U-Haul Holding Company (UHAL) Q1 2017 Earnings Report, Transcript and Summary

Welcome to AMERCO First Quarter Fiscal 2017 Investors Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Sebastien Reyes. Mr. Reyes, please go ahead.

Good morning, everyone, and thank you for joining us today. Welcome to the AMERCO first quarter fiscal 2017 investor call. Before we begin, I would like to remind everyone that certain of the statements during this call, including without limitation, statements regarding revenue, expenses, income and general growth of our business may constitute forward-looking statements within the meaning of the Safe Harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain statements could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect AMERCO’s business and future operating results, please refer to Form 10-Q for the quarter ended June 30, 2016, which is on file with the U.S. Securities and Exchange Commission. Participating in the call today will be Joe Shoen, Chairman of AMERCO. I’ll now turn the call over to Joe.

Hello. We are reporting a drop in profitability for the quarter year over year. Rental truck cost increases, put through by Ford and General Motors, was a big driver of the decline. U-Haul’s cost of acquisition went up. And we have not yet got the customer to be willing to absorb the increases. Of course, we’re continuing to work on this. Typically, June, July and August reveal any rental equipment distribution issues that we have. The undersupply of medium-size one-way trucks that we have faced since last October continued to cost us some one-way transactions in the quarter. As we had mentioned on our last call, we now should have a better relative mix of medium trucks, and we will not have that excuse in the second quarter. I have good reason to believe that there are more one-way in the in-town rental customers waiting to be served. Our challenge is to get the right match of our solution to the customers’ needs. After increasing the van and pickup fleet in each of the last three years, we have not yet settled on our plans going into next summer. Our truck sales teams continue to manage our sales volumes and prices. We held some trucks back in the quarter in an effort to gain some increased transactions and to seek some better pricing. Self-storage remains strong. We have a lot of products in the pipeline, in what we consider good locations. These are all 20-year plus commitments. So we try to make considered judgments. Market conditions continue to make development and conversion, often a preferred choice compared to acquisition. Conversion and development, however, have a longer timeframe to occupancy and profitability. I believe we continue to have a highly motivated team committed to execution. With that, I’ll turn it over to Jason to go through the numbers.

Thanks, Joe. Yesterday, we reported first quarter earnings of $7.51 a share compared to $8.74 a share for the same period in fiscal 2016. All of my period-over-period comparisons are going to be for the first quarter of fiscal 2017 compared with the first quarter of fiscal 2016, unless specifically noted. At our moving and storage segment operating earnings decreased $32 million to $249 million for the quarter. Equipment rental revenue increased by nearly 3% or about $17 million as a result of transaction growth. We believe further opportunity exists to improve upon our current results. As I mentioned during our last earnings call, covering the fourth quarter, in retrospect we likely could have used additional equipment during the second-half of last year. Making the adjustments necessary to correct this takes time. We have been adding equipment to the fleet that we believe will help us capitalize on these opportunities to get additional business. While we don’t discuss the specific size of the fleet during our quarterly calls, in general terms, I’d like to note that we’ve grown the fleet both on a sequential basis as well as year over year. From a distribution perspective, we continue to work towards growing our independent dealer network and bring new company-owned moving and storage centers online. U-Move revenue growth continued through the month of July. Storage revenues were up $10.5 million or just over 18%. Revenue growth is coming from occupancy gains at existing locations, occupancy from new facilities that we added to the system as well as general improvement in rates. From June 30, 2015 through June 30, 2016, we’ve added about 4.2 million net rentable square feet to the system with just under 1 million of that coming online during the first quarter of this year. Spending on real estate-related CapEx for the quarter was $124 million, up $11 million. Our quoted occupancy statistics include all available rooms and locations as soon as they are completed or acquired. Based upon this, all-in or what I might call it, a fully diluted basis, we reported occupancy of 77%, which was down 5% compared with the same time last year. To pull the curtain back a little bit on the statistic, I think it’s important to highlight that this does represent an increase of 2.5 million occupied square feet compared to the same time last year. And to further clarify what’s happening, of the 4,200,000 square feet of new storage that we added during the last 12 months, a little more than 60% of that was new storage that came from our own development program. So this was added to the system at zero percent occupancy. The remaining portion was from the acquisition of existing storage facilities. These facilities have starting occupancies averaging approximately 73%. So this gives us a blended occupancy on the new square footage of about 20% over the last 12 months. If you exclude this new square footage, our reported occupancy would have been in excess of 90%. This also points to the future value in the portfolio if we can execute on our plans to rent up the space. Right now for each 1% improvement in annual occupancy, that should translate into approximately $3.4 million of additional annual revenue. In the last five years we’ve doubled the size of our company-owned storage portfolio. Operating expenses at the moving and storage segment increased $22 million for the first quarter; this was driven by personnel, repair and maintenance, property tax and a change in accounting policy for the expensing of smaller capital items. To this last point, the IRS recently adjusted its regulations related to the capitalization of low value assets for items costing less than $5,000. We believe that the value of the cash savings that we will generate from taking this book-to-tax deduction is substantial enough to warrant the treatment. During the first quarter, this increased our operating expenses by about $4.7 million. While I don’t have an actual projection for the rest of the year, what I can tell you is that, had we put this policy in place last year we would have increased our expenses by about $18 million, but we would have reduced our cash tax bill by nearly $6 million before the effects of any bonus depreciation that might have been allowed. Capital expenditures on new rental trucks and trailers were $419 million compared with $310 million last year. Proceeds from the sale of equipment were $146 million as compared to $193 million last year. Depreciation expense, before equipment gains, increased $17.1 million due to additional equipment in the rental fleet. Gains from the disposal of property, plant and equipment decreased a little over $27 million. We sold fewer trucks in the first quarter, and on average, those trucks had an higher average cost versus those sold during the first quarter of the previous year. Our consolidated earnings from operations, including moving and storage and our insurance operations were $260 million, down $31 million. We continue to have strong cash and credit availability to moving and storage segment, it was $720 million at June 30 of this year. With that, I would like to hand the call back to Joe.

Thank you, Jason. We’ll go ahead and go to questions and answers.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble the roster. Our first question comes from Jim Barrett of CL King & Associates. Please go ahead.

Hi, good morning, everyone.

Good morning.

Good morning, Joe.

Jason, we’re looking forward to your presentation at our conference on September 13. Joe, in terms of your comments, I just wanted to make sure I understood what you had to say about sales. And I realized sales comparisons in the quarter were challenging. But with more equipment and unmet demand, were the sales growth trends softened in the quarter due to a mismatch between the type of equipment you had and the type of - and what customers wanted? Is that sort of sums it up?

We had some of that, but I don’t - again, we won’t have that excuse the next quarter. I believe we have the fleet where it ought to be. But yes, that cost sum it. Again, it’s kind of winding after the effect. I mean, we make all these decisions, but that’s our view, yes.

Yes, understood. And I think you alluded to the fact that customers were not willing to pay for your cost increases. Can you tell us what happened? Obviously, chassis prices went up. Could you give us some sense as to magnitude? And is that - does that appear to be permanent? And can you tell us to what extent - I mean, did you raise prices by 1%, 2%, 5%? Can you tell us what the issue was there?

Sure. Actually, if you - prices were very a difficult thing to give a straight answer to, our in-town price didn’t change at all. So basically there, it’s 100% utilization drift, Jim.

I see.

We have to do a better job of getting more customers into a truck in a given period of time. So the prices on that equipment, depending on the manufacturer and a bunch of different issues, and of course they will disagree. They tell me they didn’t raise the price, but I’d say it was between 8% and 15%. And, of course, the price is stuck, we pay them. Now, will those prices hold going ahead? I don’t know. So far, they’ve been holding - Ford and GM are real tight on pricing. They are as hard on it as I have ever seen in my work career. So, of course, I’m going to go hit them up again obviously. Whether they’ll care or not is another issue. So on the one-way truck rental, our transactions in the first part of the quarter were not - we didn’t see the increase that I thought was acceptable. And I go pretty hard on my team on transactions. And then they have given up a little price. And that it’s very hard to say that. We didn’t change the published prices. But what happened is when I drive people real hard, the next customer comes in and says so and so quoted me your price minus 100. My guys are a lot more inclined to give them the 100 than try to pitch our value and take the risk, the customer walks away. That pushed everybody real hard on transactions. And I intend to continue to push them on transactions, because I long-term want to dominate the space obviously. But I think - it’s a big guess, but I think that cost us $4, $5 or $6 a transaction personally. And that’s a lot of money when you multiply it all out. I can’t prove that. Okay, I can’t prove that. And I don’t think that there were some competitive circumstances that were greatly different from the same period last year. But I think that we didn’t see the transaction gains that I thought were acceptable in the first quarter. So I just drove on everybody. And it’s good that they respond to be, but we kind of feel how careful I can - there are only so many balls people can juggle effectively and I try to make that juggling. And those how I call them.

Right, and the 6% increase in cost, higher personnel cost, truck maintenance, the rise in property taxes, as well as the IRS ruling. The personnel cost, truck and property tax inflation; is that with us for the foreseeable future or are some of those costs controllable like property taxes?

Property tax is pretty much - property taxes are going to be a tough one. And as we bring our new centers, what happens is they’re very aggressive on full valuation of those. We might have a story that we’ve had for 10 years and it’s kind of slipped their notice, but when you bring on a new one, the process with most taxing authority because it have high visibility and they tend to get you the full amount. So since we’ll be bringing on more stores - that’s our plan - I wouldn’t expect to see that hit on us now. Of course, we’ve had better luck getting customers to pay the increased cost in storage than we have with the truck customer. And I don’t know how long that will go on, but that’s been our experience over the last five years, so I’m not despairing over that by any means. The personnel is personnel, I don’t think we’re grossly over-staffed. We try to be a little bit on the conservative side on that. Of course, I see the numbers and we’ll remain more vigilant. I don’t expect we may see some cost controls in truck maintenance. We had some bumps that I don’t think we’ll necessarily see over the next several months.

If I could chime in a little quick, Joe, as a percent of revenue the repair and maintenance costs were in line. So I don’t think we lost any margins on truck maintenance and repair. The thing that shoot into our operating margin this quarter were the change in the expensing policy on the low-value assets, which was again about $4.7 million, so a little bit over half of the margin decrease or the operating expense margin decrease. The personnel was about $3 million. We lost about $3 million in margin on the personnel increase. And then, property taxes and some maintenance costs associated with the new locations, we don’t necessarily have a revenue stream, probably fluxed up on another $3.5 million of that. So I would say that the repair and maintenance, and our liability costs, associated with the fleet were both kind of in line with revenue growth for the quarter.

Well, thank you both.

Our next question comes from Ian Gilson of Zacks Investment Research. Please go ahead.

All right, good morning, gentlemen. If we kind of go back and look at the sequential change in revenue from fourth to first quarters, in the last couple of years, that percentage change has been basically up 45%. This quarter just ended, it was up 42.7% or from a trend line basis there was a $40 million gap in what you had experienced previously to what you reported in the first quarter. And now, we’re talking revenue here, we’re not talking about expenses. Is there anything fundamental in the business? Are there any reasons you can think of, that caused this reduction in growth? And is that reduction going to continue through the rest of the year?

Ian, I’ll take a stab at it. First of all, we didn’t increase the pickup and van fleet as much as we did in the prior year. So that will directly tie into revenue. Now, at the same time, we got an increase in utilization or revenue per unit you might look at it as. But I fell short of what my objective was on that. And then, of course, I don’t know what the perfect number is. But I think there’s some more room in that. But as I indicated, I’m not sure we’re going to pull more units into that fleet in the next 12 months. And we haven’t made that decision, honestly, so I would say that there’s going to be some decrease due to that. I think that’s just top-line, I think you have to say, yes, to that. On the more conventional, we will say, the six wheel truck with the box on it, it’s I saw some - I got less transactions than I wanted in the first-half of the quarter. Started to pick it up in the second-half, but I gave away some rate. So how can I balance it? We’ll see how to balance it in this quarter here. I don’t - again, I get the problem, so I would say when you - I would say, you’d probably be - well, to factor and less pickup and van growth. And I am still shooting to get comparable growth on the box truck fleet. I’ll let Jason; he might have another way to look at it.

Well, I don’t have anything to add to that, Joe.

Okay. As we look at the commission expense in absolute dollars, year over year, there was practically no change. So is this number that I expected an increase in that dollar number, if you had increased transactions, which you said you did, was there anything in the accounting or anything there that sort of influenced that number?

Ian, this is Jason. The biggest flux in that item is that there has been a slight shift in business from the dealer network to company-owned locations. So we’re adding to both. Our company-owned locations do a greater percentage of revenue when it comes through. But we had about 1% shift of our overall revenue allocated more towards company locations than what we saw in the year before. So that ends up affecting the commission numbers a little bit. I don’t know whether a slight change in the effective rate, which would be the mix of transactions and equipment that we’re renting from the dealers.

It’s hard to put it, but if you saturate it most of the major areas?

No, Ian. This is Joe. Here is how I look at it. The dealer is inherently less productive. If you just - well, look at it from 20,000 fleet; these dealers service a smaller trade area and have less equipment. So the dealer is inherently less productive. Over the last 30 years, we’ve gone from 3,500 dealers to just shy of 20,000. And at the same time, we’ve increased overall productivity of the fleet. So we’ve been swimming upstream. Always, when things get tight, my local teams are going to pull back a little tighter to the store, because they know they can get more productivity. And I drive them hard on transactions. They’re going to pull back a little to the store. Okay, so equipment is essentially in high demand. You have to schedule really carefully at this time of the year. It’s easy for us to have 1,000 or more customers not served on a Saturday this time of year. And the equipment, when it gets to one of our locations, we do a better job of scheduling with the customer. So that, in not any sort of exactly premeditated or intentional, just de facto, is going to bring some more relative business to the center. Long-term, going out looking at 18 months or something, I fully intend to continue to expand the dealer organization. We need to continue to enhance our electronic tools. Electronic tools show promise of making these locations not be quite so inherently poorly productive. Now, there’s a lot of work to be done to get us there. But I believe we - I know we’re three years into our whole electronic tools program that I believe will enable us to make those locations more productive than we have in the past. And as we do that, we’ll access more customers. There is no question that customers want convenience. It’s overriding. You’re a consumer. I’m a consumer. People don’t want to go out of their way. So the more convenient I can make it, the more I can drive sales. I just have to watch my overall cost and overall productivity, because I won’t get as frequent a rental if I’m not very, very smart on how I do this. So I don’t see an end to it in the next five years. I don’t see an end to it. But time will tell. I have a lot of experience at it. Again, 30 years ago, if I had told everybody, we’re going to go to 20,000 dealers, they would say you’re out of your mind. And so, we don’t project out seven years we’re going to have this many thousand more dealers. We push it month by month and then a little bit year by year and try to continue to expand it. And we, again this last March, expanded our number of operating units, what we call marketing companies. When I first - back in 1990 we probably had 85 marketing companies. Today, we have 172. That’s good, because it gets us to see the market in much more detail. The sad part is each one of those units has inherently a little bit overhead with it. And some of that you saw in the personnel numbers. We bump these numbers of operating units and they have a cadre of maybe 20 employees that just kind of create. And so, that creates a little drag on overhead. The idea being is they’ll see the market with more clarity and they’ll help us drive total market penetration. Every time, we’ve done it in the past, we saw - we bought this back within a year. Now, whether we’ll buy it back within a year, of course, it’s always a $64,000 question, but that’s my plan. My plan is we’ll buy that back.

Okay. If I hear rightly, it was five, six years ago; you did a completely restructuring of the accounting systems and reporting systems for all of the dealers and yourself?

Yes.

Are we talking about changes of that magnitude? Or is this just fine-tuning the system?

This is all driven at consumer-used tools. It’s going to have very, very little effect on what the dealer does himself. These are all how the customer accesses us. And as you know, that’s always in the news and a bunch of people are telling big stories about it. But it’s clear that people want to access us electronically with greater and greater ease. And we’ve made great strides there. But I think there are a lot of gains to be there. I think the gains will impact stronger on the small locations than they will on our big stores. Our big stores are pretty efficient. And I don’t see that all up that efficiency very much in the near-term. Our dealers are, I’ll say, relatively inefficient. And so, I think we can make some progress there with electronic tools, which would then drive more business to those locations and drive our top-line, which is what I’m expecting to do. But I don’t have a hard timeline on that. And, of course, it’s like all IT stuff, delivery dates keep slipping, blah, blah, blah. But we’re driving on it. We got a whole team on it. And Jason can tell you, I think we expensed most of that cost.

We hit that pretty aggressively.

So we’re not - I’m not building some nightmare of deferred cost. But we’re hitting it pretty hard, and I think it will give us some benefit. We did some changes that wouldn’t be obvious to you. About three years ago, we saw an immediate response in demand. And I think if we can get these changes done, I think we can see another - just an immediate bump. So I’m driving on that, and I expect to get there. But I can’t tell you, I’ll get there by Christmas or not or - I’m disappointed. I thought we’d launch this summer. If you’d ask - this time last year I thought we’d be here by this summer. We’re not here, okay. We’re still driving on it; we’re going to get there. And when we get there, we’ll see if the consumer responds. And I still believe they’re going to respond, but we got to get there.

Okay. You mentioned Ford and GM increasing prices, but these are the chassis models or what; because I had not noticed any Ford 250, 150 increases? They’re up but very, very slightly.

Yes. We haven’t bought much 150 or 250. Their F-650 series, now it’s - we all see it differently. Their cost, the effective cost to us, okay, which is really comparing a prior purchase from General Motors to a Ford purchase, was nearly 20%, okay. Now Ford has a better product, and worse than that, they have the only product, okay. So GM quit making that unit and they went through their debacle. So Ford has the only product, and they are getting $4 [ph] for it. That’s a fact. Whether we can capture that back, that is a highly - it’s an unknown question. On the pickups and vans, everybody is getting price increases, everybody. There is nobody who didn’t get price increases on that. I don’t know relatively what our competitors got or not. But I know we paid up. And, of course, they justified there was changed content, changed safety equipment and all this. And then it may all be true from their point of view, but from my side, it’s just simply a cost increase. It doesn’t increase the rentability of the vehicle $0.10. It’s pure cost. There is no feature that they’ve introduced that I can now charge for, Ian. So to me, the only way I can absorb those is to rent that truck more times. I can’t rent it for more money. Can I rent it more often? And that drives me back to my own stores, where I can get the highest - the best scheduling of equipment. So these things they’re always in conflict, because I’m always trying to expand through the dealer organization, yet continue to keep utilization high enough that justifies investor support. So it’s a balance and it took it a little bit more towards the stores this quarter than it had in prior quarters.

Okay. I have noticed and then I must admit my sample was a very small one, but in the bigger trucks, Penske is - their lots are full. They don’t seem to be renting out those bigger trucks. Is that just peculiar to Penske or are you seeing any of that?

Well, we’re not seeing that. I hope their lots are full. It’s - or you may be just trying to cheer me up, because I’m reporting bad earnings. But, sure - no, there is not a lack of demand in that segment, would be kind of what you’re hitting at. Are we seeing a lack of demand there? No. It’s a tough one to schedule. The big truck is a tough to schedule, Ian, because people who want a big truck want a big truck. They won’t take a medium truck as a substitute. Now, someone who wants a small truck will take a medium truck if you have small. But when you’re in the big one, customer wants the big one, and so you got to get that equipment distributed just right. If you don’t get it just right, you could end up with some trucks parked. But we’re not seeing trucks parked in that size. If you were to go ask my stores, they would tell you we have a shortage for it. Now, that’s not - we don’t have a shortage relative to what the revenues we’re getting. But relative to how they see it, there’s a lot of activity in that big trucks. And all through the last 10 months, that’s when the truck we added the most of. So it’s a higher cost truck, absolutely. It’s relatively the highest increase truck and that’s falling through into the depreciation line at this time. My opportunity is to get more utilization on that truck. It’s unlikely any of my competitors are going to allow us to bump prices 15%. And that’s just not going to happen. So we have to drive utilization, and we’re trying to understand how to do that. We got a little bit of it back in utilization, but not the full amount.

Okay. Jason, what was the actual reduction in depreciation i.e., the profit from vehicle sales?

Our gain on disposal went down a little over $27 million during the quarter.

Let me see what I have. I actually don’t have last year’s - so what was it in the actual dollars in the first quarter?

This year it was $18.64 million. Last year it was $45.984 million.

Okay, great. Thank you very much.

Thank you, Ian.

Our next question comes from Ted Wagenknecht of Applied Fundamental Research. Please go ahead.

Good morning.

Hi, Ted.

How are you?

Good.

Can we talk about on the $22 million of OpEx increases? You mentioned that $4.7 million was from the accounting policy change. Can you tell us how much was personnel, how much was equipment maintenance cost and how much was property taxes of that increase?

Sure. The depreciation policy change on the items that we no longer capitalize was $4.7 million. And then on the personnel expense line, the number I just quoted was the decrease - the amount that it decreased our margin.

Yes, so…

So I looked at - our operating expenses to revenue were 44.2% in the first quarter; last year it was 43.2%. So we dropped 1% of margin there and that was split. It was $4.7 million. The personnel were about $3 million of that decrease. And then, property taxes and additional repairs on properties that are new over the last 12 months is about $3.5 million. So repair and maintenance, we did see an increase during the quarter, but it was in line with how much the revenue increased.

How much did repair and maintenance go up quarter over quarter or year over year dollar-wise?

We normally don’t get down to that level of detail on specific costs like that for gross numbers. I would say that as a percent of revenue that was, again, it was actually a few basis points less than it was last year.

Shouldn’t - I mean, to that point, shouldn’t that be coming down a lot more as a percentage of revenues, because the fleet is so much newer than in the past?

Well year over year, it is not that much newer. Okay? So that, yes, if you were to go back and do a seven or five year comparison, but year over year I don’t have a number in my mind, but it’s not very big of a change year over year.

And, Ted, what you might be referring to is we have our increase in depreciation taking place. And the majority of the equipment depreciation - our equipment depreciation increased, but the portion of that line-item directly related to rental equipment increased about $12.5 million for the quarter. And of that, little over $10 million was associated with these new big trucks, the 26-foot trucks. So those are kind of swapping out some of the older units for some of these units, and it’s a process that I don’t think we have swapped all of them out yet. So we don’t have that immediate impact on the repair and maintenance that you are alluding to.

Okay. And what percent of your reservations come from the Internet as opposed to walk-in?

I don’t have a quote there that I could give you on just Internet, because the data gets a little confused whether it’s from our call center, Internet or for people calling the stores. All three of those places we can do a reservation. We see that continues to grow. I am trying to think about it, if I even know a number on that.

I’m just wondering if that shouldn’t be a focus going forward. Is something that might obviate that need for as you mentioned the 20-some-odd team members that are kind of getting reads on the local market? Maybe that can be reduced if all of these scheduling…

Absolutely, absolutely; and we have done that. Proportionally, if you look to the five-year term that’s what I was - that’s the sort of the thing that we’re driving on real hard. And we’re in the midst of a huge attempted step-up in our electronic tools that we’ll allow that to happen. And so, absolutely, and if you look at this at over a three- or five-year time frame, it’s the only way we have to go. And so, we’re headed that way. I thought we’d be launching with the step-up this summer. We missed it. So, hopefully, we’ll get it working and we’ll have it fully implemented by before this time next year. But that takes how long it takes. Our whole system is just a little bit interdependent, so we’re a little cautious how we introduce them unless we trip it up. So it takes a fair amount of, what everyone call, beta testing or whatever. And you have to be pretty sure the changes you’re going to hold or you’ll pick a lot of transactions out of the system and re-convey them.

Are you seeing an increase in mobile reservations?

Absolutely, and mobile has almost replaced desktop in our experience. Desktop is almost gone.

I guess, I’m confused, why would there be scheduling issues and productivity differences between company-owned and dealer locations, if they’re all centralized, if all this data and all of the essentially fleet positioning is centralized?

Yes, if you could get it to flow perfectly, but we’ll start with - the average dealer is not open all day Saturday and Sunday. Those are arguably the second and third busiest days of the week. And a lot of dealers - the dealer has a base business, could be automotive repair, could be self-storage, but it is big self-storage, because you got a lot of those. Typical self-storage location does this unmanned on Sunday, just there’s nobody there, and so they won’t do a transaction. Now, my equipment sitting there costs me just as much of those sitting at a productive location. So solving that riddle is my challenge. And the self-storage, the most of them are open Saturday and most of them are closed on Sunday. Other businesses, a lot of them are closed almost all days. They might be open half-a-day Saturday and then close the afternoon Saturday and full day Sunday. So, that right away kills it. There is another way it kills productivity, which is availability. So let’s say, I have 20,000 of a model truck. That will represent a deal. And I have 21,000 locations. And let’s say, at any given moment half of my trucks are rented. So I actually have 10,000 trucks, let’s say, parked. That means half of my locations have no trucks. Now, the ability or the willingness to schedule against a vacant lot and dealership is much less than they’re willing to schedule against a vacant lot of a store. The store knows, hang on, one is coming in. The dealer, for whom this is a part-time occupation, looks at that and you call, and he says, I’m out. Too often, that will be his normal response, I’m out. So, inherently - and this has been a battle in my whole work career. Inherently, they’re less productive now. The answer to this is electronic tools, because I can’t make these people - it’s not economic for them to stay open on Sunday throughout. They don’t do that much business.

Right, I was going to say, you could do a Zipcar-type model on those.

Sure. We have got eight years on that. I mean, we have a whole - we have run a car-sharing operation for eight years now to try to understand the dynamics of this. And we’ve - we are diligently working at this. But this is quite a - it’s for me, if we can solve this, we’re going to get an increase. That’s pure and simple of a fact. So you’re exactly right.

So last point, I wanted to ask about is, you mentioned it was - you mentioned feeling as though you didn’t have, I guess, broad strokes, enough fleet in peak-demand situations. I’m trying to grapple with the fact that you guys have probably eight times as many points of presence, and a lot more fleets than your competitors. Is there a surge pricing element to what you do in busy periods that could allow you to capture some price increases in periods where they’re warranted?

Yes, we do that.

Okay. And why was that not more favorable, I guess, in helping to drive revenue growth in this period?

Well, again, we were, what I perceived, is below expectation in transaction growth in the early part of the quarter, and I slammed everybody really hard on it, better not miss a transaction. And my guess - and I will never be able to prove it is - they were a little more soft with the customer. The customer comes in, it’s routine people coming in - everybody wants to bargain. They come in and they say, well, I could rent it from XYZ for this minus, and now do want to go to the trouble to contact the competitor, verify the price or we’re going to just say, okay, pay, I’m in. Or we’re going to say, I’ll reach you half way. So this all has to do with - it’s a dynamic, but it’s not - we don’t dictate it, we don’t say, you must meet every competitor, we don’t say, you can’t meet a competitor. So the local person looks at their schedule, but they think they’re going to be 100% booked. They’re real. They are going to hang tight on our pricing. But if they don’t - if they’re not sure they are going to be booked and they know I am on their back over transactions, they are going to break and the customer is going to get the advantage. So, I drove real harder on transactions and the customer probably got the advantage, a few dollars of transaction, but it’s a lot of money when it adds up. So I’ve been careful how I do that at all - my sales force will lose its backbone. I believe we have a better piece of equipment than our competitor, in a general sense, but it’s always a one-on-one matchup and how you are talking to the customer and so there’s a lot of factors that go into it, but I’m trying to give you the best information I have.

Yes. And lastly, on this reduction in gain on sales of equipment, did you guys sell less equipment in the period? I think I missed that part.

Yes.

And was that a conscious decision?

Yes.

And what about prices on used equipment? Were they relatively stable year-over-year?

Well, they’re relatively stable. The problem was is the cost of equipment was not up, you see.

Yes. I’m just thinking about putting in a perspective the decrease year-over-year in earnings. It seems like increased depreciation, which was expanding fleet, which we all should appreciate if you can put it to work, that’s a good thing. And essentially, lower cost of - or I guess a lower gains on sale was another component to that and that’s a good thing because you need more fleet out there. And really then it only comes down to this increase in operating expenses as kind of the negative in the quarter. Does that seem fair?

No. I will put more emphasis on the relative less gain on the sale of equipment.

Okay. Okay, thank you very much.

Thanks, Ted.

Our next question comes from Jamie Wilen of Wilen Management. Please go ahead.

Hey, fellows, you talked a little bit about all the self-storage facilities you have added. And obviously when you bring them on with zero percent occupancy and the cost of operating a business and the depreciation that comes in immediately, there’s obviously a drag against earnings with 1 million square feet here and several million over the last year. In a given quarter, was at 1 million square feet of new space, how much does that hit the bottom line?

Jamie, I don’t know the answer to that. I am going to see if Jason can give an answer that makes sense. It definitely hits the bottom line.

Hey, Jamie, I think we’re at the point now where we’ve been doing this for so long that the incremental impact quarter-over-quarter is relatively less. And if we had - if this was the first year that we had done it, I think we’d see more of those costs sink down. This quarter because we have over 100 projects in development right now and another 60 plus in escrow, the - we’re seeing, like, the property tax number sticks out. So on some of these, the costs that come out immediately would be the property taxes and then some expense to maintain the property until we can begin converting it. Those costs were a little over $3 million more this quarter than probably last year at this time. But as far as the drag goes, we have probably a good 15 or 18, I’m sorry on a trailing 12-month basis probably 60 new locations that we’ve recognized the cost last year that now are starting to cover some of their costs through revenue this year and that kind of offsets this. So you get - kind of get this cost, the new costs are being covered by revenue from other projects. So it’s some amount, but I don’t think it’s as significant.

And how long before these new facilities become cash flow positive and actually start to contribute to income and has that figure changed over time?

I will answer that. I use three years in my mind, when I look at them. I figure it’s going to be a struggle for three years now. I have had them turn positive in six months. I have had them take five or six years. So, there’s - a lot of this is based on our ability and willingness to manage. So I would say we’re doing a little better. If I had to compare now to five years ago, I would say we’re doing a little better. I don’t have a percent or number I can tell you. We’re a little faster. We are faster making certain decisions. We’re just a little faster. But, all-in-all, these things don’t start really carrying their own way for three years. Now - and in contrast that every time when I can buy one, I’m going to pay X more for it, and it’s going to contribute quicker, and then I weigh that against will they have any strategic addition to U-Haul or is it just a storage deal. If it’s just a storage deal, then I may go for the buy deal because you can do the math pretty quick. If it’s a strategic to U-Haul location where I look at over a period of years, I expect to do significant U-Haul there, I’m a little more inclined to take the three-year hard slug-it-out, because I’ll end up with this additional price of a strong U-Haul point. So it gets - and I looked at some yesterday, we went through and it was exactly that issue, one of them was going to be a strong U-Haul point, and the other was going to be really a storage point, and it’s much easier to want to buy a up and operating place in existing place, should one be available. They are not always available…

And the next…

Right now, we’re just seeing more - the way we’re analyzing it, we’re coming to the conclusion that development or conversion is a bigger component than purchasing and that means it’ll stay that way for least a year, because you get these things start them in escrow and blah, blah, blah. It’s at least a year before anything really happens. So that will - this will be a truism for a year at least.

Okay. And when you look at the landscape in the self-storage business, what people are paying for facilities is a very high number. How do look at your evaluation with - you’re spending a lot, investment spending and self-storage, you’re not getting any credit for it and the self-storage companies are having to pay very high multiples as they make acquisitions of other companies?

Yes, it’s a puzzle. I mean, I don’t really understand how they view their business model, but we pretty much - the bigger transactions everybody kind of sees, okay. They are semi-public and you see people think five or six multiples, sometimes even lower than five and it takes my breath away. I don’t have that - I’m not that big of an optimist, okay, from our side. If we get to that, we just say, thanks, but no thanks. And in the last year, more often than not, I’ve said, don’t even bother with the analysis. We know what it is going to trade at. We have a pretty good idea it’s halfway well-managed. So you’re really buying that multiple, you’re not - it sometimes in the past, you could pick one up, and it looks like you are paying a six cap, but really it’s the bunch upside in it that the prior guide didn’t comprehend, but there is a lot of knowledge out there in the self-storage business. People are managing their properties better. So if you go buy one at 20 times its cash flow, you better plan to stand there for a while. I wouldn’t expect you’re going to see that that’s going to be a heck of lot better through years from now, but you’re going to get some big price increase or a breakthrough in something. So, we’re standing out of those. Like I said, all in times, just not even going - not doing the brain damage of even running the numbers, just say we know the properties in general, we know the market, we’re not going to pay that, don’t waste our time, let’s go do what we are comfortable doing. Now whether that’s going to work out good for these people, I’m not offering an opinion, because I don’t understand their business, but for us they don’t appear to be an opportunity.

But given the high valuation from about year ago, someone on the proxy put forth a motion to vote on putting all these self-storage facilities, if we could, into a REIT and take advantage of the much, much higher multiples being afforded that industry than being affording the moving and storage business. Have your feelings changed at all as the multiples continue to go higher and higher for self-storage?

No. And I don’t know if that’s marked stupid, but that’s the answer to your question. Everyone smile running into these guys, who run these REITs, they are all nice people as far as I’m concerned. And I asked one of them, I don’t know which one, I said, what’s going to happen when the multiples change? He says, when they get fired? Or what they can do? He says, no, everybody understands that and it’s just going to be a macroeconomic move, and I go, okay, great. But from my point of view, it wouldn’t be a macroeconomic move. If I had a bunch of stuff in my structure, which is pretty much leveraged, it could be a catastrophe, if I was paying 20 times. But, of course, if you went to a REIT, you got people to put in this that was all equity then, in a sense, you might be indifferent. But in our model, we wouldn’t be indifferent and that keeps us from some opportunities in addition to saying it might be - as you said, maybe it’s we’re - you can argue that shareholders could see a higher value in the near term. We’re very strategic on U-Haul and they’re - if you follow our competitors, extra space is the most recent one. They had a few of their own trucks, I don’t know 1,000 or something. And within the last year, they exited totally and the communication I got was it’s just not our deal, and I think it’s a fair thing. A public storage has tried a packed with budget, they did a whole bunch of budget trucks up, having public storage that thing all fell apart. The truck deal is part of our DNA, I guess, it’s the only fair way to say it and making that merge with self-storage involves some compromises that the straight REITs haven’t done. But all our facilities are in fact configured to do. So to that extent, we spent that money and the way to get it back is by renting the trucks. And we believe we’re getting it back certainly over time by renting the trucks. So there’s not a black-and-white question. I think it’s a fair question, but my attitude is, it remains unchanged.

And lastly as far as U-Box go, can you tell us has that crossed to the black yet and what’s your future expectations are there?

I will let Jason answer if it’s in the black.

Sure. We crossed back over that line last year and through our estimated calculation of what it’s doing. We think that it contributed to profitability last year. It’s doing so again this year at a rate higher than it was last year. We’ve also now seen a quarter of revenue increases again. So I think both of those numbers are trending positive again.

That’s a phenomenon out there in the moving of the storage businesses this whole containerized shipping and moving. And I don’t want to see us sitting on the sidelines. If you were at the rental counter, the customer who comes in who is the container moving and storage is the same customer who is the truck rental moving and storage, but they have a slightly different logistical problem. And if we can get a good solution to that, and that would be one that the customer likes and makes money for the shareholders, so it has to work both ways, if we can get a good solution to that. There is a considerable market there, but right now it doesn’t look wise to level materiality, I believe, under accounting standards, and we’re not going to print it till those, but we’re not losing money at it, and I think we are back making friends with the customer. Customer is overall satisfied, now there are always issues, but overall the customer’s satisfied, so we’re not alienating the customer, but it’s not a quarter as big as it should be, maybe not a tenth as big as it should be. But it’s certainly not a quarter as big as it should be, based on how I see customer preferences. And my conclusion is it does not cannibalize in any significant manner our existing storage or moving business. In other words, there’s - I’m sure there’s some isolated cannibalization. But overall, it’s not cannibalizing. It’s just simply giving people an alternative.

Okay. Thank you.

Our next question comes from Jim Barrett of CL King & Associates. It’s a follow-up question. Please go ahead.

I think you touched upon this, but of the $27 million drop in gains on disposals, can you tell me how much was the decline due to slower - less sales realization versus simply having less vehicles for sale during the time frame?

I can speak to on a relative basis. I would say the largest contributor was the higher cost and the next piece would the lower number of units sold. And then to a much lesser extent, a little bit less on average proceeds per unit sold.

So the prices of used vans, pickups and box trucks are not declining significantly at this point?

That is a $64,000-question, Jim. Rather than - when you talk about the fitness of vans, we largely go through auto auctions.

Right.

And that means they are basically going back in the dealer system. And we have pretty real-time control over that. If we think the price is going to slip, we pull the units from sale basically I’d say our minimum has not been met. Now on the other hand, we sold fewer units than we might have, so I don’t know what would’ve happened if we had sold all those units. I don’t know and I don’t - but I’m not looking to probe that either. It’s to our benefit the prices remain good. The biggest effect was we paid more from going in, that’s the big - that was the - and that’s not fixing in the short run. Okay. I eagerly read the news from the automakers, and I don’t get much probably better than you get by reading periodicals about how are their sales doing and they’re all kind of PR that one way or the other. And I really don’t have a - I’ve friends who are car dealers and probably you have friends who are car dealers. They are still very bullish, but, of course, that’s their part of the food chain. They are supposed to be optimist. So I remain optimistic, but I don’t - I really don’t know what’s going to happen with resale values. We’re really - we’re not able drive that. We could injure it by acting ignorantly, and we try real hard not to act ignorantly, but predicting it, I’m not much of in a position. Absolutely, our costs went up. And absolutely, unless pricing goes up that compresses our margins and that’s just simply the fact. Now you drive back against that by trying to increase utilization, get more rental revenue over the period, and we were up over the same time last year, our rental revenue per unit, that’s good but not up as much as I wanted. So that’s bad. Now whether my expectation was reasonable or not, no one knows for sure, but I fell short of my expectation. I think there is more money to be had through improved utilization and that fleets go, and that’s my - has been my emphasis over the last nine months and will be my emphasis going ahead. We can get greater utilization of that fleet. In other words, drive rental income and be less subject to the vagaries of the sale amounts.

And finally, Joe, how many years away is the company from implementing a Zipcar-like technology for truck rentals?

Okay, well, we’re closer than anybody else. And we’re six months behind where I thought we ought to be. So, as you know, we have a new U-Haul Car Share now. I believe we’re in our ninth year.

Yes.

We have done a lot of those types of transactions in a lot of different markets. And all that cost has run through the P&L. There is no deferred. We didn’t pay somebody $40 million or $500 million entry fee. Okay. So we have built up a body of knowledge and that the challenge is, is for us to execute it. We have a proprietary technology. It’s - we think it’s going to work, but it’s incredibly interrelated and it’s - we’re not where we have something we can roll right now. So the answer is, I don’t know how far we’re from it. We recognized we needed it nine years ago, and so we learned in the car-sharing business, which is for a whole bunch of reasons that I won’t go into the risk of entry in there is a very modest. I know, we blew that three times at least and just rebuilt it and went back at it. I do that in my U-Haul deal, it’s not a good thing. But we’ve tried to fill at least three times in that - in the cars and learned a lot of lessons and ran it all through the P&L. And now we think we have learned enough that we would be competent to run this through the U-Haul part of it, and we’re in the IT phase of that and that’s just going to take how long it takes. And I’m very frustrated on it, but my frustration inflicting that on the programmers doesn’t speed them up. So - I thought we would have it going into the summer, we don’t. But then we better have it going into the next summer. There’s no other way to put it. And what would be the gain? I don’t know what the gain would be, but it would be something. It’s the right way to go and it’s in keeping with consumer expectations. And as I think we’re really a consumer business company. We’re not a B2B company. And consumers expect that and next year, they’ll expect it more. So you need to be in that segment. I’m not aware of any significant developing issue with any of the other people in the truck rental business. The more likely threat would be that people in the car business think they should migrate to the truck business, which, of course, they will find as a day-and-night different business. They should go visit with Hertz and Avis on that before they just jump into the truck business. But I would expect that we’ll see them jump into the truck business, if you look at a five or 10-year frame reference. And I expect they will get pretty bloody though, but that doesn’t mean it will stop them. The best thing to stop them is for me to occupy the space and that’s my intent.

Okay. Thanks again.

Thank you.

Our next question comes from Bradford Seagraves of Davenport. Please go ahead.

Hi, gentlemen, I was just wondering if you could touch on utilization rate in the quarter and average age of the fleet and also how that’s trended over the last few years?

We both look at each other. So you here give us just a second here.

Well, on the average age of the fleet, we don’t necessarily track that. I guess what - we speak to it in relative terms, and I would say that that relatively speaking, the majority of the fleet has been in this kind of same condition now for the last several years. Over the last five months, six months or so, I would say that the larger end of the fleet our 26-foot box truck is undergoing a significant rotational which will reduce the age of that fleet, it’s been several years since we bought into that. As far as utilization goes, I think that we’ve been trending positively. Last year, we saw an increase in overall utilization for the fleet. This year, I think we’re seeing some nominal improvements overall. I think we have addressed some issues on specific truck models that Joe has referenced. But in general terms, if you were to average everything out, we’re a little bit better this quarter than we were last year at this time.

And then just can you give a rule of thumb for what percentage of the time the trucks were utilized?

We don’t have a day’s rental number. I don’t have access to it. So - and I know that’s very common in the car rental business. And so, I - we do it in a couple different ways that are kind of more off this, but they don’t mean anything to you. So there is no question our business is periodic. It focuses on the weekends and it’s cyclical, it focuses on the summer. So I could have a - I guess that’s kind of - we manage at a very basic rate, which is - we look at utilization by point that’s how we manage it, my brains are for those numbers. So I don’t have a good number to tell you other than we have seen increases and our overall economic model, says we need to see more increases. So that’s our challenge. We get it, we are working on it, we’re very cognizant of it, and we have it broke down into a whole bunch of thinly sliced pieces and that people assigned to attempt to manage it and, of course, they are doing better and worse like all management, but overall we’ve moved the ball a little bit down the road this quarter over same quarter last year.

And we speak in relative terms because our measurements - if we were to give our measurement, wouldn’t match up to anyone else’s because our business model is different, and Joe has touched on it based upon our dealer network and also the length of time that we hold equipment is not comparable to other two competitors. So there wouldn’t be a good number that you could line up apples-to-apples. I think it would be fairly confusing.

Okay.

Another question would be, is there any room? Yes, hell, there is room. We’re not - in storage, it’s easy to get a figure. The only question is do you want to do same-store or you want to just get the gross number. We choose to use the gross number because it’s - I think it’s more indicative, but I have a bunch of storage places that are above 90% and above 90%, you can get right down to it and you could say, well, I got a price increase opportunity. And you can get some pretty good math going on that and be pretty straight up on it. We’re nowhere near 90% of time occupied in the truck. So there is a lot of room. The question is, can you get that to be believed by the customer to be a good matchup. A good example would be this last weekend, Monday was the 1st, okay, Sunday was the 31st, Saturday was the day most people want to move, but their landlord want them to move on Monday. We had a whole bunch of tensions there, and we did have a bunch of tensions there, and we ended up pulling off one heck of a good Monday. So we are very - we thought we did a great matchup there. Now take that same weekend and make Wednesday the 1st, and we got us a catastrophe on our hands because our customer, just about, they don’t want to do what the landlord says, okay. And it gets - I don’t know what happens to them, but it depresses demand. You think what else, you got to move, you got to move, but the fact of the matter is you hit - you haven’t hit - have the 1st hit Wednesday in the middle of summer, and you’re going to have a tough time getting the customer to consider us a fair alternative. Now what they’re doing, I have no idea because I can’t go home until my wife we’re not moving, but we get a very - we see a decrease in demand. So there is a big opportunity, and we have done better moving people to midweek. If you look at 20-year comparison, we have done way better of getting people to move midweek, but there’s still a real reticence there. And you can just see it, I’m sure from your life and your own friends, people if they want to move, they want to move on Saturday. Even escrow companies, I don’t if you deal at all with those retail escrow companies, they want to close on the end of the month, which is inexplicable to me. If I ran Transamerica, would close everything in the middle of the month when it was called, but they push people to close on the end of the month, which just creates a total traffic jam for everybody, including us. So - and that creates a bunch of unused capacity, middle of the month and middle of the week. So that’s been our challenge for the years and it will be our challenge next year at this time. And we did a little bit better at now, but not a - some great big breakthrough. I think it’s just a very small incremental things and it’s kind of like playing football as much of the same routine, you just practice, practice, practice and then execute and maybe you move the ball down the field. But we moved the ball down the field, but not - no breakthroughs or something that’s a structural change at all.

Okay, fair enough. And on Penske, I was just wondering if there is anything different there with how they are acting in small transaction, few things that might have an impact going forward?

I’m sorry I missed the first part of your question, on…

I was just wondering about the competitive dynamics with Penske during the quarter?

Okay. I don’t - nothing comes to my mind if you had a very specific I tried to address of, but nothing comes to my mind that I saw on Penske in the quarter. Penske by and large, is a determined competitor, but we’re a minor part of their business play. Okay. But they are very determined competitor and obviously well financed and blah, blah, blah. They are not somebody, they need to be taken very seriously and we try to take them very seriously, but we’re not their main competitor by any means. They are in a whole different market segment and I don’t have access to their numbers, but I’m sure that business - the revenue in that business will get worse if they are doing our field, but they’ve just stayed in our field for 35 years, and I wouldn’t expect anything to change there. So it’s a slug-it-out everyday issue.

Okay. Thanks, guys.

Our next question is a follow-up question from Ian Gilson of Zacks Investment Research. Please go ahead.

Yes, thank you. Just a quick question, Joe, on how quickly do you get the truck rental business side of the storage facilities up and running? When can you start generating revenue from those facilities that you have built and not those that you buy already here that’s operating?

My objective is to open with the trailer on a dirt lot, Ian. And I have run into some - the day we close, that’s my objective. And I do that and I’m pretty hard-lined on it. Now the city’s pushed back real hard. I have some place - I got a place in San Jose, California right now. We’re into it. For 2.5 years now if we have yet to rent a storage room, but we have been renting Uton [ph] the trucks and trailers the whole time. So there, we got to buy. I’ll get - I’m trying to think about - I have had other places where they won’t let us do anything until everything is ready. We just bought a place up in Kelowna, BC and it’s on the Indian reservation and the Indian rule is you can’t do nothing until you do everything and I’m just pulling out my hair because it’s - we could be - we could have been renting trucks a week ago. It’s on - it’s in front of my plate, I get it, but the way the - their local - the way they want development done, they are not going to let you do anything until they approve everything. So we’re - we’ll see how long the process takes, but the intent is, bring the you move on immediately because the infrastructure required for that we’re very familiar with and we can basically - if we can get power and water, we can run. After that, it’s totally, what does the local authority require, do they require asphalt, do they require landscaping, ADA access, every jurisdiction has slightly different requirements, but from U-Haul’s point of view, we should be able to run in 24 hours.

Okay, great. Thank you. Yes, thanks very much.

Our next question is a follow-up question from Ted Wagenknecht of Applied Fundamental Research. Please go ahead.

Hey, guys, thanks for the follow-up. Joe, I heard your comments in response to the previous colors mentioned of the re-proposal, which obviously I’m in favor of and disagree with you on and that’s life. But what other alternatives have you guys considered in terms of realizing value for your real estate assets. Have you considered things like tracking stocks, other alternatives?

Straight - I don’t know if I could, I’m aware of tracking stocks. But have we really gone through a really work out? No, I think that, of course, what we do is we’re constantly rolling and refinancing this equipment, we are using it to continue to finance us and to - how come we’ll be able to add 4 million square-foot, because the other square-foot we had supported our ability to add 4 million more square feet. And would I like to add 5 million square feet? Yes, absolutely, that would be my intent and I intend to largely finance it, not by going and selling stock or issuing some sort of things, but by the distant pool, flowing off of that cash flow that lenders consider us attractive, and we go ahead. So that’s a very basic business model, but that’s just the truth.

Do you think, I mean given the valuation disparity, if you will, between the entity as a whole today and what those sums of the parts, I think we can all agree on your comments were astute about multiples in the 20s, which is probably even low compared to where those self-storage assets trade today? How do you while keeping this business - lack of a better term, together, how do you get that value for shareholders, including yourself, obviously, without doing some of these or trying to monetize real estate? What’s your plan for capturing that value?

I don’t know if I can give you an answer, other than tell you - everything I make on this operation outside of increase in the value by stock position is totally public knowledge and there is no - don’t have some side deal going, so I’m 100% for making the money, just the value of the - realizing the value of the stock, I think that probably from a broad-based, I probably have a longer time frame than a lot of the other people do and that might make people unhappy or not, but that’s probably just the truth. I probably would have a longer time frame and I think over time, we’ve done well with this model. By looking over this over a 10-year period, we’ve done well with it and it’s a model that has a lot of indications. It’s a sustainable model, we can keep it going rather than have it come to some sort of a halt and, of course, that’s always every business is threatened in multiple places. I see all those - I see many of those threats. I know they are involved with threats out there. I don’t say this is a little bit conservative, but I’ve been in business for 35 years and most of those things have come in - I’ve seen most of those booking and show up. And so over a 30-year period, I think it would be great, over a 10-year period I expect us to do well. I’m now 67 years old, so 30 years from now, I’m more than a distant memory. I mean you ever - people won’t be alive whoever knew me. So I get that and so - and I can’t - so I can’t wait 30 years to see something to happen, but I think it’s been a good model. We’re well positioned, we’re strategically positioned in North America, it’s a good marketplace to be. My competitor is public. It’s all over Europe and I tried to look at that. I’m glad they are and I’m glad I’m not. I wish them well there. But am not in that, I’m glad I’m in Canada and tend to continue being hard in Canada. So the truck we very much like the equipment rental, the moving component, with the storage component. But my big smart competitors, and I will say that Extra Space, Public, CubeSmart, they’ve all backed out of the truck. They have all done the truck and backed out because it’s a little bit tricky to execute, and if we had not been in the truck business before we were in the storage business, I might make the same exact conclusion, but we’ve already spent 75 years, and we have that - that’s all, I don’t want to call a paid-in capital I guess, or - that’s all existing. And so, when I look at it, I continue to think it’s a good strategy for us, although I don’t - and no way to take away from the strategy of my competitors. I will say this, once you take the REIT step, you will divorce the truck business based on their activity. And that’s what they’ve done. They’ve all been in the truck business and they’ve all gotten out of the truck business. They don’t even want to be a U-Haul dealer. And I can give you a numerous anecdotes where we’re right next door to one of them, and they are glad to send the customer over to us to rent truck. They just don’t want to be part of it. So we’re comfortable with it largely because we have become comfortable with it. We have built up the systems and the experience and the personnel who are comfortable dealing with that. So - but I believe if we did a REIT, I think we would be the divorce of the two businesses. I don’t think that they would - I think the interest of the owners would diverge over time. And so that’s just what I think, and I think Publics and CubeSmarts and Extra Space is experienced and this probably makes my conclusion valid than us. Of course, I think we do a better job than they do, they differ with me, but these aren’t stupid people or thoughtless people. They’re doing it. They’ve decided to keep them totally separate. And they don’t want to be in it. They want it off the property.

I would just think that, that’s what makes you so much more valuable, is your ability to marry the two. I appreciate your response. I hope you will either reconsider or think of a way that those can be - that value can be realized without that divorce occurring, because I think there are ways, but I just would encourage you to continue to look.

All right. Thank you very much. Appreciate it.

Thanks, Joe.

All right…

This concludes our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Sebastian or Jason?

First, thanks, everyone, for dialing in and for your support of AMERCO. And I want to remind everyone of the upcoming annual meeting that we are having of shareholders on Thursday, August 25, 9:00 AM Arizona time, followed a little bit by our virtual analyst and investor meeting. This is going to be 10th time that we do this event, the 10th time that we’ve done it. We will broadcast live over the Internet at amerco.com at 11 o’clock Arizona time. Joe will moderate the meeting. We’ll also have on-hand several other key executives to make some brief presentations and be available for questions and answers. It’s one of our fundamental investor outreach programs. I encourage everyone to participate live. We’ve also found it helpful that, as in the past, if you can submit your questions to Sebastian ahead of time that way we can attempt to address some of it as part of the presentation. You can reach Sebastian through our Investor Relations website at amerco.com. Thank you again, and I look forward to speaking everyone on August 25.

This concludes our conference. Thank you for attending today’s presentation. You may now disconnect.