Good morning, and welcome to the AMERCO Second Quarter Fiscal 2022 Investor Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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 Second Quarter Fiscal 2022 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 September 30, 2021, which is on file with the U.S. Securities and Exchange Commission. I will now turn the call over to Joe Shoen, Chairman of AMERCO.
Thanks, Sebastien. Well, we had another good financial report. Most of my teams have meaningful direction and are hard on their objectives. Attracting and retaining team members remains a struggle. We are blessed with many long-term persons and a company work ethic that is attractive to many people. As I have related before, General Motors and Ford are unable to supply U-Haul with replacement trucks in the type and quantity we desire. As a result, maintenance expense must increase. This will also cause some blips in CapEx when replacement units do become available. I have a push on this winter to bring bigger U-Box warehouses online and to expand the number of warehouses. I expect some results by late spring. We are also working to increase the size of our U-Box container fleet and re-delivery truck fleet. Our U-Box business continues to grow.
We are continuing to expand our inventory of self-storage units. Rent-up of existing units remains strong. I am working to accelerate new product coming online. Perhaps more than ever, our continued success is due to the hardworking, nimble teams we have in every phase of our organization. Should you visit one of our locations and witness a team member going above and beyond, give them a word of encouragement. They need it. I value your continued support. Jason will now walk us through the numbers.
Thanks, Joe. Yesterday, we reported second quarter earnings of $20.90 a share as compared to $13.58 a share for the same period in fiscal 2021. Throughout my presentation, the majority of the comparisons are gonna be for the second quarter of this year compared to the second quarter of last year, unless otherwise noted. Starting off with equipment rental revenue, we saw an increase of nearly 27%. That's approximately $248 million. The additional revenue came from a combination of growth in transactions and increased revenue per transaction, which was due to both more miles being driven and average rental rate per mile. We have seen growth in U-Move revenue continue for the month of October.
We are taking in new equipment from our manufacturers, but as Joe mentioned, at a rate slower than what is desired. We've also slowed the number of trucks that we're retiring and selling. Capital expenditures on new rental trucks and trailers were $548 million for the first six months. That's up from $395 million in the first six months of last year. Our original plans were skewed heavier towards heavier growth in the first half of this year. There is still a possibility of having relatively good acquisition activity over the second half of this fiscal year. However, since we initially set our fleet plan before the year started, given customer demand, we would have increased the size of our orders to be more in line with customer activity had the equipment been available to purchase.
Our expectation for net fleet CapEx in fiscal 2022 is still around $550 million, but that's subject to manufacturer availability and quite frankly could go up or down. Proceeds from the sales of retired rental equipment decreased by $10 million to a total of $300 million in the first six months of this year. For the trucks that we do choose to retire and sell, the market for these units remains strong. Demand for self-storage continues to be steady. Our occupied unit count at the end of September increased by 104,000 occupied units compared to the same time last year, while revenues were up $38 million, which is about a 33% improvement for the quarter.
Our all-in blended occupancy rate for the quarter experienced an increase from 72% in the second quarter of last year to 84% in the second quarter of this year. If you look at the subset of these facilities that have stabilized under the definition of being at 80% occupancy for the last two years, those locations occupancy increased about 280 basis points to 96.5%. This group of properties that fall under this definition also increased by a count of 82 this quarter versus how many qualified last year at this time. We have also seen increased revenue per foot, indicating improvements to our average rental rates. Capital expenditure spending related to real estate was $444 million for the first six months. That's up from $226 million last year at this time.
Our goal has been to increase the pace of investment, and we're seeing some success at doing that. We currently have approximately 7.3 million sq ft in development across 155 projects. In October, we closed on another 16 development properties, and our acquisition pipeline continues to accelerate with approximately $310 million of deals currently in escrow. That's around 125 properties. Operating earnings in our moving and storage segment increased by $182 million to $556 million for the quarter. Operating expenses saw an increase of $120 million. In spite of this increase, we still saw an improvement in our operating margin. Our two largest operating expenses, personnel and fleet repair and maintenance, accounted for approximately half of the increase.
For personnel, the increases are less than the revenue improvements, thereby helping the operating margin. The positive margin impact of fleet maintenance that we saw in the first quarter narrowed during the second quarter and may start to turn a bit negative going forward. Several of our other categories increased to lesser extents, including shipping costs, property taxes, and maintenance for buildings and non-rental equipment items. We continue to improve our cash and liquidity position. As of September 30th of this year, cash, along with availability from existing loan facilities at our moving and storage segment totaled $2.486 billion. Included in that was during the quarter that we entered into a note purchase agreement to issue $600 million of fixed rate senior unsecured notes in a private placement offering. The weighted average interest rate was 2.59%.
Our intended use of these funds is primarily to expand our presence with new locations, self-storage, and to add warehouse space in support of our U-Box program. With that, I would like to hand the call back to our operator, Debbie, to begin the question-and-answer portion of the call.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Debbie, I'll go ahead and ask two questions that have come in beforehand.
Okay.
from Greg Nielsen of Artisan Partners.
Okay.
The first question is, what influence, if any, of course, is the constrained production of new trucks having on truck rental pricing? Would management assume pricing weakens as production comes back? I'm sure this is too simple an assumption, so thoughts on how management views the current pricing environment would be helpful.
All right, I'll take that. Pricing is, or rates are up. I had a customer push back real hard on Monday. They paid $669 for a rental that five years previously they'd done for $197. They pressed me pretty hard, very thoughtful that I had overreached on the pricing. I reviewed it and repriced it at a lower number. What I found was that Budget was $900 plus, and Penske gives it exactly $1,000 above our rate on the same rental. Of course, my pricing people said we're already discounting. It's kind of an uncertain journey here. Of course, our costs of equipment are up, and they're gonna continue to go up.
We're in some kind of an inflationary cycle that I don't understand any better than any of you. We know from our vehicle suppliers that they're going to be passing on considerable costs over the next probably two years. I think it's gonna have to have some impact on pricing, and it probably already has had some impact on pricing. I don't believe that the prices I saw from, in this particular transaction from either our competitors made any sense whatsoever. I didn't give it a lot of weight, very frankly. I think we still have a pact with the customer to try to be a low-cost provider of household moving and storage services, and we want to try to honor that. Will prices come down as availability increases?
I doubt it, because I think what we'll see is inflated costs, and that's gonna mitigate the increased availability. Now, I obviously don't possess certainty on this, but what I'm seeing with all our various vendors is that there's more cost increases on the horizon. We've been served up a lot of price increases that, of course, we're pushing back on, sometimes successfully, sometimes not. That's kind of an overview of it.
Great. The second question, Jason, you kind of alluded to this. Cash is stacking up on the balance sheet, which is positive. What is management's plan for all that cash?
Our goal has been to begin reinvesting back into real estate. We had made a big push several years ago with the infusion of capital from the sale of a portion of our Chelsea, New York location. This time around now we've entered into this private placement type debt, which is eight, nine, 10 and 12 year maturities, with the idea that this is going to be working capital to help support the next round of development for the organization. This next round of development will look a lot more like ground up development versus the last time around, which was largely conversions with the Kmart properties. We thought that this type of funding better fit that type of property profile.
Okay. The next question in the queue comes from Jamie Wilen with Wilen Management. Please go ahead.
Hi, fellas. Outstanding quarter. It's amazing what the hard work and effort produces in the outcome. On the self-storage side, I'm enthused with your increase in occupancy rates that have gone up literally 500 basis points from March to September, March to June and June to September. Is that continuing? Has October shown increased strength? It looks like it's kind of a straightforward progression.
Well, I'm gonna say to your question, yes, but the reason is, we're not bringing what I consider enough new product online. We're absorbing product faster than we're bringing it online. So the party will be over if we don't bring more product online.
Okay.
We run real hard to keep rooms rented, Jamie, instead of occupancy %. Of course, we have to have enough occupancy to pay our bills and everything, but we have to see units rented grow consistently and we don't have enough in inventory to continue at the present pace. Now that the good news is that'll raise occupancy %, but the bad news is it'll constrain growth. We're trying to balance that out. It's a little inexact 'cause normally construction's herky-jerky, but with all this other nonsense in the economy, it's worse than it was five years ago. It's very, you know, all your plans keep falling apart, you put them back together. I expect by late spring to have some more product, significant more product online, and that might cause occupancy to slip a little bit.
All along our occupancy, and Jason has tried to present this, we have two kinds of occupancy, the stores that have been around a while and then whatever we're able to bring online. At this time, we're doing a lot of phase two build outs. You're aware of the Kmart stores we have. Many of them, we only built out 50%, so we will and have been and will through the rest of winter, continue to build out the rest of them, which will make each property cash flow better and be better provide enough money that we can afford management on site. That part of the picture is pretty easy to see.
The part is about bringing total roundups online is a little more murky, although we have several that are half built at this time, which means they'll be done by late spring, no doubt. That is kind of you know, you and I see it just a little bit different. I try to appreciate your view. My view is I need more inventory, so I can continue to grow.
As occupancy rates obviously are improving for everyone in the industry, that goes hand in hand with realized rental rates. As I look at Public Storage increase their year-over-year rental rates by 13%, LSI by 14%, have your rental rates increased by similar numbers?
No. The little bit of what they're showing you is a mirage. They cut prices. They cut prices March a year ago, and March a year and a half ago real solidly. We never cut our prices, so you'd have to do a three-year trend on them to know what is the comparable. I don't know what their comparable is on a three-year trend. No, we're not seeing something like 13% increases. No.
Okay. In the 10-Q, you talked about other revenues of U-Box being the most significant contributor to a $50 million increase. Am I reading that correctly?
Yes.
Could you give us a handle on what U-Box revenues are today?
It's by far the largest component of that. It's not yet 10% of the total revenue that would require us to break it out. As I mentioned before, since there are no other public competitors in that space who report any sort of information, we're gonna continue to, you know, blend that in with our other revenue number until it's required to be broken out. You know, it's starting to be a big enough number where you can kind of see the movement there. 'Cause what else is in other revenue would be, you know, interest income on our short-term cash, it would be revenues from some of our ancillary programs like Moving Help. U-Box far and away overshadows what's in that category right now.
Is there an increase, their percentage increase greater than the corporate increase at this point?
Yes.
Their historically, you said their margins are all in pretty close to historical corporate margins for everything else. Is that still the case?
You know, it's that game of how we choose to allocate expenses and how we have that sort of internal tracking set up. We allocate very heavily, so it's typically running a couple points back. But at this point, it's certainly, as we're underwriting new projects, we're finding that the inclusion of the U-Box is certainly helping the economics of our overall moving and storage offering.
Okay. I see all the new self-storage being open, you really seem to have a much greater U-Box component. Or as you build those, you make sure you have room for U-Box. Does that give you a competitive advantage in there, and is that fueling the growth in U-Box at the moment?
I would say yes. Ultimately, you know, it's just consumers want it, we're gonna try to get it to them at a fair price. I mean, there's people who want that kind of a move, and we just need to honor their requests. It's a big country. There's a lot of, you know, markets to get this into to where you could say you really have it. I think I could say today that no one has as extensive a network as we do in place. Our network is not as extensive as I can see it being. The more we get a network, the more the customer sees that as a viable alternative. We have to continue to establish a physical presence in a number of cities and towns.
I think as we do that, we'll see the business continue to grow and hopefully grow faster than the truck rental part of the business. Truck rental is much more mature relatively, probably. You know, there are no accurate numbers on market share and those things. Just from my experience is that there's a lot of room to grow in the containerized moving business.
Okay. Lastly, Joe, in Canada, while the business is very, very profitable, the profit margins are not as great as they are in the States. Is there anything that you can do in the future? You don't seem to have much of a build-out in self-storage in Canada. What will you do in the future so those margins in Canada can approach the U.S. or is that not possible just because of the logistics up there?
I think it's possible. You know, everything is a little bit different in Canada. It's a, you know, it's its own country, no kidding. They're very proud of that as we are of our distinct characteristics. We don't have as strong a storage presence relative to our U-Move presence. Until September of this year, I was prohibited from going to Canada for almost 17 months. That had the predictable effect, okay? Since then, I've been able to get into Canada, and my other managerial personnel have, and I think, we've got Canada running hard and aggressively. Before that would have any impact on product availability is probably 18 months, so maybe, March 2023 before you'd really see this stuff, you know, really percolating through. We're hard at it. We understand the deal.
The basic consumer wants and needs are very similar in Canada and the United States. It's a question of getting up there and getting the product presented.
Gotcha. Okay. Outstanding numbers. Great job, fellas.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
I just wanna thank everybody for their continued support and repeat my request. I hope you go into one of our stores from time to time. We're only as good as our last visit, which when I say that, I always cross my fingers because, of course, it is just that simple. If you go into one of our stores or when you go into one of our stores and see somebody doing a good job, tell them you're an investor and you appreciate the work they're doing. We're counting on them. I thank you. Look forward to talking to you again in 90 days. Sebastien, any closing comments?
We look forward to speaking with you in February. Thank you, everyone.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.