U-Haul 2007 Annual Report Download - page 92

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AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 10: Interest on Borrowings
Interest Expense
Expense’ s associated with loans outstanding was as follows:
2007 2006 2005
Interest expense $ 76,034 $ 61,285 $ 62,706
Capitalized interest (596) (151) (186)
Amortization of transaction costs 3,960 3,871 3,321
Interest (income) expense resulting from derivatives (2,669) (1,655) 1,137
Write-off of transactions costs related to
early extinguishment of debt 6,969 14,384 -
Fees on early extinguishment of debt - 21,243 -
Total AMERCO interest expense 83,698 98,977 66,978
SAC Holding II interest expense 13,062 12,840 14,187
Less: Intercompany transactions (7,035) (6,709) (7,960)
Total SAC Holding II interest expense 6,027 6,131 6,227
Total $ 89,725 $ 105,108 $ 73,205
Year ended March 31,
(In thousands)
Interest paid in cash by AMERCO amounted to $72.9 million, $59.8 million and $57.6 million for fiscal 2007, 2006 and
2005, respectively. Early extinguishment fees paid in cash by AMERCO was $21.2 million in fiscal 2006.
The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations. We have
used interest rate swap and interest rate cap agreements to provide for matching the gain or loss recognition on the hedging
instrument with the recognition of the changes in the cash flows associated with the hedged asset or liability attributable to
the hedged risk or the earnings effect of the hedged forecasted transaction. On June 8, 2005, the Company entered into
separate interest rate swap contracts for $100.0 million of our variable rate debt over a three year term and for $100.0
million of our variable rate debt over a five year term, which were designated as cash flow hedges effective July 1, 2005.
These swap contracts were cancelled on August 16, 2006 in conjunction with our amendment of the Real Estate Loan and
we entered into a new interest rate swap contract for $300.0 million of our variable rate debt over a twelve year term
effective on August 18, 2006. On May 13, 2004, the Company entered into separate interest rate cap contracts for
$200.0 million of our variable rate debt over a two year term and for $50.0 million of our variable rate debt over a three
year term; however, these contracts were dedesignated as cash flow hedges effective July 11, 2005 when the Real Estate
Loan was paid down by $222.4 million. The $200.0 million interest rate cap contract expired on May 17, 2006 and the
$50.0 million interest rate cap contract expired on May 17, 2007. On November 15, 2005, the Company entered into a
forward starting interest rate swap contract for $142.3 million of a variable rate debt over a six year term that started on
May 10, 2006. On June 21, 2006, the Company entered into a forward starting interest rate swap contract for $50.0 million
of our variable rate debt over a seven year term that started on July 10, 2006. On June 9, 2006, the Company entered into a
forward starting interest rate swap contract for $144.9 million of a variable rate debt over a six year term that started on
October 10, 2006. On February 9, 2007, the Company entered into an interest rate swap contract for $30.0 million of our
variable rate debt over a seven year term that started on February 12, 2007. On March 8, 2007, the Company entered into
two separate interest rate swap contracts each for $20.0 million of our variable rate debt over a seven year term that started
on March 10, 2007. These interest rate swap agreements were designated cash flow hedges on their effective dates.
The interest rate cap agreement is no longer designated as a hedge as it was replaced with an interest rate swap
agreement when the associated debt was replaced in fiscal 2007. Therefore all changes in the interest rate caps fair value
(including changes in the option’ s time value), are charged to earnings. Previously the change in each caplets’ respective
allocated fair value amount was reclassified out of accumulated other comprehensive income into earnings when each of
the hedged forecasted transactions (the quarterly interest payments) impact earnings and when interest payments are either
made or received. For the year ended March 31, 2007, the Company recorded $0.2 million to interest income related to
these cap agreements which consists of $1.8 million of interest expense representing the portion of the caps in excess of the
balance of related debt that impacted earnings during the period net of cash received of $2.0 million.
F-27