By Ian Gilson, PhD, CFA
On February 05, 2014 AMERCO (UHAL) reported its results for the third fiscal quarter of 2014, followed by a conference call on the February 06, 2014.
Continued increases in transactions, additional vehicles and some price improvements drove truck revenue up by 11.3%, all operating revenue increased by 7.9% and earnings per share jumped from $5.61 to $7.06. EBITDAL for the quarter was $15.26 a share, up from $14.65 a year ago. The company continues to add both independent dealers and owned self storage outlets (which double as U-Haul dealers) to the network in the third quarter.
Moving and storage revenue growth was slightly below with our expectations, as shown below but excellent control of expenses moved pretax and net income to slightly above our estimate.
Other revenue jumped from $28.7 million a year ago to $51.0 million in the last quarter. This revenue is driven by the company's U-Box pods business. The amount of pods revenue is now large enough that the company will probably break this out as a revenue segment within a few quarters.
The combined lease and interest expenses were $48 million in the latest quarter, versus $50 million a year ago. Stable, and low, interest rates are having a positive impact on financing the fleet and real estate expansions.
Expense ratios were close to year ago ratios since both third quarters had similar weather patterns. The fourth quarter will be affected by bad weather in the NE United States. Industrial production has been impacted by the weather and cold and snow continue into February. However, the NE states have never been major revenue producers in the winter and account for most of the seasonality of revenue. However, January 2014 revenue was higher than January 2103.
U-Haul truck and rental revenue is being driven by increasing capital expenditures that are not being matched by the competition. More trucks available contribute to more transactions and the company's past investments in IT infrastructure have reduced the expenses needed to handle the transactions. So far this fiscal year the company has spent $690 million in capital expenditures, up 20% from last year, and will spend over $720 million on the rental fleet in fiscal 2014. Sales of used trucks are expected to be about $210 million. Since the company has some excess cash we expect some vehicle purchases to be financed with this cash, keeping the combined interest and lease expenses at close to the current level.
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By Ian Gilson, PhD, CFA