UHAL

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2009 (Fiscal Q2 2010) and the six months ended September 30, 2009, for AMERCO (U-Haul Holding Co). AMERCO operates three reportable segments: Moving and Storage (U-Haul truck/trailer rentals, self-storage, and moving supplies), Property and Casualty Insurance (RepWest), and Life Insurance (Oxford). The company reported as an accelerated filer.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Consolidated revenues decreased 3.0% in Q2 and 3.5% YTD compared to the prior year. The primary driver was a decline in self-moving equipment rental revenues (down 2.7% in Q2 and 3.5% YTD) due to lower average revenue per one-way transaction and unfavorable foreign currency exchange rates (USD vs. CAD).
• Propane Sales: Sales of self-moving products decreased significantly (4.8% in Q2, 6.2% YTD) primarily due to a sharp decline in propane prices, which offset an increase in sales volume.
• Expense Management: Total costs and expenses decreased 3.6% in Q2 and 2.9% YTD. Depreciation expense decreased significantly ($9.6 million in Q2, $15.4 million YTD) due to a moderation in the equipment rotation program and improved gains on the disposal of used equipment.
• Insurance Performance: Life insurance premiums increased 6.1% in Q2 due to new sales of final expense products. However, net investment income declined across segments due to lower yields on short-term investments.
• Self-Storage: Occupancy rates for company-owned facilities declined to 77.2% in Q2 2009 from 81.8% in Q2 2008, contributing to a slight revenue decrease in this segment.

Guidance, Outlook, and Risks

• Outlook: Management plans to focus on increasing transaction volume and improving pricing for self-moving equipment. Capital expenditures for the fleet are expected to be lower in Fiscal 2010 compared to previous years due to significant prior investments. The company intends to complete current self-storage projects and increase occupancy.
• Liquidity: The company maintains strong liquidity with $385 million in cash and $40 million in available credit facilities. Management believes internal funds and existing facilities are sufficient to meet current and expected needs.
• Risks and Contingencies:
  • Legal Proceedings: A shareholder derivative lawsuit (Shoen v. SAC Holding Corp.) regarding the sale of self-storage properties remains pending on appeal before the Nevada Supreme Court.
  • Related Party Transactions: Significant transactions exist with entities controlled by major shareholders (SAC Holdings, Mercury, etc.), including management fees, lease payments, and dealership commissions totaling over $100 million in revenue and expenses YTD.
  • Market Risk: The company is exposed to interest rate risk on variable-rate debt (hedged via swaps) and foreign currency risk from Canadian operations (approx. 6% of revenue).

Investor Verification Checklist

• One-Way Moving Trends: Verify the sustainability of the decline in average revenue per one-way transaction and the impact of economic conditions on moving volume.
• Propane Pricing Sensitivity: Assess the correlation between propane commodity prices and the "Self-moving and self-storage products" revenue line.
• Related Party Exposure: Review the concentration of revenue and expenses tied to SAC Holdings and other affiliated entities to understand potential conflicts or dependency.
• Debt Maturities: Confirm the schedule of debt maturities, noting that a significant portion ($206 million) is due in Fiscal 2010, and verify refinancing plans.
• Legal Resolution: Monitor the status of the Shoen derivative lawsuit appeal for potential financial impact or governance changes.