Amerco Earnings Call Insights: Revenue and Depreciation Increases, Truck Pricing and the U-Box
Revenue and Depreciation Increases:
Ian Gilson – Zacks Investments: You’ve managed to beat my revenue projections for the fourth quarter, about $4 million. I got several questions actually. In the fourth quarter and all my comments basically relate only to the quarter not to the full year. Lease expense declined, interest expense declined, depreciation went up slightly and is there anything behind these numbers that basically will show a continuation of those trends into 2013?
A Closer Look: Amerco Earnings Cheat Sheet>>
Jason A. Berg – Principal Accounting Officer of AMERCO: Yes. Ian, this is Jason. As I mentioned in the prepared remarks, our depreciation expense is going to continue to increase. Over the last several years now we switched some of our financing allocations from lease financing to on balance sheet financing and that’s going to result in the interest expense, we’ll see that kind of increase a little bit year-over-year, this lease expense decrease and the depreciation go up. Now it’s important to note that the increase in our average debt outstanding has been more than offset by our average borrowing costs, which are down year-over-year by a little over 50 basis points all in. So that’s helped to moderate that.
Ian Gilson – Zacks Investments: Okay. So, the reason the interest expense went down, was a decline in borrowing costs, and not a decline in the financing of purchased trucks?
Jason A. Berg – Principal Accounting Officer of AMERCO: That’s correct.
Ian Gilson – Zacks Investments: Okay. You did a special dividend, which you did not mention. Is that likely to be a regular occurrence, or was just this – was this just a one-time event?
Jason A. Berg – Principal Accounting Officer of AMERCO: From what I can tell that was one time in nature. Although, every year the Board considers this, so depending upon where we’re at in fiscal 2013 it’s going to be reconsidered again, so I really can’t give you any guidance as far as whether or not that it’s going to happen again. I can say this will be considered again.
Ian Gilson – Zacks Investments: Although it’s not a very significant change, but if we look at accounts payable and accrued expenses on the balance sheet for the end of the year, and look at them as a percentage of revenue for the fourth quarter term, this percentage increased year-over-year and quarter-over-quarter sequentially. Is there anything behind that increase or is it too small to worry about?
Jason A. Berg – Principal Accounting Officer of AMERCO: Well, it was a multi-million dollar increase, and what happened there is that we’re somewhat subject to when the year closes, and that has an effect upon when we settle our credit card transactions, and debit transactions, so we finished the year, with about – an increase of about 115,000 transactions that hadn’t settled at the end of the year, so it’s really transient and that number came back down in April immediately. So now I wouldn’t put a lot of significance in that change other than just the day of the month that we happen to – that the year closed on.
Ian Gilson – Zacks Investments: Finally, I know I am being lazy, but did you give me for the quarter room count square foot, rooms occupied, occupancy rate, square feet occupied?
Jason A. Berg – Principal Accounting Officer of AMERCO: And I know you like to hear the owned and managed numbers, so I’ll provide you that. We finished the quarter with 423,000 rooms available, and that translates to 37,762,000 net rentable square feet. Of that, we had occupied rooms at the end of the year for the quarter of 329,000, which is occupied square feet of 29,856,000, and total owned and managed occupancy was, for the quarter, 77%, which was up about 1.3% compared to last year.
Ian Gilson – Zacks Investments: Okay. Can you give me total square feet? Was that 77?
Jason A. Berg – Principal Accounting Officer of AMERCO: 37,762,000.
Ian Gilson – Zacks Investments: And you mentioned that looking at the first quarter of the year, the gains are slightly – now the trend has been slightly down. I know that my weather records for the first quarter showed that we were fairly benign in the weather across the U.S., and I know – although I see your trucks in Mexico, I know you have no business in Mexico. But was the weather a factor in boosting the first quarter, and then in the June quarter we get back to a more normal weather pattern?
Jason A. Berg – Principal Accounting Officer of AMERCO: No. I don’t think that’s the case. The comment was directed more towards what we’ve seen in April and May of this year, which really hasn’t been affected by weather. We haven’t had, to my knowledge, a significant disturbance in the system due to weather. What we are looking at is the last couple of first quarters I think we have been around somewhere 6% to 7% increases. We also have the way that Memorial Day and Easter fell; some of our statistics are a little off there. So, we’re just noting a little bit of caution in that. What we have seen is that revenues certainly are increasing at the same rates that we saw in the first quarter of last year, yet this is an incomplete number. June is always a big month for us and we are geared up for that. So, we’ll wait and see how the rest of the quarter develops.
Truck Pricing and the U-Box:
Jim Barrett – CL King & Associates: Jason, just to clarify, did you just say that your rate of growth in Moving and Storage in April and May was comparable to your rate of growth in April and May of last year?
Jason A. Berg – Principal Accounting Officer of AMERCO: No, I was saying that we are looking at some tough comparables in previous years in which we had some fairly large increases in April and May in prior years. So, we’re still doing quite well, it’s just trying to eclipse those results has been somewhat of a challenge this year so far.
Jim Barrett – CL King & Associates: And you touched upon it, what is the current outlook for used truck pricing?
Jason A. Berg – Principal Accounting Officer of AMERCO: Well, so far we haven’t seen any material changes in that. I just wanted to note that we have increased the pickup and cargo van fleet a significant number of which, I think it was three or four years ago, maybe a little bit longer, when we saw a pullback in the pickup pricing that that had an effect on our gain and loss number. We don’t anticipate that happening but we are a little more exposed to price fluctuations in that fleet on a go forward basis.
Jim Barrett – CL King & Associates: And you did reference that you plan to spend $490 million in CapEx this year?
Jason A. Berg – Principal Accounting Officer of AMERCO: For the truck and trailer fleet.
Jim Barrett – CL King & Associates: I see, because the Company overall spent I believe $590 million in fiscal 2012?
Jason A. Berg – Principal Accounting Officer of AMERCO: That’s right. So then on a real estate side, which was about $100 million in fiscal 2012, we would love to meet or exceed that objective here in 2013, but I can’t give you a specific number on that because that number comes and goes as the opportunities come and go.
Jim Barrett – CL King & Associates: Could you talk broadly in terms of the March quarter, you’ve had two years where you have actually earned a profit in the quarter? Is there any reason to believe that if competitive factors remain unchanged, that March will prove to be a profitable quarter for you going forward?
Jason A. Berg – Principal Accounting Officer of AMERCO: Certainly, we expect to do better every year. So, we had a good fourth quarter last couple of years. Our goal is certainly to meet or exceed that going forward. And I can’t point to any specific item that took place in the fourth quarter that were not significantly unusual, but they wouldn’t recur in the future if we do everything right.
Jim Barrett – CL King & Associates: This past year, unlike last year, you did have what would seem to be very favorable weather that may or may not repeat next year. Was that a key factor in making the $1.29 that you made?
Jason A. Berg – Principal Accounting Officer of AMERCO: It helps but I can’t really assign a dollar amount to that.
Jim Barrett – CL King & Associates: Finally, can you give us an update on the expansion and the success to-date of U-Box?
Jason A. Berg – Principal Accounting Officer of AMERCO: Sure. I think we’re in over 1200 or 1300 of our locations now, virtually in every U-Haul location. Our revenues for that although not large enough yet to break out over the last couple years have essentially been doubling each year and we continue to roll out some fine-tuning and some improvements to the product in a way that we deliver the service. So we’re still high on the product. Although, as Joe would certainly say if he was here, we are not ready yet to say it’s accretive to earnings, but it certainly trying to take on some size and substance here.