UHAL

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended March 31, 2005, for AMERCO (the holding company) and its primary subsidiary, U-Haul International, Inc. AMERCO operates as North America's largest "do-it-yourself" moving and storage provider through a network of over 1,350 company-operated retail centers and 14,071 independent dealers. The company's operations are divided into four reportable segments: Moving and Storage Operations, Property and Casualty Insurance (RepWest), Life Insurance (Oxford), and SAC Holdings (self-storage properties).

Key Financial Metrics (Fiscal 2005)

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 7.7% to $2.01 billion from $2.18 billion in fiscal 2004. This decline was primarily driven by the deconsolidation of SAC Holding Corporation in March 2004 and the W.P. Carey Transactions, which reduced self-storage revenues by approximately $109.2 million and $29.7 million, respectively.
• Profitability Surge: Despite lower revenues, Earnings from Operations increased 31.6% to $167.0 million. This improvement was due to productivity initiatives, the absence of restructuring costs (which totaled $44.1 million in fiscal 2004), and a significant non-recurring litigation settlement income of $51.3 million.
• Turnaround from Loss: The company returned to profitability, reporting net earnings of $89.4 million compared to a net loss of $2.9 million in fiscal 2004.
• Debt Reduction: Total debt decreased to $780.0 million from $962.3 million in the prior year, reflecting lower borrowings and the deconsolidation of SAC Holding Corporation.

Guidance, Outlook, and Risks

• Refinancing: In May 2005, the company entered into agreements to refinance its capital structure, funded on June 8, 2005. This new structure includes three asset-backed facilities totaling approximately $945 million. The company expects this to lower annual interest expense by approximately $25.0 million but will incur a one-time pre-tax charge of approximately $34.0 million in the first quarter of fiscal 2006 for early loan redemption.
• Outlook: Management anticipates continued momentum in Moving and Storage operations, supported by a fleet expansion of 6,750 new trucks. The Property and Casualty segment (RepWest) continues to exit non-U-Haul lines, while the Life Insurance segment (Oxford) expects improved ratings following the Kocher litigation settlement.
• 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.
  • Securities Litigation: The company is a defendant in a consolidated putative class action lawsuit alleging false financial statements regarding transactions with SAC entities.
  • Insurance Reserves: The property and casualty segment faces risks related to long-tail claims and adverse loss development, particularly from hurricane-related losses in 2004.
  • SAC Holdings Exposure: The company holds significant notes receivable from SAC Holdings ($203.7 million). If SAC Holdings defaults on senior debt, AMERCO could suffer significant losses.

Investor Verification Checklist

• Verify the impact of the $34 million pre-tax charge related to the debt refinancing on Q1 fiscal 2006 earnings.
• Monitor the status and potential financial impact of the ongoing SEC investigation and securities class action litigation.
• Assess the creditworthiness of SAC Holdings and the adequacy of collateral for the $203.7 million in notes receivable.
• Review the adequacy of insurance reserves for RepWest, particularly regarding long-tail claims and hurricane losses.
• Confirm the execution of the fleet expansion plan (6,750 new trucks) and its effect on rental capacity and repair costs.