UHAL

Amerco (UHAL)

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AMERCO (UHAL)

F1Q09 (Qtr End 6/30/08) Earnings Call

August 7, 2008 11:00 am ET

Executives

Jennifer Flachman - Director of IR

Joe Shoen - Chairman and CEO

Jason Berg - Principal Accounting Officer

Gary Horton - Treasurer

Rocky Wardrip - Assistant Treasurer

Analysts

Jim Barrett - CL King & Associates

Ian Gilson - Zacks Investments

Ross Haberman - Haberman Fund

Michael Millman - Soleil Securities

Presentation

Operator

Good morning. My name is Brandy and I will be your conference operator today. At this time I would like to welcome everyone to the AMERCO first quarter fiscal 2009 investor call. (Operator Instructions). Thank you Ms. Flachman, you may begin your conference.

Jennifer Flachman

Thank you for joining us today, and welcome to the first quarter fiscal 2009 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, and certain factors could cause actual results to differ materially from those projected.

For a brief discussion of the risks and uncertainties that may affect AMERCO's business and future operating results, please refer to Form 10-Q for the quarter ended June 30, 2008, which is on file with the Securities and Exchange Commission.

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

Joe Shoen

Good morning, everybody. I am speaking to you from Phoenix, Arizona. I have Gary Horton and Jason Berg in the room with me. Rocky Wardrip joins us from Reno. Of course, we will all be available to respond to your questions after my remarks.

Four things I would like to comment on. First, we have decreased a plan on ten-foot truck availability due to the American Axle strike. Second, an improvement in utilization of our moving trucks. The overall flatness in U-Move revenue and softness in resale prices of trucks that are exiting our fleet.

We had talked about the American Axle strike, when we last spoke. We incorrectly believed that when that strike resolved itself, GM would begin production per prior plan. In fact, once the strike resolved itself, GM went into a very halting production, in fact, slowed production by our measure, and so we have been doubly put off now by the consequence of the American Axle strike.

It is anybody's guess, but we are going to be down for the year at least $4 million to $7 million because of this. It could be worse. We still do not have all the trucks. So, I kind of don’t have hard numbers, but we are losing the summer with these trucks, basically. As you all can imagine that's our best revenue period. Second point is utilization. I think that is the brightest news here. As you know, we do not publish utilization figure. However, we are up, and we are up solidly. We, this quarter, the way that they count the fleet, we were down an average in excess of 4000 units over the same time last year.

So in order to keep revenue where we kept it, we actually got better utilization. We didn’t get huge price increases. As Jim Barrett commented in his write-up, it's a little bit difficult to project a price increase, and a part of decrease, but I think it would be best for practical purposes to say prices stayed fairly constant, yet we're able to get revenue up, which means utilization went up basically.

So that's very positive. That's the fundamental economics of the business. It means a lot of people did something right. However, the overall result as I indicate is, revenue was flat-to-down in the U-Move segment, and I don’t think there is a prospect of it being greatly different in the second quarter, but the same basic factors are all operating, and I will be, actually, extremely thrilled if we can keep utilization where we have been running it, and I do not know that we can, because we are running at an all-time high on utilization, which is hard to project out that you're going to hold that, but we are working to do that.

The final point is one I think that I didn’t give you any sort of heads-up on, and I think to some extent caught me a little bit unawares through the first quarter and that’s softness in truck resale prices, which softness we saw across all models. We have all heard the automakers are struggling at the auto auctions, and that's just a truism. I under-appreciated the affect it would have. We saw it throughout the quarter and it's continuing in the second quarter.

Gains on pickups and vans, which we typically made a gain on sale have been substantially eroded, and box trucks for the quarter, essentially, sold for a little less than what their residual values were, so we post a loss. From your purposes, this, I believe all blends into the depreciation line, so it's a little bit of a black hole from your point of view, but I want to give you a little window into it, because we continue to sell about 8,000 pickups and vans a year, and about 9,000 to 9,500 box trucks a year.

And, so it's a some on going interest, substantial effort on our side, and the result there, which has been fairly predictable for a long time, slipped in the first quarters and likely will slip in the second quarter. I am continuing to focus daily on our U-Move transactions and revenue. Anytime, I keep hammering on something, and I have now been hammering on this for 18 months, it causes some loss of focus in other parts of our business. That's, how many balls can I get the team to juggle?

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