U-Haul 2008 Annual Report Download - page 93

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AMERCO AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 2008, AMERCO and U-Haul held various junior notes with Private Mini Realty L.P. (“Private Mini”). The
equity interests of Private Mini are ultimately controlled by Blackwater. The Company recorded interest income of $5.1
million and $5.0 million, and received cash interest payments of $5.1 million and $5.0 million, from Private Mini during
fiscal 2008 and 2007, respectively. The balance of notes receivable from Private Mini at March 31, 2008 was $69.1
million. The largest aggregate amount outstanding during fiscal 2008 was $70.1 million.
The Company currently manages 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 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 for 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 upon equipment rental revenue. 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 and 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.
In prior years, U-Haul sold various properties to SAC Holdings 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, a portion of 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. In November 2007, the remaining portion of these deferred gains were
recognized and treated as contributions from a related party in the amount of $46.1 million as a result of the deconsolidation
of SAC Holding II Corporation.
On September 1, 2007, SAC Holding Corporation issued a promissory note to U-Haul. As part of the note, the Company
reclassified $20.0 million of deferred interest due from SAC Holding Corporation to a note receivable. The note accrues
interest at 9.0% per annum with interest payments due monthly and a final maturity in 2019.
During the second quarter of fiscal 2008, the Company received $20.1 million from SAC Holding Corporation as full
repayment for one of its junior notes.
In December 2007, Real Estate paid cash for the purchase of a parcel of land from 5 SAC for $0.5 million.
F-36