U-Haul pany(UHAL_B) - 2023 Q4 - Annual Report

PART I Business Overview U-Haul Holding Company is North America's largest 'do-it-yourself' moving and storage operator, providing a wide range of moving and storage solutions - U-Haul Holding Company is North America's largest 'do-it-yourself' moving and storage operator, providing products and services for household and commercial goods[10] - The company operates over 2,200 Company-operated retail moving stores and nearly 21,300 independent U-Haul® dealers across the United States and Canada[12] - U-Haul's business model incorporates sustainable practices, including equipment sharing and manufacturing reusable/recyclable products[14] Company Overview U-Haul Holding Company is North America's largest 'do-it-yourself' moving and storage provider, founded in 1945 - U-Haul Holding Company is North America's largest 'do-it-yourself' moving and storage operator, providing products and services for household and commercial goods[10] - The company was founded in 1945 as 'U-Haul Trailer Rental Company' and expanded into truck rentals in 1959, developing a network of company-managed retail stores and independent dealers[11] - U-Haul's operations include property and casualty insurance (Repwest, ARCOA) and life insurance (Oxford Life) subsidiaries[15] Products and Rental Equipment U-Haul offers a rental fleet of trucks, trailers, and towing devices, alongside self-storage and related moving services U-Haul Rental Fleet as of March 31, 2023 | Equipment Type | Quantity (Units) | | :--------------- | :------- | | Trucks | 192,200 | | Trailers | 138,500 | | Towing Devices | 44,500 | - U-Haul offers self-storage services with 1,904 locations, nearly 949,000 rentable units, and 81.2 million square feet of space as of March 31, 2023[27] - The company provides moving and storage protection packages (Safemove®, Safetow®, Safestor®, Safestor Mobile®, Safemove Plus®) and connects customers with independent service providers through its Moving Help® program[29][30] Description of Operating Segments U-Haul operates three segments: Moving and Storage (94.9% revenue), Property and Casualty Insurance, and Life Insurance - U-Haul Holding Company has three reportable segments: Moving and Storage, Property and Casualty Insurance, and Life Insurance[33] Consolidated Net Revenue Contribution by Segment (Fiscal Years) | Segment | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :------------------------------- | :---------- | :---------- | :---------- | | Moving and Storage | 94.9% | 94.0% | 93.1% | | Property and Casualty Insurance | 1.7% | 1.9% | 1.9% | | Life Insurance | 3.4% | 4.1% | 5.0% | Moving and Storage Operating Segment The primary segment focuses on rentals, self-storage, and expanding its dealer network, with seasonal peak revenues - The Moving and Storage segment's net revenue was approximately 94.9% of consolidated net revenue in fiscal 2023[35] - Key initiatives include expanding the independent dealer network, enhancing the U-Haul® app, and implementing U-Haul Truck Share 24/7® for mobile device rentals[36][37] - The business is seasonal, with peak revenues in the first and second fiscal quarters (spring and summer months)[44] Property and Casualty Insurance Operating Segment This segment handles U-Haul's insurance claims and underwrites protection packages, contributing 1.7% of net revenue - The Property and Casualty Insurance segment provides loss adjusting and claims handling for U-Haul and underwrites protection packages for U-Haul customers[45] - Net revenue from this segment was approximately 1.7% of consolidated net revenue in fiscal 2023[46] Life Insurance Operating Segment This segment sells life, Medicare supplement, and annuity products to seniors, accounting for 3.4% of net revenue - The Life Insurance segment sells life insurance, Medicare supplement insurance, annuities, and other related products, primarily targeting the senior market[47] - Net revenue from this segment was approximately 3.4% of consolidated net revenue in fiscal 2023[47] Human Capital U-Haul's human capital strategy focuses on employee wellness, development, and community engagement for its 35,100 staff - As of March 31, 2023, U-Haul employed approximately 33,100 people in the United States and 2,000 in Canada, with 99% in Moving and Storage and 51% full-time[49] - Employee benefits include medical, dental, vision, wellness programs (Healthier You, You Matter), paid time off, and financial benefits like an Employee Stock Ownership Plan (ESOP) and 401(k)[52][53] - The company promotes life-long personal and professional development through U-Haul University courses and a tuition reimbursement program[55] Sales and Marketing U-Haul promotes its brand through direct marketing and digital platforms, driving transaction volume via online systems - U-Haul promotes brand awareness through direct marketing (web-based initiatives, print, social media, TV commercials) and co-marketing with independent dealers[57] - The marketing plan focuses on improving ease of use and economy of rental equipment, enhancing retail centers, and expanding capabilities of U-Haul® websites and the U-Haul® app[58] - Online reservation and sales systems (uhaul.com® and 1-800-GO-U-HAUL) are major drivers of customer lead sources and rental transaction volume[59] Competition U-Haul faces intense competition in truck rental, self-storage, and insurance markets based on cost, convenience, and services - The truck rental industry is highly competitive, with principal factors being convenience, equipment quality, breadth of services, and total cost. Major national competitors include Avis Budget Group, Inc. and Penske Truck Leasing[60] - The self-storage market is large and fragmented, with competition based on convenience, cleanliness, security, and price. Key competitors include Public Storage Inc., CubeSmart, Extra Space Storage, Inc., and Life Storage, Inc.[61] - The insurance industry is highly competitive, with U-Haul's insurance companies competing on price, product design, and services against firms with greater financial resources and broader product portfolios[62] Financial Data of Segment and Geographic Areas Financial data for operating segments and geographic areas is detailed in Notes 22 and 22A of the Consolidated Financial Statements - Financial data for operating segments and geographic areas is provided in Note 22 and Note 22A of the Notes to Consolidated Financial Statements[63] Cautionary Statement Regarding Forward-Looking Statements Annual Report contains forward-looking statements subject to risks and uncertainties, with no obligation to update except by law - The Annual Report contains forward-looking statements about future events and results, which are subject to risks and uncertainties[64] - Factors that could significantly affect results include economic conditions, capital expenditures, operational plans, legal positions, liquidity, and compliance with environmental laws[64] - The company assumes no obligation to update or revise any forward-looking statements, except as legally required[65] Risk Factors U-Haul faces risks from operations, industry competition, financing, organizational structure, and legal/regulatory environment - Financial market conditions can adversely affect U-Haul's fleet rotation program, impacting funding for new equipment and resale values of used equipment[67][69] - The company relies on a limited number of truck manufacturers (primarily Ford and General Motors), exposing it to supply chain issues and potential cost increases[70][71] - Regulatory changes favoring electric, autonomous, connected, and shared vehicles could negatively impact U-Haul's business model, requiring costly infrastructure upgrades and potentially limiting long-distance moving services[74][75][76] - U-Haul is highly dependent on automated systems and the Internet, making it vulnerable to disruptions, cyber-attacks, and data breaches, which could lead to operational issues, reputational damage, and legal liabilities[79][80][82] Risks Related to our Business and Operations Risks include financial market impacts on fleet, reliance on manufacturers, electric vehicle regulations, liability, and cybersecurity - The fleet rotation program, funded internally and externally, is vulnerable to financial market conditions, which could limit financing and decrease used equipment resale values[67][69] - Dependence on a few truck manufacturers (Ford, GM) creates risks from their supply chain issues, financial difficulties, or regulatory changes, potentially increasing acquisition costs or impacting supply[70][71] - Regulatory changes favoring electric/autonomous vehicles pose challenges for infrastructure, repair capabilities, and customer service for long-distance moves[74][75][76] - High dependence on internet-based automated systems (reservations, payments) exposes the company to risks from natural disasters, cyber-attacks, and data breaches, potentially causing operational disruptions and reputational damage[79][80][82] Risks Related to our Industry Industry risks include intense competition, economic downturns, inflation, and the importance of A.M. Best ratings for insurance - The truck rental industry is highly competitive, with aggressive pricing from competitors potentially impacting U-Haul's financial results and market share[86][87] - The self-storage industry is fragmented and competitive, with factors like location, cleanliness, security, and price affecting occupancy and rental rates[88] - Economic conditions, including inflation and credit market tightening, can reduce consumer spending, increase business costs, and limit access to favorable financing terms[89][90][91][92] - A.M. Best financial strength ratings are critical for the life insurance business; failure to maintain or improve ratings could adversely affect business plans[93] Risks Related to our Financings High leverage ($6,143.4 million debt) impacts debt payments, operational flexibility, and access to additional financing Total Debt and Operating Lease Liabilities (March 31, 2023) | Category | Amount (Millions) | | :----------------------- | :---------------- | | Total Debt Outstanding | $6,143.4 | | Operating Lease Liabilities | $58.4 | - High leverage could limit the company's ability to make debt and lease payments, reduce flexibility in business planning, restrict access to additional financing, and create a competitive disadvantage[94] Risks Related to our Organization Majority stockholder influence, 'controlled company' status, and potential Series N Non-Voting Common Stock price volatility are risks - Willow Grove Holdings LP and the Shoen family own approximately 50.1% of Voting Common Stock, giving them significant influence over company decisions[95] - U-Haul is a 'controlled company' under NYSE standards, allowing it to opt out of certain corporate governance requirements, though it has not yet made such elections[96] - The recent 9-for-1 stock dividend of Series N Non-Voting Common Stock (UHAL.B) may result in volatile trading prices and uncertainty about the development of a liquid trading market[98][99][100] Risks Related to Legal, Regulatory and Compliance Environmental laws, transportation regulations, carbon taxes, and state insurance department oversight pose significant compliance risks - Compliance with environmental laws and regulations (air, land, water, hazardous substances) affects the business, with potential liabilities for cleanup costs and increasing stringency in the future[101][102] - The truck, trailer, and U-Box rental businesses are subject to broad regulatory powers by transportation and environmental agencies in the U.S. and Canada[103] - Potential federal and state regulations on carbon emissions or carbon-based taxes could significantly increase operating expenses and negatively impact operating margins[104][105] - Insurance companies are heavily regulated by state insurance departments, with changes in laws potentially increasing costs, inhibiting new sales, or limiting rate increases[107] General Risk Factors Terrorist attacks could negatively impact operations, profitability, and reputation, potentially involving rental equipment - Terrorist attacks could negatively impact operations and profitability, potentially damaging facilities or involving rental equipment, leading to liability and reputational damage[110][111] Unresolved Staff Comments No unresolved staff comments to report - No unresolved staff comments[112] Properties U-Haul owns extensive property, plant, and equipment for manufacturing, repair, rental, and storage across North America - The Company owns property, plant, and equipment for manufacturing, repair, and rental of U-Haul® equipment and storage space in the U.S. and Canada[113] - Operations include over 2,200 U-Haul® retail centers (494 managed for related parties), 11 manufacturing/assembly facilities, and 151 fixed-site repair facilities[115] Legal Proceedings Legal proceedings information is incorporated by reference to Note 19, Contingencies, of the Consolidated Financial Statements - Legal proceedings information is detailed in Note 19, Contingencies, of the Notes to Consolidated Financial Statements[116] Mine Safety Disclosures This item is not applicable to U-Haul Holding Company - Mine Safety Disclosures are not applicable[117] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities U-Haul's common stock (UHAL, UHAL.B) is listed on NYSE, with dividend policies and a performance graph comparing market indices - U-Haul Holding Company has two classes of common stock: Voting Common Stock (UHAL) and Series N Non-Voting Common Stock (UHAL.B), both listed on the New York Stock Exchange[119] - As of March 31, 2023, there were approximately 3,300 holders of record for Voting Common Stock and 3,400 for Non-Voting Common Stock[119] Common Stock Dividends Declared (Fiscal 2022-2023) | Declared Date | Per Share Amount (UHAL) | Per Share Amount (UHAL.B) | | :-------------- | :---------------------- | :------------------------ | | August 18, 2022 | $0.50 | - | | April 6, 2022 | $0.50 | - | | March 3, 2023 | - | $0.04 | | December 7, 2022| - | $0.04 | Item 6.[Reserved] This item is reserved and contains no information - Item 6 is reserved[124] Management's Discussion and Analysis of Financial Condition and Results of Operations MD&A covers U-Haul's strategy, segments, accounting estimates, financial performance, liquidity, and fiscal 2024 outlook - The overall strategy is to maintain leadership in the North American 'do-it-yourself' moving and storage industry by providing a seamless and integrated supply chain[128] - The MD&A covers critical accounting estimates, results of operations, liquidity and capital resources, contractual obligations, and the fiscal 2024 outlook[125] Overall Strategy U-Haul's strategy is to maintain leadership in 'do-it-yourself' moving and storage through an integrated supply chain - The primary focus is to provide a wide selection of moving rental equipment, convenient self-storage facilities, portable moving and storage units, and related products and services[129] - Expansion of distribution and improved customer service are achieved by increasing equipment and storage unit availability, growing the independent dealer network, and utilizing Storage Affiliate and Moving Help® capabilities[129] - Property and Casualty Insurance focuses on providing and administering insurance to U-Haul and its customers, while Life Insurance aims for long-term capital growth through life, Medicare supplement, and annuity products[130] Description of Operating Segments U-Haul's three segments focus on expanding dealer networks, enhancing protection packages, and serving the senior market - The Moving and Storage segment focuses on expanding its dealer network and selection/availability of rental equipment[134] - Property and Casualty Insurance aims to increase penetration of protection packages like Safemove® and Safestor®[139] - Life Insurance provides life and health insurance products primarily to the senior market[140] Cybersecurity Incident A data security incident (Nov 2021-Apr 2022) led to unauthorized access of customer data and subsequent class action lawsuits - A data security incident occurred between November 5, 2021, and April 8, 2022, involving unauthorized access to customer contracts[141] - Compromised data included customers' names, dates of birth, and driver's license or state identification numbers; financial, payment processing, or email systems were not involved[141] - Multiple class action lawsuits related to the incident have been consolidated and will be vigorously defended by the Company[142] Critical Accounting Estimates Critical estimates include asset recoverability, insurance reserves, investment impairment, and income taxes, impacted by ASU 2018-12 - Critical accounting estimates include recoverability of property, plant and equipment, adequacy of insurance reserves, impairment of investments, and income taxes[144][145] - The valuation of policy reserves for life insurance and claims for property and casualty insurance involves complex actuarial estimates and assumptions[146][149] - ASU 2018-12 will significantly impact the measurement and disclosure of long-duration insurance contracts, requiring annual updates to cash flow assumptions and quarterly updates to discount rates, with effects recorded in earnings and AOCI[374][376] Recoverability of Property, Plant and Equipment Asset recoverability is assessed by comparing cash flows to carrying amounts, with depreciation increasing if residual values fall - Recoverability is assessed by comparing projected undiscounted net cash flows against carrying amounts, considering used vehicle market trends and estimated useful lives[145] - Reductions in estimated residual values or useful lives of assets will lead to an increase in depreciation expense[145] Insurance Reserves Life and P&C insurance reserves are based on complex actuarial estimates, regularly reviewed for adequacy and economic conditions - Life insurance policy benefits are estimated using net premium valuation and assumptions on mortality, morbidity, policy lapses, asset yields, and interest rates[146] - Property and Casualty Insurance reserves are management's best approximation of future payments, based on past claims experience, current trends, and social/economic conditions, including case reserves and IBNR losses[146] - Reserve adequacy is regularly reviewed, considering claimant longevity, cost trends, reporting practices, environmental factors, and future economic conditions[150][162] Impairment of Investments A valuation allowance for credit losses is recognized in earnings, with a $2.0 million net impairment charge in fiscal 2023 - A valuation allowance for credit losses is recognized in earnings under the current expected credit loss model[152] - If a debt security is intended to be sold or likely required to be sold before recovery, it is written down to fair value, with the write-down charged against the allowance for credit losses[152] - A net impairment charge of $2.0 million was recorded in fiscal 2023[153] Income Taxes Consolidated tax returns are subject to periodic review, with audit outcomes potentially impacting financial results - U-Haul Holding Company files a consolidated tax return with all its legal subsidiaries[154] - Tax returns are periodically reviewed by taxing authorities, and audit outcomes could materially impact financial results[154] Recent Accounting Pronouncements Further information on recent accounting pronouncements is available in Note 3, Accounting Policies - Details on recent accounting pronouncements are provided in Note 3, Accounting Policies, of the Notes to Consolidated Financial Statements[155] Results of Operations Consolidated revenues increased to $5,864.7 million in fiscal 2023, while earnings from operations decreased to $1,444.1 million Consolidated Revenue Summary (Fiscal 2023 vs. 2022) | Revenue Line Item | Fiscal 2023 (Thousands) | Fiscal 2022 (Thousands) | Change (Thousands) | | :----------------------------------------- | :---------------------- | :---------------------- | :----------------- | | Self-moving equipment rentals | $3,877,917 | $3,958,807 | $(80,890) | | Self-storage revenues | $744,492 | $617,120 | $127,372 | | Self-moving & self-storage products/service sales | $357,286 | $351,447 | $5,839 | | Life insurance premiums | $99,149 | $111,027 | $(11,878) | | Property & casualty insurance premiums | $93,209 | $86,518 | $6,691 | | Net investment & interest income | $176,679 | $148,261 | $28,418 | | Other revenue | $478,886 | $431,373 | $47,513 | | Consolidated Revenue | $5,864,691 | $5,739,747 | $124,944 | Consolidated Earnings from Operations (Fiscal 2023 vs. 2022) | Metric | Fiscal 2023 (Millions) | Fiscal 2022 (Millions) | Change (Millions) | | :------------------------- | :--------------------- | :--------------------- | :---------------- | | Earnings from operations | $1,444.1 | $1,645.0 | $(200.9) | | Net earnings available to common stockholders | $923.0 | $1,123.3 | $(200.3) | - Total costs and expenses increased by $325.8 million in fiscal 2023, driven by a $132.9 million increase in rental fleet repair costs and a $97.8 million increase in personnel costs due to a 12% average headcount increase[163] U-Haul Holding Company and Consolidated Subsidiaries (Fiscal 2023 Compared with Fiscal 2022) Consolidated revenues increased by $124.9 million, driven by self-storage, while earnings from operations decreased by $200.9 million Consolidated Revenue Changes (Fiscal 2023 vs. 2022) | Revenue Category | Change (Millions) | | :---------------------------------------- | :---------------- | | Self-moving equipment rentals | $(80.9) | | Self-storage revenues | $127.4 | | Self-moving & self-storage products/service sales | $5.8 | | Life insurance premiums | $(11.9) | | Property & casualty insurance premiums | $6.7 | | Net investment & interest income | $28.4 | | Other revenue (U-Box program) | $47.5 | - Earnings from operations decreased to $1,444.1 million in fiscal 2023 from $1,645.0 million in fiscal 2022[165] - Interest expense increased by $56.6 million to $224.0 million in fiscal 2023, driven by an $871.6 million increase in average outstanding debt and a higher average cost of debt[165] Earnings Per Share (Fiscal 2023 vs. 2022) | Stock Type | Fiscal 2023 | Fiscal 2022 | | :------------------------- | :---------- | :---------- | | Voting Common Stock (Basic & Diluted) | $5.54 | $7.08 | | Non-Voting Common Stock (Basic & Diluted) | $4.62 | $5.58 | Moving and Storage (Fiscal 2023 Compared with Fiscal 2022) Segment revenues rose by $169.4 million due to self-storage growth, but operating expenses increased by $345.7 million Moving and Storage Revenue Changes (Fiscal 2023 vs. 2022) | Revenue Category | Fiscal 2023 (Thousands) | Fiscal 2022 (Thousands) | Change (Thousands) | | :---------------------------------------- | :---------------------- | :---------------------- | :----------------- | | Self-moving equipment rentals | $3,882,620 | $3,963,535 | $(80,915) | | Self-storage revenues | $744,492 | $617,120 | $127,372 | | Self-moving & self-storage products/service sales | $357,286 | $351,447 | $5,839 | | Net investment & interest income | $70,992 | $3,135 | $67,857 | | Other revenue (U-Box program) | $475,251 | $427,836 | $47,415 | | Total Moving and Storage Revenue | $5,567,714 | $5,398,267 | $169,447 | - Self-storage revenues increased by $127.4 million, with a 14% (63,800 units) increase in average monthly occupied units and a 9% increase in average revenue per occupied square foot[170] - The segment added approximately 6.0 million net rentable square feet in fiscal 2023, a 13% increase, comprising 1.1 million square feet from acquisitions and 4.9 million from new development[171] - Operating expenses increased by $345.7 million, driven by a $132.9 million rise in rental fleet repair costs and a $97.8 million increase in personnel costs (12% headcount increase)[174] Property and Casualty Insurance (2022 Compared with 2021) Net premiums increased to $96.2 million, but pretax earnings decreased to $36.6 million due to lower investment income Property and Casualty Insurance Financials (2022 vs. 2021) | Metric | 2022 (Millions) | 2021 (Millions) | Change (Millions) | | :--------------------------- | :-------------- | :-------------- | :---------------- | | Net Premiums | $96.2 | $89.7 | $6.5 | | Net Investment & Interest Income | $7.3 | $25.4 | $(18.1) | | Pretax Earnings from Operations | $36.6 | $49.8 | $(13.2) | - The decrease in net investment income was mainly due to a $16.6 million decrease in the valuation of unaffiliated common stock[177] - Benefits and losses expenses decreased by $0.9 million due to favorable loss experience[178] Life Insurance (2022 Compared with 2021) Net premiums decreased to $99.1 million, and pretax earnings fell to $12.5 million, impacted by lower sales and investment losses Life Insurance Financials (2022 vs. 2021) | Metric | 2022 (Millions) | 2021 (Millions) | Change (Millions) | | :--------------------------- | :-------------- | :-------------- | :---------------- | | Net Premiums | $99.1 | $111.0 | $(11.9) | | Net Investment Income | $102.4 | $123.8 | $(21.4) | | Benefits & Losses Incurred | $144.0 | $164.2 | $(20.2) | | Pretax Earnings from Operations | $12.5 | $19.1 | $(6.6) | - Net premiums decreased due to lower sales of single premium life products and policy decrements in Medicare supplement[180] - Net investment income was impacted by a $12.6 million realized loss on derivatives and a $6.5 million realized loss on bonds[181] - Benefits and losses decreased due to lower death claims (related to COVID-19) and fewer Medicare supplement policies in force[182] Liquidity and Capital Resources U-Haul has sufficient liquidity, but cash decreased to $2,060.5 million, with significant capital expenditures planned for 2024 Cash and Cash Equivalents (March 31) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $2,060.5 | | 2022 | $2,704.1 | Consolidated Cash Flows (Fiscal Years) | Cash Flow Activity | Fiscal 2023 (Thousands) | Fiscal 2022 (Thousands) | Fiscal 2021 (Thousands) | | :--------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Net cash provided by operating activities | $1,729,610 | $1,946,235 | $1,535,395 | | Net cash used by investing activities | $(2,421,385) | $(1,867,176) | $(1,129,529) | | Net cash provided by financing activities | $59,795 | $1,433,155 | $287,353 | - Net cash provided by operating activities decreased by $216.6 million due to reduced net earnings and federal income tax payments[189] - Net cash used in investing activities increased by $554.2 million, primarily due to a $587.4 million increase in purchases of property, plant, and equipment[190] Liquidity and Capital Resources and Requirements of Our Operating Segments Moving and Storage plans significant reinvestment in fleet and real estate, funded by debt, lease financing, and operations - Moving and Storage plans to reinvest approximately $685 million (net of sales) in its rental equipment fleet in fiscal 2024, funded by debt, lease financing, and operations[192] - Real estate capital expenditures for self-storage acquisitions and development are expected to remain high in fiscal 2024, funded by internally generated funds, corporate debt, and borrowings against existing properties[193] Net Capital Expenditures (Moving and Storage, Fiscal Years) | Category | Fiscal 2023 (Thousands) | Fiscal 2022 (Thousands) | Fiscal 2021 (Thousands) | | :-------------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Purchases of rental equipment | $1,298,955 | $1,061,439 | $870,106 | | Purchases of real estate, construction & renovations | $1,341,417 | $1,004,192 | $505,112 | | Other capital expenditures | $86,595 | $70,906 | $54,780 | | Less: Sales of property, plant & equipment | $(701,331) | $(623,235) | $(537,484) | | Net capital expenditures | $2,025,636 | $1,513,302 | $903,991 | - Life Insurance's stockholders' equity decreased significantly in 2022 due to interest rate changes, and a statutory net loss in 2022 means no dividends can be distributed in calendar year 2023[198] Cash Provided from Operating Activities by Operating Segments Moving and Storage operating cash decreased by $229.6 million, while insurance segments saw increases due to timing - Moving and Storage's net cash from operating activities decreased by $229.6 million in fiscal 2023, mainly due to reduced net earnings and federal income tax payments[200] - Property and Casualty Insurance's net cash from operating activities increased to $36.2 million in 2022, from $31.2 million in 2021, due to intercompany balances and payables timing[201] - Life Insurance's net cash from operating activities increased to $99.8 million in 2022, from $91.8 million in 2021, primarily due to an increase in accounts payable[203] Liquidity and Capital Resources - Summary U-Haul maintains significant cash and liquidity, expects $366 million in tax refunds, and uses asset-backed debt financing - The company expects approximately $366 million in federal income tax refunds from NOL carrybacks, with $243 million already received[206] - Borrowing strategy focuses on asset-backed financing and rental equipment leases, with a goal to ladder maturities and fix interest rates[207] - As of March 31, 2023, $465.0 million in borrowing capacity was available under existing credit facilities[207] Contractual Obligations and Commercial Commitments Total contractual obligations were $12,000.7 million as of March 31, 2023, excluding $75.8 million in uncertain tax liabilities Total Contractual Obligations (as of March 31, 2023) | Category | Total (Thousands) | | :------------------------------------- | :---------------- | | Notes and loans payable - Principal | $4,049,382 | | Notes and loans payable - Interest | $1,387,115 | | Revolving credit agreements - Principal | $615,000 | | Revolving credit agreements - Interest | $102,175 | | Finance leases - Principal | $223,205 | | Finance leases - Interest | $11,991 | | Finance liability - Principal | $1,255,763 | | Finance liability - Interest | $158,493 | | Operating lease liabilities | $103,956 | | Property and casualty obligations | $110,545 | | Life, health and annuity obligations | $3,624,456 | | Self-insurance accruals | $335,227 | | Post-retirement benefit liability | $23,428 | | Total contractual obligations | $12,000,736 | - ASC 740 - Income Taxes liabilities and interest of $75.8 million are not included due to uncertainty surrounding ultimate settlements[213] Fiscal 2024 Outlook Fiscal 2024 focus includes increasing rental volume, expanding storage, continuing U-Box investment, and managing inflation - Fiscal 2024 focus for U-Move® program includes increasing transaction volume, improving pricing, product, and utilization for self-moving equipment rentals[214] - Investment in the truck fleet is likely to increase in fiscal 2024[214] - The storage business plans to complete current projects, increase occupancy, acquire new locations, and continue investing in the U-Box® program, with spending on acquisitions and new development likely to increase[216] - Inflationary pressures are expected to challenge the ability to maintain or improve operating margins[217] Quantitative and Qualitative Disclosures About Market Risk U-Haul is exposed to interest rate and foreign currency risks, using derivatives to mitigate interest rate exposure - U-Haul is exposed to financial market risks from changes in interest rates and currency exchange rates, using derivative financial instruments for mitigation[219] Interest Rate Risk Interest rate risk stems from variable rate debt, with $615.0 million unfixed; a 100 bps SOFR increase impacts earnings by $6.2 million - Interest rate risk primarily relates to variable rate debt obligations, with interest rate swap agreements used to fix payments on certain SOFR-indexed debt[220] - As of March 31, 2023, $615.0 million of variable rate debt was not fixed through interest rate swaps[221] - A 100 basis point increase in SOFR would decrease future earnings and cash flows by $6.2 million annually[221] Interest Rate Risk Sensitivity of Fixed Maturity Portfolio (March 31) | Change in Interest Rates (bps) | Market Value (2023, Thousands) | Market Value (2022, Thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | -300 | $3,100,972 | $3,262,844 | | -200 | $2,970,228 | $3,153,114 | | -100 | $2,839,624 | $2,992,011 | | No change | $2,709,037 | $2,821,092 | | +100 | $2,578,654 | $2,650,410 | | +200 | $2,448,348 | $2,479,737 | | +300 | $2,318,149 | $2,309,224 | Foreign Currency Exchange Rate Risk Canadian operations (5.0% revenue) pose foreign currency risk, but a 10% USD change is not material to net income - Foreign currency exchange rate risk is primarily from Canadian business, which accounted for approximately 5.0% of revenue in fiscal 2023[226] - A 10% change in the U.S. dollar's value relative to the Canadian dollar is not considered material to net income, and this risk is typically not hedged[226] Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements are incorporated by reference - The Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements, including notes and schedules, are incorporated by reference[227] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure to report - Not applicable[228] Controls and Procedures Disclosure controls were ineffective due to material weaknesses in IT and EPS calculation, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to material weaknesses in internal control over financial reporting[231] - Material weaknesses identified include deficiencies in general information technology controls (program change management, user access, segregation of duties, cybersecurity) and financial reporting controls for earnings per share calculation[237][238] - Remediation measures are being implemented, including formalizing IT policies, implementing new controls, and enhancing procedures for EPS calculation, with the redesigned EPS control operating as planned at year-end[239][240] - The independent registered public accounting firm, BDO USA, LLP, also expressed an adverse opinion on the effectiveness of internal control over financial reporting as of March 31, 2023[242] Other Information No other information to report under this item - Not applicable[249] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections No disclosures regarding foreign jurisdictions that prevent inspections - Not applicable[249] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement[251] - The company has a Code of Ethics for all directors, officers, and employees, posted on its investor relations website[252] Executive Compensation Executive compensation information is incorporated by reference from the definitive proxy statement - Executive compensation information is incorporated by reference from the proxy statement[253] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the proxy statement - Security ownership information is incorporated by reference from the proxy statement[253] Certain Relationships and Related Transactions, and Director Independence Related party transactions and director independence information is incorporated by reference from the definitive proxy statement - Information on related party transactions and director independence is incorporated by reference from the proxy statement[254] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the proxy statement - Principal accountant fees and services information is incorporated by reference from the proxy statement[255] PART IV Exhibits; Financial Statement Schedules This section lists financial statements, schedules, and various exhibits filed as part of the Annual Report on Form 10-K - The section includes the Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements (Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Changes in Stockholders' Equity, and Cash Flows) with accompanying notes[256] - Financial statement schedules, such as Condensed Financial Information of U-Haul Holding Company and Valuation and Qualifying Accounts, are also filed[256] - Numerous exhibits are listed, including organizational documents, various supplemental indentures related to U-Haul Investors Club, management agreements, and employee benefit plans[256][257][258][259][260][261][262][263][264][265][266][267][268] Form 10-K Summary No Form 10-K Summary is provided in this report - No Form 10-K Summary is provided[269] Report of Independent Registered Public Accounting Firm BDO USA, LLP issued an unqualified opinion on financials but an adverse opinion on internal controls due to material weaknesses - BDO USA, LLP issued an unqualified opinion on the consolidated financial statements for the period ended March 31, 2023[269] - An adverse opinion was expressed on the effectiveness of internal control over financial reporting as of March 31, 2023[270] - Critical audit matters included the valuation of Future Policy Benefits (Oxford), Reserve for Property & Casualty Losses and Loss Adjustment Expenses (Repwest), and Self-Insurance Reserves (U-Haul), all involving significant management judgment and actuarial estimates[275][277][279] Consolidated Financial Statements Audited consolidated financial statements show total assets of $18,124.6 million and net earnings of $923.0 million in fiscal 2023 Consolidated Balance Sheet Highlights (March 31) | Metric | 2023 (Thousands) | 2022 (Thousands) | | :----------------- | :--------------- | :--------------- | | Total Assets | $18,124,648 | $17,299,581 | | Total Liabilities | $11,596,313 | $11,347,089 | | Total Stockholders' Equity | $6,528,335 | $5,952,492 | Consolidated Statements of Operations Highlights (Years Ended March 31) | Metric | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :----------------- | :--------------- | :--------------- | :--------------- | | Total Revenues | $5,864,691 | $5,739,747 | $4,541,985 | | Earnings from Operations | $1,444,106 | $1,644,997 | $961,147 | | Net Earnings | $922,998 | $1,123,286 | $610,856 | Consolidated Statements of Cash Flows Highlights (Years Ended March 31) | Cash Flow Activity | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :--------------------------------- | :--------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $1,729,610 | $1,946,235 | $1,535,395 | | Net cash used by investing activities | $(2,421,385) | $(1,867,176) | $(1,129,529) | | Net cash provided by financing activities | $59,795 | $1,433,155 | $287,353 | Notes to Consolidated Financial Statements Notes detail accounting policies, financial instruments, segment info, critical estimates, and contingencies, including a cybersecurity incident - The financial statements are prepared in accordance with GAAP, with insurance subsidiaries consolidated on a calendar year basis into the company's fiscal year[300] - Critical accounting estimates include recoverability of property, plant and equipment, adequacy of insurance reserves, impairment of investments, and income taxes, all requiring significant management judgment[312] - ASU 2018-12, effective January 1, 2023, will significantly change the accounting for long-duration insurance contracts, impacting measurement of liabilities and amortization of deferred policy acquisition costs[374][377] - A cybersecurity incident in 2021-2022 led to unauthorized access of customer personal data, resulting in class action lawsuits[507][508] - The company has significant related party transactions, including management fees and lease expenses with entities controlled by major stockholders[516][517][518] 1. Basis of Presentation Financial statements are consolidated with a March 31 fiscal year, while insurance subsidiaries report on a December 31 calendar year - U-Haul Holding Company's fiscal year ends March 31, while its insurance subsidiaries' fiscal years end December 31, with consolidation on that basis[300] - Management believes this consolidation method does not materially affect the presentation of financial position or results of operations[300] Note 2. Principles of Consolidation The company applies ASC 810, consolidating wholly-owned subsidiaries including U-Haul International, Repwest, and Oxford Life - The company applies ASC 810 - Consolidation, consolidating VIEs where it is the primary beneficiary or entities where it holds a majority of voting rights[302][305] - U-Haul Holding Company is the holding company for U-Haul International, Inc., Amerco Real Estate Company, Repwest Insurance Company, and Oxford Life Insurance Company[306] - The three reportable segments are Moving and Storage, Property and Casualty Insurance, and Life Insurance[307] Note 3. Accounting Policies This note outlines significant accounting policies, including estimates, investments, and the impact of ASU 2018-12 on insurance contracts - Critical accounting policies involve difficult and subjective judgments, including consolidation principles, asset recoverability, insurance reserve adequacy, investment impairment, and income tax recognition[312] - Inventories are primarily valued using the last-in first-out (LIFO) method, comprising 94% of total inventories as of March 31, 2023[325] - Property, plant, and equipment are stated at cost, with depreciation computed using straight-line or accelerated methods; gains/losses on personal property dispositions are netted against depreciation[327] - ASU 2018-12 will require quarterly updates to discount rate assumptions for long-duration insurance contracts, with changes recorded in AOCI, and is expected to result in a $110.0 million to $130.0 million decrease to AOCI at transition[374][376][382] 4. Earnings Per Share EPS is calculated using the two-class method, allocating undistributed earnings 10% to UHAL and 90% to UHAL.B - Earnings per share are calculated using the two-class method, allocating undistributed earnings to Voting Common Stock (10%) and Non-Voting Common Stock (90%)[385][386] Earnings Per Share Calculation (Years Ended March 31) | Metric | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :---------------------------------------- | :--------------- | :--------------- | :--------------- | | Net earnings available to common stockholders | $922,998 | $1,123,286 | $610,856 | | Voting Common Stock dividends declared | $(19,608) | $(29,412) | $(49,019) | | Non-Voting Common Stock dividends declared | $(14,117) | – | – | | Undistributed earnings available to common stockholders | $889,273 | $1,093,874 | $561,837 | | Basic and diluted EPS of Voting Common Stock | $5.54 | $7.08 | $5.37 | | Basic and diluted EPS of Non-Voting Common Stock | $4.62 | $5.58 | $2.87 | Note 5. Reinsurance Recoverables and Trade Receivables, Net Reinsurance recoverables and trade receivables, net, totaled $189.5 million, with a $3.8 million allowance for credit losses Reinsurance Recoverables and Trade Receivables, Net (March 31) | Category | 2023 (Thousands) | 2022 (Thousands) | | :-------------------------------- | :--------------- | :--------------- | | Reinsurance recoverable | $42,362 | $50,586 | | Trade accounts receivable | $110,281 | $150,285 | | Accrued investment income | $29,553 | $28,689 | | Premiums and agents' balances | $4,075 | $1,650 | | Other receivables | $6,324 | $6,364 | | Less: Allowance for credit losses | $(3,789) | $(8,649) | | Total | $189,498 | $229,343 | - The allowance for expected credit losses on trade receivables was $3.8 million as of March 31, 2023, down from $8.6 million in 2022[339] Note 6. Investments Investments include fixed maturities and marketable equities ($2,709.0 million fair value), with a $2.0 million impairment charge Available-for-Sale Investments (Fair Value, March 31) | Category | 2023 (Thousands) | 2022 (Thousands) | | :---------------------------------------- | :--------------- | :--------------- | | U.S. treasury securities and government obligations | $344,676 | $135,093 | | U.S. government agency mortgage-backed securities | $27,231 | $41,805 | | Obligations of states and political subdivisions | $150,505 | $192,982 | | Corporate securities | $1,869,233 | $2,121,055 | | Mortgage-backed securities | $317,392 | $330,157 | | Total Fixed Maturities | $2,709,037 | $2,821,092 | | Common stocks | $39,375 | $46,212 | | Non-redeemable preferred stocks | $21,982 | $26,095 | | Total Equity Investments | $61,357 | $72,307 | Other Investments (Carrying Value, March 31) | Category | 2023 (Thousands) | 2022 (Thousands) | | :------------------------ | :--------------- | :--------------- | | Mortgage loans, net | $466,531 | $423,163 | | Short-term investments | $15,921 | $30,916 | | Real estate | $72,178 | $67,824 | | Policy loans | $10,921 | $10,309 | | Other equity investments | $9,989 | $11,543 | | Total | $575,540 | $543,755 | - A $2.0 million net impairment charge was reported in fiscal 2023 for available-for-sale securities[397] Note 7. Other Assets Other assets totaled $51.1 million, primarily consisting of debt-related and real estate-related deposits Other Assets (March 31) | Category | 2023 (Thousands) | 2022 (Thousands) | | :----------------------- | :--------------- | :--------------- | | Deposits (debt-related) | $35,573 | $37,588 | | Deposits (real estate related) | $15,479 | $22,821 | | Total | $51,052 | $60,409