U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

For the quarterly period ended December 31, 2015

2016

OR

For the transition period fromto.

Commission file number001-32845

Commission file number 001-32845

(Exact Name of Registrant as Specified in its Charter)

39 East Union Street

Pasadena, CA 91103

(Address of Principal Executive Offices)

(626)584-9722

(Registrant’s Telephone Number, Including Area Code)

Indicate by check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes   x☒                No    ¨

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   x☒                No    ¨

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act):

Yes   ☐                No    ☒

Yes    ¨                No    x

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 26,074,29426,354,663 shares outstanding as of February 4, 2016.2, 2017.

GENERAL FINANCE CORPORATION

INDEX TO FORM10-Q

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/LOSS

(In thousands, except share and per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share and share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Non-cash investing and financing activities:

The Company issued common stock of $156 as a part of the consideration for a business acquisition during the six months ended December 31, 2014includednon-cash holdback and included holdbackother adjustment amounts totaling $3,196$1,804 and $1,804$376 as part of the consideration for business acquisitions during the six months ended December 31, 20142015 and 2015, respectively.2016, respectively (see Note 4).

The accompanying notes are an integral part of these condensed consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Business Operations

General Finance Corporation (“GFN”) was incorporated in Delaware in October 2005. References to the “Company” in these Notes are to GFN and its consolidated subsidiaries. These subsidiaries include GFN U.S. Australasia Holdings, Inc., a Delaware corporation (“GFN U.S.”); GFN Insurance Corporation, an Arizona corporation (“GFNI”); GFN North America Leasing Corporation, a Delaware corporation (“GFNNA Leasing”); GFN North America Corp., a Delaware corporation (“GFNNA”); GFN Realty Company, LLC, a Delaware limited liability company (“GFNRC”); GFN Manufacturing Corporation, a Delaware corporation (“GFNMC”), and its 90%-owned subsidiary, Southern Frac, LLC, a Texas limited liability company (collectively “Southern Frac”); over 50%-owned Royal Wolf Holdings Limited, an Australian corporation publicly traded on the Australian Securities Exchange (“RWH”), and its Australian and New Zealand subsidiaries (collectively, “Royal Wolf”);Pac-Van, Inc., an Indiana corporation, and its Canadian subsidiary, PV Acquisition Corp., an Alberta corporation (collectively “Pac-Van”“Pac-Van”); and Lone Star Tank Rental Inc., a Delaware corporation (“Lone Star”).

The Company does business in three distinct, but related industries, mobile storage, modular space and liquid containment (which are collectively referred to as the “portable services industry”), in two geographic areas; the Asia-Pacific (orPan-Pacific) area, consisting of Royal Wolf (which leases and sells storage containers, portable container buildings and freight containers in Australia and New Zealand) and North America, consisting ofPac-Van (which leases and sells storage, office and portable liquid storage tank containers, modular buildings and mobile offices) and Lone Star (which leases portable liquid storage tank containers and containment products, as well as provides certain fluid management services, to the oil and gas industry in the Permian and Eagle Ford basins of Texas), which are combined to form our North American leasing operations, and Southern Frac (which manufactures portable liquid storage tank containers).

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) applicable to interim financial information and the instructions toForm 10-Q and Article 10 ofRegulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements, although the Condensed Consolidated Balance Sheet at June 30, 20152016 was derived from the audited Consolidated Balance Sheet at that date. In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The accompanying results of operations are not necessarily indicative of the operating results that may be expected for the entire fiscal year ending June 30, 2016.2017. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto of the Company, which are included in the Company’s Annual Report on Form10-K for the fiscal year ended June 30, 20152016 filed with the Securities and Exchange Commission (“SEC”).

Unless otherwise indicated, references to “FY 2015”2016” and “FY 2016”2017” are to the six monthsquarter ended December 31, 20142015 and 2015,2016, respectively.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include assumptions used in assigning value to identifiable intangible assets at the acquisition date, the assessment for impairment of goodwill, the assessment for impairment of other intangible assets, the allowance for doubtful accounts, share-based compensation expense, residual value of the lease fleet and deferred tax assets and liabilities. Assumptions and factors used in the estimates are evaluated on an annual basis or whenever events or changes in circumstances indicate that the previous assumptions and factors have changed. The results of the analysis could result in adjustments to estimates.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Inventories

Inventories are comprised of the following (in thousands):

Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

Lease Fleet

The Company has a fleet of storage, portable building, office and portable liquid storage tank containers, mobile offices, modular buildings and steps that it primarily leases to customers under operating lease agreements with varying terms. Units in the lease fleet are also available for sale. The cost of sales of a unit in the lease fleet is recognized at the carrying amount at the date of sale. At June 30, 20152016 and December 31, 2015,2016, the gross costs of the lease fleet were $478,416,000$503,817,000 and $492,949,000,$513,212,000, respectively.

Goodwill and Other Intangible Assets

The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based on the estimated fair values on the respective acquisition dates (see Note 4). Based on these values, the excess purchase consideration over the fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill and other intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)FASB ASC Topic 350,Intangibles — Goodwill and Other.FASB ASC Topic 350 prohibits the amortization of goodwill and intangible assets with indefinite lives and requires these assets be reviewed for impairment. The Company operates two reportable geographic areas and the vast majority of goodwill recorded was in the acquisitions of Royal Wolf,Pac-Van, Southern Frac and Lone Star.

The Company assesses the potential impairment of goodwill and intangible assets with indefinite lives on an annual basis by reporting unit (see Note 11) or if a determination is made based on a qualitative assessment that it is more likely than not (i.e., greater than 50%) that the fair value of athe reporting unit is less than its carrying amount. TheAt March 31, 2016, the Company conducteddetermined that qualitative factors in its annualNorth American leasing and manufacturing operations, pertaining primarily to conditions in the oil and gas market, required an update of the step one impairment analysis for Lone Star and Southern Frac. This updated analysis calculated that even though the excess of the estimated fair value of Lone Star over the carrying value of its invested capital declined, its implied value of goodwill was still greater than its carrying value. However, the Company determined that the implied value of Southern Frac’s goodwill was less than the carrying value of its goodwill, resulting in an impairment charge of $2,681,000 at March 31, 2016. At June 30, 2015 and concluded that goodwill and intangible assets with indefinite lives were not impaired as of that date. In particular,2016, the annual step one impairment analysis performed on the North American reporting units,Pac-Van and Lone Star, calculated that the value of goodwill was still greater than its carrying value and Southern Frac, calculated that the amount by which the excess of the estimated fair values exceeded their respective carrying value of invested capital at that date was approximately 29%, 31%21% and 33%12%, respectively, of their respective book value (carrying value of net assets) as of June 30, 2015. The Company determined that qualitative factors pertaining to its North American manufacturing operations required an update of the step one impairment analysis for Southern Frac as of December 31, 2015. This updated analysis calculated the excess of the estimated fair value of Southern Frac over the carrying value of its invested capital declining to approximately 19%. However, determiningvalue. Determining the fair value of a reporting unit is judgmentalrequires judgment and involves the use of significant estimates and assumptions. The Company based its fair value estimates on assumptions that it believes are reasonable but are uncertain and subject to changes in market conditions.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Other intangible assets include those with indefinite (trademark and trade name) and finite (primarily customer base and lists,non-compete agreements and deferred financing costs), as follows (in thousands):

Net Income per Common Share

Basic net income per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the periods. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential dilutive securities (common stock equivalents) the Company had outstanding were stock options. The following is a reconciliation of weighted average shares outstanding used in calculating earnings per common share:

Potential common stock equivalents totaling 1,027,061 for both the quarter ended December 31, 2014 and FY 2015 and 1,809,483 and 2,101,857 for the quarter ended December 31, 2015 and FY 2016, respectively, and 1,460,862 for both the quarter ended December 31, 2016 and FY 2017 have been excluded from the computation of diluted earnings per share because the effect is anti-dilutive.

Recently Issued Accounting Pronouncements

In August 2010, the FASB, as result of a joint project with the International Accounting Standards Board (“IASB”) to simplify lease accounting and improve the quality of and comparability of financial information for users, published proposed standards that would change the accounting and financial reporting for both lessee and lessor under ASC Topic 840,Leases. In particular, the proposed standards would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Instead of capital and operating leases, the proposed rules create two types of leases (both similar to capital leases for lessees), which the FASB and IASB refer to as “Type A” and “Type B.” Since then, the FASB and IASB have been deliberating about their 2010 and subsequent proposals and, as of November 11,April 2015, the FASB has decided, among other things, onissued ASUNo. 2015-03,Imputation of Interest (Subtopic835-30). The amendments in this update require that debt issuance (or deferred financing) costs related to a recognized debt liability be presented in the dual approach for lessee accounting, with lease classification determined in accordance with the principle in existing lease requirements. Most existing capital/finance leases will be accounted for by lesseesbalance sheet as Type A, with recognition of amortization of the defined “right-of-use” asset separatea direct deduction from the interest on the leasecarrying amount of that debt liability, and most operating leases would be recognized by lessees as Type B,consistent with a single total lease expense. Both types of leases would result in lessees recognizing a right-of-use asset and a lease liability. The IASB has decided on a single approach that treats all leases as Type A. Lessor accounting for both would substantially follow current lease requirements under U.S. GAAP. Type A leases will be those that are effectively direct finance or sales-type leases and Type B leases will be operating leases. However, balance sheet presentation will not be required for leases with a term of one year or less. The FASB’s proposed standard will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company believes that the final standard, if issued in substantially the same form as proposed, would have a material effect in the presentation of itsdebt discounts. In August 2015, the FASB issued ASUNo. 2015-15 which added SEC guidance that stated in the absence of authoritative guidance within ASU2015-03 of debt issuance costs related toline-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of theline-of-credit arrangement, regardless of whether there are any outstanding borrowings on theline-of-credit arrangement. The Company adopted these updates in FY 2017 and, as a result, unamortized debt issuance costs totaling $2,239,000 and $1,964,000 as of June 30, 2016 and December 31, 2016, respectively, have been deducted from the carrying amounts of the Credit Suisse Term Loan and Senior Notes (see Note 5) in the accompanying consolidated financial positionbalance sheets. Unamortized deferred financing costs related to the Asia-Pacific and results of operations.North American senior credit facilities are included in the caption “Other intangible assets, net” in the accompanying consolidated balance sheets.

In May 2014, the FASB issued Accounting Standards Update (“ASU”)No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU2014-09 completes the joint effort by the FASB and IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU2014-09 revenue recognition model virtually replaces all existing revenue recognition guidance and applies to all companies that enter into contracts

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

with customers to transfer goods or services. ASU2014-09 (as updated by ASU2015-14 in August 2015)2015, ASUNo. 2016-08 in March 2016, ASU No. 10 in April 2016 and ASU No. 12 in May 2016) is effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Public and nonpublic entities have the choice to apply ASU2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU2014-09 at the date of initial application and not adjusting comparative information. The Company is evaluating the requirements of ASU2014-09 and has not determined the effect of this ASU in the presentation of its consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In February 2016, the FASB issued new lease accounting guidance in ASUNo. 2016-02,Leases (Topic 842). This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept ofoff-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASUNo. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined“right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of theright-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASUNo. 2016-02 would be substantially unchanged from the previous lease requirements under U.S. GAAP. ASUNo. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. The Company believes the adoption of ASUNo. 2016-02 will have a material effect in the presentation of its consolidated financial statements, but has not determined the effect of this ASU in the presentation of its consolidated financial statements.

In August 2016, the FASB issued No. ASU2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to clarify whether eight specific cash flow issues should be categorized as operating, investing or financing in the statement of cash flows. ASUNo. 2016-15 will be effective for public companies in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe the requirements of this ASU will have a material effect in the presentation of its consolidated financial statements.

In October 2016, the FASB issued ASUNo. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU2016-16 requires recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU is effective for annual reporting periods after December 15, 2017, including interim periods therein, with early adoption permitted and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is evaluating the requirements of this ASU and has not determined the effect of this ASU in the presentation of its consolidated financial statements.

In November 2015,October 2016, the FASB issued ASUNo. 2015-17,2016-17,Income TaxesConsolidation (Topic 740)810): Interests Held through Related Parties That Are under Common.ASU No. 2015-17 eliminatesControl, an update to amend the guidanceaccounting standards on how a reporting entity that requires anis the single decision maker of a variable interest entity to separate deferred tax liabilities and assets between current and noncurrent amounts(“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a classified balance sheet.VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. Under this ASU, 2015-17a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. ASU No.2016-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company does not believe the requirements of this ASU will not have a material effect in the presentation of the Company’sits consolidated financial statements.

Note 3.  Equity Transactions

Preferred Stock

Upon issuance of shares of preferred stock, the Company records the liquidation value as the preferred equity in the consolidated balance sheet, with any underwriting discount and issuance or offering costs recorded as a reduction in additionalpaid-in capital.

Series B Preferred Stock

The Company has outstanding privately-placed 8.00% Series B Cumulative Preferred Stock, par value of $0.0001 per share and liquidation value of $1,000 per share (“Series B Preferred Stock”). The Series B Preferred Stock is offered primarily in connection with business combinations. At June 30, 20152016 and December 31, 2015,2016, the Company had outstanding 100 shares of Series B Preferred Stock with an aggregate liquidation preference totaling $100,000.

$102,000. The Series B Preferred Stock is not convertible into GFN common stock, has no voting rights, except as required by Delaware law, and is redeemable after February 1, 2014; at which time it

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

may be redeemed at any time, in whole or in part, at the Company’s option. Holders of the Series B Preferred Stock are entitled to receive, when declared by the Company’s Board of Directors, annual dividends payable quarterly in arrears on the 31^st day of January, July and October and on the 30^th day of April of each year. In the event of any liquidation or winding up of the Company, the holders of the Series B Preferred Stock will have preference to holders of common stock.

Series C Preferred Stock

The Company has outstanding publicly-traded 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $100.00 per share (the “Series C Preferred Stock”). At June 30, 20152016 and December 31, 2015,2016, the Company had outstanding 400,000 shares of Series C Preferred Stock with an aggregate liquidation preference totaling $40,000,000.

$40,620,000. Dividends on the Series C Preferred Stock are cumulative from the date of original issue and will be payable on the 31^st day of each January, July and October and on the 30^thday of April commencing July 31, 2013 when, as and if declared by the Company’s Board of Directors. Commencing on May 17, 2018, the Company may redeem, at its option, the Series C Preferred Stock, in whole or in part, at a cash redemption price of $100.00 per share, plus any accrued and unpaid dividends to, but not including, the redemption date. Among other things, the Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or other mandatory redemption, and is not convertible into or exchangeable for any of the Company’s other securities. Holders of the Series C Preferred Stock generally will have no voting rights, except for limited voting rights if dividends payable on the outstanding Series C Preferred Stock are in arrears for six or more consecutive ornon-consecutive quarters, and under certain other circumstances. If the Company fails to maintain the listing of the Series C Preferred Stock on the NASDAQ Stock Market (“NASDAQ”) for 30 days or more, the per annum dividend rate will increase by an additional 2.00% per $100.00 stated liquidation value ($2.00 per annum per share) so long as the listing failure continues. In addition, in the event of any liquidation or winding up of the Company, the holders of the Series C Preferred Stock will have preference to holders of common stock and are pair passu with the Series B Preferred Stock. The Series C Preferred Stock is listed on NASDAQ under the symbol “GFNCP.”

Dividends

As of December 31, 2015,2016, since issuance, dividends paid or payable totaled $73,000$81,000 for the Series B Preferred Stock and dividends paid totaled $8,970,000$12,630,000 for the Series C Preferred Stock. The characterization of dividends to the recipients for Federal income tax purposes is made based upon the earnings and profits of the Company, as defined by the Internal Revenue Code.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Royal Wolf Dividends

On August 12, 2014, the Board of Directors of Royal Wolf declared a dividend of AUS$0.055 per RWH share payable on October 3, 2014 to shareholders of record on September 18, 2014. On August 12, 2015, the Board of Directors of Royal Wolf declared a dividend of AUS$0.05 per RWH share payable on October 2, 2015 to shareholders of record on September 17, 2015. On August 10, 2016, the Board of Directors of Royal Wolf declared a dividend of AUS$0.025 per RWH share payable on October 4, 2016 to shareholders of record on September 16, 2016.

The consolidated financial statements reflect the amount of the dividends pertaining to the noncontrolling interest.

Note 4. Acquisitions

The Company can enhance its business and market share by entering into new markets in various ways, including starting up a new location or acquiring a business consisting of container, modular unit or mobile office assets of another entity. An acquisition generally provides the Company with operations that enables it to at least cover existing overhead costs and is preferable to astart-up or greenfield location. The businesses discussed below were acquired primarily to expand the Company’s container lease fleet. The accompanying consolidated financial statements include the operations of the acquired businesses from the dates of acquisition.

On August 28, 2015,July 22, 2016, the Company, throughPac-Van, purchased the business of Mobile Storage Solutions of Mo., LLC (“MSS”) for $1,497,000, which included a deferred purchase price promissory note of $613,000, bearing interest at 2.00% per annum and due in January 2016, and a holdback amount of $139,000. MSS leased and sold storage and office containers and storage trailers in Springfield, Missouri.

On October 16, 2015, the Company, through Pac-Van, purchased the container business of McKinney Trailer Rentals, Inc., d/b/a McKinneyThe Great Container Rentals & SalesCompany, Ltd. (“McKinney”GCC”), for $15,254,000, which included holdback and other adjustment amounts totaling $930,000. McKinney leased and sold storage (including refrigerated) containers and chassis and other units in the Seattle and Tacoma area.

On October 29, 2015, the Company, through Royal Wolf, purchased the container business of Spacewise (Aust) Pty Limited (“Spacewise”), for $281,000 (AUS$390,000)$662,000 (C$869,000), which included holdback and other adjustment amounts totaling $56,000 (AUS$78,000)$102,000 (C$133,000). SpacewiseGCC is basedlocated in Sydney, New South Wales.Vancouver, British Columbia.

On July 27, 2016, the Company, throughPac-Van, purchased the business of Container Systems Storage, Inc. (“CSS”), for $1,667,000, which included holdback and other adjustment amounts totaling approximately $120,000. CSS, which is located in Yakima, Washington, leases and sells storage containers in the state of Washington and in northern Oregon.

On December 23, 2015,1, 2016, the Company, through Royal Wolf, purchased the container businessbusinesses of W.A.All Direct Container ServicesSales Pty Limited (“W.A. Container”and ADC Storage Pty Limited as Trustee for the ADC Storage Unit Trust (collectively “All Direct”), for $321,000$3,040,000 (AUS$439,000)4,109,000), which included holdback and other adjustment amounts totaling $66,000$154,000 (AUS$90,000)209,000). W.A. Container is basedAll Direct leases and sells containers in Perth, West Australia.the southeast Queensland market, particularly in the Brisbane, Gold Coast and Toowoomba regions.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The preliminary allocation for the acquisitionsacquisition in FY 20162017 to tangible and intangible assets acquired and liabilities assumed based on their estimated fair market values was as follows (in thousands):

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

NotesThe FY 2017 operating results of all acquisitions prior to Condensed Consolidated Financial Statements

(Unaudited)

and since their respective dates of acquisition were not considered significant.

Goodwill recognized is attributable primarily to expected corporate synergies, the assembled workforce and other factors. The goodwill recognized in the MSSGCC, CSS and McKinneyAll Direct acquisitions isare not deductible for U.S. income tax purposes. The estimated fair value of the tangible and intangible assets acquired and liabilities assumed exceeded the purchase prices of Spacewise resulting in estimated bargain purchase gain of $72,000. This gain has been recorded as non-operating income in the accompanying consolidated statements of operations.

The Company incurred approximately $93,000 and $149,000 and $65,000 and $109,000 during the quarter ended December 31, 2014 and FY 2015$20,000 and $37,000 during the quarter ended December 31, 2015 and FY 2016 and during the quarter ended December 31, 2016 and FY 2017, respectively, of incremental transaction costs associated with acquisition-related activity that were expensed as incurred and are included in selling and general expenses in the accompanying consolidated statements of operations.

Note 5. Senior and Other Debt

Asia-Pacific Leasing Senior Credit Facility

Royal Wolf has a $127,750,000$108,102,000 (AUS$175,000,000)150,000,000) secured senior credit facility, as amended, under a common terms deed arrangement with the Australia and New Zealand Banking Group Limited (“ANZ”) and Commonwealth Bank of Australia (“CBA”) (the “ANZ/CBA Credit Facility”). Under the common deed arrangement of the ANZ/CBA Credit Facility, ANZ’s proportionate share of the borrowing capacity is $76,650,000$64,861,000 (AUS$105,000,000)90,000,000) and CBA’s proportionate share is $51,100,000$43,241,000 (AUS$70,000,000)60,000,000). The ANZ/CBA Credit Facility has $91,250,000$72,068,000 (AUS$125,000,000)100,000,000) maturing on JulyJanuary 31, 20172022 (Facility A), and $36,500,000$36,034,000 (AUS$50,000,000) maturing on July 31, 2019 (Facility B).

Borrowings under the ANZ/CBA Credit Facility bear interest at the bank bill swap interest rate in Australia (“BBSY”) or New Zealand (“BKBM”), plus a margin of 1.10%1.40% - 2.10%2.40% per annum on the Facility A and 1.35% - 2.40% on the Facility B, depending on the net debt leverage ratio (“NDLR”), as defined. The CBA proportionate share has a minimum margin that is 0.10% higher than the ANZ proportionate share.of 1.75% - 2.65% per annum on Facility A and 1.45% - 2.35% on Facility B. At December 31, 2015,2016, the30-day and90-day BBSY and BKBM were 2.11%1.69% and 2.425%1.865% and 2.67%1.90% and 2.80%2.05%, respectively. The ANZ/CBA Credit Facility also includes a $2,190,000include $2,162,000 (AUS$3,000,000) sub-facilitysub-facilities to, among other things, facilitate direct and global payments using electronic banking services. The ANZ/CBA Credit Facility, as amended, is subject to certain financial and other customary covenants, including, among other things, compliance with specified interest coverage and net debt ratios based on earnings before interest, income taxes, impairment, depreciation and amortization and othernon-operating costs and income (“EBITDA”) on a semi-annual basis and that borrowings may not exceed a multiple of 3.53.25 times EBITDA, as defined, through June 30, 2016, and 3.25 times EBITDA thereafter.defined.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2015,2016, total borrowings and availability under the ANZ/CBA Credit Facility totaled $83,019,000$83,787,000 (AUS$113,725,000)116,261,000) and $28,412,000$8,330,000 (AUS$38,920,000)11,558,000), respectively. Of the total borrowings, $76,170,000$69,506,000 (AUS$104,342,000)96,445,000) is drawn under Facility A and $6,849,000$14,281,000 (AUS$9,382,000)19,816,000) is drawn under Facility B.

The above amounts were translated based upon the exchange rate of one Australian dollar to $0.73$0.72068 U.S. dollar at December 31, 2015.2016.

North America Senior Credit Facility

The North America leasing (Pac-Van(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined $232,000,000 senior secured revolving credit facility, as amended, with a syndicate led by Wells Fargo Bank, National Association (“Wells Fargo”) that also includes HSBC Bank USA, NA, the Private Bank and Trust Company, Capital One Business Credit Corp. and OneWest Bank N.A. (the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility, which matures on September 7, 2017, effectively not only finances the Company’s North American operations, but also the funding requirements for the Series C Preferred Stock (see Note 3), the term loan with Credit Suisse (“Credit Suisse”) and the publicly-traded unsecured senior notes (see below).

The Wells Fargo Credit Facility includes a $20,000,000 real estatesub-facility to allow the borrowers (including GFNRC) to acquire real estate as collateral. In addition, subject to certain conditions, the amount that may be borrowed under the Wells Fargo Credit Facility may increase by $20,000,000 to a maximum of $252,000,000. The maximum amount of intercompany dividends thatPac-Van and Lone Star are allowed to pay in each fiscal year to GFN for the funding requirements of GFN’s senior and other debt and the Series C Preferred Stock are (a) the lesser of $5,000,000 for the Series C Preferred Stock or the amount equal to the dividend rate of the Series C Preferred Stock and its aggregate liquidation preference and the actual amount of dividends required to be paid to the Series C Preferred Stock; (b) the lesser of $3,125,000 for the term loan with Credit Suisse or the actual annual interest to be paid; and (c) $6,120,000$6,300,000 for the public offering of unsecured senior notes or the actual amount of annual interest required to be paid; provided

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

that (i) the payment of such dividends does not cause a default or event of default; (ii) each ofPac-Van and Lone Star is solvent; (iii) excess availability, as defined, is $5,000,000 or more under the Wells Fargo Credit Facility; (iv) the fixed charge coverage ratio, as defined, will be greater than 1.25 to 1.00; and (v) the dividends are paid no earlier than ten business days prior to the date they are due.

Borrowings under the Wells Fargo Credit Facility accrue interest, at the Company’s option, either at the base rate, plus 0.5% and a range of 1.00% to 1.50%, or the LIBOR rate, plus 1.0% and a range of 2.50% to 3.00%. Borrowings under the $20,000,000 real estatesub-facility accrue interest, at the Company’s option, either at the base rate, plus a range of 1.50% to 2.00%, or the LIBOR rate, plus a range of 3.0% to 3.50%. The Wells Fargo Credit Facility contains, among other things, certain financial covenants, including fixed charge coverage ratios, and other covenants, representations, warranties, indemnification provisions, and events of default that are customary for senior secured credit facilities; including a covenant that would require repayment upon a change in control, as defined. At December 31, 2015,2016, borrowings and availability under the Wells Fargo Credit Facility totaled $182,419,000$188,037,000 and $22,578,000,$8,977,000, respectively.

Credit Suisse Term Loan

On March 31, 2014, the Company at the corporate level, entered into a $25,000,000 facility agreement, as amended, with Credit Suisse (“Credit Suisse Term Loan”) as part of the financing for the acquisition of Lone Star and, on April 3, 2014, the Company borrowed the $25,000,000 available to it. The Credit Suisse Term Loan provides that the amount borrowed will bear interest at LIBOR plus 7.50% per year, will be payable quarterly and that all principal and interest will mature two years from the date that the Company borrowed the $25,000,000.on July 1, 2017. In addition, the Credit Suisse Term Loan is secured by a first ranking pledge over substantially all shares of RWH owned by GFN U.S., requires a certain coverage maintenance ratio in U.S. dollars based on the value of the RWH shares and, among other things, that an amount equal tosix-months interest be deposited in an interest reserve account pledged to secure repayment of all amounts borrowed. The Company has repaid, prior to maturity, $15,000,000 of the outstanding borrowings of the Credit Suisse Term Loan and, as of December 31, 2015, there remains $10,000,000 outstanding. Subsequent to December 31, 2015, the Credit Suisse Term Loan was amended to, among other things, extend the maturity date to July 1, 2017 (see Note 12)2016, $9,932,000 remained outstanding, net of unamortized debt issuance costs of $68,000.

Senior Notes

TheAt December 31, 2016, the Company has outstanding publicly-traded senior notes (the “Senior(“Senior Notes”) in an aggregate principal amount of $72,000,000.$72,000,000 ($70,104,000, net of unamortized debt issuance costs of $1,896,000). The Senior Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof and pursuant to the First Supplemental Indenture (the “First Supplemental Indenture”) dated as of June 18, 2014 by and between the Company and Wells Fargo, as trustee (the “Trustee”). The First Supplemental Indenture supplements the Indenture entered into by and between the Company and the Trustee dated as of June 18, 2014 (the “Base Indenture” and, together with the First Supplemental Indenture, the “Indenture”). The Senior Notes bear

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

interest at the rate of 8.125% per annum, mature on July 31, 2021 and are not subject to any sinking fund. Interest on the Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31, commencing on July 31, 2014.

The Senior Notes rank equally in right of payment with all of the Company’s existing and future unsecured senior debt and senior in right of payment to all of its existing and future subordinated debt. The Senior Notes are effectively subordinated to any of the Company’s existing and future secured debt, to the extent of the value of the assets securing such debt. The Senior Notes are structurally subordinated to all existing and future liabilities of the Company’s subsidiaries and are not guaranteed by any of the Company’s subsidiaries. The Company may, at its option, prior to July 31, 2017, redeem the Senior Notes in whole or in part upon the payment of 100% of the principal amount of the Senior Notes being redeemed plus any additional amount required by the Indenture. In addition, the Company may from time to time redeem up to 35% of the aggregate outstanding principal amount of the Senior Notes before July 31, 2017 with the net cash proceeds from certain equity offerings at a redemption price of 108.125% of the principal amount plus accrued and unpaid interest. If the Company sells certain of its assets or experiences specific kinds of changes in control, as defined, it must offer to redeem the Senior Notes. The Company may, at its option, at any time and from time to time, on or after July 31, 2017, redeem the Senior Notes in whole or in part. The Senior Notes will be redeemable at a redemption price initially equal to 106.094% of the principal amount of the Senior Notes (and which declines each year on July 31) plus accrued and unpaid interest to the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes.

The Indenture contains covenants which, among other things, limit the Company’s ability to make certain payments, to pay dividends and to incur additional indebtedness if the incurrence of such indebtedness would cause the company’s consolidated fixed charge coverage ratio, as defined in the Indenture, to be below 2.0 to 1.0. The Senior Notes are listed on NASDAQ under the symbol “GFNSL.”

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Other

At December 31, 2015,2016, other debt totaled $10,855,000.$9,490,000.

The Company was in compliance with the financial covenants under all its credit facilities as of December 31, 2015.2016.

The weighted-average interest rate in the Asia-Pacific area was 5.4% and 5.6% and 5.4%4.9% and 5.5% and 4.9% in the quarter ended December 31, 20142015 and 20152016 and in FY 20152016 and FY 2016,2017, respectively; which does not include the effect of translation, interest rate swap contracts and options and the amortization of deferred financing costs. The weighted-average interest rate in North America was 5.4% and 4.8% and 5.5%5.0% and 4.9% and 5.0% in the quarter ended December 31, 20142015 and 20152016 and in FY 20152016 and FY 2016,2017, respectively, which does not include the effect of the amortization of deferred financing costs and accretion of interest.

Note 6. Financial Instruments

Fair Value Measurements

FASB ASC Topic 820,Fair Value Measurements and Disclosures, defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, as follows:

Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s derivative instruments are not traded on a market exchange; therefore, the fair values are determined using valuation models that include assumptions about yield curve at the reporting dates as well as counter-party credit risk. The assumptions are generally derived from market-observable data. The Company has consistently applied these calculation techniques to all periods presented, which are considered Level 2. Derivative instruments measured at fair value and their classification in the consolidated balances sheets and statements of operations are as follows (in thousands):

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Interest Rate Swap Contracts

The Company’s exposure to market risk for changes in interest rates relates primarily to its senior and other debt obligations. The Company’s policy is to manage its interest expense by using a mix of fixed and variable rate debt.

To manage its exposure to variable interest rates in a cost-efficient manner, the Company enters into interest rate swaps and interest rate options, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps and options are designated to hedge changes in the interest rate of a portion of the outstanding borrowings in the Asia-Pacific area. The Company believes that financial instruments designated as interest rate hedges were highly effective; however, prior to August 2012, documentation of such, as required by FASB ASC Topic 815,Derivatives and Hedging,did not exist. Therefore, all movements in the fair values of these hedges prior to August 2012 were reported in the consolidated statements of operations in the periods in which fair values change. In August 2012, the Company entered into an interest swap contract that met documentation requirements and, as such, it was designated as a cash flow hedge. This cash flow hedge was determined to be highly effective prior to FY 2015 and, therefore, changes in the fair value of the effective portion were recorded in accumulated other comprehensive income. The Company expects this derivative to remain effective during the remaining term of the swap; however, any changes in the portion of the hedge considered ineffective would be recorded in interest expense in the consolidated statement of operations. In the quarter ended December 31, 2014 and FY 2015, the ineffective portion of this cash flow hedge recorded in interest expense was an unrealized loss of $5,000 and $11,000, respectively. There was no ineffective portion recorded in FY 2016.2016 and FY 2017.

The Company’s interest rate derivative instruments are not traded on a market exchange; therefore, the fair values are determined using valuation models which include assumptions about the interest rate yield curve at the reporting dates (Level 2 fair value measurement). As of June 30, 20152016 and December 31, 2015,2016, there was one open interest rate swap contract that was designated as a cash flow hedge and matures in June 2017, as follows (dollars in thousands):