Welcome to the AMERCO Third Quarter Fiscal 2017 Investor Call and Webcast. [Operator Instructions] Please also note that today's event is being recorded. I'd now like to turn the conference over to Sebastien Reyes. Mr. Reyes, please go ahead.

Good morning, everyone, and thank you for joining us today. Welcome to the AMERCO third quarter fiscal 2017 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 December 31, 2016, 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'll now turn the call over to Joe.

Thanks Sebastien. Our third quarter continued to show some recovery in one-way truck transactions and that trend looks like it's going on into - it went on to January and hopefully we'll continue here in February. We have our box truck window fleet in better quantities than a year ago so we should be able to get some transactions just because we have more fleet. The truck and van resell market remains down both in volume and price over last year but it seems to be trending up in the fourth quarter - the fourth quarter is starting to trend over the third. We typically look for significant vehicle sales starting in March still we'll have a better feel by then. Truck storage continues to be a very competitive, very market specific industry. We have many project in development and plan to continue to bring product online in markets that will support our product. What I see indicates that with some declining regulation judicial consistency our business will follow others in expanding. I look forward to a good quarter. Jason?

Thanks Joe. Yesterday we reported third quarter earnings of $3.33 per share compared to $4.17 per share for the same period in fiscal 2016. Unless otherwise noted all of my period-over-period comparisons today will be for the third quarter of fiscal 2017 compared to fiscal 2016. Operating earnings at our moving and storage segment decreased $26 million to $118 million. Equipment rental revenues increased nearly 5% or approximately $24 million. During the quarter we continued to see growth of transactions in our in-town market and we started to build some momentum within our one-way transaction growth. Transaction growth just slightly exceeded revenue growth on a percentage basis. This discontinued growth in transactions leads us to believe we've opportunities to further improve revenue beyond our current pace. The number of trucks in the rental fleet continues to be higher than at the same period last year as Joe just mentioned. This is a combination of a backlog of pickups and cargo vans that we intend to sell combined with a desired increase in the size of the box truck fleet. We saw U-Move revenue growth continue into the month of January. Capital expenditures on new rental trucks and trailers were $870 million for the first nine months of fiscal 2017 down that's down or up from $568 million last year at this time. Proceeds from the sales of retired rental equipment were $403 million that's down from $459 million last year. Net gains from the disposal of property, plant and equipment decreased $4.5 million for the quarter. We did increase our pace of truck sales compared to the third quarter of last year but for the nine months we're still close to a thousand trucks behind what we sold in fiscal 2016. The decrease and gains for the quarter was primarily…

Thanks, Jason. We will go to questions now on the call.

[Operator Instructions] And our first question comes from Ian Gilson of Zacks Investment Research. Please go ahead.

I have got a couple of questions. You have announced that you have committed to 3,000 additional full trucks. Are those spread across both types? Or, are we biased more toward in-town, or how would those trucks be distributed? And, when will they be coming into the fleet?

They'll be small trucks that coming into the fleet, I don’t have a firm date, but probably around June or maybe right in there and then they are kind of they come in on kind of an even basis. They don't come in big glob. And I think we're going to be able to absorb them into the marketplace.

Okay. As we look at transactions, I know there is a seasonal bias. But, was the dollar generated per transaction in the third quarter up versus last year? And, how does it look versus the second quarter of the current year?

It's not as far as I want, but we saw little increase in dollar per transaction and we saw transaction increased. So those are - that's the best way we want to run the trend. And I'd like to see a little bit more on the dollar per transaction and we're trying to manage too. It's trending in a positive direction. I was little more shocked if you talked me back in October or really September because I wasn’t seeing the trend going to way it wanted to. But we seem to be going that way, but always and it's a combination of how we manage and how optimistic the public is. I think I'm hoping - I believe we're going to see some optimistic public and that's the single biggest thing that will give us the opportunity we can manage to serve more customers.

Okay. On the balance sheet, in the prepaid expense line from March of last year to December of last year went from 134 million down to 54 million. Is that main - those expenses were obviously income statement or just prior periods, so why and what was the impact on the income statement?

This is Jason and I apologize on top of my head - not coming with that. I think what happened during third quarter of last year is that we had the retro application of the bonus depreciation which wreaked a little bit havoc within our balance sheet and we reclassify the accounts between prepaid and the deferred tax provision. I believe that that's the majority of that. And as we go through the quarters and on having the tax payment that's going to worked out, so I believe that where you see that in the cash flow statement is reduced payments of cash taxes.

Okay, fine. That’s it for me. Thank you very much.

Our next question comes from Jim Barrett of CL King & Associates. Please go ahead.

Good morning everyone. Joe a couple of questions for you, there was a mention that investment in self storage assets abated in the quarter you said in the past you find acquiring those assets in many markets tend to be expensive. Do you view this as the start of a trend that prices stay where they are or is there simply a shortage of opportunities?

It's really a shift Jim between what we’re developing whether it’s a reuse or a ground up versus what we’re able to acquire. And it's hard to give an absolute firm number because there are so many, but their stuff though perky jerky how it comes on line, but I believe we have at least as many we have put up projects in the pipeline as we did a year ago. I think we’re going to have real strong projects come on through August. So I don't have dead square foot number because it's kind of fluid thing. But it looks to me that that - I’m attempting to actually step that up. So I would expect it will happen, we're going to see the gap between how fast we’re renting up and how fast we’re adding product probably widened a little bit because everything - in development everything you bring on comes on at zero occupancy when you're buying even at the things only at 30% occupancy it’s still 30%. So I would expect that you're going to see a little - gap widened up additional inventory will step ahead of additional rent up. And then we’ll wheel that back in over the next 18 or 24 months.

On a remaining note, given the number of retail closures we all read about in the papers reflecting the fundamentals in that industry. Are you seeing an increasing number of retail boxes that are suitable for self storage?

Yes, and I'm trying to be all over it and also not alert all competitors. So less you talk about it the happier I’ll be.

Okay, fair enough. And secondly and I know it's a moving target, but it’s a corporate tax rate will cut to 15% to 20% and if arguments like they removed the interest expense deduction. Would that change your view of how much cash and maybe it's a Board decision on how much cash the company would be biased to returning to its shareholders?

It should require a whole new analysis - I have not done that analysis so you’re saying that two things happened deductibility of interest goes away and the corporate tax is reduced 40% or 50%.

Right.

I don't know Jason - I’m trying to think how that net off for us I really.

Jim as I have looked at the proposals I would try - in my cash structure working in two ways basically one is the reduction of the corporate tax income, income tax rate by itself which if that were to happen this year if we were to go from say the 35% to let’s say 20% we would reduce our cash taxes by about $80 million to $90 million. And then also reduce our outstanding deferred tax liability may be upwards of $300 million. Now as far as the interest - elimination of the interest deduction we looked at that in tandem with the proposal to expense all new capital investments upfront - a proposed to kind of trade-off and if you expense all that upfront you forego the interest deduction. So we may be looking at the proposal a little bit differently than you are. So I haven’t looked at the interest deduction by itself - at first half through I think it will benefit us more to deduct the interest and not do the immediate CapEx deduction, but I was to look those. The big one for us would be the reduction in the income tax rate.

Right. And then my last question when I look at the increase the 9% increase in operating expenses for the quarter accepting opening up new locations which obviously need to be staffed considering that personnel accounts for half of that increase. On a static basis - do you have as many personnel as you need to run the current number of locations?

Yes and I think that that's a little bit in play because we do an annual bonus for the people more that went into the third quarter than it went into second quarter. So really the second quarter should have been up a little bit and third quarter should be a little down. I don't think we’ve got into a structural problem here at this point. But you're exactly right, we call personnel cost ahead of the Dragon and if you’re not watching that you’re going to get yourself crossways. At the same time, of course we want to pay an attractive living so we’re able to attract confident personnel. So the biggest thing we could drive on Jim is what I call productivity enhancing techniques in another words enable people to do more. When you get into this whole function of running this retail end, it’s just a lot of work involved and we got to keep engineering the work out of the process which we've done a lot of that if you were to - I don’t have productivity per person metric in my head but that’s where we're driving on this increasing, the work that can be done by a given person. I'm always thinking around the edge of a breakthrough there and it always kind of comes - just an inch at time. But we’re driving on that and I don't see it that we’ve have it to reset to a new less advantageous ratio okay, but clearly the numbers are not with I’m sure you expected and I guess that we’re clear.

Okay. Thank you both.

Our next question comes from Jamie Wilen of Wilen Investment Management. Please go ahead.

Good morning fellows. You’ve talked over the years about the improved quality of the vehicles that you purchased and lower maintenance costs with that. I mean the logical thing would be if they’re in good shape maybe we should extend the life of those vehicles and then in third and fourth year of operating, a vehicle often its most cost efficient. Can you explain your model of truck purchasing and the expected life of those trucks and how is that changed over time and what will change in the future if indeed the quality of these vehicles is improving as you say they are?

Okay up and until and including right now I’ve been trying to steadily upgrade our fleet with the expectation that the federal government’s mandate to the automakers on fuel economy is going to cause them to build crappy vehicles for four or five year period. I can't tell you what data tactics are we, you know this a year-by-year battle where we try to get the automakers to keep the same content in the drive train and not alter it. Their willingness to extend that circumstance to us is a close or has been a narrowing window because they’re facing a fuel economy mandate that they actually don't know how to meet without substantially reducing the content not the price the price will actually go up, but the robustness of the drive train is going to go down. So if the administration will give some relief to these people to the automakers on that that’s going to change my fleet plan more like what you're talking about. We could extend out and maybe slowdown purchases. But I've been trying to woke up now for as three or four years of costly get the fleet and better, and better, and better circumstance in expectation of having to live through a very tough period. And as the regs are step today I think we can look forward to a very tough period where the automakers can't produce the reliability in the vehicle because they have had to make sacrifices that they don't totally understand in order to get fuel economy.

The improved fuel costs you paid for by our customer not by us?

Yes, we don't - participate in fuel savings but we’ve participate in increased maintenance expense are lower reliability and my experience with the automakers is whenever they try to make a big jump, and this jump, this current jump is ahead of them is bigger than the ones they made in the 80s and 90s by quite a bit. Our experience is, is that the reliability and maintainability and actually the capability of the truck its ability to actually go up a hill, tow a trailer or tow a car is all going to be sacrificed for that. I have innumerable instances of it even currently you can they’re struggling as they go to these technologies they’re searching for tiny fractional increments in fuel economy and they're having to go to very extensive means to get them and as they do that the price for vehicle is going to go up and its reliability is going to go down. So we right now have as reliable a bunch of vehicles as I've ever seen in my working career and if I could have these trucks in some sort of supply for the next 10 years I’d say it’s all going to be great. In fact unless the fuel economy standard change significantly we’re going to see a decline out maybe three, four years it depends on the product cycle with different manufacturers. Ford is already into that product cycle with their van they’ve gone to great things to redesign their whole van series and with – the result being increased cost and some increased expense of repairability. Fortunately that particular vehicle we are not going to keep – we turned those vehicles every year. So we’re not going to be if maintenance comes up real hard in the second year we’re not going to see that maintenance, but still it’s kind of the shape those things to come there Jamie and I think that I’m going to stick with the present idea which is where its bulk of the fleet let’s have keep making I won't say it’s exactly but it’s essentially trying to get the fleet newer and newer so that we have to we can run it out. Is that make sense?

Okay. So as you look out the next two to three years you would expect us to kind of peak and have a waterfall as a capital expenditures and the age of our fleet will start to grow a little bit a couple of years down the pipe?

For sure if the vehicle quality drops of the automakers for sure.

Okay.

Yes, no and I think it's inevitable given the present rules, but today its uncertain and of course the automakers say it’s never going to happen of course they have to say they’re going to have the quality and everything. They have a got a real problem doing, but I have been through this cycle before with them it's just, it's a bridge too far for them and they always fall a little short of the market no matter how hard they work and then the consumer in this case it will be us suffers for it. So I’m hoping that Trump is going to take your comments and look this and encourage these people to back this off to something it’s actually attainable and still increases fuel economy and everything which – of course good for everybody, but not to a point of severely impacting reliability and cost.

Okay. One other thing I'd like to revisit something that I know you visit all the time, but have never move forward on and that would be selling advertising space on the side panels of your vehicle as a moving billboard. If we could do those things and sell it for $100 a month I think that comes to the line of an extra $0.25 billion of income obviously if its $200 a month it's quite a bit more. I know you’ve looked out in the past, is there any reason why you won't look at it currently and create a new source of profitability for UHAL?

Well it’s not on my horizon right now, so I mean – no it just the truth but it’s a lot of issues with that right now our trucks are allowed to operate basically under the interstate commerce clause of the constitution and states and cities cannot regulate them okay. At the point that they become billboards that's going to be a slightly different issue now so you see it going down the road today everybody almost has graphics on their truck. We pioneered that back in the early 90s, but today the milkman, the grocery guy everybody has some graphics on their truck. I am not intimately familiar what the regulation is on these people who run a billboard truck we’re all familiar with them you see them around. But conceptually it's a different thing that a truck in interstate commerce and I honestly I've had to get myself very comfortable with that because this – our ability to not come under the regulation of every municipality and every state as to what the truck looks like gives us flexibility that if you loss that would increase the complexity of our business substantially. So and then of course I don't know that there is anybody actually want to pay a $100 a truck I mean I have no idea the market for this. I know zero about selling advertising zero, but there are people who know about it. And I don't have a hard answer and feeling you say that bigger number of course it just – well that’s get your eyeballs open wide. I would have to go back and look at it – I don't have a decent answer Jamie.

Got it. And lastly on the U-Box program we’ve now settled the litigation, you said revenues are growing is it profitable and now that the litigation is behind us how do you look at this program over the next couple years and how - where can it be from where it is today?

Jamie, this is Jason I’ll start off with the profitability piece first and then hand it over to Joe for the bigger picture look at it. But from a profitability perspective we turned to – I referred to and internally kind of contribution margin that I try to load it up with as many costs I can on a conceptual basis but it's just like the rest of our programs where it’s woven in with everything else. But from as best as we can tell, and that’s and I’m thought as much cost against it as I can including some form of imputed rent. It went positive last year, it staying positive this year that would say, it’s a small contribution margin, but it’s doubled and the revenue continues to grow. We’re almost back up to where we peaked before and we don't have the same issues with the freight costs or the accelerating expenses. So it’s look like whatever Sam and his team did to it it’s working as we grow it.

And on that one this is moving product its one that struck the chord with the consumer. It’s not going away the real question is what can we grow it to and to me $400 million or $500 million a year would be a good decent goal. I don't have a plan to be there in ex number of years or something, but I believe that with a modest market share we can be at those sorts of numbers. There is a lot of detail in this as there is in everything, but there is no question we can make a profit doing it will hammer on it, just like the truck one we’ve got a hammer on it and we are hammering on it. The customer simply wants it, always I'm on this vehicle always peers an alternative technology and alternative provider slamming us rather than insecure budget putting us out of business I’m a little bit more concerned about some buddies who I, who is not clear in the rearview mirror and I think the box business has a lot of those characteristics and for us to not participate in it would be foolishness it could be more than $400 million or $500 million I have no – if we get that big the things really won't be on it, it’s going to go and be a good contributor for years. We’re attempting to responsibly expense and depreciate things I really on Jason for that, but he gets very clear direction from me we don’t want to be building a bunch of liability up ahead of us we want to have all that flushed on an annual basis. I believe we’re doing that. So I would expect that we’re going to see it continue to grow and this summer is clearly heading in the right direction, we’re already seeing it work up now. So it did seem with our basic consumer, but it’s a whole different game it's not a truck rental, it’s not a storage rental. We’re confident both truck rentals and storage rent - this is another whole skill set and I think we're about where we are to be at this point in our life.

Okay. Thank you. Outstanding job for creating value for shareholders. We appreciate it.

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

All right, this is Joe again. I'd like to thank you all for participating. I appreciate your input. I’m looking forward to a positive close to the quarter even though we're going to have snowstorms and all the other stuff that we normally get, but I think we are positioned to have a positive fourth quarter. So, my thanks again. Look forward to talking to you in 90 days.

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