U-Haul 2008 Annual Report Download - page 92

AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other
The Company is named as a defendant in various other litigation and claims arising out of the normal course of business.
In management’ s opinion, none of these other matters will have a material effect on the Company’ s financial position and
results of operations.
Note 18: Preferred Stock Purchase Rights
The Board of AMERCO adopted a stockholder-rights agreement (also known as a “poison pill”) in July 1998. On March
5, 2008, in accordance with the provision of the Rights Agreement, the Board directed the termination of all Rights
outstanding under the Rights Agreement and the termination of the Rights Agreement.
Note 19: Related Party Transactions
AMERCO has engaged in related party transactions and has continuing related party interests with certain major
stockholders, directors and officers of the consolidated group as disclosed below. Management believes that the
transactions described below and in the related notes were consummated on terms equivalent to those that would prevail in
arm’ s-length transactions.
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.
Management believes that its sales of self-storage properties to SAC Holdings has provided a unique structure for the
Company to earn moving equipment rental revenues and property management fee revenues from the SAC Holdings self-
storage properties that the Company manages.
During fiscal 2008, 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. Blackwater is 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. The Company recorded interest income of $18.6 million, $19.2 million and $19.4 million, and received
cash interest payments of $19.2 million, $44.5 million and $11.2 million, from SAC Holdings during fiscal 2008, 2007 and
2006, 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 2008
was $203.7 million and the aggregate notes receivable balance at March 31, 2008 was $198.1 million. In accordance with
the terms of these notes, SAC Holdings may repay the notes without penalty or premium.
Interest accrues on the outstanding principal balance of junior notes of SAC Holdings that the Company holds at a 9.0%
rate per annum. A fixed portion of that basic interest is paid on a monthly basis. Additional interest can be earned on notes
totaling $122.2 million of principal depending upon the amount of remaining basic interest and 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 exceeds the amount of remaining basic interest, contingent interest
would be paid on the same monthly date as the fixed portion of basic interest. To the extent that the 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. In addition, subject to certain contingencies, the junior notes provide that
the holder of the note is entitled to receive a portion of the appreciation realized upon, among other things, the sale of such
property by SAC Holdings. To date, no excess cash flows related to these arrangements have been earned or paid.
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