U-Haul Holding Co /NV/ - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

[ ]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.



001-11255	AMERCO	88-0106815
	(A Nevada Corporation)
	5555 Kietzke Lane Suite 100
	Reno NV 89511
	Telephone 775 688-6300

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

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.25 par value	UHAL	NASDAQ Global Select Market

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

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

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

Large Accelerated Filer[x] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [ ]

Emerging growth company [ ]

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

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

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at November 1, 2019.

TABLE OF CONTENTS

		Page
	PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	a) Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and March 31, 2019	1
	b) Condensed Consolidated Statements of Operations for the Quarters Ended September 30, 2019 and 2018 (unaudited)	2
	c) Condensed Consolidated Statements of Operations for the Six Months Ended September 30, 2019 and 2018 (unaudited)	3
	d) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters and Six Months Ended September 30, 2019 and 2018 (unaudited)	4
	e) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Quarter Ended September 30, 2019 and 2018 (unaudited)	5
	f) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended September 30, 2019 and 2018 (unaudited)	6
	g) Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2019 and 2018 (unaudited)	7
	h) Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2 .	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	63

	PART II OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	64

Part i Financial information

Item 1. Financial Statements

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED balance sheets

		September 30,		March 31,
		2019		2019
		(Unaudited)
		(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	525,231	$	673,701
Reinsurance recoverables and trade receivables, net		222,481		224,785
Inventories and parts, net		102,357		103,504
Prepaid expenses		194,250		174,100
Investments, fixed maturities and marketable equities		2,413,350		2,235,397
Investments, other		320,992		300,736
Deferred policy acquisition costs, net		111,708		136,276
Other assets		72,432		78,354
Right of use assets - financing, net		1,185,629		0
Right of use assets - operating		105,298		–
Related party assets		12,902		30,889
		5,266,630		3,957,742
Property, plant and equipment, at cost:
Land		1,016,918		976,454
Buildings and improvements		4,371,637		4,003,726
Furniture and equipment		716,287		689,780
Rental trailers and other rental equipment		495,264		590,039
Rental trucks		3,560,034		4,762,028
		10,160,140		11,022,027
Less: Accumulated depreciation		(2,570,568)		(3,088,056)
Total property, plant and equipment, net		7,589,572		7,933,971
Total assets	$	12,856,202	$	11,891,713
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses	$	546,260	$	556,873
Notes, loans and finance/capital leases payable, net		4,497,912		4,163,323
Operating lease liability		104,832		0
Policy benefits and losses, claims and loss expenses payable		1,022,134		1,011,183
Liabilities from investment contracts		1,720,995		1,666,742
Other policyholders' funds and liabilities		10,911		15,047
Deferred income		35,926		35,186
Deferred income taxes, net		859,164		750,970
Total liabilities		8,798,134		8,199,324

Commitments and contingencies (notes 4, 8, 9 and 10)
Stockholders' equity:
Series preferred stock, with or without par value, 50,000,000 shares authorized:
Series A preferred stock, with no par value, 6,100,000 shares authorized;
6,100,000 shares issued and none outstanding as of September 30 and March 31, 2019
Series B preferred stock, with no par value, 100,000 shares authorized; none
issued and outstanding as of September 30 and March 31, 2019
Serial common stock, with or without par value, 250,000,000 shares authorized:
Serial common stock of $0.25 par value, 10,000,000 shares authorized;
none issued and outstanding as of September 30 and March 31, 2019
Common stock, with $0.25 par value, 250,000,000 shares authorized:
Common stock of $0.25 par value, 250,000,000 shares authorized; 41,985,700
issued and 19,607,788 outstanding as of September 30 and March 31, 2019		10,497		10,497
Additional paid-in capital		453,761		453,326
Accumulated other comprehensive income (loss)		17,151		(66,698)
Retained earnings		4,255,906		3,976,962
Cost of common stock in treasury, net (22,377,912 shares as of September 30 and March 31, 2019)		(525,653)		(525,653)
Cost of preferred stock in treasury, net (6,100,000 shares as of September 30 and March 31, 2019)		(151,997)		(151,997)
Unearned employee stock ownership plan shares		(1,597)		(4,048)
Total stockholders' equity		4,058,068		3,692,389
Total liabilities and stockholders' equity	$	12,856,202	$	11,891,713

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

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

		Quarter Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands, except share and per share amounts)
Revenues:
Self-moving equipment rentals	$	804,325	$	781,713
Self-storage revenues		104,965		91,493
Self-moving and self-storage products and service sales		73,121		72,913
Property management fees		7,233		7,192
Life insurance premiums		32,355		35,920
Property and casualty insurance premiums		18,365		16,283
Net investment and interest income		33,098		28,227
Other revenue		76,752		70,766
Total revenues		1,150,214		1,104,507

Costs and expenses:
Operating expenses		565,413		529,350
Commission expenses		86,099		85,334
Cost of sales		43,930		46,402
Benefits and losses		45,825		45,773
Amortization of deferred policy acquisition costs		6,515		5,899
Lease expense		6,356		8,170
Depreciation, net of gains on disposal of ($17,999 and $12,036, respectively)		151,553		132,625
Net (gains) losses on disposal of real estate		(217)		10
Total costs and expenses		905,474		853,563

Earnings from operations		244,740		250,944
Other components of net periodic benefit costs		(264)		(254)
Interest expense		(39,122)		(35,030)
Pretax earnings		205,354		215,660
Income tax expense		(49,028)		(52,118)
Earnings available to common stockholders	$	156,326	$	163,542
Basic and diluted earnings per common stock	$	7.97	$	8.35
Weighted average common stock outstanding: Basic and diluted		19,602,566		19,591,312

Related party revenues for the second quarter of fiscal 2020 and 2019, net of eliminations, were $7.2 million.

Related party costs and expenses for the second quarter of fiscal 2020 and 2019, net of eliminations, were $19.3 million and $19.0 million, respectively.

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

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

AMERCO AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED Statements of operations

		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands, except share and per share amounts)
Revenues:
Self-moving equipment rentals	$	1,552,921	$	1,498,315
Self-storage revenues		203,239		177,705
Self-moving and self-storage products and service sales		153,147		152,154
Property management fees		14,389		14,608
Life insurance premiums		65,065		72,808
Property and casualty insurance premiums		31,789		29,064
Net investment and interest income		68,847		52,832
Other revenue		140,066		126,598
Total revenues		2,229,463		2,124,084

Costs and expenses:
Operating expenses		1,099,885		1,025,904
Commission expenses		166,998		164,591
Cost of sales		92,859		96,283
Benefits and losses		94,831		94,327
Amortization of deferred policy acquisition costs		12,579		11,930
Lease expense		13,392		16,339
Depreciation, net of gains on disposal of ($34,677 and $28,331 respectively)		292,153		259,052
Net (gains) losses on disposal of real estate		(1,839)		10
Total costs and expenses		1,770,858		1,668,436

Earnings from operations		458,605		455,648
Other components of net periodic benefit costs		(527)		(507)
Interest expense		(78,010)		(70,284)
Pretax earnings		380,068		384,857
Income tax expense		(91,320)		(93,466)
Earnings available to common stockholders	$	288,748	$	291,391
Basic and diluted earnings per common stock	$	14.73	$	14.87
Weighted average common stock outstanding: Basic and diluted		19,600,211		19,590,946

Related party revenues for the first six months of fiscal 2020 and 2019, net of eliminations, were $14.4 million and $14.6 million, respectively.

Related party costs and expenses for the first six months of fiscal 2020 and 2019, net of eliminations, were $37.1 million and $36.2 million, respectively.

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

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

AMERCO AND CONSOLIDATED SUBSIDIARIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended September 30, 2019		Pre-tax		Tax		Net
		(Unaudited)
		(In thousands)
Comprehensive income:
Net earnings	$	205,354	$	(49,028)	$	156,326
Other comprehensive income (loss):
Foreign currency translation		629				629
Unrealized net gain on investments		52,651		(11,346)		41,305
Change in fair value of cash flow hedges		(840)		207		(633)
Amounts reclassified into earnings on hedging activities		(366)		89		(277)
Total comprehensive income	$	257,428	$	(60,078)	$	197,350



Quarter Ended September 30, 2018		Pre-tax		Tax		Net
		(Unaudited)
		(In thousands)
Comprehensive income:
Net earnings	$	215,660	$	(52,118)	$	163,542
Other comprehensive income (loss):
Foreign currency translation		1,113				1,113
Unrealized net loss on investments		(22,280)		4,679		(17,601)
Change in fair value of cash flow hedges		477		(117)		360
Amounts reclassified into earnings on hedging activities		(191)		47		(144)
Total comprehensive income	$	194,779	$	(47,509)	$	147,270

Six Months Ended September 30, 2019		Pre-tax		Tax		Net
		(Unaudited)
		(In thousands)
Comprehensive income:
Net earnings	$	380,068	$	(91,320)	$	288,748
Other comprehensive income (loss):
Foreign currency translation		3,611				3,611
Unrealized net gain on investments		104,478		(22,385)		82,093
Change in fair value of cash flow hedges		(2,034)		500		(1,534)
Amounts reclassified into earnings on hedging activities		(425)		104		(321)
Total comprehensive income	$	485,698	$	(113,101)	$	372,597



Six Months Ended September 30, 2018		Pre-tax		Tax		Net
		(Unaudited)
		(In thousands)
Comprehensive income:
Net earnings	$	384,857	$	(93,466)	$	291,391
Other comprehensive income (loss):
Foreign currency translation		(980)				(980)
Unrealized net loss on investments		(72,498)		15,225		(57,273)
Change in fair value of cash flow hedges		1,701		(418)		1,283
Amounts reclassified into earnings on hedging activities		(855)		210		(645)
Total comprehensive income	$	312,225	$	(78,449)	$	233,776

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

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders’ equity

Description		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Less: Treasury Common Stock		Less: Treasury Preferred Stock		Less: Unearned Employee Stock Ownership Plan Shares		Total Stockholders' Equity
	(In thousands)
Balance as of June 30, 2019	$	10,497	$	453,535	$	(23,873)	$	4,109,384	$	(525,653)	$	(151,997)	$	(2,870)	$	3,869,023
Increase in market value of released ESOP shares		0		226		0		0		0		0		0		226
Release of unearned ESOP shares		0		0		0		0		0		0		1,347		1,347
Purchase of ESOP shares		0		0		0		0		0		0		(74)		(74)
Foreign currency translation		0		0		629		0		0		0		0		629
Unrealized net gain on investments, net of tax		0		0		41,305		0		0		0		0		41,305
Change in fair value of cash flow hedges, net of tax		0		0		(633)		0		0		0		0		(633)
Amounts reclassified into earnings on hedging activities						(277)										(277)
Net earnings		0		0		0		156,326		0		0		0		156,326
Common stock dividends: ($0.50 per share for fiscal 2020)		0		0		0		(9,804)		0		0		0		(9,804)
Net activity		0		226		41,024		146,522		0		0		1,273		189,045
Balance as of September 30, 2019	$	10,497	$	453,761	$	17,151	$	4,255,906	$	(525,653)		(151,997)	$	(1,597)	$	4,058,068

Balance as of June 30, 2018	$	10,497	$	452,862	$	(45,966)	$	3,763,339	$	(525,653)	$	(151,997)	$	(6,937)	$	3,496,145
Increase in market value of released ESOP shares		0		144		0		0		0		0		0		144
Release of unearned ESOP shares		0		0		0		0		0		0		2,694		2,694
Purchase of ESOP shares		0		0		0		0		0		0		(3,292)		(3,292)
Foreign currency translation		0		0		1,113		0		0		0		0		1,113
Unrealized net loss on investments, net of tax		0		0		(17,601)		0		0		0		0		(17,601)
Change in fair value of cash flow hedges, net of tax		0		0		360		0		0		0		0		360
Amounts reclassified into earnings on hedging activities						(144)										(144)
Net earnings		0		0		0		163,542		0		0		0		163,542
Common stock dividends: ($0.50 per share for fiscal 2019)		0		0		0		(9,794)		0		0		0		(9,794)
Net activity		0		144		(16,272)		153,748		0		0		(598)		137,022
Balance as of September 30, 2018	$	10,497	$	453,006	$	(62,238)	$	3,917,087	$	(525,653)	$	(151,997)	$	(7,535)	$	3,633,167

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

Amerco and consolidated subsidiaries

condensed consolidated statements of changes in stockholders’ equity

Description		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Less: Treasury Common Stock		Less: Treasury Preferred Stock		Less: Unearned Employee Stock Ownership Plan Shares		Total Stockholders' Equity
	(In thousands)
Balance as of March 31, 2019	$	10,497	$	453,326	$	(66,698)	$	3,976,962	$	(525,653)	$	(151,997)	$	(4,048)	$	3,692,389
Increase in market value of released ESOP shares		0		435		0		0		0		0		0		435
Release of unearned ESOP shares		0		0		0		0		0		0		2,656		2,656
Purchase of ESOP shares		0		0		0		0		0		0		(205)		(205)
Foreign currency translation		0		0		3,611		0		0		0		0		3,611
Unrealized net gain on investments, net of tax		0		0		82,093		0		0		0		0		82,093
Change in fair value of cash flow hedges, net of tax		0		0		(1,534)		0		0		0		0		(1,534)
Amounts reclassified into earnings on hedging activities						(321)										(321)
Net earnings		0		0		0		288,748		0		0		0		288,748
Common stock dividends: ($0.50 per share for fiscal 2020)		0		0		0		(9,804)		0		0		0		(9,804)
Net activity		0		435		83,849		278,944		0		0		2,451		365,679
Balance as of September 30, 2019	$	10,497	$	453,761	$	17,151	$	4,255,906	$	(525,653)		(151,997)	$	(1,597)	$	4,058,068

Balance as of March 31, 2018	$	10,497	$	452,746	$	(4,623)	$	3,635,561	$	(525,653)	$	(151,997)	$	(7,823)	$	3,408,708
Increase in market value of released ESOP shares		0		260		0		0		0		0		0		260
Release of unearned ESOP shares		0		0		0		0		0		0		5,388		5,388
Purchase of ESOP shares		0		0		0		0		0		0		(5,100)		(5,100)
Foreign currency translation		0		0		(980)		0		0		0		0		(980)
Unrealized net loss on investments, net of tax		0		0		(57,273)		0		0		0		0		(57,273)
Change in fair value of cash flow hedges, net of tax		0		0		1,283		0		0		0		0		1,283
Amounts reclassified into earnings on hedging activities						(645)										(645)
Adjustment for adoption of ASU 2016 - 01		0		0		0		9,724		0		0		0		9,724
Net earnings		0		0		0		291,391		0		0		0		291,391
Common stock dividends: ($1.00 per share for fiscal 2019)		0		0		0		(19,589)		0		0		0		(19,589)
Net activity		0		260		(57,615)		281,526		0		0		288		224,459
Balance as of September 30, 2018	$	10,497	$	453,006	$	(62,238)	$	3,917,087	$	(525,653)	$	(151,997)	$	(7,535)	$	3,633,167

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

AMERCO AND CONSOLIDATED subsidiaries

Condensed consolidatED statements of cash flows

		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
Cash flows from operating activities:
Net earnings	$	288,748	$	291,391
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation		326,830		287,383
Amortization of deferred policy acquisition costs		12,579		11,930
Amortization of premiums and accretion of discounts related to investments, net		6,481		6,457
Amortization of debt issuance costs		2,100		2,013
Interest credited to policyholders		26,584		17,726
Change in allowance for losses on trade receivables		(113)		309
Change in allowance for inventories and parts reserves		537		1,148
Net gains on disposal of personal property		(34,677)		(28,331)
Net (gains) losses on disposal of real estate		(1,839)		10
Net (gains) losses on sales of investments		(7,595)		55
Net (gains) losses on equity investments		(2,553)		1,344
Deferred income taxes		83,708		88,485
Net change in other operating assets and liabilities:
Reinsurance recoverables and trade receivables		2,471		(14,453)
Inventories and parts		613		(4,347)
Prepaid expenses		(21,908)		(17,709)
Capitalization of deferred policy acquisition costs		(10,370)		(12,926)
Other assets		525		58,139
Related party assets		(5,019)		6,181
Accounts payable and accrued expenses		60,587		57,744
Policy benefits and losses, claims and loss expenses payable		10,709		(49,774)
Other policyholders' funds and liabilities		(4,136)		3,302
Deferred income		2,077		(124)
Related party liabilities		1,425		(3,276)
Net cash provided by operating activities		737,764		702,677

Cash flows from investing activities:
Escrow deposits		5,573		1,362
Purchases of:
Property, plant and equipment		(1,589,371)		(1,114,544)
Short term investments		(20,380)		(22,335)
Fixed maturities investments		(178,626)		(239,972)
Equity securities		(83)		(957)
Preferred stock		0		(81)
Real estate		(368)		(218)
Mortgage loans		(19,660)		(24,132)
Proceeds from sales and paydowns of:
Property, plant and equipment		401,451		429,910
Short term investments		17,282		24,568
Fixed maturities investments		127,683		64,651
Preferred stock		0		1,125
Real estate		311		–
Mortgage loans		4,299		12,912
Net cash used by investing activities		(1,251,889)		(867,711)

Cash flows from financing activities:
Borrowings from credit facilities		658,745		313,299
Principal repayments on credit facilities		(143,634)		(182,955)
Payment of debt issuance costs		(2,301)		(1,420)
Finance/capital lease payments		(180,902)		(147,913)
Employee stock ownership plan stock		(206)		(137)
Common stock dividends paid		(19,600)		(29,385)
Net contribution from (to) related party		21,600		0
Investment contract deposits		105,846		179,608
Investment contract withdrawals		(78,177)		(71,228)
Net cash provided (used) by financing activities		361,371		59,869

Effects of exchange rate on cash		4,284		(1,783)

Decrease in cash and cash equivalents		(148,470)		(106,948)
Cash and cash equivalents at the beginning of period		673,701		759,388
Cash and cash equivalents at the end of period	$	525,231	$	652,440

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

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a second fiscal quarter that ends on the 30th of September for each year that is referenced. Our insurance company subsidiaries have a second quarter that ends on the 30th of June for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2019 and 2018 correspond to fiscal 2020 and 2019 for AMERCO.

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

The condensed consolidated balance sheet as of September 30, 2019 and the related condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity for the second quarter and first six months of fiscal 2020 and 2019 and cash flows for the six months of fiscal 2020 and 2019 are unaudited.

In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

Intercompany accounts and transactions have been eliminated.

Description of Legal Entities

AMERCO is the holding company for:

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

Amerco Real Estate Company (“Real Estate”);

Repwest Insurance Company (“Repwest”); and

Oxford Life Insurance Company (“Oxford”).

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

Description of Operating Segments

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

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

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

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

2. Earnings per Share

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

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 16,128 as of September 30, 2018. As of September 30, 2019, all of these shares have been released.

3. Investments

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

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $29.4 million and $30.8 million as of September 30, 2019 and March 31, 2019, respectively.

Available-for-Sale Investments

Available-for-sale investments as of September 30, 2019 were as follows:

		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses More than 12 Months		Gross Unrealized Losses Less than 12 Months		Estimated Market Value
		(Unaudited)
		(In thousands)
U.S. treasury securities and government obligations	$	133,938	$	7,673	$	(148)	$	0	$	141,463
U.S. government agency mortgage-backed securities		40,588		694		(2)		0		41,280
Obligations of states and political subdivisions		296,325		20,642		(155)		0		316,812
Corporate securities		1,654,981		77,467		(2,329)		(176)		1,729,943
Mortgage-backed securities		150,143		5,529		(1)		(49)		155,622
Redeemable preferred stocks		1,493		74		0		0		1,567
	$	2,277,468	$	112,079	$	(2,635)	$	(225)	$	2,386,687

Available-for-sale investments at March 31, 2019 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	$	136,010	$	2,409	$	(2,104)	$	(447)	$	135,868
U.S. government agency mortgage-backed securities		31,101		433		(146)		(19)		31,369
Obligations of states and political subdivisions		298,955		8,079		(233)		(905)		305,896
Corporate securities		1,613,199		14,777		(14,257)		(24,986)		1,588,733
Mortgage-backed securities		148,203		880		(285)		(903)		147,895
Redeemable preferred stocks		1,493		20		0		(45)		1,468
	$	2,228,961	$	26,598	$	(17,025)	$	(27,305)	$	2,211,229

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 $124.8 million during the first six months of fiscal 2020. The gross realized gains on these sales totaled $3.6 million. The gross realized losses on these sales totaled $0.2 million.

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 recognize these write-downs, if any, through earnings. There were no write-downs in the second quarter or first six months of fiscal 2020 or 2019.

The investment portfolio primarily consists of corporate securities and obligations of states and political subdivisions. 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 any issuer would not have the ability to meet the remaining contractual obligations of the security, including payment at maturity. We have the ability and intent not to sell our fixed maturity and common stock investments for a period of time sufficient to allow us to recover our costs.

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

There were no credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income (loss) (“AOCI”) for the first six months of fiscal 2020 and fiscal 2019, respectively.

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

		September 30, 2019				March 31, 2019
		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
		(Unaudited)
		(In thousands)
Due in one year or less	$	83,028	$	83,337	$	71,987	$	71,954
Due after one year through five years		521,038		536,225		541,195		540,658
Due after five years through ten years		694,348		729,026		621,031		614,485
Due after ten years		827,418		880,910		845,052		834,769
		2,125,832		2,229,498		2,079,265		2,061,866

Mortgage-backed securities		150,143		155,622		148,203		147,895
Redeemable preferred stocks		1,493		1,567		1,493		1,468
	$	2,277,468	$	2,386,687	$	2,228,961	$	2,211,229

As of September 30, 2019 and March 31, 2019, our common stock and non-redeemable preferred stock that are included in Investments, fixed maturities and marketable equities on our balance sheet are stated in the table below. The changes in the fair value of these equity investments are recognized through Net investment and interest income.

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

		September 30, 2019				March 31, 2019
		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
		(Unaudited)
		(In thousands)

Common stocks	$	10,123	$	19,207	$	10,123	$	17,379
Non-redeemable preferred stocks		7,451		7,456		7,451		6,789
	$	17,574	$	26,663	$	17,574	$	24,168

4. Borrowings

Long Term Debt

Long term debt was as follows:

										September 30,		March 31,
	2020 Rates (a)					Maturities				2019		2019
										(Unaudited)
										(In thousands)
Real estate loan (amortizing term)				3.55	%			2023	$	97,913	$	102,913
Senior mortgages	3.36	%	-	6.62	%	2021	-	2038		1,876,499		1,741,652
Real estate loans (revolving credit)	3.03	%	-	3.61	%	2022	-	2024		435,000		429,400
Fleet loans (amortizing term)	1.95	%	-	4.66	%	2020	-	2027		262,984		263,209
Fleet loans (revolving credit)	3.25	%	-	3.27	%	2022	-	2024		570,000		530,000
Finance/capital leases (rental equipment)	1.92	%	-	5.04	%	2019	-	2026		861,751		1,042,652
Finance liability (rental equipment)	2.97	%	-	4.22	%	2024	-	2026		339,387		0
Other obligations	2.75	%	-	8.00	%	2019	-	2048		83,503		82,417
Notes, loans and finance/capital leases payable										4,527,037		4,192,243
Less: Debt issuance costs										(29,125)		(28,920)
Total notes, loans and finance/capital leases payable, net									$	4,497,912	$	4,163,323

(a) Interest rates as of September 30, 2019, including the effect of applicable hedging instruments.

Real Estate Backed Loans

Real Estate Loan

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

The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. As of September 30, 2019, the applicable LIBOR was 2.05% and the applicable margin was 1.50%, the sum of which was 3.55%. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Senior Mortgages

Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between 3.36% and 6.62%. Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Real Estate Loans (Revolving Credit)

Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $335.0 million. As of September 30, 2019, the outstanding balance of these loans in the aggregate was $335.0 million. These loans are secured by certain properties owned by the borrowers. The loan agreements provide for term loans, subject to the terms of the loan agreements. The final maturity of the loans is between June 2022 and February 2024. The loans require monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of September 30, 2019, the applicable LIBOR was 2.11% and the margin was between 1.25% and 1.50%, the sum of which was between 3.36% and 3.61%. Certain loans have interest rate swaps fixing the rate between 3.03% and 3.14% based on current margins. AMERCO is the guarantor of these loans. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $150.0 million, which can be increased to $300.0 million by bringing in other lenders. As of September 30, 2019, the outstanding balance was $100.0 million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. The final maturity of this loan is September 2022. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of September 30, 2019, the applicable LIBOR was 2.11% and the margin was 1.38%, the sum of which was 3.49%. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a 0.30% fee charged for unused capacity.

Fleet Loans

Rental Truck Amortizing Loans

The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the loan agreements, are carried at fixed rates ranging between 1.95% and 4.66%. Additionally, one of these loans is carried at a variable rate with the applicable LIBOR plus the applicable margins. As of September 30, 2019, the applicable LIBOR was 2.03% and applicable margin was 1.75% with a sum of 3.78%. The interest rate is hedged with an interest rate swap fixing the rate at 2.82% based on current margins.

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

Rental Truck Revolvers

Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $580.0 million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin. As of September 30, 2019, the applicable LIBOR was between 2.10% and 2.12%, and the margin was 1.15%, the sum of which was between 3.25% and 3.27%. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly.

Finance/Capital Leases

The Finance/Capital Lease balance represents our sale-leaseback transactions of rental equipment that were entered into and classified as capital leases prior to the adoption of ASC 842 on April 1, 2019. The historical capital lease balance was reclassified to ROU assets-finance, net and have an outstanding balance of $861.8 million as of September 30, 2019. The agreements are generally 7 year terms with interest rates ranging from 1.92% to 5.04%. All of our finance leases are collateralized by our rental fleet. There were no new financing leases, as assessed under the new leasing guidance, entered into during the six months ended September 30, 2019.

Finance Liability

Finance Liabilities represent our rental equipment financing transactions that have historically been accounted for as capital leases prior to the adoption of ASC 842 on April 1, 2019, which substantially changed the accounting for sale-leasebacks going forward. In accordance with the new leasing guidance, we assess if sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs. We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost. As of September 30, 2019, we have failed sale-leasebacks transactions totaling $339.4 million. Our finance liabilities have an average term of 7 years and interest rates ranging from 2.97% to 4.22%. These finance liabilities are collateralized by our rental fleet.

Other Obligations

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

As of September 30, 2019, the aggregate outstanding principal balance of the U-Notes® issued was $86.5 million, of which $3.0 million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between 2.75% and 8.00% and maturity dates range between 2019 and 2048.

Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of June 30, 2019, the deposits had an aggregate balance of $60.0 million, for which Oxford pays fixed interest rates between 1.67% and 2.95% with maturities between September 29, 2019 and March 29, 2021. As of March 31, 2019, available-for-sale investments held with the FHLB totaled $131.1 million, of which $68.8 million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.

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

The annual maturities of our notes, loans and finance/capital leases payable, as of September 30, 2019 for the next five years and thereafter are as follows:

		Year Ended September 30,
		2020		2021		2022		2023		2024		Thereafter
		(Unaudited)
		(In thousands)
Notes, loans and finance/capital leases payable, secured	$	491,098	$	401,307	$	907,853	$	525,138	$	770,782	$	1,430,859

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

		Quarter Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
Interest expense	$	44,743	$	36,220
Capitalized interest		(6,669)		(2,227)
Amortization of transaction costs		1,047		881
Interest expense resulting from cash flow hedges		1		156
Total interest expense	$	39,122	$	35,030

		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
Interest expense	$	88,074	$	70,416
Capitalized interest		(12,168)		(2,646)
Amortization of transaction costs		2,100		1,842
Interest expense resulting from cash flow hedges		4		672
Total interest expense	$	78,010	$	70,284

Interest paid in cash, including payments related to derivative contracts, amounted to $45.4 million and $36.6 million for the second quarter of fiscal 2020 and 2019, respectively, and $85.9 million and $71.1 million for the first six months of fiscal 2020 and 2019, respectively.

Interest Rates

Interest rates and Company borrowings were as follows:

		Revolving Credit Activity
		Quarter Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands, except interest rates)
Weighted average interest rate during the quarter		3.50	%	3.06	%
Interest rate at the end of the quarter		3.36	%	2.81	%
Maximum amount outstanding during the quarter	$	1,015,000	$	705,000
Average amount outstanding during the quarter	$	1,004,348	$	585,924
Facility fees	$	45	$	128

		Revolving Credit Activity
		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands, except interest rates)
Weighted average interest rate during the period		3.61	%	3.08	%
Interest rate at the end of the period		3.36	%	2.81	%
Maximum amount outstanding during the period	$	1,015,000	$	705,000
Average amount outstanding during the period	$	985,954	$	542,186
Facility fees	$	107	$	272

5. Derivatives

We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates with the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes. The following is a summary of our interest rate swap agreements as of September 30, 2019:

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

		Derivatives Fair Values as of
		September 30, 2019		March 31, 2019
		(Unaudited)
		(In thousands)
Interest rate contracts designated as hedging instruments:
Assets	$	24	$	139
Liabilities	$	2,348	$	0
Notional amount	$	249,063	$	22,792

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

		September 30, 2019		September 30, 2018
		(Unaudited)
		(In thousands)
(Gain) loss recognized in AOCI on interest rate contracts	$	1,206	$	(286)
Loss reclassified from AOCI into income	$	366	$	191

Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. During the first six months of fiscal 2020, we recognized a decrease in the fair value of our cash flow hedges of $1.9 million, net of taxes. During the first six months of fiscal 2020 we reclassified $0.4 million from AOCI to interest expense. As of September 30, 2019, we expect to reclassify $0.8 million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.

6. Accumulated Other Comprehensive Income (Loss)

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

		Foreign Currency Translation		Unrealized Net Gain on Investments		Fair Market Value of Cash Flow Hedges		Postretirement Benefit Obligation Net Loss		Accumulated Other Comprehensive Income (Loss)
		(Unaudited)
		(In thousands)
Balance at March 31, 2019	$	(56,612)	$	(7,259)	$	107	$	(2,934)	$	(66,698)
Foreign currency translation		3,611		0		0		0		3,611
Unrealized net gain on investments		0		82,093		0		0		82,093
Change in fair value of cash flow hedges		0		0		(1,534)		0		(1,534)
Amounts reclassified into earnings on hedging activities						(321)				(321)
Other comprehensive income (loss)		3,611		82,093		(1,855)		0		83,849
Balance at September 30, 2019	$	(53,001)	$	74,834	$	(1,748)	$	(2,934)	$	17,151

7. Stockholders’ Equity

The dividends declared or paid during the first six months of fiscal 2020 were as follows:

Common Stock Dividends
Declared Date		Per Share Amount	Record Date	Dividend Date

March 6, 2019	$	0.50	March 21, 2019	April 4, 2019
August 22, 2019		0.50	September 9, 2019	September 23, 2019

On June 8, 2016, our stockholders’ approved the 2016 AMERCO Stock Option Plan (Shelf Stock Option Plan). As of September 30, 2019, no awards had been issued under this plan.

8. Leases

Lessor

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

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

Lessee

We determine if an arrangement is a lease at inception. Operating leases, which are comprised primarily of storage rental locations, are included in Right-of-Use (“ROU“) assets - operating and operating lease liability in our balance sheet dated September 30, 2019. Finance leases, which are comprised primarily of rental equipment leases, are included in ROU assets - financing, net, and notes, loans and finance/capital leases payable, net in our balance sheet dated September 30, 2019.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected remaining lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that we will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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

Adoption of this standard resulted in most of our operating lease commitments being recognized as operating lease liabilities and ROU assets, which increased total assets and total liabilities by approximately $105.4 million related to property operating leases. In addition, we reclassified a net amount $948.2 million related to vehicle financing leases from property, plant, and equipment, net to ROU assets financing, net.

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

The following table shows the components of our right-of-use assets:

		As of September 30, 2019
		Finance		Operating		Total
		(Unaudited)
		(In thousands)

Buildings and improvements	$	0	$	114,696	$	114,696
Furniture and equipment		27,414		0		27,414
Rental trailers and other rental equipment		125,747		0		125,747
Rental trucks		1,759,118		0		1,759,118
Right-of-use assets, gross		1,912,279		114,696		2,026,975
Less: Accumulated depreciation		(726,650)		(9,398)		(736,048)
Right-of-use assets, net	$	1,185,629	$	105,298	$	1,290,927

	Finance		Operating
	(Unaudited)
Weighted average remaining lease term (years)	5 Years		15 Years
Weighted average discount rate	3.41	%	4.60	%

For the first six months ended September 30, 2019, cash paid for leases included in our operating and financing cash flow activities were $13.0 million and $180.9 million, respectively.

The components of lease costs were as follows:

		Six Months Ended
		September 30, 2019
		(Unaudited)
		(In thousands)

Operating lease costs	$	13,664

Finance lease cost:
Amortization of right-of-use assets	$	98,200
Interest on lease liabilities		16,740
Total finance lease cost	$	114,940

Maturities of lease liabilities were as follows:

		Finance leases		Operating leases
		(Unaudited)
Year ending September 30,		(In thousands)

2020	$	246,596	$	21,776
2021		184,010		19,336
2022		143,983		18,298
2023		122,112		17,607
2024		83,369		13,545
Thereafter		81,681		70,411
Total lease payments		861,751		160,973
Less: imputed interest		0		(56,141)
Present value of lease liabilities	$	861,751	$	104,832

9. Contingencies

Environmental

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

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

Other

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

10. Related Party Transactions

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

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

SAC Holding Corporation and SAC Holding II Corporation (collectively “SAC Holdings”) were established in order to acquire and develop self-storage properties. These properties are being managed by us pursuant to management agreements. In the past, we sold real estate and various self-storage properties to SAC Holdings, and such sales provided significant cash flows to us. SAC Holdings, Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation, Galaxy Investments, L.P. and 2015 SAC self-storage are substantially controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly owned by Willow Grove Holdings LP (“WGHLP”), which is owned by Mark V. Shoen (a significant stockholder), and various trusts associated with Edward J. Shoen (our Chairman of the Board, President and a significant stockholder) and Mark V. Shoen.

Related Party Revenue

		Quarter Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
U-Haul management fee revenue from Blackwater	$	6,318	$	6,278
U-Haul management fee revenue from Mercury		915		914
	$	7,233	$	7,192

		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
U-Haul management fee revenue from Blackwater	$	12,567	$	12,478
U-Haul management fee revenue from Mercury		1,822		2,130
	$	14,389	$	14,608

We currently manage the self-storage properties owned or leased by Blackwater and Mercury Partners, L.P. (“Mercury”), pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $16.3 million and $17.4 million from the above-mentioned entities during the first six months of fiscal 2020 and 2019, respectively. This management fee is consistent with the fee received for other properties we previously managed for third parties. Mark V. Shoen controls the general partner of Mercury. The limited partner interests of Mercury are owned indirectly by James P. Shoen and various trusts benefitting Edward J. Shoen and James P. Shoen or their descendants. Mercury holds the option to purchase a portfolio of properties currently leased by Mercury and a U-Haul subsidiary, which option is exercisable in 2024.

Related Party Costs and Expenses

		Quarter Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
U-Haul lease expenses to Blackwater	$	658	$	670
U-Haul commission expenses to Blackwater		18,617		18,348
	$	19,275	$	19,018

		Six Months Ended September 30,
		2019		2018
		(Unaudited)
		(In thousands)
U-Haul lease expenses to Blackwater	$	1,316	$	1,340
U-Haul commission expenses to Blackwater		35,819		34,833
	$	37,135	$	36,173

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

As of September 30, 2019, subsidiaries of Blackwater acted as independent dealers. The financial and other terms of the dealership contracts are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues.

These agreements with subsidiaries of Blackwater, excluding Dealer Agreements, provided revenues of $12.6 million, expenses of $1.3 million and cash flows of $11.3 million during the first six months of fiscal 2020. Revenues and commission expenses related to the Dealer Agreements were $169.6 million and $35.8 million, respectively, during the first six months of fiscal 2020.

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

Related Party Assets

		September 30,		March 31,
		2019		2019
		(Unaudited)
		(In thousands)
U-Haul receivable from Blackwater	$	27,828	$	25,158
U-Haul receivable from Mercury		5,673		7,234
Other (a)		(20,599)		(1,503)
	$	12,902	$	30,889

(a) Timing differences for intercompany balances with insurance subsidiaries resulting from the three-month difference in reporting periods. Our credit balance as of September 30, 2019, was due to a timing difference for a dividend paid by Repwest to AMERCO of $21.6 million.

amerco and consolidated subsidiaries

notes to condensed consolidated financial statements – (continued)

11. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of September 30, 2019 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated
		(Unaudited)
		(In thousands)
Assets:
Cash and cash equivalents	$	498,984	$	11,576	$	14,671	$	0		$	525,231
Reinsurance recoverables and trade receivables, net		91,985		96,690		33,806		0			222,481
Inventories and parts, net		102,357		0		0		0			102,357
Prepaid expenses		194,250		0		0		0			194,250
Investments, fixed maturities and marketable equities		0		294,681		2,118,669		0			2,413,350
Investments, other		20,988		82,395		217,609		0			320,992
Deferred policy acquisition costs, net		0		0		111,708		0			111,708
Other assets		68,416		880		3,136		0			72,432
Right of use assets - financing, net		1,185,629		0		0		0			1,185,629
Right of use assets - operating		105,298		0		0		0			105,298
Related party assets		38,671		8,998		18,554		(53,321)	(c)		12,902
		2,306,578		495,220		2,518,153		(53,321)			5,266,630

Investment in subsidiaries		619,513		0		0		(619,513)	(b)		0

Property, plant and equipment, at cost:
Land		1,016,918		0		0		0			1,016,918
Buildings and improvements		4,371,637		0		0		0			4,371,637
Furniture and equipment		716,287		0		0		0			716,287
Rental trailers and other rental equipment		495,264		0		0		0			495,264
Rental trucks		3,560,034		0		0		0			3,560,034
		10,160,140		0		0		0			10,160,140
Less: Accumulated depreciation		(2,570,568)		0		0		0			(2,570,568)
Total property, plant and equipment, net		7,589,572		0		0		0			7,589,572
Total assets	$	10,515,663	$	495,220	$	2,518,153	$	(672,834)		$	12,856,202

(a) Balances as of June 30, 2019
(b) Eliminate investment in subsidiaries
(c) Eliminate intercompany receivables and payables

Consolidating balance sheets by industry segment as of September 30, 2019 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated
		(Unaudited)
		(In thousands)
Liabilities:
Accounts payable and accrued expenses	$	538,687	$	2,865	$	4,708	$	0		$	546,260
Notes, loans and finance/capital leases payable, net		4,497,912		0		0		0			4,497,912
Operating lease liability		104,832		0		0		0			104,832
Policy benefits and losses, claims and loss expenses payable		425,448		223,744		372,942		0			1,022,134
Liabilities from investment contracts		0		0		1,720,995		0			1,720,995
Other policyholders' funds and liabilities		0		5,641		5,270		0			10,911
Deferred income		35,926		0		0		0			35,926
Deferred income taxes, net		828,584		9,068		21,512		0			859,164
Related party liabilities		25,851		4,216		1,299		-31,366	(c)		0
Total liabilities		6,457,240		245,534		2,126,726		-31,366			8,798,134

Stockholders' equity:
Series preferred stock:
Series A preferred stock		0		0		0		0			0
Series B preferred stock		0		0		0		0			0
Series A common stock		0		0		0		0			0
Common stock		10,497		3,301		2,500		-5,801	(b)		10,497
Additional paid-in capital		453,971		91,120		26,271		-117,601	(b)		453,761
Accumulated other comprehensive income (loss)		17,506		9,615		65,575		-75,545	(b)		17,151
Retained earnings		4,255,696		145,650		297,081		-442,521	(b)		4,255,906
Cost of common stock in treasury, net		-525,653		0		0		0			-525,653
Cost of preferred stock in treasury, net		-151,997		0		0		0			-151,997
Unearned employee stock ownership plan stock		-1,597		0		0		0			-1,597
Total stockholders' equity		4,058,423		249,686		391,427		-641,468			4,058,068
Total liabilities and stockholders' equity	$	10,515,663	$	495,220	$	2,518,153	$	-672,834		$	12,856,202

(a) Balances as of June 30, 2019
(b) Eliminate investment in subsidiaries
(c) Eliminate intercompany receivables and payables

Consolidating balance sheets by industry segment as of March 31, 2019 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated

Assets:		(In thousands)
Cash and cash equivalents	$	643,918	$	5,757	$	24,026	$	0		$	673,701
Reinsurance recoverables and trade receivables, net		90,832		102,120		31,833		0			224,785
Inventories and parts, net		103,504		0		0		0			103,504
Prepaid expenses		174,100		0		0		0			174,100
Investments, fixed maturities and marketable equities		0		279,641		1,955,756		0			2,235,397
Investments, other		23,013		74,679		203,044		0			300,736
Deferred policy acquisition costs, net		0		0		136,276		0			136,276
Other assets		72,768		2,456		3,130		0			78,354
Related party assets		35,997		6,639		16,466		(28,213)	(c)		30,889
		1,144,132		471,292		2,370,531		(28,213)			3,957,742

Investment in subsidiaries		534,157		0		0		(534,157)	(b)		0

Property, plant and equipment, at cost:
Land		976,454		0		0		0			976,454
Buildings and improvements		4,003,726		0		0		0			4,003,726
Furniture and equipment		689,780		0		0		0			689,780
Rental trailers and other rental equipment		590,039		0		0		0			590,039
Rental trucks		4,762,028		0		0		0			4,762,028
		11,022,027		0		0		0			11,022,027
Less: Accumulated depreciation		(3,088,056)		0		0		0			(3,088,056)
Total property, plant and equipment, net		7,933,971		0		0		0			7,933,971
Total assets	$	9,612,260	$	471,292	$	2,370,531	$	(562,370)		$	11,891,713

(a) Balances as of December 31, 2018
(b) Eliminate investment in subsidiaries
(c) Eliminate intercompany receivables and payables

Consolidating balance sheets by industry segment as of March 31, 2019 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated

		(In thousands)
Liabilities:
Accounts payable and accrued expenses	$	548,099	$	2,844	$	5,930	$	0		$	556,873
Notes, loans and leases payable, net		4,163,323		0		0		0			4,163,323
Policy benefits and losses, claims and loss expenses payable		407,934		229,958		373,291		0			1,011,183
Liabilities from investment contracts		0		0		1,666,742		0			1,666,742
Other policyholders' funds and liabilities		0		5,259		9,788		0			15,047
Deferred income		35,186		0		0		0			35,186
Deferred income taxes, net		741,644		6,961		2,365		0			750,970
Related party liabilities		25,446		3,836		692		(29,974)	(c)		0
Total liabilities		5,921,632		248,858		2,058,808		(29,974)			8,199,324

Stockholders' equity:
Series preferred stock:
Series A preferred stock		0		0		0		0			–
Series B preferred stock		0		0		0		0			–
Series A common stock		0		0		0		0			–
Common stock		10,497		3,301		2,500		(5,801)	(b)		10,497
Additional paid-in capital		453,536		91,120		26,271		(117,601)	(b)		453,326
Accumulated other comprehensive income (loss)		(68,459)		(3,721)		(5,300)		10,782	(b)		(66,698)
Retained earnings		3,976,752		131,734		288,252		(419,776)	(b)		3,976,962
Cost of common stock in treasury, net		(525,653)		0		0		0			(525,653)
Cost of preferred stock in treasury, net		(151,997)		0		0		0			(151,997)
Unearned employee stock ownership plan stock		(4,048)		0		0		0			(4,048)
Total stockholders' equity		3,690,628		222,434		311,723		(532,396)			3,692,389
Total liabilities and stockholders' equity	$	9,612,260	$	471,292	$	2,370,531	$	(562,370)		$	11,891,713

(a) Balances as of December 31, 2018
(b) Eliminate investment in subsidiaries
(c) Eliminate intercompany receivables and payables

Consolidating statement of operations by industry segment for the quarter ended September 30, 2019 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated
		(Unaudited)
		(In thousands)
Revenues:
Self-moving equipment rentals	$	805,659	$	0	$	0	$	(1,334)	(c)	$	804,325
Self-storage revenues		104,965		0		0		0			104,965
Self-moving and self-storage products and service sales		73,121		0		0		0			73,121
Property management fees		7,233		0		0		0			7,233
Life insurance premiums		0		0		32,355		0			32,355
Property and casualty insurance premiums		0		19,216		0		(851)	(c)		18,365
Net investment and interest income		3,031		4,312		26,165		(410)	(b)		33,098
Other revenue		75,543		0		1,339		(130)	(b)		76,752
Total revenues		1,069,552		23,528		59,859		(2,725)			1,150,214

Costs and expenses:
Operating expenses		552,708		9,395		5,619		(2,309)	(b,c)		565,413
Commission expenses		86,099		0		0		0			86,099
Cost of sales		43,930		0		0		0			43,930
Benefits and losses		0		5,041		40,784		0			45,825
Amortization of deferred policy acquisition costs		0		0		6,515		0			6,515
Lease expense		6,492		0		0		(136)	(b)		6,356
Depreciation, net of (gains) losses on disposal		151,553		0		0		0			151,553
Net gains on disposal of real estate		(217)		0		0		0			(217)
Total costs and expenses		840,565		14,436		52,918		(2,445)			905,474

Earnings from operations before equity in earnings of subsidiaries		228,987		9,092		6,941		(280)			244,740

Equity in earnings of subsidiaries		12,914		0		0		(12,914)	(d)		0

Earnings from operations		241,901		9,092		6,941		(13,194)			244,740
Other components of net periodic benefit costs		(264)		0		0		0			(264)
Interest expense		(39,402)		0		0		280	(b)		(39,122)
Pretax earnings		202,235		9,092		6,941		(12,914)			205,354
Income tax expense		(45,909)		(1,864)		(1,255)		0			(49,028)
Earnings available to common stockholders	$	156,326	$	7,228	$	5,686	$	(12,914)		$	156,326

(a) Balances for the quarter ended June 30, 2019
(b) Eliminate intercompany lease / interest income
(c) Eliminate intercompany premiums
(d) Eliminate equity in earnings of subsidiaries

Consolidating statements of operations by industry for the quarter ended September 30, 2018 are as follows:

		Moving & Storage Consolidated		Property & Casualty Insurance (a)		Life Insurance (a)		Eliminations			AMERCO Consolidated
		(Unaudited)
		(In thousands)
Revenues:
Self-moving equipment rentals	$	783,035	$	0	$	0	$	(1,322)	(c)	$	781,713
Self-storage revenues		91,493		0		0		0			91,493
Self-moving and self-storage products and service sales		72,913		0		0		0			72,913
Property management fees		7,192		0		0		0			7,192
Life insurance premiums		0		0		35,920		0			35,920
Property and casualty insurance premiums		0		16,972		0		(689)	(c)		16,283
Net investment and interest income		2,830		3,550		22,270		(423)	(b)		28,227
Other revenue		69,471		0		1,422		(127)	(b)		70,766
Total revenues		1,026,934		20,522		59,612		(2,561)			1,104,507

Costs and expenses:
Operating expenses		518,383		7,915		5,186		(2,134)	(b,c)		529,350
Commission expenses		85,334		0		0		0			85,334
Cost of sales		46,402		0		0		0			46,402
Benefits and losses		0		4,748		41,025		0			45,773
Amortization of deferred policy acquisition costs		0		0		5,899		0			5,899
Lease expense		8,306		0		0		(136)	(b)		8,170
Depreciation, net of (gains) losses on disposal		132,625		0		0		0			132,625
Net losses on disposal of real estate		10		0		0		0			10
Total costs and expenses		791,060		12,663		52,110		(2,270)			853,563

Earnings from operations before equity in earnings of subsidiaries		235,874		7,859		7,502		(291)			250,944

Equity in earnings of subsidiaries		11,986		0		0		(11,986)	(d)		0

Earnings from operations		247,860		7,859		7,502		(12,277)			250,944
Other components of net periodic benefit costs		(254)		0		0		0			(254)
Interest expense		(35,321)		0		0		291	(b)		(35,030)
Pretax earnings		212,285		7,859		7,502		(11,986)			215,660
Income tax expense		(48,743)		(1,628)		(1,747)		0			(52,118)
Earnings available to common stockholders	$	163,542	$	6,231	$	5,755	$	(11,986)		$	163,542

(a) Balances for the quarter ended June 30, 2018
(b) Eliminate intercompany lease / interest income
(c) Eliminate intercompany premiums
(d) Eliminate equity in earnings of subsidiaries