U-Haul Holding Co (UHAL) 2019 Q1 法說會逐字稿

Good morning, and welcome to the AMERCO First Quarter Fiscal 2019 Investor Conference Call and Webcast. (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, and thank you for joining us today. Welcome to the AMERCO First Quarter Fiscal 2019 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, 2018, which is on file with the U.S. Securities and Exchange Commission.

I'll now turn the call over to Jason Berg, CFO for AMERCO.

Thanks, Sebastien. We're speaking to you today from Phoenix, Arizona. After a few minutes of prepared remarks, we'll go ahead and open it up for questions and answers. Throughout the presentation, all of my comparisons here are going to be for the first quarter of this year compared to first quarter of fiscal '18, unless otherwise noted.

Yesterday, we reported first quarter earnings of $6.53 a share as compared to $6.44 a share for the same period last year. I think it's important to remind everyone that the effective federal income tax rate for the first quarter of fiscal '19 benefited from the Tax Reform Act while the first quarter of last year did not. Had this year's rate been effective for the first quarter of fiscal 2018, it would have increased earnings by about $24 million or about $1.22 per share.

Equipment rental revenues increased over 7%. That's about $47 million. For the quarter, the increase was primarily the result of transaction growth, combined with slightly better revenue per transaction. Our continued focus on the sales of our Safemove and related protection packages to our rental customers resulted in revenue gains from broader penetration.

Quarter-over-quarter growth in our independent dealer count picked back up again, and we also continue to open new company locations. We continue to have a larger rental truck fleet than in previous years. However, the rate of increase has moderated. U-Move revenue growth has continued into the month of July.

Capital expenditures on new rental trucks and trailers were $440 million for the quarter compared to $396 million last year. Proceeds from the sales of retired equipment also increased from $140 million last year to $187 million this year.

Regarding truck sales, gains from the disposal of rental equipment were up a little over $11 million for the quarter. We've increased the volume of sales, and we've also seen improvements in the sales proceeds per truck. It's also worthwhile to note that we're only seeing nominal increases in the acquisition costs of the trucks that we sold this year as compared to the price increases that we saw in the equipment that was sold the previous 2 years.

Storage revenues were up nearly $10 million, which is just over 12%. Average monthly occupancy throughout the first quarter of fiscal 2019 for the entire portfolio was 70%.

In the press release, I referenced the average occupancy of facilities open either more than 3 years or less than 3 years. To build on that, I wanted to bring up what the median occupancy was for these categories to give you a better sense of how we're doing at the majority of the locations. So for locations open more than 3 years, we had a median occupancy of 92%, while facilities open less than 3 years, we had a median occupancy of 50%. Both of these numbers are about 8 points ahead of the average figures that we provided in the press release. What this says to me is the facilities are generally operating to where we thought they should be, but we do have a few opportunities to manage locations better than we're currently managing them.

A large portion of the revenue gain came from the growth in occupied rooms. Looking just at our occupied room count at June 30, we had an increase of 25,500 rooms compared to the same date in the previous year. If you looked at the same statistic for last year, June 30, 2017, we had an increase of 17,200 rooms compared to 2016. So all of this points to improved rental activity. We are continuing to see an improvement in the underlying revenue per square foot as well, from increasing rates.

Our real estate-related CapEx for the first quarter of this year was $219 million. That's up from $143 million last year. Over the last 12 months, we've added right around 4.3 million net rentable square feet into our -- into the system, with about 1.4 million of that coming online in the first quarter of this year. Both of those figures are high points for us. It is fair to expect that our real estate-related CapEx for fiscal 2019 is going to eclipse our fiscal 2018 levels as we finish acquiring what we have in the pipeline and continue working on conversions and ground-up projects. I would expect to see new acquisition activity begin to taper off as we head into fiscal 2020.

Looking at what we own currently or have under contract, our development portfolio has the potential to create or generate over 18 million additional net rentable square feet over the next several years.

Operating earnings in the Moving and Storage segment decreased $20 million to $200 million for the quarter. I'd like to touch on a few of the more significant items. The single biggest driver of the increase in operating costs and the decrease in the operating margin has been the additional maintenance and repair that we've been incurring for nearly the last year now in the cargo van and pickup fleet. For the quarter, our total repair costs were up about $41 million. About $28 million of that is associated with the cargo van and pickup issue. This became an issue on the income statement in the second quarter of fiscal '18, with the first large variance appearing in August. So we're approaching the 1-year mark, and it does look like progress is being made. We've reduced the amount that we spend per truck getting them ready for resale. However, in this quarter, those improvements were offset just by the sheer increase in volume of the trucks that we repaired prior to their sale.

Property taxes, building maintenance and utilities are 3 of the larger non-personnel expenses associated with new properties that we're buying. For -- in total, this category increased $6 million compared to last year. About half of that came from properties that we acquired over the last 12 months.

Also of significance, in that it wasn't as big of a drag on margin as it has been, personnel expense, the costs were up $14 million for the quarter, but it was only about a $1.3 million drag on the margin. So personnel expense, our largest operating expense number, is still well within our ability to manage it.

A few final items. In June, we declared a $0.50 per share dividend. That was paid in July. At the end of June, our cash and availability from existing loan facilities at the Moving and Storage segment was $838 million.

And then one last item. I want to take a moment and give kudos to our Life Insurance and Property and Casualty Insurance teams. With Repwest's recent upgrade, both of these organizations now have A- financial strength ratings from A.M. Best. Their Presidents, Mark Haydukovich and Doug Bell, have been with the organization now, combined, for nearly 60 years, and they've been excellent stewards of these organizations for us.

With that, I'd like to hand the call back to Kate to begin the question-and-answer portion of the call. Thank you.

(Operator Instructions) The first question comes from George Godfrey of CL King.

I just wanted to ask about the operating margin within Moving and Storage and taking a multiyear look at it from where we were to where we are today. By looking at my numbers, if I go back to Q1 of fiscal '16, I have a margin of 34%, that in Q1 of '17 is 29%, Q1 of '18 is 25%, and now in this quarter we just reported, it's 21%. And so that's a 1,300 basis point degradation, and perhaps the '16 Q1 was elevated. But my question is, is the same revenue on the storage facilities and the trucks just secularly a lower -- structurally a lower profit margin of revenue today versus where we were 5 or 10 years ago?

Great question. I think that's on a lot of the people's mind, and that's kind of our challenge. And a few things going on here. First, the biggest decrease in margin this year over last year continues to be, and it has been this for the last 3 quarters, this repair and maintenance on the pickups and cargo vans. And so I think we've made a reasonable amount of progress. I mentioned that we've increased revenue from sales of protection packages to customers. Our field team has been monitoring the equipment much closer on the receive and dispatch end. When there is damage, we've been working with the customer more diligently to try to get reimbursed for that or through their insurance company for that. And then the last piece of the puzzle, spending less per unit. And our repair and maintenance team and our fleet sales team have been moving levers here over the last 6 months, trying to figure out what is the right amount of repair and maintenance that we need to do to continue getting these trucks moving. And I think that we're starting to see some benefits of that. If we had repaired the same number of units this year that we repaired last year, the increase would have been much less than it was. So I think that's a positive. Getting back to the overall question, and the second piece of this puzzle is the effect that we've had by adding all of these new properties and how that is dragging down the margin. And I think it was 2 calls ago, I introduced kind of this analysis where we began tracking our quarterly acquisitions, having seen how they were doing from a kind of a cash flow or NOI perspective and evaluating what that drag has been. So we're up to looking at kind of 14 of these quarterly groups of acquisitions, about 20 acquisitions in each group, and seeing what the drag is on them. So those -- it covers about 286 properties. And for the quarter, those 286 properties, I think we lost about $1.3 million on an NOI basis from those properties. So those are locations that not only are they not contributing anything positive to margin, they're actually a little bit of a loss right now. But that's a fairly big piece of this puzzle. Now on the positive side, those properties did about $136,000 better than they did the year before. And that was, at the same time frame, we added 112 new properties over the last 12 months. So we're starting to see some improvement in the development portfolio. In fact, over the last 2 quarters, only that first group of properties that we bought in the fourth quarter of '15 were -- had a positive NOI. Now in this quarter, half of those groups, the first 7 cohorts, are operating at a positive NOI. That's going to take us some time to -- for that to kind of turn the ship around. So as an example, this quarter, an additional $25 million of storage revenue and not having the pickup and cargo van expense, our operating margin would have been flat. Now that sounds really simple, but storage revenues only increased $10 million. So I'm asking someone to increase them $25 million. But we certainly have the ability to do that. Every 1% increase in occupancy right now is about $4.5 million of revenue. So in our existing portfolio, we have about $100 million of revenue opportunity. Once we finish building out all of our development properties that we own or have in escrow, that's probably another $150 million to $160 million of storage revenue on top of that. So I view a lot of this as a revenue problem that, once we fix that, our margins should come back up to what we've seen in the past. And I've been looking for that point where previous acquisitions are going to start offsetting new acquisitions. And I think those figures that I just gave you for the NOI turn in earlier acquisitions, they're starting to indicate that maybe we're at the front end of that now, where it's starting to turn.

And that's -- that was going to be my more positive take on it. It sounds like it has been difficult. It has cost more, both acquiring new trucks, refurbishing trucks for sale, but we're at a low point now, and now the margins can go higher from here as some of these headwinds start to abate on the truck side. That's what I heard.

Yes. And that, in a very long-winded way, was what I was trying to say. And so I normally don't go on this long. But in the absence of Joe on the call, I felt like someone needed to have a long answer. So I was trying to provide that.

Yes, I appreciate that. And then -- and that was all very clear on the truck side. And then on the storage side -- and thank you for providing the occupancy rates based on the room count. If I look at the reverse of the occupancy rate or the vacancy rate, the vacancy rate in 2015 was roughly 15.5%, and now here in this quarter, Q1, the vacancy rate is 30.5%. 30% vacancy are the rooms not filled. Is there a point where, even if the capital deployment of the real estate asset you want to buy makes sense, that you just reach a point where we just say, "You know what, we can't have 35% or 40% of our room portfolios empty even if this acquisition does make sense"? Or do you just plow ahead and say, "No, if it's a good buy, it's a good buy"? And I'll leave it there.

Thanks, George. Well, I think up until this point, we've said if it's a good buy, it's a good buy, and let's move ahead. Now 48% of our locations are above 90% occupancy. So the underlying fundamentals of the storage market are still strong. I think in certain areas, supply is creeping up, and there's going to be challenges with that. But we still believe in the underlying storage market. Now to the -- probably the bigger part of that question, that is, do we keep buying? Well, I think, certainly for us, there's a natural constraint at some point with how much capital that you have. And I think as I project out the cash that we have and the cash that we need, and then in conjunction with our treasury team up in our Reno office who's projected out what they think that they can lever against these assets, I think we're approaching a time towards the end of this year where acquisitions are just naturally going to begin to -- I think the word I used was taper off. They're going to slow down a little bit. We're going to continue to spend probably in excess of $300 million a year in development, construction of what it is that we bought, but perhaps begin to slow down the number of new properties coming into the portfolio.

The next question is from Ian Gilson of Zacks Investment Research.

Jason, I don't want to belabor the point, but I will. If you back out the $28 million, which you said was the increase in van and pickup maintenance and repair costs, and you're still at a loss of 3 percentage points in gross margin, how much of that -- as you look at that number, the $13 million, how much of that was included in the truck and the storage business and how much was not? And will we ever get back to the 50% gross margin number? And I'm talking here as operating expenses as a proportion of rental revenue, not as a percent of total revenue.

Okay. Right, Ian. I was looking at it, at total revenue, and I was coming up with a margin shortfall of about $47 million this year -- or this quarter. So the maintenance and repair from what I -- that I thought was about 2/3 of that, and then it gets to smaller numbers. The property taxes, utilities, building maintenance, that was about $6 million of drag on margin. We had a great quarter for U-Box. But we did see our shipping costs increase, and they were probably off margin by a little over $3 million. I mentioned the personnel about $1.3 million. And then we still haven't quite been able to turn the corner on payment process, and that was about a $2.5 million variance. But I get to the majority of it in those items.

Okay. So as we go forward, even if we get maintenance and repair costs down, we're still looking at a gross margin -- maybe I shouldn't call it a gross margin, but, say, operating expenses as a proportion of revenue basically running 5 percentage points above what they have been in 2016 and prior years. And is that a fair statement, that basically, we've built in a new level of expenses?

No. I think that this is a function of where we're at in the expansion cycle, for the most part. I think if we were to wind them to manufacture an improved operating margin, we could just cut off -- well, at this point, even if we cut off new acquisitions, we have something on the books that we have to finish. But this is going to take a few years for us to get those up towards a point where they're contributing some sort of meaningful amount of NOI. So company-owned locations, we have something close to 1,500 company locations. And I just mentioned that 268 of them right now are at like a $1.1 million loss, so -- just because they're so new. So I think over time, we're going to see the value from these decisions that we've made over the last 3 or 4 years is going to come out over time.

Okay. And actually, that -- adding new facilities is a benefit. I now tend to see that benefit continue. If we are only talking about, say, $5 million or $6 million of additional expenses, that is internal growth that is good. And -- but it's the problem of all of these little things are adding up to something which is significant. And so far, I don't see any reversal in the amount and number, excluding the additional repair and maintenance.

Well, certainly, over the last 3 years, we've acquired somewhat -- somewhere, give or take, 450 properties. You're right, it's a big number, but I guess I'm a little more positive in the figures that I'm seeing. I was trying to show that I think some of the indicators are beginning to point forward. And also, hidden in all of this, that is -- I want to make a comment, make sure that it gets in if -- in case we don't get a question on it, is that on the fleet side, we've seen steady growth on the In-Town transactions. We've seen a little bit of a strengthening of growth on the one-way business. And this is the first quarter that we've had now in probably 2 years where more models than not are seeing utilization improvements, which is something that I've been looking for, for quite some time, and we're starting to see some improvements there. So if that continues to trend that way and we continue to fill rooms the way we've been filling rooms, then I'd like to think that we're going to start seeing the operating earnings number begin to turn if we can -- again, the big wild card right now is the repair cost.

Okay. When you have a repair that is actually on a vehicle that has been insured through Repwest's IBU, where does that number come in on the cost side? Is that covered by insurance? Or is it part of the expenses incurred on the fleet, and there's no charge to insurance reserves?

No, there's no charge to insurance reserves. So what Repwest provides to our customers is the Safe products. So that ensures them against having to pay for damage or if they're in an accident, there's some medical coverage or some coverage if they run into someone else. So if they purchase that and they damage the equipment, then the premium that they paid for that goes into a bucket. We use those funds then to fix the equipment. So that -- our growth in the sales of that product, that was one of the kind of the three-pronged approach where we were trying to sell more of that to help offset some of these costs. And I would say that above transaction trend, we probably picked up maybe $4 million of additional revenue from those sales in the quarter that ran through our truck rental revenues. But otherwise, we don't have property coverage from an outside insurance company if the truck is damaged. That's our responsibility to fix the truck.

Okay. So when I look at roughly $12 million on Repwest a year ago and $12.5 million this last quarter, that revenue, as we look down the pretax, pre-interest number for that, that does not include any of the maintenance -- or not maintenance, but that does not include any of the repair costs within that $28 million number?

No.

Okay, okay. Tax rate. I presume that the first quarter is what you expect the year to be?

Yes.

And that's in line with what you had previously discussed, nothing on the horizon there that may change that number?

No, I don't see anything, at least in the next 12 months, as far as proposed changes to the tax laws. A few years out, when the interest expense limitation could become effective, if there aren't any changes made, we'll look at that then. But I think that we'll benefit from having the insurance companies within the group, which could help mitigate any potential limitation there. So I don't foresee anything in the -- at least the next 12 months.

Okay. The balance sheet is still very healthy. And you've still got $650 million in cash and cash equivalents on the balance sheet. Is there any intent to make the dividend a recurring event so that it is picked up by the rating agencies on the stock side?

I have to defer to the board on that. But so far, they seem to be more focused on just doing a -- well, they've fallen into a pattern of a quarterly dividend, but we do not have a dividend policy at this time.

Okay, okay. And what is the minimum level of cash that you would be comfortable with?

We've set the minimum amount of cash reserves at about $250 million, and then I'd like to have another $150 million of availability on top of that. So somewhere between $250 million and $400 million.

So you basically got, say, $300 million worth of cash that can be used for fleet purchase and property purchase?

Yes.

The next question is from Jamie Wilen of Wilen Management.

Jason, I have a few questions, but first, a little bit of a rant for what's happening here. The company really doesn't seem to have a capital allocation strategy that fits both the short term and the long term. I mean, as you can see, with adding 4.3 million square feet of which -- this past year and the 3-year average occupancy is 42%, all those things within the last 3, 4 years not only have an operating loss, but then we have a depreciation expense and interest expense to build and carry these things. And I realize we have -- one of our greatest assets is we have tremendous cash flows, and we can -- we don't have to worry about making -- being as selective when we add these new properties. But we are basically impoverishing the truck rental business by having to carry these operating losses and extra losses from the self-storage business. So my question is, I think we have 2 choices, and you tell me which one's the better one for the company. I think we need to reduce the capital expenditure outlay annually and be more selective on our property, so we only add 1 million square feet and not this 3 million to 4 million square feet that we have to cover the expense and so on and impairs the profitability of a business that you're looking at the profitability, which is the truck rental business. Or do we, as people have suggested in the past, continue to do this and have great cash flow from self-storage but not great profitability and put the self-storage into a much better vehicle, which would be a REIT, where people would appreciate the cash flow because we have 2 different businesses. One is a cash flow business, and one is a profit-center business. And it's really hard to combine the 2. You're doing a good job of doing both individually. But when you put the 2 together, I think you harm both worlds. So which do you see would be the proper way for U-Haul in the future? To reduce the capital expenditures of how much we add to self-storage or to really actively consider this time putting everything you've built so much value in self-storage, but it's all hidden, and to help realize that value by putting it in a REIT and really reconsidering that, considering how much money you've spent to develop that cash flow?

Well, I appreciate the feedback, Jamie. And as we normally do, there's probably a third option that we're going to do. But I think we're probably closer to the option where we're going to reduce capital expenditures over time. Now I don't see that happening in the next few years, and I don't know if it makes a lot of sense for us, as long as we have available capital, not to finish what we started. So I think we're going to try to finish everything that we've started and ride that out. And so as far as the REIT, that issue has been raised. I watch the storage REITs, and I don't know if -- I think they would have had to address this issue a little bit differently than how this is. So I'm not sure how feasible that would have been anyway. But I don't see us going down that path. The path that I see in front of us right now is we're going to finish what it is that we have, which is going to take quite a bit of capital over the next several years. And then there probably would be a slowing down of the spending. We've been saying for years, we've had -- we've been at elevated cash levels, and we've been wanting to reinvest it. Now we've reinvested the majority of it, and now we're having to deal with the income statement consequences of doing that. But I think we're real happy with what we bought, and over time, I think you'll be happy with it. I think it's just going to take us some time to get there. But I appreciate the concern about the pain that it's causing in the interim.

Can we separate out what the self-storage business does, so you can see the health of the truck rental business without having the overriding cost of adding the 15 million square feet of self-storage that is negatively impacting what the truck rental business looks like? I don't see why we can't separate those things so we can get a much clearer look at how well you're managing each of those businesses.

I don't have anything on the drawing board, but I'll certainly see what we can do, Jamie.

Okay. I mean, your job is to build value short term and long term for all shareholders. And to look just 10 years down the pike and not look out 1 year, 2 year and 5 years, I think, is really not managing the business as well as you could. And I would hope Joe and the team would see fit to look at 1 and 3 years as opposed to just 10 years down the road as he's allocating capital to various projects.

Understood.

The next question is from Craig Inman of Artisan Partners.

Jason, a question for you. So this $41 million of repair costs, you're calling out the $28 million. What is that again?

That's the amount that we have spent to fix the equipment that is headed to auction. So it's fixing bumpers, dents, buying new floor mats, cleaning up the trucks, doing all of the things that we need to do in order to get an auction rating high enough where we think the product is going to move at auction.

Okay. So that's more the number that, as time goes by, will diminish as a cost of business because we just weren't repairing trucks in the past as we should have been?

Well, they weren't as damaged in the past.

Okay, okay.

So if we just hadn't been fixing them, then this would be more of a structural change in the cost. And we don't believe that that's the case yet. We still think that we can manage this back closer to where it was.

Okay. And then it looks like the used market improved. Is that a function of just that market improving or these trucks being better prepared for sale?

I think our team has done a better job of prepping them for sale. We've put more people on the job in order to do that, and so we were expecting improvements from that. And I think they're monitoring the process better. They're monitoring the trucks a little bit better. Last year, we were also contending with recall issues on portions of this fleet that limited our ability to move them. So I think things are just kind of starting to fall back in place in some of these processes.

Okay. And you all still anticipate fleet growth moderates significantly this year?

That's still the plan. Last year, from a fleet spending perspective, I think we probably -- the fleet growth came more from kind of a slowdown in box truck sales and pickup and cargo van sales than a dramatic expansion in the number of purchases. So I think over the next several years, we might see fleet sales pick up a little bit.

Okay, okay. And then you gave the number on median versus average year and the median storage being higher. I might be dense, but how do I interpret that? What's the...

That means -- I interpret that as, as we're looking down at the specific facilities that are dragging the average down, we have some facilities that aren't performing as well as the others. So the -- what I was trying to convey is that on -- more than not, we're able to manage these to where we would like them managed. And -- but then there's a few, and when you have this many facilities, there's always going to be a few that just aren't getting up there. So our competition kind of deals with that by creating a same-store portfolio and then kind of kicks these orphans off into another pool, and no one really looks at them. But ours are all combined. So those are management opportunities for us.

Okay. And are you all -- is there anything you can do with those facilities? Do you need to -- are you looking to sell them or it's an operational issue where the...

No, no. It probably -- it either needs a new manager or we've placed it somehow incorrectly on the Internet or we're not routing customers there through equipment rentals or something that happened in how we imaged the property to the street. That's normally what it is. I haven't yet gone through every one of them, so I can't tell you specifically on each one. But generally, those are the problems that we see.

Okay, okay. And then the performance in self-storage was -- picked up. Is that a function of the market or operationally, you all do anything different?

No. I think we're still doing the same things. We just have a lot more rooms available to rent. And there's been a lot of focus. This is kind of the busy rent-up season. July and August are typically your peak occupancy months. So there's a big push to capture as many customers as we can right now. So we are, over time, dedicating more and more management resources towards the self-storage business. In 3 years from now, this could easily be, between what we have on our balance sheet and off balance sheet, over $1 billion of revenue here in 3 to 4 years. So it'll be 1/3 the size of equipment rental. It's a big deal, and I think we're looking to make sure we're putting enough attention on it.

Yes. And the comments, those are some of the first you all made about this potentially slowing down in the next year or 2, the development pipeline. Is that more a function of opportunities or just how big the pipeline is now? I'm just trying to get a sense of -- or are you talking about just the pipeline just becomes a smaller percentage of what you already have in place?

No. As we build out stuff, today's pipeline will be a smaller percentage of our pipeline 5 years ago -- or 5 years from now just because we're going to build out so much. But I think it's more a function of I think we realized exactly how much we have to finish, and it's -- there's a lot of work involved with that. And then two, we had said and communicated that we have this -- a whole lot of cash and availability that -- a lot of it that we obtained from refinancing existing properties several years ago and that we wanted to reinvest that back into the business, and it took time. Well, it's now -- we've reinvested much of that back in the business, and we've gone through that amount. Now it's time to start slowing back down and going more towards the normal acquisition schedule. And then over the next several years, we're going to develop additional liquidity as these properties stabilize and go out. Our treasury team is projecting $200-plus million of likely liquidity for the next several years that we're going to be able to pull out of the portfolio from properties that are stabilizing. So I think it's probably 2 parts: Capital, available capital, and then also just wanting to maybe finish what it is we've got.

Okay, sounds great. And now when you're doing your analysis of these properties, you're not seeing a large change in your -- what you thought they would -- how they would perform in terms of IRR of the capital invested.

No, I don't think we've done anything in the last 12 months to reduce our expectations. I would say in places, it's been harder to find that. And just as a general comment, markets where we used to have a little bit more ability to make acquisitions, secondary markets, Class B-type products, there's been an influx of capital into those markets and are pricing those deals, especially portfolio deals, much higher than what we think they're worth. So our acquisition of existing storage facilities, I think, has dropped even from last year. I think we -- I think in the last 12 months, we maybe only acquired somewhere around 11 storage facilities, existing storage facilities, versus in years past where it's been much more than that. So the market for self-storage, I haven't seen any respite from the low cap rates. But we're still finding opportunities in dated retail product that we can convert.

Okay. So your capital discipline -- okay, that's good to know you guys are not chasing. Okay. Well, that's it for me.

The next question is a follow-up from George Godfrey of CL King.

I just wanted to ask, what is the average life of the truck in the U-Haul fleet right now? How long do you own the truck from new to resale?

We've modeled them out where generally, we expect to hold the box trucks 12 to 15 years. I think with what we've been seeing, probably if you were to compare how long we held trucks, say, 5 years ago to today, we've probably shortened that a couple of years, probably closer to 12.

Okay, got it. And you made the comment that the trucks are more damaged today than they were 5 or 10 years ago. Why do you think that is?

I think that what we saw was, 3 or 4 years ago, it was a very strong resale market for pickups and cargo vans. And I think the market was more forgiving of what it was that we sent to auction. And I think we lost some discipline on our side as far as watching the equipment, watching the customers who were damaging it because we knew it was going to sell and cover the sins of the damage. And now the markets aren't as forgiving, and we're having to fix that up, and we're having to tighten up our discipline with the customer on the receive and dispatch.

Okay. So I just want to make sure I differentiate. So the market is demanding a higher-quality truck at resale, I get that. But today's renter, are they more abusive with the truck today than they were 5 years ago, either more potholes, driving faster, more damage in...

No, I...

Okay.

I don't think that's the case. I think that if someone walks with you around the truck when you rent it and points out any damage that the truck has and then informs you how much it's going to cost if you damage any part of the truck when you bring it back, you may drive that a little bit more carefully than if someone just hands you the keys and lets you go.

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

Thank you. I'd like to thank everyone for attending this meeting.

I want to remind you that at the end of the month here on August 23, we have a few important meetings and opportunities for you to interact with us again. At 9:00 Arizona time on August 23, we're going to have -- we're going to start with our Annual Shareholder Meeting. Once again, this is going to be a live video feed that we broadcast over the Internet. And then 2 hours after that, at 11:00 Arizona time, we're going to do our Virtual Analyst and Investor Meeting. Joe Shoen, our CEO, will be moderating both of these meetings and available for you to interact with. We'll probably have some other key executives available for questions and answers. So please feel free to start submitting questions to Sebastien ahead of time if you have his e-mail address, or it's available on our Investor Relations website at amerco.com. This allows us to get to as many questions as possible and gives us a chance to prepare better answers.

So I look forward to speaking to you in a few weeks. Thank you for your time.

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