**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington, D.C. 20549**





**Form 10-Q**





(Mark One)


R  **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.**


**For the quarterly period ended September 30, 2004**





or





£  **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.**


**For the transition period from __________________ to __________________**





**Commission**
**File Number**
**Registrant, State of Incorporation,**
**Address and Telephone Number**
**I.R.S. Employer**
**Identification No.**1-11255
**AMERCO**
88-0106815(A Nevada Corporation)1325 Airmotive Way, Ste. 100Reno, Nevada 89502-3239Telephone (775) 688-63002-38498
**U-Haul International, Inc.**
86-0663060(A Nevada Corporation)2727 N. Central AvenuePhoenix, Arizona 85004Telephone (602) 263-6645




Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £





Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes R No £





Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes R No £





21,284,604 shares of AMERCO Common Stock, $0.25 par value, were outstanding at September 30, 2004.





5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at September 30, 2004.







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**TABLE OF CONTENTS**





Page No.**PART I FINANCIAL INFORMATION**Item 1.
Financial Statementsa)Condensed Consolidated Balance Sheets as of September 30, 2004 (unaudited) and March 31, 2004
1b)Condensed Consolidated Statement of Operations for the Quarters and Six Months ended September 30, 2004 and 2003 (unaudited)
2c)Condensed Consolidated Statements of Comprehensive Income for the Quarters and Six Months ended September 30, 2004 and 2003 (unaudited)
3d)Condensed Consolidated Statements of Cash Flows for the Six Months ended September 30, 2004 and 2003 (unaudited)
4e)Notes to Condensed Consolidated Financial Statements
5Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
34Item 3.
Quantitative and Qualitative Disclosures About Market Risk
57Item 4.
Controls and Procedures
58**PART II OTHER INFORMATION**Item 1.
Legal Proceedings
60Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
60Item 3.
Defaults Upon Senior Securities
60Item 4.
Submission of Matters to a Vote of Security Holders
61Item 5.
Other Information
61Item 6.
Exhibits
62















**PART I FINANCIAL INFORMATION**




**ITEM 1.** **Financial Statements**


**AMERCO AND CONSOLIDATED ENTITIES**


**CONDENSED CONSOLIDATED BALANCE SHEETS**


**September 30,**

**March 31,****2004**

**2004**(Unaudited)(In thousands)**ASSETS**Cash and cash equivalents

$
45,759

$
81,557Trade receivables, net


251,043


268,386Notes and mortgage receivables, net


5,352


4,537Inventories, net


55,876


52,802Prepaid expenses


16,803


13,172Investments, fixed maturities


678,834


709,353Investments, other


328,314


347,537Deferred policy acquisition costs, net


69,219


76,939Other assets


84,980


65,071Related party assets


310,205


304,446$
1,846,385

$
1,923,800Property, plant and equipment, at cost:Land


151,012


158,594Buildings and improvements


681,162


874,985Furniture and equipment


296,046


293,115Rental trailers and other rental equipment


186,079


159,586Rental trucks


1,279,915


1,219,002SAC Holdings II - property, plant and equipment


78,533


78,3632,672,747


2,783,645Less: Accumulated depreciation


(1,344,908
)

(1,331,840
)Property, plant and equipment, net


1,327,839


1,451,805Total assets

$
3,174,224

$
3,375,605**LIABILITIES AND STOCKHOLDERS' EQUITY**Liabilities:Accounts payable and accrued expenses

$
253,195

$
244,570Capital leases


-


99,609AMERCO's notes and loans payable


696,896


862,697SAC Holdings' notes and loans payable, non-recourse to AMERCO


78,101


78,637Policy benefits and losses, claims and loss expenses payable


788,641


813,738Liabilities from investment contracts


528,169


574,745Other policyholders' funds and liabilities


18,173


28,732Deferred income


51,119


51,383Deferred income taxes


106,223


63,800Related party liabilities


70,175


53,848Total liabilities

$
2,590,692

$
2,871,759Commitments and contingent liabilities (Notes 5 and 9)Stockholders' equity:Series preferred stock, with or without par value:Series A preferred stock, with no par value

$
-

$
-Series B preferred stock, with no par value


-


-Series common stock, with or without par value:Series A common stock of $0.25 par value


929


1,416Common stock of $0.25 par value


9,568


9,081Additional paid in-capital


349,732


349,732Accumulated other comprehensive loss


(33,184
)

(21,446
)Retained earnings


686,177


595,181Cost of common shares in treasury, net


(418,092
)

(418,092
)Unearned employee stockownership plan shares


(11,598
)

(12,026
)Total stockholders' equity


583,532


503,846Total liabilities and stockholders' equity

$
3,174,224

$
3,375,605




The accompanying notes are an integral part of these condensed consolidating financial statements.








**AMERCO AND CONSOLIDATED ENTITIES**


**CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS**







**Quarter Ended September 30,**

**Six Months Ended - September 30,****2004**

**2003**

**2004**

**2003**(Unaudited)(In thousands except per share amounts)**Revenues:**Rental revenue

$
469,320

$
482,972

$
895,952

$
918,014Net sales


57,817


65,627


119,063


134,836Premiums


39,072


67,480


82,134


131,936Net investment and interest income


12,339


11,378


32,110


22,787Total revenues


578,548


627,457


1,129,259


1,207,573**Costs and expenses:**Operating expenses


288,447


305,324


560,659


600,317Restructuring expenses


-


2,124


-


4,414Commission expenses


51,908


44,802


98,821


84,996Cost of sales


28,516


30,896


56,256


63,115Benefits and losses


31,454


65,446


65,591


118,845Amortization of deferred policy acquisition costs


7,778


8,759


17,736


17,859Lease expense


36,348


34,191


76,883


68,514Depreciation, net


29,904


36,925


57,932


74,963Total costs and expenses


474,355


528,467


933,878


1,033,023Earnings from operations


104,193


98,990


195,381


174,550Interest expense


18,060


30,773


37,064


61,671Pretax earnings


86,133


68,217


158,317


112,879Income tax expense


(33,074
)

(24,192
)

(60,839
)

(41,118
)Net earnings

$
53,059

$
44,025

$
97,478

$
71,761Less: Preferred stock dividends


(3,241
)

(3,241
)

(6,482
)

(6,482
)Earnings available to common shareholders

$
49,818

$
40,784

$
90,996

$
65,279Basic and diluted earnings per common share

$
2.39

$
1.97

$
4.38

$
3.15Weighted average common shares outstanding


20,801,525


20,744,692


20,794,766


20,738,389








The accompanying notes are an integral part of these condensed consolidating financial statements.









2





**AMERCO AND CONSOLIDATED ENTITIES**


**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**




**Quarter Ended September 30,****2004**

**2003**(Unaudited)(In thousands)**Comprehensive income:**Net earnings

$
53,059

$
44,025Changes in other comprehensive income, net of taxes:Foreign currency translation


2,010


(4,377
)Unrealized gain/(loss) on investments


(12,796
)

15,774Fair market value of interest rate hedge


(1,668
)

-Total comprehensive income

$
40,605

$
55,422








The accompanying notes are an integral part of these condensed consolidating financial statements.





**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)**Comprehensive income:**Net earnings

$
97,478

$
71,761Changes in other comprehensive income, net of taxes:Foreign currency translation


(217
)

1,374Unrealized gain/(loss) on investments


(9,853
)

25,861Fair market value of interest rate hedge


(1,668
)

-Total comprehensive income

$
85,740

$
98,996










The accompanying notes are an integral part of these condensed consolidating financial statements.








3







**AMERCO AND CONSOLIDATED ENTITIES**


**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**




**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)**Cash flow from operating activities:**Earnings available to common shareholders

$
90,996

$
65,279Depreciation


56,455


69,674Amortization of deferred policy acquisition costs


19,293


16,737Provision for losses on accounts receivable


102


686Net loss on sale of real and personal property


1,477


5,289(Gain) on sale of investments


(198
)

(2,317
)Reductions in policy liabilities and accruals


(13,170
)

(18,194
)Capitalizations of deferred policy acquisition costs


(6,732
)

(11,765
)Net reduction in other operating assets and liabilities


19,841


5,194Net cash provided by operating activities

$
168,064

$
130,583**Cash flows from investing activities:**Purchases of investments:Property, plant and equipment


(161,693
)

(102,295
)Fixed maturities


(60,023
)

(24,144
)Common Stock


(6,766
)

-Proceeds from sale(purchase) of investments:Property, plant and equipment


220,848


19,091Fixed maturities


74,929


128,499Preferred stock


2,708


11,380Real estate


1,722


(22,860
)Mortgage loans


1,913


10,114Changes in other investments


45,862


(56,321
)Net cash provided by (used in) investing activities

$
119,500

$
(36,536
)**Cash flows from financing activities:**Borrowings from Credit Facilities

$
14,385

$
50,000Leveraged Employee Stock Ownership Plan:Purchase of shares


428


375Principal Repayments on Credit Facilities


(181,076
)

(54,681
)Pay off of capital leases


(99,609
)

-Dividends paid


(9,723
)

-Investment contract deposits


13,427


34,422Investment contract withdrawals


(61,194
)

(39,375
)Net cash used in financing activities

$
(323,362
)
$
(9,259
)Increase (decrease) in cash equivalents

$
(35,798
)
$
84,788Cash and cash equivalents at the beginning of period


81,557


66,834Cash and cash equivalents at the end of period

$
45,759

$
151,622


The accompanying notes are an integral part of these condensed consolidating financial statements.












4






**1.**  **Basis of Presentation**




The second fiscal quarter for AMERCO ends the 30th of September for each year that is referenced. Our insurance company subsidiaries have a second quarter that ends on the 30th of June for each year that is referenced. They have been consolidated on that basis. Consequently, all references to our insurance subsidiaries years 2004 and 2003 correspond to the Companys fiscal years 2005 and 2004.





Accounts denominated in non-U.S. currencies have been re-measured using the U.S. dollar as the functional currency. Certain amounts reported in previous years have been reclassified to conform to the current presentation.





**2.**  **Principals of Consolidation and Organization**




***Principles of Consolidation***




The consolidated financial statements for the second quarter and the first six months of fiscal year 2005 and the balance sheet as of March 31, 2004 include the accounts of AMERCO, its wholly owned subsidiaries and SAC Holding II Corporation and its subsidiaries. The balance sheet and the statements of operations, comprehensive income, and cash flows for the second quarter and the first six months of fiscal year 2004 include all of the abovementioned entities plus SAC Holding Corporation and its subsidiaries.





SAC Holding Corporation and SAC Holding II Corporation and their subsidiaries (the "SAC entities") were considered special purpose entities. During the first three quarters of fiscal year 2004, the SAC entities were consolidated based on the provisions of Emerging Issues Task Force (EITF) Issue No. 90-15. During the fourth quarter of fiscal year 2004, the Company applied FASB Interpretation No. 46(R) to its interest in the SAC entities and determined that SAC Holding Corporation should no longer be consolidated with the Companys financial statements. Accordingly, during the fourth quarter of fiscal year 2004 the Company deconsolidated those entities. The deconsolidation was accounted for as a distribution of the Companys interests to the SAC entities. Because of the Companys continuing involvement with SAC Holding Corporation and its subsidiaries, the distributions do not qualify as discontinued operations as defined by SFAS No. 144.





The condensed consolidated balance sheet as of September 30, 2004 and the related condensed consolidated statements of operations, comprehensive income, and cash flow for the quarter and the first six months ended September 30, 2004 are unaudited. In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. Inter-company accounts and transactions have been eliminated. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation.




***Description of Legal Entities***




AMERCO, a Nevada corporation ("AMERCO"), is the holding company for:





U-Haul International, Inc. ("U-Haul")





Amerco Real Estate Company ("Real Estate")





Republic Western Insurance Company ("RepWest")





North American Fire & Casualty Insurance Company ("NAFCIC")





Oxford Life Insurance Company ("Oxford")





North American Insurance Company ("NAI") and





Christian Fidelity Life Insurance Company ("CFLIC")





Unless the context otherwise requires, the term "Company" refers to AMERCO and its legal subsidiaries.





5





AMERCO AND CONSOLIDATED ENTITIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2004 (Unaudited), March 31, 2004, and September 30, 2003 (Unaudited)


***Description of Operating Segments***




AMERCO has three reportable segments and five identifiable segments. The three reportable segments are Moving and Self-Storage, Property and Casualty Insurance and Life Insurance. U-Haul moving and storage, Real Estate, and SAC moving and storage, are listed under Moving and Self-Storage, since they meet the aggregation criteria of FASB 131.





U-Haul moving and self-storage operations consist of the rental of trucks, trailers and self-storage spaces and sales of moving supplies, trailer hitches and propane to the "do-it-yourself" mover. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.





Real Estate owns approximately 90 percent of the Companys real estate assets, including U-Haul Centers and Storage locations. The remaining real estate assets of the Company are owned by other subsidiaries. Real Estate is responsible for overseeing major property repairs, dispositions and managing the environmental risks of the properties.





SAC moving and self-storage operations consist of the rental of self-storage spaces and sales of moving supplies, trailer hitches and propane. In addition, SAC functions as an independent moving equipment rental dealer and earns commissions from the rental of U-Haul trucks and trailers. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.





Republic Western Insurance Company (RepWest) provides loss adjusting and claims handling for *U-Haul* through regional offices across North America. RepWest also provides components of the *Safemove, Safetow*and*Safestor*protection packages to *U-Haul* customers.





Oxford Life Insurance Company (Oxford) originates and reinsures annuities; credit life and disability; single premium whole life, group life and disability coverage; and Medicare supplement insurance. Oxford also administers the self-insured employee health and dental plans for the Company.





**3. Accounting Policies**




***Use of Estimates***




The preparation of financial statements in conformity with the accounting principles generally accepted in the U.S. requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require managements most difficult and subjective judgments include the principals of consolidation, the recoverability of property, plant and equipment; the adequacy of insurance reserves; and the valuation of investments. The future results actually experienced by the Company may differ from managements estimates.




***Cash and Cash Equivalents***




The Company considers cash equivalents to be highly liquid debt securities with insignificant interest rate risk with original maturities from the date of purchase of three months or less.




***Investments***




*Fixed Maturities.* Fixed maturity investments consist of either marketable debt or redeemable preferred stocks. As of the balance sheet date, these investments are either intended to be held to maturity or are considered available-for-sale.




*Held-to-Maturity.* Investments that are intended to be held-to-maturity are recorded at cost, as adjusted for the amortization of premiums or the accretion of discounts.




*Available-for-Sale.* Investments that are considered available-for-sale are reported at fair value, with unrealized gains or losses, net of tax, recorded in ** stockholders equity. Fair value for these investments is based on quoted market prices, dealer quotes or discounted cash flows. The cost of investments sold is based on the specific identification method. Realized gains or losses on the sale or exchange of investments and declines in value judged to be other than temporary are recorded as revenues. Investments are judged to be impaired if the fair value is less than cost continuously for six months, absent compelling evidence to the contrary.




6  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




*Mortgage Loans and Notes on Real Estate.*Mortgage loans and notes on real estate are reported at their unpaid balance, net of any allowance for possible losses and any unamortized premium or discount.





*Recognition of Investment Income.*Interest income from bonds and mortgage notes is recognized when it becomes earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date. Unrealized gains and losses are determined as of each balance sheet date.





***Fair Values***




Fair values of cash equivalents approximate cost due to the short period of time to maturity. Fair values of short-term investments, investments available-for-sale, long-term investments, mortgage loans and notes on real estate, swaps and forward currency contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.




Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. The Companys financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables and notes receivable. The Company places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution.




The Company has mortgage receivables, which potentially expose the Company to credit risk. The portfolio of notes is principally collateralized by mini-warehouse storage facilities and other residential and commercial properties. The Company has not experienced losses related to the notes from individual notes or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings.





Other investments, including short-term investments, are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value. The carrying value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair market value due to its recent issuance.




***Derivative Financial Instruments***




The Companys primary objective for holding derivative financial instruments is to manage currency and interest rate risk. The Companys derivative instruments are recorded at fair value under SFAS No. 133 and are included in prepaid expenses.




The Company used derivative financial instruments to reduce its exposure to interest rate volatility. During May 2004, the Company entered into two (2) separate interest rate cap agreements on its $350 million amortizing term loan with notional value of $200 million for a two-year term and $50 million for a three-year term. These agreements cap the LIBOR component on the $250 million notional value at 3.0% throughout the life of the cap. At September 30, 2004, the Company had $348.3 million of variable rate debt.





7


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




***Inventories, net***




Inventories consist primarily of truck and trailer parts and accessories used to repair rental equipment and products purchased directly for resale. Inventories are valued at the lower of cost or market. Inventory cost is primarily determined using the last-in, first-out method. Inventories valued on the LIFO basis were approximately 89% of total inventories as of September 30, 2004 and 93% of total inventories as of March 31, 2004. Inventories would have been $3.2 **** million higher at both September 30, 2004 and March 31 2004, if the Company valued inventories using the first-in, first-out method. Inventories are stated net of reserves for obsolescence of $2.5 million at both September 30, 2004 and March 31, 2004.




***Property, Plant and Equipment***




Property, plant and equipment is stated at cost. Interest cost incurred during the initial construction of buildings and rental equipment is considered part of cost. Depreciation is computed for financial reporting purposes principally using the straight-line method over the following estimated useful lives: rental equipment 2-20 years, buildings and non-rental equipment 3-55 years. Major overhauls to rental equipment are capitalized and are amortized over the estimated period benefited. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized. Depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., no gains or losses. During the first quarter of fiscal year 2005, the Company lowered its estimates for residual values on rental trucks purchased off TRAC leases from 25% of the original cost to 20%. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. Since this change in estimated residual values will be applied prospectively we do not anticipate any significant increases in depreciation expense for the current fiscal year.





We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets is shorter or longer than originally estimated. We assess the recoverability of the cost of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If the remaining cost of assets is determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives.





The carrying value of surplus real estate, which is lower than market value, at the balance sheet date was $12.5 million for September 30, 2004 and $10.1 million for March 31, 2004, respectively, and is included with investments, other. During the second quarter Real Estate reclassified certain assets held for investment purposes. The reclassification of $11.2 million is reflected as a decrease in Property, Plant, and Equipment and an increase in Investments Other on our balance sheet.




***Receivables***




Accounts receivable include trade accounts from moving and self storage customers and dealers, insurance premiums and agent balances due, net of commissions payable and amounts due from ceding re-insurers, less managements estimate of uncollectible accounts.




Notes and mortgage receivables include accrued interest and are reduced by discounts and amounts considered by management to be uncollectible.




***Policy Benefits and Losses, Claims and Loss Expenses Payable***




Liabilities for life insurance and certain annuity policies are established to meet the estimated future obligations of policies in force, and are based on mortality and withdrawal assumptions from recognized actuarial tables which contain margins for adverse deviation.





Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders, excluding surrender values. Liabilities for health, disability and other policies represents estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported.





8


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


Liabilities for reported and unreported losses are based on RepWests historical experience and industry averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from re-insurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the reinsured policy. Adjustments to the liability for unpaid losses and loss expenses, as well as amounts recoverable from re-insurers on unpaid losses, are charged or credited to expense in the periods in which they are made.




***Revenue Recognition***




Rental revenue is recognized for the period that trucks and moving equipment are rented. Storage space revenue is recognized based on the numbers of storage contract days earned. Product sales are recognized at the time that title passes and the customer accepts delivery. Insurance premiums are recognized over the policy periods. Interest and investment income are recognized as earned.




***Advertising***




Advertising costs are expensed as incurred. Advertising expense was $7.5 million in the second quarter of fiscal year 2005 and $9.2 million in the second quarter of fiscal year 2004. Advertising expense was $14.8 million for the first six months of fiscal year 2005 and $17.4 million for the first six months of fiscal year 2004




***Deferred Policy Acquisition Costs***




Commissions and other costs which fluctuate with, and are primarily related to, the production of future insurance premiums, are deferred. For Oxford, these costs are amortized in relation to revenue such that costs are realized as a constant percentage of revenue. For RepWest, these costs are amortized over the related contract period which generally does not exceed one year.




***Environmental Costs***




Liabilities are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs can be reasonably estimated. The amount of the liability is based on managements best estimate of undiscounted future costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and amortized over the estimated useful lives of the properties. These costs improve the safety or efficiency of the property or are incurred in preparing the property for sale.




***Income Taxes***




AMERCO files a consolidated tax return with all of its legal subsidiaries, except for Christian Fidelity Insurance Company, which files on a stand alone basis. SAC Holdings and its legal subsidiaries file a consolidated return, and their return is not consolidated with AMERCO. In accordance with SFAS No. 109, the provision for income taxes reflects deferred income taxes resulting primarily from changes in temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.




***Comprehensive Income/(Loss)***




Comprehensive income/(loss) consists of net income, foreign currency translation adjustments, unrealized gains and losses on investments and fair market values of interest rate hedges, net of the related tax effects.




**4. Earnings per Share**




Net income for purposes of computing earnings per common share is net income minus preferred stock dividends. Preferred stock dividends include accrued dividends of AMERCO.





9


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




The shares used in the computation of the Companys basic and diluted earnings per common share were as follows:


**Quarter Ended September 30,****2004**

**2003**Basic and diluted earnings per common share

$
2.39

$
1.97Weighted average common shares outstandingBasic and diluted :


20,801,525


20,744,692







**Six Months Ended September 30,****2004**

**2003**Basic and diluted earnings per common share

$
4.38

$
3.15Weighted average common shares outstandingBasic and diluted :


20,794,766


20,738,389




The weighted average common shares outstanding listed above exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released as of September 30, 2004 and September 30, 2003, respectively.




6,100,000 shares of preferred stock have been excluded from the weighted average shares outstanding calculation because they are not common stock equivalents.




**5.** **Borrowings**




***Long-Term Debt***




Long-term debt consisted of the following:


**September 30,**

**March 31,****2004**

**2004**(Unaudited)(In thousands)Revolving credit facility, senior secured first lien

$
-

$
164,051Senior amortizing notes, secured, first lien, due 2009


348,250


350,000Senior notes, secured second lien, 9.0% interest rate, due 2009


200,000


200,000Senior subordinated notes, secured, 12.0% interest rate, due 2011


148,646


148,646Total AMERCO notes and loans payable

$
696,896

$
862,697




*First Lien Senior Secured Notes*




The Company has a First Lien Senior Secured credit facility, due 2009 in the amount of $550 million, with a banking syndicate led and arranged by Wells Fargo Foothill, a part of Wells Fargo & Company (the "Senior Secured Facility"). These senior notes consist of two components, a $200 million revolving credit facility (including a $50 million letter of credit sub-facility) and a $350 million amortizing term loan.





10


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




The $350 million amortizing term loan requires monthly principal payments of $291,667 and periodic interest payments, with the balance due on maturity in 2009. The interest rate per the provisions of the term loan agreement is defined as the 3-month London Inter Bank Offer Rate ("LIBOR"), plus 4.0%, the sum of which at September 30, 2004 was 5.84%. Advances under the revolving credit facility are based on a borrowing base formula which is based on a percentage of the value of our eligible real estate. At September 30, 2004, there were no outstanding advances under the revolving credit facility $200.0 million was available to borrow. The interest rate per the provisions of the revolving credit facility agreement is defined as the prime rate ("Prime") plus 1.5%, the sum of which at September 30, 2004 was 6.25%. The Senior Secured Facility is secured by a first priority position in substantially all of the assets of AMERCO and its subsidiaries, except for our notes receivable from SAC Holdings, certain real estate held for sale, the capital stock of our insurance subsidiaries, real property previously mortgaged to Oxford, vehicles subject to certain lease financing arrangements, proceeds in excess of $50 million associated with the settlement, judgment or recovery related to our litigation against PricewaterhouseCoopers (after deduction of attorneys fees and costs and taxes payable with respect to such proceeds).




*9.0% Second Lien Senior Secured Notes*




The Company issued and has outstanding $200 million aggregate principal amount of 9.0% Second Lien Senior Secured Notes due 2009. These senior notes are secured by a second priority position in the same collateral which secures our obligations under the First Lien Senior Secured Notes. No principal payments are due on the Second Lien Senior Secured Notes until maturity.




*Senior Subordinated Notes*




The Company issued and has outstanding $148.6 million aggregate principal amount of 12.0% senior subordinated notes due 2011 (the "Senior Subordinated Notes"). No principal payments are due on the Senior Subordinated Notes until maturity. These senior notes, which are subordinated to all of the senior indebtedness of AMERCO (including the First Lien Senior Secured Notes and the Second Lien Senior Secured Notes, both due 2009), are secured by certain assets of AMERCO, including the capital stock of our life insurance subsidiary (Oxford Life Insurance Company), certain real estate held for sale, 75% of the net proceeds in excess of $50 million associated with the settlement, judgment or recovery related to our litigation against PricewaterhouseCoopers (after deduction of attorneys fees and costs and taxes payable with respect to such proceeds), and payments from notes receivable from SAC Holdings having an aggregate outstanding principal balance at September 30, 2004 of $203.8 million.




*Restrictive Covenants*




Under the abovementioned loan agreements, we are required to comply with a number of affirmative and negative covenants. These covenants apply to the obligors, and provide that, among other things:





·
On a quarterly basis, the obligors cannot allow EBITDA minus capital expenditures (as defined) to fall below specified levels.




·
The obligors are restricted in the amount of capital expenditures that can be made in any fiscal year.




·
The obligors ability to incur additional indebtedness is restricted.





11  **AMERCO AND CONSOLIDATED ENTITIES** **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


·
The obligors ability to create, incur, assume, or permit to exist any lien on or against any of the secured assets is restricted.




·
The obligors ability to convey, sell, lease, assign, transfer or otherwise dispose of any of the secured assets is restricted.







·
The obligors cannot enter into any merger, consolidation, reorganization, or recapitalization (subject to exceptions), and we cannot liquidate, wind up or dissolve any subsidiary that is a borrower under the abovementioned loan agreements, unless the assets of the dissolved entity are transferred to another subsidiary that is a borrower under the abovementioned loan agreements and certain other conditions are met.




·
The obligors ability to guarantee the obligations of our insurance subsidiaries or any third party is restricted.




·
The obligors ability to prepay, redeem, defease, purchase or otherwise acquire any of our indebtedness or any indebtedness of a subsidiary that is a borrower under the abovementioned loan agreements is restricted.




As of September 30, 2004 the Company was in compliance with the abovementioned covenants.


12  **AMERCO AND CONSOLIDATED ENTITIES** **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


*Annual Maturities of AMERCO Consolidated Notes and Loans Payable*




The annual maturity of AMERCO Consolidated long-term debt as of September 30, 2004 for the next five years and thereafter is as follows:





**Fiscal Years Ending**(In thousands)**2005**

**2006**

**2007**

**2008**

**2009**

**Thereafter**Notes payable, secured

$
3,500


3,500


3,500


3,500


534,250


148,646




*SAC Holding II Corporation Notes and Loans Payable to Third Parties*




SAC Entities notes and loans payable consisted of the following:




**September 30,**
**2004**

**March 31,**
**2004**(Unaudited)(In thousands)Notes payable, secured, bearing interest rates ranging from7.87% to 9.00%, due 2027

$
78,101

$
78,637




13


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


**6. Interest on Borrowings**




Interest expense was as follows:


**Quarter Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Interest expense

$
14,778

$
20,345Amortization of transaction costs


863


169Interest expense resulting from SWAP/CAP agreements


845


-Total AMERCO interest expense

$
16,486

$
20,514SAC Holdings' interest expense


3,968


20,414Less: Intercompany transactions


2,394


10,155Total SAC Holdings' interest expense


1,574


10,259Consolidated interest expense

$
18,060

$
30,773




**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Interest expense


31,342


39,528Amortization of transaction costs


1,596


374Interest expense resulting from SWAP/CAP agreements


992


-Default interest


-


715Total AMERCO interest expense

$
33,930

$
40,617SAC Holdings' interest expense


7,231


41,221Less: Intercompany transactions


4,097


20,167Total SAC Holdings' interest expense


3,134


21,054Consolidated interest expense

$
37,064

$
61,671




Interest paid in cash by AMERCO amounted to $13.5 million and $7.8 million for the second quarters of fiscal year 2005 and fiscal year 2004, respectively.





Interest paid in cash by AMERCO amounted to $28.8 million and $30.6 million for the six months ended September 30, 2004 and 2003, respectively.




14


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




Interest rates and company borrowings were as follows:


**Revolving Credit Activity****September 30,**
**2004**

**March 31,**
**2004****AMERCO**

(In thousands, except interest rates)Weighted average interest rate during the first six months/year


5.50
%

6.75
%Interest rate at the end of the second fiscal quarter/year


5.84
%

5.50
%Maximum amount outstanding during the quarter/year

$
33,039

$
205,000Average amount outstanding during the quarter/year

$
14,340

$
174,267Facility fees

$
-

$
1,333




**7. Comprehensive Income**




The components of accumulated other comprehensive income/(loss), net of tax, were as follows:


**September 30,**
**2004**

**March 31,**
**2004**(In thousands)Accumulated foreign currency translation

$
(35,131
)
$
(34,914
)Accumulated unrealized gain or (loss) on investments


3,615


13,468Accumulated FV of Interest Rate Hedge


(1,668
)

-$
(33,184
)
$
(21,446
)




A summary of accumulated comprehensive income/ (loss) components, net of tax, were as follows:


**Foreign Currency Translation**

**Unrealized Gain/(Loss) on Investments**

**Fair Market Value of Interest Rate Hedge**

**Accumulated Other Comprehensive Income/(Loss)**Balance at March 31, 2004

$
(34,914
)
$
13,468

$
-

$
(21,446
)Foreign currency translation


(217
)

-


-


(217
)Unrealized gain/(loss) on investments


-


(9,853
)

-


(9,853
)Fair market value of interest rate hedge


-


-


(1,668
)

(1,668
)Balance at September 30, 2004

$
(35,131
)
$
3,615

$
(1,668
)
$
(33,184
)






15


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


**8. Reinsurance**




During their normal course of business, our insurance subsidiaries assume and cede reinsurance on both a coinsurance and a risk premium basis. They also obtain reinsurance for that portion of risks exceeding their retention limits. The maximum amount of life insurance retained on any one life is $150,000.


**Direct**
**Amount (a)**

**Ceded to**
**Other**
**Companies**

**Assumed**
**from Other**
**Companies**

**Net**
**Amount (a)**

**Percentage of**
**Amount**
**Assumed to Net**(Unaudited)(In thousands)June 30, 2004Life insurance in force

$
1,427,735


249,175


1,944,703


3,123,263


62
%Premiums earned:Life

$
5,909


3,792


6,232


8,349


75
%Accident and health


49,810


3,790


8,243


54,263


15
%Annuity


1,255





1,427


2,682


53
%Property and casualty


17,008


3,576


3,408


16,840


20
%Total

$
73,982


11,158


19,310


82,134


24
%





**Direct**
**Amount (a)**

**Ceded to**
**Other**
**Companies**

**Assumed**
**from Other**
**Companies**

**Net**
**Amount (a)**

**Percentage of**
**Amount**
**Assumed to Net**(Unaudited)(In thousands)June 30, 2003Life insurance in force

$
1,719,979


752,501


2,343,287


3,310,765


71
%Premiums earned:Life

$
10,908


5,429


7,727


13,206


59
%Accident and health


54,946


5,912


10,650


59,684


18
%Annuity


1,067


-


1,110


2,177


51
%Property and casualty


65,441


23,161


14,589


56,869


26
%Total

$
132,362


34,502


34,076


131,936


26
%




(a)
Balances are reported net of inter-segment transactions.




Premiums eliminated in consolidation were as follows:




**RepWest**

**Oxford**(Unaudited)(In thousands)Six months ended June 30, 2004

$
-

$
743Six months ended June 30, 2003

$
1,272

$
1,358




16


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


**9. Contingent Liabilities and Commitments**




The Company leases a portion of its rental equipment and certain of its facilities under operating leases with terms that expire at various dates substantially through 2034. At September 30, 2004, AMERCO has guaranteed $178.5 million of residual values for these assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions. At the expiration of the lease, the Company has the option to renew the lease, purchase the asset for fair market value, or sell the asset to a third party on behalf of the lessor. AMERCO has been leasing equipment since 1987 and has experienced no material losses relating to these types of residual value guarantees.




Lease commitments for leases having terms of more than one year as of September 30, 2004, were as follows:





**Property**
**Plant and**
**Equipment**

**Rental**
**Fleet**

**Total**(In thousands)Year-ending:2005




$
11,093

$
109,626

$
120,7192006





10,919


88,482


99,4012007





10,689


56,664


67,3532008





10,519


18,587


29,1062009





10,212


8,627


18,839Thereafter





48,354


4,125


52,479Total




$
101,786

$
286,111

$
387,897




***W. P. Carey Transaction***




In 1999, AMERCO, U-Haul and Real Estate entered into financing agreements for the purchase and construction of self-storage facilities with the Bank of Montreal and Citibank (the "synthetic leases"). Title to the real property subject to these leases was held in the name of off balance sheet special purpose entities. As of March 31, 2003, we had obligations outstanding of $254 million under these synthetic leases, of which $117 million represented properties qualifying as operating leases and $137 million represented properties qualifying as capital leases.





As part of our overall Chapter 11 plan of reorganization, these leases were amended and restated on March 15, 2004. As a result, we paid down approximately $31 million of lease obligations and entered into a lease with a three year term, with four one year renewal options. After such pay down, our lease obligation under the amended and restated synthetic leases was approximately $218.5 million. The amended and restated terms of the synthetic lease caused it to become a capital lease. Consequently, we capitalized these leased properties as an asset and reported the corresponding lease obligation as a liability at March 31, 2004.




On April 30, 2004, the amended and restated leases were terminated, the properties underlying these leases were sold to, W.P. Carey (UH Storage DE). U-Haul entered into a ten year operating lease with W.P. Carey (UH Storage DE) for a portion of each property (the portion of the property that relates to U-Hauls truck and trailer rental and moving supply sales businesses). The remainder of each property (the portion of the property that relates to self-storage) was leased from W.P. Carey (UH Storage DE) to Mercury Partners, LP ("Mercury") pursuant to a 20 year lease. These events are referred to as the "W.P. Carey Transaction."  As a result of the W.P. Carey Transaction, we no longer have a capital lease related to these properties. The terms of the W.P. Carey Transaction provide for us to be reimbursed for capital improvements we previously made to these properties, subject to conditions, which we expect will occur over approximately the next 18 months.




17


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




As part of the W.P. Carey Transaction, U-Haul entered into arrangements to manage these properties (including the properties leased by Mercury Partners). These management arrangements allow us to continue to operate the properties as part of the U-Haul moving and self-storage system.





U-Hauls annual lease payments under the new lease are approximately $10 million per year, with CPI inflation adjustments beginning in the sixth year of the lease. The lease term is ten years, with a renewal option for an additional ten years. Upon closing of the W.P. Carey Transaction, we made a $5 million security deposit, which will be refunded to us at the end of the lease term. We also made a deposit as part of the W.P. Carey Transaction totaling approximately $23 million, which is to be refunded to us at the earlier of attainment by the properties of certain earn-out milestones, or the end of the lease term.





The property management agreement we entered into with Mercury provides that Mercury will pay U-Haul a fee equal to 4% of the gross self-storage rental revenues generated by the properties, plus a bonus of up to 6% of gross self-storage rental revenues based on specified performance levels. During the first six months of fiscal year 2005, U-Haul earned $0.6 million in management fees from Mercury.




**10. Contingencies**




***Kocher***




On July 20, 2000, Charles Kocher (Kocher) filed suit in Wetzel County, West Virginia, Civil Action No. 00-C-51-K, entitled Charles Kocher v. Oxford Life Insurance Co. (Oxford) seeking compensatory and punitive damages for breach of contract, bad faith and unfair claims settlement practices arising from an alleged failure of Oxford to properly and timely pay a claim under a disability and dismemberment policy. On March 22, 2002, the jury returned a verdict of $5 million in compensatory damages and $34 million in punitive damages. On November 5, 2002, the trial court entered an Order (Order) affirming the $39 million jury verdict and denying Oxfords motion for New Trial Or, in The Alternative, Remittitur. On January 27, 2004, the matter was argued before the West Virginia Supreme Court and taken under advisement. On June 17, 2004 the West Virginia Supreme Court reversed and vacated the punitive damages award and remanded the case for a new trial on punitive damages. The trial judge has set an April 28, 2005 trial date. The Company has accrued $725,000, which represents managements best estimate of the costs associated with legal fees to appeal and re-try the case. The Company has notified its Errors & Omissions carrier of the West Virginia Supreme Courts ruling. The E&O carrier is disputing coverage.




***Shoen***




On September 24, 2002, Paul F. Shoen filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned Paul F. Shoen vs. SAC Holding Corporation et al., CV02-05602, seeking damages and equitable relief on behalf of AMERCO from SAC Holdings and certain current and former members of the AMERCO Board of Directors, including Edward J. Shoen, Mark V. Shoen and James P. Shoen as defendants. AMERCO is named a nominal defendant for purposes of the derivative action. The complaint alleges breach of fiduciary duty, self-dealing, usurpation of corporate opportunities, wrongful interference with prospective economic advantage and unjust enrichment and seeks the unwinding of sales of self-storage properties by subsidiaries of AMERCO to SAC Holdings over the last several years. The complaint seeks a declaration that such transfers are void as well as unspecified damages. On October 28, 2002, AMERCO, the Shoen directors, the non-Shoen directors and SAC Holdings filed Motions to Dismiss the complaint. In addition, on October 28, 2002, Ron Belec filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned Ron Belec vs. William E. Carty, et al., CV 02-06331 and on January 16, 2003, M.S. Management Company, Inc. filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned M.S. Management Company, Inc. vs. William E. Carty, et al., CV 03-00386. Two additional derivative suits were also filed against these parties. These additional suits are substantially similar to the Paul F. Shoen derivative action. The five suits assert virtually identical claims. In fact, three of the five plaintiffs are parties who are working closely together and chose to file the same claims multiple times. The court consolidated all five complaints before dismissing them on May 28, 2003. Plaintiffs appealed and the appeal is before the Nevada Supreme Court. The parties are briefing the issues. These lawsuits falsely alleged that the AMERCO Board lacked independence. In reaching its decision to dismiss these claims, the court determined that the AMERCO Board of Directors had the requisite level of independence required in order to have these claims resolved by the Board.




18


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




***Securities Litigation***




AMERCO is a defendant in a consolidated putative class action lawsuit entitled "In Re AMERCO Securities Litigation", United States District Court, Case No. CV-N-03-0050-ECR (RAM). The action alleges claims for violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 there under, section 20(a) of the Securities Exchange Act of 1934 and sections 11, 12, and 15 of the Securities Act of 1933. The action alleges that AMERCO engaged in transactions with SAC entities that falsely improved AMERCOs financial statements and that AMERCO failed to disclose the transactions properly. The action has been transferred to the United Sates District Court, District of Arizona. The action is in a very early stage. Management intends to defend these cases vigorously.




***Securities and Exchange Commission***




The Securities and Exchange Commission ("SEC") has issued a formal order of investigation to determine whether the Company has violated the Federal Securities laws. On January 7, 2003, the Company received the first of several subpoenas issued by the SEC to the Company. SAC Holdings, the Companys current and former auditors and others have also received subpoenas relating to this matter. The Company is cooperating with the SEC and is facilitating the expeditious review of its financial statements and any other issues that may arise. The Company has produced a substantial number of documents to the SEC and continues to respond to requests for additional documents and to provide witnesses for testimony. We cannot predict when the investigation will be completed or its outcome.




***Environmental***




In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management, that none of these suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss.





Compliance with environmental requirements of federal, state and local governments significantly affects Real Estates business operations. Among other things, these requirements regulate the discharge of materials into the water, air and land and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on some of its properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws and has put in place a remedial plan at each site where it believes such a plan is necessary. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks. Under this program we have spent approximately $44 million.





Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to have a material adverse effect on AMERCOs financial position or operating results.





**11. Related Party Transactions**




AMERCO has engaged in related party transactions, and has continuing related party interests with certain major stockholders, directors and officers of the consolidating group as disclosed below. Management believes that the transactions described below and in the related notes were consummated on terms equivalent to those that would prevail in arms-length transactions.





A brother of an executive officer is employed by U-Haul Business Consultants Inc., a subsidiary of U-Haul International.




19


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




During the second quarter of fiscal year 2005, a subsidiary of the Company held various unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Mark V. Shoen, a significant shareholder and executive officer of AMERCO. The Company does not have an equity ownership interest in SAC Holdings, except for minority investments made by RepWest and Oxford in a SAC Holdings-controlled limited partnership which holds Canadian self-storage properties. The Company received cash interest payments of $3.7 million and $8.1 million, from SAC Holdings during the second quarter and first six months of fiscal year 2005, respectively. The largest aggregate amount of notes receivable outstanding during the second quarter of fiscal year 2005 and the aggregate notes receivable balance at September 30, 2004 was $203.8 million. Interest accrues on the outstanding principal balance of junior notes of SAC Holdings that the Company holds at a stated rate of basic interest. A fixed portion of that basic interest is paid on a monthly basis. Additional interest is paid on the same payment date based on the amount of remaining basic interest and of the cash flow generated by the underlying property. This amount is referred to as the "cash flow-based calculation." To the extent that this cash flow-based calculation exceeds the amount of remaining basic interest, contingent interest is paid on the same monthly date as the fixed portion of basic interest. To the extent that the cash flow-based calculation is less than the amount of remaining basic interest, the additional interest payable on the applicable monthly date is limited to the amount of that cash flow-based calculation. In such a case, the excess of the remaining basic interest over the cash flow-based calculation is deferred. In addition, subject to certain contingencies, the junior notes provide that the holder of the note is entitled to receive 90% of the appreciation realized upon, among other things, the sale of such property by SAC Holdings.





The Company currently manages the self-storage properties owned by SAC Holdings, Mercury, 4 SAC, 5 SAC and 19 SAC pursuant to a standard form of management agreement, under which the Company receives a management fee of between 4% and 10% of the gross receipts. The Company received management fees of $7.5 million for the six months ended September 30, 2004. This management fee is consistent with the fees received for other properties the Company manages for third parties.





RepWest and Oxford currently hold a 46% limited partnership interest in Securespace Limited Partnership ("Securespace"), a Nevada limited partnership. A SAC Holdings subsidiary serves as the general partner of Securespace and owns a 1% interest. Another SAC Holdings subsidiary owns the remaining 53% limited partnership interest in Securespace. Securespace was formed by SAC Holdings to be the owner of various Canadian self-storage properties.





For the six months ended September 30, 2004, the Company leased space for marketing company offices, vehicle repair shops and hitch installation centers owned by subsidiaries of SAC Holdings. Total lease payments pursuant to such leases were****$1.3 million. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to the Company.





At September 30, 2004, subsidiaries of SAC Holdings, 4 SAC, 5 SAC and 19 SAC acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with subsidiaries of SAC Holdings are substantially identical to the terms of those with the Companys other independent dealers. For the six months ended September 30, 2004, the Company paid the above mentioned entities $18.7****million in commissions pursuant to such dealership contracts.





SAC Holdings was established in order to acquire self-storage properties. These properties are being managed by the Company pursuant to management agreements. The sale of self-storage properties by the Company to SAC Holdings has in the past provided significant cash flows to the Company and the Companys outstanding loans to SAC Holdings entitle the Company to participate in SAC Holdings excess cash flows (after senior debt service). However, in connection with SAC Holdings issuance of the New SAC Holdings Notes to AMERCOs creditors in AMERCOs Chapter 11 proceeding, certain SAC Holdings notes payable to the Company were eliminated, thereby extinguishing the participation in certain SAC entity excess cash flows.





Management believes that its sales of self-storage properties to SAC Holdings in the past provided a unique structure for the Company to earn rental revenues from the SAC Holdings self-storage properties that the Company manages and to participate in SAC Holdings excess cash flows as described above. No real estate transactions with SAC Holdings that involve the Company or its subsidiaries are expected in the foreseeable future.




20  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




Independent fleet owners own approximately 4% of all U-Haul rental trailers and 0.01% of certain other rental equipment. There are approximately 1,290 independent fleet owners, including certain officers, directors, employees and stockholders of AMERCO. Such AMERCO officers, directors, employees and stockholders owned less than 1% of all U-Haul rental trailers during the second quarter of fiscal years 2005 and 2004, respectively. All rental equipment is operated under contract with U-Haul whereby U-Haul administers the operations and marketing of such equipment and in return receives a percentage of rental fees paid by customers. Based on the terms of various contracts, rental fees are distributed to U-Haul (for services as operators), to the fleet owners (including certain subsidiaries and related parties of U-Haul) and to rental dealers (including Company-operated U-Haul Centers).





On August 20, 2004, an exchange occurred between the Company and James P. Shoen. Mr. Shoen, transferred 1,946,314 shares of AMERCO Series A Common Stock, $0.25 par value, in exchange for 1,946,314 shares of AMERCO Common Stock, $0.25 par value. Mr. Shoen is a director, employee and significant shareholder of AMERCO. No gain or loss was recognized as a result of this transaction.





In February 1997, AMERCO, through its insurance subsidiaries, invested in the equity of Private Mini Storage Realty, L.P. (Private Mini), a Texas-based self-storage operator. RepWest invested $13.5 million and had a direct 30.6% interest and an indirect 13.2% interest. Oxford invested $11 million and had a direct 24.9% interest and an indirect 10.8% interest. During 1997, Private Mini secured a $225 million line of credit with a financing institution, which was subsequently reduced in accordance with its terms to $125 million in December 2001. Under the terms of this credit facility, AMERCO entered into a support party agreement with Private Mini whereby upon default or noncompliance with debt covenants by Private Mini, AMERCO assumed responsibility to fulfill all obligations related to the credit facility. In 2003, the support party obligation was bifurcated into two separate support party obligations; one consisting of a $55 million support obligation and one consisting of a $70 million support obligation.





At March 31, 2003, $55 million of AMERCOs support party obligations had been triggered. As part of AMERCOs bankruptcy reorganization, AMERCO satisfied the $55 million obligation by issuing notes to the Private Mini creditor, and we correspondingly increased our receivable from Private Mini by $55 million. Interest from Private Mini on this receivable is being recorded and received by AMERCO on a regular basis.





Under the terms of FIN 45, the remaining $70 million support part obligation is recognized by the Company as a liability. This resulted in AMERCO increasing Other Liabilities by $70 million and increasing our receivable from Private Mini by an additional $70 million.





**12. Subsequent Event**




RepWest experienced insurances losses associated with the recent hurricanes in the southeastern United States. These losses will be reflected in RepWests third and fourth quarter financial statements. The losses are estimated to be approximately $5 to $7 million on an after taxes basis.





**13. Consolidating Financial Information by Industry Segment**




AMERCO has three reportable segments represented by Moving and Self-Storage operations (U-Haul and Real Estate), Property and Casualty Insurance (RepWest) and Life Insurance (Oxford). SAC Holdings is part of the Moving and Self-Storage segment, but is not a part of the group obligated under the AMERCO debt agreement. Management tracks revenues separately, but does not report any separate measure of the profitability of rental vehicles, rentals of self-storage spaces and sales of products that are required to be classified as a separate operating segment and accordingly does not present these as separate segments.





The notes of the Company are fully and unconditionally guaranteed, jointly and severally, by all of AMERCOs legal subsidiaries, except for our insurance company subsidiaries and except for SAC Holdings. Footnote 13 includes condensed consolidating financial information which presents the Condensed Consolidating Balance Sheets as of September 30, 2004 and 2003 and the related Condensed Consolidating Statements of Earnings and Condensed Consolidating Cash Flow Statements for the first six months ended September 30, 2004 and 2003 for:




(a) AMERCO,





(b) the guarantor subsidiaries (comprised of AMERCO, U-Haul and Real Estate and each of their respective subsidiaries);




21


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**




(c) the non guarantor subsidiaries (comprised of Oxford and RepWest and each of their respective subsidiaries); and





(d) SAC Holdings.





The information includes elimination entries necessary to consolidate AMERCO, the parent, with the guarantor and non-guarantor subsidiaries. Investments in subsidiaries are accounted for by the parent using the equity method of accounting. The guarantor and non-guarantor subsidiaries are presented on a combined basis. Deferred income taxes are shown as liabilities on the consolidating statements.








22





AMERCO AND CONSOLIDATED ENTITIES
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - C** **ontinued**


**13.**  **Consolidating balance sheets by industry segment as of September 30, 2004 are as follows:**


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)Assets:

(Inthousands)Cash and cash equivalents

$
16

$
34,478

$
983

$
-




$
35,477

$
4,998

$
4,590

$
-




$
45,065

$
694

$
-




$
45,759Trade receivables, net


-


16,712


16,339


-





33,051


203,056


14,936


-





251,043


-


-





251,043Notes and mortgage receivables, net


-


3,824


1,528


-





5,352


-


-


-





5,352


-


-





5,352Inventories, net


-


54,774


-


-





54,774


-


-


-





54,774


1,102


-





55,876Prepaid expenses


2,694


13,774


-


-





16,468


-


-


-





16,468


335


-





16,803Investments, fixed maturities


-


-


-


-





-


121,041


557,793


-





678,834


-


-





678,834Investments, other


-


1,387


11,167


-





12,554


140,995


174,765


-





328,314


-


-





328,314Deferred policy acquisition costs, net


-


-


-


-





-


2,146


67,073


-





69,219


-


-





69,219Other assets


21,775


53,132


1,776


-





76,683


2,516


876


-





80,075


4,905


-





84,980Related party assets


547,124


615,920


12,626


(776,223
)

(d
)

399,447


100,942


32,515


(136,233
)

(d
)

396,671


-


(86,466
)

(d
)

310,205571,609


794,001


44,419


(776,223
)




633,806


575,694


852,548


(136,233
)




1,925,815


7,036


(86,466
)




1,846,385Investment in Subsidiaries


1,249,773


-


-


(966,068
)

(c
)

283,705


-


-


(283,705
)

(c
)

-


-


-





-Investment in SAC


(12,350
)

-


-


-





(12,350
)

-


-


-





(12,350
)

-


12,350


(c
)

-Total investment in subsidiaries


1,237,423


-


-


(966,068
)




271,355


-


-


(283,705
)




(12,350
)

-


12,350





-Property, plant and equipment, at cost:Land


-


20,845


130,167


-





151,012


-


-


-





151,012


-


-





151,012Buildings and improvements


-


82,225


598,937


-





681,162


-


-


-





681,162


-


-





681,162Furniture and equipment


413


277,761


17,872


-





296,046


-


-


-





296,046


-


-





296,046Rental trailers and other rental equipment


-


186,079


-


-





186,079


-


-


-





186,079


-


-





186,079Rental trucks


-


1,279,915


-


-





1,279,915


-


-


-





1,279,915


-


-





1,279,915SAC Holdings - property, plant and equipment (b)


-


-


-


-





-


-


-


-





-


152,745


(74,212
)

(e
)

78,533413


1,846,825


746,976


-





2,594,214


-


-


-





2,594,214


152,745


(74,212
)




2,672,747Less: Accumulated depreciation


(364
)

(1,080,804
)

(266,226
)

-





(1,347,394
)

-


-


-





(1,347,394
)

(6,338
)

8,824


(e
)

(1,344,908
)Total property, plant and equipment


49


766,021


480,750


-





1,246,820


-


-


-





1,246,820


146,407


(65,388
)




1,327,839Total assets

$
1,809,081

$
1,560,022

$
525,169

$
(1,742,291
)



$
2,151,981

$
575,694

$
852,548

$
(419,938
)



$
3,160,285

$
153,443

$
(139,504
)



$
3,174,224


(a) Balances as of June 30, 2004


(b) Included in this caption is land of $56,959, buildings and improvements of $95,613, and furniture and equipment of $174


(c) Eliminate investment in subsidiaries


(d) Eliminate intercompany receivables and payables


(e) Eliminate gain on sale of property from U-Haul to SAC





23  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued**


**13.** **Consolidating balance sheets by industry segment as of September 30, 2004 are as follows (continued):**


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)(In thousands)Liabilities:Accounts payable and accrued expenses

$
47,482

$
199,405

$
2,296

$
-




$
249,183

$
-

$
2,046

$
-




$
251,229

$
1,966

$
-




$
253,195Capital leases


-


-


-


-





-


-


-


-





-


-


-





-AMERCO's notes and loans payable


696,896


-


-


-





696,896


-


-


-





696,896


-


-





696,896SAC Holdings' notes and loans payable


-


-


-


-





-


-


-


-





-


78,101


-





78,101Policy benefits and losses,
claims and loss expenses payable


-


232,452


-


-





232,452


385,925


170,264


-





788,641


-


-





788,641Liabilities from investment contracts


-


-


-


-





-


-


528,169


-





528,169


-


-





528,169Other policyholders' funds and liabilities


-


-


-


-





-


8,771


9,402


-





18,173


-


-





18,173Deferred income


-


21,026


2


-





21,028


15,229


14,279


-





50,536


583


-





51,119Deferred income taxes


180,798


270,710


94,914


(365,624
)

(d
)

180,798


(10,372
)

761


(34,338
)

(d
)

136,849


(3,324
)

(27,302
)

(e
)

106,223Other liabilities


-


-


-


-





-


-


-


-





-


-


-





-Related party liabilities


250,689


125,626


184,290


(410,599
)

(d
)

150,006


8,853


11,210


(101,895
)

(d
)

68,174


88,467


(86,466
)

(d
)

70,175Total liabilities


1,175,865


849,219


281,502


(776,223
)




1,530,363


408,406


736,131


(136,233
)




2,538,667


165,793


(113,768
)




2,590,692Stockholders' equity:Series preferred stock:Series A preferred stock


-


-


-


-





-


-


-


-





-


-


-





-Series B preferred stock


-


-


-


-





-


-


-


-





-


-


-





-Series A common stock


929


-


-


-





929


-


-


-





929


-


-





929Common Stock


9,568


540


1


(541
)

(c
)

9,568


3,300


2,500


(5,800
)

(c
)

9,568


-


-





9,568Additional paid in-capital


395,803


121,230


147,481


(268,711
)

(c
)

395,803


70,023


16,435


(86,458
)

(c
)

395,803


-


(46,071
)

(e
)

349,732Accumulated other
comprehensive income/(loss)


(33,184
)

(35,131
)

-


35,131


(c
)

(33,184
)

4,911


(1,296
)

(3,615
)

(c
)

(33,184
)

-


-





(33,184
)Retained earnings


678,192


635,762


96,185


(731,947
)

(c
)

678,192


89,054


98,778


(187,832
)

(c
)

678,192


(12,350
)

20,335


(c
)

686,177Cost of common shares in treasury, net


(418,092
)

-


-


-





(418,092
)

-


-


-





(418,092
)

-


-





(418,092
)Unearned employee stock
ownership plan shares


-


(11,598
)

-


-





(11,598
)

-


-


-





(11,598
)

-


-





(11,598
)Total stockholders' equity


633,216


710,803


243,667


(966,068
)




621,618


167,288


116,417


(283,705
)




621,618


(12,350
)

(25,736
)




583,532Total liabilities and stockholders' equity

$
1,809,081

$
1,560,022

$
525,169

$
(1,742,291
)



$
2,151,981

$
575,694

$
852,548

$
(419,938
)



$
3,160,285

$
153,443

$
(139,504
)



$
3,174,224


(a) Balances as of June 30, 2004


(b) Not used


(c) Eliminate investment in subsidiaries


(d) Eliminate intercompany receivables and payables


(e) Eliminate gain on sale of property from U-Haul to SAC





24****
**AMERCO AND CONSOLIDATED ENTITIES**
**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C****ontinued)**


13.


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real
Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total ConsolidatedAssets:

(In thousands)Cash and cash equivalents

$
-

$
64,717

$
661

$
-




$
65,378

$
-

$
15,168

$
-




$
80,546

$
1,011

$
-




$
81,557Trade receivables, net


-


13,404


14,856


-





28,260


223,747


16,379


-





268,386


-


-





268,386Notes and mortgage receivables, net


-


2,973


1,564


-





4,537


-


-


-





4,537


-


-





4,537Inventories, net


-


51,922


-


-





51,922


-


-


-





51,922


880


-





52,802Prepaid expenses


81


12,947


2


-





13,030


-


-


-





13,030


142


-





13,172Investments, fixed maturities


-


-


-


-





-


148,903


560,450


-





709,353


-


-





709,353Investments, other


-


-


-


-





-


143,163


204,374


-





347,537


-


-





347,537Deferred policy acquisition costs, net


-


-


-


-





-


3,843


73,096


-





76,939


-


-





76,939Other assets


26,001


26,762


2,989


-





55,752


3,686


1,000


-





60,438


4,633


-





65,071Related party assets


531,458


397,406


13,300


(551,450
)

(d
)

390,714


104,543


50,187


(155,341
)

(d
)

390,103


-


(85,657
)

(d
)

304,446557,540


570,131


33,372


(551,450
)




609,593


627,885


920,654


(155,341
)




2,002,791


6,666


(85,657
)




1,923,800Investment in subsidiaries


1,137,579


-


-


(847,545
)

(c
)

290,034


-


-


(290,034
)

(c
)

-


-


-





-Investment in SAC


(12,427
)

-


-


-





(12,427
)

-


-


-





(12,427
)

-


12,427


(c
)

-Total investment in subsidiaries


1,125,152


-


-


(847,545
)




277,607


-


-


(290,034
)




(12,427
)

-


12,427





-Property, plant and equipment, at cost:Land


-


20,923


137,671


-





158,594


-


-


-





158,594


-


-





158,594Buildings and improvements


-


271,223


603,762


-





874,985


-


-


-





874,985


-


-





874,985Furniture and equipment


413


274,600


18,102


-





293,115


-


-


-





293,115


-


-





293,115Rental trailers and other
rental equipment


-


159,586


-


-





159,586


-


-


-





159,586


-


-





159,586Rental trucks


-


1,219,002


-


-





1,219,002


-


-


-





1,219,002


-


-





1,219,002SAC Holdings - property,
plant and equipment (b)


-


-


-


-





-


-


-


-





-


152,575


(74,212
)

(e
)

78,363413


1,945,334


759,535


-





2,705,282


-


-


-





2,705,282


152,575


(74,212
)




2,783,645Less: Accumulated depreciation


(353
)

(1,069,605
)

(265,279
)

-





(1,335,237
)

-


-


-





(1,335,237
)

(5,147
)

8,544


(e
)

(1,331,840
)Total property, plant and equipment


60


875,729


494,256


-





1,370,045


-


-


-





1,370,045


147,428


(65,668
)




1,451,805Total assets

$
1,682,752

$
1,445,860

$
527,628

$
(1,398,995
)



$
2,257,245

$
627,885

$
920,654

$
(445,375
)



$
3,360,409

$
154,094

$
(138,898
)



$
3,375,605


(a) Balances as of December 31, 2003


(b) Included in this caption is land of $57,123, buildings and improvements of $95,326, and furniture and equipment of $126


(c) Eliminate investment in subsidiaries


(d) Eliminate intercompany receivables and payables


(e) Eliminate gain on sale of property from U-Haul to SAC




25


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**





**13.**  Consolidating balance sheets by industry segment as of March 31, 2004 are as follows (continued):


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(In thousands)Liabilities:Accounts payable
and accrued expenses

$
9,971

$
220,587

$
2,622

$
-




$
233,180

$
734

$
5,522

$
-




$
239,436

$
5,134

$
-




$
244,570Capital leases


-


99,609


-


-





99,609


-


-


-





99,609


-


-





99,609AMERCO's notes and
loans payable


862,697


-


-


-





862,697


-


-


-





862,697


-


-





862,697SAC Holdings' notes
and loans payable


-


-


-


-





-


-


-


-





-


78,637


-





78,637Policy benefits and losses, claims
and loss expenses payable


-


206,595


-


-





206,595


429,593


177,550


-





813,738


-


-





813,738Liabilities from
investment contracts


-


-


-


-





-


-


574,745


-





574,745


-


-





574,745Other policyholders' funds
and liabilities


-


-


-


-





-


18,369


10,363


-





28,732


-


-





28,732Deferred income


-


21,278


36


-





21,314


15,229


14,279


-





50,822


561


-





51,383Deferred income taxes


163,652


222,188


94,914


(355,399
)

(d
)

125,355


(12,080
)

5,953


(24,552
)

(d
)

94,676


(3,468
)

(27,408
)

(e
)

63,800Other liabilities


-


-


-


-





-


-


-


-





-


-


-





-Related party liabilities


92,300


74,089


196,051


(196,051
)

(d
)

166,389


7,000


11,248


(130,789
)

(d
)

53,848


85,657


(85,657
)

(d
)

53,848Total liabilities


1,128,620


844,346


293,623


(551,450
)




1,715,139


458,845


799,660


(155,341
)




2,818,303


166,521


(113,065
)




2,871,759Stockholders' equity:Series preferred stock:Series A preferred stock


-


-


-


-





-


-


-


-





-


-


-





-Series B preferred stock


-


-


-


-





-


-


-


-





-


-


-





-Series A common stock


1,416


-


-


-





1,416


-


-


-





1,416


-


-





1,416Common Stock


9,081


540


1


(541
)

(c
)

9,081


3,300


2,500


(5,800
)

(c
)

9,081


-


-





9,081Additional paid in-capital


395,803


121,230


147,481


(268,711
)

(c
)

395,803


70,023


16,435


(86,458
)

(c
)

395,803


-


(46,071
)

(e
)

349,732Accumulated other comprehensive
income/(loss)


(21,446
)

(34,913
)

-


34,913


(c
)

(21,446
)

6,975


7,299


(14,274
)

(c
)

(21,446
)

-


-





(21,446
)Retained earnings


587,370


526,683


86,523


(613,206
)

(c
)

587,370


88,742


94,760


(183,502
)

(c
)

587,370


(12,427
)

20,238


(c
)

595,181Cost of common shares
in treasury, net


(418,092
)

-


-


-





(418,092
)

-


-


-





(418,092
)

-


-





(418,092
)Unearned employee stock
ownership plan shares


-


(12,026
)

-


-





(12,026
)

-


-


-





(12,026
)

-


-





(12,026
)Total stockholders' equity


554,132


601,514


234,005


(847,545
)




542,106


169,040


120,994


(290,034
)




542,106


(12,427
)

(25,833
)




503,846Total liabilities and
stockholders' equity

$
1,682,752

$
1,445,860

$
527,628

$
(1,398,995
)



$
2,257,245

$
627,885

$
920,654

$
(445,375
)



$
3,360,409

$
154,094

$
(138,898
)



$
3,375,605


(a) Balances as of December 31, 2003


(b) Not used


(c) Eliminate investment oin subsidiaries


(d) Eliminated intercompany receivables and payables


(e) Eliminate gain on sale of property from U-Haul to SAC





26  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**





**13.**  Consolidating statement of operations by industry segment for the quarter ended September 30, 2004 are as follows:


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)(In thousands)Revenues:Rental revenue

$
-

$
465,836

$
14,556

$
(15,534
)

(b
)
$
464,858

$
-

$
-

$
505


(b
)
$
465,363

$
7,505

$
(3,548
)

(b
)
$
469,320Net sales


-


53,546


-


-





53,546


-


-


-





53,546


4,271


-





57,817Premiums


-


-


-


-





-


7,038


32,405


(371
)

(c
)

39,072


-


-





39,072Net investment and interest income


188


5,339


27


-





5,554


3,699


5,480


-





14,733


-


(2,394
)

(d
)

12,339Total revenues


188


524,721


14,583


(15,534
)




523,958


10,737


37,885


134





572,714


11,776


(5,942
)




578,548Costs and expensesOperating expenses


4,756


285,963


1,617


(15,534
)

(b
)

276,802


982


5,808


134


(b,c
)

283,726


5,446


(725
)

(b,c
)

288,447Commission expenses


-


54,625


-


-





54,625


-


-


-





54,625


-


(2,717
)




51,908Cost of sales


-


27,227


-


-





27,227


-


-


-





27,227


1,289


-





28,516Benefits and losses


-


-


-


-





-


7,869


23,585


-





31,454


-


-





31,454Amortization of deferred
policy acquisition costs


-


-


-


-





-


1,783


5,995


-





7,778


-


-





7,778Lease expense


22


36,428


4


-





36,454


-


-


-





36,454


-


(106
)

(b
)

36,348Depreciation, net


10


27,386


2,006


-





29,402


-


-


-





29,402


642


(140
)

(e
)

29,904Total costs and expenses


4,788


431,629


3,627


(15,534
)




424,510


10,634


35,388


134





470,666


7,377


(3,688
)




474,355Equity in earnings of AREC,
UHI, RWIC & OLIC


68,047


-


-


(66,325
)

(f
)

1,722


-


-


(1,722
)

(f
)

-


-


-





-Equity in earnings of SAC


200


-


-


-





200


-


-


-





200


-


(200
)

(f
)

-Total equity earnings in subsidiaries


68,247


-


-


(66,325
)




1,922


-


-


(1,722
)




200


-


(200
)




-Earnings (losses) from operations


63,647


93,092


10,956


(66,325
)




101,370


103


2,497


(1,722
)




102,248


4,399


(2,454
)




104,193Interest expense(benefit)


19,539


(8,030
)

4,977


-





16,486


-


-


-





16,486


3,968


(2,394
)

(d
)

18,060Pretax earnings (loss)


44,108


101,122


5,979


(66,325
)




84,884


103


2,497


(1,722
)




85,762


431


(60
)




86,133Income tax benefit (expense)


8,864


(38,366
)

(2,410
)

-





(31,912
)

(29
)

(849
)

-





(32,790
)

(231
)

(53
)




(33,074
)Net earnings (loss)


52,972


62,756


3,569


(66,325
)




52,972


74


1,648


(1,722
)




52,972


200


(113
)




53,059Less: Preferred stock dividends


(3,241
)

-


-


-





(3,241
)

-


-


-





(3,241
)

-


-





(3,241
)Earnings (loss) available to common shareholders

$
49,731

$
62,756

$
3,569

$
(66,325
)



$
49,731

$
74

$
1,648

$
(1,722
)



$
49,731

$
200

$
(113
)



$
49,818


(a) Balances for the quarter ended June 30, 2004


(b) Eliminate intercompany lease income


(c) Eliminate intercompany premiums


(d) Eliminate intercompany interest on debt


(e) Eliminate gain on sale of surplus property from U-Haul to SAC


(f) Eliminate equity earnings of subsidiaries




27


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**


**13.**  Consolidating statements of operations by industry for the quarter ended September 30, 2003 are as follows:


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)(In thousands)Revenues:Rental revenue

$
-

$
456,186

$
15,312

$
(14,842
)

(b
)
$
456,656

$
-

$
-

$
-


(b
)
$
456,656

$
41,858

$
(15,542
)

(b
)
$
482,972Net sales


-


51,444


22


-





51,466


-


-


-





51,466


14,161


-





65,627Premiums


-


-


-


-





-


29,574


38,341


(435
)

(c
)

67,480


-


-





67,480Net investment and interest income


284


7,804


2,003


-





10,091


6,118


5,324


-





21,533


-


(10,155
)

(d
)

11,378Total revenues


284


515,434


17,337


(14,842
)




518,213


35,692


43,665


(435
)




597,135


56,019


(25,697
)




627,457Costs and expenses:Operating expenses


4,979


271,097


1,870


(14,842
)

(b
)

263,104


9,023


8,503


(435
)

(b,c
)

280,195


28,493


(3,364
)

(b,c
)

305,324Restructuring expenses


2,124


-


-


-





2,124


-


-


-





2,124


-


-





2,124Commission expenses


-


53,789


-


-





53,789


-


-


-





53,789


-


(8,987
)




44,802Cost of sales


-


24,788


10


-





24,798


-


-


-





24,798


6,098


-





30,896Benefits and losses


-


-


-


-





-


37,415


28,031


-





65,446


-


-





65,446Amortization of deferred
policy acquisition costs


-


-


-


-





-


3,456


5,303


-





8,759


-


-





8,759Lease expense


230


37,014


138


-





37,382


-


-


-





37,382


-


(3,191
)

(b
)

34,191Depreciation, net


4


30,314


1,995


-





32,313


-


-


-





32,313


5,094


(482
)

(e
)

36,925Total costs and expenses


7,337


417,002


4,013


(14,842
)




413,510


49,894


41,837


(435
)




504,806


39,685


(16,024
)




528,467Equity in earnings of AREC,
UHI, RWIC & OLIC


59,970


-


-


(67,305
)

(f
)

(7,335
)

-


-


7,335


(f
)

-


-


-





-Equity in earnings of SAC


(2,495
)

-


-


-





(2,495
)

-


-


-





(2,495
)

-


2,495


(f
)

-Total equity earnings in subsidiaries


57,475


-


-


(67,305
)




(9,830
)

-


-


7,335





(2,495
)

-


2,495





-Earnings (losses) from operations


50,422


98,432


13,324


(67,305
)




94,873


(14,202
)

1,828


7,335





89,834


16,334


(7,178
)




98,990Interest expense(benefit)


15,554


(4,081
)

9,041


-





20,514


-


-


-





20,514


20,414


(10,155
)

(d
)

30,773Pretax earnings (loss)


34,868


102,513


4,283


(67,305
)




74,359


(14,202
)

1,828


7,335





69,320


(4,080
)

2,977





68,217Income tax benefit (expense)


8,675


(37,698
)

(1,793
)

-





(30,816
)

4,983


56


-





(25,777
)

1,585


-





(24,192
)Net earnings (loss)


43,543


64,815


2,490


(67,305
)




43,543


(9,219
)

1,884


7,335





43,543


(2,495
)

2,977





44,025Less: Preferred stock dividends


(3,241
)

-


-


-





(3,241
)

-


-


-





(3,241
)

-


-





(3,241
)Earnings (loss) available to common
shareholders

$
40,302

$
64,815

$
2,490

$
(67,305
)



$
40,302

$
(9,219
)
$
1,884

$
7,335




$
40,302

$
(2,495
)
$
2,977




$
40,784


(a) Balances for the quarter ended June 30, 200


(b) Eliminate intercompany lease income


(c) Eliminate intercompany premiums


(d) Eliminate intercompany interest on debt


(e) Eliminate gain on sale of surplus property from U-Haul to SAC


(f) Eliminate equity earnings of subsidiaries




28  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**





**13.** Consolidating statements of operations by industry for the six months ended September 30, 2004 are as follows:


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)(In thousands)Revenues:Rental revenue

$
-

$
891,216

$
29,363

$
(31,011
)

(b
)
$
889,568

$
-

$
-

$
(1,252
)

(b
)
$
888,316

$
14,514

$
(6,878
)

(b
)
$
895,952Net sales


-


110,440


15


-





110,455


-


-


-





110,455


8,608


-





119,063Premiums


-


-


-


-





-


16,840


66,037


(743
)

(c
)

82,134


-


-





82,134Net investment and interest income


4,957


11,299


54


-





16,310


8,236


11,661


-





36,207


-


(4,097
)

(d
)

32,110Total revenues


4,957


1,012,955


29,432


(31,011
)




1,016,333


25,076


77,698


(1,995
)




1,117,112


23,122


(10,975
)




1,129,259Costs and expenses:Operating expenses


11,527


555,691


3,647


(31,011
)

(b
)

539,854


1,557


11,251


(1,995
)

(b,c
)

550,667


11,389


(1,397
)

(b,c
)

560,659Commission expenses


-


103,947


-


-





103,947


-


-


-





103,947


-


(5,126
)




98,821Cost of sales


-


53,235


8


-





53,243


-


-


-





53,243


3,013


-





56,256Benefits and losses


-


-


-


-





-


17,897


47,694


-





65,591


-


-





65,591Amortization of deferred
policy acquisition costs


-


-


-


-





-


5,153


12,583


-





17,736


-


-





17,736Lease expense


44


77,167


27


-





77,238


-


-


-





77,238


-


(355
)

(b
)

76,883Depreciation, net


17


53,851


3,084


-





56,952


-


-


-





56,952


1,260


(280
)

(e
)

57,932Total costs and expenses


11,588


843,891


6,766


(31,011
)




831,234


24,607


71,528


(1,995
)




925,374


15,662


(7,158
)




933,878Equity in earnings of AREC,
UHI, RWIC & OLIC


123,071


-


-


(118,741
)

(f
)

4,330


-


-


(4,330
)

(f
)

-


-


-





-Equity in earnings of SAC


77


-


-


-





77


-


-


-





77


-


(77
)

(f
)

-Total equity earnings in subsidiaries


123,148


-


-


(118,741
)




4,407


-


-


(4,330
)




77


-


(77
)




-Earnings (losses) from operations


116,517


169,064


22,666


(118,741
)




189,506


469


6,170


(4,330
)




191,815


7,460


(3,894
)




195,381Interest expense(benefit)


34,210


(6,904
)

6,624


-





33,930


-


-


-





33,930


7,231


(4,097
)

(d
)

37,064Pretax earnings (loss)


82,307


175,968


16,042


(118,741
)




155,576


469


6,170


(4,330
)




157,885


229


203





158,317Income tax benefit (expense)


14,997


(66,889
)

(6,380
)

-





(58,272
)

(157
)

(2,152
)

-





(60,581
)

(152
)

(106
)




(60,839
)Net earnings (loss)


97,304


109,079


9,662


(118,741
)




97,304


312


4,018


(4,330
)




97,304


77


97





97,478Less: Preferred stock dividends


(6,482
)

-


-


-





(6,482
)

-


-


-





(6,482
)

-


-





(6,482
)Earnings (loss) available to common shareholders

$
90,822

$
109,079

$
9,662

$
(118,741
)



$
90,822

$
312

$
4,018

$
(4,330
)



$
90,822

$
77

$
97




$
90,996


(a) Balances for the six months ended June 30, 2004


(b) Eliminate intercompany lease income


(c ) Eliminate intercompany premiums


(d) Eliminate intercompany interest on debt


(e) Eliminate gain on sale of surplus property from U-Haul to SAC


(f) Eliminate equity earnings of subsidiaries




29


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**


**13.** **Consolidating statements of operations by industry for the six months ended September 30, 2003 are as follows:**


Obligated Group





AMERCO Legal Group



AMERCO as ConsolidatedAMERCO

U-Haul

Real Estate

Eliminations



Obligated Group
Consolidated

Property and Casualty Insurance(a)

Life
Insurance(a)

Eliminations



AMERCO
Consolidated

SAC Moving and Storage Operations

Eliminations



Total Consolidated(Unaudited)(In thousands)Revenues:Rental revenue

$
-

$
863,233

$
30,140

$
(30,161
)

(b
)
$
863,212

$
-

$
-

$
-


(b
)
$
863,212

$
84,158

$
(29,356
)

(b
)
$
918,014Net sales


-


105,720


37


-





105,757


-


-


-





105,757


29,079


-





134,836Premiums


-


-


-


-





-


58,141


76,425


(2,630
)

(c
)

131,936


-


-





131,936Net investment and interest income


528


15,832


3,995


-





20,355


11,922


10,677


-





42,954


-


(20,167
)

(d
)

22,787Total revenues


528


984,785


34,172


(30,161
)




989,324


70,063


87,102


(2,630
)




1,143,859


113,237


(49,523
)




1,207,573Costs and expenses:Operating expenses


14,219


533,832


3,643


(30,161
)

(b
)

521,533


14,301


17,153


(2,630
)

(b,c
)

550,357


56,615


(6,655
)

(b,c
)

600,317Restructuring expenses


4,414


-


-


-





4,414


-


-


-





4,414


-


-





4,414Commission expenses


-


100,942


-


-





100,942


-


-


-





100,942


-


(15,946
)




84,996Cost of sales


-


50,415


16


-





50,431


-


-


-





50,431


12,684


-





63,115Benefits and losses


-


-


-


-





-


62,997


55,848


-





118,845


-


-





118,845Amortization of deferred
policy acquisition costs


-


-


-


-





-


7,166


10,693


-





17,859


-


-





17,859Lease expense


460


74,534


275


-





75,269


-


-


-





75,269


-


(6,755
)

(b
)

68,514Depreciation, net


7


60,894


4,166


-





65,067


-


-


-





65,067


10,860


(964
)

(e
)

74,963Total costs and expenses


19,100


820,617


8,100


(30,161
)




817,656


84,464


83,694


(2,630
)




983,184


80,159


(30,320
)




1,033,023Equity in earnings of AREC,
UHI, RWIC & OLIC


107,141


-


-


(113,906
)

(f
)

(6,765
)

-


-


6,765


(f
)

-


-


-





-Equity in earnings of SAC


(6,027
)

-


-


-





(6,027
)

-


-


-





(6,027
)

-


6,027


(f
)

-Total equity earnings in subsidiaries


101,114


-


-


(113,906
)




(12,792
)

-


-


6,765





(6,027
)

-


6,027





-Earnings (losses) from operations


82,542


164,168


26,072


(113,906
)




158,876


(14,401
)

3,408


6,765





154,648


33,078


(13,176
)




174,550Interest expense(benefit)


29,929


(5,150
)

15,838


-





40,617


-


-


-





40,617


41,221


(20,167
)

(d
)

61,671Pretax earnings (loss)


52,613


169,318


10,234


(113,906
)




118,259


(14,401
)

3,408


6,765





114,031


(8,143
)

6,991





112,879Income tax benefit (expense)


18,184


(61,422
)

(4,224
)

-





(47,462
)

5,046


(818
)

-





(43,234
)

2,116


-





(41,118
)Net earnings (loss)


70,797


107,896


6,010


(113,906
)




70,797


(9,355
)

2,590


6,765





70,797


(6,027
)

6,991





71,761Less: Preferred stock dividends


(6,482
)

-


-


-





(6,482
)

-


-


-





(6,482
)

-


-





(6,482
)Earnings (loss) available to common
shareholders

$
64,315

$
107,896

$
6,010

$
(113,906
)



$
64,315

$
(9,355
)
$
2,590

$
6,765




$
64,315

$
(6,027
)
$
6,991




$
65,279


(a) Balances for the six months ended June 30, 2003


(b) Eliminate intercompany lease income


(c) Eliminate intercompany premiums


(d) Eliminate intercompany interest on debt


(e) Eliminate gain on sale of surplus property from U-Haul to SAC


(f) Eliminate equity earnings of subsidiaries





30  ****
 **AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**


**13.**  **Consolidating cash flow statements by industry segment for the six months ended September 30, 2004 are as follows:**


Obligated Group



AMERCO Legal Group

AMERCO as ConsolidatedAmerco

U-Haul

Real
Estate

Eliminations

Obligated Group
Consolidated

Property and Casualty Insurance (a)

Life
Insurance (a)

Eliminations

Amerco Consolidated

SAC Moving and Storage Operations

Eliminations

Total Consolidated(Unaudited) (In thousands)Cash flows from operating activities:Earnings available to common shareholders

$
90,822

$
109,079

$
9,662

$
(118,741
)
$
90,822

$
312

$
4,019

$
(4,331
)
$
90,822

$
77

$
97

$
90,996Depreciation


17


51,149


4,309


-


55,475


-


-


-


55,475


1,260


(280
)

56,455Amortization of deferred policy acquisition costs


-


-


-


-


-


5,730


13,563


-


19,293


-


-


19,293Provision for losses on accounts receivable


-


102


-


-


102


-


-


-


102


-


-


102Net (gain) loss on sale of real and personal property


-


2,702


(1,225
)

-


1,477


-


-


-


1,477


-


-


1,477(Gain) loss on sale of investments


-


-


-


-


-


(369
)

171


-


(198
)

-


-


(198
)Reductions in policy liabilities and accruals


-


25,857


-


-


25,857


(32,015
)

(7,012
)

-


(13,170
)

-


-


(13,170
)Capitalizations of deferred policy acquisition costs


-


-


-


-


-


(3,456
)

(3,276
)

-


(6,732
)

-


-


(6,732
)Net reduction in other operating
assets and liabilities


84,846


(179,877
)

(11,678
)

118,741


12,032


7,236


(3,062
)

4,331


20,537


(879
)

183


19,841Net cash provided by (used in) operating activities


175,685


9,012


1,068


-


185,765


(22,562
)

4,403


-


167,606


458


-


168,064Cash flows from investing activities:Purchases of investments:Property, plant and equipment


(6
)

(160,334
)

(1,114
)

-


(161,454
)

-


-


-


(161,454
)

(239
)

-


(161,693
)Fixed maturities


-


-


-


-


-


(2,045
)

(57,978
)

-


(60,023
)

-


-


(60,023
)Common stock


-


-


(1
)

-


(1
)

-


(6,765
)

-


(6,766
)

-


-


(6,766
)Proceeds from sale of investments:Property, plant and equipment


-


220,479


369


-


220,848


-


-


-


220,848


-


-


220,848Fixed maturities


-


-


-


-


-


27,010


47,919


-


74,929


-


-


74,929Preferred stock


-


-


-


-


-


-


2,708


-


2,708


-


-


2,708Real estate


-


-


-


-


-


1,722


-


-


1,722


-


-


1,722Mortgage loans


-


-


-


-


-


-


1,913


-


1,913


-


-


1,913Changes in other investments


-


-


-


-


-


873


44,989


-


45,862


-


-


45,862Net cash provided by (used in)
investing activities


(6
)

60,145


(746
)

-


59,393


27,560


32,786


-


119,739


(239
)

-


119,500Cash flows from financial activities:Borrowings from Credit Facilities


14,385


-


-


-


14,385


-


-


-


14,385


-


-


14,385Leverage Employee Stock Ownership Plan:Purchase of shares


-


428


-


-


428


-


-


-


428


-


-


428Principal Repayments on Credit Facilities


(180,325
)

(215
)

-


-


(180,540
)

-


-


-


(180,540
)

(536
)

-


(181,076
)Payoff of capital leases


-


(99,609
)

-


-


(99,609
)

-


-


-


(99,609
)

-


-


(99,609
)Dividends paid


(9,723
)

-


-


-


(9,723
)

-


-


-


(9,723
)

-


-


(9,723
)Investment contract deposits


-


-


-


-


-


-


13,427


-


13,427


-


-


13,427Investment contract withdrawals


-


-


-


-


-


-


(61,194
)

-


(61,194
)

-


-


(61,194
)Net cash provided by (used in) financing activities


(175,663
)

(99,396
)

-


-


(275,059
)

-


(47,767
)

-


(322,826
)

(536
)

-


(323,362
)Increase (decrease) in cash equivalents


16


(30,239
)

322


-


(29,901
)

4,998


(10,578
)

-


(35,481
)

(317
)

-


(35,798
)Cash and cash equivalents at the beginning of period


-


64,717


661


-


65,378


-


15,168


-


80,546


1,011


-


81,557Cash and cash equivalents at the end of period

$
16

$
34,478

$
983

$
-

$
35,477

$
4,998

$
4,590

$
-

$
45,065

$
694

$
-

$
45,759


(a) Balances for the quarter ended June 30, 2004




31


**AMERCO AND CONSOLIDATED ENTITIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (C** **ontinued)**





**13.** **Consolidating cash flow statements by industry segment for the six months ended September 30, 2003 are as follows:**


Obligated Group



AMERCO Legal Group

AMERCO as ConsolidatedAmerco

U-Haul

Real
Estate

Eliminations

Obligated Group
Consolidated

Property and Casualty Insurance (a)

Life
Insurance (a)

Eliminations

Amerco Consolidated

SAC Moving and Storage Operations

Eliminations

Total Consolidated(Unaudited) (In thousands)Cash flows from operating activities:Earnings available to common shareholders

$
64,315

$
107,896

$
6,010

$
(113,906
)
$
64,315

$
(9,355
)
$
2,590

$
6,765

$
64,315

$
(6,027
)
$
6,991

$
65,279Depreciation


7


55,480


4,291


-


59,778


-


-


-


59,778


10,860


(964
)

69,674Amortization


-


-


-


-


-


7,653


9,084


-


16,737


-


-


16,737Amortization of deferred policy acquisition costs


-


-


-


-


-


-


-


-


-


-


-


-Provision for losses on accounts receivable


-


686


-


-


686


-


-


-


686


-


-


686Net (gain) loss on sale of real and personal property


-


5,414


(125
)

-


5,289


-


-


-


5,289


-


-


5,289(Gain) loss on sale of investments


-


-


-


-


-


(775
)

(1,542
)

-


(2,317
)

-


-


(2,317
)Reductions in policy liabilities and accruals


-


-


-


-


-


(18,111
)

(83
)

-


(18,194
)

-


-


(18,194
)Capitalizations of deferred policy acquisition costs


-


-


-


-


-


(3,600
)

(8,165
)

-


(11,765
)

-


-


(11,765
)Net reduction in other operating assets and liabilities


13,647


(74,555
)

(9,615
)

113,906


43,383


(28,351
)

659


(6,765
)

8,926


1,431


(5,163
)

5,194Net cash provided by (used in) operating activities


77,969


94,921


561


-


173,451


(52,539
)

2,543


-


123,455


6,264


864


130,583Cash flows from investing activities:Purchases of investments:Property, plant and equipment


-


(93,091
)

(697
)

-


(93,788
)

-


-


-


(93,788
)

(8,507
)

-


(102,295
)Fixed maturities


-


-


-


-


-


(1,880
)

(22,264
)

-


(24,144
)

-


-


(24,144
)Proceeds from sale of investments:Property, plant and equipment


-


11,353


154


-


11,507


-


-


-


11,507


39,169


(31,585
)

19,091Fixed maturities


-


-


-


-


-


58,046


70,453


-


128,499


-


-


128,499Preferred stock


-


-


-


-


-


-


11,380


-


11,380


-


-


11,380Real estate


-


-


-


-


-


(17,371
)

(5,489
)

-


(22,860
)

-


-


(22,860
)Mortgage loans


-


73


130


-


203


-


9,911


-


10,114


(31,585
)

31,585


10,114Changes in other investments


-


-


-


-


-


6,697


(63,018
)

-


(56,321
)

-


-


(56,321
)Net cash provided by (used in) investing activities


-


(81,665
)

(413
)

-


(82,078
)

45,492


973


-


(35,613
)

(923
)

-


(36,536
)Cash flows from financial activities:Borrowings from Credit Facilities


50,000


-


-


-


50,000


-


-


-


50,000


864


(864
)

50,000Leverage Employee Stock Ownership Plan:Purchase of shares


-


375


-


-


375


-


-


-


375


-


-


375Principal Repayments on Credit Facilities


(50,000
)

-


-


-


(50,000
)

-


-


-


(50,000
)

(4,681
)

-


(54,681
)Dividends paid


-


-


-


-


-


-


-


-


-


-


-


-Investment contract deposits


-


-


-


-


-


-


34,422


-


34,422


-


-


34,422Investment contract withdrawals


-


-


-


-


-


-


(39,375
)

-


(39,375
)

-


-


(39,375
)Net cash provided by (used in) financing activities


-


375


-


-


375


-


(4,953
)

-


(4,578
)

(3,817
)

(864
)

(9,259
)Increase (decrease) in cash equivalents


77,969


13,631


148


-


91,748


(7,047
)

(1,437
)

-


83,264


1,524


-


84,788Cash and cash equivalents at the beginning of period


18,524


30,046


174


-


48,744


4,108


9,320


-


62,172


4,662


-


66,834Cash and cash equivalents at the end of period

$
96,493

$
43,677

$
322

$
-

$
140,492

$
(2,939
)
$
7,883

$
-

$
145,436

$
6,186

$
-

$
151,622


(a) Balances for the quarter ended June 30, 2003




32


AMERCO AND CONSOLIDATED ENTITIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


**14. Industry Segment and Geographic Area Data**




***Geographic Area Data -- All amounts are in U. S. $s***


**United States**

**Canada**

**Consolidated****Quarter Ended**(Unaudited)(All amounts are in thousands U.S. $'s)**As of and for the period ended, September 30, 2004**Total revenues

$
562,489

$
16,059

$
578,548Depreciation / amortization, net


36,490


1,192


37,682Interest expense / (income)


18,070


(10
)

18,060Pretax earnings


83,190


2,943


86,133Income tax expense


33,074


-


33,074Identifiable assets


3,104,125


70,099


3,174,224





**United States**

**Canada**

**Consolidated**(All amounts are in thousands U.S. $'s)**As of and for the period ended, September 30, 2003**Total revenues

$
607,391

$
20,066

$
627,457Depreciation / amortization, net


43,329


2,355


45,684Interest expense


29,769


1,004


30,773Pretax earnings


63,746


4,471


68,217Income tax expense


24,192


-


24,192Identifiable assets


3,753,386


136,264


3,889,650





**United States**

**Canada**

**Consolidated****Six Months Ended**(Unaudited)(All amounts are in thousands U.S. $'s)**As of and for the period ended, September 30, 2004**Total revenues

$
1,098,777

$
30,482

$
1,129,259Depreciation / amortization, net


73,275


2,393


75,668Interest expense / (income)


37,072


(8
)

37,064Pretax earnings


152,493


5,824


158,317Income tax expense


60,839


-


60,839Identifiable assets


3,104,125


70,099


3,174,224





**United States**

**Canada**

**Consolidated**(All amounts are in thousands U.S. $'s)**As of and for the period ended, September 30, 2003**Total revenues

$
1,168,961

$
38,612

$
1,207,573Depreciation / amortization, net


88,935


3,887


92,822Interest expense


59,301


2,370


61,671Pretax earnings


103,997


8,882


112,879Income tax expense


41,118


-


41,118Identifiable assets


3,753,386


136,264


3,889,650




33


AMERCO AND CONSOLIDATED ENTITIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  - (Continued)


***ITEM 2.*** ***Managements Discussion and Analysis of Financial Condition and Results of Operations***




**Cautionary Statements Regarding Forward-Looking Statements**




This Quarterly Report on Form 10-Q contains forward-looking statements. We may make additional written or oral forward-looking statements from time to time in filings with the Securities and Exchange Commission or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, projections of revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services, financing needs and plans, our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us, liquidity, goals and strategies, plans for new business, growth rate assumptions, pricing, costs, and access to capital and leasing markets as well as assumptions relating to the foregoing. The words "believe," "expect," "anticipate," "estimate," "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the risk factors enumerated at the end of this section, as well as the following: the Companys ability to operate pursuant to the terms of its credit facilities;  the Companys ability to maintain contracts that are critical to its operations; the costs and availability of financing; the Companys ability to execute its business plan; the Companys ability to attract, motivate and retain key employees; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; our ability to refinance our debt; changes in government regulations, particularly environmental regulations; our credit ratings; the availability of credit; changes in demand for our products; changes in the general domestic economy; degree and nature of our competition; the resolution of pending litigation and government investigations involving the Company; changes in accounting standards and other factors described in this report or the other documents we file with the Securities Exchange Commission. The above factors, the following disclosures, as well as other statements in this report and in the Notes to our Condensed Consolidated Financial Statements, could contribute to or cause such differences, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by the Company that such matters will be realized. The Company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.





**General**




We begin Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a description of our operating segments. This is followed by a review of the overall strategy of AMERCO and a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. This is followed by a discussion of the strategy of our business segments to give the reader an overview of the goals of our business and the direction in which our business and products are moving. In the next section, we discuss our Results of Operations for the second quarter and six months ending September 30, 2004 compared with the same periods last year. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our liquidity and financial commitments in the sections entitled "Liquidity and Capital Resources" and "Disclosures about Contractual Obligations and Commercial Commitments." We conclude this MD&A by discussing our outlook for the remainder of fiscal year 2005.





This MD&A should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q. The various sections of this MD&A contain a number of forward looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly under the caption "Risk Factors" in this section. Our actual results may differ materially from these forward looking statements.





**Description of Operating Segments**




AMERCO has three reportable segments and five identifiable segments. The three reportable segments are Moving and Self Storage, Property and Casualty Insurance and Life Insurance. The five identifiable segments include U-Haul moving and storage, Real Estate, and SAC moving and storage, which are listed under the Moving and Self Storage segment. The remaining identifiable segments are Property and Casualty Insurance and Life Insurance.




34




**Overall** **Strategy**




Our plan is to maintain our leadership position in the North American "do-it-yourself" moving and storage industry. Our overall strategy is to provide a seamless and integrated supply chain to the "do-it-yourself" moving and storage market. As part of executing this strategy, we leverage the brand recognition of *U-Haul* with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence.





Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage rooms available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our growing eMove capabilities.





Oxfords business strategy is long-term capital growth through direct writing and reinsuring of annuity, credit life and disability, and Medicare supplement products. Oxford is pursing this growth strategy through increased direct writing via acquisitions of insurance companies, expanded distribution channels and product development.





During fiscal year 2004, RepWest decided to focus its activities on providing and administering property and casualty insurance to *U-Haul,* its customers and its independent dealers and affiliates. We believe this will enable RepWest to focus its core competencies and financial resources to better support our overall strategy. This shift in direction has resulted in near term losses as RepWest exits unprofitable non-*U-Haul*business.




**Critical Accounting Policies and Estimates**




The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The accounting estimates that require managements most difficult and subjective judgments include our principles of consolidation, the recoverability of property, plant and equipment, the adequacy of insurance reserves, and the valuation of investments. Below, we discuss these policies further, as well as the estimates and judgments involved. The estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions. Such differences may be material.





Accounting policies are considered critical when they are significant and involve difficult, subjective or complex judgments or estimates. The accounting policies that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following:





***Principles of Consolidation***




The consolidated financial statements for the second quarter and the first six months of fiscal year 2005 and the balance sheet as of March 31, 2004 include the accounts of AMERCO, its wholly owned subsidiaries and SAC Holding II Corporation and its subsidiaries. The balance sheet and the statements of operations, comprehensive income, and cash flows for the second quarter and the first six months of fiscal year 2004 include all of the abovementioned entities plus SAC Holding Corporation and its subsidiaries.





SAC Holding Corporation and SAC Holding II Corporation and their subsidiaries (the "SAC entities") were previously considered special purpose entities. During the first three quarters of fiscal year 2004, the SAC entities were consolidated based on the provisions of Emerging Issues Task Force (EITF) Issue No. 90-15. During the fourth quarter of fiscal year 2004, the Company applied FASB Interpretation No. 46(R) to its interest in the SAC entities and determined that SAC Holding Corporation should no longer be consolidated with the Companys financial statements. Accordingly, during the fourth quarter of fiscal year 2004 the Company deconsolidated those entities. The deconsolidation was accounted for as a distribution of the Companys interests to the SAC entities. Because of the Companys continuing involvement with SAC Holding Corporation and its subsidiaries, the distributions do not qualify as discontinued operations as defined by SFAS No. 144.





Inter-company accounts and transactions have been eliminated







35




**Recoverability of Property, Plant and Equipment**




Property, plant and equipment is stated at cost. Interest cost incurred during the initial construction of buildings or rental equipment is considered part of cost. Depreciation is computed for financial reporting purposes principally using the straight-line method over the following estimated useful lives: rental equipment 2-20 years, buildings and non-rental equipment 3-55 years. Major overhauls to rental equipment are capitalized and are amortized over the estimated period benefited. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized. Depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., no gains or losses. During the first quarter of fiscal year 2005, the Company lowered its estimates for residual values on rental trucks purchased off TRAC leases from 25% of the original cost to 20%. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed. Since this change in estimated residual values will be applied prospectively we do not anticipate any significant increases in depreciation expense for the current fiscal year.





We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets is shorter or longer than originally estimated. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If assets are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets are depreciated over the newly determined remaining useful lives.




***Insurance Reserves*** ****




Liabilities for life insurance and certain annuity policies are established to meet the estimated future obligations of policies in force, and are based on mortality and withdrawal assumptions from recognized actuarial tables which contain margins for adverse deviation. Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders, excluding surrender values. Liabilities for health, disability and other policies represents estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported. Insurance reserves for RepWest and U-Haul take into account losses incurred based upon actuarial estimates. These estimates are based on past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation. Due to the nature of underlying risks and the high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle liabilities cannot be precisely determined and may vary significantly from the estimated liability.




***Investments***




For investments accounted for under SFAS No. 115, in determining if and when a decline in market value below amortized cost is other than temporary, quoted market prices, dealer quotes or discounted cash flows are reviewed. Other-than-temporary declines in value are recognized in the current period operating results to the extent of the decline.




***Key Accounting Policies***




We also have other policies that we consider key accounting policies, such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective.




36




**Business Segment Strategy**




***Moving and*** **Self-Storage**




U-Haul moving and self-storage operations consist of the rental of trucks, trailers and self-storage spaces and sales of moving supplies, trailer hitches and propane to the "do-it-yourself" mover. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.





Real Estate owns approximately 90 percent of the Companys real estate assets, including U-Haul Center and Storage locations. The remaining real estate assets are owned by other subsidiaries. Real Estate is responsible for overseeing major property repairs and dispositions and managing the environmental risks of the properties.





SAC moving and self-storage operations consist of the rental of self-storage spaces and sales of moving supplies, trailer hitches and propane. In addition, SAC functions as an independent moving equipment rental dealer and earns commissions from the rental of U-Haul trucks and trailers. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.





We continue to focus on expanding our dealer network, which provides added convenience for our customers, and expanding the selection and availability of rental equipment to satisfy the growing demands of our customers.





With respect to our retail sales of product, U-Haul has developed a number of specialty packing boxes, "Mover's Wrap" and Smart Move tape. Movers Wrap is a sticks-to-itself plastic stretch wrap used to bind, bundle, and fasten items when moving or storing. Additionally, U-Haul has added a full line of Smart Move tape products. The Smart Move tape is a color coded packing tape that has the room printed right on it allowing you to tape and label your belongings in one quick step.





eMove.com connects consumers to independent customer rated moving and storage service providers who provide packing, loading, unloading, self-storage, cleaning, driving help and more. With over 23,000 unedited reviews of service providers, the marketplace has facilitated over 40,000 moving and storage transactions. Another eMove service is the Storage Affiliate program. It targets independently owned self-storage facilities to connect into the eMove network to provide more customers with storage services. Over 2,200 self-storage facilities are now registered on the eMove network. We believe that acting as an intermediary, with little added investment, serves the customer in a cost effective manner. Within two years of its inception, eMove has established itself as the only online destination in the "do-it-yourself" moving and storage industry that connects consumers to service providers in all across North America. Our goal is to further utilize our web-based technology platform to further penetrate this market.





***Republic Western Insurance Company***




Republic Western Insurance Company (RepWest) provides loss adjusting and claims handling for *U-Haul* through regional offices across North America. RepWest also provides components of the *Safemove, Safetow and Safestor*protection packages to *U-Haul* customers. We continue to focus on increasing the penetration of these products. The business plan for RepWest includes offering property and casualty products in other *U-Haul* related programs. During the past year RepWest has commuted numerous assumed reinsurance treaties to eliminate the risk of further development on these treaties.





For additional information about the "DOI Supervision" reference is made to the section on "Risk Factors" under the title "RepWest has consented to an Order of Supervision issued by the Arizona Department of Insurance".




***Oxford*** **Life Insurance Company**




Oxford originates and reinsures annuities, credit life and disability, single premium whole life, group life and disability coverage, and Medicare supplement insurance. Oxford also administers the self-insured employee health and dental plans for AMERCO. Reinsurance arrangements are entered into with unaffiliated reinsurers.





At June 30, 2004, the Companys non-seasonal work force consisted of 137 full and part-time employees.




37




Oxfords business strategy is long-term capital growth through direct writing and reinsuring of annuity, credit life and disability, and Medicare supplement products. Oxford is pursing this growth strategy of increased direct writing via acquisitions of insurance companies, expanded distribution channels and product development. The acquisitions of North American Insurance Company and Safe Mate Life Insurance Company in 1997 and Christian Fidelity Life Insurance Company in 2000 represent a significant movement toward this long-term goal. Oxford has significantly expanded product offerings, distribution channels and administrative capabilities through these acquisitions.




**Results of Operations**


**Quarter Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****AMERCO and Consolidated Entities**

(In thousands)Rental revenue

$
469,320

$
482,972

$
(13,652
)

-3
%Net sales


57,817


65,627


(7,810
)

-12
%Premiums


39,072


67,480


(28,408
)

-42
%Net investment and interest income


12,339


11,378


961


8
%Total revenues


578,548


627,457


(48,909
)

-8
%Operating expenses


288,447


305,324


(16,877
)

-6
%Restructuring expenses


-


2,124


(2,124
)

-100
%Commission expenses


51,908


44,802


7,106


16
%Cost of sales


28,516


30,896


(2,380
)

-8
%Benefits and losses


31,454


65,446


(33,992
)

-52
%Amortization of deferred policy
acquisition costs


7,778


8,759


(981
)

-11
%Lease expense


36,348


34,191


2,157


6
%Depreciation, net (a)


29,904


36,925


(7,021
)

-19
%Total costs and expenses


474,355


528,467


(54,112
)

-10
%Earnings from operations


104,193


98,990


5,203


5
%Interest expense


18,060


30,773


(12,713
)

-41
%Pretax earnings


86,133


68,217


17,916


26
%Income tax expense


(33,074
)

(24,192
)

(8,882
)

37
%Net earnings


53,059


44,025


9,034


21
%Less: Preferred stock dividends


(3,241
)

(3,241
)

-


0
%Earnings available to common shareholders

$
49,818

$
40,784

$
9,034


22
%




(a)     Depreciation is shown net of (gain)/losses on the disposal of fixed assets:


**Quarter Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
28,073

$
33,100Loss on disposals


1,831


3,825Depreciation, net

$
29,904

$
36,925




38




**Six Months Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****AMERCO and Consolidated Entities**

(In thousands)Rental revenue

$
895,952

$
918,014

$
(22,062
)

-2
%Net sales


119,063


134,836


(15,773
)

-12
%Premiums


82,134


131,936


(49,802
)

-38
%Net investment and interest income


32,110


22,787


9,323


41
%Total revenues


1,129,259


1,207,573


(78,314
)

-6
%Operating expenses


560,659


600,317


(39,658
)

-7
%Restructuring expenses


-


4,414


(4,414
)

-100
%Commission expenses


98,821


84,996


13,825


16
%Cost of sales


56,256


63,115


(6,859
)

-11
%Benefits and losses


65,591


118,845


(53,254
)

-45
%Amortization of deferred policy
acquisition costs


17,736


17,859


(123
)

-1
%Lease expense


76,883


68,514


8,369


12
%Depreciation, net (a)


57,932


74,963


(17,031
)

-23
%Total costs and expenses


933,878


1,033,023


(99,145
)

-10
%Earnings from operations


195,381


174,550


20,831


12
%Interest expense


37,064


61,671


(24,607
)

-40
%Pretax earnings


158,317


112,879


45,438


40
%Income tax expense


(60,839
)

(41,118
)

(19,721
)

48
%Net earnings


97,478


71,761


25,717


36
%Less: Preferred stock dividends


(6,482
)

(6,482
)

-


0
%Earnings available to common shareholders

$
90,996

$
65,279

$
25,717


39
%




(a) Depreciation is shown net of (gains)/losses on the disposal of fixed assets:


**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
56,455

$
69,674Loss on disposals


1,477


5,289Depreciation, net

$
57,932

$
74,963




39




***Quarters Ended -*** **September 30, 2004 versus September 30, 2003**




AMERCO and its consolidated entities reported revenues of $578.5 million for the second quarter of fiscal year 2005. This compares with revenues of $627.5 million for the second quarter of fiscal year 2004. During the first quarter of this year, we sold 78 self-storage properties to U.H. Storage DE, a W.P. Carey affiliate (See Footnote 9 for a more detailed discussion of the W.P. Carey Transaction). This reduced storage revenues approximately $7.9 million in the second quarter of fiscal year 2005, compared with the second quarter of last year. Moving equipment rentals and storage revenues at U-Haul, adjusted for the effect of the W.P. Carey Transaction, increased approximately 3% in the second quarter of fiscal year 2005, compared with the same period a year ago. Also, we deconsolidated 281 SAC Holding Corporation storage properties during the fourth quarter of last year, and they are excluded from our fiscal year 2005 results. Included in the second quarter of last year were $24.4 million of revenues for these deconsolidated properties. Revenues at RepWest were $25.0 million lower in the second quarter of this year compared with the same period a year ago. This decline reflects the impact of our strategy to exit unprofitable non U-Haul lines of business. At Oxford, revenue decreased in the second quarter by 13%, primarily as a result of the lingering effects of its rating downgrade by A. M. Best in 2003.





Earnings from operations were $104.2 million in the second quarter of fiscal year 2005 compared with $99.0 million for the same period last year. Earnings from operations, at U-Haul were $93.1 million in the second quarter of fiscal year 2005. This reflects a decrease of $5.3 million, or 5% compared with the second quarter of fiscal year 2004, and is attributable to a change in the timing of recognizing current year insurance expense to better match revenues with expenses and lost equipment rentals resulting from the hurricanes that affected the southeastern part of the U.S. during August and September. Earnings from operations at Oxford were $2.5 million in the second quarter of this year, compared with $1.8 million in the second quarter of last year. The increase from 2003 is due primarily to improved loss experience in the credit insurance segment. At RepWest, the run-off of our non-U-Haul insurance business is progressing as planned. As a result, earnings from operations were $0.1 million in the second quarter of this year, compared with a loss from operations of $14.2 million for the same period last year





Interest expense for the second quarter of fiscal year 2005 was $18.1 million. This compares with $30.8 million in the second quarter of fiscal year 2004. The reduction in interest expense is due to the deconsolidation of SAC Holding Corporation, lower borrowings and lower borrowing costs. Income tax expense was $33.1 million in the second quarter of fiscal year 2005 compared with $24.2 million in the second quarter of fiscal year 2004, and reflects higher earnings before taxes. Preferred stock dividends were unchanged, at $3.2 million for both periods. As a result of the above mentioned items, net income available to common shareholders was $49.8 million in the second quarter of fiscal year 2005, compared with $40.8 million for the same period last year. Earnings per share were $2.39 in the second quarter of fiscal year 2005, compared with $1.97 for the same period last year. This reflects an improvement of 21%, or $.42 per share.





***Six Months Ended -*** **September 30, 2004 versus September 30, 2003**




AMERCO and its consolidated entities reported revenues of $1,129.3 million for the first six months of fiscal year 2005. This compares with revenues of $1,207.6 million for the first six months of fiscal year 2004. As previously mentioned, we deconsolidated 281 SAC Holding Corporation storage properties during the fourth quarter of last year, and they are excluded from our fiscal year 2005 results. Included in the first six months of last year were $51.6 million of revenues for these deconsolidated properties. Moving equipment rentals and storage revenues at U-Haul, adjusted for the effect of the W. P. Carey Transaction, increased 5% in the first six months of fiscal year 2005, compared with the same period a year ago. The W.P. Carey transaction had the effect of reducing storage revenues approximately $15.5 million in the first six months of fiscal year 2005. Revenues at RepWest were $45.1 million lower for the first six months of 2004, compared with the same period a year ago. This decline reflects the impact of its strategy to exit unprofitable non U-Haul lines of business. At Oxford, revenue decreased 11% for the first six months of 2004, primarily as a result of the lingering effects of its rating downgrade by A. M. Best in 2003.




40




Earnings from operations were $195.4 million for the first six months of fiscal year 2005, compared with $174.6 million for the same period last year. Earnings from operations, at U-Haul, were $169.1 million for the first six months of fiscal year 2005. This reflects an improvement of $4.9 million, or 3% compared with the same period last year and reflects the above mentioned change in the timing of recognizing current year insurance expense and lost equipment rentals resulting from the hurricanes in the southeastern U.S. Through six months strong truck and storage rentals, along with increased fleet productivity were major contributors to the increase in operating profitability at U-Haul. Earnings from operations at Oxford were $6.2 million for the first six months of 2004, compared with $3.4 million for the same period last year. The increase from 2003 is due primarily to improved investment income, and positive loss experience in the Medicare supplement and Credit insurance segments. At RepWest, the run-off of our non-U-Haul insurance business is progressing as planned. As a result, earnings from operations were $0.5 million in the first six months of 2004, compared with a loss from operations of $14.4 million for the same period last year.





Interest expense for the first six months of fiscal year 2005 was $37.1 million. This compares with $61.7 million in the same period last year. The reduction in interest expense is due to the deconsolidation of SAC Holding Corporation, lower borrowings and lower borrowing costs. Income tax expense was $60.8 million for the first six months of fiscal year 2005, compared with $41.1 million in the same period last year, and reflects higher earnings before taxes. Preferred stock dividends were unchanged, at $6.5 million for both periods. As a result of the above mentioned items, net income available to common shareholders was $91.0 million for the first six months of fiscal year 2005, compared with $65.3 million for the same period last year. Earnings per share were $4.38 for the first six months of fiscal year 2005, compared with $3.15 for the same period last year. This reflects an improvement of 39%, or $1.23 per share.




***Moving and Self-Storage***




The following tables set forth net revenue and certain consolidated statements of income data for the periods indicated:


**Quarter Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****U-Haul International**

(In thousands)Rental revenue

$
465,836

$
456,186

$
9,650


2
%Net sales


53,546


51,444


2,102


4
%Net investment and interest income


5,339


7,804


(2,465
)

-32
%Total revenues


524,721


515,434


9,287


2
%Operating expenses


285,963


271,097


14,866


5
%Commission expenses


54,625


53,789


836


2
%Cost of sales


27,227


24,788


2,439


10
%Lease expense


36,428


37,014


(586
)

-2
%Depreciation, net (a)


27,386


30,314


(2,928
)

-10
%Total costs and expense


431,629


417,002


14,627


4
%Earnings from operations


93,092


98,432


(5,340
)

-5
%Interest expense, net


(8,030
)

(4,081
)

(3,949
)

97
%Pretax earnings


101,122


102,513


(1,391
)

-1
%Income tax expense


(38,366
)

(37,698
)

(668
)

2
%Net earnings

$
62,756

$
64,815

$
(2,059
)

-3
%




(a) Depreciation is shown net of (gains)/losses on the disposal of fixed assets:







41




**Quarter Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
25,401

$
26,344Loss on disposals


1,985


3,970Depreciation, net

$
27,386

$
30,314




**Six Months Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****U-Haul International**

(In thousands)Rental revenue

$
891,216

$
863,233

$
27,983


3
%Net sales


110,440


105,720


4,720


4
%Net investment and interest income


11,299


15,832


(4,533
)

-29
%Total revenues


1,012,955


984,785


28,170


3
%Operating expenses


555,691


533,832


21,859


4
%Commission expenses


103,947


100,942


3,005


3
%Cost of sales


53,235


50,415


2,820


6
%Lease expense


77,167


74,534


2,633


4
%Depreciation, net (a)


53,851


60,894


(7,043
)

-12
%Total costs and expense


843,891


820,617


23,274


3
%Earnings from operations


169,064


164,168


4,896


3
%Interest expense, net


(6,904
)

(5,150
)

(1,754
)

34
%Pretax earnings


175,968


169,318


6,650


4
%Income tax expense


(66,889
)

(61,422
)

(5,467
)

9
%Net earnings

$
109,079

$
107,896

$
1,183


1
%





(a) Depreciation is shown net of (gains)/losses on the disposal of fixed assets:


**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
51,149

$
55,480Loss on disposals


2,702


5,414Depreciation, net

$
53,851

$
60,894




42


**Quarter Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****SAC Holdings ***

(In thousands)Rental revenue

$
7,505

$
41,858

$
(34,353
)

-82
%Net sales


4,271


14,161


(9,890
)

-70
%Total revenues


11,776


56,019


(44,243
)

-79
%Operating expenses


5,446


28,493


(23,047
)

-81
%Cost of sales


1,289


6,098


(4,809
)

-79
%Depreciation, net


642


5,094


(4,452
)

-87
%Total costs and expenses


7,377


39,685


(32,308
)

-81
%Earnings from operations


4,399


16,334


(11,935
)

-73
%Interest expense


3,968


20,414


(16,446
)

-81
%Pretax income(loss)


431


(4,080
)

(4,511
)

-111
%Income tax (expense)benefit


(231
)

1,585


(1,816
)

-115
%Net earnings (loss)

$
200

$
(2,495
)
$
(2,695
)

-108
%





* SAC Holdings II for quarter ended September 2004 and SAC Holdings I & II for 2003




**Six Months Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****SAC Holdings ***

(In thousands)Rental revenue

$
14,514

$
84,158

$
(69,644
)

-83
%Net sales


8,608


29,079


(20,471
)

-70
%Total revenues


23,122


113,237


(90,115
)

-80
%Operating expenses


11,389


56,615


(45,226
)

-80
%Cost of sales


3,013


12,684


(9,671
)

-76
%Depreciation, net


1,260


10,860


(9,600
)

-88
%Total costs and expenses


15,662


80,159


(64,497
)

-80
%Earnings from operations


7,460


33,078


(25,618
)

-77
%Interest expense


7,231


41,221


(33,990
)

-82
%Pretax loss


229


(8,143
)

(8,372
)

-103
%Income tax (expense) benefit


(152
)

2,116


(2,268
)

-107
%Net earnings (loss)

$
77

$
(6,027
)
$
(6,104
)

-101
%





* SAC Holdings II for six months ended September 2004 and SAC Holdings I & II for 2003




43





**Quarter Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Amerco Real Estate**

(In thousands)Rental revenue

$
14,556

$
15,312

$
(756
)

-5
%Net sales


-


22


(22
)

-100
%Net investment and interest income


27


2,003


(1,976
)

-99
%Total revenues


14,583


17,337


(2,754
)

-16
%Operating expenses


1,617


1,870


(253
)

-14
%Cost of sales


-


10


(10
)

-100
%Lease expense


4


138


(134
)

-97
%Depreciation, net (a)


2,006


1,995


11


1
%Total costs and expenses


3,627


4,013


(386
)

-10
%Earnings from operations


10,956


13,324


(2,368
)

-18
%Interest expense


4,977


9,041


(4,064
)

-45
%Pretax earnings


5,979


4,283


1,696


40
%Income tax expense


(2,410
)

(1,793
)

(617
)

34
%Net earnings

$
3,569

$
2,490

$
1,079


43
%





(a) Depreciation is shown net of (gains)/losses on the disposal of fixed assets:




**Quarter Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
2,160


2,140Gain on disposals


(154
)

(145
)Depreciation, net

$
2,006


1,995




44


**Six Months Ended September 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Amerco Real Estate**

(In thousands)Rental revenue

$
29,363

$
30,140

$
(777
)

-3
%Net sales


15


37


(22
)

-59
%Net investment and interest income


54


3,995


(3,941
)

-99
%Total revenues


29,432


34,172


(4,740
)

-14
%Operating expenses


3,647


3,643


4


0
%Cost of sales


8


16


(8
)

-50
%Lease expense


27


275


(248
)

-90
%Depreciation, net (a)


3,084


4,166


(1,082
)

-26
%Total costs and expenses


6,766


8,100


(1,334
)

-16
%Earnings from operations


22,666


26,072


(3,406
)

-13
%Interest expense


6,624


15,838


(9,214
)

-58
%Pretax earnings


16,042


10,234


5,808


57
%Income tax expense


(6,380
)

(4,224
)

(2,156
)

51
%Net earnings

$
9,662

$
6,010

$
3,652


61
%





(a) Depreciation is shown net of (gains)/losses on the disposal of fixed assets:


**Six Months Ended September 30,****2004**

**2003**(Unaudited)(In thousands)Depreciation expense

$
4,309


4,291Gain on disposals


(1,225
)

(125
)Depreciation, net

$
3,084


4,166




**Quarters Ended - September 30, 2004 versus September 30, 2003**




Rental revenues at U-Haul, before consolidating entries, were $465.8 million for the second quarter of fiscal year 2005 compared with $456.2 million for the same period last year. This represents an increase of $9.7 million, or 2%, and was driven by a combination of factors, including increased equipment rentals, better price realization and product mix, net of lower storage revenues resulting from the sale of property pursuant to the W.P. Carey Transaction, and lost equipment rentals resulting from the hurricanes that affected the southeastern U.S. during August and September. Rental revenues at the SAC entities, before consolidating entries, were $7.5 million for the second quarter of fiscal year 2005, compared with $41.9 million for the same period last year. This represents a reduction of $34.4 million, and reflects the deconsolidation of SAC Holding Corporation. Rental revenues at Real Estate, before consolidating entries, were $14.6 million for the second quarter of fiscal year 2005 and $15.3 million for the same period last year.





Net sales of moving and self-storage related products and services at U-Haul were $53.5 million for the second quarter of fiscal year 2005, compared with $51.4 million for the same period last year. This represents an increase of $2.1 million, or 4%, and was driven by increased rental activity and improved pricing. Net sales of moving and self-storage related products and services at the SAC entities were $4.3 million for the second quarter of fiscal year 2005, compared with $14.2 million for the same period last year. This represents a reduction of $9.9 million, and reflects the deconsolidation of SAC Holding Corporation.




45




Net investment and interest income at U-Haul, before consolidating entries, was $5.3 million for the second quarter of fiscal year 2005, compared with $7.8 million for the same period last year. The reduction in interest income is directly related to lower average investment balances in SAC Holdings notes. Net investment and interest income at Real Estate, before consolidating entries, decreased $2.0 million in the second quarter of fiscal year 2005, compared with the same period last year. The reduction in interest income is directly related to lower investments in mortgage notes, which decreased as a result of lower investment balances in SAC Holdings notes.





Operating expenses at U-Haul, before consolidating entries, were $286.0 million for the second quarter of fiscal year 2005, compared with $271.1 million for the same period last year. This represents an increase of $14.9 million, or 5%, and was the result of increases in payroll, equipment maintenance and timing changes in the recognition of insurance costs. Increased payroll and maintenance were driven by increases in volume and inflation, partially offset by lower other operating expenses. Operating expenses at the SAC entities, before consolidating entries, were $5.4 million for the second quarter of fiscal year 2005, compared with $28.5 million for the same period last year. This represents a reduction of $23.0 million, and reflects the deconsolidation of SAC Holding Corporation. Operating expenses at Real Estate, before consolidating entries, were $1.6 million for the second quarter of fiscal year 2005, compared with $1.9 million for the same period last year.





Dealer commissions at U-Haul were $54.6 million for the second quarter of fiscal year 2005, compared with $53.8 million for the same period last year. This represents an increase of $0.8 million, or 2%, and was driven by increased equipment rentals at our independent dealers.





Lease expense at U-Haul, before consolidating entries, was $36.4 million for the second quarter of fiscal year 2005, compared with $37.0 million for the same period last year. This represents a decrease of $0.6 million, or 2%, and reflects a decrease in the amount of rental equipment we leased.





Depreciation expense at U-Haul, before consolidating entries, was $27.4 million for the second quarter of fiscal year 2005, compared with $30.3 million for the same period last year. Depreciation expense at SAC Holdings, before consolidating entries, was $0.6 million during the second quarter of fiscal year 2005, compared with $5.1 million for the same period last year. This represents a reduction of $4.5 million and reflects the deconsolidation of SAC Holding Corporation. Depreciation expense at Real Estate, before consolidating entries, was $2.0 million during the second quarter of fiscal year 2005, which is consistent with the same period last year.




Earnings from operations at U-Haul, before consolidating entries, were $93.1 million during the second quarter of fiscal year 2005, compared with $98.4 million for the same period last year. This represents an decrease of $5.3 million, or 5%, and is attributable to the change in the timing of recognizing current year insurance expense and lost equipment rentals resulting from the hurricanes that affected the southeastern U.S. during August and September. Earnings from operations at SAC Holdings, before consolidating entries, were $4.4 million in the second quarter of fiscal year 2005, compared with $16.3 million for the same period last year. This represents a reduction of $11.9 million, and reflects the deconsolidation of SAC Holding Corporation. Earnings from operations at Real Estate, before consolidating entries, were $11.0 million during the second quarter of fiscal year 2005, compared with $13.3 million for the same period last year. This represents a reduction of $2.3 million, and reflects lower interest income from investments in mortgage notes, partially offset by gains on real estate sales.





**Six Months** **Ended - September 30, 2004 versus September 30, 2003**




Rental revenues at U-Haul, before consolidating entries, were $891.2 million for the first six months of fiscal year 2005, compared with $863.2 million for the same period last year. This represents an increase of $28.0 million, or 3% and was driven by a combination of factors, including increased equipment rentals, better price realization and product mix, net of lower storage revenues resulting from the sale of property pursuant to the W.P. Carey Transaction and lost equipment rentals resulting from the hurricanes that affected the southeastern U.S. during August and September. Rental revenues at the SAC entities, before consolidating entries, were $14.5 million for the first six months of fiscal year 2005, compared with $84.2 million for the same period last year. This represents a reduction of $69.6 million, and reflects the deconsolidation of SAC Holding Corporation. Rental revenues at Real Estate, before consolidating entries, were $29.4 million for the first six months of fiscal year 2005, and $30.1 million for the same period last year.




46




Net sales of moving and self-storage related products and services at U-Haul were $110.4 million for the first six months of fiscal year 2005, compared with $105.7 million for the same period last year. This represents an increase of $4.7 million, or 4%, and was driven by increased rental activity and improved pricing. Net sales of moving and self-storage related products and services at the SAC entities were $8.6 million for the first six months of fiscal year 2005, compared with $29.1 million for the same period last year. This represents a reduction of $20.5 million, and reflects the deconsolidation of SAC Holding Corporation.





Net investment and interest income at U-Haul, before consolidating entries, was $11.3 million for the first six months of fiscal year 2005 compared with $15.8 million for the same period last year. The reduction in interest income is directly related to lower average investment balances in SAC Holdings notes. Net investment and interest income at Real Estate, before consolidating entries, was $3.9 million lower for the first six months of fiscal year 2005, compared with the same period last year. The reduction in interest income is directly related to lower investments in mortgage notes, which decreased as a result of lower investment balances in SAC Holdings notes.





Operating expenses at U-Haul, before consolidating entries, were $555.7 million for the first six months of fiscal year 2005, compared with $533.8 million for the same period last year. This represents an increase of $21.9 million, or 4%, and was the result of increases in payroll, equipment maintenance and changes in the timing recognition of insurance costs. Increases in payroll and maintenance were driven by increases in volume and inflation, partially offset by lower other operating expenses. Operating expenses at the SAC entities, before consolidating entries, were $11.4 million for the first six months of fiscal year 2005, compared with $56.6 million for the same period last year. This represents a reduction of $45.2 million, and reflects the deconsolidation of SAC Holding Corporation. Operating expenses at Real Estate, before consolidating entries, were $3.6 million for the first six months of fiscal year 2005, which is consistent with the same period last year.





Dealer commissions at U-Haul were $103.9 million for the first six months of fiscal year 2005, compared with $100.9 million for the same period last year. This represents an increase of $3.0 million, or 3%, and was driven by increased equipment rentals at our independent dealers.





Lease expense at U-Haul, before consolidating entries, was $77.2 million for the first six months of fiscal year 2005, compared with $74.5 million for the same period last year. This represents an increase of $2.6 million, or 4%, and reflects an increase in the amount of rental equipment we leased.





Depreciation expense at U-Haul, before consolidating entries, was $53.9 million for the first six months of fiscal year 2005, compared with $60.9 million for the same period last year. Depreciation expense at SAC Holdings, before consolidating entries, was $1.3 million during the first six months of fiscal year 2005, compared with $10.9 million for the same period last year. This represents a reduction of $9.6 million and reflects the deconsolidation of SAC Holding Corporation. Depreciation expense, net at Real Estate, before consolidating entries, was $3.1 million during the first six months of fiscal year 2005, compared with $4.2 million for the same period last year, and includes a gain of $1.2 million from asset disposals this year.




Earnings from operations at U-Haul, before consolidating entries, were $169.1 million during the first six months of fiscal year 2005, compared with $164.2 for the same period million last year. This represents an increase of $4.9 million, or 3%, and reflects the abovementioned change in the timing of recognizing current year insurance expense and lost equipment rentals resulting from the hurricanes in the southeastern U.S. Also, we experienced strong truck and storage rentals during the first six months of fiscal 2005, which along with increased fleet productivity, were major contributors to the increase in operating profitability at U-Haul. Earnings from operations at SAC Holdings, before consolidating entries, were $7.5 million in the first six months of fiscal year 2005, compared with $33.1 million for the same period last year. This represents a reduction of $25.6 million, and reflects the deconsolidation of SAC Holding Corporation. Earnings from operations at Real Estate, before consolidating entries, were $22.7 million during the first six months of fiscal year 2005, compared with $26.1 million for the same period last year. This represents a reduction of $3.4 million, and reflects lower interest income from investments in mortgage notes, partially offset by gains on real estate sales.




47




***Oxford Life Insurance Company***




The following table sets forth net revenue and certain consolidated statements of income data for the periods indicated:


**Quarter Ended June 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Oxford Life Insurance**

(In thousands)Premiums

$
32,405

$
38,341

$
(5,936
)

-15
%Net investment income


5,480


5,324


156


3
%Total revenue


37,885


43,665


(5,780
)

-13
%Benefits and losses


23,585


28,031


(4,446
)

-16
%Amortization of deferred
policy acquisition costs


5,995


5,303


692


13
%Operating expenses


5,808


8,503


(2,695
)

-32
%Total expenses


35,388


41,837


(6,449
)

-15
%Earnings from operations


2,497


1,828


669


37
%Income tax expense (benefit)


(849
)

56


(905
)

-1616
%Net earnings

$
1,648

$
1,884

$
(236
)

-13
%




Net premiums were $32.4 million and $38.3 million for the quarters ended June 30, 2004 and 2003, respectively. Medicare supplement premiums decreased by $2.3 million due to lapses on closed lines being greater than new business written on active lines. Credit insurance premiums decreased $1.5 million for the quarter due to fewer accounts. Life and annuity premiums decreased $2.1 million due to fewer sales and annuitizations.





Net investment income before inter-company eliminations was $5.5 million and $5.3 million for the quarters ended June 30, 2004 and 2003, respectively.





Benefits incurred were $23.6 million and $28.0 million for the quarters ended June 30, 2004, and 2003, respectively. Medicare supplement incurred claims decreased $1.3 million due to reduced exposure and improved experience. Credit insurance benefits decreased $1.3 million due to reduced exposure and improved disability experience. Life insurance incurred claims declined $1.8 million due to declining sales and improved mortality experience.





Amortization of deferred acquisition costs (DAC) and the value of business acquired (VOBA) was $6.0 million and $5.3 million for the quarters ended June 30, 2004 and 2003, respectively. These costs are amortized for life and health policies as the premium is earned over the term of the policy; and for deferred annuities, amortized in relation to interest spreads. Amortization associated with annuity policies increased $1.0 million from the comparable 2003 quarter primarily due to increased surrender activity. Other segments had decreases of $0.3 from 2003 due to decreased new business volume.




Operating expenses were $5.8 million and $8.5 million for the quarters ended June 30, 2004, and 2003. Non-deferrable commissions decreased $1.9 million from 2003 primarily due to decreased sales of Medicare supplement and life products. Fee income from surrendered annuity policies netted into this category increased $0.8 million from the comparable 2003 quarter.





Operating profit before tax and inter-company eliminations was $2.5 million and $1.8 for the quarters ending June 30, 2004, and 2003, respectively. The increase from 2003 is due primarily to improved loss experience in the credit insurance segment.




48




**Six Months Ended June 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Oxford Life Insurance**

(In thousands)Premiums

$
66,037

$
76,425

$
(10,388
)

-14
%Net investment income


11,661


10,677


984


9
%Total revenue


77,698


87,102


(9,404
)

-11
%Benefits and losses


47,694


55,848


(8,154
)

-15
%Amortization of deferred
policy acquisition costs


12,583


10,693


1,890


18
%Operating expenses


11,251


17,153


(5,902
)

-34
%Total expenses


71,528


83,694


(12,166
)

-15
%Earnings from operations


6,170


3,408


2,762


81
%Income tax expense


(2,152
)

(818
)

(1,334
)

163
%Net earnings

$
4,018

$
2,590

$
1,428


55
%




Net premiums were $66.0 million and $76.4 million for the six months ended June 30, 2004 and 2003, respectively. Medicare supplement premiums decreased by $4.4 million due to lapses on closed lines being greater than new business written on active lines. Credit insurance premiums decreased $3.1 million due to fewer accounts. Life and annuity premiums decreased $2.9 million from fewer sales and annuitizations.





Net investment income before inter-company eliminations was $11.7 million and $10.7 million for the six months ended June 30, 2004 and 2003, respectively. This was primarily due to interest received from the maturity of inter-company investments.





Benefits incurred were $47.7 million and $55.8 million for the six months ended June 30, 2004, and 2003, respectively. Medicare supplement incurred claims decreased $4.3 million due primarily to reduced exposure. Credit insurance benefits decreased $1.7 million due to reduced exposure and improved disability experience. All other lines had decreases of $2.1 million.





Amortization of deferred acquisition costs (DAC) and the value of business acquired (VOBA) was $12.6 million and $10.7 million for the six months ended June 30, 2004 and 2003, respectively. These costs are amortized for life and health policies as the premium is earned over the term of the policy; and for deferred annuities, amortized in relation to interest spreads. Amortization associated with annuity policies increased $2.7 million from 2003 primarily due to increased surrender activity. Other segments had decreases of $0.8 from the comparable 2003 period due to decreased new business volume.





Operating expenses were $11.3 million and $17.2 million for the six months ended June 30, 2004, and 2003. Non-deferrable commissions have decreased $3.3 million from 2003 primarily due to decreased sales of Medicare supplement and life products. Fee income from surrendered annuity policies netted into this category increased $2.0 million from the comparable 2003 period. General and administrative expenses net of fees collected decreased $0.4 million.





Operating profit before tax and inter-company eliminations was $6.2 million, and $3.4 for the six months ending June 30, 2004, and 2003, respectively. The increase from 2003 is due primarily to improved investment income, and positive loss experience in the Medicare supplement and Credit insurance segments.




49




***Republic Western Insurance Company***




The following table sets forth net revenue and certain consolidated statements of income data for the periods indicated:


**Quarter Ended June 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Property and Casualty Insurance**

(In thousands)Premiums

$
7,038

$
29,574

$
(22,536
)

-76
%Net investment income


3,699


6,118


(2,419
)

-40
%Total revenues


10,737


35,692


(24,955
)

-70
%Benefits and losses


7,869


37,415


(29,546
)

-79
%Amortization of deferred
policy acquisition costs


1,783


3,456


(1,673
)

-48
%Operating expenses


982


9,023


(8,041
)

-89
%Total expenses


10,634


49,894


(39,260
)

-79
%Earnings/(loss) from operations


103


(14,202
)

14,305


101
%Income tax benefit (expense)


(29
)

4,983


(5,012
)

-101
%Net earnings (loss)

$
74

$
(9,219
)
$
9,293


101
%




Premiums, before inter-company eliminations, were $7.0 million and $29.6 million for the quarters ended June 30, 2004 and 2003, respectively. Premiums from terminated programs were $1.6 million and $23.2 million for the quarters ended June 30, 2004 and 2003, respectively. The decrease in 2004 is the result of the RepWest shifting its operating focus away from non-affiliated and unprofitable lines of business. Rental industry revenues were $5.4 million and $6.4 million for the quarters ended June 30, 2004 and 2003, respectively. The 2004 decrease is the result of decreased premiums in the non-U-Haul self storage program.





Net investment income was $3.7 million and $6.1 million for the quarters ended June 30, 2004 and 2003, respectively. The decrease in 2004 is attributable to RepWest exiting non U-Haul lines which resulted in an overall decrease in invested assets. This reduction will continue until reserves associated from these exited lines are run-off.





Benefits and losses incurred were $7.9 million and $37.4 million for the quarters ended June 30, 2004 and 2003, respectively. The decrease in 2004 is due to RepWest terminating its non U-Haul related programs and reserve strengthening that was done during the prior year.





Net operating expenses, which are offset by claims handling fees, were $1.0 million and $9.0 million for the quarters ended June 30, 2004 and 2003 respectively. Included in net operating expenses are commissions that were $1.3 million and $8.6 million for the quarters ended June 30, 2004 and 2003, respectively. The decrease in 2004 is due to decreased premium writings.





Pretax gain/(loss) from operations was $0.1 million and ($14.2) million for the quarters ended June 30, 2004 and 2003. The improvement during fiscal 2005 is the result of the elimination of unprofitable programs and the reserve strengthening that was done during the comparable period in the prior year.




50


**Six Months Ended June 30,**

**Changes**

**Changes****2004**

**2003**

**Dollar**

**Percentage****Property and Casualty Insurance**

(In thousands)Premiums

$
16,840

$
58,141

$
(41,301
)

-71
%Net investment income


8,236


11,922


(3,686
)

-31
%Total revenues


25,076


70,063


(44,987
)

-64
%Benefits and losses


17,897


62,997


(45,100
)

-72
%Amortization of deferred
policy acquisition costs


5,153


7,166


(2,013
)

-28
%Operating expenses


1,557


14,301


(12,744
)

-89
%Total expenses


24,607


84,464


(59,857
)

-71
%Earnings/(loss) from operations


469


(14,401
)

14,870


103
%Income tax benefit (expense)


(157
)

5,046


(5,203
)

-103
%Net earnings (loss)

$
312

$
(9,355
)
$
9,667


103
%




Premiums, before inter-company eliminations, were $16.8 million and $58.1 million for the six months ended June 30, 2004 and 2003, respectively. Premiums from terminated programs were $6.5 million and $45.4 million for the six months ended June 30, 2004 and 2003, respectively. The decrease in 2004 is the result of the RepWest shifting its operating focus away from non-affiliated and unprofitable lines of business. Rental industry revenues were $10.3 million and $12.7 million for the six months ended June 30, 2004 and 2003, respectively. The 2004 decrease is the result of decreased premiums in the RepWests non-U-Haul self storage program.





Net investment income was $8.2 million and $11.9 million for the six months ended June 30, 2004 and 2003, respectively. The decrease in 2004 is attributable to RepWest exiting non U-Haul lines which resulted in an overall decrease in invested assets. This reduction will continue until reserves associated from these exited lines are run-off.





Benefits and losses incurred were $17.9 million and $63.0 million for the six months ended June 30, 2004 and 2003, respectively. The decrease in 2004 is due to RepWest terminating its non U-Haul related programs and reserve strengthening that was done during the prior year.





Operating expenses, which are offset by claims handling fees, were $1.6 million and $14.3 million for the six months ended June 30, 2004 and 2003 respectively. Included in net operating expenses are commissions that were $3.5 million and $16.2 million for the six months ended June 30, 2004 and 2003, respectively. The decrease in 2004 is due to decreased premium writings.





Pretax gain/(loss) from operations was $0.5 million and ($14.4) million for the six months ended June 30, 2004 and 2003. The improvement during fiscal 2005 is the result of the elimination of unprofitable programs and the reserve strengthening that was done during the prior year




**Liquidity and Capital Resources**




We believe our current capital structure will allow us to achieve our operational plans and goals, and provide us with sufficient liquidity for the next 3 to 5 years. The majority of the obligations currently in place mature at the end of fiscal year 2009. The senior subordinated notes mature at the end of fiscal year 2011. As a result, we believe that our liquidity is strong. This will allow us to focus on our operations and business to further improve our liquidity in the long term. We believe these improvements will enhance our access to capital markets. However, there is no assurance that future cash flows will be sufficient to meet our outstanding obligations or our future capital needs. The terms of our secured indebtedness place financial and operational covenants on AMERCO and its subsidiaries, and restrict our ability to incur additional indebtedness and other obligations.





At September 30, 2004, cash and cash equivalents totaled $45.8 million, compared with $81.6 million on March 31, 2004. In addition, as of September 30, 2004, AMERCO has availability under its revolving credit facility of $200.0 million.





At September 30, 2004, notes and loans payable were $696.9 million, and represented 1.2 times stockholders equity. At March 31, 2004, notes and loans payable were $862.7 million, and represented 1.7 times stockholders equity.




51




On April 30, 2004, AMERCO completed its transaction with W.P. Carey (UH Storage DE), effectively terminating its amended and restated leases (the synthetic leases) with the Bank of Montreal and Citibank. This transaction resulted in AMERCO eliminating its capital lease obligations of approximately $99.6 million during the first quarter of fiscal year 2005.





For the first six months of fiscal year 2005, cash provided by operating activities was $168.1 million, compared with $130.6 million in the first six months of fiscal year 2004. This improvement of $37.5 million was primarily driven by stronger earnings.





Investing activities provided $119.5 million in net cash during the first six months of fiscal year 2005, compared to a use of $36.5 million in the first six months of fiscal year 2004. The majority of the increase in the first six months of fiscal year 2005 compared with the first six months of fiscal year 2004 was related to the W. P. Carey Transaction. Gross capital expenditures were $161.7 million and $102.3 million through September 30, 2004 and September 30, 2003, respectively. Capital dispositions were $220.8 million and $19.1 million through September 30, 2004 and September 30, 2003, respectively.





Financing activities used $323.4 million during the first six months of fiscal year 2005. This primarily reflects the pay down of $180.3 million on our revolving line of credit and the termination of the synthetic lease obligations, and the net change in contract deposits and withdrawals by Oxford during the first six months of fiscal year 2005. This compares with usage of $9.3 million from financing activities during the first six months of fiscal year 2004.




**Liquidity and Capital Resources and Requirements of Our Operating Segments**




***Moving and Self-Storage***




To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Historically, capital requirements have primarily reflected new rental equipment acquisitions. The capital to fund these requirements has historically been obtained through internally generated funds from operations, lease financing and sales of used equipment. Going forward, we anticipate that a substantial portion of our internally generated funds will be used to enhance liquidity by paying down existing indebtedness. During each of the fiscal years ended March 31, 2005, 2006 and 2007, U-Haul estimates that net capital expenditures will average approximately $150 million to maintain its fleet at current levels. Financial covenants contained in our loan agreements limit the amount of capital expenditures we can make in fiscal years 2005, 2006, and 2007, net of dispositions, to $185 million, $245 million and $195 million, respectively. Management estimates that U-Haul will fund its fleet expansion requirements from leasing and from the proceeds from the sale of trucks. We intend to focus our growth on expanding our independent dealer network, which does not require a substantial amount of capital resources. Net capital proceeds were $60.1 million for the first six months of fiscal year 2005. Excluding the effect of W.P. Carey, the capital outlays were $100 million. Rental truck net capital expenditures primarily reflect lease residual buyouts.





Real Estate has traditionally financed the acquisition of self-storage properties to support U-Hauls growth through lease and debt financing. U-Hauls growth plan in self-storage is focused on eMove, which does not require acquisition or construction of self-storage properties by the Company. Therefore, Real Estate will not require substantial capital for its future plans.





SAC Holdings operations are funded by various mortgage loans, secured and unsecured notes. SAC Holdings does not utilize revolving lines of credit to finance its operations or acquisitions. Certain of SAC Holdings loan agreements contain restrictive covenants and restrictions on incurring additional subsidiary indebtedness.




***Oxford Life Insurance Company***




As of June 30, 2004, Oxford had no notes and loans payable in less than one year and its accounts payable and accrued expenses total approximately $2.0 million. Oxfords financial assets (cash, receivables, short-term investments, other investments, and fixed maturities) at June 30, 2004 were approximately $784.6 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Oxfords funds are generally not available to satisfy the claims of the creditors of AMERCO or its legal subsidiaries.





Oxford's primary sources of cash are premiums, receipts from interest-sensitive products, and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements.




52


Cash provided by operating activities was $4.4 million, and $2.5 million for the six months ended June 30, 2004, and 2003 respectively. Cash used by financing activities was $47.8 million, and $4.9 million for the six months ended June 30, 2004, and 2003, respectively. Cash flows from deferred annuity sales are a component of financing activities. Investment contract deposits increase cash flows while surrenders of these policies are a use of funds. The decrease in investment contract deposits over 2003 is due to a reduction in new contract sales and an increase in contract surrenders; both due to Oxfords decreased ratings.





In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. At June 30, 2004 and 2003, short-term investments amounted to $97.6 million, and $144.5 million, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs.





Oxfords stockholder's equity was $116.4 million, and $169.0 million as of June 30, 2004, and December 31, 2003, respectively. Increases from earnings were offset by decreases in unrealized gains resulting from the change in interest rates.





Applicable laws and regulations of the State of Arizona require the Company's insurance subsidiaries to maintain minimum capital and surplus determined in accordance with statutory accounting practices. With respect to Oxford, the amount is $0.4 million. In addition, the amount of dividends that can be paid to shareholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. At June 30, 2004, Oxford cannot distribute any of its statutory surplus as dividends without regulatory approval.




***Property and Casualty Insurance***




As of June 30, 2004, RepWest had no notes or loans due in less than one year and its accounts payable, accrued expenses, and other payables were approximately $17.6 million. RepWests financial assets (cash, receivables, inventories and short-term investments) at June 30, 2004 were approximately $371.3 million.





State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, RepWests funds are generally not available to satisfy the claims of the creditors of AMERCO or its legal subsidiaries. Conversely, AMERCOs loan agreements prohibit any loans, capital contributions or other advances to RepWest by AMERCO.





The primary sources of cash for RepWest include invested assets, premiums and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements.





RepWests cash and cash equivalents and short-term investment portfolio were $67.3 million and $62.1 million at June 30, 2004 and December 31, 2003 respectively. This balance reflects funds in transition from maturity proceeds to long term investments. This level of liquid assets, combined with budgeted cash flow, is adequate to meet periodic needs.





For additional information about the "DOI Supervision" reference is made to the section on "Risk Factors" under the title "RepWest has consented to an Order of Supervision issued by the Arizona Department of Insurance".




53




**Cash Provided from Operating Activities by Operating Segments**




***Moving and Self-Storage***




Cash provided by operating activities from U-Haul was $9.0 million and $94.9 million for the first six months of fiscal years 2005 and 2004, respectively. Cash provided by operating activities for Real Estate was $1.1 million and $0.6 million for the first six months of fiscal years 2005 and 2004, respectively. Cash provided from operating activities for SAC Holdings was $0.5 million and $6.3 million for the first six months of fiscal years 2005 and 2004, respectively. The cash provided by U-Haul International operations for the first six months ended September 30, 2004 was approximately $189 million and approximately $145 million for the same period last year. Of this amount for the first six months of September 30, 2004, U-Haul transferred approximately $180 million to its parent, AMERCO, to extinguish outstanding debt, and approximately $50 million for the same period last year.




***Life Insurance***




Cash provided by operating activities was $4.4 million, and $2.5 million for the first six months ended June 30, 2004, and 2003 respectively




***Property and Casualty Insurance***




Cash flows used by operating activities were $22.6 million and $52.5 million for the six months ended June 30, 2004 and 2003, respectively. The cash used by operating activities is the result of RepWest exiting the assumed reinsurance and non U-Haul related lines. As RepWest adjudicates the claims in these lines there will be a continued use of its portfolio and a corresponding decrease in insurance reserves.




***Summary***




We believe we have the financial resources needed to meet our business requirements including capital expenditures for the expansion and modernization of our rental fleet, rental equipment and rental storage space and working capital requirements.





For a more detailed discussion of our long-term debt and borrowing capacity, please see footnote 5 "Borrowings" to the "Notes to the Condensed Consolidated Financial Statements."





**Disclosures about Contractual Obligations and Commercial Commitments**




AMERCO uses certain equipment and occupies certain facilities under operating lease commitments with terms expiring through 2034, with the exception of one land lease expiring in 2079. In the event of a shortfall in proceeds from the sale of the underlying assets, AMERCO has guaranteed approximately $178.5 million of residual values at September 30, 2004 for these assets at the end of the respective lease terms. AMERCO has been leasing equipment since 1987. Thus far, we have experienced no residual value shortfalls. (See details related to operating lease commitments in footnote 9 "Contingent Liabilities and Commitments" to the "Notes to the Condensed Consolidated Financial Statements.")




**Business Outlook**




As we look ahead to the remainder of fiscal year 2005, we believe the momentum in our moving and self-storage segments will continue, adjusted for the deconsolidation of SAC Holding Corporation and the W.P. Carey Transaction. During fiscal year 2004, we reported approximately $101.9 million of revenues, $26.5 million of earnings from operations, $37.8 million of interest expense, and a net loss of $8.6 million related to the 281 SAC Holdings properties which were deconsolidated March 31, 2004. We reported approximately $29.2 million of storage revenues during fiscal year 2004 at the 78 self-storage properties that were recently sold to W.P. Carey (UH Storage DE).





U-Haul is expected to continue to benefit from the initiatives mentioned earlier, including positive sales increases and maintenance and repair cost improvements associated with our fleet replacement program.




54




Oxford is in the process of rebuilding its distribution that was impacted by the AMERCO restructuring. Prior to the restructuring, Oxford was rated B++ by A.M. Best. The rating was reduced to C+ during the restructuring. In March 2004 the rating was upgraded to B-. In October 2004 the rating was upgraded to B with a continued positive outlook. Continued improvement in the rating will be a key factor in the success of Oxfords marketing programs including annuities, life insurance, Medicare supplement, and credit life and disability. Oxfords statutory capital measurements continue to strengthen and existing business is expected to continue to perform profitably.





RepWest expects to realize the benefits of its changed business plan. During fiscal 2004, we successfully discontinued the majority of the unprofitable direct and assumed reinsurance lines and significantly strengthened our reserves associated with those lines. U-Haul related lines have historically been profitable and we expect to see the results of the new business plan during fiscal year 2005. We believe that RepWests statutory capital measurements will continue to strengthen as the reserves of the discontinued lines are being run off. We are working with the Arizona Department of Insurance regarding the supervision order and expect it to be resolved in the future.




**Risk Factors**




***We operate in a highly competitive industry.***




The truck rental industry is highly competitive and includes a number of significant national and hundreds of regional and local competitors. Competition is generally based on price, product quality, convenience, availability, brand name recognition and service. In our truck rental business, we face competition from Budget Car and Truck Rental Company and Penske Truck Leasing. Some of our competitors may have greater financial resources than we have. We cannot assure you that we will not be forced to reduce our rental prices or delay price increases.





We compete with national and regional self-storage operators as well as local operators. Competition in the market areas in which we operate is significant and affects the occupancy levels, rental rates and operating expenses of our facilities. Competition might cause us to experience a decrease in occupancy levels, limit our ability to increase rental rates and compel us to offer discounted rental rates which could have a material adverse effect on our operating results.





Entry into the self-storage business through acquisition of existing facilities is possible for persons or institutions with the required initial capital. Development of new self-storage facilities is more difficult, however, due to zoning, environmental and other regulatory requirements. The self-storage industry has in the past experienced overbuilding in response to perceived increases in demand. We cannot assure you that we will be able to successfully compete in existing markets or expand into new markets.




***Control of AMERCO remains in the hands of a small contingent.***




As of September 30, 2004, Edward J. Shoen, Chairman of the Board of Directors and President of AMERCO, James P. Shoen, a director of AMERCO, and Mark V. Shoen, an executive officer of AMERCO, collectively own 8,789,973 shares (approximately 41.3%) of the outstanding common shares of AMERCO. Accordingly, Edward J. Shoen, Mark V. Shoen and James P. Shoen will be in a position to continue to influence the election of the members of the Board of Directors and approval of significant transactions. In addition, 2,230,061 shares (approximately 10.5%) of the outstanding common shares of AMERCO, including shares allocated to employees and unallocated shares are held by our Employee Savings and Employee Stock Ownership Trust.




***Our operations subject us to numerous environmental regulations and the possibility that environmental liability in the future could adversely affect our operations.***




Compliance with environmental requirements of federal, state and local governments significantly affects our business. Among other things, these requirements regulate the discharge of materials into the water, air and land and govern the use and disposal of hazardous substances. Under environmental laws, we can be held strictly liable for hazardous substances that are found on real property we have owned or operated. We are aware of issues regarding hazardous substances on some of our real estate and we have put in place a remedial plan at each site where we believe such a plan is necessary. We regularly make capital and operating expenditures to stay in compliance with environmental laws. In particular, we have managed a testing and removal program since 1988 for our underground storage tanks. Under this program, we spent $43.7 million between April 1988 and September 30, 2004. Despite these compliance efforts, risk of environmental liability is part of the nature of our business.




55




Environmental laws and regulations are complex, change frequently and could become more stringent in the future. We cannot assure you that future compliance with these regulations or future environmental liabilities will not have a material adverse effect on our business.




***Our business is seasonal.***




Our business is seasonal and our results of operations and cash flows fluctuate significantly from quarter to quarter. Historically, revenues have been stronger in our first and second fiscal quarters due to the overall increase in moving activity during the spring and summer months. Our fourth fiscal quarter is generally weakest, when there is a greater potential for adverse weather conditions.




***We obtain our rental trucks from a l*** **imited number of manufacturers.**




In the past ten years, we purchased most of our rental trucks from Ford and General Motors. Although we believe that we have alternative sources of supply for our rental trucks, termination of one or both of our relationships with these suppliers could have a material adverse effect on our business, financial condition or results of operations.




***Our property and casualty insurance busines*** **s has suffered extensive losses.**




Since January 2000, our property and casualty insurance business, RepWest, reported losses totaling approximately $149 million. These losses are primarily attributable to business lines that were unprofitable as underwritten. To restore profitability in RepWest, we have exited all non-U-Haul related lines and have strengthened the reserves on the lines being eliminated. Although we believe the terminated lines are adequately reserved, we cannot assure you that there will not be future adverse loss development.




***Our*** **life insurance business was downgraded by A.M. Best during restructuring**




A.M. Best downgraded Oxford and its subsidiaries during the restructuring to C+. Upon emergence from bankruptcy in March 2004, Oxford and its subsidiaries were upgraded to B-. The ratings were again upgraded in October 2004 to B. A.M. Best has indicated the rating outlook for our life insurance business is positive. Prior to AMERCOs restructuring Oxford was rated B++. Financial strength ratings are important external factors that can affect the success of Oxfords business plans. Accordingly, if Oxfords ratings, relative to its competitors, do not continue to improve, Oxford may not be able to retain and attract business as currently planned.




***Notes receivable from SAC Holdings are a significant portion of AMERCOS total asset*** **s.**




At September 30, 2004, we held approximately $203.8 million of notes due from SAC Holdings. Although these assets have been eliminated in the consolidating financial statements, we have significant economic exposure to SAC Holdings. SAC Holdings is highly leveraged with significant indebtedness to others. We hold various junior unsecured notes of SAC Holdings. If SAC Holdings is unable to meet its obligations to its senior lenders, it could trigger a default on its obligations to us. In such an event of default, we could suffer a significant loss. We cannot assure you that SAC Holdings will not default on its loans to their senior lenders or that the value of SAC Holdings assets upon liquidation would be sufficient to repay us in full.




***We face risks related to an SEC investigation and securities litigation.***




The SEC has issued a formal order of investigation to determine whether we have violated the federal securities laws. Although we have cooperated with the SEC in this matter and intend to continue to cooperate, the SEC may determine that we have violated federal securities laws. We cannot predict when this investigation will be completed or its outcome. If the SEC makes a determination that we have violated federal securities laws, we may face sanctions, including, but not limited to, significant monetary penalties and injunctive relief.





In addition, the Company has been named a defendant in a number of class action and related lawsuits. The findings and outcome of the SEC investigation may affect the class-action lawsuits that are pending. We are generally obliged, to the extent permitted by law, to indemnify our directors and officers who are named defendants in some of these lawsuits. We are unable to estimate what our liability in these matters may be, and we may be required to pay judgments or settlements and incur expenses in aggregate amounts that could have a material adverse effect on our financial condition or results of operations.




56





RepWest has consented to an Order of Supervision issued by the Arizona Department of Insurance.






On May 20, 2003, RepWest consented to an Order for Supervision issued by the Arizona Department of Insurance ("DOI"). The DOI determined that RepWests level of risk based capital (RBC) allowed for regulatory control. Pursuant to this order and Arizona law, during the period of supervision, RepWest may not engage in any of the following activities without the prior approval of the DOI:




a.    dispose of, convey or encumber any of its assets or its business in force;





b.    withdraw any of its bank accounts;





c.    lend any of its funds;





d.    invest any of its funds;





e.    transfer any of its property;





f.    incur any debt, obligation or liability including the issuance of all new and renewal business;





g.    merge or consolidate with another company;





h.    enter into any new reinsurance contract or treaty; or





i.    enter into any affiliate transactions.




In order to abate the DOIs order, RepWest must establish that it possesses surplus in compliance with Arizona law and as the Director of Insurance may require based on type, volume or nature of its business pursuant to Arizona law and establish that certain credit risks associated with the exposures to AMERCO and its affiliates have been eliminated.





If RepWest fails to satisfy the DOIs concerns, the DOI may take further action, including, but not limited to, commencing a conservatorship.




***Subsequent Event*** **RWIC experienced insurances losses associated with the recent hurricanes in the southeastern United States.** ****




These losses will be reflected in RWICs third and fourth quarter financial statements. The estimated losses approximate $5 to $7 million dollars after taxes.




***Item 3.***  ***Quantitative and Qualitative Disclosures about Market Risk***




We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.




***Interest rate risk***




The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations. Interest rate cap contracts represent non-linear derivative instruments which protect the holder from rises in short-term interest rates by making a payment to the holder when an underlying interest rate (the index or reference interest rate) exceeds a specified strike rate (the cap rate). During the second quarter of fiscal year 2005, the Company entered into separate interest rate cap contracts for $200.0 million of its variable rate debt obligations for a two year term and for $50.0 million of its variable rate debt obligations for a three year term. At September 30, 2004, the Company had approximately $348.3 million of variable rate debt obligations. A fluctuation in interest rates of 100 basis points would change interest expense for the Company by approximately $3.5 million annually to the extent that the three month LIBOR is below 3.0% and by $1.0 million to the extent that the three month LIBOR exceeds 3.0%.




57




***Foreign Currency Exchange Rate Risk***




The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 2% of our revenue is generated in Canada. The result of a 10% change in the value of the U.S. dollar relative to the Canadian dollar would not be material. We typically do not hedge any foreign currency risk since the exposure is not considered material.




***Item 4.*** ***Controls and Procedures***




We conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (Disclosure Controls) as of the end of the period covered by this Quarterly Report. The controls evaluation was done under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO).




***Definition of Disclosure Controls***




Disclosure Controls are controls and procedures designed to assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure Controls include controls and procedures designed to ensure that such information is accumulated and communicated to our management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the U.S. To the extent that components of our internal control over financial reporting are included within Disclosure Controls, they are included in the scope of our quarterly controls evaluation.





***Limitations on the Effectiveness of Controls***




The management of the Company, including the CEO and the CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent all error or fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of certain future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.




***Scope of the Controls Evaluation***




The evaluation of our Disclosure Controls included a review of the objectives and design of the controls, the implementation of the controls by the Company and the effect of the controls on the information generated for use in this Quarterly Report. In the course of the controls evaluation, we sought to identify data errors, control problems or acts of fraud and confirm that appropriate corrective action, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and the CFO, concerning the effectiveness of the controls can be reported in our Quarterly Reports on Form 10-Q and to supplement our disclosures made in our Annual Report on Form 10-K. Many of the components of our Disclosure Controls are evaluated on an on-going basis by personnel in our finance department, as well as our independent auditors who evaluate them in connection with determining their auditing procedures related to their report on our annual financial statements. The overall goals of these various evaluation activities are to monitor our Disclosure Controls, and to modify them as necessary. Our intent is to maintain the Disclosure Controls as dynamic systems that change as conditions warrant.




58




Among other matters, we also considered whether our evaluation identified any "significant deficiencies" or "material weaknesses" in our internal control over financial reporting, and whether the Company had identified any acts of fraud involving personnel with a significant role in our internal control over financial reporting. This information was important both for the controls evaluation generally, and because item 5 of the certifications of the CEO and the CFO requires that the CEO and the CFO disclose that information to the Audit Committee of our Board and the independent auditors. In the professional auditing literature, "significant deficiencies" are referred to as "reportable conditions," which are deficiencies in the design or operation of controls that could adversely affect our ability to record, process, summarize and report financial data in the financial statements. Auditing literature defines "material weakness" as a particularly serious reportable condition in which the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and the risk that such misstatements would not be detected within a timely period by employees in the normal course of performing their assigned functions. We also sought to address other controls matters in the controls evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accordance with our on-going procedures.




***Conclusions***




Based upon the controls evaluation, our CEO and CFO have concluded that, subject to the limitations noted above, as of the end of the period covered by this Quarterly Report, our Disclosure Controls were effective to provide assurance that material information relating to AMERCO and its consolidated subsidiaries is made known to management, including the CEO and the CFO, particularly during the period when our periodic reports are being prepared.




***Changes in Internal Control over Financial Reporting***




During the fiscal quarter covered by this report we made no change in our internal control over financial reporting which materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




59




**PART II. OTHER INFORMATION**




**Item 1.**  **Legal Proceedings**




***Kocher***




On July 20, 2000, Charles Kocher (Kocher) filed suit in Wetzel County, West Virginia, Civil Action No. 00-C-51-K, entitled Charles Kocher v. Oxford Life Insurance Co. (Oxford) seeking compensatory and punitive damages for breach of contract, bad faith and unfair claims settlement practices arising from an alleged failure of Oxford to properly and timely pay a claim under a disability and dismemberment policy. On March 22, 2002, the jury returned a verdict of $5 million in compensatory damages and $34 million in punitive damages. On November 5, 2002, the trial court entered an Order (Order) affirming the $39 million jury verdict and denying Oxfords motion for New Trial Or, in The Alternative, Remittitur. On January 27, 2004, the matter was argued before the West Virginia Supreme Court and taken under advisement. On September 17, 2004 the West Virginia Supreme Court reversed and vacated the punitive damages award and remanded the case for a new trial on punitive damages. The trial judge has set an April 28, 2005 trial date. The Company has accrued $725,000, which represents managements best estimate of the costs associated with legal fees to appeal and re-try the case. The Company has notified its E & O carrier of the West Virginia Supreme Courts ruling. The E&O carrier is disputing coverage in a declaratory judgment action against Oxford.





**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**




On August 20, 2004, an exchange occurred between the Company and James P. Shoen. Mr. Shoen, transferred 1,946,314 shares of AMERCO Series A Common Stock, $0.25 par value, in exchange for 1,946,314 shares of AMERCO Common Stock, $0.25 par value. Mr. Shoen is a director, employee and significant shareholder of AMERCO. No gain or loss was recognized as a result of this transaction. This exchange was completed as an offering exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.





The following table provides information about purchases of our equity securities during the quarter ended September 30, 2004.


Period
Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet Be Purchased Under the Plans or ProgramsJuly 1 through July 31, 2004
-

-

-August 1 through August 31, 2004
1,946,314 (a)

(b)

-September 1 through September 30, 2004
-

-

-1,946,314 (a)

(b)

-

-




(a)    Series A Common Stock, par value $0.25 per share.





(b)    Consideration paid by AMERCO was 1,946,314 shares of its Common Stock, par value $0.25.




**Item 3. Defaults upon Senior Securities**




Not applicable.




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Item 4. Submission of Matters to a Vote of Security Holders






The 2004 Annual Meeting of Stockholders was held on September 24, 2004. At the 2004 Annual Meeting of Stockholders, Edward J. Shoen and M. Frank Lyons were elected to serve as directors until the 2008 Annual Meeting of Stockholders. John M. Dodds and James P. Shoen continue as directors with terms that expire at the 2005 Annual Meeting of Stockholders; William E. Carty and Charles J. Bayer continue as directors with terms that expire at the 2006 Annual Meetings of Stockholders; and John P. Brogan and James J. Grogan continue as directors with terms that expire at the 2007 Annual Meeting of Stockholders. In addition, our Stockholders rejected a shareholder proposal that "independent directors" constitute two-thirds of the Board of Directors and to define the meaning of "independent director" for this purpose. The following table sets forth the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes with respect to each matter voted on at the 2004 Annual Meeting of Stockholders.




Votes Cast For

Votes Cast Against

Withheld

Abstentions

Non-VotesElection of DirectorsEdward J. Shoen
10,326,119

-

932,676

-

-M. Frank Lyons
9,783,768

-

1,475,027

-

-Shareholder ProposalRegarding Independent Directors
1,095,820

9,303,506

-

614,519

-




**Item 5. Other Information**




For inclusion in the proxy statement and form of proxy relating to the 2005 Annual Meeting of Stockholders, a proposal intended for presentation at that meeting must be submitted in accordance with the applicable rules of the Securities and Exchange Commission and received by the Secretary of AMERCO, c/o U-Haul International, Inc., 2721 North Central Avenue, Phoenix, Arizona 85004, on or before March 25, 2005. Proposals to be presented at the 2005 Annual Meeting of Stockholders that are not intended for inclusion in the proxy statement and form of proxy must be submitted by that date and in a accordance with the applicable provisions of the Companys By-Laws, a copy of which is available upon written request, delivered to the Secretary of AMERCO at the address in the preceding sentence. The Company suggests that proponents submit their proposals to the Secretary of AMERCO by Certified Mail-Return Receipt Requested.




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**Item 6. Exhibits**




The following documents are filed as part of this report:


**Exhibit Number**
**Description**
**Page or Method of Filing**2.1
Joint Plan of Reorganization of AMERCO and Amerco Real Estate Company
Incorporated by reference to AMERCOs Current Report on Form 8-K filed October 20, 2003, file no. 1-112552.2
Disclosure Statement Concerning the Debtors Joint Plan of Reorganization
Incorporated by reference to AMERCOs Current Report on Form 8-K filed October 20, 2003, file no. 1-112552.3
Amended Joint Plan of Reorganization of AMERCO and Amerco Real Estate Company
Incorporated by reference to AMERCOs Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, file No. 1-112553.1
Restated Articles of Incorporation of AMERCO
Incorporated by reference to AMERCOs Registration Statement on form S-4 filed March 30, 2004, file number 1-112553.2
Restated By-Laws of AMERCO
Incorporated by reference to AMERCOs Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, file No. 1-112553.3
Restated Articles of Incorporation of U-Haul International, Inc.
Incorporated by reference to AMERCOs Annual Report on Form 10-K for the year ended March 31, 2003, file no. 1-112553.4
Bylaws of U-Haul International, Inc.
Incorporated by reference to AMERCOs Annual Report on Form 10-K for the year ended March 31, 2003, file no. 1-1125531.1
Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO and U-Haul International, Inc.
Filed herewith31.2
Rule 13a-14(a)/15d-14(a) Certificate of Jack A. Peterson, Chief Financial Officer of AMERCO
Filed herewith31.3
Rule 13a-14(a)/15d-14(a) Certification of Robert T. Peterson, Chief Financial Officer of U-Haul International, Inc.
Filed herewith32.1
Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO and U-Haul International, Inc. pursuant to Section 906 of the Sabanes-Oxley Act of 2002
Filed herewith32.2
Certificate of Jack A. Peterson, Chief Financial Officer of AMERCO pursuant to Section 906 of the Sabanes-Oxley Act of 2002
Filed herewith32.3
Certificate of Robert T. Peterson, Chief Financial Officer of U-Haul International, Inc. pursuant to Section 906 of the Sabanes-Oxley Act of 2002
Filed herewith





62


SIGNATURES








Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.











AMERCO








Date: November 9, 2004   /s/ Edward J. Shoen


Edward J. Shoen


President and Chairman of the Board


(Duly Authorized Officer)








Date: November 9, 2004   /s/ Jack A. Peterson


Jack A. Peterson


Chief Financial Officer


(Principal Financial Officer)








U-HAUL INTERNATIONAL, INC.





Date: November 9, 2004   /s/ Edward J. Shoen


Edward J. Shoen


President and Chairman of the Board


(Duly Authorized Officer)








Date: November 9, 2004   /s/ Robert T. Peterson


Robert T. Peterson


Chief Financial Officer


(Principal Financial Officer)