U-Haul Holding Co (UHAL) 2012 Q1 法說會逐字稿

Good morning. My name is Kayla and I will be your conference operator today. At this time I would like to welcome everyone to the AMERCO first-quarter fiscal 2012 investors call. All lines have been placed on 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 first-quarter fiscal 2012 investor call. Before we begin I would like to remind everyone that certain of the statements 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. 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 June 30, 2011, which is on file with the Securities and Exchange Commission.

Participating in the call today will be Jason Berg, Chief Accounting Officer of AMERCO. I will turn the call over to Jason now.

Thanks, Jennifer. Good morning. I am speaking to you today from Phoenix Arizona. Also on the call with me from our offices in Reno, Nevada, are Gary Horton, AMERCO's Treasurer, and Rocky Wardrip, AMERCO's Assistant Treasurer.

We will all be available for questions after the prepared remarks. Joe Shoen, the Chairman of AMERCO, is unable to participate in today's call.

Yesterday we reported first-quarter earnings of $3.56 per share compared with $3.26 per share for the same period in fiscal 2011. The first quarter of this year includes a $0.30 per share one-time charge related to the redemption of our Series A 8.5% preferred stock on June 1.

For the quarter, U-Move revenues increased $27 million, just over 6%. I would like to remind everyone that last year at this time we reported record first-quarter revenues as well; so the results we are reporting today are improvements over an excellent quarter last year.

We are continuing to see increases in both our one-way and in-town business. We get the sense that demand for our products and services has increased somewhat, and we have been able to do a better job of capturing these transactions. This has been accomplished through programs aimed at increasing our utilization, including improved management of the fleet.

The average number of trucks in the rental fleet increased approximately 4% from where it was last year at this time. These positives are tempered somewhat by what we still consider to be a very competitive rate environment. From what we have seen in the month of July, revenues are still trending positively.

For the first quarter, our capital expenditures on new rental trucks and trailers increased nearly $65 million to right around $170 million as compared to the first quarter of last year. Proceeds from the sale of retired equipment was around $55 million. Our projection for rental equipment gross capital expenditures in fiscal 2012 is in the neighborhood of $380 million to $400 million.

We are continuing to opportunistically expand our storage operations. Revenues for our storage program increased just about $3.5 million for the first quarter of fiscal 2012 compared to the same time last year. In addition to increases in overall occupancy, we are seeing incremental gains in our average rates.

From June 30, 2010, through June 30, 2011, we have added over 1,068,000 net rentable square feet to our self-storage portfolio. 398,000 of that was added during this last quarter.

Spending on real estate related CapEx, which includes construction, renovation, and acquisitions, was approximately $19 million during the quarter. Even considering the pace of additions to the portfolio, we were still able to increase our all-in occupancy figures 1% to 77%.

Operating expenses at the Moving and Storage segment increased $17 million for the first quarter of fiscal 2012 compared to the same time last year. Equipment, maintenance, and repair spending increased during the quarter, as we have programs in place to refresh portions of the trailer fleet, and we also just have an increase in the number of trucks in the fleet. In fact, if you exclude the trailer update costs, repair and maintenance costs are in line with the increase in U-Move revenues.

Similar case with our personnel expense increase. As a percent revenues, they remained relatively flat with last year.

I mentioned this last quarter and I will go over it again. With our U-Box Portable Storage program now beginning to gain some traction, we are seeing increases in our other revenues line. We are also seeing the associated operating expenses run through the operating cost line.

Depreciation expense, net of gains on the disposal of property, plant, and equipment, was flat for the quarter while lease expense was down just over $4 million. The majority of new financing has been in the form of term loans or securitizations, which will lead to an increase in depreciation expense this year, which we expect should be offset by a decline in lease costs.

Our Life Insurance premiums continue to show large year-over-year increases resulting from our third-quarter acquisitions last year. These fluctuations will begin to even themselves out after the next quarter.

The earnings improvements that we expect to see from these acquisitions are going to be realized incrementally over time. This year we should see them adding somewhere close to $1 million to pretax income. Earnings from operations for the first quarter of fiscal 2012 were $148 million compared to $128 million in the first quarter of last year.

On June 1 of this year we redeemed our Series A 8.5% preferred stock at a redemption price of $25.00 per share plus accrued dividends through that date. When we initially issued the preferred stock at 1993, it was recorded into our capital accounts at $25.00 per share less the issuance costs, which were approximately $1.02 per share.

Upon redemption we recognize the difference between what we were carrying the preferred stock at on our books and the $25.00 redemption price as a charge. This amount was reduced by the shares that we had been purchasing from -- our insurance companies had been purchasing over the last two years.

So the net effect of all of this accounting was a one-time charge to earnings of $5,908,000 or $0.30 per share for the quarter. Based upon what our common stock share count is at June 30 of this year, the termination of the preferred stock dividends due to the redemption will increase our earnings per share by approximately $0.15 per quarter into the future.

Cash and short-term investments excluding our insurance companies was $191 million at June 30. We also had cash availability from existing borrowing facilities of an additional $334 million. And this is all after we spent $152 million during the quarter to redeem our preferred stock.

I would like to take this opportunity to once again invite everyone listening to attend our fifth annual virtual analyst meeting on Thursday, August 25, at 11 o'clock Arizona time. The event is broadcast live over the Internet, so there is no need for you to leave your office or home to persist.

We will make available to you executives responsible for some of our most significant programs. There will be prepared presentations and then time provided for question and answers. Please feel free to submit questions ahead of time to Jennifer Flachman, and we can be sure to address them as part of the program.

With that I would like to hand the call back to Kayla to start the question-and-answer portion of the call.

(Operator Instructions) Ian Gilson, Zacks Investment.

You have made a small debt issuance cost on a -- I guess it would be a new method of raising money.

Yes, our U-Haul Investors Club. This is a program that we launched in February of this year, and it is a program that is complementary to what Gary and Rocky are doing up in Reno.

It is a relatively small program. I think through this week we have issued about just under $6 million through this program.

It's asset-backed notes that we are issuing direct to investors over our website. We have a website, uhaulinvestorsclub.com, that you can go in and sign up for free, set up an account, and you can invest in notes that are backed by various types of equipment. We have trucks, trailers, some of our real estate out there.

We have it for various terms. I think anywhere from two years to 20 years we have out there right now, and at rates anywhere from 3% to 8%.

Is this a registered security in the eyes of the SEC?

Yes, it is.

Okay. How do you decide what the return would be on those equipment certificates, I guess, would be an equivalent name from the railroad business? The railways used to issue these daily.

I would say that the program right now, we are testing various maturities and various rates, so the rates that we have on there may be -- they are not necessarily indicative of what our overall borrowing costs are. It is more of a test program at this point.

Okay, fine. Thank you very much.

Jim Barrett, CL King and Associates.

Good morning, everyone. Jason, I missed your comment about maintenance. Can you repeat that and amplify? Should we assume that with the truck fleet aging this number will be growing in excess of sales?

Well, I have been mentioning now for the last couple quarters that the decreases that we saw from the fleet rotation tapered off. We saw in this quarter those numbers start to come up a little bit.

Outside of what I would call our out of the ordinary type programs, it is trending along with our U-Move revenues. It's a little difficult for me to say if that is going to continue at that pace.

If revenues continue where they're at, that is possible. But I'm going to hedge a little bit on that one and say that, in the interim, those costs might creep up a little.

Might continue to creep up? So we should assume that they creep in line with revenues?

I don't see any significant -- I don't see them significantly cutting into our operating margin, no.

Okay. The industry pricing, if we go back to fiscal 2006 when you enjoyed what seemed to be, I thought, good industry pricing. Can you compare the current environment to that period of time?

I would say that the current environment is similar to what we have been seeing over the last several years. In '06, we may have taken rates up a little bit (technical difficulty) at that time versus industry pricing overall. So, what we have seen over the last three months does not indicate any change in the competitive pricing market to me.

One thing I kind of let slip by in your last question, Jim, is that you said that the fleet is aging. I would say that that isn't necessarily the case. We have been rotating a fairly decent number of trucks in. But as far as the catch-up in our rotation program, that is largely (technical difficulty).

Okay, and on the self-storage purchase of real estate, can you comment on the current pricing environment, and how that compares year-over-year, broadly speaking?

In comparison to what it was like several years ago it is much better. I would say compared to where it was at last year, there is more interest in the sector. There is more -- I have noticed more money coming into it.

So it's a little bit more difficult to close on some of the deals. But the pricing is still fantastic.

Good. Then finally, U-Box, can you give us more details on that? Is there any more clarity as to when that might be broken out separately in terms of its sales and as well as its profitability?

The program is still expanding. I think we are in -- the last thing we said was over 1,200 locations. We are continuing to roll that out with our new trailer delivery option, which puts the customer in a position to control the transaction much more than in most situations in a portable storage transaction.

The majority of the increase in other revenues that you see are related to this program, over half of increase. But it is still relatively small in the big picture, so I still think that we are quite some ways away from breaking out the revenue.

Then on the profitability side, it's an integrated component of our overall Moving and Storage offering. But I would say that we are not seeing it necessarily accretive to earnings at this point.

Okay, thank you very much.

(Operator Instructions) Ian Glidson.

Hi, that's actually Ian Gilson, but everybody knows who I am. You had mentioned and I missed the storage spending in the first quarter. Number of square feet you added?

Yes.

Could you give me that?

Sure, it is -- to our on balance sheet portfolio we added a million -- I'm sorry, in the quarter we added 398,000 net rentable square feet. Over the last 12 months we have added 1,068,000.

Couple expenditures.

Okay, and in the quarter, you spent $19 million on that storage?

Yes, and on some other programs. So if you were to try to calculate the acquisition cost per square foot, it is going to be a little bit less than the $19 million divided by the 398,000.

Okay. All right. You have now gone back to the truck count that you had reported in the first quarter of fiscal 2010. So presumably from here on out the truck count will increase.

Given the turn of the business, do you think the transaction will move up, fleet utilization move -- be the same on that fleet expansion over the next three quarters?

Well, certainly going into our next quarter, which is our busy time, I think we have positioned our fleet with trucks over last year to try to meet the demand. Last year at this time I think we reported about an 8% increase in transactions; this year we are just under 4%. So the transaction growth is there.

For us, it's a combination of adding trucks to the fleet and also not taking as many out for sale. We have increased the number of available.

Also, something that doesn't get mentioned often is that we have done a good job on the repairs side, in that we have a total fleet count, but then the total number of available for rental has also improved because we have trucks in the repair shop for much less time than what they used to be. So the total fleet available for rent is in a much better spot this year than it was even last year at this time.

Okay, thank you.

At this time there are no further questions.

I would like to thank everyone for their participation in the call, and we hope to have all of you attend the virtual analyst meeting here at the end of the month. Thank you very much.

Thank you. This concludes today's conference. You may now disconnect.