U-Haul 2005 Annual Report Download - page 77

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76 I AMERCO ANNUAL REPORT
Amerco and Consolidated Entities
Notes to Consolidated Financial Statements, continued
Management฀ believes฀ that฀ its฀ sales฀ of฀ self-storage฀
properties฀ to฀ SAC฀ Holdings฀ has฀ provided฀ a฀ unique฀
structure฀ for฀ the฀ Company฀ to฀ earn฀ management฀ fee฀
income฀ from฀ the฀ SAC฀ Holdings฀ self-storage฀ properties฀
that฀ the฀ Company฀ manages฀ and฀ to฀ participate฀ in฀ SAC฀
Holdings’฀excess฀cash฀flows฀as฀described฀above.
Independent฀ fleet฀ owners฀ own฀ approximately฀ 4%฀ of฀
all฀ U-Haul฀ rental฀ trailers฀ and฀ 0.01%฀ of฀ certain฀ other฀
rental฀ equipment.฀ There฀ are฀ approximately฀ 1,421฀
independent฀ fleet฀ owners,฀ including฀ certain฀ officers,฀
directors,฀ employees฀ and฀ stockholders฀ of฀ AMERCO.฀
Such฀ AMERCO฀ officers,฀ directors,฀ employees฀ and฀
stockholders฀ owned฀ less฀ than฀ 1%฀ of฀ all฀ U-Haul฀ rental฀
trailers฀during฀fiscal฀2005,฀2004฀and฀2003,฀respectively.฀
Payments฀to฀these฀individuals฀under฀this฀program฀are฀de฀
minimis฀(less฀than฀one฀thousand฀dollars฀per฀quarter,฀per฀
person).฀All฀rental฀equipment฀is฀operated฀under฀contract฀
with฀U-Haul฀whereby฀U-Haul฀administers฀the฀operations฀
and฀marketing฀of฀such฀equipment฀and฀in฀return฀receives฀
a฀percentage฀of฀rental฀fees฀paid฀by฀customers.฀Based฀on฀
the฀terms฀of฀various฀contracts,฀rental฀fees฀are฀distributed฀
to฀U-Haul฀(for฀services฀as฀operators),฀to฀the฀fleet฀owners฀
(including฀ certain฀ subsidiaries฀ and฀ related฀ parties฀ of฀
U-Haul)฀ and฀ to฀ Rental฀ Dealers฀ (including฀ Company-
operated฀U-Haul฀Centers).
During฀ fiscal฀ 2003฀ AMERCO฀ purchased฀ $2.1฀ million฀ of฀
printing฀services฀from฀a฀company฀wherein฀an฀owner฀is฀related฀
to฀a฀major฀stockholder,฀director฀and฀officer฀of฀AMERCO.
On฀ August฀ 20,฀ 2004,฀ James฀ P.฀ Shoen฀ exchanged฀ with฀
the฀ Company฀ 1,946,314฀ shares฀ of฀ AMERCO฀ Series฀ A฀
Common฀Stock,฀$0.25฀par฀value,฀for฀1,946,314฀shares฀of฀
AMERCO฀Common฀Stock,฀$0.25฀par฀value.฀ Mr.฀ Shoen฀
is฀ a฀ director,฀ employee฀ and฀ significant฀ shareholder฀ of฀
AMERCO.฀No฀gain฀or฀loss฀was฀recognized฀as฀a฀result฀of฀
this฀transaction.
In฀ February฀ 1997,฀ AMERCO,฀ through฀ its฀ insurance฀
subsidiaries,฀ invested฀ in฀ the฀ equity฀ of฀ Private฀ Mini,฀
a฀ Texas-based฀ self-storage฀ operator.฀ RepWest฀ invested฀
$13.5฀ million฀ and฀ had฀ a฀ direct฀ 30.6%฀ interest฀ and฀ an฀
indirect฀13.2%฀interest.฀Oxford฀invested฀$11฀million฀and฀
had฀a฀direct฀24.9%฀interest฀and฀an฀indirect฀10.8%฀interest.฀
On฀June฀30,฀2003,฀RepWest฀and฀Oxford฀exchanged฀their฀
respective฀ interests฀ in฀ Private฀ Mini฀ for฀ certain฀ real฀
property฀ owned฀ by฀ certain฀ SAC฀ Holdings฀ entities.฀ The฀
exchanges฀were฀non-monetary฀and฀were฀recorded฀on฀the฀
basis฀of฀the฀book฀values฀of฀the฀assets฀exchanged.
During฀ 1997,฀ Private฀ Mini฀ secured฀ a฀ $225.0฀ million฀
line฀ of฀ credit฀ with฀ a฀ financing฀ institution,฀ which฀ was฀
subsequently฀ reduced฀ in฀ accordance฀ with฀ its฀ terms฀ to฀
$125.0฀ million฀ in฀ December฀ 2001.฀ Under฀ the฀ terms฀ of฀
this฀ credit฀ facility,฀ AMERCO฀ entered฀ into฀ a฀ support฀
party฀ agreement฀ with฀ Private฀ Mini฀ whereby฀ upon฀
default฀or฀noncompliance฀with฀debt฀covenants฀by฀Private฀
Mini,฀AMERCO฀assumes฀ responsibility฀ in฀fulfilling฀all฀
obligations฀ related฀ to฀ this฀ credit฀ facility.฀ In฀ 2003,฀ the฀
support฀party฀obligation฀was฀bifurcated฀into฀two฀separate฀
support฀party฀obligations;฀one฀consisting฀of฀a฀$55฀million฀
support฀ party฀ obligation฀ and฀ one฀ consisting฀ of฀ a฀ $70฀
million฀support฀party฀obligation.฀At฀March฀31,฀2003,฀$55฀
million฀of฀AMERCO’s฀support฀party฀obligation฀had฀been฀
triggered.฀AMERCO฀satisfied฀the฀$55฀million฀obligation฀
by฀ issuing฀ notes฀ to฀ the฀ Private฀ Mini฀ creditor,฀ and฀ we฀
correspondingly฀ increased฀ our฀ receivable฀ from฀ Private฀
Mini฀by฀$55฀million.฀Interest฀from฀Private฀Mini฀on฀this฀
receivable฀is฀being฀recorded฀and฀received฀by฀AMERCO฀
on฀a฀regular฀basis.฀The฀Company฀expects฀to฀fully฀recover฀
this฀amount.฀Under฀the฀terms฀of฀FIN฀45,฀the฀remaining฀
$70฀million฀support฀party฀obligation฀was฀recognized฀by฀
the฀Company฀as฀a฀liability฀at฀March฀31,฀2004฀and฀March฀
31,฀ 2003.฀ This฀ resulted฀ in฀ AMERCO฀ increasing฀ Other฀
Liabilities฀by฀$70฀million฀and฀increasing฀our฀receivable฀
from฀Private฀Mini฀by฀an฀additional฀$70฀million.฀At฀March฀
31,฀ 2005,฀ the฀Company฀revalued฀the฀ FIN฀45฀liability฀to฀
$2.9฀million.
In฀ prior฀ years,฀ U-Haul฀ sold฀ various฀ properties฀ to฀ SAC฀
Holding฀ Corporation฀ at฀ prices฀ in฀ excess฀ of฀ U-Haul’s฀
carrying฀values฀resulting฀in฀gains฀which฀U-Haul฀deferred฀
and฀treated฀as฀additional฀paid-in฀capital.฀The฀transferred฀
properties฀ have฀ historically฀ been฀ stated฀ at฀ the฀ original฀
cost฀basis฀as฀the฀gains฀were฀eliminated฀in฀consolidation.฀
In฀March฀2004,฀these฀deferred฀gains฀were฀recognized฀and฀
treated฀as฀contributions฀from฀a฀related฀party฀in฀the฀amount฀
of฀ $111.0฀ million฀ as฀ a฀ result฀ of฀ the฀ deconsolidation฀ of฀
SAC฀Holding฀Corporation.