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General Finance Corporation (NASDAQ:GFN)

F2Q 2014 Earnings Call

February 10, 2014 11:30 AM ET

Executives

Chris Wilson - VP, General Counsel and Secretary

Ronald Valenta - President and CEO

Charles Barrantes - EVP and CFO

Analysts

Ian Corydon - B. Riley & Company

Sal Vitale – Sterne Agee

Brent Thielman - D.A. Davidson

Brian Hollenden - Sidoti

Brian Gagnon - Gagnon Securities

Operator

Welcome to General Finance Corporation’s Earnings Conference call for the Second Quarter ended December 31, 2013. Hosting the call today from the Company’s corporate offices in Pasadena, California are Mr. Ronald Valenta, President and Chief Executive Officer of General Finance Corporation 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 1.30 PM 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 Counsel and Secretary of General Finance Corporation. Please go ahead Mr. Wilson.

Chris Wilson

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, market interest rates for our variable rate indebtedness, our ability to raise capital or borrow additional funds, changes in the Australian, New Zealand or Canadian dollar relative to the U.S. dollar, regulatory changes, customer defaults or insolvencies, litigation, 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 mining industry or the U.S. construction or oil and gas industries or a write-off of all or a part of our goodwill and intangible assets.

These involve risks and uncertainties that 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 factor section of our prior periodic reports filed with the SEC and posted to our website at 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-U.S. GAAP financial measures such as adjusted EBITDA, a reconciliation of how we -- define and arrive at with these non-U.S. GAAP measures are in our earnings release. They will be included in our quarterly report on Form 10-Q.

And now we will turn the call over to Ronald Valenta, President and CEO. Ron, please go ahead.

Ronald Valenta

Thank you Chris. Good morning and thanks for joining us to discuss General Finance’s results for the second quarter of our fiscal year 2014. I’ll begin with a brief discussion of our operations and then discuss the outlook for our companies. Then our CFO, Chuck Barrantes will provide a financial overview and following his remarks we will open the call to your questions.

Our second quarter of fiscal year 2014 was another quarter of continued positive results where we delivered year-over-year growth in total revenues and adjusted EBITDA for the 15th consecutive quarter. We continue to significantly invest in our container fleet and also completed three accretive acquisitions two in North America and one in the Asia Pacific region. Our growth during the second quarter was led by another quarter of very strong performance in North America where at Pac-Van revenues and adjusted EBITDA grew 18% and 56% respectively. The increase in revenues at Pac-Van was primarily the result of the 28% year-over-year increase in leasing revenues as demand improved across most sectors. But particularly in construction, retail and commercial which also includes oil and gas customers. Pac-Van’s lease grew by 32% year-over-year to nearly 18,600 units with all of the growth occurring in our storage, office and portable liquid storage tank container product lines. This is consistent with our stated strategy to increase our investment in the container asset class.

Average fleet utilization was 80% during the quarter driven by continued strong utilization across most product lines particularly in storage containers where we experienced an 87% average utilization rate. We are very pleased with the broad based growth that we continue to see in this product line across both our end markets and geographies. We continue to experience solid results for our portable liquid storage tank container product line, we have responded to strong customer demand particularly in the oil and gas sector by expanding our leased fleet which has more than quadrupled in the last 12 months to over 1,000 units at the end of the quarter.

We are also continuing to expand our portable liquid tank business to include non-oil and gas customers. And while this still represents a small portion of our current business, 10 out of the 20 branches that lease portable liquid tanks serve only non-oil and gas customers and we believe that we can continue to diversify into other end markets for the container product over time.

Pac-Van’s mobile office product line continues to experience steady improvement as we are seeing signs of increased nonresidential construction activity in a number of our markets for the first time since the great recession. Pac-Van completed two acquisitions during the quarter bringing the year-to-date total to four, one of which was in Canada. Acquisitions continue to remain one of our focuses in North America as we look to expand our geographic footprint and branch network in to attractive markets.

Southern Frac our manufacturer of portable liquid storage tank containers generated total standalone revenues of 6.5 million, down approximately 4.8 million from the second quarter of fiscal year 2013. This is primarily due to lower sales to external customers as a result of lower oil and gas drilling activity between the periods. Despite the drop in revenues adjusted EBITDA only declined by approximately 100,000 due to among other things efficiencies that we have attained in the manufacturing process including lower material cost.

Southern Frac also continues to pursue sales outside the oil and gas industry in an effort to diversify the customer base and enter into new end markets. Additionally though not reflected on the books of Southern Frac we have benefited from leasing referrals that played no small part in Pac-Van attaining a current annual run rate of over $8 million on its portable liquid tanks.

Turning to our Asia-Pacific subsidiary Royal Wolf continued to generate healthy growth benefiting from increased demand in the resources, transport and government sectors. In large part due to our innovative products such as our mining camps, our specialized refrigerated freight containers and our recently introduced low security prisoner accommodation cabins which were sold into the institutional corrections market in the past quarter.

During this quarter we delivered the six mining camps that we spoke about last quarter, which will contribute to future leasing revenue growth. Despite in overall slowing in the natural resources market in Australia our mining camp solutions continued to gain acceptance and market share based on their sophisticated features and speed of deployment. Our reported results at Royal Wolf continued to be impacted by the weaker Australian dollar relative to U.S. dollar, which declined by approximately 11% on a year-over-year basis for the second quarter of fiscal 2014. However on a local currency basis Royal Wolf’s revenues and adjusted EBITDA grew by 24% and 14% during the quarter respectively.

Our Royal Wolf experienced lower than normal profitability for the second quarter of 2014, due in part to the completion of a low margins sales contract to a freight logistics customer and continued softness on the Eastern seaboard of Australia. Royal Wolf lease grew by 5% year-over-year to nearly 41,000 units, the majority coming from organic growth. Average fleet utilization was a healthy 84% and leasing revenue increased by 11% in local dollars driven by the larger fleet, higher average lease rates year-over-year.

We continued our strategy of supplementing our organic growth with accretive acquisitions as we completed a small tuck in acquisition in New Zealand during the quarter in addition to the Australian acquisition that we completed in the first quarter, expanding our footprint in the region and bolstering our market position in the freight container sector.

Now turning to our company wide outlook, we are optimistic about our prospects for continued strong performance for the second half of fiscal year 2014 and we’re executing on our objectives to drive growth. We remain comfortable that consolidated adjusted EBITDA should increase 10% to 13% in fiscal year 2014 from fiscal year 2013. However based primarily on our year-to-date results and revised expectations for lower than originally forecasted North America manufacturing sales to external customers, we believe that the consolidated revenues for fiscal year 2014 should be in the range of 250 million to 260 million. This outlook does not take into account the impact of current acquisitions for which year-to-date we have made cash investments of approximately $16 million.

At this time I would like to turn the call over to Chuck Barrantes for his financial review.

Charles Barrantes

Thanks Ron. We will be filing our quarterly report on Form 10-Q shortly at which time this document will be available on both the SEC's EDGAR filing system and on our website and I encourage investors and other interested parties to read it as it contains a substantial amount of information about our Company some of which we will discuss today.

Now turning over to our financial results for the quarter. Total revenues were 65.6 million in the second quarter of fiscal year 2014, a 4% increase over the comparable period of the prior year and leasing revenues increased by 10% to 34.5 million from 31.3 million for the second quarter fiscal year 2013. Leasing revenues comprised 55% of total manufacturing revenues in the quarter compared with 56% for the same period last year.

Non-manufacturing sales revenues increased by 17% to 28.4 million in the second quarter compared to 24.3 million in second quarter of the prior year. In North America Pac-Van’s revenues for the second quarter of 2014 total 21.4 million an increase of 18% compared with 18.1 million for the prior year’s second quarter. Leasing revenues increased by approximately 3.4 million or 28%, primarily due to a 32% year-over-year increase in the average number of units on lease and moderately higher monthly lease rates for storage containers, office containers and mobile offices.

In addition Pac-Van achieved an average fleet utilization rate of 80% for the second quarter of 2014, as compared to 79% for the second quarter of 2013. Southern Frac’s standalone manufacturing revenues for the second quarter of fiscal year 2014 totaled 6.5 million and included inter-company revenues of 3.8 million from portable liquid tank containers sold to Pac-Van, which are eliminating the company’s consolidated results. This compares to 11.3 million and 3.6 million of standalone and inter-company revenues respectively, during the second quarter of fiscal year 2013.

In the Asia-Pacific region, Royal Wolf’s revenues for the second quarter of fiscal year 2014, totaled 41.5 million compared with 37.5 million for the second quarter of fiscal year 2013, an increase of 11%. As Ron mentioned earlier, the increase in revenues in Royal Wolf was primarily due to growth in the mining, transport, and in government sectors as well as continued strength in New Zealand. On a local currency basis, revenues increased by 24%. Royal Wolf’s lease revenues while showing a slight decrease in U.S. dollars during the quarter actually increased by 11% from last year’s quarter on a local currency basis. This increase in local currency results from an approximate 7% year-over-year increase in the average number of units on lease and higher average monthly lease rates which increased by approximately 5% year-over-year.

Royal Wolf’s average fleet utilization was 84% for both second quarters of fiscal year 2013 and 2014. Consolidated adjusted EBITDA was 16.6 million in the second quarter of 2014 as compared with 14.4 million in the prior year period, an increase of 15%. Adjusted EBITDA margin as the percentage of total revenues was 25% for the second quarter 2014 compared to 23% in the prior year’s quarter. Pac-Van’s adjusted EBITDA was 6.1 million in the second quarter compared with 3.9 million in the prior year second quarter, an increase of just over 56%. And its adjusted EBITDA margin increased to 29% from 22% between the period, primarily as a result of a higher mix of leasing revenues to total revenues.

Royal Wolf’s adjusted EBITDA was 11.1 million in the second quarter as compared to 10.9 million in the prior year period, an increase of 2%. However on a local currency basis, adjusted EBITDA was up 14% year-over-year. Royal Wolf’s adjusted EBITDA margin decreased to 27% in the second quarter of fiscal year 2014 from 29% in the current quarter due primarily to the completion of the previously mentioned lower margin sales contract to a freight logistic customer. Southern Frac’s adjusted EBITDA on a standalone basis and prior to inter-company adjustments was 800,000 in the second quarter of fiscal 2014 as compared to 900,000 in the prior year period.

Interest expense for the second quarter of 2014 was 2.3 million compared with 2.6 million for the second quarter of last year. The lower interest expense was primarily due to lower weighted average interest rates in both North America and the Asia Pacific combined with lower average borrowings in North America in the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013, partially offset by higher average borrowings at Royal Wolf in the current year’s quarter. Net income attributable to common stockholders was 1.6 million or $0.07 per share in the second quarter of 2014 versus 1.7 million or $0.08 per share in the second quarter of 2013.

The same quarter of 2014 includes a reduction of 920,000 or $0.04 per share for the second dividend paid in our Series C cumulative preferred stock. Free cash flow before fleet activity during the first six months of fiscal year 2014 was 15.7 million compared with 12.1 million in the second quarter of fiscal year 2013. As a reminder, we define free cash flow to be cash from operating and investing activities, adjusted for changes in non-manufacturing inventory, net fleet CapEx and business acquisitions.

For the first six months of fiscal year 2014 we invested a net 33.4 million in our lease fleet, 17.7 million in North America and 15.7 million in the Pan-Pacific. This compares to 24.1 million in the net fleet investment in the prior year’s period of which 11.3 was in North America and 12.8 was in the Pan Pacific.

Turning to our balance sheet. At December 31, 2013 the Company had total debt of 198.9 million and cash and equivalents of 2.4 million with the net leverage ratio of 3.5 times. This compares with a 163 million and 6.3 million at June 30, 2013 respectively with a net leverage of three times. As we have stated before we are very comfortable with the net leverage ratio of 4.5 times or lower.

Receivables were 32.2 million at December 31, 2013 as compared to 34.4 at June 30th. Days' sales outstanding in receivables were 38 days and 48 days for Royal Wolf and Pac-Van respectively, compared to 44 days and 50 days at June 30, respectively.

At December 31, 2013 Pac-Van had 35.1 million available under its credit facility and Royal Wolf had approximately AU$6.5 million availability over AU$125 million credit facility. We are very pleased to announce that late last week Pac-Van amended its credit facility to, among other things, increase the maximum borrowing capacity from 120 million to 200 million and added two new lenders to the syndicate, One West Bank and Capital One. In addition, we achieved better pricing on the revised facility. I would like to welcome our new lenders and express our gratitude for the support that we continue to receive from our bank syndicate and congratulations to our Pac-Van team.

As you can see we have ample financial flexibility to continue pursuing our growth strategy. As Ron mentioned earlier we expect to continue to showing improved results on a consolidated basis, driven by the execution of our growth initiatives which include expanding our container lease fleet. This now concludes our prepared comments and I would like to turn the call back to the operator for the question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Ian Corydon of B. Riley & Company.

Ian Corydon - B. Riley & Company

Thank you. With the lowered revenue guidance but the EBITDA guidance being maintained and obviously looks like your margins are going to be better than you previously expected. Can you just talk about the reasons for that?

Charles Barrantes

Yes. The primary reason is because of our manufacturing sales of Southern Frac are lower than expected on a third party basis, not only third but consolidated. But the biggest impact is that a great proportion of the sales to Pac-Van which are limited in consolidation. Now on a consolidated basis, the corporation benefits because indirect/directly, we have currently over $8 million of leasing of rental run rate of which the majority of that came through Southern Frac. So while the revenues have gone down from manufacturing sales it’s more than offset by the higher margin leasing revenues that we’ve incurred at Pac-Van or that we have recognized at Pac-Van.

Ian Corydon - B. Riley & Company

Got it, and in terms of Pac-Van’s revenue growth for the second half of the fiscal year, how are you looking at what that number might look like?

Charles Barrantes

Revenue?

Ian Corydon - B. Riley& Company

Yes, the revenue growth year-over-year in the back-half of the year.

Charles Barrantes

I think we can expect the revenue growth to be consistent with the first six months, double-digits. We’ve had a slight impact from the bad weather but we don’t think it will significantly impact us for the year.

Ian Corydon - B. Riley & Company

Great, and I think you might have filed the agreement, but could you just tell us what the rate on the expanded agreement is versus the previous one?

Charles Barrantes

Yes, so the new agreement has a base rate which is basically the bank’s primary plus a 100 basis to 150 basis points, just as a comparison, the old amendment, not the old amendment but the previous revised number had 1.7 -- 175 basis points to 225 basis points, so definitely better pricing on that. Or we can use the LIBOR which is typically the 90 days LIBOR, it’s now 250 basis points to 300 basis points, and that compares to 275 and 325 prior to the amendment.

Operator

Your next question comes from the line of Sal Vitale of Sterne Agee.

Sal VitaleSterne Agee

Quick question, so the guidance you gave that was that the 10% to 13% is ex the effect of the acquisitions.

Charles Barrantes

That is correct. That is guidance that we provided at the end of our fiscal year, which do not consider any acquisitions in the current year.

Sal VitaleSterne Agee

Correct. And you said you’ve invested [$16] million year-to-date. So can we get a sense for what the annualized EBITDA contribution would be from that?

Charles Barrantes

Well, we haven’t disclosed the annualized EBITDA, however, what we have said, is that the average for these acquisitions had been around 4.5, 5 times. So based on that you can figure on an annualized basis EBITDA probably around little over 3 million and that over the -- obviously that’s straight over the six months, so roughly somewhere between $1.8 million to $2 million impact for fiscal year 2014.

Sal VitaleSterne Agee

Right. Okay, that’s pretty much what I was thinking. And then the other question I had was very impressive growth on the average units for Pac-Van, up 32%. Utilization was also up. I would have expected the revenues to actually be up a little bit more than that, so I assume the pricing was actually pretty healthy, so I assume that mix was the impact there?

Charles Barrantes

It is mix, pricing was moderately increased on most of the product lines, but the mix was important because we actually had a reduction in sales of Pac-Van so the total revenues are down but the leasing revenues are up, so higher margin.

Sal VitaleSterne Agee

Right, okay, that makes sense. And then you mentioned $8 million of rental run rate derived from the Southern Frac in terms of referrals...

Charles Barrantes

Yes, indirectly/directly, from Southern Frac, yes.

Sal VitaleSterne Agee

Indirectly/directly, can you refresh my memory, what was that same figure you gave on the last conference call?

Charles Barrantes

Sal, I don’t recall…

Sal VitaleSterne Agee

But it was below 8, right?

Charles Barrantes

However, I can tell you that the rental run rate has ramped up from the beginning of the year. It was about 0.5 million a month, so it’s ramped up from $6 million to over $8 million for the first six months.

Sal VitaleSterne Agee

Okay, good. And then just the last question, your unit growth is about 32% in Pac-Van and then if I look at your CapEx year-to-date and I assume that it was disproportionate if I look at your CapEx, net CapEx, year-to-date, compared to the year-ago period, I assume the increase was disproportionally from Pac-Van. So the question is, should we expect the same level of growth in the second half or do you slow it down in the second half?

Ronald Valenta

Good morning Sal it’s Ron. Yes, so I would anticipate in the second half of the year that the North American operations were probably in best twice as much as what we’re doing in the Asia-Pacific. And that CapEx growth rate then would be very similar to what North America experienced in the first half of the year.

Operator

Your next question comes from the line of Brent Thielman of D. A. Davidson & Co.

Brent Thielman - D.A. Davidson

Good morning, guys. Yes, the leasing margins bit higher levels than we’ve seen in the last few quarters and up year-on-year, can you kind of prioritize what were the kind of drivers of that improvement this quarter and I guess particularly if mix was a meaningful factor?

Ronald Valenta

So again just in our model the leasing has a very significant flow through so for every dollar the rental revenue over the current landscape we would anticipate incremental margin to be somewhat north of 70%. So simply said is the demand increases for the leasing side, we do have the balance sheet to support that and we will continue to make those capital investments and then as we do more leasing, it will clearly drive the margins. So the more leasing you see us do should then contribute to a higher ultimate margin. And so it’s the same old model, we’re executing it effectively I think in both venues.

But again as we continue to do more leasing on the top line, our margins in theory and if we execute well, will happen as you see the margins expand what you’d see now in North America, very similar to what we’ve experienced in Australia where they were heavily sales weighted, I think initial years they’re like 10.5% in EBITDA margins and as we focus more on the leasing side that has grown to almost 30% now. So again the focus for us is leasing and as we do more leasing that in turn will create higher EBITDA margins.

Brent Thielman - D.A. Davidson

Okay and then you’ve had a couple of quarters here in row with some pretty solid margins in Southern Frac even with little over the pressure this quarter, how do we think about the margin contribution going forward there and it’s kind of what we’ve seen in the first half sort of a sustainable level to think about and at the rest of the year?

Ronald Valenta

Yes, the Southern Frac investment is a little different because we do have that inter-company activity, so we tend to think in the second half of the year that the Southern Frac team will be able to get to what we were internally forecasting, however, what we don’t fully have control over is how much of that is external volume versus internal, so at absolute terms we think that they will achieve their objectives in the second half of the year, however, more of that maybe internal than external and hence when we consolidate that internal performance sort of gets backed out of their performance.

So we continue to be very pleased with the investment and we think they will achieve their objectives based on the run rate and their bidding activity most recently but the one thing we can’t control again is the internal versus external and so when you see them on a consolidative basis, they won’t show as well as they do when they’re on a standalone basis.

Brent Thielman - D.A. Davidson

How does external sales started to pick back up for you?

Ronald Valenta

Yes, they have but what we have in finding though which we do like is a lot more customers are going to the leasing side which then again that creates the internal sale and the leasing. And from a corporate perspective in the aggregate, we really enjoy that so even though it’s a consolidated negative in the aggregate it’s very positive because it drives our leasing activity which is what our ultimate goal is, so I guess there is a hidden benefit in the internal sales, really.

Operator

Your next question comes from the line of Brian Hollenden of Sidoti.

Brian Hollenden - Sidoti

Thanks for taking my call. Can you talk a little about the pricing environment in Asia Pacific?

Ronald Valenta

I’m sorry what was that Brian?

Brian Hollenden - Sidoti

Can you talk a little bit about the pricing environment in Asia Pacific?

Ronald Valenta

Yes, I think on the pricing side again we’re fortunate to be the market leader in the two venues Australia and New Zealand, so we have been passed on a rate increase, a nominal rate increase, during the current year. So we’re finding pricing to be reasonably steady on the leasing side which is clearly a market that we are the leader in. On the sales side, used box prices have fallen during the first half of the fiscal year and hence sales prices have also decreased a bit. So we’re seeing lower sale prices really because there is more supply on the used market which effectively decreased our margins slightly because we’ve had some inventory to work through that we have purchased in prior periods, so in summary sales pricing is softer, leasing is up.

Charles Barrantes

Yes, I can tell you that for quarter, the second quarter, the composite average in Australian dollar was 175 on our container products and that compares to 157 second quarter of last year, so we have definitely been proven pricing as well as our unit -- our average units on lease are higher.

Operator

[Operator Instructions] Your next question comes from the line of [indiscernible] an Individual Investor.

Unidentified Participant

Hey, Ron and Chuck. First and foremost from operative perspective, it looks like it was just a really strong quarter, so my half-up you guys because you’re executing just quarter-after-quarter so congratulations on that. My question really at the heart is not on the operating side, I think as probably you guys are doing exception not very strong on that but could you comment on what I call the valuation discrepancy between General Finance and some of your other peer companies, the publicly traded peer companies price; GFN it is trading arguably at a steep discount versus some of the peers. So could I get your comment on that and what steps you’re taking to address that?

Ronald Valenta

On the peer comment, we would view in the public arena, the peers has been, Mobile Mini under the ticker MINI and McGrath under the ticker MGRC. And so relative to those two the peer's play clearly is MINI, and I haven’t looked at their numbers recently and they haven’t done their year-end. But I think their multiples at 14 to 15. And then McGrath which is not quite of a pure comparable to us. I think there have been actually somewhere in the 7, so they’re actually on an EBITDA basis trading lower than we are. So one is higher and one is lower. Clearly, the average is a little bit higher than we are. So one's higher and one's lower, clearly the average looked at higher than we are. And we internally really believe, as we have continued to outperform the sector during this great recession period, quite clearly from every perspective, is we were trading three years ago or so, $1 - $1.15, say, we're somewhere north of $6. Our issue really, one is liquidity of the float, and you know sort of the inverse, I think what you proposed earlier was to buyback of shares. Actually what we need is more shares because we don’t have enough float to attract larger investors. So our objective is really to expand the thin float issue which is only done by issuance of shares.

So I think what we have signaled in the increase debt facility which is a significant increase from $120 to $200 million are really two things. One is, our bank syndicate is very supportive of us which generally is a conservative view to most, so that’s a very big benefit, and positive comment to our performance. And then secondly I think it signals that we are looking for things of larger size and we have more capacity to invest than what we have in the past. So I think what you’ll find us -- continue to do what we have done, which his outperform the sector and then if that happens we will address the thinly traded issue somewhere in the future.

But we really think that’s is the primary objective to unleash greater value than the share prices what we have today, but clearly by putting our heads down to the grindstone over the last three years, four years in outperforming the sector. You know, you’ve seen that performance reflected in the stock price. So what I would ask is that you as well as other shareholders are patient, we really view this is a long-term hold. We’re not really having a great interest in a quick flip. I think it’s consistent with what we said when we originally went public is that this was going to be a long-term hold and that we thought that we would be able to compete in the various landscapes in which we are doing business. And I think we have done that.

As our group being collectively the largest shareholder and our objectives are in line with all our shareholders, but with everything, you know things take time, and we think we’re getting closer to resolving the thin float issue. But again it wasn’t -- we didn’t think it would be solved in a day. And all we can do really is to perform and now we have additional capital to continue to do that. So I think that is really our approach to the value issue that you constantly ask us about.

Unidentified Participant

Ron, thank you for that explanation; just as a follow-up. I haven’t checked this today but I believe decisively the debt facility was increased to $25 million; was that the numbers that Charles?

Ronald Valenta

The North America one, Tobey was increased from $120 million to $200 million.

Unidentified Participant

Okay, fine, so the…

Ronald Valenta

So we have a very significant increase. We’re not even close to the 120, but what that just signaled to you and everyone is clearly we're looking for bigger investments, and we have a bigger capital need and proposed in our bank syndicate which we have now added two new banks in the -- are both our general counsel and the Pac-Van Executives did a great job in closing that facility last week because we were hoping to talk about it today. But again I think what it signals is just more accretive opportunity in front of us and bigger than we had originally thought. And we’re very pleased that the banks are supportive of our efforts.

Unidentified Participant

But Ron, given the $80 million or so increase in size of the debt facility, from your perspective, does that give you the gunpowder you need to execute on the strategy that you just articulated?

Ronald Valenta

Yes, I think our strategy has been consistent, Tobey. I think what we have been lacking in the past is the amount of capital. And I think what it does now is open up our horizon to potentially larger-larger things that what we have been doing. I think our development team led by Jeff Kluckman, where they closed six transactions in the first six months of this year, three a quarter, in all the venues in which we trade, so we’ve acquired in the US, in Canada, in Australia, and New Zealand and that he has done a tremendous job in closing those transactions. But they’re smaller transactions. But with this additional capital I think we can begin to look at potentially larger transactions than what we have done in over the last -- certainly not only the last six months but the last few years.

Operator

Your next question comes from the line of Brian Gagnon of Gagnon Securities

Brian GagnonGagnon Securities

This is actually Brian Gagnon. A couple of questions for you. Good afternoon. Your Pac-Van growth has been stellar in the last several quarters, with these US acquisitions and maybe you could talk a little bit about those if you would, can you get this Pac-Van portion to be as big as it was pre-acquisition and then the second part of that is how long do you think Pac-Van can grow at these rates that's been growing at for the last couple of quarters.

Ronald Valenta

That’s sort of a two tiered question, Brian. So first of all, we believe that their current run rate and clearly from that we can see them project that you probably can’t. We think that this fiscal they will be at pre-recession levels, so based on the momentum that they have and how they’ve been performing we feel comfortable in saying that we think by the end of this fiscal ’14 that they will be at or greater than where they were pre-recession which is a huge achievement to which we’ve all been waiting for, so that’s a very big positive.

Your second question was great rate and I think what I’ve said publically before was we thought that North America had the potential to grow at growth rates similar to what the Asia Pacific group had done in previous periods and they had grown significantly since we had acquired them and I think their growth rate over their first six years was somewhere around the 32% annual compounded growth rate. They’re plus or minus so I think, you know our view is that North American can do the same over a similar period of time. And I think they have exceeded those expectations certainly over the last few quarters. So consistently we have said and I’ll say again that I think they can achieve what the Asia Pacific group has done in prior years.

Brian GagnonGagnon Securities

Can you talk a little bit about these acquisitions that you guys made during the quarter?

Ronald Valenta

Yes, sure we can, I don’t think they were again material to the overall performance. I think all the transactions were accretive to our current multiples. I think clearly we either have acquired or do have the management team in place to effectively execute those acquisitions, the integration had been flawless and seamless. Again I don’t think any of my really material Brian, but every move that helps we think that’ll be positive and we think with our added product lines we should see significant growth in those areas as we roll those product lines out. And then…

Charles Barrantes

And Brian, for the quarter we made two, three acquisitions. The largest one is out of Alabama, it was purely –a fleet we didn’t acquire a yard or any personnel, it’s really going to really fill right in very nicely, that’s Pinnacle and then we made two other small acquisitions, one in Royal Wolf in New Zealand and one in Pac-Van. Both of the other two are relatively small, somewhere in the $300,000 range. Pinnacle was around $6 million.

Operator

There are no other questions at this time, I would now like to turn the call back to Mr. Ronald Valenta, President and CEO for any closing remarks, please go ahead Mr. Valenta.

Ronald Valenta

Yes, I’d like to thank you for joining our call today and for your interest in our company, General Finance Corporation, again thanks and enjoy your day.

Operator

Thank you for participating in today’s conference call, you may now disconnect.

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