U-Haul 2005 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2005 U-Haul annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

75 I AMERCO ANNUAL REPORT
Amerco and Consolidated Entities
Notes to Consolidated Financial Statements, continued
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฀$11.7฀million฀and฀$26.6฀million,฀
from฀SAC฀Holdings฀during฀fiscal฀2005฀and฀fiscal฀2004.฀
The฀ notes฀ receivable฀ balance฀ outstanding฀ at฀ March฀ 31,฀
2005฀ and฀ 2004฀ was,฀ in฀ the฀ aggregate,฀ $203.8฀ million.฀
The฀ largest฀ aggregate฀ amount฀ outstanding฀ during฀ the฀
fiscal฀ year฀ ended฀ March฀ 31,฀ 2005฀ was฀ $203.8฀ million.฀
Of฀ this฀ amount,฀ $75.1฀ million฀ is฀ with฀ SAC฀ Holding฀ II฀
Corporation฀and฀eliminates฀in฀consolidation.
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฀due฀and฀
on฀ 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”฀ 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฀ and฀ all฀ amounts฀ so฀ deferred฀ bear฀ the฀ stated฀
rate฀ of฀ basic฀ interest฀ until฀ maturity฀ of฀ the฀ junior฀ note.฀
For฀ the฀ note฀ with฀ SAC฀ Holding฀ II฀ Corporation฀ and฀ for฀
certain฀notes฀with฀specified฀subsidiaries฀of฀SAC฀Holding฀
Corporation,฀ 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.฀ In฀ addition,฀
subject฀ to฀ certain฀ contingencies,฀ the฀ note฀ with฀ SAC฀
Holding฀ II฀ Corporation฀ and฀ certain฀ notes฀ with฀ SAC฀
Holding฀Corporation฀provide฀that฀the฀holder฀of฀the฀note฀is฀
entitled฀to฀participate฀in฀any฀appreciation฀realized฀upon,฀
among฀ other฀ things,฀ the฀ sale฀ of฀ certain฀ properties฀ 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฀based฀on฀gross฀receipts.฀The฀
Company฀ received฀ management฀ fees฀ of฀ $14.4฀ million,฀
and฀$12.9฀million฀during฀fiscal฀year฀2005฀and฀2004.฀This฀
management฀ fee฀ is฀ consistent฀ with฀ the฀ fee฀ 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.฀RepWest’s฀and฀Oxford’s฀
investment฀ in฀ Securespace฀ is฀ included฀ in฀ Investments,฀
Other,฀ and฀ is฀ accounted฀ for฀ using฀ the฀ equity฀ method.฀
We฀ do฀ not฀ believe฀ that฀ the฀ carrying฀ amount฀ of฀ their฀
investments฀in฀Securespace฀is฀in฀excess฀of฀fair฀value.
During฀ fiscal฀ 2005,฀ the฀ Company฀ leased฀ space฀ for฀
marketing฀company฀offices,฀vehicle฀repair฀shops฀and฀hitch฀
installation฀centers฀in฀properties฀owned฀by฀subsidiaries฀of฀
SAC฀ Holdings.฀ Total฀ lease฀ payments฀ pursuant฀ to฀ such฀
leases฀ were฀$2.7฀million฀and฀ $2.6฀million฀during฀fiscal฀
2005฀and฀fiscal฀2004.฀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฀March฀31,฀2005,฀subsidiaries฀of฀SAC฀Holdings฀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.฀
During฀ fiscal฀ 2005฀ and฀ fiscal฀ 2004,฀ the฀ Company฀
paid฀ subsidiaries฀ of฀ SAC฀ Holdings฀ $33.1฀ million฀ and฀฀
$29.1฀ 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).