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This excerpt taken from the VLG 10-K filed Sep 28, 2006. Variable
Interest Entities
We lease buildings and equipment and rent cylinders from West
Rentals, Inc., G.E.W. Real Estate LLC, RealEquip-Lease LLC,
Acetylene Products Corp. and Plymouth Holding LLC, entities that
are engaged primarily in the purchase, development, sale
and/or lease
of real estate and that are controlled by Gary E. West, our
Chairman and principal shareholder. Under accounting
interpretations that were effective for us on March 31,
2004, and because we are under common control with these
entities, we must consolidate in our financial statements, the
financial statements of these related entities. In
consolidation, the rent expense we pay to these entities is
eliminated, resulting in us reporting slightly less operating,
distribution and administrative expense and slightly more income
from operations. Because some of the properties held by the
variable interest entities are financed, and because of the
amount of depreciable assets these entities hold, the
consolidation results in us reporting slightly more interest and
depreciation expense. Further, because we classify the rental
income that these entities generate as “other income”
for our purposes, these entities result in our reporting more
other income. All of the effect of these entities on our net
income is eliminated when we deduct the net effect as a minority
interest. The real property and equipment held by these entities
result in our reporting significantly higher balances of
buildings and equipment on our balance sheet and, because some
of these properties are subject to mortgage loans, higher
indebtedness.
Table of Contents
Although these entities are controlled by related parties, we
have no equity interest in any of them and the creditors and
beneficial interest holders of these entities have no recourse
to our general credit.
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