UHAL

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended December 31, 2007 (Fiscal Q3 2008) and the nine months ended December 31, 2007 (Fiscal YTD 2008) for AMERCO, the holding company for U-Haul International, Inc., Amerco Real Estate Company, Republic Western Insurance Company, and Oxford Life Insurance Company. A significant event during the period was the deconsolidation of SAC Holding II effective October 31, 2007, following a capital contribution by Blackwater Investments Inc. that removed AMERCO's status as the primary beneficiary.

Key Financial Metrics

Material Changes vs. Prior Period

• Deconsolidation of SAC Holding II: The most significant change was the deconsolidation of SAC Holding II effective October 31, 2007. This reduced reported self-storage revenues and product sales for the quarter and YTD periods compared to the prior year, which included full or partial consolidation of this entity.
• Revenue Trends: Self-moving equipment rental revenues were flat for the quarter but decreased $15.3 million YTD due to lower average one-way revenue per transaction and utilization, despite an increase in fleet size and transaction volume. Self-storage revenues increased YTD excluding SAC Holding II due to pricing improvements.
• Expense Increases: Total costs and expenses increased primarily due to higher depreciation associated with the fleet rotation program. Interest expense increased to $25.2 million for the quarter and $76.5 million YTD, driven by increased debt levels to fund fleet acquisitions.
• Profitability: While operating earnings increased slightly for the quarter, YTD operating earnings decreased by $35.1 million compared to the prior year, largely due to the loss of SAC Holding II results and higher depreciation.

Guidance, Outlook, and Risks

Outlook: Management plans to focus on increasing transaction volume, improving pricing, and optimizing product mix for self-moving equipment rentals. The company intends to continue investing in its truck fleet, having added over 17,000 new trucks in the first nine months of fiscal 2008. Storage occupancy gains are expected in fiscal 2009.

Risks and Contingencies:

• Related Party Exposure: AMERCO holds approximately $198.3 million in junior unsecured notes receivable from SAC Holdings. If SAC Holdings defaults on senior debt, AMERCO could suffer losses if collateral is insufficient.
• Leverage: Total debt outstanding is $1.4 billion. High leverage limits flexibility and requires significant cash flow allocation to debt service.
• Interest Rate Risk: The company has approximately $616.4 million in variable rate debt. While hedged with swaps, a 100 basis point increase in LIBOR would increase interest expense by approximately $0.2 million annually.
• Legal Proceedings: Ongoing derivative litigation involving the Shoen family and SAC Holdings remains pending, though the court has previously dismissed claims regarding board independence.

Investor Verification Checklist

• Verify the impact of the SAC Holding II deconsolidation on year-over-year revenue and earnings comparisons.
• Review the details of the $198.3 million notes receivable from SAC Holdings and the creditworthiness of the related party.
• Assess the sustainability of the fleet rotation program given the $1.4 billion debt load and rising interest rates.
• Monitor the status of the derivative litigation (Shoen vs. SAC Holding Corporation) for potential financial impact.
• Confirm the effectiveness of the stock repurchase program, which reduced weighted average shares outstanding.