U-Haul Holding Company (UHAL) Q1 2018 Earnings Report, Transcript and Summary

Good morning and welcome to the AMERCO First Quarter Fiscal 2018 Investor Conference Call. [Operator Instructions] After today's presentation, there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sebastien Reyes. Please go ahead.

Good morning, everyone and thank you for joining us today. Welcome to the AMERCO first quarter fiscal 2018 investor call. Before we begin, I'd 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 factors 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-K for the quarter ended June 30, 2017, 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.

Good morning. The basis U-Haul self-moving, self-storage businesses are strong. Our truck sales performed below last year due to some mistakes on our part and a tougher resale market. We have and we'll continue to take action. This part of our business is simply tighter than two years ago. Self-move customers are still very active. All of August, we are operating in a very active market that will stress our personal and our systems. Self-storage demand is strong. Many new entrances have recently ordered the process of putting more capacity in the market. It may take a while for these locations to be observed. The customer has a strong preference for well managed facilities. This is where we can shine or not. We've had some class creep up Jason will address that. We've recently rolled a new program we called U-Haul truck shared 24/7 across all of North America. This is a result of years of work. We cannot yet tell that this will make existing customers happier or will attract new customers. I believe it will do some fold. U-Haul truck shared 24/7 is a proprietary system for which we are seeking intellectual property protection. We will take several years to realize the potential of this system. I think it is safe to say we personally have the largest membership and the largest number of active locations of any organization in the vehicle sharing marketplace. This is part of our plan to secure our future. With that I'll turn it over to Jason to go through the numbers.

Thanks Joe. Yesterday, we've reported first quarter earnings of $6.44 a share that's compared to $7.51 a share for the same period in fiscal 2017. Throughout my presentation, year-over-year - all my comparisons will be first quarter of this year compared to first quarter of 2017 unless otherwise noted. Equipment rental revenue, it increased about almost 4%, which is about $24 million improvement as a result of additional transactions. We experience growth in both the one-way and in-town markets as well across our truck and trailer fleets. Speaking at the rental fleet, we saw both year-over-year and sequential growth in our trucks, trailers and towing devices. The growth in the truck fleet was a combination of planned new trucks combined with some holdover of unites that we would have expected to have sold by now. U-Move revenue continued into the month of July. Storage revenues were up over $9 million as just over 13%. We continue to see revenue growth from occupancy gains at existing locations. Occupancy from new facilities that we've added to the system and we are still seeing general improvement rates across the country and Canada. Spending on real estate-related CapEx for the first quarter of this year was $142 million that's up $18 million. From July 1st, 2016 through June 30th of this year, we've added approximately 3,100,000 net rentable square feet to the system. About 740,000 of that came online here in the first quarter. To take that back a bit further over the last 24 months we've added 7,300,000 net rentable square feet about 70% of that is newly developed product the remaining 30% is from existing storage facilities that we acquired it if you combine those together the initial starting occupancy of this product was about 15%, it is this influx of new rooms that is causing the decline in our reported occupancy ratios. At the end of the quarter for each 1% improvement in annual occupancy, we would expect that to now translate into about $3.8 of annualized revenue on the storage side. And our Moving and Storage segment operating earnings decreased $28 million to $221 million. Net depreciation accounted for little over $31 million of the decrease so excluding the depreciation operating earnings nominally increased. Operating expenses at the Moving and Storage segment increased $30 million for the quarter. The largest contributors were personnel, repair and maintenance, and to a lesser extent costs associated with new locations or revenue is not yet ramped up enough to cover these costs. Depreciation is a significant factor with regards to reduced GAAP earnings for the quarter, depreciation associated with the rental fleet was up about $13 million. I think it's worthwhile the note that this is the smallest increase that we've seen since the first quarter of last year. The 26-foot trucks account for about two thirds of this increase. Depreciation on buildings, improvements and non-rental equipment was up a little over $4 million. It's a combination of just the share increase and the amount of PP&E that we've added the last several years along with more detailed approach that we've taken to classify in these assets on the balance sheet, which has resulted in shorter average lives. Capital expenditures on new rental trucks and trailers was $396 million as down from $419 million last year at this time. Our rental equipment sales were down $6 million to $140 million. Gains from the disposal of property plant equipment which is primarily the sales of our retired trucks decreased almost $14 million The trucks that we sold this year had a higher average costs than what we saw last year and we are receiving lower average proceeds versus the proceeds we received per unit last year. Consolidated earnings from operations for the consolidated group, which includes moving in storage as well as our Life, Property and Casualty insurance operations with $229 million dollars this was a decrease of $31 million. We continue to have strong cash and credit availability at the Moving and Storage segment it was $826 million at the end of quarter. In July, the board declared a dollar per share cash dividend that was paid in August. We continue to have robust development in acquisition pipeline that is queuing more and more towards new development versus existing facilities. With further reinvestment of our earnings in this fashion we are likely to continue to take on costs, which are unlikely to be off that by immediate revenues thus resulting in some downward pressure on our operating margin as we've seen this year this past 12 months. However, our expectations at these investments in the new Moving and Storage locations are going to add profits over the next several years. With that I'd like to hand the call back to Joe.

Thanks Jason. Let's have the moderator take us into Q&A.

[Operator Instructions] The first question comes from Ian Gilson with Zacks Investment Research. Please go ahead.

Hey good morning Joe and Jason.

Good morning Ian.

Joe you've mentioned the mistakes in the first quarter. Can you sort of offline what they were?

In the truck sales, Ian I don't think we managed the auctions and I'm sure we didn't manage the auctions as well as we could have and that compounding at being kind of a little bit tougher resell market just simply get both told unit sold and sales price per unit have a shakeup in there, I think we're doing better, we're performing better, and of course the result should start to reflect it, we're probably going to see the results in the second quarter be pretty middling to just because they are about done with that. So that is where it is, it's a little bit tough to resell market, but it's not a reason to panic at this time, you just have to be minding your P's and Q's and I don't think we did a good job, the shareholders should expect us to in managing the auctions.

Okay. A question for Jason, and in fact both of you, in the positive balanced depreciation versus leasing, but leasing expenses over the past few quarters remain pretty constant and interest rates would sort of suggest the leasing is a better financial decision at this point and then buying and then facing heavy depreciation charges, you did a comment.

Ian, this is Jason, I'll start with that one. When we look at how we finance the equipment we're looking for the lowest total all in and where we've been for the last six, seven, eight years I think is that as a full tax payer, when we do that analysis, the depreciation deductions that we get from a federal income tax perspective. Our swing in the overall costs more towards holding this equipment on balance sheet, so we're doing on balance sheet loans and also capital leases. So we manage that from a cash flow perspective. Certainly under the old method of accounting and maybe even to a lesser extent under the new method of accounting that's coming on line, if we were to do operating leases that would maybe skew the expense down a little bit in the first couple years, but that's not how we're managing the process.

Ian, I'll comment on that, as I told you here in about two years ago most of the Ford and General Motors, but both after their substantial price increases, because they could. And we're rubbing that all off in the first two years and that's what I think is a good thing to do. It's always a judgment, but being cart with your book value above your market value is at the uncomfortable situation of put it politely, and I'm trying not to have us be there.

Okay. Is the truck capital expenditures out of current cash flow or are you borrowing against any of the truck purchases?

This is Jason, so on our truck purchases, we are borrowing approximately 70% of the purchase price on the trailers we're borrowing 100% right now.

Okay, if only repeat the back town trucks?

This is Joe. We have two fleets, we have one fleet of about 34,000 that we will keep 18 months or less, we have another fleet which will be about 115 or 20,000 trucks which will keep seven to 10 years, so there's always a mix, but those ratios are pretty consistent.

Okay, great. Thank you very much.

The next question comes from Jim Barrett with C.L. King & Associates. Please go ahead.

Good morning everyone. More of you have to.

Good morning Jim.

Joe, in the 10-Q you've mentioned spending $300 million loss on a net basis on fleeting equipment. At least year-to-date, it's one quarter, but you're spending a little bit less on your real estate and you'll be receiving that cash for the sale of the Manhattan real estate. As you look forward at this point in time just given the amount of money you've invest over the last several years or reinvestment opportunities as robust as you've seen in the past several years or you're seeing fewer that pitches to hit in terms of where to put the company's money?

The real easy pickings in storage or few and far between. Now this could turn Jim and I expect it will when some people discover there's more to with them having a location that looks like a public stores or U-Haul location. So I think there will some falling out and that's pretty typical real estate, there will be some opportunity then I hope, but there's a lot of sharp people out there so I don't think you'll be an immense opportunity. I'm seeing a consistent opportunity to develop new product. The biggest constraint is land use, is can we get a local community to go along with the program and if so, it's almost mind numbing that the amount of process involved in getting building permits and getting buildings open. And I don't see that getting any better, I don't think anyone in the storage business has a competitive advantage over us and that when I speak to my peer group they all sing the same song about that. And so when like two years ago, we bought several facilities that are already built by someone else, that's a real boon, because they just come right online and you can go, when you're having to develop things get a little agonizing and you'll have a property, you thought you were going to develop this year, you don't get anything done at all, because it gets caught up in a snag somewhere on the way. So there's a lot of opportunity, I continue to see, let me tell, I continue to see opportunity and I'm kind of an optimistic type person anyways, but I continue to see opportunity. I think that the industry is push prices about as much as that are pushed prices in my opinion and then we're not going to not raise prices if the rest of the industry does, but I think what somewhere is up about what this product can go for, so now we can't just foolishly spend to bring more product on we have to have a lot of fiscal discipline. And that's just fundamental management so I think there's good opportunities, we have tried to look has been different portfolios sold, people saw eight, 10 or maybe even 30 locations. We try to look at them, we could get the math to work. But we thought was fair for our shareholders. Now other people I believe all these units did trade of somebody to pick them up and they may do great you know I have no reason to doubt that, but the prices of these things are very competitive, I spoke to someone yesterday, and they indicated, they'd looked at the same portfolio we had, and we were both $20 million shy what it sold for, well that just made gave me confirmation that our analysis was okay, in other words, okay, we lost a very sadly, lost it. But I don't think paying extra was going to be prudent for us, so we're still we have a lot of stuff in the pipeline, but it's agonizingly slow, but it's starting if it comes on and as you can easily follow about 15 years or something and so you can see that historically we have a greater case reserve than we've had. And I keep want to be to hold that because I think our opportunity will come. But that's a real - that's a good question and we go through it all the time that versus the cost to holding the cash and we push and shove back and forth all the time, and I don't think there's a certain answer to it. But it's in any time you're holding cash can argue your sub optimizing it. But I'm open to that discussion, but I but I don't, I'm not hold and comfortable where we're at. And I think there's going to be opportunities, we're trying to get some progress going in Albany, you're familiar, you don't live that far away from Albany.

Right.

And Albany is - I shouldn't say this some of that. You know there's room in Albany, okay, so I should be all over Albany, okay, sometime, but you would expect for me and my job, there's room there, we should move on.

Understand. That's helpful. And although it appears to me calculating offline that your price per square foot occupy continues to be growing and a quite healthy fashion, I've heard what you said that you don't think you should put push pricing, but in spite of the monies invested in Self Storage it appears that if you're still seeing some decent price appreciation on your Self Storage assets, is that correct?

And we've got a whole crew that's their job, and I'm not telling them not to raise prices, but I'm not factoring in big price increases in my analysis for the next five years. Okay, now maybe we're going to get that before it. But when I go look at a project I'm not figured in a whole lot of upside in pricing.

And you cost - I'm sorry, go ahead…

That's my attitude, it's not at the end, who knows where get back for this.

Right. And as well as the case in 2017 the operating expenses in moving storage are up about 8%. I understand your investment spending, but does that imply - should we - does that imply you expect sales growth in that segment to pick up appreciably from the 4% it's now tracking?

I don't think so, no, I think that would be overoptimistic. I'm looking in for a breakthrough, I mentioned briefly 24/7 I mean I've got things really, but nothing that I want to credit tell you because I know you're trying to make very serious advice to people or investing large something money. So we're pushing very hard looking for a breakthrough. I believe there's more market potential out there, but we have to keep sorting for where that is, as you know our utilization theoretically can always be improved we made, a lot of our success has been on driving utilization and that's part of what's behind, what part of what may come out of structure 24/7 is a little increase in utilization that is very positive leverage we can get that happen now, I don't have enough information, but I can report it, but it's a possibility and of course, but no, I would say we're not - I'm not forecasting 8%, I don't see 8% next year in my mind I don't see it down.

And U-Haul truck share had 3,500 locations last quarter, can you tell us how many locations you've expanded that too?

Well, participating. It just under 9000 participating locations, it's an option at all 20,000 plus locations, but we've actually had other transactions around 9000 locations as of now, not as of the quarter, but as the present type period, so it's growing, Jim, and I expect we're going to drive on it. I think it speaks to what customers to lease what some customers want, our jobs to get it done.

And my last question, U-Box it look appeared sales declined in the quarter, is that business still profitable, I thought you were through the investment phase, so what's your outlook on that?

This is Jason, we didn't have a decrease in U-Box revenue, the other revenue line which it's embedded did have an increase, and just about all of that increase was related to U-Box. I mentioned during the last - the fourth quarter call that we completed an acquisition in April of portable storage box competitor and have brought that on line and have been blending that with our operations. So we're still seeing healthy growth and safety even double digit growth here. I think we're into our price 16th month of year-over-year monthly growth.

And about profitability.

And profitability, we did see I measure contribution margin, how much it can contribute to the rest of the organization and that was also up and it's been up for really the last five quarters.

Thank you both very much.

The next question comes from Jamie Wilen with Wilen Management. Please go ahead.

Hi guys, one about you, because your inflection point where above a certain amount that we have now reached above breakeven at the incremental profit margin really gets to the bottom line?

We surely hope Jamie and we surely if it's easy to project. We have cost discipline, so we can kind of tell what our margin is, it all comes down to can you track the customer and then can you execute on those you attract, always I see you know where we that short, I get that and so, but that also means we're pushing the system and we're growing it, so absolutely there is we started a little bit of TV advertising in some of select markets in August that's because I believe we have a very low awareness of the product and an ability to execute, and so if we can attract some more customers we're going to start to see this greater contribution on marginal basis, which is what of course we're hoping for, I don't have that dollar amount in my mind.

How large you in regards to help to the size of pods and are you gaining and losing market share?

Okay, first question would be how large is pod, it's okay, so I don't have anything better than three or four year old stuff, maybe not even that new and how big they are? I'm going to guess they're north of a billion dollars today, but I don't really have an accurate way to know that, okay. They're doing a better job in getting coverage, I'm a little disappointed, I thought we would just beaten to death with coverage, but they're doing a better job, I have to take my hat off to them on that. There are still of variety of small players in the market in the markets much bigger than with any of us are experiencing pods does a tremendous amount of onsite storage, but they also do a tremendous amount of moving we're concentrated in the moving and almost no onsite storage, so they're - let's say possibly half the time we're providing the same, overlapping product and service would be my guess. So I couldn't tell you who's growing faster, I really don't know. I kind of have focused on where can we push and I think we have the ability to deliver the product in greater quantity and still positive margins and that that's why I encouraged that team to put together some TV advertising to see if they could get a blip at some markets, and then try to project that to a larger footprint.

Gotcha. On the self-storage side obviously the increase in million, it has a major impact upon the capacity utilization for the whole company, and it does take I guess two to three years for a new unit to stabilize, do you have any figures on capacity utilization for units that are more than two to three year old, so we can accurately assess, how are you doing and managing that business as far as the past utilization from year-to-year?

Jamie, this is Jason. So the portfolio properties that we manage the off balance sheet properties those haven't had significant growth and a trailing 12 month basis those have been running right around 90% occupancy.

Okay. And then very stable in 90% from year-to-year, I guess?

Yeah, I think it's down maybe a 50 basis points.

Okay. And then you also talk about how competitive the market is out there for unit yet we're adding three million square feet per year. Those two statements really don't jive it is competitive and market is tough, we would say why are we adding that many that much in the way of new square footage?

It's part of our base business at this point. We'll be in his business 20 years from now, and there's going to be some ups and downs. We've got a little bit of momentum. We have good access to capital financial markets are receptive to this. And my money we're putting in woodshed and we're growing total occupied room steadily and we'll continue to grow them. I wish I could tell you, I could rent them as fast as we can bring them online, but what happens is each individual unit has its own characteristics, they're really geographically very discrete in most cases. So if I introduce new product into market where, let's just say Phoenix for an example, let's say that my two year old product had average occupancy 90% of Phoenix. Introducing a new location in there it won't just jump to 90 it'll still take it two or three years. We've tried to find ways to make it go to market occupancy faster, and we have one or two successes, but overall my experience is that they ramp up pretty close to the same, which is as you said two to three years. So it's - I'd just say we're going to be in it's at least a 30 year commitment capital in storage business. We're in it for the 30 years, let's get in there, we're still growing in and I used Albany is an example, there's room and all, but we should get in there and make our presence felt, will still take us two or three years to get rent up, but maybe the competitors who'll see who're in there and they won't be in a dead heat to follow us. And I really don't know how to predict their behavior, but it's a fundamental part of our business. So I think we just have to have a time horizon that at least for think this is a five year cycle or something it's to lease that.

Okay. And on the truck rental business, so obviously we've chosen to accelerate the depreciation and as you've said operating profit was marginally higher in the quarter. When this accelerated depreciation even out versus when we started it?

Okay. My guess is another 18 months, because we haven't committed yet, but I'm anticipating we're going to go back to adding some big trucks, and they're the ones that just really slaughter this, okay. And they trailed off as Jason noted in his comments, the percentage of their contribution to this increase trailed off in the quarter, but as soon as we go back to producing them, they'll just jump right back up and we'll be producing them again within six months maybe quicker is my judgment that we're not committed, we haven't placed an order, but I think in our life that's what will happen.

I don't know if I missed it, but did you mention what your anticipating truck purchases maybe for this year?

Our projection was somewhere just south of $900 million growth, now that will really wasn't anticipating any significant investment in the 26-foot truck, and that was as I mentioned during the last call that if there is a variability in our CapEx projections it was going to be to the upside it was because of the 26-foot trucks, so the current projections really don't have any investment here over the last half of the year in that truck, so if we do start that towards the end of the year that that could push our projected CapEx numbers up a little bit.

Okay, one also wonder increasing CapEx for trucks when utilization is not significantly higher, how do you - why wouldn't you want to increase that utilization number on a little bit more?

We do what you're actually seeing the building trucks is to forward and Jason mentioned it. We have somewhere - I can't give you an absolute number, but we have between 3000 and 5000 trucks today I just assume not have, because I'd rather they were sold, but they are not sold. So the capital in the utilization numbers, but they're not trucks that are either positioned or capable of that for utilization that's what it should be sold. So it's getting that sales back in line will they want to actually increase utilization, but the map to the extent utilization the map problem. Yes, it'll change a little bit. So somewhere it's been 3000 and 5000 trucks we have our trucks too many and that's part of - it has been seen to big trucks it down a little bit better solution on taking big trucks out before it to get more big trucks, and I'm still that's in process issue right now and not happy with where we are. So I'm not going to commit more trucks targeted get that under control, Jamie.

And lastly I would hope one day you would get change the corporate and so it is one of the most brand names in the country, and certainly more well known to anyone in America, I hope you consider that it wouldn't cost much, but I think we did nicely for shareholders?

All right. Thank you again.

Thanks.

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

Okay. Thank you very much. On the truck share program, what inducement is there for the independent dealers to drop that program?

Well, they have the greatest inducement, I would argue Ian, because under that program, the truck can rent and return while they're not physically present at the location. So let's say, you're a dealer and most of these dealers of course have a base business and let's that imagine your base business is a Monday to Friday, business or with the truck share those trucks come at Saturday and Sunday without you having known the person physically present. So to them it's almost right now it's a freebie almost.

So tell me how that actually works for an independent dealer as closed on…

They all have the software, but what happens is they designate certain units as available. They make the key available, they park the truck what's available, so can't be behind a fence et cetera. Our park behind another truck, okay so they make the unit, they positioned it's also available, they enter in the system is available, and that now shows it is available in all of our systems. Customers can then go and select that truck regardless of the operating hours of the location. So they can either go be on the operating hours, for instance in the summer there's a lot of people like the truck at five in the morning, because it's light, and so the most locations don't open till seven or eight or nine, and so this way the customer can get a truck of five in the morning and maybe return it earlier in the day, so that the customer goes through a process of registering with us and then getting approved what we call live verification right at the dispassion location right after time of the transaction and then they dispatch. So it's all done on a - say basically a smartphone, so you can do it tablet, but most people just use a smartphone and they can return at the same way they can return on the location is not open and they can close out the contract, make it finalize, clear their credit card and send themselves an e-mail receipt, which for a lot of customers is very important because many, many people today actually budget half of their debit or credit card and so they want transactions to close and the problem with the rental transactions as stays open in the credit card company probably is holding a little bit of credit until that transaction closes, and so the customer has a high desire to see that the contract finalized even if they're returning at 10 o'clock at night they'd like to finalize it that night rather than see finalize the next day.

It was same to me and that would increase utilization when where we expect to see that translating to better operating efficiencies?

What I would like you to be the first to know, and it's not there yet, but you can see that that's in the back of my mind all right that's for sure and of course a 1% change or utilization, the big change, 0.5% utilization is big change. So the needle want just jump off the dial, but anecdotally it's already impact of utilization, but now to do that to the whole fleet on a consistent basis that's why I said in my comments I can't tell how much of this is just making existing customers happy or in other words they were going to run at 9 o'clock anyway they got to get a five that is happier. And how much of it is going to bring us new customers know we're there had to have the truck at five and because we weren't open they didn't rent. So it's - I can't sort them out, I don't have a meaningful way to sort them and have a better impression, we've been part into this for six months, we have hundreds of thousands of transactions to go back and try to go through, right now I'm stuck with anecdotal information and I'm seeing a little bit of both, we're just starting to promote it here the next two weeks we haven't promoted this yet. We've only made this, the only promotion that isn't even promotion we haven't even promoted in our website. We've just basically been accommodating customers who trip across it because they enter in when asked when you want the truck they put him 5:00 AM Sunday morning and we go great, whereas before we would have said nothing available.

Okay. But the deal has have lock box of a key correct?

Basically yes, yes. And that will allow the customer access to the key and there are often running hopefully.

Okay. Fine, thank you.

Sure.

The next question is a follow-up from Jim Barrett with CL King. Please go ahead.

Hi, Joe or Jason when you evaluate Self Storage acquisitions, do you include a revenue stream from renting trucks? At those locations or that revenue stream viewed is not material, because I would think that it was material it would make for different economics U-Haul versus a competitor.

And it cuts both ways, Jim. It takes additional facility to do that. So let's say we were buying an existing Self Storage location, typically they would have five parking spaces totally and we would not consider the U-Haul as additive to that facility, okay. If we were something that let's say we were building something in a market, we thought there was several hundred thousand of U-Haul truck and trailer rental revenue in there then, of course, we would include that in our calculation. And at all the times we're doing both I think the fairest assumption is to say because we have truck and traders we get a shot at these customers a little more often than anyone else does, a little more than just our brand is, our brand is helpful, it's certainly a big asset, but the fact that people come to us when they're moving in a high number of people who subsequently store or involved in the move either at the beginning or the end of the move. So we have access to our customers that's what should really help us and I think we're most successful that is what the truck rolled out.

And Joe with how is internal over up and it's been up for a period unemployment down, consumer confidence up. You would appear that the stars would aligned for demand for increased mobility and I know you've stated in the past that there's no relationship between your business and using a statistics, but are you seeing any anecdotal signs that those kind of macro drivers are helping the business or do they not seem to really matter?

The best macro driver is overall consumer confidence. I think consumer confidence is up and that almost statistics, which means we should be capturing an increased customer base. We are whether it's enough or not as I'm always unsatisfied thinking it's not enough we're capturing an increase customer base, the only contradictory statistic is the census keeps publishing information that says the percentage of people who change their resident is down is down over 15 years of being down. And the statistic still compounds need. But I think overall consumer confidence is up due to better joblessness and so people are relocating and we're capturing a share of that, I'm always looking to capture a bigger shareholder, but that causes need to be optimistic, which is I try to open this is our base new business is strong, we need to manage to it there's a lot of wrinkles to that, but there's people out there need our help, we need to get front of them with a good combination of product and pricing and get it done.

And Joe if to summarize your view on capital allocation when an investor looks at the cash balances in the future cash flow this company could throw off. It sounds like the plan is to wait for sporadic market dislocations to reinvest those funds as opposed to making a major capital disbursement to shareholders. Is that a fair characterization of how the board in your cash position?

Well, I don't want to speak to the more, they are probably they speak for itself, but of course, first thing, if we really thought we had just $2 much money go paid down debt, we got a bunch of debt we could pay down and that's really going to start that money earning to keep it high when California have 5% which would be productive. We made distributions to shareholders. I think there's somewhere in the range of reasonable or there's no way to know that, but do I see $100 million or something disbursement to shareholders on the horizon, no I don't. I'm not saying that's in possibility, but I'm not forecasting or advocating for at this time, Jim.

Thank you, Joe. Jason my last question for you is, is some of your elevated spending in moving and storage related to ramping up truck share with new personnel IT spending et cetera, and if so when does that plateau?

The biggest portion, the biggest single expense line that contribute in the operating expense increases really for the last several quarters as is the personnel line. And the areas that we've been doing increased spending on personal has been here at the home office has been customer facing personnel so our roadside assistance, sales in reservation, our call center. IT is up to a lesser degree and those are folks that are working on they are at two points of sale systems, which include the 24/7. And then we do have some increased headcount out in the field, and I think most of that is largely related to just the increase and number of locations. So our call center and customer service spending is going to flex start flexing down towards the end of this year, but on a comparative basis is trying to look a lot like it did the year before. And the IT spending has been fairly consistent we did ramp up a little bit towards the end of last year. So I don't have a real good prediction on whether or not that's going to even out year-over-year or if we're going to keep adding. But if they keep producing new programs that that are going to help us rent trucks then we'll keep putting more money back into that part of the business and investing that there.

Well thank you again both of you. I appreciate it.

Thank you.

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

I like to thank everyone for attending this meeting. I want to remind everyone at the end of the month here August 24, we have our Investor and Analyst meeting that we do a live video webcast this is going to be believe our 11th Annual one. On that day at 9 o'clock, Arizona time we're going to start off with array of shareholder meeting which will once again be video webcast and then two hours after that and at 11 o'clock Arizona time will do operational and also the investor meeting. Joe will be moderating both of those meetings and we'll have key executives available to kind of open up questions and answers. So I would encourage everyone that if you have some more detailed questions. We look at participation last year with questions ahead of time that we would love for you to submit questions to Sebastian ahead of time so that we can kind of do our best job and in answering them as well as we can. So we look forward to speaking to you in a few weeks. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.