UHAL

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended March 31, 2006 for AMERCO (the holding company) and its primary operating subsidiary, U-Haul International, Inc. AMERCO operates as North America's largest "do-it-yourself" moving and storage provider. The company's operations are divided into four reportable segments: Moving and Storage Operations, Property and Casualty Insurance (RepWest), Life Insurance (Oxford), and SAC Holding II (self-storage properties).

Key Financial Metrics (Fiscal 2006)

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 4.9% to $2.11 billion from $2.01 billion in fiscal 2005. This was driven by a 4.6% increase in self-moving equipment rentals ($1.50 billion) and a 7.0% increase in self-storage revenues ($122.1 million).
• Profitability Surge: Net earnings available to common shareholders rose 41.5% to $108.2 million from $76.5 million. Earnings from operations more than doubled to $305.4 million from $167.0 million.
• Non-Recurring Items:
  • Debt Extinguishment: Fiscal 2006 included a one-time charge of $35.6 million for fees on early extinguishment of debt and write-offs of debt issuance costs.
  • Litigation Settlement: Fiscal 2005 included a $51.3 million gain from a litigation settlement with a former auditor, which is absent in 2006.
• Segment Performance: The Moving and Storage segment earnings from operations increased to $292.8 million from $166.0 million. The Property and Casualty Insurance segment returned to profitability with $1.1 million in earnings, compared to a $14.8 million loss in 2005, following the exit of non-U-Haul business lines.

Guidance, Outlook, and Risks

Outlook: Management expects momentum in Moving and Storage operations to continue in fiscal 2007. Key initiatives include increasing transaction volume and utilization through the addition of approximately 15,000 new trucks and 4,200 trailers. The company plans to increase storage occupancy and expand the eMove affiliate network.

Risks and Contingencies:

• SEC Investigation: The SEC has issued a formal order of investigation regarding potential violations of Federal Securities laws. The outcome is unpredictable and could result in significant penalties.
• Securities Litigation: A consolidated class action lawsuit is pending, though a settlement in principle for $5.0 million (covered by D&O insurance) has been agreed upon.
• Environmental Liability: The company faces potential liabilities regarding hazardous substances on real estate properties, with estimated remediation costs of approximately $7.6 million through 2011.
• Insurance Reserves: The Property and Casualty segment (RepWest) has a history of losses in non-U-Haul lines. While these lines have been exited, future adverse loss development remains a risk.
• Related Party Transactions: Significant financial relationships exist with SAC Holdings entities (controlled by the Shoen family), including $203.7 million in notes receivable and management fee arrangements.

Investor Verification Checklist

• Debt Refinancing: Verify the terms and interest rates of the new $200 million in term loan facilities secured in June 2006 (BTMU Capital and Bayerische Hypo-und Vereinsbank) intended to fund fleet expansion.
• Insurance Reserve Adequacy: Review the "Unpaid Loss and Loss Adjustment Expenses" tables for RepWest to assess the stability of loss reserves following the exit of non-core business lines.
• Related Party Exposure: Confirm the status of the $203.7 million in notes receivable from SAC Holdings and the potential impact of SAC Holdings' leverage on AMERCO's financial position.
• Legal Resolution: Monitor the status of the SEC investigation and the final court approval of the $5.0 million securities litigation settlement.
• Fleet Depreciation Policy: Note the change in depreciation method for new trucks from straight-line to an accelerated declining balance method, which increased depreciation expense by approximately $4.0 million in fiscal 2006.