

 

 

 

Income taxes paid (net of income tax refunds received)

$

141,901

$

195,072

$

138,384

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

 

Statutory federal income tax rate

 

35.00%

 

35.00%

 

35.00%

Increase (reduction) in rate resulting from:

 

 

 

 

 

 

State taxes, net of federal benefit

 

2.34%

 

2.21%

 

2.38%

Foreign rate differential

 

(0.24)%

 

(0.32)%

 

(0.33)%

Federal tax credits

 

(0.19)%

 

(0.29)%

 

(0.32)%

Dividend received deduction

 

(0.02)%

 

(0.03)%

 

(0.03)%

Other

 

(0.49)%

 

(0.11)%

 

(0.40)%

Actual tax expense of operations

 

36.40%

 

36.46%

 

36.30%

Significant components of our deferred tax assets and liabilities were as follows:

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

Deferred tax assets:

 

 

 

 

Net operating loss and credit carry forwards

$

1,462

$

1,228

Accrued expenses

 

185,088

 

171,761

Policy benefit and losses, claims and loss expenses payable, net

 

21,911

 

19,560

Unrealized losses

 

 

Total deferred tax assets

$

208,461

$

192,549

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

Property, plant and equipment

$

831,914

$

680,501

Deferred policy acquisition costs

 

20,557

 

18,369

Unrealized gains

 

9,593

 

20,216

Other

 

9

 

262

Total deferred tax liabilities

 

862,073

 

719,348

Net deferred tax liability

$

653,612

$

526,799

The net operating loss and credit carry-forwards in the above table are primarily attributable to $22.0 million of state net operating losses that will begin to expire March 31, 2017 if not utilized.

ASC 740 prescribes a minimum recognition and measurement methodology that a tax position is required to meet before being recognized in the financial statements. The total amount of unrecognized tax benefits at March 31, 2015 was $19.9 million. This entire amount of unrecognized tax benefits if resolved in our favor, would favorably impact our effective tax rate. During the current year we recorded tax expense (net of settlements), resulting from uncertain tax positions in the amount of $4.0 million. At March 31, 2016, the amount of unrecognized tax benefits and the amount that would favorably affect our effective tax rate was $23.9 million.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:

 

 

Unrecognized Tax Benefits

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

 

 

 

 

 

Unrecognized tax benefits beginning balance

$

19,929

$

16,850

Additions based on tax positions related to the current year

 

4,313

 

3,695

Reductions for tax positions of prior years

 

(327)

 

(616)

Settlements

 

(3)

 

Unrecognized tax benefits ending balance

$

23,912

$

19,929

We recognize interest related to unrecognized tax benefits as interest expense, and penalties as operating expenses. At March 31, 2015, the amount of interest and penalties accrued on unrecognized tax benefits was $5.2 million, net of tax. During the current year we recorded expense from interest and penalties in the amount of $0.7 million, net of tax. At March 31, 2016, the amount of interest and penalties accrued on unrecognized tax benefits was $5.9 million, net of tax.

We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With some exceptions, we are no longer subject to audit for years prior to the fiscal year ended March 31, 2013. No provision was made for U.S. taxes payable on undistributed foreign earnings since these amounts are permanently reinvested; the amount of this unrecognized deferred tax liability is not practical to determine at this time.

Note 14.  Employee Benefit Plans

Profit Sharing Plans

We provide tax-qualified profit sharing retirement plans for the benefit of eligible employees, former employees and retirees in the U.S. and Canada. The plans are designed to provide employees with an accumulation of funds for retirement on a tax-deferred basis and provide for annual discretionary employer contributions. Amounts to be contributed are determined by the President and Chairman of the Board of the Company under the delegation of authority from the Board, pursuant to the terms of the Profit Sharing Plan. No contributions were made to the profit sharing plan during fiscal 2016, 2015 or 2014.

We also provide an employee savings plan which allows participants to defer income under Section 401(k) of the Internal Revenue Code of 1986.

ESOP Plan

We sponsor a leveraged ESOP that generally covers all employees with one year or more of service. The ESOP shares initially were pledged as collateral for its debt which was originally funded by U-Haul. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year. ESOP shares are committed to be released monthly and ESOP compensation expense is recorded based on the current market price at the end of the month. These shares then become outstanding for the earnings per share computations. ESOP compensation expense was $11.6 million, $6.9 million and $6.6 million for fiscal 2016, 2015 and 2014, respectively. Listed below is a summary of these financing arrangements as of fiscal year-end:

 

 

Outstanding as of

 

Interest Payments

Financing Date

 

March 31, 2016

 

2016

 

2015

 

2014

 

 

(In thousands)

June, 1991

$

46

$

10

$

48

$

53

July, 2009

 

991

 

33

 

31

 

17

February, 2016

 

5,000

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Leveraged contributions to the Plan Trust during fiscal 2016, 2015 and 2014 were $0.4 million, $1.0 million and $0.7 million, respectively. In fiscal 2016 and 2015, the Company made  non-leveraged contributions of $4.0 and $8.0 million, respectively to the Plan Trust. In fiscal 2014, $0.6 million of common stock dividends paid to unallocated shares was applied towards debt service.

Shares held by the Plan were as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

 

(In thousands)

Allocated shares

 

1,203

 

1,249

Unreleased shares - leveraged

 

22

 

14

Fair value of unreleased shares - leveraged

$

8,072

$

4,781

Unreleased shares - non-leveraged

 

8

 

25

Fair value of unreleased shares - non-leveraged

$

2,756

$

8,242

The fair value of unreleased shares issued prior to 1992 is defined as the historical cost of such shares. The fair value of unreleased shares issued subsequent to December 31, 1992 is defined as the trading value of such shares as of March 31, 2016 and March 31, 2015, respectively.

Post Retirement and Post Employment Benefits

We provide medical and life insurance benefits to our eligible employees and their dependents upon retirement from the Company. The retirees must have attained age sixty-five and earned twenty years of full-time service upon retirement for coverage under the medical plan. The medical benefits are capped at a $20,000 lifetime maximum per covered person. The benefits are coordinated with Medicare and any other medical policies in force. Retirees who have attained age sixty-five and earned at least ten years of full-time service upon retirement from the Company are entitled to group term life insurance benefits. The life insurance benefit is $2,000 plus $100 for each year of employment over ten years. The plan is not funded and claims are paid as they are incurred. We use a March 31 measurement date for our post retirement benefit disclosures.

The components of net periodic post retirement benefit cost were as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Service cost for benefits earned during the period

$

961

$

827

$

726

Interest cost on accumulated postretirement benefit

 

752

 

720

 

564

Other components

 

35

 

14

 

19

Net periodic postretirement benefit cost

$

1,748

$

1,561

$

1,309

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


The fiscal 2016 and fiscal 2015 post retirement benefit liability included the following components:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

 

(In thousands)

Beginning of year

$

18,554

$

16,119

Service cost for benefits earned during the period

 

961

 

827

Interest cost on accumulated post retirement benefit

 

752

 

720

Net benefit payments and expense

 

(541)

 

(450)

Actuarial loss

 

1,065

 

1,338

Accumulated postretirement benefit obligation

 

20,791

 

18,554

 

 

 

 

 

Current liabilities

 

658

 

513

Non-current liabilities

 

20,133

 

18,041

 

 

 

 

 

Total post retirement benefit liability recognized in statement of financial position

 

20,791

 

18,554

Components included in accumulated other comprehensive income (loss):

 

 

 

 

Unrecognized net loss

 

(2,847)

 

(1,817)

Cumulative net periodic benefit cost (in excess of employer contribution)

$

17,944

$

16,737

The discount rate assumptions in computing the information above were as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In percentages)

Accumulated postretirement benefit obligation

 

3.89%

 

3.99%

 

4.49%

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 became law. Net periodic post retirement benefit cost above includes the effect of the subsidy. The discount rate represents the expected yield on a portfolio of high grade (AA to AAA rated or equivalent) fixed income investments with cash flow streams sufficient to satisfy benefit obligations under the plan when due. Fluctuations in the discount rate assumptions primarily reflect changes in U.S. interest rates. The assumed health care cost trend rate used to measure the accumulated postretirement benefit obligation as of the end of fiscal 2016 was 7.3% in the initial year and was projected to decline annually to an ultimate rate of 4.5% in fiscal 2038. The assumed health care cost trend rate used to measure the accumulated post retirement benefit obligation as of the end of fiscal 2015 (and used to measure the fiscal 2016 net periodic benefit cost) was 7.3% in the initial year and was projected to decline annually to an ultimate rate of 4.5% in fiscal 2029.

If the estimated health care cost trend rate assumptions were increased by one percent, the accumulated post retirement benefit obligation as of fiscal year-end would increase by $219,243 and the total of the service cost and interest cost components would increase by $26,180. A decrease in the estimated health care cost trend rate assumption of one percent would decrease the accumulated post retirement benefit obligation as of fiscal year-end by $314,603 and the total of the service cost and interest cost components would decrease by $30,103.

Post employment benefits provided by us, other than upon retirement, are not material.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Future net benefit payments are expected as follows:

 

 

Future Net Benefit Payments

 

 

(In thousands)

Year-ended:

 

 

2017

$

658

2018

 

773

2019

 

914

2020

 

1,073

2021

 

1,263

2022 through 2026

 

9,169

Total

$

13,850

Note 15.  Fair Value Measurements

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.

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. ASC 820 - Fair Value Measurements and Disclosures (“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 measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following tables represent the financial assets and liabilities on the condensed consolidated balance sheet at March 31, 2016 and 2015, that are subject to ASC 820 and the valuation approach applied to each of these items.

Year Ended March 31, 2016

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

(In thousands)

Assets

 

 

 

 

 

 

 

 

Short-term investments

$

499,491

$

499,491

$

$

Fixed maturities - available for sale

 

1,466,941

 

96,328

 

1,370,275

 

338

Preferred stock

 

18,428

 

18,428

 

 

Common stock

 

25,169

 

25,169

 

 

Derivatives

 

3,344

 

3,344

 

 

Total

$

2,013,373

$

642,760

$

1,370,275

$

338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Guaranteed residual values of TRAC leases

$

$

$

$

Derivatives

 

14,845

 

 

14,845

 

Total

$

14,845

$

$

14,845

$

 

Year Ended March 31, 2015

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

(In thousands)

Assets

 

 

 

 

 

 

 

 

Short-term investments

$

460,762

$

460,762

$

$

Fixed maturities - available for sale

 

1,262,012

 

101,201

 

1,159,807

 

1,004

Preferred stock

 

18,296

 

18,296

 

 

Common stock

 

24,654

 

24,654

 

 

Derivatives

 

4,876

 

4,876

 

 

Total

$

1,770,600

$

609,789

$

1,159,807

$

1,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Guaranteed residual values of TRAC leases

$

$

$

$

Derivatives

 

24,484

 

 

24,484

 

Total

$

24,484

$

$

24,484

$

In light of our definition of an active market at the end of the fourth quarter of fiscal 2016, we reclassified $1,079.0 million and $895.7 million of fixed maturities – available for sale from Level 1 to Level 2 due to a review of their trading activity for fiscal 2016 and 2015, respectively.

The following tables represent the fair value measurements for our assets at March 31, 2016 using significant unobservable inputs (Level 3).

 

 

Fixed Maturities - Asset Backed Securities

 

 

(In thousands)

Balance at March 31, 2015

$

1,004

 

 

 

Fixed Maturities - Asset Backed Securities - redeemed

 

(753)

Fixed Maturities - Asset Backed Securities - net gain (realized)

 

34

Fixed Maturities - Asset Backed Securities - net gain (unrealized)

 

53

Balance at March 31, 2016

$

338

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 16.  Reinsurance and Policy Benefits and Losses, Claims and Loss Expenses Payable

During their normal course of business, our insurance subsidiaries assume and cede reinsurance on both a coinsurance and a risk premium basis. They also obtain reinsurance for that portion of risks exceeding their retention limits. The maximum amount of life insurance retained on any one life is $110,000.

 

 

Direct

Amount (a)

 

Ceded to

Other

Companies

 

Assumed

from Other

Companies

 

Net

Amount (a)

 

Percentage of

Amount

Assumed to Net

 

 

(In thousands)

Year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

Life insurance in force

$

927,647

$

397

$

949,413

$

1,876,663

 

51%

Premiums earned:

 

 

 

 

 

 

 

 

 

 

Life

$

49,126

$

8

$

11,310

$

60,428

 

19%

Accident and health

 

99,354

 

312

 

2,545

 

101,587

 

3%

Annuity

 

392

 

 

255

 

647

 

39%

Property and casualty

 

50,012

 

 

8

 

50,020

 

0%

Total

$

198,884

$

320

$

14,118

$

212,682

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

Life insurance in force

$

905,987

$

402

$

990,406

$

1,895,991

 

52%

Premiums earned:

 

 

 

 

 

 

 

 

 

 

Life

$

47,298

$

$

12,337

$

59,635

 

21%

Accident and health

 

93,319

 

345

 

2,796

 

95,770

 

3%

Annuity

 

386

 

 

312

 

698

 

45%

Property and casualty

 

46,417

 

 

39

 

46,456

 

0%

Total

$

187,420

$

345

$

15,484

$

202,559

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

Life insurance in force

$

861,967

$

403

$

1,033,136

$

1,894,700

 

55%

Premiums earned:

 

 

 

 

 

 

 

 

 

 

Life

$

45,625

$

212

$

12,888

$

58,301

 

22%

Accident and health

 

95,536

 

397

 

3,157

 

98,296

 

3%

Annuity

 

847

 

23

 

498

 

1,322

 

38%

Property and casualty

 

40,685

 

 

367

 

41,052

 

1%

Total

$

182,693

$

632

$

16,910

$

198,971

 

 

(a)  Balances are reported net of inter-segment transactions. 

To the extent that a reinsurer is unable to meet its obligation under the related reinsurance agreements, Repwest would remain liable for the unpaid losses and loss expenses. Pursuant to certain of these agreements, Repwest holds letters of credit as of December 31, 2015 in the amount of $0.5 million from re-insurers and has issued letters of credit in the amount of $1.9 million in favor of certain ceding companies.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Policy benefits and losses, claims and loss expenses payable for Property and Casualty Insurance were as follows:

 

 

December 31,

 

 

2015

 

2014

 

 

(In thousands)

Unpaid losses and loss adjustment expense

$

251,964

$

271,609

Reinsurance losses payable

 

855

 

135

Total

$

252,819

$

271,744

Activity in the liability for unpaid losses and loss adjustment expenses for Property and Casualty Insurance is summarized as follows:

 

 

December 31,

 

 

2015

 

2014

 

2013

 

 

(In thousands)

Balance at January 1

$

271,609

$

295,126

$

330,093

Less: reinsurance recoverable

 

120,894

 

136,535

 

176,439

Net balance at January 1

 

150,715

 

158,591

 

153,654

Incurred related to:

 

 

 

 

 

 

Current year

 

12,214

 

11,690

 

9,861

Prior years

 

84

 

(694)

 

1,652

Total incurred

 

12,298

 

10,996

 

11,513

Paid related to:

 

 

 

 

 

 

Current year

 

7,509

 

6,155

 

5,226

Prior years

 

10,851

 

12,717

 

1,350

Total paid

 

18,360

 

18,872

 

6,576

Net balance at December 31

 

144,653

 

150,715

 

158,591

Plus: reinsurance recoverable

 

107,311

 

120,894

 

136,535

Balance at December 31

$

251,964

$

271,609

$

295,126

The liability for incurred losses and loss adjustment expenses (net of reinsurance recoverable of $107.3 million) decreased by $6.1 million in 2015.

Note 17.  Contingent Liabilities and Commitments

We lease a portion of our rental equipment and certain of our facilities under operating leases with terms that expire at various dates substantially through 2019. As of March 31, 2016, we have guaranteed $22.3 million of residual values for these rental equipment assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions. At the expiration of the lease, we have the option to renew the lease, purchase the asset for fair market value, or sell the asset to a third party on behalf of the lessor. We have been leasing equipment since 1987 and have experienced no material losses relating to these types of residual value guarantees.

Lease expenses were as follows:

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Lease expense

$

49,780

$

79,798

$

100,466

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


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

 

 

Property,

Plant and

Equipment

 

Rental

Equipment

 

Total

 

 

(In thousands)

Year-ended March 31:

 

 

 

 

 

 

2017

$

16,360

$

14,433

$

30,793

2018

 

15,457

 

10,989

 

26,446

2019

 

14,313

 

9,058

 

23,371

2020

 

14,132

 

1,310

 

15,442

2021

 

14,029

 

 

14,029

Thereafter

 

47,473

 

 

47,473

Total

$

121,764

$

35,790

$

157,554

Note 18.  Contingencies

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

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

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

U-Haul does not believe that PEI’s claims have merit and vigorously defended the lawsuit.  On September 17, 2012, U-Haul filed its Counterclaims, seeking a Court Order declaring that: (1) U-Haul’s use of the term “pods” or “pod” does not infringe or dilute PEI’s purported trademarks or violate any of PEI’s purported rights; (2) the purported mark “PODS” is not a valid, protectable, or registrable trademark; and (3) the purported mark “PODS PORTABLE ON DEMAND STORAGE” is not a valid, protectable, or registrable trademark. U-Haul also sought a Court Order cancelling the marks at issue in the case.

The case was tried to a jury, beginning on September 8, 2014. On September 19, 2014, the Court granted U-Haul’s motion for directed verdict on the issue of punitive damages.  The Court deferred ruling on U-Haul’s motion for directed verdict on its defense that the words “pod” and “pods” were generic terms for a container used for the moving and storage of goods at the time PEI obtained its trademark (“genericness defense”).  Closing arguments were on September 22, 2014.

On September 25, 2014, the jury returned a unanimous verdict, finding in favor of PEI and against U-Haul on all claims and counterclaims.  The jury awarded PEI $45 million in actual damages and $15.7 million in U-Haul’s alleged profits attributable to its use of the term “pod” or “pods.” 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


On October 1, 2014, the Court ordered briefing on U-Haul’s oral motion for directed verdict on its genericness defense, the motion on which the Court had deferred ruling during trial.  Pursuant to the Court’s order, the parties’ briefing on that motion was completed by October 21, 2014.

On March 11, 2015, the Court denied U-Haul’s Renewed Motion for Directed Verdict, For Judgment as a Matter of Law, Or in the Alternative, Motion for a New Trial. Also on March 11, 2015, the Court entered Judgment on the jury verdict in favor of PEI and against U-Haul in the amount of $60.7 million. This was recorded as an accrual in our financial statements.

The parties have filed a series of post-Judgment motions: 

On March 25, 2015, PEI filed a motion for an award of attorneys’ fees and expenses in the amount of $6.5 million.  On April 27, 2015, U-Haul filed its opposition brief to that motion. 

On March 25, 2015, PEI filed a Proposed Bill of Costs in the amount of $186,411.  On April 14, 2015, U-Haul filed an opposition to PEI’s Proposed Bill of Costs.  On May 1, 2015, PEI filed an amended bill of costs in the amount of $196,133.

On April 6, 2015, U-Haul filed, with PEI’s consent, a motion to stay execution of the Judgment, pending the trial court’s rulings on U-Haul’s post-Judgment motions.  That motion was supported by a supersedeas bond in the amount of $60.9 million, which represents 100% of the Judgment plus post-Judgment interest at the rate of 0.25% per year for 18 months. PEI and U-Haul both reserved the right to modify the amount of the bond in the event the Judgment is modified by the Court’s rulings on the parties’ post-Judgment motions (described below).  On April 7, 2015, the Court granted U-Haul’s motion on consent, staying the Judgment pending rulings on U-Haul’s post-Judgment motions.

On April 8, 2015, U-Haul filed its Renewed Motion for Judgment As Matter of Law, or in the Alternative, Motion for New Trial, or to Alter the Judgment.  U-Haul argued that it is entitled to judgment as a matter of law because even when all evidence is viewed in PEI’s favor, it was legally insufficient for the jury to find for PEI.  Alternatively, U-Haul argued that it is entitled to a new trial because the verdict is against the weight of the evidence. Alternatively, U-Haul argued that the Court should reduce the damages and profits award under principles of equity.  On April, 27, 2015, PEI filed its opposition brief.

On April 8, 2015, PEI filed a Motion to Amend the Judgment pursuant to Fed. R. Civ. P. 59(e), in which it asked that the Judgment be amended to include (i) the entry of a permanent injunction; (ii) an award of pre-Judgment interest in the amount of $4.9 million; (iii) an award of post-Judgment interest in the amount of $11,441 and continuing to accrue at the rate of 0.25% while the case proceeds; (iv) doubling of the damages award to $121.4 million; and (v) the entry of an order directing the Patent and Trademark Office to dismiss the cancellation proceedings that U-Haul filed, which sought cancellation of the PODS trademarks.  On April 27, 2015, U-Haul filed its opposition brief arguing, among other things, that (1) PEI is not entitled to recover double the windfall the jury incorrectly awarded it; (2) PEI is not entitled to the overreaching injunction it seeks; (3) PEI is not entitled to pre-judgment interest; (4) PEI has overstated the amount of post-Judgment interest to which it is entitled; and (5) PEI’s request that the Court order the Trademark Trial and Appeal Board to dismiss U-Haul’s cancellation proceeding is premature.

On April 9, 2015, U-Haul filed a protective Notice of Appeal.  We expect that this notice of appeal will be automatically stayed and will become effective upon the disposition of (1) U-Haul’s renewed motion for judgment or a new trial or alteration of the Judgment or (2) PEI’s motion to alter or amend the Judgment, whichever comes later.

On August 24, 2015, the trial court entered two orders resolving the parties' post-trial motions.  In short, U-Haul’s efforts at setting aside the judgment, getting a new trial or reducing the amount of the jury award were denied, PEI’s motions to enhance (i.e., double) the jury award and receive an award for attorneys’ fees were denied, but the Court entered a permanent injunction, and awarded PEI $4.9 million in pre-judgment interest, $82,727 in costs, and post-judgment interest at the rate of 0.25%, beginning March 11, 2015, computed daily and compounded annually. This was recorded as an accrual of $5.0 million in our financial statements during fiscal 2016.

On September 4, 2015, U-Haul filed in the trial court its (i) amended notice of appeal, (ii) motion on consent of PEI to approve the bond and stay execution of the judgment pending appeal, and (iii) motion to stay or modify the injunction.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


On September 8, 2015, the trial court entered an Order granting U-Haul’s Motion on Consent to Approve Bond and Stay Execution of Judgment.  The Judgment, as amended by the trial court’s orders adding an award of costs and pre-judgment interest, is stayed pending resolution of appeals.  

On October 15, 2015, the trial court denied U-Haul’s motion to modify or stay the injunction pending appeal. But in the process, the Court clarified that (i) the reach of the injunction is limited to “advertising, promoting, marketing, or describing any products or services” and (ii) use of the terms “pod” and “pods” in comparative advertising is not prohibited, thereby allowing “nominative fair use" and truthful communications in customer dialogue and making clear that “nothing in the injunction mandates censorship with respect to consumer comments.

PEI’s deadline for filing a notice of cross-appeal was September 23, 2015, and PEI did not file a notice of cross-appeal. 

On September 23, 2015, the Eleventh Circuit Court of Appeals granted the parties’ joint motion for an extension of time for filing their respective briefs on appeal.  U-Haul’s initial brief was due on December 17, 2015, PEI’s response brief was due on March 16, 2016, and U-Haul’s reply was due on April 29, 2016.

On September 24, 2015, the Eleventh Circuit Court of Appeals issued a Notice setting a telephonic mediation for November 16, 2015, beginning at 2:00 p.m., Eastern Time. The mediation was unsuccessful.

U-Haul filed its opening brief on appeal with the Eleventh Circuit Court of Appeals on December 17, 2015. PEI filed its response brief on March 16, 2016. U-Haul filed its reply brief on April 29, 2016.  U-Haul has requested oral argument, PEI did not oppose that request, and the Eleventh Circuit Court of Appeals has not yet acted on that request.

Environmental

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

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

Other

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

Note 19.  Related Party Transactions

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

AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below. Management believes that the transactions described below and in the related notes were completed on terms substantially equivalent to those that would prevail in third party, arm’s-length transactions.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


SAC Holdings was established in order to acquire and develop self-storage properties. These properties are being managed by us pursuant to management agreements. In the past, we sold real estate and various self-storage properties to SAC Holdings, and such sales provided significant cash flows to us.

Related Party Revenues

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

4,960

$

5,914

$

7,071

U-Haul interest income revenue from Private Mini

 

1,126

 

4,918

 

5,348

U-Haul management fee revenue from SAC Holdings

 

18,657

 

18,472

 

18,007

U-Haul management fee revenue from Private Mini

 

3,330

 

2,614

 

2,437

U-Haul management fee revenue from Mercury

 

4,546

 

4,255

 

4,049

 

$

32,619

$

36,173

$

36,912

During fiscal 2016, a subsidiary of ours held a junior unsecured note of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Willow Grove Holdings LP, 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.  We do not have an equity ownership interest in SAC Holdings. We received cash interest payments of $4.6 million, $5.7 million and $17.2 million, from SAC Holdings during fiscal 2016, 2015 and 2014, respectively. The largest aggregate amount of notes receivable outstanding during fiscal 2016 was $50.4 million and the aggregate notes receivable balance at March 31, 2016 was $49.3 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturity of this note is 2017.

During fiscal 2016, AMERCO held a junior note issued by Private Mini Storage Realty, L.P. (“Private Mini”). The equity interests of Private Mini are ultimately controlled by Blackwater. We received cash interest payments of $1.5 million, $5.1 million and $5.4 million from Private Mini during fiscal years 2016, 2015 and 2014, respectively. The largest aggregate amount outstanding during fiscal 2016 was $56.5 million. In July 2015, Private Mini repaid its note and all outstanding interest due AMERCO totaling $56.8 million.

We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury Partners, L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $27.1 million, $25.8 million and $25.8 million from the above mentioned entities during fiscal 2016, 2015 and 2014, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are indirectly owned by James P. Shoen (a significant shareholder), Mark V. Shoen and a trust benefitting the children and grandchild of Edward J. Shoen.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Related Party Costs and Expenses

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

2,648

$

2,618

$

2,619

U-Haul commission expenses to SAC Holdings

 

51,036

 

48,833

 

46,886

U-Haul commission expenses to Private Mini

 

3,684

 

3,258

 

3,047

 

$

57,368

$

54,709

$

52,552

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

At March 31, 2016, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues.

These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $28.1 million, expenses of $2.6 million and cash flows of $83.8 million during fiscal 2016. Revenues and commission expenses related to the Dealer Agreements were $254.7 million and $54.7 million, respectively for fiscal 2016.

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

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

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

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

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


We have not provided financial or other support explicitly or implicitly during the fiscal year ended March 31, 2016 to any of these entities that it was not previously contractually required to provide. In addition, we currently have no plan to provide any financial support to any of these entities in the future. The carrying amount and classification of the assets and liabilities in our balance sheets that relate to our variable interests in the aforementioned entities are as follows, which approximate the maximum exposure to loss as a result of our involvement with these entities:

Related Party Assets

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

U-Haul notes, receivables and interest from Private Mini

$

2,752

$

59,375

U-Haul note receivable from SAC Holding Corporation

 

49,322

 

50,428

U-Haul interest receivable from SAC Holdings

 

4,970

 

4,579

U-Haul receivable from SAC Holdings

 

20,375

 

20,108

U-Haul receivable from Mercury

 

8,016

 

6,667

Other (a)

 

299

 

633

 

$

85,734

$

141,790

(a) Timing differences for intercompany balances with insurance subsidiaries resulting from the three month difference in reporting periods.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 20.  Statutory Financial Information of Insurance Subsidiaries

Applicable laws and regulations of the States of Arizona and Nevada require Property and Casualty Insurance and Life Insurance to maintain minimum capital and surplus determined in accordance with statutory accounting principles. Audited statutory net income (loss) and statutory capital and surplus for the years ended are listed below:

 

 

Years Ended December 31,

 

 

2015

 

2014

 

2013

 

 

(In thousands)

Repwest:

 

 

 

 

 

 

Audited statutory net income

$

22,308

$

21,287

$

18,286

Audited statutory capital and surplus

 

158,376

 

155,835

 

126,836

ARCOA:

 

 

 

 

 

 

Audited statutory net income

 

1,391

 

1,358

 

532

Audited statutory capital and surplus

 

5,386

 

4,175

 

2,666

Oxford:

 

 

 

 

 

 

Audited statutory net income

 

12,150

 

12,115

 

11,130

Audited statutory capital and surplus

 

172,282

 

158,512

 

148,486

CFLIC:

 

 

 

 

 

 

Audited statutory net income

 

9,217

 

9,157

 

9,567

Audited statutory capital and surplus

 

28,892

 

28,551

 

28,848

NAI:

 

 

 

 

 

 

Audited statutory net income (loss)

 

1,161

 

886

 

(419)

Audited statutory capital and surplus

 

12,685

 

11,589

 

10,185

The amount of dividends that can be paid to shareholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. The statutory surplus for Repwest at December 31, 2015 that could be distributed as ordinary dividends was $15.8 million. The statutory surplus for Oxford at December 31, 2015 that could be distributed as ordinary dividends was $12.0 million. Oxford did not pay a dividend to AMERCO in fiscal 2016, 2015 or 2014. After receiving approval from the Arizona Department of Insurance, Repwest paid a $19.6 million non-cash dividend to AMERCO in fiscal 2016.

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Note 21.  Financial Information by Geographic Area

 

 

United States

 

Canada

 

Consolidated

 

 

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

Fiscal Year Ended March 31, 2016

 

 

 

 

 

 

Total revenues

$

3,130,097

$

145,559

$

3,275,656

Depreciation and amortization, net of (gains) losses on disposal

 

313,099

 

863

 

313,962

Interest expense

 

97,739

 

164

 

97,903

Pretax earnings

 

745,194

 

23,717

 

768,911

Income tax expense

 

273,473

 

6,437

 

279,910

Identifiable assets

 

7,901,365

 

249,360

 

8,150,725

 

 

 

United States

 

Canada

 

Consolidated

 

 

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

Fiscal Year Ended March 31, 2015

 

 

 

 

 

 

Total revenues

$

2,916,027

$

158,504

$

3,074,531

Depreciation and amortization, net of (gains) losses on disposal

 

292,345

 

5,481

 

297,826

Interest expense

 

96,979

 

546

 

97,525

Pretax earnings

 

541,371

 

20,047

 

561,418

Income tax expense

 

199,444

 

5,233

 

204,677

Identifiable assets

 

6,685,572

 

186,603

 

6,872,175

 

 

 

United States

 

Canada

 

Consolidated

 

 

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

Fiscal Year Ended March 31, 2014

 

 

 

 

 

 

Total revenues

$

2,681,800

$

153,452

$

2,835,252

Depreciation and amortization, net of (gains) losses on disposal

 

272,236

 

7,358

 

279,594

Interest expense

 

92,128

 

564

 

92,692

Pretax earnings

 

516,207

 

21,315

 

537,522

Income tax expense

 

189,419

 

5,712

 

195,131

Identifiable assets

 

5,854,503

 

144,475

 

5,998,978

Note 21A.  Consolidating Financial Information by Industry Segment

AMERCO’s three reportable segments are:

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

Management tracks revenues separately, but does not report any separate measure of the profitability for rental vehicles, rentals of self-storage spaces and sales of products that are required to be classified as a separate operating segment and accordingly does not present these as separate reportable segments. Deferred income taxes are shown as liabilities on the consolidating statements.

The information includes elimination entries necessary to consolidate AMERCO, the parent, with its subsidiaries.

Investments in subsidiaries are accounted for by the parent using the equity method of accounting.

 


amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


 

Note 21A. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of March 31, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

585,666

$

14,049

$

931

$

 

$

600,646

Reinsurance recoverables and trade receivables, net

 

34,451

 

111,978

 

28,781

 

 

 

175,210

Inventories, net

 

79,756

 

 

 

 

 

79,756

Prepaid expenses

 

134,300

 

 

 

 

 

134,300

Investments, fixed maturities and marketable equities

 

 

238,570

 

1,271,968

 

 

 

1,510,538

Investments, other

 

21,431

 

47,374

 

241,267

 

 

 

310,072

Deferred policy acquisition costs, net

 

 

 

136,386

 

 

 

136,386

Other assets

 

95,081

 

3,088

 

2,403

 

 

 

100,572

Related party assets

 

88,022

 

12,465

 

613

 

(15,366)

(c)

 

85,734

 

 

1,038,707

 

427,524

 

1,682,349

 

(15,366)

 

 

3,133,214

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

432,277

 

 

 

(432,277)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

587,347

 

 

 

 

 

587,347

Buildings and improvements

 

2,187,400

 

 

 

 

 

2,187,400

Furniture and equipment

 

399,943

 

 

 

 

 

399,943

Rental trailers and other rental equipment

 

462,379

 

 

 

 

 

462,379

Rental trucks

 

3,514,175

 

 

 

 

 

3,514,175

 

 

7,151,244

 

 

 

 

 

7,151,244

Less:  Accumulated depreciation

 

(2,133,733)

 

 

 

 

 

(2,133,733)

Total property, plant and equipment

 

5,017,511

 

 

 

 

 

5,017,511

Total assets

$

6,488,495

$

427,524

$

1,682,349

$

(447,643)

 

$

8,150,725

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating balance sheets by industry segment as of March 31, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

492,982

$

1,535

$

8,096

$

 

$

502,613

Notes, loans and leases payable

 

2,688,758

 

 

 

 

 

2,688,758

Policy benefits and losses, claims and loss expenses payable

 

386,366

 

252,819

 

432,227

 

 

 

1,071,412

Liabilities from investment contracts

 

 

 

951,490

 

 

 

951,490

Other policyholders' funds and liabilities

 

 

3,017

 

5,633

 

 

 

8,650

Deferred income

 

22,784

 

 

 

 

 

22,784

Deferred income taxes

 

633,061

 

7,526

 

13,025

 

 

 

653,612

Related party liabilities

 

13,138

 

2,067

 

161

 

(15,366)

(c)

 

Total liabilities

 

4,237,089

 

266,964

 

1,410,632

 

(15,366)

 

 

5,899,319

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity :

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

451,839

 

91,120

 

26,271

 

(117,601)

(b)

 

451,629

Accumulated other comprehensive income (loss)

 

(60,525)

 

3,611

 

10,504

 

(14,115)

(b)

 

(60,525)

Retained earnings

 

2,533,431

 

62,528

 

232,442

 

(294,760)

(b)

 

2,533,641

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,186)

 

 

 

 

 

(6,186)

Total stockholders' equity

 

2,251,406

 

160,560

 

271,717

 

(432,277)

 

 

2,251,406

Total liabilities and stockholders' equity

$

6,488,495

$

427,524

$

1,682,349

$

(447,643)

 

$

8,150,725

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating balance sheets by industry segment as of March 31, 2015 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

431,873

$

8,495

$

1,482

$

 

$

441,850

Reinsurance recoverables and trade receivables, net

 

32,364

 

125,506

 

31,999

 

 

 

189,869

Inventories, net

 

69,472

 

 

 

 

 

69,472

Prepaid expenses

 

126,296

 

 

 

 

 

126,296

Investments, fixed maturities and marketable equities

 

 

228,530

 

1,076,432

 

 

 

1,304,962

Investments, other

 

27,637

 

50,867

 

190,216

 

 

 

268,720

Deferred policy acquisition costs, net

 

 

 

115,422

 

 

 

115,422

Other assets

 

101,689

 

1,924

 

2,544

 

 

 

106,157

Related party assets

 

144,040

 

13,268

 

586

 

(16,104)

(c)

 

141,790

 

 

933,371

 

428,590

 

1,418,681

 

(16,104)

 

 

2,764,538

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

443,462

 

 

 

(443,462)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land

 

467,482

 

 

 

 

 

467,482

Buildings and improvements

 

1,728,033

 

 

 

 

 

1,728,033

Furniture and equipment

 

355,349

 

 

 

 

 

355,349

Rental trailers and other rental equipment

 

436,642

 

 

 

 

 

436,642

Rental trucks

 

3,059,987

 

 

 

 

 

3,059,987

 

 

6,047,493

 

 

 

 

 

6,047,493

Less:  Accumulated depreciation

 

(1,939,856)

 

 

 

 

 

(1,939,856)

Total property, plant and equipment

 

4,107,637

 

 

 

 

 

4,107,637

Total assets

$

5,484,470

$

428,590

$

1,418,681

$

(459,566)

 

$

6,872,175

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating balance sheets by industry segment as of March 31, 2015 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

489,140

$

1,235

$

5,995

$

 

$

496,370

Notes, loans and leases payable

 

2,190,869

 

 

 

 

 

2,190,869

Policy benefits and losses, claims and loss expenses payable

 

363,552

 

271,744

 

426,892

 

 

 

1,062,188

Liabilities from investment contracts

 

 

 

685,745

 

 

 

685,745

Other policyholders' funds and liabilities

 

 

2,837

 

4,927

 

 

 

7,764

Deferred income

 

18,081

 

 

 

 

 

18,081

Deferred income taxes

 

524,550

 

(18,592)

 

20,841

 

 

 

526,799

Related party liabilities

 

13,919

 

2,073

 

112

 

(16,104)

(c)

 

Total liabilities

 

3,600,111

 

259,297

 

1,144,512

 

(16,104)

 

 

4,987,816

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity :

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

Common stock

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

449,878

 

91,120

 

26,271

 

(117,601)

(b)

 

449,668

Accumulated other comprehensive income (loss)

 

(34,365)

 

8,871

 

32,310

 

(41,181)

(b)

 

(34,365)

Retained earnings (deficit)

 

2,142,390

 

66,001

 

213,088

 

(278,879)

(b)

 

2,142,600

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

(6,391)

 

 

 

 

 

(6,391)

Total stockholders' equity (deficit)

$

1,884,359

 

169,293

 

274,169

 

(443,462)

 

 

1,884,359

Total liabilities and stockholders' equity

 

5,484,470

$

428,590

$

1,418,681

$

(459,566)

 

$

6,872,175

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances as of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating statements of operations by industry segment for period ending March 31, 2016 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

2,301,586

$

$

$

(3,606)

(c)

$

2,297,980

Self-storage revenues

 

247,944

 

 

 

 

 

247,944

Self-moving & self-storage products & service sales

 

251,541

 

 

 

 

 

251,541

Property management fees

 

26,533

 

 

 

 

 

26,533

Life insurance premiums

 

 

 

162,662

 

 

 

162,662

Property and casualty insurance premiums

 

 

50,020

 

 

 

 

50,020

Net investment and interest income

 

8,801

 

14,783

 

63,999

 

(778)

(b)

 

86,805

Other revenue

 

148,099

 

 

4,559

 

(487)

(b)

 

152,171

Total revenues

 

2,984,504

 

64,803

 

231,220

 

(4,871)

 

 

3,275,656

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

1,423,107

 

27,958

 

23,037

 

(4,055)

(b,c)

 

1,470,047

Commission expenses

 

262,627

 

 

 

 

 

262,627

Cost of sales

 

144,990

 

 

 

 

 

144,990

Benefits and losses

 

 

12,298

 

155,138

 

 

 

167,436

Amortization of deferred policy acquisition costs

 

 

 

23,272

 

 

 

23,272

Lease expense

 

49,966

 

 

 

(186)

(b)

 

49,780

Depreciation, net of (gains) losses on disposals

 

290,690

 

 

 

 

 

290,690

Total costs and expenses

 

2,171,380

 

40,256

 

201,447

 

(4,241)

 

 

2,408,842

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

813,124

 

24,547

 

29,773

 

(630)

 

 

866,814

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

35,522

 

 

 

(35,522)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

848,646

 

24,547

 

29,773

 

(36,152)

 

 

866,814

Interest expense

 

(98,533)

 

 

 

630

(b)

 

(97,903)

Pretax earnings

 

750,113

 

24,547

 

29,773

 

(35,522)

 

 

768,911

Income tax expense

 

(261,112)

 

(8,379)

 

(10,419)

 

 

 

(279,910)

Earnings available to common shareholders

$

489,001

$

16,168

$

19,354

$

(35,522)

 

$

489,001

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating statements of operations by industry segment for period ending March 31, 2015 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

2,149,986

$

$

$

(3,595)

(c)

$

2,146,391

Self-storage revenues

 

211,136

 

 

 

 

 

211,136

Self-moving & self-storage products & service sales

 

244,177

 

 

 

 

 

244,177

Property management fees

 

25,341

 

 

 

 

 

25,341

Life insurance premiums

 

 

 

156,103

 

 

 

156,103

Property and casualty insurance premiums

 

 

46,456

 

 

 

 

46,456

Net investment and interest income

 

13,644

 

12,819

 

59,051

 

(786)

(b)

 

84,728

Other revenue

 

156,154

 

 

4,502

 

(457)

(b)

 

160,199

Total revenues

 

2,800,438

 

59,275

 

219,656

 

(4,838)

 

 

3,074,531

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

1,436,145

 

24,802

 

22,476

 

(4,014)

(b,c)

 

1,479,409

Commission expenses

 

249,642

 

 

 

 

 

249,642

Cost of sales

 

146,072

 

 

 

 

 

146,072

Benefits and losses

 

 

10,996

 

147,764

 

 

 

158,760

Amortization of deferred policy acquisition costs

 

 

 

19,661

 

 

 

19,661

Lease expense

 

79,984

 

 

 

(186)

(b)

 

79,798

Depreciation, net of (gains) losses on disposals

 

278,165

 

 

 

 

 

278,165

Total costs and expenses

 

2,190,008

 

35,798

 

189,901

 

(4,200)

 

 

2,411,507

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

610,430

 

23,477

 

29,755

 

(638)

 

 

663,024

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

34,783

 

 

 

(34,783)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

645,213

 

23,477

 

29,755

 

(35,421)

 

 

663,024

Interest expense

 

(98,163)

 

 

 

638

(b)

 

(97,525)

Fees and amortization on early extinguishment of debt

 

(4,081)

 

 

 

 

 

(4,081)

Pretax earnings

 

542,969

 

23,477

 

29,755

 

(34,783)

 

 

561,418

Income tax expense

 

(186,228)

 

(8,060)

 

(10,389)

 

 

 

(204,677)

Earnings available to common shareholders

$

356,741

$

15,417

$

19,366

$

(34,783)

 

$

356,741

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances for the year ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease/interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating statements of operations by industry segment for period ending March 31, 2014 are as follows:

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

1,958,209

$

$

$

(2,786)

(c)

$

1,955,423

Self-storage revenues

 

181,794

 

 

 

 

 

181,794

Self-moving & self-storage products & service sales

 

234,187

 

 

 

 

 

234,187

Property management fees

 

24,493

 

 

 

 

 

24,493

Life insurance premiums

 

 

 

157,919

 

 

 

157,919

Property and casualty insurance premiums

 

 

41,052

 

 

 

 

41,052

Net investment and interest income

 

15,212

 

10,592

 

54,398

 

(611)

(b)

 

79,591

Other revenue

 

158,055

 

 

3,211

 

(473)

(b)

 

160,793

Total revenues

 

2,571,950

 

51,644

 

215,528

 

(3,870)

 

 

2,835,252

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

1,272,406

 

20,799

 

23,686

 

(3,217)

(b,c)

 

1,313,674

Commission expenses

 

227,332

 

 

 

 

 

227,332

Cost of sales

 

127,270

 

 

 

 

 

127,270

Benefits and losses

 

 

11,513

 

145,189

 

 

 

156,702

Amortization of deferred policy acquisition costs

 

 

 

19,982

 

 

 

19,982

Lease expense

 

100,649

 

 

 

(183)

(b)

 

100,466

Depreciation, net of (gains) losses on disposals

 

259,612

 

 

 

 

 

259,612

Total costs and expenses

 

1,987,269

 

32,312

 

188,857

 

(3,400)

 

 

2,205,038

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations before equity in earnings of subsidiaries

 

584,681

 

19,332

 

26,671

 

(470)

 

 

630,214

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

29,992

 

 

 

(29,992)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

614,673

 

19,332

 

26,671

 

(30,462)

 

 

630,214

Interest expense

 

(93,162)

 

 

 

470

(b)

 

(92,692)

Pretax earnings

 

521,511

 

19,332

 

26,671

 

(29,992)

 

 

537,522

Income tax expense

 

(179,120)

 

(6,670)

 

(9,341)

 

 

 

(195,131)

Earnings available to common shareholders

$

342,391

$

12,662

$

17,330

$

(29,992)

 

$

342,391

 

 

 

 

 

 

 

 

 

 

 

 

(a)  Balances for the year ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease/interest income

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating cash flow statements by industry segment for the year ended March 31, 2016, are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

489,001

$

16,168

$

19,354

$

(35,522)

 

$

489,001

Earnings from consolidated subsidiaries

 

(35,522)

 

 

 

35,522

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

389,393

 

 

 

 

 

389,393

Amortization of deferred policy acquisition costs

 

 

 

23,272

 

 

 

23,272

Interest credited to policyholders

 

 

 

20,465

 

 

 

20,465

Change in allowance for losses on trade receivables

 

7

 

 

(212)

 

 

 

(205)

Change in allowance for inventory reserve

 

(1,343)

 

 

 

 

 

(1,343)

Net gain on sale of real and personal property

 

(98,703)

 

 

 

 

 

(98,703)

Net gain on sale of investments

 

 

(1,317)

 

(3,174)

 

 

 

(4,491)

Deferred income taxes

 

124,838

 

9,311

 

3,926

 

 

 

138,075

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

(2,169)

 

13,528

 

3,406

 

 

 

14,765

Inventories

 

(9,009)

 

 

 

 

 

(9,009)

Prepaid expenses

 

(10,338)

 

 

 

 

 

(10,338)

Capitalization of deferred policy acquisition costs

 

 

 

(32,590)

 

 

 

(32,590)

Other assets

 

16,231

 

(1,050)

 

141

 

 

 

15,322

Related party assets

 

55,962

 

682

 

 

 

 

56,644

Accounts payable and accrued expenses

 

26,093

 

1,533

 

9,761

 

 

 

37,387

Policy benefits and losses, claims and loss expenses payable

 

23,215

 

(18,925)

 

5,336

 

 

 

9,626

Other policyholders' funds and liabilities

 

 

(1,056)

 

707

 

 

 

(349)

Deferred income

 

4,757

 

 

 

 

 

4,757

Related party liabilities

 

(779)

 

115

 

48

 

 

 

(616)

Net cash provided (used) by operating activities

 

971,634

 

18,989

 

50,440

 

 

 

1,041,063

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(1,509,154)

 

 

 

 

 

(1,509,154)

Short term investments

 

 

(44,735)

 

(471,164)

 

 

 

(515,899)

Fixed maturities investments

 

 

(45,048)

 

(372,014)

 

 

 

(417,062)

Equity securities

 

 

 

(1,315)

 

 

 

(1,315)

Preferred stock

 

 

(1,005)

 

 

 

 

(1,005)

Real estate

 

 

(36)

 

(39)

 

 

 

(75)

Mortgage loans

 

(15,384)

 

(1,800)

 

(85,404)

 

 

 

(102,588)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

539,256

 

 

 

 

 

539,256

Short term investments

 

 

44,756

 

483,424

 

 

 

528,180

Fixed maturities investments

 

 

26,193

 

128,343

 

 

 

154,536

Equity securities

 

 

1,236

 

808

 

 

 

2,044

Preferred stock

 

 

1,126

 

 

 

 

1,126

Real estate

 

 

 

 

 

 

Mortgage loans

 

21,589

 

5,878

 

21,090

 

 

 

48,557

Net cash provided (used) by investing activities

 

(963,693)

 

(13,435)

 

(296,271)

 

 

 

(1,273,399)

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany investments

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2016, are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Borrowings from credit facilities

 

808,972

 

 

47,000

 

 

 

855,972

Principal repayments on credit facilities

 

(381,403)

 

 

(47,000)

 

 

 

(428,403)

Debt issuance costs

 

(10,184)

 

 

 

 

 

(10,184)

Capital lease payments

 

(168,661)

 

 

 

 

 

(168,661)

Purchases of Employee Stock Ownership Plan Shares

 

(9,302)

 

 

 

 

 

(9,302)

Securitization deposits

 

544

 

 

 

 

 

544

Common stock dividends paid

 

(78,374)

 

 

 

 

 

(78,374)

Investment contract deposits

 

 

 

298,237

 

 

 

298,237

Investment contract withdrawals

 

 

 

(52,957)

 

 

 

(52,957)

Net cash provided (used) by financing activities

 

161,592

 

 

245,280

 

 

 

406,872

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

(15,740)

 

 

 

 

 

(15,740)

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

153,793

 

5,554

 

(551)

 

 

 

158,796

Cash and cash equivalents at beginning of period

 

431,873

 

8,495

 

1,482

 

 

 

441,850

Cash and cash equivalents at end of period

$

585,666

$

14,049

$

931

$

 

$

600,646

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating cash flow statements by industry segment for the year ended March 31, 2015, are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

356,741

$

15,417

$

19,366

$

(34,783)

 

$

356,741

Earnings from consolidated subsidiaries

 

(34,783)

 

 

 

34,783

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

352,796

 

 

 

 

 

352,796

Amortization of deferred policy acquisition costs

 

 

 

19,661

 

 

 

19,661

Interest credited to policyholders

 

 

 

18,110

 

 

 

18,110

Change in allowance for losses on trade receivables

 

(179)

 

 

11

 

 

 

(168)

Change in allowance for inventory reserve

 

(872)

 

 

 

 

 

(872)

Net gain on sale of real and personal property

 

(74,631)

 

 

 

 

 

(74,631)

Net gain on sale of investments

 

 

(841)

 

(3,084)

 

 

 

(3,925)

Deferred income taxes

 

66,628

 

8,030

 

1,842

 

 

 

76,500

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

(3,213)

 

16,830

 

(3,985)

 

 

 

9,632

Inventories

 

(1,579)

 

 

 

 

 

(1,579)

Prepaid expenses

 

(65,720)

 

 

 

 

 

(65,720)

Capitalization of deferred policy acquisition costs

 

 

 

(27,084)

 

 

 

(27,084)

Other assets

 

4,437

 

102

 

(804)

 

 

 

3,735

Related party assets

 

27,753

 

(258)

 

 

211

(b)

 

27,706

Accounts payable and accrued expenses

 

91,409

 

22

 

7,446

 

 

 

98,877

Policy benefits and losses, claims and loss expenses payable

 

(4,327)

 

(23,472)

 

10,178

 

 

 

(17,621)

Other policyholders' funds and liabilities

 

 

317

 

671

 

 

 

988

Deferred income

 

(13,181)

 

 

 

 

 

(13,181)

Related party liabilities

 

(1,016)

 

428

 

(67)

 

(211)

(b)

 

(866)

Net cash provided (used) by operating activities

 

700,263

 

16,575

 

42,261

 

 

 

759,099

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(1,041,931)

 

 

 

 

 

(1,041,931)

Short term investments

 

 

(40,583)

 

(249,796)

 

 

 

(290,379)

Fixed maturities investments

 

 

(43,062)

 

(171,309)

 

 

 

(214,371)

Equity securities

 

 

(3,333)

 

(426)

 

 

 

(3,759)

Preferred stock

 

 

(1,006)

 

(1,000)

 

 

 

(2,006)

Real estate

 

 

(7,857)

 

(7,542)

 

 

 

(15,399)

Mortgage loans

 

(22,876)

 

(4,350)

 

(15,457)

 

 

 

(42,683)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

411,629

 

 

 

 

 

411,629

Short term investments

 

 

53,112

 

234,771

 

 

 

287,883

Fixed maturities investments

 

 

18,556

 

89,311

 

 

 

107,867

Equity securities

 

 

3,082

 

 

 

 

3,082

Preferred stock

 

 

400

 

2,027

 

 

 

2,427

Real estate

 

 

 

396

 

 

 

396

Mortgage loans

 

28,089

 

4,203

 

9,691

 

 

 

41,983

Net cash provided (used) by investing activities

 

(625,089)

 

(20,838)

 

(109,334)

 

 

 

(755,261)

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany investments

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2015, are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Borrowings from credit facilities

 

657,535

 

 

 

 

 

657,535

Principal repayments on credit facilities

 

(593,722)

 

 

 

 

 

(593,722)

Debt issuance costs

 

(12,327)

 

 

 

 

 

(12,327)

Capital lease payments

 

(121,202)

 

 

 

 

 

(121,202)

Purchases of Employee Stock Ownership Plan Shares

 

(7,939)

 

 

 

 

 

(7,939)

Common stock dividends paid

 

(19,594)

 

 

 

 

 

(19,594)

Investment contract deposits

 

 

 

105,019

 

 

 

105,019

Investment contract withdrawals

 

 

 

(54,108)

 

 

 

(54,108)

Net cash provided (used) by financing activities

 

(97,249)

 

 

50,911

 

 

 

(46,338)

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

(10,762)

 

 

 

 

 

(10,762)

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(32,837)

 

(4,263)

 

(16,162)

 

 

 

(53,262)

Cash and cash equivalents at beginning of period

 

464,710

 

12,758

 

17,644

 

 

 

495,112

Cash and cash equivalents at end of period

$

431,873

$

8,495

$

1,482

$

 

$

441,850

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Consolidating cash flow statements by industry segment for the year ended March 31, 2014 are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

342,391

$

12,662

$

17,330

$

(29,992)

 

$

342,391

Earnings from consolidated subsidiaries

 

(29,992)

 

 

 

29,992

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

293,169

 

 

 

 

 

293,169

Amortization of deferred policy acquisition costs

 

 

 

19,982

 

 

 

19,982

Interest credited to policyholders

 

 

 

22,890

 

 

 

22,890

Change in allowance for losses on trade receivables

 

(28)

 

 

(8)

 

 

 

(36)

Change in allowance for inventory reserve

 

871

 

 

 

 

 

871

Net gain on sale of real and personal property

 

(33,557)

 

 

 

 

 

(33,557)

Net gain on sale of investments

 

(1,325)

 

(536)

 

(4,550)

 

 

 

(6,411)

Deferred income taxes

 

34,605

 

7,301

 

4,465

 

 

 

46,371

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

14,328

 

43,675

 

4,503

 

 

 

62,506

Inventories

 

(11,495)

 

 

 

 

 

(11,495)

Prepaid expenses

 

2,186

 

 

 

 

 

2,186

Capitalization of deferred policy acquisition costs

 

 

 

(32,611)

 

 

 

(32,611)

Other assets

 

8,670

 

(781)

 

(222)

 

 

 

7,667

Related party assets

 

11,060

 

(4,231)

 

 

725

(b)

 

7,554

Accounts payable and accrued expenses

 

32,394

 

62

 

3,909

 

 

 

36,365

Policy benefits and losses, claims and loss expenses payable

 

(8,202)

 

(34,968)

 

12,674

 

 

 

(30,496)

Other policyholders' funds and liabilities

 

 

513

 

118

 

 

 

631

Deferred income

 

1,259

 

 

 

 

 

1,259

Related party liabilities

 

5,647

 

(131)

 

(61)

 

(725)

(b)

 

4,730

Net cash provided (used) by operating activities

 

661,981

 

23,566

 

48,419

 

 

 

733,966

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(1,000,243)

 

 

 

 

 

(1,000,243)

Short term investments

 

 

(60,551)

 

(210,139)

 

 

 

(270,690)

Fixed maturities investments

 

 

(58,790)

 

(223,634)

 

 

 

(282,424)

Equity securities

 

 

(746)

 

(816)

 

 

 

(1,562)

Preferred stock

 

 

(640)

 

 

 

 

(640)

Real estate

 

 

 

(532)

 

 

 

(532)

Mortgage loans

 

(21,349)

 

(3,500)

 

(39,159)

 

11,589

(b)

 

(52,419)

Proceeds from sales and paydowns of:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

270,053

 

 

 

 

 

270,053

Short term investments

 

 

68,852

 

200,200

 

 

 

269,052

Fixed maturities investments

 

 

17,106

 

121,295

 

 

 

138,401

Equity securities

 

26,569

 

2,570

 

 

 

 

29,139

Preferred stock

 

 

4,504

 

1,500

 

 

 

6,004

Real estate

 

193

 

 

351

 

 

 

544

Mortgage loans

 

38,959

 

6,267

 

15,049

 

(11,589)

(b)

 

48,686

Net cash provided (used) by investing activities

 

(685,818)

 

(24,928)

 

(135,885)

 

 

 

(846,631)

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany investments

 

 

 

 

 

 

 

 

 

 

 

amerco and consolidated subsidiaries

notes to consolidated financial statements – (continued)


Continuation of consolidating cash flow statements by industry segment for the year ended March 31, 2014 are as follows:

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(In thousands)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Borrowings from credit facilities

 

431,029

 

 

 

 

 

431,029

Principal repayments on credit facilities

 

(293,068)

 

 

 

 

 

(293,068)

Debt issuance costs

 

(3,943)

 

 

 

 

 

(3,943)

Capital lease payments

 

(53,079)

 

 

 

 

 

(53,079)

Purchases of Employee Stock Ownership Plan Shares

 

(207)

 

 

 

 

 

(207)

Securitization deposits

 

 

 

 

 

 

Common stock dividends paid

 

(19,568)

 

 

 

 

 

(19,568)

Investment contract deposits

 

 

 

117,723

 

 

 

117,723

Investment contract withdrawals

 

 

 

(34,677)

 

 

 

(34,677)

Net cash provided (used) by financing activities

 

61,164

 

 

83,046

 

 

 

144,210

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

(177)

 

 

 

 

 

(177)

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

37,150

 

(1,362)

 

(4,420)

 

 

 

31,368

Cash and cash equivalents at beginning of period

 

427,560

 

14,120

 

22,064

 

 

 

463,744

Cash and cash equivalents at end of period

$

464,710

$

12,758

$

17,644

$

 

$

495,112

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balance for the period ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 


 



SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF AMERCO

BALANCE SHEETS

 

 

March 31,

 

 

2016

 

2015

 

 

(In thousands)

ASSETS

Cash and cash equivalents

$

381,690

$

291,550

Investment in subsidiaries

 

1,185,021

 

813,735

Related party assets

 

1,249,835

 

1,225,044

Other assets

 

94,128

 

85,409

Total assets

$

2,910,674

$

2,415,738

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

 

 

 

 

Other liabilities

$

653,082

$

524,988

 

 

653,082

 

524,988

Stockholders' equity:

 

 

 

 

Preferred stock

 

 

Common stock

 

10,497

 

10,497

Additional paid-in capital

 

451,839

 

449,878

Accumulated other comprehensive loss

 

(60,525)

 

(34,365)

Retained earnings:

 

 

 

 

Beginning of period

 

2,142,390

 

1,805,243

Net earnings

 

489,001

 

356,741

Dividends

 

(97,960)

 

(19,594)

End of period

 

2,533,431

 

2,142,390

 

 

 

 

 

Cost of common shares in treasury

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury

 

(151,997)

 

(151,997)

Total stockholders' equity

 

2,257,592

 

1,890,750

Total liabilities and stockholders' equity

$

2,910,674

$

2,415,738

 

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

 

 


CONDENSED FINANCIAL INFORMATION OF AMERCO

STATEMENTS OF OPERATIONS

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands, except share and per share data)

Revenues:

 

 

 

 

 

 

Net interest income and other revenues

$

2,420

$

4,862

$

6,465

Expenses:

 

 

 

 

 

 

Operating expenses

 

7,525

 

7,055

 

6,636

Other expenses

 

111

 

99

 

97

Total expenses

 

7,636

 

7,154

 

6,733

Equity in earnings of subsidiaries

 

417,087

 

300,566

 

287,803

Interest income

 

93,873

 

75,241

 

86,916

Pretax earnings

 

505,744

 

373,515

 

374,451

Income tax expense

 

(16,743)

 

(16,774)

 

(32,060)

Earnings available to common shareholders

$

489,001

$

356,741

$

342,391

Basic and diluted earnings per common share

$

24.95

$

18.21

$

17.51

Weighted average common shares outstanding: Basic and diluted

 

19,596,110

 

19,586,633

 

19,558,758

 

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

 

CONDENSED FINANCIAL INFORMATION OF AMERCO

STATEMENTS OF comprehensive income

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands, except share and per share data)

 

 

 

 

 

 

 

Net earnings

$

489,001

$

356,741

$

342,391

Other comprehensive income (loss)

 

(26,160)

 

19,558

 

(31,243)

Total comprehensive income

$

462,841

$

376,299

$

311,148

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

 

 


CONDENSED FINANCIAL INFORMATION OF AMERCO

STATEMENTS OF CASH FLOW

 

 

Years Ended March 31,

 

 

2016

 

2015

 

2014

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

$

489,001

$

356,741

$

342,391

Change in investments in subsidiaries

 

(417,087)

 

(300,566)

 

(287,803)

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

 

 

Depreciation

 

6

 

6

 

5

Net gain on sale of investments

 

 

 

(1,325)

Deferred income taxes

 

124,838

 

66,628

 

34,605

Net change in other operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

(8,723)

 

(66,786)

 

3,938

Other assets

 

6

 

84

 

(41)

Related party assets

 

56,849

 

(539)

 

Accounts payable and accrued expenses

 

(14)

 

5,239

 

6,589

Net cash provided by operating activities

 

244,876

 

60,807

 

98,359

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(8)

 

 

(2)

Proceeds of equity securities

 

 

 

26,569

Net cash provided by investing activities

 

(8)

 

 

26,567

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from (repayments) of intercompany loans

 

(76,354)

 

(71,207)

 

(110,933)

Common stock dividends paid

 

(78,374)

 

(19,594)

 

(19,568)

Net cash provided (used) by financing activities

 

(154,728)

 

(90,801)

 

(130,501)

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

90,140

 

(29,994)

 

(5,575)

Cash and cash equivalents at beginning of period

 

291,550

 

321,544

 

327,119

Cash and cash equivalents at end of period

$

381,690

$

291,550

$

321,544

Income taxes paid, net of income taxes refunds received, amounted to $141.9 million, $195.1 million and $138.4 million for fiscal 2016, 2015 and 2014, respectively.

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

 


CONDENSED FINANCIAL INFORMATION OF AMERCO

NOTES TO CONDENSED FINANCIAL INFORMATION

March 31, 2016, 2015, and 2014

1.  Summary of Significant Accounting Policies

AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the holding Company for U-Haul International, Inc., Amerco Real Estate Company, Repwest Insurance Company and Oxford Life Insurance Company. The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Annual Report.

AMERCO is included in a consolidated Federal income tax return with all of its U.S. subsidiaries. Accordingly, the provision for income taxes has been calculated for Federal income taxes of AMERCO and subsidiaries included in the consolidated return of the Registrant. State taxes for all subsidiaries are allocated to the respective subsidiaries.

The financial statements include only the accounts of AMERCO, which include certain of the corporate operations of AMERCO. The interest in AMERCO’s majority owned subsidiaries is accounted for on the equity method. The intercompany interest income and expenses are eliminated in the Consolidated Financial Statements.

2.  Guarantees

AMERCO has guaranteed performance of certain long-term leases and other obligations. See Note 17, Contingent Liabilities and Commitments and Note 19, Related Party Transactions of the Notes to Consolidated Financial Statements.

 


SCHEDULE II

AMERCO AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

 

 

Balance at Beginning of Year

 

Additions Charged to Costs and Expenses

 

Additions Charged to Other Accounts

 

Deductions

 

Balance at Year End

 

 

 

 

 

 

 

 

 

 

 

Year ended March 31, 2016

 

(In thousands)

Allowance for doubtful accounts

 

 

 

 

 

 

 

 

 

 

(deducted from trade receivable)

$

790

$

967

$

$

(1,172)

$

585

Allowance for obsolescence

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

1,384

$

213

$

$

$

1,597

Allowance for LIFO

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

15,019

$

$

$

(1,556)

$

13,463

Allowance for probable losses

 

 

 

 

 

 

 

 

 

 

(deducted from mortgage loans)

$

370

$

$

$

(2)

$

368

 

 

 

 

 

 

 

 

 

 

 

Year ended March 31, 2015

 

 

Allowance for doubtful accounts

 

 

 

 

 

 

 

 

 

 

(deducted from trade receivable)

$

958

$

994

$

$

(1,162)

$

790

Allowance for obsolescence

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

2,487

$

$

$

(1,103)

$

1,384

Allowance for LIFO

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

14,788

$

231

$

$

$

15,019

Allowance for probable losses

 

 

 

 

 

 

 

 

 

 

(deducted from mortgage loans)

$

370

$

$

$

$

370

 

 

 

 

 

 

 

 

 

 

 

Year ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

 

 

 

 

 

 

 

 

 

(deducted from trade receivable)

$

994

$

958

$

$

(994)

$

958

Allowance for obsolescence

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

1,711

$

776

$

$

$

2,487

Allowance for LIFO

 

 

 

 

 

 

 

 

 

 

(deducted from inventory)

$

14,693

$

95

$

$

$

14,788

Allowance for probable losses

 

 

 

 

 

 

 

 

 

 

(deducted from mortgage loans)

$

370

$

$

$

$

370


 


SCHEDULE V

AMERCO AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION (FOR PROPERTY-CASUALTY INSURANCE Operations)

Years Ended December 31, 2015, 2014 AND 2013

 

Fiscal Year

 

Affiliation with Registrant

 

Deferred Policy Acquisition Cost

 

Reserves for Unpaid Claims and Adjustment Expenses

 

Discount if any, Deducted

 

Unearned Premiums

 

Net Earned Premiums (1)

 

Net Investment Income (2)

 

Claim and Claim Adjustment Expenses Incurred Related to Current Year

 

Claim and Claim Adjustment Expenses Incurred Related to Prior Year

 

Amortization of Deferred Policy Acquisition Costs

 

Paid Claims and Claim Adjustment Expense

 

Net Premiums Written (1)

(In thousands)

2016

 

Consolidated property

casualty entity

$

$

251,964

$

N/A

$

59

$

50,020

$

13,491

$

12,214

$

84

$

$

18,360

$

50,034

2015

 

Consolidated property

casualty entity

$

$

271,609

$

N/A

$

45

$

46,456

$

11,980

$

11,690

$

(694)

$

$

18,872

$

46,452

2014

 

Consolidated property

casualty entity

 

 

295,126

 

N/A

 

49

 

41,052

 

10,057

 

9,861

 

1,652

 

 

6,576

 

41,065

 

(1) The earned and written premiums are reported net of intersegment transactions. There were no earned premiums eliminated for the years ended December 31, 2015, 2014 and 2013, respectively.

(2) Net Investment Income excludes net realized (gains) losses on investments of ($1.3) million, ($0.8) million and ($0.5) million for the years ended December 31, 2015, 2014 and 2013, respectively.


 


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AMERCO

 

Date:  May 25, 2016

 

/s/ Edward J. Shoen          

 

 

Edward J. Shoen

 

 

President and Chairman of the Board

 

 

(Duly Authorized Officer)

 

 

 

 

 

 

 

 

 

Date:  May 25, 2016

 

/s/ Jason A. Berg                 

 

 

Jason A. Berg

 

 

Chief Accounting Officer

 

 

(Principal Financial Officer)


 


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Edward J. Shoen his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act or things requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Jason A. Berg

Chief Accounting Officer
(Principal Financial Officer)

May 25, 2016

Jason A. Berg

 

 

/s/ James E. Acridge

Director

May 25, 2016

James E. Acridge

 

 

/s/ Charles J. Bayer

Director

May 25, 2016

Charles J. Bayer

 

 

/s/ John  P. Brogan

Director

May 25, 2016

John P. Brogan

 

 

/s/ John M. Dodds

Director

May 25, 2016

John M. Dodds

 

 

/s/ Michael L. Gallagher

Director

May 25, 2016

Michael L. Gallagher

 

 

/s/ Daniel R. Mullen

Director

May 25, 2016

Daniel R. Mullen

 

 

/s/ Samuel J. Shoen

Director

May 25, 2016

Samuel J. Shoen