Amerco (UHAL) Q4 2021 Earnings Call Transcript

Image source: The Motley Fool.

Amerco (UHAL 0.69%)
Q4 2021 Earnings Call
May 27, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the AMERCO Fourth Quarter Fiscal 2021 Year-End Investor Call. [Operator Instructions] I would now like to turn the conference over to Sebastien Reyes, please go ahead.

Sebastien Reyes -- Director of Investor Relations

Good morning, and thank you for joining us today. Welcome to the AMERCO fourth quarter fiscal 2021 year-end investor call. Before we begin, I'd like to remind everyone that certain 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-K for the year ended March 31, 2021, which is on file with the US Securities and Exchange Commission.

I'll now turn the call over to Jason Berg, Chief Financial Officer of AMERCO.

Jason A. Berg -- Chief Financial Officer

Thanks, Sebastien. I'm speaking to you from Phoenix, Arizona this morning. I have a few minutes of prepared remarks that I wanted to go over and then, we'll go ahead and open it up for questions and answers. Yesterday, we reported fourth quarter earnings of $3.76 a share, as compared to $6.24 a share for the same period in fiscal 2020. I did want to remind you, though, that in the fourth quarter of fiscal 2020 that was when we recorded the additional net tax benefit of $146 million, which was $7.45 per share when we recognized the effects of the Coronavirus Aid, Relief, and Economic Security or the CARES Act. So I believe that another useful supplemental measurement is to look at our earnings, excluding this item. This results in adjusted losses for the fourth quarter of fiscal 2020 of $1.21 per share.

For the full year of fiscal 2021, we reported net earnings of $31.15 a share. For fiscal 2020, the unadjusted number was $22.55. However, if you exclude the aforementioned CARES Act tax benefit, our earnings per share for the full fiscal year in 2020 were $15.10. We have a reconciliation of this in our press release as well.

Let me start with a few comments on our equipment rental revenue. We experienced an increase of 33% or approximately $172 million for the fourth quarter versus the same period last year. And we finished the full year up 15% or $391 million. For the fourth quarter and the full year, we saw increases across most of our categories, one-way and in-town revenue and transactions, both increased in double-digits, average miles per transaction increase and our one-way rates remained strong. Our corporate account business or what many might refer to as last mile experienced a strong increase in revenue for the quarter and for the year. Compared to the same period last year, we increased the number of retail locations and independent dealers.

As you may recall, it was during the first quarter of fiscal 2021 that we began to experience the effects of COVID, and we had a 13% decrease in equipment rental revenues. We're now beginning to run into those months on a comparative basis. We saw no such weakness in April and May of this current year. And in fact, revenue trends continued on a very strong fashion.

Capital expenditures on new rental equipment were $870 million for fiscal 2021. That's down from $1.374 billion in fiscal 2020. Our original plan for fiscal 2021 was to reduce capital spending on the fleet. Between that plan, COVID delays and now the microchip situation facing our manufacturers, we're working to normalize our truck rotation schedule. Capital expenditures for the rental fleet and again, this projection is depending upon manufacturer availability, are expected to increase to approximately $1.2 billion in fiscal 2022. That's before netting any sales proceeds against them.

So speaking of sales proceeds, sales proceeds from retired rental equipment decreased by about $150 million this last year to a total of $527 million. Sales volume for fiscal '21 was below last year's levels. However, sales price per unit improved. Should the availability of new equipment allow for us to complete our planned purchases this coming year, I would expect to see our volume of sales and related proceeds increase in fiscal '22.

The fourth quarter was another good quarter for filling in self-storage units. Looking at our occupied unit count at the end of March, we had an increase of 69,000 occupied units, compared to the same time last year. To put this in the context, during last year's fourth quarter call, I reported to you that we had increased occupied rooms, just over 49,000 rooms in the previous 12 months. We've increased the pace of filling rooms by about 40% or 20,000 more rooms than we filled last year. This pace of filling rooms has continued to accelerate into April and May.

Storage revenues were up $21 million, which is a 19% improvement. And for the full year -- that was for the quarter. For the full year, revenue increased just under $60 million or 14%. For the third quarter in a row, our all-in blended occupancy rate experienced an increase. The fourth quarter rate went from 66% last year to 74% this year. We've added just over 36,000 new rooms into the portfolio during fiscal 2021. For fiscal 2021, we invested $505 million in new real estate acquisitions and in development of self-storage and U-Box warehouse space. That was down from fiscal 2021, we spent $750 million. Our goal going into fiscal 2022 is to increase the pace of investments.

We currently have approximately 6,700,000 new square feet in development. We still have about 50 properties that are not yet in the active development phase that at a bare minimum would add about 2.5 million square feet. And we are now starting to see our acquisition pipeline beginning to accelerate a bit. We have approximately $150 million worth of acquisitions currently in escrow.

Retail product sales increased 40% for the quarter. All three of our major product lines, moving supplies, hitches and towing accessories and propane saw revenue and volume increases during the quarter. These lines are continuing to improve into April and May. In the Moving and Storage segment, while operating expenses increased for the quarter, we continued to see an improvement in our operating margin for both the quarter and for the full year. If you look at either our GAAP operating margin or total cost or total revenue or the EBITDA margin, we posted improvements from the fourth quarter and for the full year. Operating expenses in the quarter increased $78 million, which is higher than usual. However, the quarter included some costs that are better evaluated within the context of the entire fiscal year.

For fiscal 2021, we saw -- for the full year, we saw the smallest increase in operating costs since 2016. And if you look back across the last 10 years, it was the second smallest increase in operating costs. Our three largest operating expense categories, personnel, maintenance and repair and liability costs did see quarterly increases, but they remained below the rate of revenue increase. I alluded to on our third quarter call that we were going to make a contribution to our employee stock ownership plan. We did that in the fourth quarter. It was about a $19 million charge that was recognized in the quarter.

I also highlighted in the press release that fleet maintenance has increased as the need for preventative checks has gone up in relation to additional rental miles in the fleet. And as we've had -- as we haven't been able to rotate in as many new trucks, there is some portion of the $6 million quarterly decrease in fleet depreciation that is now being reflected in increased maintenance costs.

Operating earnings at the Moving and Storage segment increased by $138 million bringing our earnings for the quarter to $117 million. We continue to improve our cash and liquidity position at the end of March. Cash and availability from existing loan facilities at the Moving and Storage segment totaled $1.115 billion.

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

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Steven Ralston with Zacks. Please go ahead.

Steven Ralston -- Zacks Investments -- Analyst

Good morning.

Jason A. Berg -- Chief Financial Officer

Good morning, Steve.

Steven Ralston -- Zacks Investments -- Analyst

Great top line. I really don't want to get involved with that. It seems like the -- everything is going your way there. I'm looking at the cost area. And could you delve a little bit more into your comments about the margin? Looking just at the operating expenses, it seems like, did you have an abnormal amount of increased personnel costs, even if you ex out the stock ownership program that you had? And also going forward, it may be harder to acquire more employees. Could you just go into detail on that?

Jason A. Berg -- Chief Financial Officer

Sure. Yeah, I'd be happy to. On the personnel for the quarter, it was up in total in absolute dollars, probably a little over $40 million. So close to half of that was this ESOP cost, which didn't run through the fourth quarter of last year. So that's a cost that's probably better evaluated over -- in the context of a 12-month period. And for the 12 months, our personnel number was up maybe $36 million roughly just to kind of put it into context. We also had some additional bonus compensation to the field also in the quarter. So our bonus number was probably up close to $10 million, but that's largely calculated based upon improved results. So if you compare our overall personnel numbers to revenue, even with that extra ESOP expense, we still picked up arguably somewhere around $18 million to $19 million of margin in the quarter there. It was just -- it led to increase in absolute dollars.

On the repair and maintenance side, we're working. We had such a busy year. We're working to get caught up a little bit on repair and maintenance costs. So some of those costs arguably took place in the third quarter and then, the equipment got into the repair shops and began getting maintenance checked out in the fourth quarter. Those costs were up a little over $13 million. We're still down for the year on repair and maintenance cost to the tune of about $18 million.

Other significant increases for the quarter we had, if you look at like property taxes, utility costs and non-capitalized building maintenance, those were up about $5 million. Our liability insurance costs were up about $104 million [Phonetic]. Shipping, we've been shipping a lot more retail product to our locations. We're also been shipping a lot more U-Boxes. So shipping costs were probably up close to just $6 million. So I don't see anything in our expense numbers that concerns me from a structural perspective. We -- I would say the timing of personnel expenses kind of uneven across the course of the year, but I think the 12 months is a reasonable look at that.

Steven Ralston -- Zacks Investments -- Analyst

Thank you for the amount of details leading to the way one of my follow-up questions. Also on the additions to the truck fleet, there are a lot of challenges there, especially the lack of supply. And while we also know that the metal costs are going through the roof, so even when some things get resolved, there seems to be -- there'll be quite a bit of inflation impacting your new inventory of the truck fleet. Could you make a comment on that?

Jason A. Berg -- Chief Financial Officer

Sure. We have for the most quarter our costs for the equipment going into this next year. Equipment costs have been going up 2% to 3% per year over last 10 years. Right now, more so than cost, I think we're just concerned about the availability of and when they're going to be able to deliver. So I think versus our competition, we are uniquely qualified to deal with hiccups in the fleet supply chain. We have the repair organization established where you saw this year, if we don't get as much new equipment in as we wanted to, we're able to deal with the equipment as it ages, I think, better than most. So we are planning -- our fleet plan for this coming year is to grow the fleet a few thousand trucks, if they're are available. And right now, it's a little early on. I would say that we're looking at somewhere so far maybe 5,000 to 7,000 cancellations maybe on the low end so far of current model year trucks. And we'll see how that flushes itself out over the rest of the year.

Steven Ralston -- Zacks Investments -- Analyst

All right. And just to circle back to the top line, I want to say it's like self-storage is on cruise control, but that's because of good management planning and increasing the capacity. Any forward-looking comments that you'd like to make on the self-moving side, especially about repositioning any trucks that are in undesirable locations?

Jason A. Berg -- Chief Financial Officer

Yeah, I'll certainly hit on that last point. The repositioning of trucks, which is the basic. I talk to our folks here internally. It's the basic blocking and tackling of what we do, and you never really have a point when everything is where you want it, but they have made over the last three to six months some significant progress in getting trucks to areas where we want them, I would say, in talking with our folks who run those areas. They've made progress in getting equipment down to Southern California. We've made some progress in relieving some of the oversupply in Texas toward Nashville. We always have areas that need equipment. The Northeast is still an area where we can use some equipment. We still have probably a little bit of excess equipment in parts of Florida. But there is always going to be something like that. I think we've made some good progress in areas. So I don't see anything uniquely in place right now that would prevent us from being able to serve customers this year and recognize revenue increases.

Steven Ralston -- Zacks Investments -- Analyst

Thank you for taking my questions.

Jason A. Berg -- Chief Financial Officer

Thank you.

Operator

The next question comes from Jamie Wilen with Wilen Management. Please go ahead.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Hey, Jason, nice quarter.

Jason A. Berg -- Chief Financial Officer

Thanks.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

First of all, a comment on things. Your math, you take two negatives and you come up with a positive, that's not quite the way it works in business. You had a ton of positive this quarter and you put out a press release that sounded like the world was coming to an end. I would encourage you in the future actually hiring Investor Relations firm to write these press releases, so you can actually accentuate some of the positives that you've been achieving and how you got there during the past year.

So first, I'll start with truck rental. You were -- your profits for the year obviously were significantly higher than last year. Was this the highest level of profitability you've ever had in truck rental?

Jason A. Berg -- Chief Financial Officer

That's a great question. Certainly, going back over, say, the last five years, I don't have that at the top of my head going back, say, before fiscal '16. I think fiscal '16 -- I'm thinking of '16, I'm thinking 2006 as both years that we had peak kind of -- in absolute dollars, yes. I'm trying to take a look like a common size measurement. I might have to compare it against a couple of other years.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Would it not have been a good thing to look at that and to show how well your truck rental business as this was the highest you've ever achieved?

Jason A. Berg -- Chief Financial Officer

Yeah.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. I mean, just -- and indeed when the press release came out for the year and for the quarter, the newswires really didn't pick it up that last year's quarter included a $7 a share gain from the CARES Act tax provision. I think more clarity might have helped them do that, and the earnings might have looked as good as they were. Indeed, your profits were up significantly in that quarter and should have been recognized as such. As I look at truck rental, what I'm really pleased about is the fleet utilization. We have been buying a lot of trucks and here, we have -- as we've been forced to slow down and had increased volume, the difference in fleet utilization caused profits to nearly double in this year. Joe has always said fleet utilization is his driving force. How do you look at fleet utilization for what you're going to achieve in the future?

Jason A. Berg -- Chief Financial Officer

Well, there was a whole lot of pre-tax before you got to the question there. I just wanted to comment on the press release. So we attempt to adhere to the letter of what the SEC expects of people, and I'm very sensitive to providing non-GAAP measurements or adjusted earnings per share. So I appreciate what you're saying, Jamie. But if I say something wrong, I'm the one that's going to get in trouble for and not you. So I'm a little sensitive to where I place adjusted earnings. I appreciate that. I try to put it in the same paragraph. I can't help it if people aren't reading that.

On the utilization question, yes, we saw improved utilization this year. We have had years where on a per truck basis, utilization has been higher. So we still have blue sky on how much more utilization we can get out of the equipment.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. On the self-storage side, I know you don't break things out, but we have a large amount of depreciation in there. Do we have an actual operating profit after depreciation? I realize the cash flow is humongous because once these things are built, it requires a little in the way of capital expenditures.

Jason A. Berg -- Chief Financial Officer

Sure. I -- since we don't break that out, the best I can tell you is based upon how we do reporting to the lenders that have lent us money against those assets and I guess even after depreciation assumption [Indecipherable].

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. And could you shed some light on an annual basis on a given self-storage facility that you build, what would the annual depreciation charge be on whatever 700-unit $5 million facility versus what would your capital expenditures normally be?

Jason A. Berg -- Chief Financial Officer

It's a good question. I don't know that off the tip of my tongue, Jamie.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. But what -- is it 20% of depreciation or...

Jason A. Berg -- Chief Financial Officer

We attempted to allocate as much of the cost of the storage facility as we can to assets that depreciate. It did benefit us from a tax perspective. On conversion properties in particular, we focus on cost segregation study. There is tax law that is very beneficial to us for conversion properties that allows us to really front load as much of the -- those of the tax depreciation as possible. On a lot of those, we do have a different depreciation on the GAAP basis, which slow that down a little bit, but I would say maybe five years ago, we focused on that and we probably accelerated our GAAP depreciation a little bit as well as we've allocated more toward assets that depreciate quicker.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

And over the first five years of the life of the self-storage, what percentage of the assets are then depreciated with the accelerated basis?

Jason A. Berg -- Chief Financial Officer

That would kind of go with your first question that I have not looked at an example of that recently at one of our -- I get cost segregation studies. I haven't -- I don't recall that off the top of my head, Jamie.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. You said you had about $150 million, I believe, in the acquisition pipeline. Could you tell us the location of these and the multiple of EBITDA you're paying for most of these?

Jason A. Berg -- Chief Financial Officer

Sure. All right. As far as locations those that are -- they are spread all over the place, that translates into about 50 or 55 deals that are spread. I mean, off the top of my head, I'm thinking California, New Mexico, Colorado, Florida, they're -- it's really spread all over the place. Or what we did in the last 12 months, I would say, I think we bought nine or 10 existing storage facilities and probably, the projected cap rate on those purchases was somewhere around 7.5% for conversion properties. I would say that the projected cap rate on those deals is closer to say 9.5%, 10% and on ground ups, probably 9% to 9.5%.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. I also saw that you were -- are now ramping up in affiliate program for your self-storage units, as you're all going to be managing more outside units in the future.

Jason A. Berg -- Chief Financial Officer

That -- we're ramping up the existing affiliate program that's been in place now for close to 20 years. As far as us doing actual third-party management, no, I have not seen that yet.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay, very good. And then, last question, as you look into April and May, I believe you said on both sides of the business, those truck rental revenues and self-storage revenues, both look to be at a growth rate that is equal to or exceeding where you have been in the previous quarters.

Jason A. Berg -- Chief Financial Officer

Yeah. It's going to get complicated here because up until June -- from the last 10 days of March through June, we had decreased revenue. So by the time we hit next quarter, I'm going to need to come up with some comparison to maybe two years ago in order to say, OK, what's the real growth. Of course, it's going to be easy to show outsized improvement compared to the first quarter of last year. But I think we wanted to say, if you did average growth from two years ago, how does our improved working, and we're still seeing -- April and May was strong revenue growth even compared to two years ago what -- when you take an average. So we'll try to work something out. I have no doubt that I will find a way to disappoint you and how I present that. But I will try to find some way of doing it.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. And one last one with self-storage, you've always done a figure for the existing units. What percentage of capacity they are running the one, the mature units and the percentage of self-storage facilities running over 90%?

Jason A. Berg -- Chief Financial Officer

Yeah, that is. So well, I -- a couple of measurements. What I've been kind of going to is locations that are over 80%. So right now, we have about 70% of our locations are over 80% occupancy on balance sheet. Compared to last year at this time, that's 145 more locations at 80% occupancy. And then, the average occupancy at those locations was 92.3%, which is 140 basis point improvement from where we were last year at this time.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. Within the industry, it seems like rates are moving up a little bit as occupancy rates are moving up. Do you see that as well?

Jason A. Berg -- Chief Financial Officer

Yes. Yeah, I would say that at the end of March, our average asking rents were up maybe 1.5%, 2% compared to the same rents -- asking rents a year before. And based upon how the rooms are filling up, I would estimate that we'll see some stronger rate growth this year.

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Okay. Thank you very much, Jason. I appreciate it. Nicely done.

Jason A. Berg -- Chief Financial Officer

You're welcome, Jamie. Thanks.

Operator

[Operator Instructions] The next question comes from Craig Inman with Artisan Partners. Please go ahead.

Craig Inman -- Artisan Partners -- Analyst

Hey, Jason. Can you hear me, OK?

Jason A. Berg -- Chief Financial Officer

Yeah.

Craig Inman -- Artisan Partners -- Analyst

I guess, I'll start on the capex side for the trucks. You indicated this year was gross $1.2 billion, is that right?

Jason A. Berg -- Chief Financial Officer

That -- that's what we're going into thinking is going to happen.

Craig Inman -- Artisan Partners -- Analyst

Okay. One of the things, obviously the business kind of pre-pandemic grew in that 5% to 6% range. And so, we kind of pulled forward four or five years of revenue growth during this period, which -- certainly in the last nine months. And you saw the OP margin improvement and the utilization improvement. So how do we not get back into that situation, we're building for the future too soon, where we have too many trucks and we're kind of waiting on the revenue to come? Can you give [Phonetic] me a sense of that dynamic?

Jason A. Berg -- Chief Financial Officer

Well, it's a balancing act. So right now, we have two things that we're trying to accomplish in the fleet program. One, we're trying to get back to a normalized rotation program because we weren't able to get all of the trucks that we needed in this year in order to rotate out the old ones. So there is a certain amount of that, that we have actually caught up on and then, in the middle of that, we see an opportunity where we would like to increase the size of the box truck fleet nominally. I mean it's not going to be a dramatic increase. I think total growth capex next year under our base plan would be somewhere on $200 million. And are we 100% sure that we're going to be right on demand? No. But our best indication is that we're going to be able to use that equipment.

If you go back 18 months and some of the discussions that we were having here then was that we should start buying trucks and that we should stop buying self-storage, and we slowed. But I think we're all pretty happy that serendipitously, it worked out to our advantage to have that capacity in the business environment that we're in today. So sometimes, it works out. Sometimes, it doesn't. I think we had put ourselves into a good position for an environment that we hadn't planned on, and we can take advantage of it.

Craig Inman -- Artisan Partners -- Analyst

Yeah. I just -- just seeing how the revenue came through and the opex didn't expand as much, it gave us a picture of where utilization was. We were over-fleeted. For today, we weren't over-fleeted for maybe three years from now and that had pressured margins, that had pressured returns and it's worked out, but I'm just asking because we don't want to go back to waiting for three more years, if we over-fleet again. I was just trying to get a sense of how you all are thinking about that.

Jason A. Berg -- Chief Financial Officer

I try to put -- I understand your point, Craig, and we're aware of that and we will -- we're trying to be as thoughtful and careful about this as we know how.

Craig Inman -- Artisan Partners -- Analyst

Yeah. I know there's no answer because -- I mean, you got to play to win, so...

Jason A. Berg -- Chief Financial Officer

Yeah, that's -- look, there is an opening here that we've been trying to take advantage of with other people who have been paying us close of attention and [Technical Issues] holding. I think we've been able to take it -- get credit for all of the convenience that we offer on the one-way rate, and that benefited us.

Craig Inman -- Artisan Partners -- Analyst

Okay. One thing, interestingly, the -- on the P&C side, revenues were not very much year-over-year, is there less uptake on the insurance product from customers, because one of the issues we had remember -- I'm remembering correctly, as you know, repair ended up being higher later, customers returning the product with too much damage and the dealers weren't kind of pushing to get that paid for immediately. I'm just -- there's just a gap there where I thought P&C would have followed volumes a little more.

Jason A. Berg -- Chief Financial Officer

Yeah. Well, there is -- I would remind you that there is a three-month lag in reporting. So our insurance companies are required to report on a trailing 12-month basis -- I mean, on a calendar year basis. So they -- I think we're catching two quarters that we look back are -- didn't have the same growth in Moving and Storage transactions. So I think there is a little bit of a lag there that -- then, we'll start to catch up on a little bit.

Craig Inman -- Artisan Partners -- Analyst

Okay.

Jason A. Berg -- Chief Financial Officer

But otherwise, from -- as I look at it, penetration rate and the take rate on our storage customers and our equipment sharing customers, they are still using the insurance product. So I'm not too concerned about that. I think the programs are still thriving. I think maybe that three-month lag is causing it to look a little bit off.

Craig Inman -- Artisan Partners -- Analyst

Okay. Now, it makes sense. And on the development side for self-storage, the pressure just on labor costs, land value, so you're still able to get those high-single-digit cap rates on conversions and ground up?

Jason A. Berg -- Chief Financial Officer

We have been. I mean, if things materially change from here, we may have to adjust our approach, but at this point in time, we're still completing projects. I think we're going into new projects with a little bit more of a sober view on what the costs are likely to be by the time we get there. On bare land that we're buying today, you're oftentimes a year out from actually building. So a lot can change between now and then. Cost could go up or if you believe folks may be, some of these are transitory, inflationary pressures. It's hard to say. We've built in, projected additional cost into our models. But if things were to trend up further from where they are today, then we'd have to figure that out at that point.

Craig Inman -- Artisan Partners -- Analyst

Okay. So the stuff that is that you've already bought and had owned before, it's still penciling out because rates have gone up enough to keep the developments going.

Jason A. Berg -- Chief Financial Officer

Yeah.

Craig Inman -- Artisan Partners -- Analyst

Okay. And then on -- you're doing a little more M&A, is that sound -- [Indecipherable] that right in terms of in-place rent up self-storage?

Jason A. Berg -- Chief Financial Officer

Okay. Well, I mean, like going from 3% the year before to 10%, it's still very, very minor part. And in most of the time, these are smaller complementary facilities to our existing footprint. I would say a couple of them more kind of big stand-alone ones, but for the most part, that market is still very expensive. And I mentioned to Jamie the cap rates on those deals and you can see the difference, the stuff that we're building and converting is expected to -- it depends a lot much better than the existing stores that we're buying.

Craig Inman -- Artisan Partners -- Analyst

Right. As I was asking because even that 7.5% is better than where the -- a lot of the big public guys are pulling out their checkbook. I think [Speech Overlap].

Jason A. Berg -- Chief Financial Officer

Yeah. One [Indecipherable] facilities. And oftentimes, these deals then, when you mix them in with the existing U-Haul presence in the market, the idea is that it's going to a rising tide raises all ships for us in that market. So it's meant to help out our existing facility as well.

Craig Inman -- Artisan Partners -- Analyst

Okay. So you got ability to get squeezed a little more out of it.

Jason A. Berg -- Chief Financial Officer

Yeah, yeah. If we can buy something that currently has staff and we can run it with our existing staff, it helps, but that's factored into the 7.5%.

Craig Inman -- Artisan Partners -- Analyst

That's factored into the 7.5%. Okay, because that's what -- I mean, you can see where they are operating in, the big public guys and they're not there. So there is a more attractive cap rates. I was just curious how. Okay. I think that's it from -- the refund from the IRS, are we still waiting on that? It looks like in the K [Phonetic].

Jason A. Berg -- Chief Financial Officer

Yes. I won't go into the details of working with the federal government agency just in case they're listening, but it's been a challenge. It's -- there is nothing -- there is no disagreement with them on whether or not we should get the money back. There has just been disarray and how they're getting the money back.

Craig Inman -- Artisan Partners -- Analyst

Okay. Well, actually, I will ask one more. Obviously, you stepped up at the dividend last quarter. I think you will decide on a 90-day basis. Any changes in capital allocation or returning ways to return cash to shareholders?

Jason A. Berg -- Chief Financial Officer

I will tell you that our Board hears you or read the transcript of this call. So they're always paying attention to that. And we'll see where -- our cash position is very strong quite right now, even given the amount of capex that we want to do. So I think we have some flexibility, but I'm not going to say that we're inclined to go either way on that. I'm not in that discussion. And I don't want to say that [Indecipherable] either way on the call.

Craig Inman -- Artisan Partners -- Analyst

Well, if they read it, we're in business to get paid and make money and generate cash. So we appreciate the kick up. That's all from me.

Jason A. Berg -- Chief Financial Officer

Thanks, Craig.

Craig Inman -- Artisan Partners -- Analyst

Thanks.

Operator

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

Jason A. Berg -- Chief Financial Officer

Thanks, John. Actually, I do have -- there is one more question that was submitted via email. Beforehand, I want to make sure I get to that. Steve Galbraith of Kindred Capital Advisors. And his question was, you continue to build and hold much higher cash levels than has historically been the case. Is this simply an anticipation of deferred expenditures expected in the coming year? Are you confident that you're being as efficient with your balance sheet as possible? With an ever-increasing self-storage business, your capital structure would seem to be less efficient than pure-play storage comparable company.

So I wanted to touch on that and answer it for Steve. He largely answered the question. We are anticipating a higher level of capital expenditures. Those of you who have been around us for an extended period of time know that our first use of cash is to put it back into the business and grow it. If I look at our fleet capex for the coming year, we play any -- somewhere around $250 million of working capital to fund that plan. On the storage side, we were light this year with $125 million of acquisition. Two years ago, that number was closer to $550 million. So I think we're going to end up somewhere in the middle of those two numbers as far as acquisitions now. Development spending last year was around $385 million, the highest we've ever spent in the year was $540 million. So there is another opportunity here depending upon how we get land use and get into this project quickly, that will certainly increase the spend from compared to this year.

So going into the pandemic, we would work the cash balance down to about $450 million. It's going to take us some time to get back down to that level between investment or any other uses of capital as Craig mentioned. I do think that now is still a good time to lock in low-cost debt on the borrowings front, if that becomes a possibility in order to help fund us for the next decade. So Steve, I hope that answers your question. Otherwise, you can follow up.

So with that, I'd like to thank you all for your time and attending the call. And I look forward to speaking with all of you again on August 8 for our first quarter earnings call. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Sebastien Reyes -- Director of Investor Relations

Jason A. Berg -- Chief Financial Officer

Steven Ralston -- Zacks Investments -- Analyst

Jamie Wilen -- Wilen Management Company, Inc. -- Analyst

Craig Inman -- Artisan Partners -- Analyst

More UHAL analysis

All earnings call transcripts