UHAL: AMERCO Reports Financial Results for the 2nd Quarter of Fiscal 2023; 9-for-1 stock dividend of new dividend-paying Series N non-voting common stock effective November 10th
NASDAQ:UHAL
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Financial Results for Second Quarter of Fiscal 2023
On November 9, 2022 after the market close, AMERCO (NASDAQ:UHAL) reported financial results for the second fiscal quarter ending September 30, 2022. Total revenues increased 2.3% YOY to approximately $1.70 billion. Self-moving equipment rentals decreased by 1.4% (or $17 million) as continued improvement for in-town rentals almost offset the softness in the one-way business. Other revenues (which are predominately driven by U-Box) increased 17.4% (or $24.9 million). U-Box revenues have flattened in the current third fiscal quarter. Self-storage revenues increased 20.9% (or $32.1 million).
In the self-moving equipment rental business, there was continued improvement of transactions and revenue for in-town rentals. However, despite continued rate improvement for the one-way business, there was a decrease in the average number of miles driven per transaction, which slightly more than offset the improvement for in-town rentals of trucks and trailers.
In self-moving/self-storage products & services, the 5.1% revenue increase was due to higher sales of hitches and propane, which were somewhat offset a decrease in moving supplies.
In the self-storage area, revenues increased 20.9% (or $32.1 million) as the average monthly number of occupied units at company-owned locations increased by 64,500 units, occupancy rates increased YOY from 84.3% to 85.4% and new capacity over the last 12 months expanded by 70,000 new storage units (5.4 million net rentable square feet).
Other revenue increased 20.9% (or $32.1 million) driven primarily by growth in the U-Box program.
Total costs and expenses increased by 8.8% (or $95.2 million). Operating expenses increased 16.6% (or $115.5 million) primarily driven by fleet repair & maintenance and personnel costs.
Management has been attempting to return to a normalized rotation program; the availability of certain truck models has improved with capital expenditures on new rental trucks totaling $718.2 million during the first six months of this fiscal year compared to $564.3 million last fiscal year. Nevertheless, management has again reduced forecasted gross fleet capex to slightly under $1.4 billion.
Earnings from operations decreased 9.8% (or by $56.6 million) to $522.1 million compared to $578.7 million in second fiscal quarter of 2022. An income tax expense of $129.0 million was recorded.
For the second quarter of fiscal 2022, AMERCO reported a net income of $352.0 million (or $17.95 per diluted share pre-stock dividend), a 14.1% decrease compared to $409.9 million (or $20.90 per diluted share) in the comparable quarter last year. Shares outstanding have remained stable at 19,607,788 shares, though effective November 10, 2022, shares outstanding increased to 196,077,889 due to the 9-for-1 stock dividend of non-voting Series N shares.
As of September 30, 2022, AMERCO has a strong liquidity position. The Moving and Storage operating segment has approximately $3.175 billion of cash and available credit. Working capital sequentially decreased slightly by 1.7% to approximately $6.97 billion.
In summary, management is disappointed at the mediocre results from the one-way transactions in the truck rental business and also is concerned about the flattening of the U-Box business during the current third fiscal quarter. Over the next two quarters, management anticipates addressing the increase in operating expenses “in a meaningful way.”
Creation of Series N Non-Voting Common Stock
The new Non-Voting Common Stock was distributed at the close of trading on November 9, 2022. Trading of the non-voting shares began on November 10, 2022 under the ticker UHALB. The ticker symbol of the voting common stock will continue to be UHAL.
The new series of non-voting stock is intended to preserve the current voting structure of the company so that management’s long-term operational orientation can be retained. The stock dividend has almost the same effect as a 10-for-1 stock split with every holder of current voting shares subsequently holding ten (10) shares, of which one (1) will be voting and nine (9) will be non-voting. The proportional ownership will remain the same. On the dividend front, holders of non-voting shares will be entitled to receive the same dividends or distributions in the future at no less a rate than voting shares on a per share basis.
Dividend Policy on Series N Non-Voting Common Stock
On October 25, 2022, the company announced that the Board of Directors adopted a dividend policy for the newly-created Series N Non-Voting Common Stock. The Board’s policy is to declare and pay quarterly cash dividends on the Series N Non-Voting Common Stock of $0.04 per share, beginning with the third quarter of fiscal year 2023. Special quarterly dividends for voting shares will create additional dividend rights for non-voting stock only to the extent the special dividend exceeds the quarterly non-voting dividend. In other words, the holders of non-voting shares will be entitled to receive the same dividends or distributions in the future at no less a rate than voting shares on a per share basis.
Corporate Name Change
In order to attract new stockholders, Committee approved a name change to U-Haul Holding Company so that current shareholders and potential investors will have the awareness that the company holds one of the most recognized brands in North America. The name change will occur by the end of 2022 calendar year.
Valuation
Utilizing comparable valuations of a blend of truck rental and self-storage companies, an EV-to-EBITDA first quartile valuation level of 7.4 indicates a target price of $67.50.
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