Question-and-Answer Session
Operator
At this time, sir, your first question comes from Ian Gilson.
Joe Shoen
Well, how are you, Ian?
Ian Gilson
Good results. Very good results. I do have a question regarding the operating segment's results and I know that SAC Holding revenue dropped from $10.8 million to $3.55 million and the earnings from operations dropped to $3.01 to $0.85 million. Did they sell properties or what happened here?
Jason Berg
Hi, Ian. This is Jason. During the quarter SAC Holding II was deconsolidated from our financial statements. SAC Holding II's parent company, Blackwater, made a contribution to SAC Holding II, that triggered a reevaluation of its consolidated status with us. We made that evaluation and based upon our accounting analysis of the facts and circumstances, they were deconsolidated effective October 31st. So, the results shown in the financial statements you're looking for a fiscal 2008, the third quarter includes only one month of activity for SAC Holding II. In future periods, we will not be consolidating any new activity from SAC Holding II.
Joe Shoen
I would add to that that I consider this a blessing. The last four years we've been stuck in an accounting convention that caused us to consolidate certain of the income and expenses of that company, although that didn't reflect any of the actual economic benefit either way. Going ahead, you'll see the SAC relationship in management fee income and interest income and that will be more predictable, and it also indicates true economic affect.
Ian Gilson
Okay. So there is an impact on the overall income statement, but it's like a minority ownership.
Jason Berg
No, not exactly. We won't be showing any of their future income. Now we still have to consolidate their activity through October 31st, so you are going to see those numbers remain in the financial statements as long as those historical periods are shown, but going forward any new activity will not be consolidated.
Ian Gilson
You have no financial interest in SAC II?
Jason Berg
No. We no longer consolidate SAC II. But we still have junior notes with them, interest income and we also manage their storage properties for them. We will receive management fees from them, which will show up in the U-Haul financial statements as management fee income.
Joe Shoen
Which is precisely what the economic relationship has been, but the accounting presentation has been subject to certain accounting conventions that aren't always get on with the economic relations should be. And now these two are going to be mere each other more closely. Including them in our gross revenue is confusing, but including them in our interest income which we do get actual interest income managed with fee income and of course, to the extent they are U-Haul dealers or they do U-Haul revenue, of course, we see all that revenue. So there is still a lot of flows, but the flows are presented on an income statement basis, which is really where the economic interest is.
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