U-Haul 2008 Annual Report Download - page 41

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Historically, AMERCO used off-balance sheet arrangements in connection with the expansion of our self-storage
business. Refer to Note 19 Related Party Transactions of the Notes to Consolidated Financial Statements. These
arrangements were primarily used when the Company’ s overall borrowing structure was more limited. The
Company does 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, the Company will continue to identify and consider off-
balance sheet opportunities to the extent such arrangements would be economically advantageous to the Company
and its stockholders.
The Company currently manages the self-storage properties owned or leased by SAC Holdings, Mercury Partners,
LP (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”),
Galaxy Investments, L.P. (“Galaxy”), and Private Mini Storage Realty (“Private Mini”) pursuant to a standard form
of management agreement, under which the Company receives a management fee of between 4% and 10% of the
gross receipts plus reimbursement for certain expenses. The Company received management fees, exclusive of
reimbursed expenses, of $23.7 million, $23.5 million and $22.5 million from the above mentioned entities during
fiscal 2008, 2007 and 2006, respectively. This management fee is consistent with the fee received for other
properties the Company previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private
Mini are substantially controlled by Blackwater. Mercury is substantially controlled by Mark V. Shoen. James P.
Shoen, a significant shareholder and director of AMERCO, has an interest in Mercury.
The Company leases 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 $2.1 million,
$2.7 million and $2.7 million in fiscal 2008, 2007 and 2006, respectively. The terms of the leases are similar to the
terms of leases for other properties owned by unrelated parties that are leased to the Company.
At March 31, 2008, 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 the Company’ s other independent dealers
whereby commissions are paid by the Company based on equipment rental revenues. During fiscal 2008, 2007 and
2006, the Company paid the above mentioned entities $36.0 million, $36.6 million and $36.8 million, respectively in
commissions pursuant to such dealership contracts.
These agreements along with notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini,
excluding Dealer Agreements, provided revenues of $43.6 million, expenses of $2.1 million and cash flows of $68.8
million during fiscal 2008. Revenues and commission expenses related to the Dealer Agreements were $170.0
million and $36.0 million, respectively.
During fiscal 2008, subsidiaries of the Company held various junior unsecured notes of SAC Holdings. The
Company does not have an equity ownership interest in SAC Holdings. The Company recorded interest income of
$18.6 million, $19.2 million and $19.4 million and received cash interest payments of $19.2 million, $44.5 million
and $11.2 million from SAC Holdings during fiscal 2008, 2007 and 2006, respectively. The cash interest payments
for fiscal 2007 included a payment to significantly reduce the outstanding interest receivable from SAC Holdings.
The largest aggregate amount of notes receivable outstanding during fiscal 2008 was $203.7 million and the
aggregate notes receivable balance at March 31, 2008 was $198.1 million. In accordance with the terms of these
notes, SAC Holdings may repay the notes without penalty or premium.
Fiscal 2009 Outlook
In fiscal 2009, we are focused on increasing transaction volume and improving pricing, product mix and
utilization for self-moving equipment rentals. Investing in our truck fleet is a key initiative to reach this goal.
During fiscal 2008, the Company acquired over 21,000 new trucks. Our plans include manufacturing additional box
trucks and maintaining our pick-up and cargo van fleet, resulting in a similar amount of new trucks in fiscal 2009.
This investment is expected to increase the number of rentable equipment days available to meet our customer
demands and to reduce future spending on repair costs and equipment downtime. Revenue growth in the U-Move
program could continue to be adversely impacted should we fail to execute in any of these areas.
We are also working towards increasing our storage occupancy at existing sites, adding new eMove Storage
Affiliates and building new locations. We believe that additional occupancy gains in our current portfolio of
locations can be realized in fiscal 2009. While the Company saw increased storage revenue in fiscal 2008 due to
pricing, this trend may not continue. The Company continues to evaluate new moving and storage opportunities in
the market place including portable storage.