U-Haul 2016 Annual Report Download - page 13

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7
We operate in a highly competitive industry.
The truck rental industry is highly competitive and includes a number of significant national, regional
and local competitors. We believe the principal competitive factors in this industry are convenience of
rental locations, availability of quality rental moving equipment, breadth of essential services and products
and total cost. Financial results for the Company can be adversely impacted by aggressive pricing from
our competitors. Some of our competitors may have greater financial resources than we have. We cannot
assure you that we will be able to maintain existing rental prices or implement price increases. Moreover,
if our competitors reduce prices and we are not able or willing to do so as well, we may lose rental
volume, which would likely have a materially adverse affect on our results of operations.
The self-storage industry is large and highly fragmented. We believe the principal competitive factors
in this industry are convenience of storage rental locations, cleanliness, security and price. Competition in
the market areas in which we operate is significant and affects the occupancy levels, rental rates and
operating expenses of our facilities. Competition might cause us to experience a decrease in occupancy
levels, limit our ability to raise rental rates or require us to offer discounted rates that would have a
material affect on results of operations and financial condition. Entry into the self-storage business may
be accomplished through the acquisition of existing facilities by persons or institutions with the required
initial capital. Development of new self-storage facilities is more difficult however, due to land use, zoning,
environmental and other regulatory requirements. The self-storage industry has in the past experienced
overbuilding in response to perceived increases in demand. We cannot assure you that we will be able to
successfully compete in existing markets or expand into new markets.
We are highly leveraged.
As of March 31, 2016, we had total debt outstanding of $2,688.8 million and total undiscounted
operating lease commitments of $157.0 million. Although we believe, based on existing information, that
additional leverage can be supported by our operations and revenues, our existing debt could impact us
in the following ways among other considerations:
require us to allocate a considerable portion of cash flows from operations to debt service and
operating lease payments;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which
we operate;
limit our ability to obtain additional financing; and
place us at a disadvantage compared to our competitors who may have less debt.
Our ability to make payments on our debt and operating leases depends upon our ability to maintain
and improve our operating performance and generate cash flow. To some extent, this is subject to
prevailing economic and competitive conditions and to certain financial, business and other factors, some
of which are beyond our control. If we are unable to generate sufficient cash flow from operations to
service our debt and meet our other cash needs, including our operating leases, we may be forced to
reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our
indebtedness. If we must sell our assets, it may negatively affect our ability to generate revenue. In
addition, we may incur additional debt or leases that would exacerbate the risks associated with our
indebtedness.
Economic conditions, including those related to the credit markets, may adversely affect our
industry, business and results of operations.
Consumer and commercial spending is generally affected by the health of the economy, which places
some of the factors affecting the success of our business beyond our control. Our businesses, although
not as traditionally cyclical as some, could experience significant downturns in connection with or in
anticipation of, declines, or sustained lack of recovery, in general economic conditions. In times of
declining consumer spending we may be driven, along with our competitors, to reduce pricing which
would have a negative impact on gross profit. We cannot predict if another downturn, or sustained lack of
recovery, in the economy will occur, which could result in reduced revenues and working capital.