U-Haul 2005 Annual Report Download - page 42

41 I AMERCO ANNUAL REPORT
gross฀receipts฀from฀the฀properties฀plus฀reimbursement฀for฀
certain฀expenses.฀We฀received฀management฀fees,฀exclusive฀
of฀ expenses,฀ of฀ $14.4฀ million฀ during฀ fiscal฀ 2005.฀ This฀
management฀fee฀is฀consistent฀with฀ the฀fees฀we฀ received฀
from฀unrelated฀parties฀for฀other฀properties฀we฀manage.
Certain฀subsidiaries฀of฀SAC฀Holdings฀and฀its฀affiliates฀act฀
as฀U-Haul฀dealers.฀The฀financial฀and฀other฀terms฀of฀the฀
dealership฀ contracts฀ with฀ subsidiaries฀ of฀ SAC฀ Holdings฀
and฀its฀affiliates฀are฀substantially฀identical฀to฀the฀terms฀of฀
those฀with฀our฀14,071฀independent฀dealers.฀During฀fiscal฀
2005,฀we฀paid฀subsidiaries฀of฀SAC฀Holdings฀$33.1฀million฀
in฀commissions฀pursuant฀to฀such฀dealership฀contracts.
The฀ Company฀leased฀ space฀ for฀certain฀ of฀its฀ marketing฀
company฀offices,฀vehicle฀repair฀shops฀and฀hitch฀installation฀
centers฀from฀subsidiaries฀of฀SAC฀Holdings฀and฀its฀affiliates.฀
Total฀ lease฀ payments฀pursuant฀ to฀ such฀leases฀ were฀$2.7฀
million฀during฀fiscal฀2005.
These฀ agreements฀ provided฀ revenues฀ of฀ $35.0฀ million,฀
expenses฀of฀$35.8฀million,฀cash฀receipts฀of฀$60.5฀million฀
and฀cash฀disbursements฀of฀$71.6฀million฀during฀fiscal฀2005.฀
These฀ amounts฀ exclude฀ rental฀ revenues฀ received฀ by฀ the฀
Company฀for฀which฀SAC฀Holdings฀and฀its฀affiliates฀were฀
paid฀a฀commission.
During฀ fiscal฀ 2005,฀ a฀ subsidiary฀ of฀ the฀ Company฀ held฀
various฀ senior฀ and฀ junior฀ unsecured฀ notes฀ of฀ SAC฀
Holdings.฀The฀Company฀recorded฀interest฀income฀of฀$22.0฀
million฀ and฀ received฀ cash฀ interest฀ payments฀ of฀ $11.7฀
million฀during฀fiscal฀2005.
Fiscal 2006 Outlook
We฀ have฀many฀exciting฀developments฀ which฀we฀believe฀
should฀ positively฀ affect฀ performance฀ in฀ fiscal฀ 2006.฀
We฀ believe฀ the฀ momentum฀ in฀ our฀ Moving฀ and฀ Storage฀
Operations฀ will฀ continue.฀ We฀ are฀ investing฀ strongly฀ in฀
our฀ truck฀ rental฀ fleet฀ to฀ further฀ strengthen฀ U-Haul’s฀
“do-it-yourself”฀ moving฀ business.฀ We฀ placed฀ purchase฀
orders฀last฀fall฀for฀6,750฀of฀our฀largest฀rental฀trucks฀and฀expect฀
to฀have฀them฀in฀service฀by฀mid-August.฀This฀investment฀
is฀expected฀to฀increase฀the฀number฀of฀rentable฀truck฀days฀
available฀to฀meet฀our฀customer’s฀demand฀and฀should฀reduce฀
future฀spending฀on฀repair฀costs฀and฀equipment฀down-time.
At฀RepWest,฀our฀plans฀to฀exit฀non-U-Haul฀lines฀of฀business฀
are฀progressing฀well.
At฀Oxford,฀the฀recent฀Kocher฀litigation฀settlement฀should฀
produce฀improved฀ratings,฀which฀in฀turn฀should฀support฀
the฀expansion฀of฀its฀distribution฀capabilities.
Also,฀ we฀ completed฀ the฀ refinancing฀ of฀ the฀ Company’s฀
debt฀on฀June฀8,฀2005.฀This฀action฀increased฀our฀borrowing฀
capacity฀ by฀ more฀ than฀ $45.0฀ million฀ and฀ is฀ expected฀ to฀
lower฀ our฀ annual฀ interest฀ expense฀ approximately฀ $25.0฀
million฀ before฀ taxes฀ (based฀ on฀ current฀ borrowing฀ levels).฀
The฀early฀extinguishment฀of฀our฀existing฀debt฀will฀result฀
in฀ a฀ one฀ time฀ pre-tax฀ charge฀ of฀ approximately฀ $34.0฀
million฀during฀the฀first฀quarter฀of฀fiscal฀2006.
Our฀objectives฀for฀fiscal฀2006฀are฀to฀position฀our฀rental฀
fleet฀to฀achieve฀revenue฀and฀transaction฀growth฀and฀continue฀
to฀drive฀down฀operating฀costs.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This฀Annual฀Report฀contains฀forward-looking฀statements.฀
We฀may฀make฀additional฀written฀or฀oral฀forward-looking฀
statements฀from฀time฀to฀time฀in฀filings฀with฀the฀Securities฀
and฀ Exchange฀ Commission฀ or฀ otherwise.฀ We฀ believe฀
such฀forward-looking฀statements฀are฀within฀the฀meaning฀
of฀ the฀ safe-harbor฀ provisions฀ of฀ the฀ Private฀ Securities฀
Litigation฀ Reform฀ Act฀ of฀ 1995.฀ Such฀ statements฀ may฀
include,฀ but฀ are฀ not฀ limited฀ to,฀ projections฀ of฀ revenues,฀
income฀ or฀ loss;฀estimates฀ of฀capital฀ expenditures,฀ plans฀
for฀ future฀ operations,฀ products฀ or฀ services;฀ financing฀
needs฀ and฀ plans;฀ our฀ perceptions฀ of฀ our฀ legal฀ positions฀
and฀ anticipated฀ outcomes฀ of฀ pending฀ litigation฀ against฀
us;฀ our฀ liquidity฀ and฀ financial฀ resources;฀ goals฀ and฀
strategies;฀ plans฀ for฀ new฀ business;฀ assumptions฀ about฀
pricing,฀costs,฀and฀access฀to฀capital฀and฀leasing฀markets฀
as฀ well฀ as฀ assumptions฀ relating฀ to฀ the฀ foregoing.฀ The฀
words฀ “believe”,฀ “expect”,฀ “anticipate”,฀ “estimate”,฀
“project”฀ and฀ similar฀ expressions฀ identify฀ forward-
looking฀ statements,฀ which฀ speak฀ only฀ as฀ of฀ the฀ date฀
the฀ statement฀ was฀ made.฀ Forward-looking฀ statements฀
are฀ inherently฀ subject฀ to฀ risks฀ and฀ uncertainties,฀ some฀
of฀ which฀ cannot฀ be฀ predicted฀ or฀ quantified.฀ Factors฀
that฀ could฀ significantly฀ affect฀ results฀ include,฀ without฀
limitation,฀the฀risk฀factors฀enumerated฀at฀the฀end฀of฀this฀
section,฀as฀ well฀as฀the฀following:฀the฀Company’s฀ability฀
to฀ operate฀ pursuant฀ to฀ the฀ terms฀ of฀ its฀ credit฀ facilities;฀
the฀ Company’s฀ ability฀ to฀ maintain฀ contracts฀ that฀ are฀
critical฀ to฀ its฀ operations;฀ the฀ costs฀ and฀ availability฀ of฀
financing;฀the฀Company’s฀ability฀to฀execute฀its฀business฀
plan;฀ the฀ Company’s฀ ability฀ to฀ attract,฀ motivate฀ and฀
retain฀ key฀ employees;฀ general฀ economic฀ conditions;฀
fluctuations฀in฀our฀costs฀to฀maintain฀and฀update฀our฀fleet฀
and฀facilities;฀our฀ability฀to฀refinance฀our฀debt;฀changes฀
in฀ government฀ regulations,฀ particularly฀ environmental฀
regulations;฀our฀credit฀ratings;฀the฀availability฀of฀credit;฀
changes฀ in฀ demand฀ for฀ our฀ products;฀ changes฀ in฀ the฀
general฀ domestic฀ economy;฀ the฀ degree฀ and฀ nature฀ of฀
our฀ competition;฀ the฀ resolution฀ of฀ pending฀ litigation฀
against฀ the฀Company;฀ changes฀in฀ accounting฀standards฀
and฀other฀factors฀described฀in฀the฀documents฀we฀file฀with฀
the฀ Securities฀ Exchange฀ Commission.฀ Consequently,฀
the฀ forward-looking฀ statements฀ should฀ not฀ be฀ regarded฀
Management’s Discussion and Analysis
of Financial Condition and Results of Operations