U-Haul Holding Co (UHAL) 2018 Q1 法說會逐字稿

Good morning and welcome to the AMERCO First Quarter Fiscal 2018 Investor Conference Call. (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-Q 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 will now turn the call over to Joe.

Good morning. The basic 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 will continue to take action. This part of our business is simply tighter than 2 years ago. Self- move customers are still very active. All of August, we are operating in a very active market that will stress our personnel, and our systems. Self- storage demand is strong. Many new entrants have recently or in the process of putting more capacity in the market. It may take a while for these locations to be absorbed. The customer has a strong preference for well-managed facilities. This is where we can shine or not.

We've had some cost creep up. Jason will address that. We recently rolled a new program, we call, U-Haul Truck Share 24/7 across all of North America. This is the result of years of work. We cannot yet tell that this will simply make existing customers happier or will attract new customers. I believe, it will do some of both. U-Haul Truck Share 24/7 is a proprietary system for which we are seeking intellectual property protection. It will take several years to realize the potential of this system. I think, it is safe to say, we presently 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 reported first quarter earnings of $6.44 a share as compared to $7.51 a share for the same period in fiscal ' 17. 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 a $ 24 million improvement as a result of additional transactions. We experienced growth in both the one-way and in-town markets as well as across our truck and trailer fleets. Speaking of 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 units that we would have expected to [fall] by now. U-Move revenue continued into the month of July.

Storage revenues were up over $ 9 million that's 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 in rates across the country, in Canada.

Spending on real estate related CapEx for the first quarter of this year was $ 142 million, that's up $ 18 million. From July 1, 2016 through June 30 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 have 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, and 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 million of annualized revenue on the storage side. At 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 depreciation, operating earnings nominally increased. Operating expenses at the Moving and Storage segment increased $ 30 million for the quarter. The largest contributor to this were personnel, repair and maintenance and to a lesser extent cost associated with new locations or revenues not yet ramped up enough to cover these costs. Depreciation is a significant factor with regards to our reduced GAAP earnings. For the quarter, depreciation associated with the rental fleet was up about $ 13 million. I think, it's worthwhile to 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 2/3 of this increase. Depreciation on buildings, improvements and non-rental equipment was up a little over $ 4 million. This is a combination of just the sheer increase in the amount of PP&E that we've added the last several years along with a 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. That's down from $ 419 million last year at this time. All rental equipment sales were down $ 6 million to $ 140 million. Gains from the disposal of property, plant and 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 cost than what we sold 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 and Storage as well as our life and property and casualty insurance operations was $ 229 million. 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 $1 per share cash dividend, that was paid in August. We continue to have a robust development and acquisition pipeline that is skewing 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 offset 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 are that these investments in the new Moving and Storage locations are going to add profits over the next several years. With that, I would 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.

Joe, you mentioned, you made some mistakes in the first quarter. Could you sort of outline what they were?

In the truck sales, Ian, I don't think we managed the auctions, well, I'm sure we didn't manage the auctions as well as we could have. And that compounding it being a kind of little bit tougher resale market just simply did hurt both total units sold and sales price per unit. I have a shake up in there. I think, we're doing better. We're performing better and of course the result should start to reflect it, but we're probably going to see the results in the second quarter be pretty middling too just because, we're about done with that. So that's just where it is. It's a little bit tougher resale market, but it's not a reason to panic at this time. You just have to be minding your Ps and Qs, and I don't think we did as good a job as the shareholders should expect us to in managing the auctions.

A question for Jason, and in fact to both of you. In the past, you've balanced depreciation versus leasing, but your leasing expenses over the past few quarters remain pretty constant and yet interest rates would sort of suggest that leasing is a better financial decision at this point than buying and then placing heavy depreciation charges. Dare to 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 cost and where we've been for the last 6, 7, 8 years, I think is as a full taxpayer, when we do that analysis, the depreciation deductions that we get from a federal income tax perspective are swaying the overall cost 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 online, if we were to do operating leases that would maybe skew the expense down a little bit in the first couple of years, but that's not how we're managing the process.

Ian, I'll comment on that, that as I told you here, and about 2 years ago most of the Ford and General Motors, but both got through substantial price increases because they could. And we're rubbing that all off in the first 2 years, and that's what I think is a good thing to do. It's always a judgment, but being caught with your book value above your market value is an uncomfortable situation to put it politely in. I am trying not to have us be there.

Okay, is truck capital expenditures out of current cash flow or are your 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 a 100% right now.

Okay. How long do you keep the (inaudible) trucks?

This is Joe. We have 2 fleets. We have 1 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 7 to 10 years. So it's a -- there is a -- always a mix, but those ratios are pretty consistent.

The next question comes from Jim Barrett with CL King & Associates.

Joe, in the 10-Q, you mentioned spending $ 300 million less on a net basis on fleet and equipment, at least year-to-date, it's 1 quarter, but you're spending a little bit less on your real estate and you will 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 invested over the last several years, are reinvestment opportunities as robust as you've seen in the past several years or you're seeing fewer fat pitches to hit in terms of where to put the company's money?

The real easy pickings in storage are few and far between. Now this could turn, Jim, and I expect it will, when some people discover there's more to it than having a location that looks like a public storage or U-Haul location. So I think there will be some falling out. That's pretty typical of real estate. There will be some opportunity then, I hope. But there is a lot of sharp people out there. So I don't think it would be an immense opportunity. I'm seeing a consistent opportunity to develop new product. The biggest constraint is land use -- as can we get the local community to go along with the program and 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 in that. When I speak to my peer group, they all sing the same song about that. And so when, like 2 years ago, we bought several facilities that have been 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 proper -- 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 along the way. So there is a lot of opportunity. I continue to see, let me put it that way. I continue to see opportunity and I'm kind of an optimistic type person in many ways. But I continue to see opportunity. I think that the industry has pushed prices about as much as it ought to push prices in my opinion and that we're not going to -- not raise prices as the rest of the industry does, but I think we're somewhere as up about with this product can go for. So now we can't just foolishly spend to bring more product on. You have to have a lot of fiscal discipline and that's just fundamental management. So -- but I think there is good opportunities. We have tried to look -- there's been different portfolios sold. People selling 8, 10 or maybe even 30 locations. We've tried to look at them, but we couldn't get the math to work, what we thought was fair for our shareholders. Now other people, I believe all these units did trade and somebody did pick them up and they may do great. 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 it. I am very sad, we lost it. But I don't think paying extra was going to be prudent for is. So we're still -- we have a lot of stuff in the pipeline, but it's agonizingly slow. But it started -- it comes on and as you can -- even you follow this, I don't know what now 15 years or something and you can see that historically, we have a greater cash reserves than we've had. And I keep -- long to be to hold that, because I think opportunity will come. But that's a real -- it's a good question and we go through it all the time back versus it cost to holding the cash and we push and shove back and forth all the time. I don't think there is a certain answer to it. But it's -- anytime you are holding cash, you can argue, you're sub-optimizing and I am open to that discussion, but I don't -- I'm not totally uncomfortable where we are at. And I think there's going to be opportunities, believe it or not. We're trying to get some progress going in Albany . You're familiar -- you don't live that far away from Albany. Albany is a -- I shouldn't say this on the radio or the...

There's room in Albany, okay? So I should be all over Albany. Okay, [from that] what you would expect from me and my job. There is room there and we should move on.

I understood, that's helpful. And although it appears to me, calculating offline that your price per square foot occupied continues to be growing in a quite healthy fashion. I 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 as if you're still seeing some decent price appreciation on your self-storage assets. Is that where you are?

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 5 years. okay? Now maybe we're going to get it, that'd be great. But when I go look at a project, I'm not figured in a whole lot of upside to pricing.

Okay. And in your call. I'm sorry, go ahead.

That's just -- that's my attitude but it's not -- who knows (inaudible) Jim.

Right. And as was the case in ' 17, the operating expenses in moving storage were 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. We -- I'm looking for a breakthrough. I mentioned briefly 24/7. I mean, I've got things brewing, but nothing that I want to -- correct to tell you, because I know you're trying to make very serious advice to people that you are investing large sums of money. So we're pushing very hard, looking for a breakthrough. I believe there is more market potential out there, but we have to keep searching for where that is. As our utilization theoretically can always be improved, we've made a lot of our success has been on driving utilization and that's part of what's behind or what -- part of what may come out of Truck Share 24/7 as a little increase in utilization of that is very positive leverage, if we can get that to 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 are not -- I'm not forecasting 8%, I don't see 8% next year in my mind, I don't see it though.

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

Well, participating...

We were just under 9,000.

Just under 9,000 participating locations. It's an option at all 20,000 plus location. But we've actually had part -- in other words, transactions at around 9,000 locations as of now, not as of the quarter, but as of the present time period. So it's growing, Jim. And I expect, we're going to drive on it. I think, it speaks to what customers at least what some customers want. Our job is to get it to them.

And then 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. 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 a portable storage box competitor and have brought that online and have been blending that with our operations. I know, we're still seeing healthy growth let's say even double-digit growth. So I think we're into our price -- 16th month of the year-over-year monthly growth.

And about profitability.

And profitability, we did see, I measure -- contribution margin, how much it contributes to the rest of the organization and that was also up, and it's been up for really the last 5 quarters.

The next question comes from Jamie Wilen with Wilen Management.

One more about you -- is there any inflection point where above a certain amount that we have now reached above breakeven at the incremental profit margin really hits to the bottom line?

We surely hope so Jamie. And -- we surely -- it's easy to project. We have cost discipline. So we could kind of tell what our margin is. It all comes down to can you attract a customer and then can you execute on those you attract, always I see where we felt short, I get bad. 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 whole select markets in August that's because I believe, we have very low awareness to the product and an ability to execute. And so if we can attract some more customers, we're going to start -- you could see this a greater contribution on a marginal basis, which is what of course, we're hoping for. I don't know have a -- [$1 about my mind] .

How large do you -- in regards to help to the size of PODS and are you gaining numbers in market share?

First, question would be, how large is POD, okay. So I don't have anything better than 3 or 4-year-old stuff maybe I am not even that new on how big they are. I'm going to guess, they are north of $ 1 billion today, but I don't really have a -- an accurate way to know that. They're doing a better job in getting coverage. I'm a little disappointed. I thought we would just beat them to death with coverage but they're doing a better job. I have to take my hat off to them on that. There is still a variety of small players in the market, and the market is much bigger than what any of us are experiencing. PODS does a tremendous amount of on-site storage, but they also do a tremendous amount of moving. We're concentrated in the moving and almost no on-site storage. So there -- let's say possibly half the time, we're providing the same or overlapping product and service would be my guess. So I couldn't tell you who is 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 have positive margins and that's why I encouraged that team to put together some TV advertising to see if that could get a blip at some markets then try to project that to a larger footprint.

On the self-storage side, obviously the increase in new units has a major impact upon the capacity utilization for the whole company. And it does take, I guess 2 to 3 years for under unit to stabilize. Do you have any figures on capacity utilization for units that are more than 2 to 3-year-old, so we can accurately assess how well you're doing in managing that business as far as capacity utilization from year-to-year?

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

Okay and very stable at 90% from year-to-year, right so?

Yes, I think it was down maybe 50 basis points.

And then you also talk about how competitive the market is out there for units, yet, we're adding 3 million square feet per year. Those 2 statements really don't jive. If it is competitive and market is tough, I would say, why are we adding that many -- that much in the way of new square footage?

Well it's part of our base business at this point. We will be in this business 20 years from now and there is 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. From my money, we are putting wood in the woodshed. And we are growing total occupied room steadily and will continue to grow them. I wish, I could tell you, I could rent them as fast as we could bring them online. But what happens at each individual unit has its own characteristics. They are 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 2-year-old product had a average occupancy at 90% in Phoenix, introducing a new location in there, it won't just jump to 90%. It will still take it 2 or 3 years. We've tried to find ways to make it go-to-market occupancy faster and we have 1 or 2 successes. But overall, my experience is that that they ramp-up pretty close to the same, which is, as you said, 2 to 3 years. So it's -- I just -- let's say, we're going to be in it. It's at least a 30 year commitment of capital getting the storage business. We're in for the 30 years. Let's get in there. We're still going in. I used Albany as an example. There is room in Albany and we should get in there and make our presence felt. It will still take us 2 or 3 years to get rented up. But maybe the competitors will see we're in there, and they won't in dead heat to follow soon. I believe, 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 at least where we think this is a 5-year cycle or something, it's at least that.

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

Okay my guess is another 18 months because we haven't committed yet, but I -- I am anticipating. We're going to go back to adding some big trucks, and they are the ones that just really slaughter this. And they trailed off as Jason noted in his comments, the percentage of their contribution to this increase had trailed off in the quarter but as soon as we go back to producing them, they will just jump right back up and we'll be producing them again within 6 months, maybe quicker is my judgment. Now that we're not committed, we haven't placed an order but I think in all likelihood that's what will happen.

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

Our projection was somewhere just south of [$ 900 million] growth. Now that 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 variability in our CapEx projections it was going to be to the upside, and it was because of the 26-foot truck. 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 could push our projected CapEx numbers up a little bit.

Okay, and one offs. So when there is increasing CapEx for trucks when utilization is not significantly higher, how do you -- why wouldn't you want to increase that utilization number a little bit more?

We do. What you're actually seeing the build-in trucks is twofolded and Jason mentioned this. Where we have somewhere, I don't want to -- I can't give you an absolute number. Who we have between 3000 and 5000 trucks today, I just do not have, because I'd rather they were sold, but they're not sold. So they account in the utilization numbers, but they're not trucks that are either positioned or capable of that hard utilization, that's why they should be sold. So it's getting their sales back in-line will -- it won't actually increase utilization, but it's a math to the extent utilization is a math problem. Yes, it will change in a little bit. So somewhere its between 3000 and 5,000 trucks we have or trucks too many. And that's part of my hesitancy in saying, we will commit to big trucks. I need to have a little bit better solution on taking big trucks out before -- to get to more big trucks, and I'm still, that's an in process issue right now. I'm not happy with where we are. So I'm not going to commit to more trucks till I get it -- get that under control, or get it -- to get that under control, Jamie.

And lastly, I would hope one day, you would change the corporate name to U-Haul, and so, it is one of the most well-known brand names in the country and certainly little well-known to anyone (inaudible) I hope you would consider that. It wouldn't cost much but I think it would be a nice thing for shareholders.

All right, thank you, again.

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

Okay, thank you very much. On the Truck Share program, what inducement is there for the independent dealers to adopt 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 and most of these dealers, of course, have a base business and let's imagine your base business is a Monday to Friday business. Well with the Truck Share, those trucks can rent Saturday and Sunday without you having now a person physically present. So to them it's a -- it's almost right, right now it's a freebie almost.

Well, tell me some, how does that actually work staying for an independent dealer that is closed on (inaudible).

They all have a software. What happens is they designate certain units as available. They make the key available, they park the truck where it's available, so can't be behind a fence et cetera. Our park behind another truck, okay, so they make the unit, they position it so it's available, they entered in the system as available and that how 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 beyond the operating hours, for instance in the summer there's a lot of people who ride the truck at 5 in the morning. Because it's light and so most locations don't opened up 7 or 8 or 9. And so this way, the customer can get the truck at 5 in the morning. And maybe return it earlier in the day, so the -- the customer go through a process of registering with us and then getting approved, what we call live verification right at the dispatching location right at the time of the transaction and then they dispatch. So it's all done on a -- say basically a smartphone or you can do it on a tablet, but most people just use a smartphone and they can return it the same way. They can return it when the location is not open and they can close out the contract, make it finalize, clear their credit card and send themselves an email receipt, which for a lot of customers is very important because many, many people today actually budget off of their debit or credit card and so they want transactions to close. And the problem with the rental transactions is it stays open and 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 the contract finalized even if they're returning at 10 o'clock at night, they would like to finalize at that night rather than see it finalize the next day.

It would seem to me that that would increase utilization, when would we expect to see that translating to better operating efficiencies?

Well I would like you to be the first and know and I -- it's not there yet, but you can see that that's in the back to my mind all right, that's for sure. And of course a 1% percent change to utilization is a big change, at 0.5% utilization is a big change . So it's -- the needle won't just jump off the dial but anecdotally, it's already impacted 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 happier. In other words, they were going to rent at 9 o'clock anyway. They got to get it at 5, they're just happier and how much of it is going to bring us new customers. In other words, they had to have the truck at 5. And because we weren't open, they didn't rent. So it's -- I can't them out. I don't have a meaningful way to sort them. I will have a better impression after we've been hard into this for 6 months and we have hundreds of thousands of transactions to go back and try to go through. Right now, I'm stuck with anecdotal information. And so, I'm seeing a little bit of both. We are just starting to promote it here in the next 2 weeks. We have not promoted this yet. We've only made this -- the only promotion, it isn't even promotion, we haven't even promoted it on our website. We've just basically been accommodating customers who trip across it because they enter in when asked, when do you want the truck?. They put in 5:00 a.m. Sunday morning, and we go, great. Whereas before, we would have said nothing available.

Okay but the dealer has to have a lock box for the key, correct?

Basically, yes. And that will allow the customer access to the key and they're often running hopefully.

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

Joe or Jason, when you evaluate self-storage acquisitions, do you include a revenue stream from renting trucks at those locations or is that revenue stream viewed as not material, because I would think that if it was material, it would make for different economics for U-Haul versus a competitor.

And it cuts both ways, Jim. It takes additional facility to do that, but let's say, we were buying an existing self-storage location, typically they would have 5 parking spaces totally. And we would not consider the U-Haul as additive to that facility. If we were something that-- let's say, we were building something in a market we thought that there was several hundred thousand of U-Haul trucks and trailer rental revenue in there, then of course we would include that in our calculation. At all times, we're doing both. I think the fairest assumption is to say, because we have trucks and trailers, we get a shot of these customers, a little more often than anyone else does, a little more than just our brand does. Our brand is helpful, it's sort of a big asset, but the fact that people come to us when they're moving and a high number of the people who subsequently store are involved in the move either at the beginning or the end of a move. So we have -- we will have access to that customer. That's what should really help us and I think where we're most successful that is what the truck rental does.

And Joe with housing turnover up and it's been up for -- at a period unemployment down, consumer confidence up. It would appear that the stars would align for demand for increased mobility. And I know you have stated in the past that there is no relationship between your business and housing 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. And I think, consumer confidence is up and [that's except] for all those statistics which means, we should be capturing an increased customer base. We are, whether it's the -- whether it's enough or at, as I'm always unsatisfied thinking it's not enough. We're capturing an increased customer base. The only contradictory statistic is the census keeps publishing information that says, the percentage of people who change their resident is down and is down over 15 years of being down, and I -- the statistics still compounds me. 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 share of it, but that causes me to be optimistic, which is how I try to open. This is -- our base U-Haul business is strong. We need to manage to it. There is a lot of wrinkles to that, but there's people out there need our help. We need to get in front of them with a good combination of product and pricing and get it done.

And Joe, to summarize your view on capital allocation, when an investor looks at the cash balances and 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 and yourself see -- your cash position?

I don't want to speak for the board because they'll probably, they speak for themselves. But of course first thing if we really thought we had just [too dollar] much money, go pay down debt. We got a bunch of debt we could pay down and that's immediately going to start that money earning [typically tell you like] 4%, 5% which would be productive. We've made distributions to shareholders. I think, you're somewhere in the range of reasonable or there is no way to know that. But do I see a $ 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 forward at this time, Jim.

Thank you, Joe. And 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's contributing to the operating expense increase is really for the last several quarters is the personnel line and the areas that we've been doing increased spending on personnel has been, here at the home office, it's been customer facing personnels, our roadside assistance, sales and reservation, our call center, IT is up to a lesser degree and those are folks that are working on our 2 points of sale systems, which includes 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 in the 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 probably going to look a lot like it did the year before. And the IT spending has been fairly consistently, we did ramp-up a little bit towards the end of last year. So I don't have a real good projection 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 are going to help us rent trucks then we'll keep putting more money back into that part of the business and investing it there.

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

I'd 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, I believe our 11th annual one. On that day at 9 o'clock Arizona time, we're going to start off with our annual shareholder meeting which will once again be video webcast. And then 2 hours after that at 11 o'clock Arizona time, we'll do our Virtual Analyst and Investor Meeting. Joe will be moderating both of those meetings and we'll have key executives available to kind of open up for questions and answers. So I would encourage everyone that if you have some more detailed questions. We had little bit participation last year with questions ahead of time that we would love for you to submit questions to Sebastien ahead of times that we can kind of do our best job 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.