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Ian GIlson, CFA

On June 6, 2012 AMERCO reported is fourth quarter and full year results for fiscal 2012. The numbers were another record and very close to our estimates, as shown below.


The extra day in February had a positive impact on the quarter and both local and one-way transactions increased. Truck utilization improved which caused the operating expense ratio improve from 51.2% in the fourth quarter or 2011 to 49.1% in the fourth quarter of 2012. This has a significant impact on operation income. Commissions as a percentage of truck rental revenue increased slightly as slightly less revenue was generated at company owned stores. The cost of sales expense ratio for the self-moving and self-storage business increased. A significant amount of revenue is from the sales of propane (which follows the price of natural gas and this has been volatile over the last 4 months).

The U-Box business has expanded to all company owned self storage facilities (between 12,000 to 13,000 locations). This business is growing rapidly but is not yet large enough for management to consider it material relative to total revenue.

AMERCO has benefitted from declining interest rates. Both lease expense and interest expense has been declining over the last few quarters. With $54 million a quarter of combined lease and interest expense good financial management has been a positive factor for many years.

At the current price the stock is selling at a lower valuation than most of its peer group yet it has the highest return on equity. We believe that the stock will outperform its peer group, and the overall market, over the next six months. Our valuation methods use Earnings Before Interest Taxes Depreciation Amortization (EBITDA) and EBITDA plus Lease expense (EBITDAL) since the company can buy (using borrowed moneys and generating depreciation) or lease depending on the lowest cost to the company.

In fiscal 2012 AMERCO paid a special cash dividend of $1.00 a share. In our opinion the company has the necessary cash generation to institute a regular cash dividend.

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