Life Storage Inc (LSI) 2005 Q2 法說會逐字稿

Good morning. At this time, I would like to welcome everyone to the Sovran Self Storage second quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

Mr. Myszka, you may begin your conference.

Good morning and welcome to our second quarter conference call. As a reminder the following discussion will include forward-looking statements. Sovran's actual results may differ materially from projected results. Additional information concerning the factors that may cause such differences is included in our Company's SEC filings. Copies of these filings may be obtained by contacting the Company or the SEC.

Before we begin our prepared remarks I would just like to take notice that this marks our 10th anniversary as a public company as well as over 20 years in the storage business. It has been a remarkable run for us. And over that time we have experienced sweeping changes to our industry and we look forward to sharing our future successes with all of our investors and interested parties.

Speaking of successes, Sovran delivered another quarter of strong operating results, with same-store revenues and net operating incomes increasing by 5.4% and 4.9%, respectively, over the second quarter last year.

Dave Rogers, our Chief Financial Officer, will provide details in a moment. A major contributor to our performance continues to be our Customer Care Call Center. For the second quarter of this year, we achieved a closing rate on rental increase of nearly 31%, up 7 percentage points higher than the second quarter of last year.

We were also encouraged to see improvement in the Center's efficiencies in several other areas.

Similarly our truck program continues to add to our rentals. We currently have trucks at 219 of our stores; and last quarter nearly 7200 new customers used one of our trucks to assist their move in from an Uncle Bob's Store. This computes an increase of over 30% from the second quarter of last year. Our humidity control system, Dri-guard, also continues to attract new customers. The rates we collect on Dri-guard treated units are running approximately 28% higher than nontreated units. And with the installation of the system in 2 stores last quarter we now have Dri-guard operational at 75 stores.

Our expansion and enhancement program which we announced earlier this year has moved into high gear. We currently have 26 stores comprising nearly 300,000 square feet undergoing expansion or conversion. And we expect completion of these by the end of the year. We also have identified 24 stores where we expect to initiate construction this year and are conducting feasability studies at many more stores. We will certainly keep you posted on our progress here.

From an acquisition standpoint we acquired 5 stores during the second quarter. We announced the purchase of 2 properties in New England for a total purchase price of $11.3 million during our first quarter conference call.

They are in Springfield, Massachusetts and Stanford, Connecticut. Since then we have purchased 3 additional stores during this second quarter for a total cost of $17.6 million. Our fourth store in Montgomery, Alabama, was purchased in June for $9.6 million. It is somewhat unique in that the entire 120,000 square foot facility is totally climate controlled. Also in June we added to our Houston portfolio. This is a large store as well, containing about 125,000 square feet at a cost $5.75 (ph) million.

Toward the end of June we closed on a 3-year-old store in Boston -- near Boston. It had 64,000 square feet with additional land available for future expansion. The purchase price was $2.3 million.

Shortly after the close of the quarter we bought 4 stores in Texas for just under $11.5 million. Our 5th and 6th stores in Austin are still in lease up and cost a total of $6.3 million. The first store had 61,000 (ph) square feet with expansion land available of an additional 70,000 square feet. The other store also has expansion land available for 29,000 square feet which, when it is appropriate, can be added to the existing 71,000 square feet for storage.

The other 2 stores are in Houston and San Antonio. Both are in lease up and both have expansion capabilities. We purchased the Houston store for just under $2.4 million and San Antonio for just over $2.7 million. We certainly are reviewing other candidates and we hope to acquire several more stores over the next couple quarters.

Overall, we are really confident in the fundamentals of our industry and how we're doing. We are particularly pleased with the performance of our same-store growth, achieving topline growth at same-store revenues of better than 5% for 8 quarters in a row.

At this time, though, I would like to ask Dave Rogers to offer some details on our financial performance and position.

Thank you. For the quarter, total revenues increased $3.8 million or almost 13% over 2004's second quarter and total operating expenses increased by $1.5 million. These increases, resulting in an overall NOI increase of 11.4%, were primarily due to improvements in the same-store results that Ken mentioned, the addition of the 9 stores we purchased in the second half of 2004, and the 8 we acquired so far this year.

Our average overall occupancy was 85.5% for the quarter ended June 30th and our average rent per square foot was $9.62.

Same-store revenues increased by 5.4% over those in the second quarter of '04. Broken down, our rental rates increased 4.6%; our average weighted occupancy improved by 70 basis points; and other income which is primarily truck and sell (ph) power income increased by $160,000.

For the 3 months ended June 30th, weighted average occupancy for the 262 same-store pool was 86.2%. For the same period in 2004, it was 85.5%. At the quarter end date, same-store occupancy was 87.1% which is up 80 basis points from last June 30th and our rental rates grew to $9.58 per square foot from the same-store rate of $9.16 last year.

Our regular operating expenses on a same-store basis increased 6.4% this quarter. Most categories were in line with increases of about 4% or so. The notable exceptions were our repairs and maintenance items which were almost 16% higher than last year, and our insurance costs which were 13% higher than last year.

So overall then with the strong revenue growth and the effects of the expense increases we enjoyed a 4.9% increase in our same-store property level NOI. Our G&A cost for the quarter came in at about 2.9 million which is on track and we estimate the year 2005 total G&A expense to be about 12 million.

Interest expense for the quarter was $525,000 higher as compared to last year. This is essentially the cost of an increase of our debt outstanding of $57 million. As a result of repairing the whole of our $30 million Series B Preferred Issue last July and 10 million of our Series C Issue our preferred stock dividends were $950,000 less this quarter than for the same period last year.

Regarding our capital structure, during the quarter we issued 82,000 shares via our drip (ph) and shareholder purchase plan and about 58,000 shares to employees exercising stock options, a net total of 4.7 million was raised via these issuances. We also issued 195,000 shares pursuant to warrants issued in 2002 to the purchasers of our Series C Preferred Shares for which we received 6.4 million. The total proceeds of 11.1 million received from these issuances was used upon the acquisition of some other properties we acquired and except for the warrants, equity issuances significantly curtailed from that of recent quarters.

While we have kept the drip plan in place, we have pretty much stopped releasing shares through our share purchase plan. Given our present capital position we do not plan to sell many shares via the share purchase program in the immediate future. We do not purchase any shares of our own stock this quarter.

As Ken mentioned we acquired 5 stores at a total cost of 29 plus million. This was funded, partly, by the just-mentioned drip issuance and borrowings on the line of credit.

The 4 properties acquired at a cost of 11.5 million on July 12th were also acquired via line borrowings. Regarding our overall debt structure, we have in place $100 million line of credit at LIBOR plus 90 basis points. The line expires in 2007 and we have an option to extend the agreement to September of 2008. We also have an option to exercise an accordion feature that allows us to expand the line's capacity to 200 million. We have $100 million term note that matures in September of 2009 and an interest rate of LIBOR plus 120; and we have rate swap agreements in place to effectively fix the rate of interest on that note at 6.7%.

We have another $100 million for a note that matures in 2013 with an effective rate of 6.27%; and we have mortgages totaling $50 million that mature in 2012.

At the end of June our Desk Service Coverage was 4 times EBITDA and fixed charge coverage was 3.2 times EBITDA. Our debt to enterprise value is about 27%; and our unused capacity on the line is $129 million. As you can see, we are conservatively capitalized and we have got plenty of dry powder available to fund future growth.

With regard to guidance for the balance of the year and into next year, we are encouraged certainly by the operating aspects of our business. Our occupancies are stable, rents are being bumped and discounting is pretty much in line. Our year-over-year expense growth is pretty moderate; so we are forecasting an approximate 4 to 4.5% NOI growth to the balance of the year.

The acquisition climate of course remains challenging. Cap rates haven't been to our liking; and while we have been active in bidding on dozens of properties and portfolios, our hit ratio is still kind of love. Through July, we've done 55 million in purchases. Of these, 38 million have been of the usual variety which we consider stabilized with growth potential and yields in the 7.5 to 8.5 cap range.

Another 17 million has been opportunistic -- what we call opportunistic. With occupancy in the 50 to 60% and initial yields in the 4 to 5% range. By year end, we acquire -- we expect to acquire more of each type but as far as impact on 2005 FFO goes, we are sticking to our original forecasts of $50 million of accretive acquisitions. We have not factored in any dispositions.

As Ken mentioned we have embarked on a pretty extensive expansion program over the next 30 months or so. We expect expenditures of up to $40 million to enhance and enlarge revenue capabilities at our existing stores, in addition to the typical $4 million or so of annual recurring maintenance outlays.

With all but 61 million of our debt on a fixed basis, the financing component of our model is pretty simple and fairly easy to predict. We do expect to issue shares through our dividend reinvestment program but as said will significantly curtail the stock purchase plan. We are projecting 12 to 15 million in equity issuance this year via these programs, as compared to about $50 million last year.

Financing and property acquisitions and the revenue enhancement projects will be with these drip proceeds and borrowings on the line of credit. We expect to use leverage pretty extensively to fuel our near-term growth plans.

So given the above, we are estimating points from operations to come in at between 294 and 298 per share for the full year of '05 and for the third quarter between $0.76 and $0.78.

At this point, Ken, I'll turn the discussion back to you.

Before we open up the call to questions I just want to make one more note. Because of the Neary (ph) Convention taking place in Chicago November 2nd through the 4th of later this year we are going to accelerate our next quarter's earnings release and conference call by 1 day to accommodate those people who will be there.

So we will release earnings at the close of the market on Tuesday, November 1st, and holds our call at 9:00 Eastern time on Wednesday the 2nd.

With that we would be pleased to field any questions you might have.

+++ q-and-a.

(OPERATOR INSTRUCTIONS) Jordan Tatler.

It's Craig Meltzer (ph) here with Jordan. Had a question on same-store guidance. You are running at 5.3% year-to-date with your same-store NOI. So you're basically implying in 2.5 to 3.5% in the second half. What's going on there? Do you see a slowdown in any specific markets or --?

We are looking at -- we're still not sure what is going to happen in Florida. We are enjoying a very good run their basically as a result of the push from the hurricanes last year. Our typical experience has been to show a 6 to 8 month period of people who have been in distress to stay storing with us. I can't say that through July we have seen much of a fall off but we are basing it on past experiences and Florida has really been a big win behind our sails this year and as that falls off to normalized levels I think we would see 4% NOI growth tops this year with the rest of our market. So that has really been the big factor hanging over us all year -- a very strong first-half and 4Q of last year driven by Florida markets.

What impact you think Hurricane Dennis has had (indiscernible) Panhandle of Florida?

Unfortunately, we've suffered some damage. Probably around $100,000 but we haven't been able to improve occupancy whatsoever because we're as full as we can be.

Have you been able to push rental rates?

We don't typically. In a situation like that consider it bad form and that's not the way we want to do it.

Really should talk a little bit about some markets definitely outperforming some of the others -- Florida being the strongest. Can you quantify the spread between some of these markets in just year-over-year NOI growth?

Well the Carolinas and Atlanta have been good in terms of what we consider strong markets that we put in the press release and we talk about are sales in excess -- same-store sales growth in excess of 5%. So certainly all the Carolina stores, Atlanta stores are very good. The stores in Phoenix have had a couple of years of weakness there so Phoenix has been 5% plus for most of the design (ph) stores we have there. Dallas has picked it up. The Dallas-Fort Worth stores are good. I think Ohio is not there yet but it's improving. Austin, likewise, is close to our average. The weaker markets are primarily in the mid-Atlantic states -- New York, Pennsylvania, Maryland. Those are up 4.5% same store growth. (indiscernible) Texas has been weak primarily because of some overbuilding. Stores in the Gulf area in Louisiana and Mississippi have not been up to par.

Would you say most of the markets are still positive same store NOI growth?

Virtually all are positive. Yes all are positive. It's just in the rage of 0 to 4% is weak, 4 to 6 is average and plus 6 is strong. Yes we don't have any markets or I think even any stores in an NOI negative position.

Just a little bit on the opportunistic acquisitions. With the initial yields 4 to 5% what do you think the stabilized yields would be on those compared to what you could buy a stabilized asset to 7.5, 8.5 range?

Certainly depends on the market but people give you kind of an example of what we're thinking about in one of our Austin facilities where going in basis there our cap rate is around 5.5% with an occupancy of 48% and we are expecting if we get to 55% in the first 12 to 18 months, the yield will be about 8.5 to 9. And once we go over 75% the yield will be over 10%.

So give you a little bit of a range of what we are expecting from these properties there (indiscernible).

So the balance of the year we should expect a blend of the 2 or do you think that it's in the greater shift towards these opportunistic purchases?

I think it'll probably be similar to what we've done before unless there was a portfolio of some mature properties that we could acquire. I think the ratio that Dave outlined earlier would probably be reasonable to assume.

Just on asset sales there's none in your guidance. But what's your take on that, cap rates where they are today?

We sold a few last year. We did scrub down our portfolio pretty good just before we went public and we didn't have cause for any buyer's remorse in the 10 years we've been public. So the only thing we've had a hard time doing, sometimes, is matching properties to stores that we bought in a portfolio and there being one in a market that we expect it to build around. Last year we said to some markets such as Nashville and Akron, Ohio -- we are not going to be able to build around these so let's stop. We looked every year at a group of our stores and looked to see what the future growth prospects are, where we could redeploy the capital.

And at this point there are a couple that might be -- we might be tempted to sell but for the most part we're happy with our portfolio and even though cap rates are rich, our businesses sell stores, and what we wind up doing is redeploying into other properties of the similar type. So as long as we're happy with the markets we're going to stay pretty much with what we have.

Ross Nussbaum.

I have one big picture question and a couple of second quarter questions. There's obviously been a lot of portfolio consolidation in the self-storage sector the past couple quarters. I guess -- was curious what your comments are in terms of what you're thinking strategically just from the standpoint of these portfolios that are trading at cap rates well below what your implied cap rate is today. What are your thoughts on where you are strategically?

We've established a business plan that when we first went public, we kind of cut our teeth on acquiring properties on a one off basis with relatively high cap rate. Unfortunately, those cap rates that we thought were unusual that been about 9, 10 have come down to about 7, 8. But we are still employing that strategy to continue to grow incrementally. We are conservatively structured. We are looking to provide secure dividends to our investors and moderate growth from a price standpoint. We consider ourselves outstanding managers of our properties; we add value when we acquire it. I don't see a need in us, in trying to change what has made us successful over the past 10 years as a public company and over 20 years in the storage industry.

It is exciting go out there and acquire a 100-store portfolio and we are not adverse to that if we can find the right package and the right people to possibly do it with, as we've been able to assimilate both of the large packages in the past. But we are not going to risk what we've developed here for ourselves and for our shareholders to go out on a limb and buy things at incredibly low cap rates.

So I guess our strategy is to continue the work that we've done. When we buy properties we know we buy them well, we know we can operate them as well or better than anybody.

Dave, let me ask on a financing front. You've got 70 million out on the line. It looks like from your press release (technical difficulty) 30 to 40 million on expansions and Dri-guard going forward here and assuming the acquisition pace continues at the way it's going, it seems to me that your variable debt exposure is going to be pretty meaningful from where it is today a year from now with the capacity on that line lower. What are your plans in terms of flopping or fixing a big chunk of that debt here in the next couple quarters?

I think that is a good possibility. I'm really encouraged by the way (indiscernible) have stayed where they are. So perhaps even before we pull the trigger on the accordion feature at $100 million we will take the majority of our existing line debt and turn that out. The market for that 5- and 7- and even 10-year money is pretty good. So it might would take a big deal quick to make us go into the second tranche of our line. I think we are very favorably inclined towards terming out and fixing the rate on a good chunk of the existing line debt.

Another question is on your FFO guidance for the year you have upped your acquisition guidance by 20 million. You are just reiterating your earnings guidance. Am I to assume that it is a combination of lower cap rates, higher interest rates that are leaving you with flat guidance?

Yes. The thing I was trying to say was that the $50 million that we picked was, we expected to do $50 million of accretive investment. We are finding a lot of opportunities like Ken mentioned in Texas where we are going in an initial yield of 4.5 cap or so which is pretty close to our short-term debt cost. So I'm not really -- while we're adding properties I'm not showing an asset (indiscernible) in '05 because of that. As we get further into the year now we might have, I would love to say significantly more than 50 million of even accretive investments but as we dig deep into the fourth quarter on those they're not going to add anything to our FFO, so it's a combination of timing and buying lower spreads on the opportunistic acquisition.

Final question is on these expansions and conversions. The 26 properties that you said have been expanded -- the 300,000 square feet. How best are those leasing up? Should we expect normalized development lease up that is going to take 2, 3, 4 plus years to get these things fully stabilized?

First of all there's only been several that have been completed so far. There's the great bulk of them are under construction. We anticipate having them completed before the end of the year. But so really there hasn't been much of an impact as far as any growth in our stores from the (indiscernible) that we started this year.

As far as how long we expect them to take the lease up, our expectation is they would be quicker than what we'd normally expect by property primarily because we've kind of cherry picked these. The area that we know. We know there's demand. So our expectations are that they would lease up probably within hopefully 12 to 18 months to where we would get the full occupancy from them.

What will be the yield if I take the current rent per square foot at those properties at the current occupancy over the construction cost? What kind of yield do you get there on a stabilized bases?

In the range of between 11 and 13% or something like that.

The final question on Dri-guard if the rents are 28% higher, why aren't you just going gangbusters rolling this out a lot faster?

the problem you have is just that it is 28% higher so people are going to be less inclined to spend the money. Also people don't need it for all their business. When we -- when somebody comes in and they have a 10 by 20 need they may only have a 5 by 5 need for Dri-guard because not everything needs to have that in there so we go through a selection of our stores that we want to put this in. We also -- even though we can add Dri-guard with minimal disruption of our current customers, there is some disruption where you have current customers occupying space.

So it's a combination of what's demand out there? How much do we think we'd get in the future? How much disruption will it be to the current customers in the trade that we have? Our experience shows us that at any given store you can't really have much more than maybe 20 to 30% of your store with Dri-guard and lease it up unless of course you're building -- you're putting up a whole new building.

In that situation if you can pick what you think your customers are going to need, say, 10 by 10s or 10 by 15s, put up a new building, then that whole building might be susceptible to putting Dri-guard in but if you are modifying existing spaces and most buildings may have all 10 by 10s or all 5 by 5s you are not when have people (indiscernible) at one space and taking it all in Dri-guard.

John Sheehan.

Follow up to that last question on Dri-guard. Are you able to track when incoming calls come into your Customer Care Center whether or not customers are looking for Dri-guard, relative to normal spaces? And if so what are you seeing in terms of additional, incremental demand for Dri-guard over and above what you've seen before?

Very honestly, John, most people when they call, they don't know the difference between Dri-guard or Climate Control or regular storage. So unless they stored before and they've used it. So part of it is an education process wherein our call reps are schooled to engage people in conversation and ask them what they need, how long they're going to be storing it and that's the process that you go through. If somebody has stored before and they've experienced it, it's much easier and they are asking for it. It's very difficult though for me to quantify it -- I don't know, Dave, if you have (MULTIPLE SPEAKERS)

Inbound calls are work for educating. The other side of the coin though is (indiscernible) demand and we are pretty full. Our Dri-guard units across the portfolio are pretty full. So it's not a tough sell. Once people are educated on it and they have a couch or they have clothing or they have books or anything upholstered stuff like that it's an easy sell for the most part. And so we don't demand it as good once people know that to ask for it. As our marketing gets stronger and the concept is out there for another year or two I think we may be getting calls that say, we want your Dri-guard. But unfortunately it's not that prominent and differentiated enough just yet that we're getting inbound calls with that topic on a customer's mind.

It sounds like, clearly, the repeat customer, there's a much higher hit rate on Dri-guard vis a vis a new customer?

Yes and an easier sale, too, because they know even if something happens (indiscernible) they've stored a couch and chair -- they have for six months -- even in the Northern climate a lot of times it might smell a littel bit musty and that's the question we will hit is, how can we get the -- I've stored before. How can I get the mustiness out and prevent that? What should I wrap it in or something like that. You don't have to wrap. You don't have to do any of that if you store in a Dri-guard facility.

I asked specifically because of the story the other day that discussed some of the problems customers have had with mold. And that would seem to be right up your alley in terms of being able to sell Dri-guard using those types of experiences that customers have had with the goods being damaged.

Yes I think if a person is going to be storing with us with Dri-guard they can be certain that the low humidity in their unit is going to be less than 50%. And that's kind of the line of demarcation as to where you have to begin worrying about those problems that those people are experiencing.

Tim Pier (ph).

Question for you and I might have missed the beginning of this on the call. Could you talk -- one of the big expense increases were on repairs and maintenance and insurance. Is that one time? Or do you expect that to carry through into the back half of the year?

With the insurance, actually, we expect good news. We've renewed our policy which is effective July 1st and have been able to hold rates pretty well there so for insurance, I think we are done complaining about it. Got a good handle on our risks, worked with good agents and a good company and that won't be a problem.

Repairs and maintenance, it (indiscernible) actually some of it was held over from Hurricane -- all four of them last year. The last trickle through of -- we estimated initially I think 450,000 and then we had another hurricane. We bumped it up to 650,000. At the end of the year we had spent almost 750,000 and were still finding a little more from those 4 storms that we hit. And, importantly, as I mentioned earlier Hurricane Dennis nicked us for about 100 grand across 14 or 15 stores. I think percentagewise we are looking at an overall of about 5.5% of the repair and maintenance side will probably be double digits for the next couple quarters.

Those one time items, can you apply a total dollar amount on year-to-date basis to them? Hurricane damage, I guess is not one time (MULTIPLE SPEAKERS)

This year so far is about $.25 million -- I just read the paper yesterday that says there's going to be more storms covering and that probably we -- (indiscernible) there's nothing unusual going on the repair maintenance other than A., summer's a busy time for us and we didn't do a lot of it last year and I'm not sure why that aberration happened so 2Q over 2Q looked a little different and then the added pop from the hurricane and storm damage came through.

(OPERATOR INSTRUCTIONS) Rich Moore.

On these opportunistic acquisitions, I'm (indiscernible) what was the previous owner doing that was not so good that the occupancy was so low and I guess what would you guys do that is better that would drive that-- it seems fairly quickly or maybe could you comment on the timeframe to 5% (ph) ?

First, let's talk to the situations. One is some of these acquisitions -- they were built in the last year or two might be developers working to the point where they need to get permanent financing (indiscernible) so that is several of them on -- unsure what percentage of the number that we're (indiscernible) 2003 (indiscernible) percentage completed just last year (indiscernible) and beginning of this year, last phase of it. So that's part of it. The other part though where the former owner only had actually in that 70% as I said earlier (indiscernible) think we know how to operate in back facilities as well as anybody. We go in there, we have our Call Center, we'd have our plans put in place before we open the doors and market next-door and we are able to impact studies on our own before we could in the calls. We know we were missing upwards of 30% of the calls that came in. (indiscernible) manager might have the at the desk or if he was -- he was with a customer or out on the grounds making rounds (ph) into back, asked them to leave a message that if somebody is shopping your store, everybody after the next one. With that Call Center we are able to automatically capture 30% more calls than the person was before. People here are experts, very very good at engaging people in conversation and making a sale. We think the amenities would be into back Dri-guard, our listings combined help us with those things we added over the past 3 or 4 years. I think not to put ourselves too much on the back I think a combination of those things.

How quickly do you think the lease up occurs or the additional occupancy that you drive through actually occurs?

I guess it depends if we're at a 50% occupancy we'd would anticipate that within 18 to 24 months it would be right around 80% or so. It's difficult because it is so micromarkets specific. I would say in fact (inaudible) any how on that but I'm thinking that over a 2 year period we should be able to get 20 basis, 25 basis points increase starting at 75%, certainly be less because (inaudible) 85% occupancy that will (inaudible).

As I look at occupancy and it's up fairly nicely over the year ago period are you at a point where you start pushing rents more aggressively or should we expect more in the rate of occupancy increase from here?

We are in -- many of our markets we're at (indiscernible) with our rates but fortunately the industry is coming along with us pretty nicely. We have a good chunk of this revenue growth from great rates and I think we're going to continue to push that. So actually they will be -- we have room. We are only at 87 or so%. As always it's a combination Rich. In every store we let the managers and the regional team leaders use their own discretion how best to drive the top line and we don't micromanage to the 10th how many points of occupancy we want or dollars. So it's going to be -- I can tell you that we're pretty comfortable in the 4 to 5% range of rate increases for the next quarters. I can't tell you with any degree of certainty exactly how we're going to get it which mix we're going to use.

Last thing on the trucks is the plan just remind the to put the trucks at all of the stores?

I don't think that will ever happen, because we have a number of stores where they are close enough to one of our other stores that you'll be a mile or two miles away where they can share them. Some stores frankly don't need it. And we have higher occupancy where we don't have to make the expenditure. Keep in mind we look at these trucks as much as a marketing tool as they are a utility for our customers and once they use them and renting them out to people. So we don't need to spend marketing cost to drive people to the store. We won't do it. So I would say it will be very unlikely we will ever get to more than 85 to 90% of our stores with trucks.

There are no further questions at this time.

Thank you very much, everyone, for participating in our call and we appreciate your confidence and interest in us. And we look forward to seeing you in 3 or 4 months. Bye.

Thank you for participating in today's conference. You may now disconnect.