U-Haul 2016 Annual Report Download - page 92

AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
F-36
Related Party Costs and Expenses
Years Ended March 31,
2016
2015
2014
(In thousands)
U-Haul lease expenses to SAC Holdings
$
2,648
$
2,618
$
2,619
U-Haul commission expenses to SAC Holdings
51,036
48,833
46,886
U-Haul commission expenses to Private Mini
3,684
3,258
3,047
$
57,368
$
54,709
$
52,552
We lease space for marketing company offices, vehicle repair shops and hitch installation centers from
subsidiaries of SAC Holdings, 5 SAC and Galaxy. The terms of the leases are similar to the terms of
leases for other properties owned by unrelated parties that are leased to 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 upon equipment rental revenues.
These agreements and 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 for fiscal 2016.
Pursuant to the variable interest entity model under ASC 810 – Consolidation (“ASC 810”),
Management determined that the junior notes of SAC Holdings and Private Mini as well as the
management agreements with SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini
represent potential variable interests for us. Management evaluated whether it should be identified as the
primary beneficiary of one or more of these VIEs using a two-step approach in which management (i)
identified all other parties that hold interests in the VIEs, and (ii) determined if any variable interest holder
has the power to direct the activities of the VIEs that most significantly impact their economic
performance.
Management determined that they do not have a variable interest in the holding entities SAC Holding
II Corporation, Private Mini, Mercury, 4 SAC, 5 SAC, or Galaxy based upon management agreements
which are with the individual operating entities or through the issuance of junior debt; therefore, we are
precluded from consolidating these entities.
We have junior debt with the holding entity SAC Holding Corporation which represents a variable
interest in the entity. Though we have certain protective rights within this debt agreement, we have no
present influence or control over this holding entity unless the protective rights become exercisable, which
management considers unlikely based on their payment history. As a result, we have no basis under ASC
810 to consolidate this entity.
We do not have the power to direct the activities that most significantly impact the economic
performance of the individual operating entities which have management agreements with U-Haul. There
are no fees or penalties disclosed in the management agreement for termination of the agreement.
Through control of the holding entities' assets, and its ability and history of making key decisions relating
to the entity and its assets, Blackwater, and its owner, are the variable interest holder with the power to
direct the activities that most significantly impact each of the individual holding entities and the individual
operating entities’ performance. As a result, we have no basis under ASC 810 to consolidate these
entities.