U-Haul 2006 Annual Report Download - page 125

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Off Balance Sheet Arrangements
The Company uses off-balance sheet arrangements where the economics and sound business principles warrant
their use.
AMERCO utilizes operating leases for certain equipment and facilities with terms expiring substantially through
2034, with the exception of one land lease expiring in 2079. In the event of a shortfall in proceeds from the sales of
the underlying rental equipment assets, AMERCO has guaranteed approximately $193.1 million of residual values
at March 31, 2006 for these assets at the end of their respective lease terms. AMERCO has been leasing rental
equipment since 1987. Thus far, we have experienced no residual value shortfalls.
AMERCO has used off-balance sheet arrangements in connection with the expansion of our self-storage business.
The Company currently manages the self-storage properties of SAC Holdings (see Note 19 of our Consolidated
Financial Statements).
The Company currently manages the self-storage properties owned or leased by SAC Holdings, Mercury, 4 SAC,
5 SAC, Galaxy, and Private Mini Storage Realty (“Private Mini”) 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 plus
reimbursement for certain expenses. The Company received management fees, exclusive of expenses, of $22.5
million, and $14.4 million from the above mentioned entities during fiscal 2006 and 2005, respectively. This
management fee is consistent with the fee received for other properties the Company previously managed for third
parties. SAC Holdings, 4 SAC, 5 SAC Galaxy and Private Mini are substantially controlled by Blackwater.
Mercury is substantially controlled by Mark V. Shoen. James P. Shoen, a significant shareholder and director of
AMERCO, has an interest in Mercury.
At March 31, 2006, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul
independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies
and their subsidiaries are substantially identical to the terms of those with the Company’ s other 13,950 independent
dealers. During fiscal 2006 and fiscal 2005, the Company paid the above mentioned entities $36.8 million and $33.1
million, respectively in commissions pursuant to such dealership contracts.
The Company leases space for marketing company offices, vehicle repair shops and hitch installation centers from
subsidiaries of SAC Holdings, 5 SAC and Galaxy. Total lease payments pursuant to such leases were $2.7 million in
both fiscal 2006 and 2005. 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.
During fiscal 2006 subsidiaries of the Company held various junior unsecured notes of SAC Holdings.
Substantially all of the equity interest of SAC Holdings is controlled by Blackwater, wholly-owned 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 recorded
interest income of $19.4 million and $22.0 million, and received cash interest payments of $11.2 million and $11.7
million, from SAC Holdings during fiscal 2006 and fiscal 2005. The largest aggregate amount of notes receivable
outstanding during fiscal 2006 and the aggregate notes receivable balance at March 31, 2006 was $203.7 million, of
which $75.1 million is with SAC Holding II and have been eliminated in the consolidating financial statements.
These agreements with Blackwater entities, excluding dealer agreements, provided revenue of $38.7 million,
expenses of $2.7 million and cash flows of $27.5 million during fiscal 2006. Revenues and commission expenses
related to the Dealer Agreements were $171.5 million and $36.7 million, respectively.
Fiscal 2007 Outlook
We have many developments which we believe should positively affect performance in fiscal 2007. We believe
the momentum in our Moving and Storage Operations will continue. The revenue gains during fiscal 2006 were
primarily due to improved pricing, product mix, occupancy, and utilization.
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