U-Haul 2016 Annual Report Download - page 42

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AMERCO utilizes operating leases for certain rental equipment and facilities with terms expiring
substantially through 2019. In the event of a shortfall in proceeds from the sales of the underlying rental
equipment assets, AMERCO has guaranteed $22.3 million of residual values at March 31, 2016 for these
assets at the end of their respective lease terms. AMERCO has been leasing rental equipment since
1987. To date, we have not experienced residual value shortfalls related to these leasing arrangements.
Using the average cost of fleet related debt as the discount rate, the present value of AMERCO’s
minimum lease payments and residual value guarantees was $55.5 million at March 31, 2016.
Historically, we have used off-balance sheet arrangements in connection with the expansion of our
self-storage business. For more information please see Note 19, Related Party Transactions of the Notes
to Consolidated Financial Statements. These arrangements were primarily used when our overall
borrowing structure was more limited. We do 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, we will
continue to identify and consider off-balance sheet opportunities to the extent such arrangements would
be economically advantageous to us and our stockholders.
We currently manage 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 pursuant to a standard form of management
agreement, under which we receive a management fee of between 4% and 10% of the gross receipts
plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed
expenses, of $27.1 million, $25.8 million and $25.8 million from the above mentioned entities during fiscal
2016, 2015 and 2014, respectively. This management fee is consistent with the fee received for other
properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private
Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by Willow Grove, which is
owned by Mark V. Shoen (a significant shareholder), and various trusts associated with Edward J. Shoen
and Mark V. Shoen. Mark V. Shoen controls the general partner of Mercury. The limited partner interests
of Mercury are indirectly owned by James P. Shoen (a significant shareholder), Mark V. Shoen and a
trust benefitting the children and grandchild of Edward J. Shoen (our Chairman of the Board, President
and a significant shareholder).
We lease 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
$2.6 million for each of fiscal years 2016, 2015 and 2014, respectively. The terms of the leases are
similar to the terms of leases for other properties owned by unrelated parties that are leased by us.
At March 31, 2016, 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 our
other independent dealers whereby commissions are paid by us based on equipment rental revenues.
We paid the above mentioned entities $54.7 million, $52.1 million and $49.9 million in commissions
pursuant to such dealership contracts during fiscal 2016, 2015 and 2014, respectively.
During fiscal 2016, subsidiaries of ours held various junior unsecured notes of SAC Holdings.
Substantially all of the equity interest of SAC Holdings is controlled by Blackwater. We do not have an
equity ownership interest in SAC Holdings. We recorded interest income of $5.0 million, $5.9 million and
$7.1 million and received cash interest payments of $4.6 million, $5.7 million and $17.2 million from SAC
Holdings during fiscal 2016, 2015 and 2014, respectively. The largest aggregate amount of notes
receivable outstanding during fiscal 2016 was $50.4 million and the aggregate notes receivable balance
at March 31, 2016 was $49.3 million. In accordance with the terms of these notes, SAC Holdings may
prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are
2017.
These agreements along with notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and
Private Mini, excluding Dealer Agreements, provided revenues of $28.1 million, expenses of $2.6 million
and cash flows of $83.8 million during fiscal 2016. Revenues and commission expenses related to the
Dealer Agreements were $254.7 million and $54.7 million, respectively during fiscal 2016.