Good morning, and welcome to the AMERCO 2014 Second Quarter Fiscal Investor Relations 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. Before we begin, I would like to remind everyone that certain of the statements during this call, including without limitations, statements regarding revenue, expenses and 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 our most recent Form 10-K filing at the U.S. Securities and Exchange Commission and any updates as may be provided in Form 10-Q for the quarter ended September 30, 2013. Participating in the call today will be Joe Shoen, Chairman and President of AMERCO. I will now turn the call over to Joe.

Good morning. We continued some good results through the end of our second quarter. Our U-Haul rental business was up due to increases in both fleet size and number of U-Haul rental outlets. We are continuing to grow our self-storage business. The self-storage market remains very geographically specific. We will continue to build, buy or do conversions of newly acquired structures depending on what appears to be the best approach to that specific market. When building or buying, it usually takes at least 3 years to achieve stabilized occupancy. In nearly every market in which we compete, we face multiple well-funded competitors. We are succeeding based on a disciplined group of committed people bent upon delivering a quality customer experience. The do-it-yourself moving market remains a highly competitive arena where the customer has options; in those, they have options. Our plan is to maintain the discipline that has brought us thus far. With that, I'll turn it over to Jason who will go through some specifics.

Thanks, Joe. Yesterday, we reported second quarter earnings of $7.06 a share, that's compared with $5.61 per share for the same period in fiscal '13. To minimize repetition during my prepared comments here, all of my period-over-period comparisons are going to be for the second quarter of fiscal 2014 compared to the second quarter of 2013 unless specifically noted. Operating earnings for our Moving and Storage segment, this specifically excludes the earnings of our insurance subsidiaries, increased $38 million to $226 million, about a 20% increase. The most significant reason behind the improvement and profitability is the continued growth of our equipment rental business. U-Move revenues increased over $60 million to just under $600 million with the majority stemming from additional transaction growth. This is the largest quarterly increase in revenue that we've seen for U-Move. The revenue growth that we've seen now over the last 16 quarters has been facilitated by the actions we have taken to improve the customer experience, as Joe mentioned. All of the items I'm about to mention really are dependent upon the success of the others in order for them to work. These improvements include our proprietary rates and distribution program, which has assisted us in improving utilization by better geographic placement of the fleet. Additionally, we continue to enhance our convenience by opening new U-Haul-operated locations as well as establishing new independent dealerships. Over the last 12 months, we've added 45 new U-Haul-owned locations, and we've expanded our dealer network by over 500 sites. And we continue to grow the rental equipment fleet, which is evidenced by our capital expenditure figures. Spending on new rental equipment for the first 6 months of fiscal 2014 increased by $52 million to $383 million. Proceeds from the sales of retired equipment are up over $35 million…

Thanks, Jason. We're going to go ahead and take calls. Now we'll have the operator take calls.

[Operator Instructions] Our first question comes from Ian Gilson of Zacks Investment Research.

I had a couple of questions. Could you give us, Jason, some color on the other income line, which has now risen to $15 million? What is the main producer of that income and what is likely volatility in the future of that level of income because it has become very significant and I can see no way of forecasting that except merely maintaining at that sort of level. Secondly, I'm looking at the various ratios. It appears that the commission expense as a proportion of stock rental revenue has increased slightly, a trend that has been occurring over several quarters. Is that because of the added increase of, what should we call, retail centers versus your corporate-earned facilities? Or is there something behind there that I can't see?

Okay, I'll start. The first question was -- well, I'll hit the commission first. We've been adding independent dealers at a little bit greater rate than we've been adding U-Haul locations. Although as a ratio of how much revenue they produce, I think we're up slightly, maybe 10 or 15 basis points on the commission expense line item. So it's trended up a little bit. There isn't any fundamental change in how we're paying people for that. So it's really just due to the expansion of the distribution network and the ratio of business at independent dealers to company-owned locations. On the other income question, the majority of that income is related to our U-Box program. So the delta from quarter-to-quarter is related to the growth in that program. I think we're just about here in the next couple of quarters, we'll need to be breaking out that revenue as a separate line item, so you'll be able to see that. We're still -- that program is still in growth mode, so it's still a little bit difficult even for us to necessarily project the revenue path for that. But I would expect here in the next few quarters that you might see a little more visibility into that.

Okay. Have the expenses of U-Box folded into the normal U-Haul operation?

Yes, they do.

Our next question comes from Justin McEntee from Goodnow Invest.

We're new to the story and the performance over the last 4 years or so has been really impressive. And we're just -- we were just looking back at the free cash flow generation of the business from, say, in the early '90s to 2009 and it was relatively volatile. But since 2010, you've generated very strong free cash flow and this quarter is no exception. So would you mind sort of commenting on what's changed over the last 3 or 4 years that's enabled such consistent free cash flow generation? And then also whether these changes are sustainable?

Well, the biggest one that drives our organization, kind of the time frames that you broke it out to, kind of 2010, even before 2010 and after, we went through an unusual period in our history there from about 2007 through 2010 where we actually were recognizing decreases in our equipment rental revenues, and it's an operating leverage organization such that, as we layer on new revenue, a larger proportion of that comes down to the bottom line to a certain extent. So we went through several years there, at least from 2007 to 2010, in a down-revenue environment for us. Since then, we've been increasing revenues and we've been able to keep the expenses in line. On the fleet spending, at the same time that we were going down in revenue from '07 to '10, we were adding a significant amount of fleet to rotate the fleet. So we were kind of hitting the financial statements with 2 items: we had a decrease in operating cash flows from down revenues, but we were reinvesting in the fleet to kind of turn the ship around. And then I think we saw the benefits of those efforts here when things kind of turned around 2011 forward. We're -- now we're in an up-revenue environment, a revenue environment that we typically grow 4.5% to 5% per year historically. Now, we're -- we have been exceeding that now for quite some time period. As far as sustainability of that goes, our goal is obviously to continue to sustain that. We think that we have the programs in place. We're continuing to make investments. Joe may be able to speak operationally a little bit more to that. But we're doing things, making investments today in the infrastructure that we think are going to pay dividends down the line.

Yes, this is Joe. I would chime in on that. In this -- particularly in the equipment rental business, but really in the storage business, current results are best related to actions taken in prior years. And so what happens is there's a lead lag and hope that what we're doing today is correctly positioning us for coming years. We're doing a good job overall just in pleasing the customers, so we have good customer loyalty. But these cash flow measurements are a little bit confusing, I think, and I think what Jason said is very accurate. 2007 to '10, we saw 2 things, down -- our top line was down and our equipment spending was up in anticipation of the present day. So we figured that one right and hopefully we're making the right decisions today that will have us have continued good results for the next couple of years.

I know you commented on a call or 2 ago that you saw the competitive intensity of the industry actually increasing, and I assume the reason that the revenues were down in the 2007 to 2010 period was because of competitive pressure. Is that the right assumption? And secondly, can you comment on the current competitive situation and whether revenue should continue to increase?

I don't think that competitors drove our top line through '07 to '10. Our competitors don't have a lot of disclosures, so it's -- unlike some industries where you really know what they did, we really don't know what they did, but we have opinions about it. Our opinion is that their business is probably down over the same periods. Today, we're in very competitive markets in the truck rental business. Of course, everybody is driven by people like yourself that are encouraged the grass must be green over at U-Haul, why doesn't someone give them U-Haul's business. So lots of people are trying. And we're trying to not let them get ahold of our customers. In the storage business, it'll never be anything but competitive and it's very geographically specific. So each market is a separate situation. And we're always going to have some winners and some losers. We're trying to, of course, average up over time. But the self-storage market is far from a lead-pipe cinch and a lot of new money is coming to this marketplace with people who don't appreciate the management intensity of the industry by judgment, and let's see how they do over a period of time.

Okay, great. And then, if I may, just one more question that -- I'm sorry if this is somewhat old news, but the -- looking at the relationship with the related part of the SAC Holdings parties, it seems like the -- that's getting less and less, at least, the loans that you have to them. They seem to be calling. But in the -- you're still -- the way I understand it, leasing quite a bit of space from SAC. Could you explain how those leases work and whether there is any risk to those leases not being renewed?

Yes. Actually, the leases that are referenced are for really nonrevenue-generating types of property where we have offices on some of the locations that they have. The more substantive relationship that we have with them is that we are the property manager for their storage locations and we earn property management fees from them and that's on a standard type of property management agreement that as long as we're doing a good job for them, we would expect them to continue to utilize us as the property manager. The lease, I think -- for a whole year, I think the amount of lease payments that we may pay SAC is less than a $1.5 million. That's actually a very small part. The more substantive part is the property management relationship that we have with them.

This is Joe. What's the risk that SAC is going to go find another property manager? Well, I hope it's not very great. I mean, that's the reason it's considered related party is that it's controlled by people who are related to myself and other members of the company. So the plan would be that they don't leave and that, in fact, they're an integral part of our success. And the people who -- the SAC enterprise also has significant miracle shareholdings. So we'd like to believe that our interests are pretty common and that we'll proceed in the same direction. I have no reason to believe otherwise.

Our next question comes from Jamie Wilen of Wilen Management.

I'll just continue on in that one. Do we make -- obviously, when we record the profits from those self-storage units, it's basically all profits. So that affects our margins in that business. Would we be more profitable or less profitable if we owned those centers? Are we making too much from managing those centers as we do from operating our own?

Probably not. The average -- the average fee that we charge on those is right around 6%. They cover all the rest of the costs. So I would think that we would do a little bit better on owning them.

Okay. And would you characterize our EBITDA margin in Self-Storage as similar, better or worse than the rest of the industry given that we have probably a number of ancillary services that we can provide that maybe others can't?

We don't measure that individually. I think, just from an operational perspective, we view ourselves as just as good at operating the facilities as our competitors are. So in theory, we would be doing as well. Then with the additional services that we offer, we think the combined offering is a better business proposition. But I don't track an EBITDA or a margin or any sort of margin like that by product line.

Okay. Of the 2 million square feet or so that you've acquired in Self-Storage in the past year, could you give us an occupancy rate on what they were doing at in average?

I would guess that it would be in the 60s to 70s perhaps.

Yes, but wait, that's going to be from 0% to 85%.

Yes, there's a range there.

It depends on the mix there of whether we acquired something that was brand-new built or something that had been out for a while. There's a lot of variation and giving a number on that is hard to say.

And when you acquire an existing facility, forgetting about the new bill, what is your target that you hope to achieve as far as utilization or percentage of occupancy 12 months down the pipe from the acquisition?

Again, it's going to vary. What we're looking to is drive occupancy, but if you -- in fact, what you'll find is you may, a year out, report lower occupancy than the people when you acquired it because they basically had garbage on the books. 15% of the people hadn't made a payment in 6 months. The pizza place was getting a free room for delivering pizzas. It's very -- so I would say more than half the time, reported occupancy is lower 12 months out, but actual money brought in is up. And with most of these places, it depends where you start. It's an extraordinary place that you can drive more than 10 percentage points in occupancy a year. It's a very unusual place. So if we brought it on at 55%, then we'd be maybe targeting 65%. We did that on a per-store basis. We set out a goal, a pro forma and a goal. We work out with the individual site manager what we expect to see, so I'm very familiar with them. And it really gets down to rooms rented this month compared to the same month last year. There's seasonality in the storage business, so there's a lot of different factors going on. But we obviously are trying to drive rooms rented and also drive dollars per square foot. In some places that had good occupancy, say, at $85, we're totally on a dollar-per-square foot drive. But it's very individual and specific and we have people who have as their job to understand that.

You guys have done an absolutely remarkable job of managing every aspect of this business. But one thing as a shareholder I would love to see is you do an equally good job of presenting the company to the investor public, so they will know who you are. I do wish you would do a stock split. Our stock is well over $200. We don't trade that much volume. There's only 20 million shares out. It will not cost us anything. And I think investors would be more aware of who you are, especially if you would do that in concert with a name change and possibly a regular dividend.

Our next question comes from Rohit Sahni.

I'm sure you get asked this a lot and it kind of ties to some of the commentary earlier on the call. But as your business continues to grow and you generate more cash over time, you obviously have a lot of options, whether it's deploying it towards a larger truck fleet, especially as your competitors have publically stated that they're in some areas retrenching or investing more money toward storage or returning cash or paying down debt. As you think about a longer-term view, whether it's 6 months, a year, 2, 3 years out, how are you internally debating those decisions? And I'm sure there's no secret sauce or clear answer at this point, but how do you debate those internally and how do you think about that going forward?

Well, of course Gary Horton, our Treasurer, he maintains a very factual approach to what are our refinancial -- refinancing needs. And as you can see from our published documents, we have some -- we have a bubble coming up in 2 years. And so he's very methodically addressing that, has been and will continue to be. And we had a life-threatening event in 2002, 2004 and so we're very, very -- there's a whole group in the company that's very risk-averse and wants to make damn sure we're just liquid as heck. On the fleet and storage, of course, investing in the futures is right there. Most of those decisions are over 5-year decisions minimum. You have to buy new trucks or new storage. You need to have some degree of confidence going out at least 5 years. Storage is longer than 5 years. You don't have trucks unless you have confidence for 5 years. So of course, we discuss that and then, of course, last year we had an extraordinary dividend because in the judgment of a lot of people, that was appropriate. So we have active people supporting each one of those deals and we argue back and forth. It's nice to be in a situation where we have some modest amount of cash availability so we can, in fact, have that argument. It had been years from [ph] -- the argument was which bill to pay first, whether to -- which one to do, so which bill, should we pay the bill at all. So we still have a lot of that mindset in the organization. I think you'll see us, at least through this financing bubble that we've got coming up, I think you'll see us maintaining a pretty liquid condition. And I think that -- personally, I think that's prudent, but it's debated all the time.

That's very helpful. And one other question, it's clear some of your large competitors have publically stated that their fleet sizes are probably going to decrease over time. And some of your other competitors, this is not their core part of their business. And as you keep operating effectively and growing scale, do you see any benefit to pricing on your end? Do you see any impact to pricing and is that something we should think about in our long-term plan? Or is that a difficult one to predict?

It's fairly difficult to predict and what actually happens is customers have economic alternatives to doing business in either the self-storage or the self-move industry and you can price yourself out of the market. And so there's -- in every single market in which we operate, there is customer pressure on price increasing. And so while we're bent on continuing to grow the top line, we're having to be fairly tight on trying to pass through price increases because we're expanding into more and more peripheral markets and those are markets that may be very price-sensitive. And so we have to be -- we're going to -- you could expect us to keep discipline. I think that's about what I can say. We're going to have to be very disciplined there. I don’t think you're going to see a situation where all of a sudden we can get a price increase because we said so. I've never seen that in our history. We did that one time, I forget, maybe 25 or 30 years ago, and it took us like 4 years to recover after transaction sale. So we're not too inclined to run right into that mess again. It's always going to be market-by-market. But again in every market, there's a lot more alternatives than maybe you perceive. The customer perceives themselves as having a lot of alternatives.

The next question comes from with Shahzeb Zakaria with Macquarie.

Could you speak a little bit about the self-storage acquisition market right now? Some of your competitors in that space currently have huge portfolios under contract right now. What does your pipeline look like right now? And what are your expectations with 2014? And also if you could comment on the cap rates right now, that would be helpful.

Well, I talked -- this is Joe, I talked with Jason before the call and he said that he had heard one of our REIT friends, their cap rate was between 0% and 8%. And I think that, that was an interesting summary. So I think that the REITS perceive they have a cap rate advantage over us because they're looking at these things on a very specific basis. I don't know if they really do or not, but if you were to look at a REIT quality property in a major market, odds are high that they'll pay more than we will. That doesn't mean there isn't still opportunities for us. We are unlikely to buy a large portfolio because again in those cases, and you're seeing them, they're being a bit extremely aggressively by the 3 or 4 REITs in the marketplace and there's no -- we've seen no indication that they're not going to continue to do so. And there's a lot of other money chasing those deals. I don't know who all these people are, but these are people of significant financial wherewithal, several hundreds millions of dollars, and they're out there bidding on these properties, too. I'm not sure they fully appreciate the management intensity of the self-storage business. But I would encourage them to reflect on that just a little bit. So it's hard. The REIT cap rates they're paying now are typically more than what we would pay. Is that correct, Jason?

Yes.

And that may be a good strategy for them, I'm not done talking about strategy, but we're not going to follow them into that. We don't have a pipeline of 3 acquisitions of 20 or 30 locations each. There is no such pipeline here. We're doing one-offs. I can't -- it's very rare we'll buy 2 at a time. It happens once in a while, but we're mainly doing one-offs.

Got it. That's helpful, guys. And also if could comment a little bit on what do you think on the development front as it relates to self-storage, that'd be very useful.

Well, we're not developing today. Again, it's very market-specific. There's markets that are -- there's large markets that vary by a multiple of 3 as to the presence of storage in that marketplace. So there's markets -- large markets that are 3 times more or less, depending how you want to look at it, served by self-storage providers. So we're like everybody else trying to sort for the market that has more growth rather than less, although we're in many, many markets that are heavily supplied with storage product and we're doing okay in them. The one I always like to refer to is Glendale, Arizona, it's -- I live here in Phoenix. Glendale is a suburban location. And Glendale has, at least for the last 15 years, had a self-storage availability at least 3x the national average. And yet we've made a living in Glendale all through those year. That doesn't necessarily tell me, though, that the whole country we could triple the storage product in the whole country, pull that off. Glendale's a western suburb with pretty good mobility and it's in Arizona, which is a kind of a growth state. But it's -- I'm not afraid. We, in fact, right now we're doing about 60,000-square foot conversion in Glendale, yet it's 3x, at least, the average amount of storage per population than any other major -- than the United States as a whole. So we're still interested in development. And that also has to do with the fact though that we're in the U-Haul business, so we're going to continue to try to grow with the country as markets grow. We're going to try to be there with our U-Haul product and we ordinarily develop both products simultaneously, both the storage and moving product. So that, again, is a little different than what you're seeing with people generally just in the storage business.

Got it. That's helpful, guys. And just one last question. With regards to development, I apologize if you gave this information out before, but what would you say is your annualized development budget for a year? And are there specific markets that you're more focused on from a development perspective than others? And if you could name those, that would be great as well.

If I name those markets, some people here would shoot me afterwards. So I won't name the markets. And our overall budget is a flexible thing. We're being opportunistic. What happens with -- in our experience with development is you could be a year or longer before you can get the land use permission in most of these markets. And so don't get too hung up on what your budget was. So long as you're able to fund it and you get land use approval, just go right ahead. So we've increased our budget through this year because we found a little more opportunity than we thought we would have when we first started. And we don’t budget separately development, new acquisition or conversion. We want that whole budget together and split it out depending on where we see the opportunity in a specific market.

Got it. And are you able to provide that figure, the combined budget for the external growth?

I just got a no.

The next question comes from Justin McEntee from Goodnow Invest.

I just wanted to go back to the comments you made about the period in the past when the overall do-it-yourself moving market seemed to be in decline. You mentioned that it's a sort of a 5% to 6% growth over the long term and right now we're, obviously, in a period of growth above that. Are you -- I guess, a couple of questions: one, are you outgrowing the market currently? Are you gaining share? Secondly, you're investing in your fleet right now, so does that indicate that you believe that the market should continue to grow at a healthy rate? And then third, what was it in the past that caused the market to go into a decline?

This is Jason. I just wanted to start off first by our historical growth rate. If I communicated 5% to 6%, I should have communicated it's 4.5% to 5% is what we have historically grown. And we're outpacing that now. There aren't industry statistics for the moving business, so it's hard for us to -- I'll let Joe follow up on this. But there aren't industry standards that you kind of point to, to say if the market is shrinking or expanding. I don't know if that was necessarily the case.

Justin, I had fun [ph] a year ago, I took U.S. census figures and they had a whole deal here where they showed mobility at its lowest since basically the late '40s. And then I charted our transactions against that and 2 the curves run dead opposite. There's a lot of factors going on besides people just thought they wanted to move more. And our biggest -- as I indicated earlier, customers see a lot of options and so our biggest opportunity is to make the self-move option with the U-Haul solution the most attractive to the customer and that's, of course, pricing but it's also availability and it's quality of the experience. And so if we can drive on those and we have, we can way outpace what the census says. The census says that our business should be declining over the last 30 years, which is -- that's clearly not the case. And there's a lot of new things happening and the demographic information is -- I don't know how old you are, but it's very common that children move out of the house and then move back in with their parents, just a very common experience people have today that maybe wasn't as common 20 years ago. The census might not pick those up as moves. But for us, they're an opportunity to rent. There's a lot of people doing home improvement and these things that feed -- that are fed by the do-it-yourself industry. And do-it-yourself has been a long-term positive demographic here in the United States for maybe 40 years and witness the rise of many people who are in that part of the business, including my grocery store, which has me check my own groceries out now. So this is just kind of an overall demographic shift and so we're -- to the extent we're able to be responsive to that, we can prosper even though I just said -- the census says overall mobility is down. So there's just a lot of submarkets, and of course, I wouldn't go through all of them on the telephone because, first of all, I couldn't do it from memory, but second of all, I don't want to share what's taken us decades to learn. So we have -- if you looked at the people I have in most of these senior positions, they're 20-year people or more with the company. They've all had a lot of U-Haul-type experience and they're trying to leverage that experience to get us gains in their specific part of the business that they manage and they've had some success. And my plan is to give them the tools and the support that will allow them to continue to get that success in markets all over the -- all over United States and Canada.

Okay. And then I've noticed that, just using your website, it's remarkably easy to get moving help. So it's almost like you can reproduce a full-service moving experience given the technology that you have on your site. Are you finding that you're taking share at all from full-service movers?

I doubt we're taking much share from full-service movers. Again, that's very difficult data to have on an aggregate basis. But in the specific, we don't see a lot of people shop with us and say, I was looking at Mayflower and I wanted to compare you. They're very little. I mean, it exists, but that's -- the full-service move market is largely third-party pay, military or employee or government pay. And that was done at a sales meeting with the purchasing agent, not dealing with the individual customer or website.

And would you consider advertising these new services because they seem pretty compelling like the ability to hire movers? It's a lot easier.

I'm really trying to communicate those. And any way that I could better communicate it, I'm open to trying to understand or get my team to understand. So sure, we're -- of course, we think we are doing advertising, but we're not doing it through traditional agency advertising. But surely, increased public awareness should benefit us if we have a quality product service offering. And I think in the moving help, very specifically, we have an under-awareness of the public relative to the quality of the product that we produce now. I believe, this is our 11th year on that program. So we've been at it a little while and we've suffered the things that you do learning to get into a marketplace. We're pretty firmly in that marketplace, but for it to triple or quadruple in size is very believable to me. It's a question of can we communicate it and then, of course, continue to deliver a quality customer experience. So yes, I'm very open to advertising and any -- I'm routinely trying to learn better and see what would this or that method of communicating do to increase our awareness and therefore increase total business.

And what portion of your customers actually use that service? Is it still small?

Tiny fraction. That's why I say it could triple or quadruple and that's not a -- that wouldn't be a -- that's a very modest goal in my mind. And I don't -- I don't know if we publish any statistics on that. We don't publish any statistics on it. And also on that, you have to understand, we get -- do we publish what our participation is?

No.

Okay. We get a fee. That's a fee basis. You saw the site. We get a fee basis on that. So this isn't some avalanche of money. But it goes into a total combined package of customer satisfaction. And me, I'm now 64 years old, an aging baby boomer and the next move I do is going to send me to the chiropractor for 6 visits. So if I can get somebody to give me a hand, I'm very -- and I am able to pay them, so absolutely I would use that service where when I was 30, I would have scoffed it paying someone a couple hundred bucks to help me do something that I was capable of doing.

Our next question comes from Jamie Wilen of Wilen Management.

Just a follow-up to the previous question. When you say you look at all forms of advertising, you have all these ancillary services that you are working on, whether it's U-Box or having movers with you. Do you ever advertise that on the sides of the vehicles to promote your product? You have these moving billboards that are free from charge for you and it would seem that people see the U-Haul logo and then they would recognize another service?

Yes, we do. And we're constantly trying to better communicate with that medium. As you said, we have a -- we should have a theoretical cost advantage to use that medium. And so yes, we do.

Okay. And lastly, do you break down what percentage of your truck rental revenues are out-of-town revenue versus local revenues? And would you have any idea what the margins are local versus one-way rentals?

That's a hotly debated deal. The transaction size is different. And so if you're the operator, let's say you are a U-Haul dealer, they get paid a percentage of revenue. They very much like the longer rentals because their percentage just simply makes it a higher -- higher dollar transaction for them. If you want to do actual gross margin, we don't track it. But I don't have any reason to believe it'd be very much different between the 2. They're different -- they have different economic profiles. But in both cases, you're running a truck, depreciating it and wearing it out. And so to that extent, they're both very similar. And that's our single biggest cost is financing then maintaining that fleet. So they're not drastically different.

But your competitors don't have the dealer network that you've established to be as competitive in the one-way rentals as they are in the local rentals?

That's true and false. I mean, you're right. So there are select markets where our competitive picture will change, but -- and we were very aware of what we try to adjust. And if you looked at the -- I took a textbook on the economics of transportation, of course, always from a major metro to a major metro, the cost or price, depending how you want to look at it, but a per mile per ton is lower than it is for a major metro to a smaller. And then of course your highest is a small to a small. And -- but it's not just that you can price higher, it's your cost vary about the same way. So I'm not so sure that your margin really grows, although definitely our costs, what we charge to a move from one tiny town to another tiny town 200 miles away should be greater per mile than the cost per mile to go from L.A. to San Francisco. Our charge should be higher, but our cost is higher, too. So the margins really very much different, I personally wouldn't bet on that. I don’t -- inside the company, it's debated do we make any money at all on some of these small-to-small rentals because there's frequency and there's a lot of other issues going on. So it's our strategy to be in those markets and we are in those markets, but not necessarily because we thought it was a gross margin opportunity.

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

Yes, I got one final question, guys. Do you still allow vehicles to flow on a more natural basis? Or are you doing any backhauling?

We're doing 0 backhauling, but we're very much controlling flows, Ian. And if you recall, about 5 years ago, we spent a bunch of money putting in a new rate system? We've continued to dump money in that. And more than that, we've continued to educate our personnel on how to manipulate that to control traffic flows. And that's fundamental to our economics, our ability to manage that system. And backhauls cost you so much that basically you've destroyed the profitability of the rental in and then some. So not that we don't end up doing it them sometimes, but our official position is we never do them. And if I find somebody doing them, immediately I'll see that as a total red flag and we'll go in and see what did we do wrong to result in that situation. We don't believe there should be any if we run our company right.

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