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Amerco (NASDAQ:UHAL)
Q2 2021 Earnings Call
Nov 5, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the AMERCO Second Quarter Fiscal 2021 Investor Call and Webcast. [Operator Instructions].

At this time, it is my pleasure to turn the floor over to your host for today, Mr. Sebastien Reyes. Sir, the floor is yours.

Sebastien Reyes -- Director of Investor Relations

Good morning, and thank you for joining us today. Welcome to the AMERCO Second Quarter Fiscal 2021 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, 2020, which is on file with the U.S. Securities and Exchange Commission.

I'll now turn the call over to Joe Shoen, Chairman of AMERCO.

Edward Shoen -- President and Chief Executive Officer

Thanks, Sebastien, and good morning, everybody. As you can see from what we press released, we had bang-up results for the quarter and the more modest results for the six months. We have weathered significant adversity. We guarded our cash, and we kept our team intact. These COVID-related events will be felt for at least two years as we get fleet rotation and real estate capex on track. As Jason will explain, we put off 18,000 to 20,000 scheduled vehicle replacements, and we cut back about or delayed one million square foot of storage developed. Throughout this time, our banks and insurance company lenders have supported us well. I trust our performance continues to meet -- to merit their support. We are now seeing a wave of demand that is driving our top line growth. We are attempting to earn these customers' continuing repeat business. We are in a better position than I thought possible last March. We have a good team in place, and I look forward to further success.

With that, I'll turn it over to Jason to go through the numbers.

Jason Berg -- Chief Financial Officer

Thanks, Joe. Yesterday, we reported second quarter earnings of $13.58 a share. That's compared to $7.97 a share for the same period in fiscal 2020. Throughout my presentation, I'm going to have all my comparisons will be with the second quarter of this year compared to the second quarter of fiscal 2020, unless otherwise noted. During the second quarter, we've seen an increase in customer demand for our self-moving products and services. I believe that as various levels of government have eased restrictions as compared to the first quarter and as our customers across North America are adapting to the challenges of COVID-19, economic activity has improved. Equipment rental saw an increase of nearly 16% or approximately $127 million. This quarterly increase has also brought us now positive for the six months of the fiscal year for U-Move revenue. In comparison to the same month last year, July was up 11%, August was up 14% and September revenues were up 24%. We've seen this growth in human revenue now continue for the month of October. Compared to the same period last year, we've increased the number of retail locations, independent dealers, box trucks and trailers in the rental fleet.

Capital expenditures on new rental trucks and trailers were $395 million for the first six months of this year. Now that's compared to $1.037 billion for the first six months of last year. While our original plans did contemplate a decrease in fleet spending for fiscal 2021 compared to the year before, this is more than what we had planned. At the onset of COVID-19, we pared back our capital investment in both our fleet and real estate in order to preserve liquidity. Our measures were coupled then with manufacturer delays. These actions are effectively pushing out fleet capex necessary for the normal rotation of our fleet. Over the next 18 to 24 months, we're likely to see increased spending on fleet, which is going to eventually lead to an increase in depreciation. Our expectation for net fleet capex in fiscal 2021 has dropped to around $430 million, largely due to timing, but there is still much uncertainty to this projection. Proceeds from the sale of retired rental equipment decreased by nearly $87 million to a total of $310 million for the first six months. In the first quarter, sales decreased from commercial auto auctions. These are now open, and we're experiencing higher resale values, but we've slowed sales while we wait for new truck deliveries. With regards to self-storage, we continue to have success in the rooms.

Looking at our occupied unit out at the end of September, we had an increase of 53,800 occupied rooms compared to the same point in time last year. During our last earnings call, I reported that our June-over-June growth was $41,700. So the pace of filling rooms has continued to accelerate and does so -- and continues to do so into October. Revenues for the quarter were up about $10 million or 10%. For the first time in several years, our all-in blended occupancy rate for the quarter experienced an increase. I think this is the first time that we've seen an increase in this since March 2015. This is a result of the increased pace of filling new rooms and also partially to a slower rollout of new rooms. So far for the first six months of this year, we've added 17,000 new rooms while last year, at this time, we added 43,000 rooms for the same six month period. This is related to our capital expenditure spending for real estate. For the first six months, it was $226 million, that's down from the first six months of last year when it was $423 million, both the pace of acquisitions and construction has slowed during the first six months. Retail sales increased $25.5 million. That's about a 35% increase for the quarter.

All three of our major product lines, moving supplies, hitches and towing accessories and their installation and propane refilling reported gains. These lines are continuing to improve in October. Operating earnings in our moving and storage segment increased by $145 million to $374 million. I wanted to touch on a couple of the expense highlights. First, depreciation expense associated with the fleet decreased by about $11 million for the quarter. So we had expected depreciation expense to slow this year, but it's happened a bit sooner than what we expected due to the delays in new production. Over the last half of this year, we should see that decrease begin to add but then likely increase for fiscal 2021. Operating expenses increased $10 million, a rate much lower than the growth in revenue. We benefited from flat personnel costs and decreased repair and maintenance costs. In the coming months, we will see some increases in repair and maintenance due to the increased miles driven by the fleet and as we begin to ramp up truck sales. Several of our other categories increased, but to a lesser extent, this includes estimated liability costs, property taxes and shipping costs from our U-Box line. We continue to improve our cash and liquidity position.

At September 30 this year, we had cash and availability from existing loan facilities at our moving and storage segment of $1.293 billion. As a reminder, six months ago, at March 31, as we were going into the beginning of the COVID-19 crisis, this number was $498 million. From a cash and liquidity perspective, we are much better situated now should COVID-19-related business restrictions worsen.

With that, I would like to hand the call back to our operator, Jess, to begin the question-and-answer portion of the call. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question will come from Steven Ralston at Zacks.

Steven Ralston -- Zacks -- Analyst

Good morning.

Edward Shoen -- President and Chief Executive Officer

Good morning, Steve.

Steven Ralston -- Zacks -- Analyst

Congratulations on the blowout quarter. Stock is doing very well today. Could you delve in a little more into your expansion program? It seemed to be a driver that you had enough capacity to meet the demand that happened during the quarter, but also you're insinuating that your capex has pulled back at the same time. And I'm looking more out at future demand. It seems like, obviously, there's been a lot of moving -- transitioning of workplaces, that sort of thing due to COVID-19 and when situations come back to normal, there might be the exact reverse. So there might be another huge bubble of demand further out in a year. Could you delve into that?

Edward Shoen -- President and Chief Executive Officer

Sure. We're really excited if that happens. We don't control that. And I don't think we have any particular insight as to it. Of course, any capacity that we build is really work that happened two or three years ago. So the problem is there's a tremendous lead lag in bringing on more capacity. So we were lucky to have the capacity we did. We still have good capacity. And as we go ahead, we'll probably build that buffer up a little bit. Of course, we monitor how many rooms are renting every day, by every location. There's always room to do better, and I believe there is -- well, I believe there is room to do better, although we're doing it as well as we've ever done. Does that speak to what your question is? Or do you want to talk about the truck rental, too?

Steven Ralston -- Zacks -- Analyst

I want to talk both about storage and truck. I assume there's a problem in being able to access supply on the transportation side?

Edward Shoen -- President and Chief Executive Officer

Yes. It's -- the automakers are still struggling to meet their commitments, both to their dealers and their fleet customers. They just -- they're -- they have so many supply suppliers, such a complex web. It's not so simple for them to get this all going again. At the same time, we have kind of a unique situation, which is where is our fleet. Right now, basically, you can take the two coasts and mark them empty and you can mark the center of the country oversupplied. And so that's not where we'd like to be, and it's an unusual circumstance. Normally, we've not seen patterns change this radically this fast. So we're, of course, daily trying to figure out how to maneuver to keep the best utilization of the fleet going...

Steven Ralston -- Zacks -- Analyst

Right. By repositioning your fleet, yes.

Edward Shoen -- President and Chief Executive Officer

Sure. So any of you who are in the New York, New Jersey area, we're just simply out of trucks for what we call one-way rentals. Now if you want to move in the area from one building to another, we're well supplied. But for people who want to move to Iowa, and there's a bunch who want to go to Iowa, it's a little bit tougher. And so we're not able to fill that demand as great as it is. It's greater than we can fill, but we're working on it every day. And of course, our U-Box product has really come into play here, giving us another option for the customer that not everybody who is in our peer group has.

Steven Ralston -- Zacks -- Analyst

Year-over-year, what was the increase in the number of box trucks and trailers available?

Jason Berg -- Chief Financial Officer

We're actually -- at the end of the quarter, we're down a little less than 1,000 trucks or about 1,000 trucks from where we were last year at this time. And that's mostly has to do with the pickups and cargo van and Porsche fleet.

Steven Ralston -- Zacks -- Analyst

So your usage rate, your utilization rate of the -- has obviously gone up?

Edward Shoen -- President and Chief Executive Officer

Exactly.

Steven Ralston -- Zacks -- Analyst

You give a metric on that?

Edward Shoen -- President and Chief Executive Officer

We have dozens of them, but it's only meaningful if you get down to a very high geographic area. The metric for the whole country is just kind of like the average health of the country, doesn't mean hell of lot...

Steven Ralston -- Zacks -- Analyst

Right. It's meaningless, yes. Understand.

Edward Shoen -- President and Chief Executive Officer

We're driving on all that. We're organized with what we call marketing companies, which we have 185 of. And then we have, inside that, we call dealer routes and then centers. So we have about 800 dealer routes and about 2,000 centers. So we measure it at that level, those three levels and then we try to optimize inside of that. And some days, we do better and some days, we do worse, obviously. We're, of course, going into what would normally be our slow season. So we've got overall plenty of equipment, even with the increase in demand through the winter. Does that make sense?

Steven Ralston -- Zacks -- Analyst

Yes.

Edward Shoen -- President and Chief Executive Officer

So we have lower utilization, normally. So we can run the same utilization and do OK. But we'll see what happens come spring.

Steven Ralston -- Zacks -- Analyst

Thank you very much.

Edward Shoen -- President and Chief Executive Officer

Thank you.

Operator

We'll go next to Jamie Wilen of Wilen Management.

Jamie Wilen -- Wilen Management -- Analyst

Thanks. Excellent quarter, fellows. Joe, I want to issue many moons ago what the most important metric was in managing your business and managing truck rental, you said fleet utilization. And obviously, this quarter with fewer trucks and volumes up that much, the fleet utilization was off the chart. When you look at that number, when fleet utilization goes off the charts, obviously, our income goes off the charts because everything is in motion. So the previous caller asked about what the future plans are for increased -- increasing the fleet. But in the context of greater operating margins with greater fleet utilization, could I hear your broader term perspective?

Edward Shoen -- President and Chief Executive Officer

Yes. Of course, you want to drive on fleet utilization. And if you -- I'll be -- this is in the SEC number, but over the last 30 years, we've probably had a net increase of fleet utilization every year, but maybe [four]. Jason is not nodding his head or not. But I've kept track of it. It's pretty close to that. So that's where the economics are. And also, we're kind of driven there, Jamie, just because cost of equipment is always rising, wages are rising. You just -- the place to take it out of is better utilize the fleet. And if of course, if you ever run the fleet seven days a week, we'd have to hire armed guards to take the money to the bank. So we get that, and we do have locations that run every equipment every day of the week. Now that's not the norm, but we know basically how to -- we know how to run at that level. So there's a lot of scheduling and things involved to run at a higher utilization level, and most of our systems would facilitate that. So what we're looking -- what little unknown here right now is the distribution of the fleet.

Like I said, it's kind of creeping toward the center of the country. And so we're getting great utilization. But at a point, we're going to get made too much in the center of the country, and we won't have enough outflow. And then -- so we have to be kind of careful there and selective where we're seeing this equipment. And we're sorting through that as best we know how, it's a constant process. So we don't need to expand the fleet to do more business. That's what you saw here now. Now, we kind of held the fleet because your fleet can also be determined by how many trucks you sell. You saw truck sales were down. So -- because the gain on sales were down, you saw that.

Jason Berg -- Chief Financial Officer

Gain on sales for the quarter were up, that was from resale value. The actual number of units sold was down.

Edward Shoen -- President and Chief Executive Officer

Was down. And so that way, you can kind of a what you call, grow at the bottom end of the fleet. And so -- and we have some flexibility there in sales. We've been blessed by a good sales team, and the country has been prosperous for the last 10 years or so. And our consumer for our sale truck is usually a small business or an entrepreneur. So when those people are thriving, we have a ready market to sell our equipment into. So we've kind of postponed some of those sales and we're going to regulate that as best we can, even geographically. So for an instance, I had two people call me last week, one to buy a truck in Los Angeles. Well, I'm sure they did, but my guys' sell at truck at Los Angeles, I'm going to be upset because we ought to rent the damn thing, even if it's a little bit high mileage, even if it isn't perfect. We got to rent it because there's enormous demand there. But on the other hand, if my guy in Nebraska sells a few extra trucks, I want to send him an attaboy. So there's a lot going on inside that.

We have a pretty good idea of what it is, and we're going to try to manage it to increase fleet utilization. You also saw, I think, Jason said, we upped our number of centers and upped our number of dealers in the first six months of the year. And that goes against workload, the utilization you see, because the more places you spread the equipment, it's harder to get good utilization. So to get good utilization and also see an increase in locations, I was pleased with that. I think that's operating well. We're not always -- we have not always done as well on that, but that's -- if we open the right locations and get the right equipment to them, we can hold or increase utilization while we're expanding convenience to our customers.

Jamie Wilen -- Wilen Management -- Analyst

Okay. And October, did you mention that it's continuing at a double-digit pace of increase?

Edward Shoen -- President and Chief Executive Officer

I'll let Jason pick that.

Jason Berg -- Chief Financial Officer

Yeah.

Jamie Wilen -- Wilen Management -- Analyst

Yes. Okay. On the self-storage side, Jason, in the past, historically, you've given some numbers on the occupancy rates for those for our mature stores. Do you have those as well?

Jason Berg -- Chief Financial Officer

Sure. So the last couple of quarters, I've given what a competitor same-store calculation would look like for us. So locations that have been at 80% for two years in a row. So the occupancy at those locations this year is about 93.2%. That same group of facilities last year was about 92.3%.

Jamie Wilen -- Wilen Management -- Analyst

Excellent. Excellent. The state of the self-storage industry seems incredibly healthy. And last week, there were a couple of transactions that were at incredible prices per square foot. When you see those numbers, and obviously, it points to how undervalued our self-storage operations are. But do you get the thought of we would -- could sell some of our self-storage that are mature, and that we could get a full price on, so we could accelerate the development of other self-storage?

Edward Shoen -- President and Chief Executive Officer

I don't see us doing that. But we do presently as we basically put them into CMBS or some other long-term financing and take that money and reinvest it. And so you take a little haircut every time you do that compared to a straight out sale, let's just argue and say you take a 30% to 35% haircut in cash realized, Jason?

Jason Berg -- Chief Financial Officer

Yes.

Edward Shoen -- President and Chief Executive Officer

Something like that. But we still have the asset, the assets that are producing income, the very next day is producing income. So it's -- I don't know exactly how to calculate the haircut. So that's the way you should expect to see us going ahead. We're actually -- in our own minds, I think we're more than trying to buy more self-storage than not. You mentioned there was a couple of transactions. I'm familiar with the Simply -- I'm not sure of another one. I'm not sure what you're talking about.

Jamie Wilen -- Wilen Management -- Analyst

There was the BlackRock, and there's also -- I believe U-Store bought some from a New York affiliate of recent vintage?

Edward Shoen -- President and Chief Executive Officer

Yes. I don't know much about the storage deluxe, the transaction at all. As far as BlackRock, they probably bought that at the best price that could be achieved. So it's hard to say, it looks an astronomical price. I always wonder, it seems every time I go to buy something, it's astronomical. So -- but the little bit I know about the BlackRock organization is they probably dealt pretty hard and probably bought that at the best price that was going to trade at. I don't think the -- were suckered or anything or bottom [Indecipherable] of the sky to my knowledge. So it was -- they got a real good price that I think those properties -- a lot of those properties have traded three times in 10 years, is that close, Jason?

Jason Berg -- Chief Financial Officer

Yes. Yes.

Edward Shoen -- President and Chief Executive Officer

So -- and every time they've traded it, they traded it at gain.

Jamie Wilen -- Wilen Management -- Analyst

Got you. But Joe, when I wrap those numbers around, our self-storage operations, you get that our self-storage would be worth several hundred dollars a share, per share more than what we carry it for. Not that we're selling it, but that's an incredible number.

Edward Shoen -- President and Chief Executive Officer

Yes, we're building a base of value here that should allow us to project into the future aggressively these markets are vast and changing. I mean, they're vast. If we ever got a position to make a real move, you see that may come into play and allow us to take an action that nobody expects. We don't have anything like that on the burner. But obviously, we have some value there, and we need to try to help our shareholders appreciate.

Jamie Wilen -- Wilen Management -- Analyst

Would we have a one day break out of the self-storage business? So I mean it's a tremendous cash flow business, but obviously, there is a significant amount of depreciation and very little in the way of any capital expenditures. So on a profit basis, it's not nearly as impressive as on a cash flow basis. Could we ever break it out so we could see those numbers of how profitable those guys are on a cash basis?

Jason Berg -- Chief Financial Officer

Jamie, this is Jason. Right now, we don't have any plans to do that.

Jamie Wilen -- Wilen Management -- Analyst

Okay. Last two things, U-Box volumes, you mentioned was strong. Could you give any percentages?

Edward Shoen -- President and Chief Executive Officer

Yes. Sam's here. Sam -- it's Sam who runs that. There he is. Sam, do you want to speak to that? What's the increase for U-Box in percentages?

Samuel Joseph Shoen -- Vice Chairman of the Board & U-Box Project Manager

Sure. My name is Sam Shoen, I'm the program manager for the U-Box product line. We've seen performance relative to U-Move with about 10% more on top of what you've seen with U-Move. I'd rather not give more specifics than that, but we've seen exciting performance. Itt's continuing into October. I think we were performing, I would have characterized us performing well, pre-COVID. I'm extremely excited to see how we're performing in the middle of COVID and I'm expecting it to continue post-COVID.

Jamie Wilen -- Wilen Management -- Analyst

The operating margins on U-Box, how would you compare it to the U-Move business?

Jason Berg -- Chief Financial Officer

Jamie, this is Jason. On that, it's all kind of pro forma, how you decide to do internal financial statements, but it's very close. We've had some quarters it's outperformed, other quarters is within a couple of percentage points. So it's very close. And it's all a game of how many -- how much -- how we decide to allocate overhead costs.

Jamie Wilen -- Wilen Management -- Analyst

Got you. And lastly, the products and services you sell as an adjunct for self-moving was up 33%. I would assume that's a higher-margin business than anything else we do?

Jason Berg -- Chief Financial Officer

You can track the margin on that because if you take the retail sales line and the cost of goods sold line, those two are directly attached to each other. So if you look at the contribution margin between those two, you'll get a sense of that.

Jamie Wilen -- Wilen Management -- Analyst

Nice one and well done managing your business. Thanks, fellows.

Edward Shoen -- President and Chief Executive Officer

Thank you, James.

Operator

We'll go next to Craig Inman at Artisan Partners.

Craig Inman -- Artisan Partners -- Analyst

Hey. On the revenue growth, can you talk about -- I know it's hard to get an average. But can you talk about the split between transaction and pricing changes just because you're seeing some -- the way the shift in the trucks from coast to inland is creating some pricing tailwinds, too?

Jason Berg -- Chief Financial Officer

Craig, this is Jason. To flip that up a couple of different ways, I would say that a little more than half of the increase is coming from the one-way business and then between in town and one-way, a little -- about half of that is coming from transaction increases.

Craig Inman -- Artisan Partners -- Analyst

Okay. Split half and half. Okay. On the -- I'll ask a technical question. The prepaids in the Q, it's discussing the -- about a $380 million refund on taxes. How much is that the number that's outstanding still?

Jason Berg -- Chief Financial Officer

So yes. So we have -- we've received, I believe, it's around $110 million of our refunds. We have $123 million pending with the IRS right now. And then we have an estimated amount for our fiscal year '20 return that we have -- we are about to file but haven't yet filed.

Craig Inman -- Artisan Partners -- Analyst

Okay. And that goes into that $380 million number that you'd expect to receive?

Jason Berg -- Chief Financial Officer

Yes. [Indecipherable] borrowed and paid that we would expect to get back.

Craig Inman -- Artisan Partners -- Analyst

Okay. And that's booked in that prepaid number on the balance sheet?

Jason Berg -- Chief Financial Officer

Correct. That got upon the passage of -- I think it was the CARES Act, that was when we reclassified that amount out of the tax provision.

Craig Inman -- Artisan Partners -- Analyst

Okay. One more on the senior mortgages, you have a little over $2 billion there with, I think, a little over 4% interest rate. Obviously, that's come down a lot. Is there much wiggle room? Or would you ever try to extend duration and bring rate down?

Jason Berg -- Chief Financial Officer

Well, on our new deals, Kevin Hart is our Assistant Treasurer in charge of real estate financing, he has a couple of deals outstanding now. And I think the most recent CMBS DLAs pending working at a rate that probably come in under $270 million for a 10-year deal. Otherwise, typically, what we do to answer your duration question is that we'll find -- we'll do temporary financing on a property within its first five years of life. Then we'll typically look to do a seven to 10-year deal for the first portion of its stabilized life. And then after that, we'll look to do something that's maybe 20-year plus. So at a certain point, all of this new development is going to work its way through that process, and we'll start to do some longer-term financing on those properties.

Craig Inman -- Artisan Partners -- Analyst

Okay. Okay. I guess I'll ask on, obviously, if you look at the six months results, you have a little bit of gain in revenue. I'm looking more at the moving and self-storage business and a little bit of decrease in operating costs. But in this 90-day period, you had a massive gain in revenue and no real jump in operating costs. And can you talk about how much you think you can leverage there? Because I want to get a better picture of a lot of -- I mean it is utilization driven, but how did you pull it off? I mean, is there more to -- is there -- is that just a phenomenon of 90 days? Or is this more like, hey, if we get this revenue growth, you can expect the cost to stay low and we can leverage off of them?

Jason Berg -- Chief Financial Officer

Craig, it's a little bit of both. We have some trailing costs that we're incurring right now that aren't showing up on the income statement, and that's largely in repair and maintenance, right? So we have these trucks that transactions are up 10% plus. At some point, now we're going to have the preventative maintenance checks on those when they come back in. And we're going to have those during the time of the year that we don't normally have those, right? So the comparison year-over-year on maintenance expense, probably we're going to see that come up a little bit. But on the other portion of the U-Move revenue increase that isn't transaction based, that's largely operating leverage, right? And on personnel expense, that was the other -- I mean, really, the majority of the margin improvement came from keeping a lid on personnel costs and then keeping a lid on repair and maintenance costs. I think the personnel one, we have the opportunity to continue to contain that a bit. And we will see repair and maintenance come up a bit, but there's certainly a good opportunity over the last six months of the year to continue to accrete some margin improvement from repair and maintenance.

Craig Inman -- Artisan Partners -- Analyst

Okay. Yes. So people running the stores, you don't need to -- they can get more efficient. You don't need to bring more folks in there and drive costs up if they're driving -- if more business is coming their way?

Edward Shoen -- President and Chief Executive Officer

It's possible. Just a question. It's a whole bunch of small things. It's a service business. It's like anything, any other operation, you can -- there are more efficient ways to do things, best practices. And as we get more uniform implementation of best practices, they become, basically, by definition, more efficient. Now at the same time, for the last six months, we've been saddled with this COVID sanitizing, which is a huge effort. And I can't under -- I don't want to underplay it, but huge effort is ongoing. I don't know if Jason has a guess of what we spent, he doesn't have a guess. And -- but it's a lot because basically, the customer expects to truck sanitized. And that's a little bit easier said than done. It's not a miracle spray that we've point it through the window. It's a whole bunch of wiping and scrubbing, and this is all done by human beings. So that's hurt our efficiency, in fact. And so I'm very impressed with the force we have out there at the point-of-sale that they were able to hold as well as they did on total cost and still accomplish this work.

Craig Inman -- Artisan Partners -- Analyst

So in that light to OpEx, is even better than it appears?

Edward Shoen -- President and Chief Executive Officer

Yes. That's what I would say. I'm real proud of what they've done. I would much rather we didn't have this disinfection or whatever you want to call a sanitization thing going on because it's just wastes labor at every turn. I shouldn't say it at every turn it consumes labor. And you have to pay for labor, that's all. And of course, we want to actually see people get paid more. That would be our objective -- our big objective in trying to drive efficiency here, Craig, is to be able to pay better. We have a lot of entry-level people prior to COVID, President Trump had driven the economy for entry-level people we had to compete for them. And that was kind of exciting, and that means they get paid better. And I got a lot of them working for me. I'd like to see them pay better, not worse. But to pay them better, I got to make them a little more efficient. So COVID set me back there, but if I didn't have COVID, there may be more margin in payroll to pay the individual person more per hour. And I think all of us as Americans are 100% more for people at the entry level, getting a better income. So these things are all kind of intended and pushed on each other. But the last six months, we did well, and we're trying to do well going ahead.

Craig Inman -- Artisan Partners -- Analyst

That's great. The self-storage obviously, the development is a little bit slower in terms of square footage added. How much influence there is just building costs changing with your backlog? Is there -- is that going to slow development in terms of what you can pencil out to get a return?

Edward Shoen -- President and Chief Executive Officer

Probably not in the short run. I mean, I think that there's a lot of pressure. Construction costs are, I think, I don't have a metric out but they just seem to me like they're rising faster than the rate of inflation that's talked by the Fed. So -- and there's been a shortage of people. So they've had the same problem. Can the contractor produce framers or concrete layers? Can they even produce the people to get the work done? So you pay a little bit more. And maybe it just takes longer. That's all. So we've seen a lot of delays caused by inability to find crews. So I don't know what the office industry is, I'm hoping it slows down construction and frees up some people that -- our contractors could hire.

Craig Inman -- Artisan Partners -- Analyst

Yes. Last one, Jason. I saw -- it looks like you all bought $13 million in preferred issues. Was that in the -- I saw in the Q, was that in the insurance business?

Jason Berg -- Chief Financial Officer

Yes. Pretty sure that was at our Property and Casualty, so subsidiary.

Craig Inman -- Artisan Partners -- Analyst

Okay. Can you talk about why you targeted that instead of equities or just the mines out there?

Jason Berg -- Chief Financial Officer

Well, we already have a pretty decent portfolio of common stocks over there. I think it's about $17 million at cost. The preferreds most of these, I think, are perpetual preferreds, they fit the long-term liability stream that we have over there as well as we have some excess capital over there as well. So that -- it was a yield enhancement, decent credit and it helps enhance the yield a bit. And also of note, during the quarter, A.M. Best upgraded our P&C company from an A- to an A rating. So we're pretty excited about that. Oxford, our life insurance company is an A-, and we would expect that they would also be an A-rated company in the near future.

Craig Inman -- Artisan Partners -- Analyst

And were those discounted preferreds, those weren't like new issues that were coming out? Those were open to market?

Jason Berg -- Chief Financial Officer

I don't believe so. I'd have to go back and look at the list. I don't remember off the top of my head.

Craig Inman -- Artisan Partners -- Analyst

Okay. That was pretty a technical question. Okay, that's all for me. Thank you.

Operator

And there's no other questions holding. I will turn the conference back to management for any additional or closing comments.

Sebastien Reyes -- Director of Investor Relations

Thanks, Jess. Many of you may have noticed the absence of someone on the call today. We were recently notified that Ian Gilson with Zacks investment is retiring. I think we all wanted to say that we appreciate the time and effort that Ian put into following UHAL over the years. I know that I started doing these calls in 2005, and he was following us even before then. His knowledge, insight and understanding of our business has really enlightened countless new investors and his presence is going to be missed here. God bless, Ian. And we look forward to speaking to everyone again for our third quarter in the first week of February. Thank you.

Operator

[Operator Closing Remarks].

Duration: 40 minutes

Call participants:

Sebastien Reyes -- Director of Investor Relations

Edward Shoen -- President and Chief Executive Officer

Jason Berg -- Chief Financial Officer

Samuel Joseph Shoen -- Vice Chairman of the Board & U-Box Project Manager

Steven Ralston -- Zacks -- Analyst

Jamie Wilen -- Wilen Management -- Analyst

Craig Inman -- Artisan Partners -- Analyst

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