U-Haul 2009 Annual Report Download - page 41

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Historically, AMERCO has used off-balance sheet arrangements in connection with the expansion of our self-
storage business. Refer to Note 21 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 opportunities to the extent such arrangements would be economically advantageous to the Company
and its stockholders.
The Company currently manages the self-storage properties owned or leased by SAC Holdings, Mercury Partners,
L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”),
Galaxy Investments, L.P. (“Galaxy”), and Private Mini Storage Realty L.P. (“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 $24.3 million, $23.7 million and $23.5 million from the above mentioned entities during
fiscal 2009, 2008 and 2007, 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.
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 $2.4 million,
$2.1 million and $2.7 million in fiscal 2009, 2008 and 2007, respectively. 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, 2009, 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. The Company paid the above
mentioned entities $34.7 million, $36.0 million and $36.6 million, respectively in commissions pursuant to such
dealership contracts during fiscal 2009, 2008 and 2007, respectively.
These agreements along with notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini,
excluding Dealer Agreements, provided revenues of $43.2 million, expenses of $2.4 million and cash flows of $38.1
million during fiscal 2009. Revenues and commission expenses related to the Dealer Agreements were $164.0
million and $34.7 million, respectively.
During fiscal 2009, 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
$18.4 million, $18.6 million and $19.2 million and received cash interest payments of $14.1 million, $19.2 million
and $44.5 million from SAC Holdings during fiscal 2009, 2008 and 2007, 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 2009 was $198.1 million and the
aggregate notes receivable balance at March 31, 2009 was $197.6 million. In accordance with the terms of these
notes, SAC Holdings may repay the notes without penalty or premium at any time.
Fiscal 2010 Outlook
We will continue to focus our attention on increasing transaction volume and improving pricing, product and
utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is
an important component of our plan to meet these goals. Over the last four years we have rotated over 55,000 new
box trucks into the rental fleet while at the same time removing over 51,000 older box trucks from the active fleet.
This aggressive rotation of the fleet provides us the opportunity in fiscal 2010 to reduce our new equipment capital
expenditures relative to the last several years. Revenue in the U-Move program could continue to be adversely
impacted should we fail to execute in any of these areas. Even if we execute our plans we could see declines in
revenues primarily due to the adverse economic conditions that are beyond our control.
We have added new storage locations and expanded at existing locations. In fiscal 2010 we are looking to
complete current projects and increase occupancy in our existing portfolio of locations. New projects and
acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. While
the Company was able to maintain storage revenue in fiscal 2009 due to pricing, this trend may not continue. The
Company will continue to invest capital and resources in the “U-Box”TM storage container program throughout fiscal
2010.