U-Haul Holding Co (UHAL) 2007 Q3 法說會逐字稿

Good morning. My name is Dakeesha and I will be your conference operator today. At this time, I would like to welcome everyone to the AMERCO third quarter 2007 investor conference call. All lines have been placed to mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (OPERATOR INSTRUCTIONS). Thank you. Ms. Flachman, you may begin your conference.

Thank you for joining us today and welcome to the AMERCO third quarter fiscal 2007 investor call. Before we begin, I would like to remind everyone that certain of the statement during this call regarding general revenues, income and general growth of our business constitute forward-looking statements contemplated under the Private Securities Litigation Reform Act of 1995 and certain factors could cause actual results to differ materially from those projected. For a brief 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 December 31, 2006, which is on file with the Securities and Exchange Commission.

Participating on the call today will be Joe Shoen, AMERCO's Chairman and CEO, and I will now turn the call over to Joe.

Good morning. This is Joe, I'm speaking to you from Phoenix. I have Jason Berg, our Chief Accounting Officer; Gary Horton, our Treasurer; and Rocky Wardrip, our Assistant Treasurer, on the call. At the end of the call, you may direct questions to any of us.

As you know, we do not give earnings guidance, and this quarter, we have cut short our two analysts with greater revenue declines than they could have anticipated. Additionally, depreciation continues up due to rental truck additions. We expect to continue to add trucks at a strong rate through the first quarter, so the depreciation increase will be with us through fiscal year '08. We continue to have some distribution imbalances on our larger trucks. This of course is where the bigger dollar rentals are, so this effectively alters product mix, and therefore, depresses revenue. Our revenue decline is and has been my top concern for sometime. There is some modest room left to reduce our expenses in the near-term, but not to measure it with the revenue shortfall. We will not give up any market share. We have multi-year assets and we will continue to manage them beyond any one reporting period.

One further piece of information you don't yet know is that we have become aware that the Los Angeles Times is currently preparing an investigative report about U-Haul. Based on the content that we have had with the reporters, we believe their reporting what the sensational and in an attempt to bolster their circulation. We have cooperated with their reporters, we have answered their questions and I personally spent a day-a-and-a-half with them at our headquarters here in Phoenix, toured rental and manufacturing facilities, had a session at a test track where we were able to demonstrate our equipment. As you all know, U-Haul customers drive the equivalent of to the moon and back over 10 times a day, and regrettably accidents sometimes occur.

We are guessing this article will run in late March. So if and when the L.A. Times article does come out, I hope you'll be able to put it into its proper perspective and realize it's an attempt to bolster circulation, attract readers by publishing a sensationalized story that is more befitting a tabloid publication. At the time that article is and when it does come out, we will no doubt post something on the web site, discussing it from our point of view.

Back on the U-Haul business, people are still moving. We see increased transactions one-way. This continues to confirm our belief that people are moving. At the same time, in-town transactions, or a transaction where a person rents it and returns it to the same location, have been flat. If the present trends continue, we will end the year with nearly 2% less you-move growth than the prior year. Of course, I am working for a better and a different result. However, we are already five weeks into the fourth quarter.

With that, I'm going to turn the call back to the moderator and take questions from you.

(OPERATOR INSTRUCTIONS). Jim Barrett, CL King and Associates.

Joe, I just had three short questions. The first is, when you look at pricing by competition, could you characterize, is there any difference between the pricing tactics of your number two competitor versus your number-three competitor?

Okay, give me all three, and I will get them all, or do you want to --.

The second one was, I just wanted to better understand what percentage of your Moving and Storage of your self-move revenues, were one-way moves versus in-town moves. And the third one, if you are willing to share it, is understand what the revenue breakout is within truck rentals, between large, medium and small.

Okay. The first one is, how is the competitors' pricing? Budget is, as near as we can tell, inherited a pricing system that was originally developed by Ryder Truck Rentals in Miami that was modeled after our pricing system. So they price in a conceptually similar manner to us, Jim. And so as a result, it's much more easy for us to say that they are ridiculously cutting prices, because I think we understand our strategy. And so, very clearly, I would say that Budget is a big offender.

Penske has always priced on a -- more of a -- we believe they target a specific dollar amount-- I don't know what is it -- per time period -- per day, per week, per month, on a given size vehicle, and they will do anything to get that revenue in that time period, if that makes sense. So it's a little harder to say for me to compare a price and say, well this is ruinous price by Penske. Maybe they are strategically maybe at the price that they want it. I would say that Penske, this all kind of gets jumbled up when everybody is trying to figure out who is pricing where. I would say Penske has, is probably enjoying lower pricing than they would like right now. I'm pretty confident, I'm sure the Budget organization is, and I know we are. So they are different pricing, and it's not a straight apples-to-apples comparison.

At the same time, of course my job is to figure a way around it. We have been hard at in our programming an entire new pricing system which we think we can counter them and get the dollars where the dollars are still available, which anytime you do a big system, a big computer system, you don't know when it will launch. But we're intending to launch it within 90 days, which won't help us in this quarter at all, and might help us in the first quarter, but it will be -- it's kind of a little risky, Jim, because anytime you introduce something as you're going into your peak season, which is what we will be doing, a small mistake will cost you a lot of revenue. So we intend to launch it, but if I get to that point and the thing is a little shaky, then I'm going to have to run all summer with my present pricing system because there's a great risk of kind of over-responding and then shooting ourselves in the foot. But I have -- I spent a couple of million dollars on a new pricing system which isn't running yet, but I hope to have running -- it's running beta, but it's not running on a robust method. I hope to have it running robustly, and I believe with that, it allows me to do some different strategic things. I believe I will be able to better address the pricing and try to get the pockets where I can get good increases, get those. I think right now, sometimes because of just the mechanics of pricing, that I may be meeting three prices and undercutting a fourth of theirs, if that makes sense.

Right. And do you have any info to what extent consumers actually comparison shop?

We know that the Internet is driven by people who are comparison shoppers. That is no question. Internet business, it's difficult to say exactly how much of it is because we know that people shop the Internet and then buy either at a store or at the 800 number. So, at the very minimum, Jim, I'm sure that 15% of our customers come off of the Internet, and I have people in my shop who argue it's closer to 35. It is very difficult to have an accurate number there, it just is. But we know and I think probably your own experience tells you, that those people are comparison shoppers.

Eventually what happens with in this industry and we've observed it several times is, as one person starts saying something like I have the lowest price or call me if you need a lower price, or if you get a better quote give me a call, well it then incentivizes the customer to go get a second quote. And it's a little kind of a negative spiral. So while you want to always -- you want to convey that. You don't want to really kind of blurt it out, because you're inviting the customer to go out and start making a quote.

So -- and I'm sure several of my operators right now, if you talk to them, they're going to say some version of I won't the undersold, or how does that price sound to you. And the problem with that kind of vocabulary is that it invites comparisons. So we have seen times when I would say 60% of people shopped -- on a one-way rental, I'm talking, not an in-town. So I could not tell you today in any accurate method how many people shopping. But this kind of behavior increases it because, and you've seen some rates, but if we're at 400 and they find a budget rate of 150, they're going to shop us the next three times they move, you see, because they now have lost confidence that the industry has comparable pricing, right. And so it's a very negative thing. So my while interest is in stabilization, and then of course, modest increases on an annual basis.

So, there always have found -- you will always find a Penske rate that will -- let's say you wanted to move from Albany to St. Louis via Atlanta because you were going to go down to Atlanta and grab some stuff somebody and then drive back up to St. Louis. Penske will almost always be priced more attractively for that move, and we would almost always be priced more attractively direct from Albany to St. Louis. And so the customer kind of knows that if it's a screwball -- I won't say a screwball -- but a multi-stop move, that the Penske could be an improved rate, and that's just their strategy. Again, they're looking for kind of a yield. So they wouldn't care where you went and how many cities you stopped at, so long as you made the trip in three days. But, we would care how many miles you've put on the truck, you see? And I think the customer kind of has figured that out over the time, and so they just know on certain moves, go call Penske, and in fact, our operators on that move, we probably aren't competitive. And they would not apologize for it, they would just say we're probably not competitive on that.

Your next question on the percent of revenue, self-move one-way verses in-town, it's roughly a 50-50 split. That is eliminating box sales, we're talking just truck rental revenue. It's roughly a 50-50 split. Of course, there's way more transactions on the in-town rentals because the average dollar size of the transaction is considerably less, but it's roughly a 50-50 split.

I don't have a revenue breakout small, medium and large that I have command of in my head. I can tell you that inventory, what you have is you have your small truck that we call a 10-footer, or a large truck we call a 26-footer, and then we have a 14 and a 17 truck basically priced in the middle. The bulk of our inventory is in the 14 and 17, and so the book of our revenue is going to be in there. And it's kind of logical. If just think about it, it's kind of like a -- the shoe size or the shirt size that's more in the mid-size. It's where the volume is. The volume is in the mid-size trucks. But nevertheless, I have had a little imbalance and I thought I would get it cured by now, but I've had a little imbalance all falling in through the winter on where my biggest trucks are sitting. Of course, I will be trying to correct it as we kind of break into spring here and things start moving a little more fluidly, and that has had the effect of, I'm a little bit behind where I wanted to be on big trucks. Nevertheless, I'm going ahead and adding or replacing another 3250 large trucks in the early spring, and purely because I have to look beyond one year. In the short term, it's not going to do a heck of a lot for me. But I think, I have to [intend] that we're going to get that situation under control. And so I'm acting as if I'm getting it under control, although it's not my near-term biggest dollar move. So if that addresses your three questions.

That helped. Thank you very much.

Ian Gilson, Zacks Equity Research.

Clarification of one question from Jim. One-way verses in-town percentage, 50-50, is that dollar revenue or trucks rented?

Dollar revenue, Ian. On trucks rented, there is considerably more on the in-town rentals because the dollar transaction is so much smaller, but gross revenue breaks roughly 50-50 there may be a couple of percent either side of that, but it's roughly 50-50, and that has been pretty consistent for a number of years.

Okay. Where geographically is the discounting taking place, or most of the discounting if it's widespread? What is the percentage that you find on the original quote that you have to match?

Those two questions? I don't think there is a where. A good example was, this week, I went into as I was looking at Reno to Las Vegas and Las Vegas to Reno, it's roughly a 500-mile rent, and Budget was roughly $139 from Reno to Las Vegas and $189 going back. So if you roughly average those two rates, let's say they're at $175 to go 500 miles, you did not make money either side of that deal. If it had been to a distribution issue -- a decent rate on that would be somewhere between $400 and $500, Ian. And on that rental, renting that at the rate they are doing, that makes no sense because if you had a distribution imbalance, you'd lower the rate one way and you would raise it the other way. That is kind of the standard model in this business. But in this case, they discounted it going both ways. It just creates mileage and no income. So it's not a specific geographic deal and we've -- Budget, as you may know, kind of got reorganized as [Sendance] got reorganized here in the last year, and they have relocated all of their people who do this work from the Colorado to New Jersey. And we don't have a real good contact with them that says -- that gives us any feedback where they are headed with this. Oftentimes, we will find that we have a regional deal because we have a specific analyst, say, who is covering Atlanta or Georgia down into Florida, and so you see that person gets a little bit too aggressive, and okay, fine, you can kind of deal with that. This, we haven't got a good pattern, so I couldn't tell you that in the northeast I have a problem, but in the northwest, we've got it stabilized. We keep getting signs that we're getting rates stabilized, and the then kind of they fall apart again, which has been very disappointing. Ordinarily if we show little but of surprise leadership, first what we so, Ian, is show that we're willing to meet their rate; in other words, come on in the, water is fine. After a few weeks of that, then we ordinarily go back up to what we consider to be a rate at which you can make a living, and hope that the competitor then says okay, they can come back up somewhere in that ballpark. They may try to shave us 5% or they may have a distribution need that's slightly different than ours, but we would hope they would come back up to a price that at least can recover your cost. And we will see signs that they are doing it and then it kind of goes away. So it could just be personnel disruption on their end. I have no idea why they're pricing this way.

The percentage of discount -- we've looked to see if there's a mathematical thing. We studied it in reverse. In other words, do they have a -- like Penske. Penske has an automatic 10% that kicks in. If you blink to Penske, they will lower their rate 10%. It's obviously a standard procedure they have, it's built into their computer program. You would figure it out if you made three calls. The Budget system does not work that way. The Budget system is not predictable. So if you told me, if I was working a counter today and you told me you had a Penske price and it was better, I might come off my price 10%, figuring I'd probably get your business. If you told me you had a Budget price and it was better, I would have to flat ask you, well what was the price and see if I can get close, because I don't have -- there's not a real system to it. I could not say, I'll bet they're 10 back of us or I bet they're 30% back of us. They could be 50% back of us, easily. And the of course, if they do that very much, I am inclined to come and meet their price, and that's of course the dilemma.

Okay. Could you give us numbers for the -- average number of transactions? You did say that transactions were up slightly, but also fleet is up slightly. Could you give us more concrete data on that?

That's a good question. I'm going to ask Jason first of all is there something we can tie back to a published source?

We don't have anything in our SEC statements regarding the fleet, except on an annual basis, and we have not done transaction [count].

What I will do is confirm exactly what you said then, Ian, which is fleet is up a little bit, transactions are up a little bit. Transactions are actually up less than fleet is. So what you see is a drop in utilization, and of course that pretty much trickles right through to profitability, because however you want to figure it, a truck costs money, whether it's interest or depreciation or maintenance. But having the truck on the books costs money. And so we're sitting with a little more trucks than we had this time last year and we are up in transactions but not as up as much as we are in trucks, which means productivity is down. Now, so you correctly have that. I just don't have a public number that I can tie back to a percentage for you.

Okay, so would you say that sort of the average tone of business, or the business climate is flat versus a year ago, and basically you have seen 8 to 9% average price attrition?

I want to just think that, because -- here just for a minute. First of all, the price attrition is one-way, not in-town, okay? And I think you are probably in the ballpark with 8 to 9% on that on the one-way. Jason is given me hand signs, but we have to think, Jason. He wants to know one-way price attrition, not total price. It's not an average of the whole fleet. So I would say you're number is in the ballpark there, Ian. You have kind of deduced that. And then on top of that, we have a little bit more fleet, and so it's kind of like negative leverage.

Okay, as your people look at the market, is there any way to say that pricing would stabilize, not during the slow season, the fourth quarter, but during the summer season, the second or third quarters?

I intend for it to absolutely stabilize, and as I commented talking to Jim, we have been busy building us a new pricing model that we think will allow us to dig out pockets. We know there's pockets of this, but as you know, we're talking over 100,000 prices. I don't know, 200,000 prices at any time in our system. So to actually effectively reach each pocket is a little bit of a trick, but we have a new pricing model that we have been programming now, and I know we've spent more $200 million in programming and it's a big program. But we think the new pricing model will allow us to drill into those pockets better than the pricing model we have been using and will effectively allow us to counter any individual move by a competitor in a way so as to minimize the effect, and then at the same time, continue to get the dollar where it is.

As you know, we have a much more broad distribution system than our competitors, and so we need to use that to our advantage, not to our disadvantage. And without saying enough that if somebody could figure out what we have planned, we are attempting to use that to be a hammer. And if I can get it to go, and it's a big if, but I can guarantee it's what I am working on -- if I can get it to go, I should have it going by June. This is nonsense what's going on, Ian, it's not helping anybody. It's really not helping the customer, because at the end of the day, the customer is confused and they wonder who is gouging, because I'm $400 to Reno out of Vegas and Budget is $189, they think I'm gouging. Hell, $400 isn't a high price at all. $400 is kind of a halfway sustainable price, you understand? But it confuses the customer and it's not a good thing for the business any more than it would be if I was 50% under Budget, then they'd think Budget was gouging. Well, no, it sends the wrong message to a customer when you give them something below the true cost of the product, and that is what is going on right now. So some people tell me, well, the customer is benefiting. I don't believe the customer is benefiting, I believe the customer is getting confused and confused customers don't like the industry as a whole, is my experience. So we don't want this to continue one day.

Okay, final question on maintenance. Are we still seeing a dollar decline?

Right now, we're seeing a dollar decline (technical difficulty) ask a little bit in the accounting for it, so we're seeing an economic decline, but the accounting is a little bit complicated. And I would say that in the -- let's pick the month of December. In the month of December, the accounting decline shown in maintenance was considerably less than the amount shown for the decline of maintenance last June. So in other words, the lines are converging -- does that makes sense? In other words, the amount of savings that we are getting per month is declining. That is -- I have an initiative on that, but I'm not going to (technical difficulty) when I turn that. But that line can be turned. There's more room there, but maintenance is something that you have to be really careful how you touch because of course you want to always have your fleet maintained. So when you work at cutting maintenance, it needs to be on a very specific basis that relates either to a retirement of the vehicle or to some cost savings in either how you require the materials or how you install the materials on the truck. If I squeeze maintenance, we will all not like the results six months from now.

However, a vehicle that has made the 8 to 10 years old should have a lower programmed maintenance schedule than a vehicle that is only a year old.

Absolutely, and we've been seeing that all year. The lines are approaching a little bit, so I need to build that gap. There is a gap that should be in there, but I don't think we're going to see it in the fourth quarter as much as we saw it in the first quarter. But it's potentially there and we're driving on it and intend to open it back up again, Ian. So what we would actually hope is that we would do a favorable trend out of depreciation interest against maintenance.

That's where I was going to take my question.

I would say, right now, we're closer to a neutral trade-out. There's not 100 -- I can't absolutely tell you, but I would say right now, we're closer to a neutral trade-out where, last spring, we definitely were on a positive -- we were definitely making a positive trade-out there.

One comment, aside if you like, and a partial question. A couple of days ago, I was on the freeway and I passed a truck that looked identical to your small truck, and even in the colors, except the box was overpainted white. But as I went by it, I noticed that there was big by the filler cap to use diesel fuel. Is somebody copying your design, or have you started using diesels?

No, I'm not familiar with that vehicle you're describing. So no, our intent is to stay with gasoline, and this gets to this whole idea of sustainability, where are we at with the customer, how does the customers see this, how is the government going to see it. Right now, the diesel people, as you probably know from the big trucks, had to really up the ante for what they did because the particulate emissions have been I won't say annoying the regulating people for sometime now. So they had legislation that took effect this year that really upped the ante for being in the diesel engine business. At the same time, they changed to this low-sulfur diesel all around the country. They're in this change-out period, and that has popped the price of diesel. Almost everywhere I have seen and the Lundberg reports and these people report, all show diesel costs more than gasoline on a per-gallon basis. So we are still satisfied with our decision to quit the diesel. Our competitors, to my knowledge, are only diesel on their largest truck. Now there may be something that I have not seen there, but I have not seen it -- I will start looking again.

Ian, it is a possibility that what you saw with the white box and the orange, you may have seen one of our old diesel trucks we have sold.

Okay, but I was always under the impression that, since the consumer doesn't necessarily know that you could put gasoline into a diesel engine, that you were almost exclusively gasoline across the range. Is that not the case?

We had some diesels that -- quite awhile ago, and that is what I'm saying is it could be one of those trucks we sold in the used truck market.

Fair enough, thank you very much.

(OPERATOR INSTRUCTIONS). John Sheehan, A.G. Edwards.

Good morning. I was wondering if you could maybe provide everybody on the call with some commentary on what you're seeing in terms of occupancy trends, rental rate trends and discounting trends across your self-storage portfolio.

Self-storage remains strong. I think -- it's confusing how people quote occupancy as, I believe we have said publicly before, we do an occupancy based on rooms rented, and we do it all stores. In other words, no ramp-up, no deleting a store for whatever reason. Typically in the industry, our competitors quote square foot occupancy, and they quote same store. What we are seeing in ours is, on average occupancy, we are exactly where we were a year ago. I think the weekly number last week showed us off like 0.017% or something of this nature. In other words, we have an increased inventory, we have increased room rentals, but maybe we were back 20% of 1% on total occupancy. We're not seeing a problem in our occupancy. Rates have been very selective for almost 24 months now. Three years ago, you could just raise rents and no big deal. Today, you want to be very careful and very selective. There's always regional variations. I would say that, as always, the better located stores and the stores with the more amenities are enjoying the better occupancy in a general sense. We have a lot of those stores, which means they have interior rooms and they have climate control and video, and maybe electronic security. Those are the rooms that are least affected by competition in my experience and we have a lot of those. I cannot quote that number, but that is the kind of product we've built for more than 10 years, so we have a boat load of that product. But I think that the general market is good. We have done a modest amount of ground-up. We have a little more aggressive campaign on the books for the next 12 months. The development is kind of a -- you don't drive the pace of that, so much as the local building people kind of drive the pace of that. So we expect to continue to add rooms. We think it's -- the market still has lots of opportunity, although as always in the storage market, we could find a market that I wish I had maybe less product in or something, and I will pick on Houston right now, because Houston kind of gets kicked around in the Houston business. But I have lots of products in Houston. I would not be offended if I had less product in Houston. But -- and to address that specific market, we just did a change-up in Houston and reshuffled management and blah, blah, blah, because we were unhappy with our results in Houston. But we do not believe that we have to accept that result. In other words, we think that better management will continue to attract clients, and so the bottom 30 percentile are going to be in trouble, they're just going to be in trouble. The people in the middle will be the people in the middle. Our aim is to be in the top 30% in any individual market. And so we should manage to that deal.

So I think that, if you talk to my storage people, the actual management people, they would say our -- Houston is not the greatest market, but we could manage better. And when we do manage better, we will see better occupancy. So our short deal is, overall, we're at the same basic occupancy we were at a year ago, not seeing anything a whole lot different. Regional trends are regional trends, but they are not disaster. I think I would be safe to tell you that my top 100 stores are all above 94% occupancy, so that means I have some stinkers there too. I have some stores that are at 70% occupancy. But typically when I go through my top stores, in addition to having real good managers, I also have a high level of product. In other words, it's and amenity-rich product. It's not just straight driveway self-storage. It's interior room, climate controlled storage, extended access hours. It's kind of the whole panoply of services that the customer wants to get.

That's great detail. Could you maybe comment on your top two or three and bottom two or three markets? I know you said there was a lot of variability by regions. I'm just curious what you think are maybe the top two or three and bottom two or three storage markets in your portfolio right now.

I don't think I could answer that question. I apologize, I should have that. I don't want to answer that question. I don't feel that I am absolutely clear where they are. I kind of revealed that I'd rather have a few less rooms in Houston, but -- and we have taken steps in the last two weeks to reorganize our management with the intent that we'll manage it more intensively. So I would say Houston could be towards the bottom, but -- and it's -- there's a lot of storage available in Houston. I don't know if you follow that market that close, but Houston has plenty of storage (MULTIPLE SPEAKERS) have a lot of choices. But still, there is the bottom third and there's the top third, and go manage in the top third, you'll do okay. And so I could give you -- I don't have accurate information. I don't want a tell you something that's not correct.

Thank you very much.

Scott Sullivan, Smith Barney.

Thanks for taking my call. Would you please comment on the truck size demand trends, perhaps versus your projected mix?

We're still, if you looked at our fleet, we're still a little light in the midsize truck from where we want to be. We just, in the next I don't know eight weeks or something, we will complete a run of maybe I think about 7000 midsize trucks (indiscernible) Rocky, help me with the number.

I believe it's 6000 with the 2000 that we're (MULTIPLE SPEAKERS).

Thank you. We're just finishing a run or will finish in the next eight weeks, a run of about 7000 midsize trucks, and we're then switching, as I indicated with either Jim or Ian, we're switching to larger trucks, but we could have taken more small trucks, it just kind of -- the system is kind of at capacity if we're adding trucks. We've been adding trucks at a pretty good rate and we're about at capacity of what we can absorb versus what we can sell. So you can kind of anticipate that, in the second and third quarters of the coming year, if we add trucks, it will undoubtedly be in the midsize range.

Okay. And lastly, would you please comment on the status of your stock repurchase program?

Gary Horton, I will let you have that one.

Yes. It's up and ready to go. Again, there are various rules that we must follow. I would say, we can be in the market since we just filed by Tuesday morning.

And what is the Board approved level at this point?

I believe we issued something, I think it's $50 million.

Thank you very much. Good luck.

Jim Barrett, CL King & Associates.

Joe, if you didn't answer it already, you're partly into renovating your fleet with newer trucks. Can you give us any sense, even directionally, once you have completed the process, and I suspect it's probably somewhat of an ongoing process, but once you have completed the current process, what magnitude of reduced truck maintenance the Company is looking at an annualized basis?

Jim, I don't have a good number for you on that. If we went back 18 months, Gary or Jason, do either of you want to hazard a comparison or a percentage? What can we help Jim with? Do have something that makes any sense to say? As you know, the maintenance number is a little difficult to pinpoint from a published data, Jim, and I'm trying to if we have anything we can tie back in any way.

We don't have anything published, but I will just reiterate what Joe said, and that was, the percentage decrease was much greater last year, and that trend has flattened out a bit this year.

Can you help me understand why that's happening, because it seems like you would have more new trucks in the system now than you did a year ago. And I assume trucks that are (MULTIPLE SPEAKERS)

You anticipate. In other words, I know, if I have 10,000 trucks that I anticipate I'm going to sell over the next 12 months, Jim, I can then selectively change my maintenance or withdraw from service selectively trucks, and I get a very -- an immediate boom. And so you can kind of lead with it a little bit, if that makes sense. If I knew I had 10,000 coming in and 10,000 going out, I don't wait until I have the 10,000 in to be able to back my maintenance down, because if I have 10,000 trucks to liquidate, I'm going to liquidate 800 a month. So by picking the right 800, I have a much more comprehensive effect on income drop, and we did a good job of that all through the last spring and into last summer. I've spent a lot of my time on the revenue line right now, and I think there's some more savings to be realized there, but it's a very selective analytical process. It's not an issue, a deal to my guys, and say cut maintenance 10%. It doesn't work that way. That would get you a horrible negative result. So what you have to say is, this particular model of truck, and we run it through a series of decision trees that says if this, then that, and the ultimate is, do you fix it or sell it? And if you do that, you can get a certain amount of lead on the game.

Additionally, as you might imagine, as we reduce total overall expenses in maintenance, the slowest part to reduce is your indirect or overhead. We have the same problem anybody does. When costs are coming down of course, all of the general administrative people are the last people who are subject to a reduction in force. Obviously, if you only have work for 10 mechanics, the 11th mechanic will either attrition out you'll cut your worst performer. But general and administrative people tend to be a little bit harder to pare it out, and I think I have some -- I'm sure I have some opportunity there, and I will be ferreting it out through the spring. But I think it's the lead effect of getting ahead, and we did a nice job of that last spring, and then it's the drag of the general and administrative people in that that don't reduce as quick as you reduce your direct expenses.

And Joe, just to review, my recollection was, is that your maintenance is done in-house in your own facilities?

yes, I'm going to say 35%, maybe it's 80%, Jason. It's 80%-85% in our own facilities on a dollar volume. So yes, we do. And so -- and the disadvantage of that is, when you are on a contraction, of course, is that you have to deal with the overhead. And that is just normal cost cutting, like any organization you have ever dealt with.

So that sounds like a fixed cost operation, with the exception of when someone orders motor oil or orders a new tire or something like that. Is that the way one should look at it conceptually?

It's a fixed cost until you get in and dig it out, you're exactly right. It does not reduce on its own, you have to go in there and reduce it. So it's -- the component of that's fixed would be your property, plant and equipment, which is -- I'm going just make a guess, 10% of the total cost. It's not your big driver. It's your general and administrative, which is your parts people, your transfer drivers, people who do keypunch, data entry type people. It's that whole group of people that tends to not reduce. The direct people, the people turning wrenches, it's a pretty straight equivalent. If they don't do as many exhaust systems as they did this time last year, pretty much that work force will [attrit] out. So that part is pretty variable, but the G&A is, and I'm going to say that -- I don't want to -- G&A is a substantial portion of the overall cost, but I don't have a number in my mind that I'm comfortable to quote.

That's very helpful. Thanks again.

Jeff Lignelli, Stonebrook Fund Management.

I had a question strategically. Given the high value that the storage assets carry in the REIT market, have you guys ever given some point to separating your two different businesses?

Yes, we have looked at it. We have not looked at it recently, Jeff. We have looked at it in the -- we don't believe that is the way for us to go. There is some physical limitations. If you took our whole portfolio and said we have 1000 locations, just to pick a number that is at least in the ballpark, all of them, we co-manage the rental of trucks and the rental of storage with the same staff at the site. Some of them, is inextricably linked; other places, it could be separated. But you don't yield -- if you started out with 34 million square feet, by the time that you divided it, you're not going to end up with 34 million square feet and you're going to end up with an externally managed REIT, which depending on who you talk to, is a no-no or it's okay. But I think the most immediate answer is, is we've looked at it and decided not to, although it's a big creator of value. And what Gary Horton has been spending his time doing over the last couple of years is taking that value and leveraging it in an effective way that gives us the opportunity to get the financial leverage we ought to get off of it, and thereby see a benefit to our shareholders.

I just bring up the point, because if you looked at the 12 to 24 months in a stock like Public Storage, Public Storage trades at EBITDA multiples that approach 20. And clearly, it's clear that the people in the REIT world place different values on the sort of assets that you have versus just plain fundamental stock market investors. So I just think that at some point, it's worth reconsidering.

Thank you very much, Jeff.

Thank you.

There are no further questions at this time. I would now like to turn the call over to Mr. Joe Shoen.

Thank you all for your time here this morning. I apologize for the (indiscernible) our two analysts short. Again, I think that is a decision we have made right or wrong not to give earnings guidance, and in this case I think it ended up catching people short. I have tried to be as Frank as possible discussing with you here today so you can kind of see where we are headed in the near-term.

The fundamental business is healthy, our fleet is in the best condition it has been in in at least five years. Our competitors, while at least I will say the Budget people are acting in a noneconomic manner, they will be called to task because they have the people they must answer to also. They will be called to task and they're going to have to cease that behavior. And my objective is to, the minute they cease that behavior, to let -- to have us adjust our behavior accordingly. So I thank you all for your time and I appreciate your continued support.

This concludes today's AMERCO third quarter 2007 investor call. You may now disconnect.