U-Haul 2007 Annual Report Download - page 48

42
O
pany uses off-balance sheet arrangements where the economics and sound business principles warrant
th
value of AMERCO’ s minimum lease payments and residual value
g
nities to the extent such arrangements would be economically advantageous to the Company
an
by Mark V. Shoen.
Ja
are similar to the terms of leases for other
pr
s $36.6 million, $36.8 million and $33.1 million, respectively in
co
which $75.1 million is with SAC Holding II and has been
eli
and commission expenses related to the Dealer Agreements were $168.6
million and $36.6 million, respectively.
ff Balance Sheet Arrangements
The Com
eir use.
AMERCO utilizes operating leases for certain rental equipment and facilities with terms expiring substantially
through 2012, with the exception of one land lease expiring in 2034. In the event of a shortfall in proceeds from the
sales of the underlying rental equipment assets, AMERCO has guaranteed approximately $172.3 million of residual
values at March 31, 2007 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. Using the average cost of
fleet related debt as the discount rate, the present
uarantees is $490.6 million at March 31, 2007.
Historically, AMERCO used off-balance sheet arrangements in connection with the expansion of our self-storage
business (see Note 19 “Related Party Transactions” of the “Notes to Consolidated Financial Statements”). These
arrangements were primarily used when the Company’ s overall borrowing structure was more limited. The
Company does not face similar limitations currently and off-balance sheet arrangements have not been utilized in
our self-storage expansion in recent years. In the future the Company will continue to identify and consider off-
balance sheet opportu
d its stockholders.
The Company currently manages the self-storage properties owned or leased by SAC Holdings, Mercury Partners,
LP (“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
reimbursed expenses, of $23.5 million, $22.5 million and $14.4 million from the above mentioned entities during
fiscal 2007, 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 Investments, Inc. (“Blackwater”), wholly-owned by Mark V. Shoen,
a significant shareholder and executive officer of AMERCO. Mercury is substantially controlled
mes P. Shoen, a significant shareholder and director of AMERCO, has an interest in Mercury.
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
fiscal 2007, 2006 and 2005, respectively. The terms of the leases
operties owned by unrelated parties that are leased to the Company.
At March 31, 2007, 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 independent dealers
whereby commissions are paid by the Company based on equipment rental revenues. During fiscal 2007, 2006 and
2005 the Company paid the above mentioned entitie
mmissions pursuant to such dealership contracts.
During fiscal 2007, subsidiaries of the Company held various junior unsecured notes of SAC Holdings. The
Company does not have an equity ownership interest in SAC Holdings. The Company recorded interest income of
$19.2 million, $19.4 million and $22.0 million and received cash interest payments of $44.5 million, $11.2 million
and $11.7 million from SAC Holdings during fiscal 2007, 2006 and 2005, respectively. The cash interest payments
for fiscal 2007 included a payment to significantly reduce the outstanding interest receivable from SAC Holdings.
The largest aggregate amount of notes receivable outstanding during fiscal 2007 and the aggregate notes receivable
balance at March 31, 2007 was $203.7 million, of
minated in the consolidating financial statements.
These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini,
excluding Dealer Agreements, provided revenue of $39.7 million, expenses of $2.7 million and cash flows of $63.5
million during fiscal 2007. Revenues