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General Finance Corp  (NASDAQ:GFN)
Q2 2019 Earnings Conference Call
Feb. 11, 2019, 8:30 a.m. ET

Contents:

Prepared Remarks:

Operator

Welcome to General Finance Corporation's Earnings Conference Call for the Second Quarter Ended December 31st, 2018. Hosting the call today from the company's corporate office in Pasadena, California are Mr Jody Miller, President and Chief Executive Officer; and Mr. Charles Barrantes, Executive Vice President and Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 2:30 p.m. Eastern Time. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. (Operator Instructions).

It is now my pleasure to turn the call over to Mr. Chris Wilson, Vice President, General Finance Counsel and Secretary of General Finance Corporation. Please go ahead, Mr. Wilson.

Christopher A. Wilson -- Vice President, General Counsel and Secretary

Thank you, operator. Before, we begin today, I would like to remind you that this conference call may contain certain forward-looking statements. Such forward-looking statements include, but are not limited to our views with respect to future financial and operating results; competitive pressures; increases in interest rates for our variable interest rate indebtedness; our ability to raise capital or borrow additional funds; the availability of sufficiently qualified employees to staff our businesses; changes in the Australian, New Zealand or Canadian dollar relative to the US dollar; regulatory changes; customer defaults or insolvencies; litigation; the acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control; our ability to secure adequate levels of products to meet customer demand; our ability to procure adequate supplies for our manufacturing operations; labor disruptions; adverse resolution of any contract or other disputes with customers; declines in demand for our products and services from key industries such as the Australian construction and transportation industries or the US construction and oil and gas industries or a write-off of all or a part of our goodwill and intangible assets.

These risks and uncertainties could cause actual outcomes or results to differ materially from those described in our forward-looking statements. We believe that the expectations represented by our forward-looking statements are reasonable, but there can be no assurance that such expectations will prove to be correct. For more details regarding these risks, please see the Risk Factors section of our periodic reports filed with the SEC and posted to our website at www.generalfinance.com. These forward-looking statements represent the judgment of the company at this time and General Finance Corporation disclaims any intent or obligation to update forward-looking statements.

In this conference call, we will also discuss certain non-US GAAP financial measures, such as adjusted EBITDA. A reconciliation of how we define and arrive at adjusted EBITDA is in our earnings release and will be included in our quarterly report on Form 10-Q.

And now, I turn the call over to Jody Miller, President and Chief Executive Officer. Jody, please go ahead.

Jody E. Miller -- Director, Chief Executive Officer and President

Thank you, Chris. Good morning and we appreciate you joining us today for our second quarter fiscal year 2019 conference call. I will begin with a brief discussion of our operations and then our CFO, Chuck Barrantes will provide a financial overview and our outlook for the remainder of the fiscal year. Following his remarks, we will open the call up for questions.

We continue to be extremely pleased with our solid operational and financial performance. The strong momentum that we experienced in first quarter has continued into the second quarter, where we delivered our highest quarterly level of revenues and adjusted EBITDA in the company's history. We also reached a company milestone with opening our 100th branch during the quarter. To put this in perspective, we have grown our branch network, a compounded annual growth rate of 11% over the last five years. This is the result of our long-term strategy of expanding our geographic footprint with a combination of accretive container-based acquisitions and Greenfield openings. We're also closing on our 100,000 units in our rental fleet which has grown at a similar rate over the last five years.

Now turning to our geographic venues. Our North American leasing operations continue to see strong demand across all of the sales markets with total revenue in second quarter increasing by 25% year-over-year, driven by both higher sales and leasing revenues. Sales revenues were up 27% in the quarter, mostly due to two large sales in industrial and education sector, which contributed approximately $2 million of the $3.6 million increase. The remaining increase was spread evenly across all sectors.

Leasing revenues increased by 24%, driven by an increase in unit growth, higher average lease rates and higher fleet utilization across all our product lines during the quarter. We are very proud of these outstanding results. Our core portable storage also continue to perform at the high-end of our expectations, driven by consistent execution and broad-based demand across the majority of our end markets.

Demand for our ground level storage continued to show very high demand, as these two products generated a combination year-over-year rental revenue increase of 30%, of which over half was organic growth. Taking into account all the Pac-Van's product lines, organic rental revenue growth was 17% for the quarter and 18% year-to-date.

Our team continues to do a great job executing our business plan, including gain traction on a number of initiatives such as our national account program, our online ordering capabilities and our recent introduction of PV 3 Safety Containers. We are particularly excited about this new innovative product, which offers the industry's only emergency exit feature, as well as an upgraded option to including tier solar powered lighting.

Pac-Van continues to be highly regarded by its customer base and once again posted a world-class net promoter score of 84 for the last 12 months. In addition to organic growth, we remain focused on building the Pac-Van brand throughout North America by geographically expanding our portable storage container business, particularly into adjacent markets.

During the second quarter, we completed one acquisition in New Hampshire, increasing our presence in the New England region. We also opened a Greenfield location in Tampa, Florida adding our fourth branch in Florida. We continue to serve just over half of the top 100 MSAs in the US, and our acquisition pipeline remains healthy.

Our liquid container business in North America, once again delivered a very strong quarter, generating year-over-year leasing revenues and adjusted EBITDA growth of 37% and 57% respectively. While oil and gas production activity in the both Permian and Eagle Ford basins remained healthy, the increase in volatility in oil prices during the quarter created caution among some of our customers. As a result, we had a small decline in fleet utilization.

Our North American manufacturing operations posted a 29% year-over-year increase in sales to external customers and delivered its fifth quarter in a row of positive stand-alone EBITDA. This ongoing improvement is due to increased demand in especially tanks and other steel related products.

Now, turning to our Asia-Pacific region. Our Asia-Pacific region continued its positive momentum posting second quarter growth in leasing revenues of 9% in local currency basis, marking its ninth year-over-year increase over last 10 quarters. Sales revenues were down year-over-year due to two large sales that occurred last year in second quarter that were not repeated this year. Excluding the impact of those two transactions, sales revenues would have increased by 30% in local currency.

Total reported revenues for the quarter in US dollars were adversely impacted by the approximate 7% decline in average Australian dollar exchange rate between periods. The increase in oil wells leasing revenue was spread across almost all of its markets were noticeable increases in construction, consumer and industrial sectors. The growth has mainly been driven by increase in average units on lease combined with higher average lease rates.

Our team remains focused on building upon its leading market position across the region, through a combination of organic growth, Greenfield openings and as a extent they become available accretive acquisitions. During the quarter, we opened one additional location in the State of Victoria, increasing our branch count in Asia-Pacific to 37.

To conclude, we continue to see both organic growth and expansion opportunities in North America and the ability to strengthen our market leadership in the Asia-Pacific region. As always, we remain disciplined in our capital allocation, our performance year-to-date positions us well to exceed our goals for this year also providing us with optimism about the future. Our hardworking employees continue to execute on our proven business strategy, and their dedication to the company has led to our outstanding and record-breaking financial performance.

I'll now turn the call over to Chuck Barrantes for his financial review and our outlook for the remainder of the fiscal year.

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Thanks, Jody. We will be filing our Annual Report on Form 10-Q shortly, at which time the document will be available on both the SEC's EDGAR filing system and our website. And I encourage investors and other interested parties to read it, as it contains substantial amount of information about our company, some of which we will discuss today.

Turning to our fiscal second quarter financial results. Total revenues were $98 million in the second quarter of fiscal year 2019, compared to $92.1 million for the second quarter of fiscal year 2018, an increase of 6%. Leasing revenues were $63.5 million, an increase of approximately 18% over the prior year's quarter and comprised 67% of total non-manufacturing revenues for the quarter versus 60% in the second quarter of fiscal year 2018. Non-manufacturing sales revenues were $34.5 million in the quarter, down from $38.1 million in the second quarter of the prior year.

In our North American leasing operations, revenues for the second quarter totaled $63.9 million, compared with $51.1 million for the year-ago period, an increase of 25%. Increases occurred across all sectors, but primarily in the oil and gas, commercial and construction sectors. Revenues in our North American manufacturing operations for the second quarter were $3.6 million, including intercompany sales of $946,000 to our North American leasing operation. This comparison to $3.5 million of total sales for the year-ago period, including intercompany sales of $1.4 million. As Jody mentioned, our manufacturing operations saw increased demand for specialty tanks and other steel-related products, particularly chassis.

In our Asia-Pacific, leasing operations revenues for the second quarter totaled $31.4 million, compared to $38.9 million for the year-ago period, a decrease of 19%. The decrease in revenues was driven primarily in the utilities and transportation sectors, as two large sales totaling $10.5 million, which occurred in the second quarter of fiscal year 2018 were not repeated this year. Excluding the impact of these two large sales, revenues would have increased by 18%, mostly driven by increases in the moving and storage constructions and industrial sectors. As Jody mentioned, total revenues were adversely impacted by the approximate 7% decline in the Australian dollar compared to the US dollars between the periods.

Leasing revenues increased by 2% on a year-over-year basis and 9% on a local currency basis, driven mainly by increases in the construction, consumer and industrial sectors. Consolidated adjusted EBITDA was $29.7 million in the quarter, compared to $25.2 million in the prior year's quarter, an increase of 18%. And adjusted EBITDA margin as a percentage of total revenues was 30% up from 27% in the second quarter of fiscal year 2018. This was the eight consecutive year -- quarter, excuse me of year-over-year adjusted EBITDA growth, it marks the first time in the company's history, that we have surpassed $100 million adjusted EBITDA mark on a trailing 12 month basis.

In North America, adjusted EBITDA for our leasing operations was $22 million in the second quarter, compared to $16 million for the year-ago quarter, an increase of 38%. Adjusted EBITDA at Pac-Van was $15.4 million, up 32% year-over-year and Lone Star's adjusted EBITDA was $6.6 million, up 57% from the prior year. For our manufacturing operations on a stand-alone basis, adjusted EBITDA was $228,000 for the quarter, compared to $73,000 last year's second quarter.

Asia-Pacific's adjusted EBITDA for the second quarter was $8.6 million, compared to $10.2 million in the year ago period. On a local currency basis, adjusted EBITDA decreased by approximately 9%, driven by the absence of the two large sales that occurred in last year's second quarter. Interest expense for the second quarter was $8.9 million, a decrease of $0.5 million from the year ago period. The decrease was primarily driven by lower interest expense of $1.5 million between the periods in the Asia-Pacific area, due to lower average borrowings or lower weighted average interest rate of 8.9% for the second quarter of fiscal year '19 versus 9.9% in the year ago period and a weaker Australian dollar.

In North America, interest expense increased by $1 million from the second quarter 2018, mostly due to a higher weighted average interest rate of 7.2% versus 5.9% last year, offset somewhat by lower average borrowings between the periods. Net loss attributable to common shareholders in the second quarter was $5.1 million or $0.17 per diluted share, compared to a net loss of $2.1 million or $0.08 per share in the year ago quarter, included in these results were non-cash charges of $9.3 million and $1.7 million in fiscal years 2019 and '18 respectively for the change in valuation of the stand-alone bifurcated derivatives in our Asia-Pacific convertible note. Both periods include $922,000 for the dividends paid on our preferred stock. For the first six months of fiscal 2019, we generated free cash flow before fleet activity of $30.1 million, compared to $18 million in the prior year quarter, an increase of 67%.

Now, turning to our balance sheet. At December 31, the company had a net leverage ratio of 4 times for the trailing 12 months, our lowest level in four years. The reduction in leverage is due to a combination of factors, including the forced conversion of the convertible at Royal Wolf, and of course our strong financial performance. Also during the quarter, we paid off the entire FILO portion of our North American credit facility, we replaced this higher-cost debt with lower-cost revolver borrowings in the credit facility, which we also amended and expanded, freeing up additional borrowing base capacity.

Now, turning to our companywide outlook for the remainder of fiscal year 2019. Based on our excellent operating results in the second quarter and our ongoing positive outlook, we are increasing our guidance for fiscal year 2019. So many exchange rates, the Australian dollar versus the US dollar averages $0.71 during the rest of the rest of the fiscal year. We now expect the consolidated revenues for fiscal year 2019 will be in the range of $270 million -- $290 million, and the consolidated adjusted EBITDA will increase between 20% and 25% in fiscal year 2019 from fiscal year 2018. This outlook does not take into account the impact of any additional acquisitions that may occur for the remainder of the fiscal year.

This now concludes our prepared comments, I would like to turn the call back to the operator for the question-and-answer session.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Brent Thielman with DA Davidson.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Thanks, good morning.

Jody E. Miller -- Director, Chief Executive Officer and President

Good morning.

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Good morning, Brent.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Hey, Jody. It seems like the liquid containment business was pretty immune to the commodity price swings in the quarter that you did talk about some impact utilization rates. Has that deepened or is it stabilized since quarter-end? Maybe just an update on where the market is there?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah, I think it stabilized, to be honest, a lot of the change that we saw as we had some consolidation of our customer base, it took a couple of months to get that kind of sorted out. And there's typically always a little bit of the seasonal downturn after Thanksgiving kind of going into the first calendar quarter, where things kind of get caught up. But if you look at the rig counts and activity, I think it's pretty stable and our levels are gradually kind of coming back.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Okay. And then I guess outside of oil and gas, I mean it seems like most of the engines are humming here in Pac-Van. Can you just talk about maybe some of the best markets for you around the country? And we are seeing particular pockets of strength.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah, I would say, to be honest, it's pretty much universal across the Board. I think the team has done a great job with the strategy and carrying out the business plan and we've really seen good trends across the US, there is not really any real high down spots, real high spots as well, it's been very consistent and the team has done its good job executing and we continue to see a very positive outlook on the portable storage and office side. I think some of our new products also evaded in some of the increase.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Okay. And then, I guess my last question Jody just in the Asia-Pacific. I guess as you think about the outlook and the guidance. How confident are you that you can kind of maintain that, decent revenue growth, call it local currency? Just kind of seems like the Australian economy could feel the brunt at a slower China economy here?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. We haven't seen much, and there is some huge infrastructure builds that should help in the coming quarters as well. But key drive around those markets, there is tower cranes and just a tremendous amount of construction activity. Containers are very accepted in that market, so there is a very high demand for the use of containers across the Board in almost all sectors. So we feel like it's going to be pretty consistent. We feel like there is upside on the building construction side, the infrastructure piece should help us. So we're pretty confident that the (inaudible) sustain their current path.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Okay. Thank you.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah.

Operator

Your next question comes from the line of Scott Schneeberger with Oppenheimer.

Scott Schneeberger -- Oppenheimer & Co. Inc. -- Analyst

Thank you. Hey, good morning guys.

Jody E. Miller -- Director, Chief Executive Officer and President

Good morning,

Scott Schneeberger -- Oppenheimer & Co. Inc. -- Analyst

Chuck, I guess, if we could start, what would you say the primary drivers across the whole company of the increased guidance and outlook in obviously parts of the strong quarter, it look like things really improved across the Board. But, I want to to hear, just kind of (inaudible) what you think were the main drivers of what pushed you higher for the year?

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Well, I think certainly in North America, I think the economy is solid. We've seen growth across all sectors in particularly product line wise our, ground level offices are doing very, very well. And I've stated really for the last few quarters that there is much more tailwinds and headwinds. So we feel pretty bullish about well, where we're going. But I would say generally a strong economy.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. Scott. This is Jody. I'd just say, if you look at all of our product lines across the Board, they're doing very well, led by the GLO and storage side, that all segments are doing very well and trending positive.

Scott Schneeberger -- Oppenheimer & Co. Inc. -- Analyst

Great, thanks. And on -- in Pac-Van, I've couple questions there. Obviously GLO has been very successful. Do you think there we're going to see an industry shift? Is it just GLOs are kind of emerging and so they are going to be incremental to what's going on in the industry? Or might they eat into some other products over time?

And then secondly, Jody, if you could just talk a little bit to what you saw with seasonal rentals for containers and what that competitive environment looks like? Thanks.

Jody E. Miller -- Director, Chief Executive Officer and President

Sure. Thanks. Yeah, I mean I think, GLOs are definitely growing in popularity, the ease of setup, where they can settle in the ground, especially for sub-contractors, they can be moved very easily, they don't have to be skirted and anchor those types of things. So the GLO product itself, I think is becoming more and more popular and more widely used. The mobile offices, we've not seen any decline there, they're very strong and it still continue to do very well. Also they're just kind of two separate applications, that I do think there is a trend in the GLO side that becoming more popular all the time. And then regarding your seasonal question. We did see an increase in seasonal business this year, it was back kind of what I would say a normalized level, it was a nice increase for the year about 400k or so nothing too drastic. But, there are still a nice increase in the retail side.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Thanks. And just following on that, specifically to the seasonal. How is pricing in that category for you? And then taking a step back, how is pricing overall in the Pac-Van segment? Thanks.

Jody E. Miller -- Director, Chief Executive Officer and President

We continue to see price increases across the Board. We saw probably a little bit better pricing on the mobile modular side, I think the consolidation industry has been good and it helps the industry as well. So that's been very positive as well. But the storage in GLO side had nice increase as well.

Brent Thielman -- D. A. Davidson & Co -- Analyst

Thanks. And then just switching over to -- toward Lone Star. The -- kind of the same question, what're you seeing in pricing, you already touched a little bit upon the pause in utilization there. What's the pricing environment? Like, as we had a really nice run in oil and gas prices, and then had a bit of a hiccup. So where does pricing stand and what do you see for the coming quarters?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah, I would phrase it is more stabilized now. We were getting -- having pretty good success in moving the prices up every quarter. And going back and some customers have seen as much as two and three price increases over the last year and a half or so, as the market continued to be more positive. I would say with oil prices going down, beginning of last quarter, it kind of put us in a situation not to ask. And so we've kind of seen the pricing kind of stabilize, that we see oil and gas continue to be positive, then we'll go back and ask for some more price increases. But the way I would phrase it right now is kind of stabilize pricing.

Brent Thielman -- D. A. Davidson & Co -- Analyst

All right. Thanks. Appreciate you fielding all the questions.

Jody E. Miller -- Director, Chief Executive Officer and President

You bet. Thank you, Scott.

Operator

Your next question comes from private investor, Luis Fernandez. (ph)

Jody E. Miller -- Director, Chief Executive Officer and President

Thanks, Luis.

Luis Fernandez -- Private Investor -- Analyst

Yes. Hello, good morning.

Jody E. Miller -- Director, Chief Executive Officer and President

Hey, Luis.

Luis Fernandez -- Private Investor -- Analyst

Hello. All right. My first question is on free cash flow. Chuck you mentioned $34 million, was that six months or 12 months?

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

That's six months.

Luis Fernandez -- Private Investor -- Analyst

Okay. 6 months for sort of (Multiple Speakers) million.

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Year-to-date.

Luis Fernandez -- Private Investor -- Analyst

Yeah. (inaudible) on the release you mentioned $19 million in operating cash flow for the six months?

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Okay. Yeah, the $19 million that's in the release is the operating activities for GAAP, whereas the $34 million is the free cash flow.

Luis Fernandez -- Private Investor -- Analyst

Right. Okay, just $34 million for six months all right. (inaudible) pretty well. Right. Then the other question is on Jody, you mentioned you guys selling new products, I couldn't hear you well on that. Could you expand on those, please?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. So we introduced what we call the PV 3 Safety Container and the Wolf Lock in Asia Pacific. It's a new innovative product on the container side, it has internal walking mechanisms it's very -- one handle easy opening unit. That's the most impressive thing about it, it's got an internal emergency release, so if someone were to get locked and/or trapped in the container, there is one lever to pull and it will release to let you out of the container and it's the only product in the industry like that. So we feel like it's going to be very well accepted, as far as safety and ease-of-use, and simplicity and security it allows.

Luis Fernandez -- Private Investor -- Analyst

All right. And then how much impact do you expect from these new products, are they minor or they could be the other?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. So we just rolled out the product not long ago, we also rolled out solar lighting because, the containers are pretty dark when you open the doors, there's no lights. So we've got a innovative products that the panels we can still stack and deliver the units with panels to very nice light kit as well for the units. But it's still too early to say that we have high expectations that our thought process is, after people see it. Why wouldn't they want it in the future, so we obviously feel like it's going to take off and do very well for us.

Luis Fernandez -- Private Investor -- Analyst

All right. Good. And then finally on pricing on Lone Star, regarding the peak, where do you think we're now? (Multiple Speakers) from 20, yeah sorry.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. So I think -- so yeah, I mean we're not anywhere even close to where we were back in the day. I think this first little peak until the oil prices went down, I think we were in good shape, if oil price stays in the range it is now or a little higher, which most are predicting, then I think there is more upside on the pricing for sure. But if you look at where it is now, it's less than two-thirds of where it was in the peak and there is a lot of runway ahead if we could get back to those levels. But I think it'll be a more steady, slower, gradual increase, it's what we're foreseeing in the future as long as stability is there on pricing.

Luis Fernandez -- Private Investor -- Analyst

Okay. Good. And then one last one. The derivative cost in the convertible one, that goes away going forward, right?

Christopher A. Wilson -- Vice President, General Counsel and Secretary

I'm sorry, Luis. What was the question, on the derivative?

Luis Fernandez -- Private Investor -- Analyst

There is an expense based on the conversion of it, that goes away going forward? Yeah, all right.

Christopher A. Wilson -- Vice President, General Counsel and Secretary

No, doesn't go away for a while that -- what derivative represents is a minimum return provision for buys in capital on the shares, on the convertible note, it's 1.75. And so until they actually sell and realize down the road, it's going to stay with us.

Luis Fernandez -- Private Investor -- Analyst

Okay. All right. I thought it was (Multiple Speakers)

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Non-cash, it goes up and down, if our stock goes up, it will go down.

Luis Fernandez -- Private Investor -- Analyst

Okay. Yeah, I thought it would -- since this was already converted and -- go away. But all right. Thanks for clarifying.

Christopher A. Wilson -- Vice President, General Counsel and Secretary

Sure.

Luis Fernandez -- Private Investor -- Analyst

That's all for me. Thanks for taking the questions.

Christopher A. Wilson -- Vice President, General Counsel and Secretary

Thanks, Luis. Thank you.

Jody E. Miller -- Director, Chief Executive Officer and President

Thank you.

Operator

(Operator Instructions) Our next question comes from the line of Toby Slodden, a private investor.

Toby Slodden -- Private Investor -- Analyst

Hey, good morning guys. Can you hear me?

Jody E. Miller -- Director, Chief Executive Officer and President

Yes, good morning.

Toby Slodden -- Private Investor -- Analyst

Hey, congratulations, consistently you just did another great quarter. So, thank you. This is kind of a broader-based question. When you look at the financials, to what extent were the finance was affected by their -- on assuming high demand, you saw and like let's call it a disaster prone areas like Florida, Texas and California?

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah, it was pretty small. We obviously deliver units into those areas that were affected, but if you look at it as a whole, as far as affecting the full company numbers, it was very minimal. But obviously, we try to service that area as best we can and help the folks out and optimize the opportunity. But if you look at it as a whole, it's not a large piece at all, very small.

Toby Slodden -- Private Investor -- Analyst

Were you surprised by that?

Jody E. Miller -- Director, Chief Executive Officer and President

In regards to the impact or the --

Toby Slodden -- Private Investor -- Analyst

Yes, yeah. Just a little bit -- I would have expected to see a larger impact.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah. It takes a while on those rebuilds, we've always found that you don't see 100s and 100s of units going out day one. We've set up drop yards there in the Panama City area. We've also added resources and added equipment at a fast pace. But when you're looking at a company that's got 60 some ranches in the US and the volume that we do even several 100s units, even 1,000 units going out for an isolated area, it's still not a huge impact overall. But it's obviously something we're going to try to optimize the best we can. But -- and we're definitely are, we're adding heading yards and equipment to service that area, put through the rebuild, that's going to happen for a long time, it's not something that just --

Toby Slodden -- Private Investor -- Analyst

Okay, thanks.

Jody E. Miller -- Director, Chief Executive Officer and President

Yeah.

Toby Slodden -- Private Investor -- Analyst

Thank you.

Operator

And at this time there are no further questions. I would now like to turn the call back over to Mr. Jody Miller, President and CEO for closing remarks. Please go ahead, Mr. Miller.

Jody E. Miller -- Director, Chief Executive Officer and President

Thank you, operator. I'd like to thank you for joining our call today and we appreciate the continued interest in General Finance Corporation and look forward to speaking to you next quarter.

Operator

This concludes today's call. You may now disconnect.

Duration: 32 minutes

Call participants:

Christopher A. Wilson -- Vice President, General Counsel and Secretary

Jody E. Miller -- Director, Chief Executive Officer and President

Charles E. Barrantes -- Executive Vice President and Chief Financial Officer

Brent Thielman -- D. A. Davidson & Co -- Analyst

Scott Schneeberger -- Oppenheimer & Co. Inc. -- Analyst

Luis Fernandez -- Private Investor -- Analyst

Toby Slodden -- Private Investor -- Analyst

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