U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~March~~December 31, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to. ______________________.

Commission file number001-32845

LOGO

(Exact Name of Registrant as Specified in its Charter)

Delaware

32-0163571

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

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 ☒		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 ☒		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.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~26,757,054~~30,309,821 shares outstanding as of ~~May 4, 2018.~~February 7, 2019.

GENERAL FINANCE CORPORATION

INDEX TO FORM10-Q


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38	40

Item 4.	Controls and Procedures	38	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39	41

Item 1A.	Risk Factors	39	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39	41

Item 3.	Defaults Upon Senior Securities	39	41

Item 4.	Mine Safety Disclosures	39	41

Item 5.	Other Information	39	41

Item 6.	Exhibits	39	41

SIGNATURES		41	43

Part ~~I. FINANCIAL~~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)


	June 30, 2017		March 31, 2018		June 30, 2018		December 31, 2018

Assets
Cash and cash equivalents	$	7,792	$	10,827	$	21,617	$	5,848
Trade and other receivables, net of allowance for doubtful accounts of $6,387 and $5,501 at June 30, 2017 and March 31, 2018, respectively		44,390		53,169
Trade and other receivables, net of allowance for doubtful accounts of $5,687 and $4,469 at June 30, 2018 and December 31, 2018, respectively						50,525		54,977
Inventories		29,648		29,208		22,731		36,978
Prepaid expenses and other		8,923		10,413		8,023		10,452
Property, plant and equipment, net		23,388		22,731		22,310		23,238
Lease fleet, net		427,275		436,712		429,388		448,454
Goodwill		105,129		110,699		109,943		110,924
Other intangible assets, net		28,769		26,088		25,150		23,851

Total assets	$	675,314	$	699,847	$	689,687	$	714,722


Liabilities
Trade payables and accrued liabilities	$	42,774	$	47,001	$	50,545	$	53,812
Income taxes payable						361		—
Unearned revenue and advance payments		15,548		19,394		19,226		20,208
Senior and other debt, net		355,638		439,423		427,218		412,020
Fair value of bifurcated derivative in Convertible Note		—		4,085
Fair value of bifurcated derivatives in Convertible Note						15,583		16,910
Deferred tax liabilities		38,106		36,771		34,969		37,975

Total liabilities		452,066		546,674		547,902		540,925


Commitments and contingencies (Note 9)		—		—		—		—

Equity
Cumulative preferred stock, $.0001 par value: 1,000,000 shares authorized; 400,100 shares issued and outstanding (in series) and liquidation value of $40,722 and $40,702 at June 30, 2017 and March 31, 2018, respectively		40,100		40,100
Common stock, $.0001 par value: 100,000,000 shares authorized; 26,611,688 shares issued and outstanding at June 30, 2017 and 26,753,254 at March 31, 2018		3		3
Cumulative preferred stock, $.0001 par value: 1,000,000 shares authorized; 400,100 shares issued and outstanding (in series) and liquidation value of $40,722 at June 30, 2018 and December 31, 2018						40,100		40,100
Common stock, $.0001 par value: 100,000,000 shares authorized; 27,017,606 shares issued and outstanding at June 30, 2018 and 30,309,821 at December 31, 2018						3		3

Additionalpaid-in capital		120,370		138,778		139,547		175,488

Accumulated other comprehensive loss		(12,355)		(15,608)		(17,091)		(17,568)

Accumulated deficit		(12,972)		(10,604)		(21,278)		(24,730)


Total General Finance Corporation stockholders’ equity		135,146		152,669		141,281		173,293

Equity of noncontrolling interests		88,102		504		504		504


Total equity		223,248		153,173		141,785		173,797

Total liabilities and equity	$	675,314	$	699,847	$	689,687	$	714,722

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)


									Quarter Ended December 31,				Six Months Ended December 31,
	Quarter Ended March 31,				Nine Months Ended March 31,				2017		2018		2017		2018
	2017		2018		2017		2018

Revenues
Sales:
Lease inventories and fleet	$	23,557	$	27,251	$	69,316	$	88,698	$	36,065	$	31,813	$	61,447	$	67,449
Manufactured units		1,032		2,349		3,789		6,332		2,080		2,671		3,983		6,509

		24,589		29,600		73,105		95,030		38,145		34,484		65,430		73,958
Leasing		43,875		54,821		130,484		158,438		53,985		63,509		103,617		121,827

		68,464		84,421		203,589		253,468		92,130		97,993		169,047		195,785


Costs and expenses
Cost of sales:
Lease inventories and fleet (exclusive of the items shown separately below)		17,017		19,729		48,989		64,039		25,900		23,289		44,310		50,110
Manufactured units		1,389		2,126		4,916		6,266		1,964		2,271		4,140		5,369
Direct costs of leasing operations		19,303		22,684		55,821		65,690		21,951		23,574		43,006		45,928
Selling and general expenses		17,299		18,996		50,256		56,224		17,725		20,350		37,228		39,663
Depreciation and amortization		9,846		10,014		29,237		29,671		9,531		11,054		19,657		21,055


Operating income		3,610		10,872		14,370		31,578		15,059		17,455		20,706		33,660

Interest income		18		43		54		81		23		33		38		81
Interest expense		(5,249)		(9,398)		(15,096)		(24,667)		(9,447)		(8,868)		(15,269)		(17,493)
Change in valuation of bifurcated derivatives in Convertible Note (Note 5)										(1,717)		(9,332)		(1,717)		(12,780)
Foreign exchange and other		(164)		(1,852)		(70)		(4,906)		(135)		(1,782)		(1,337)		(3,293)

		(5,395)		(11,207)		(15,112)		(29,492)		(11,276)		(19,949)		(18,285)		(33,485)


Income before provision (benefit) for income taxes		(1,785)		(335)		(742)		2,086
Income (loss) before provision for income taxes										3,783		(2,494)		2,421		175

Provision (benefit) for income taxes		(714)		228		(297)		519
Provision for income taxes										809		1,712		291		3,627


Net income (loss)		(1,071)		(563)		(445)		1,567		2,974		(4,206)		2,130		(3,452)

Preferred stock dividends		(922)		(922)		(2,766)		(2,766)		(922)		(922)		(1,844)		(1,844)

Noncontrolling interests		(86)		—		(1,644)		801		—		—		801		—


Net loss attributable to common stockholders	$	(2,079)	$	(1,485)	$	(4,855)	$	(398)
Net income (loss) attributable to common stockholders									$	2,052	$	(5,128)	$	1,087	$	(5,296)


Net loss per common share:
Net income (loss) per common share:
Basic	$	(0.08)	$	(0.06)	$	(0.18)	$	(0.02)	$	0.08	$	(0.17)	$	0.04	$	(0.18)
Diluted		(0.08)		(0.06)		(0.18)		(0.02)		0.08		(0.17)		0.04		(0.18)


Weighted average shares outstanding:
Basic		26,404,450		26,301,706		26,307,066		26,210,697		26,636,594		29,907,679		26,624,141		28,649,451
Diluted		26,404,450		26,301,706		26,307,066		26,210,697		27,311,401		29,907,679		27,297,266		28,649,451

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)


	Quarter Ended March 31,				Nine Months Ended March 31,				Quarter Ended December 31,				Six Months Ended December 31,
	2017		2018		2017		2018		2017		2018		2017		2018

Net income (loss)	$	(1,071)	$	(563)	$	(445)	$	1,567	$	2,974	$	(4,206)	$	2,130	$	(3,452)

Other comprehensive income (loss):
Change in fair value of interest rate swap, net of income tax effect of $67 and $60 and $(78) and $(34) in the quarter and nine months ended March 31, 2017 and 2018, respectively		174		(184)		452		(100)
Change in fair value change of interest rate swap, net of income tax effect of $6 and $44 and $46 and $88 in the quarter and six months ended December 31, 2017 and 2018, respectively										(41)		(21)		84		(35)

Cumulative translation adjustment		5,808		(138)		2,164		3,491		(249)		(783)		3,629		(442)


Total comprehensive income (loss)		4,911		(885)		2,171		4,958		2,684		(5,010)		5,843		(3,929)

Allocated to noncontrolling interests		(3,037)		—		(3,026)		(1,095)		—		—		(1,095)		—


Comprehensive income (loss) allocable to General Finance Corporation stockholders	$	1,874	$	(885)	$	(855)	$	3,863	$	2,684	$	(5,010)	$	4,748	$	(3,929)

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)

Cumulative
Preferred
Stock Common
Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
General Finance
Corporation
Stockholders’
Equity
Equity of
Noncontrolling
Interests Total
Equity

Balance at June 30, 2017   $ 40,100   $ 3   $ 120,370   $ (12,355)   $ (12,972)   $ 135,146   $ 88,102   $ 223,248
Share-based compensation — — 2,395 — — 2,395 591 2,986
Preferred stock dividends — — (2,766) — — (2,766) — (2,766)
Dividends and distributions by subsidiaries — — — — — — (1,038) (1,038)
Issuance of 63,363 shares of common stock on exercises of stock options — — 161 — — 161 — 161
Grant of 35,430 shares of restricted stock — — — — — — — —
Grant of 42,773 shares of common stock — — — — — — — —
Refund from terminated Royal Wolf LTI Plan trust — — 338 — — 338 — 338
Net income (loss) — — — — 2,368 2,368 (801) 1,567
Fair value change in derivative, net of related tax effect — — — (161) — (161) 61 (100)
Cumulative translation adjustment — — — 1,656 — 1,656 1,835 3,491

Total comprehensive income — — — — — 3,863 1,095 4,958

Acquisition of noncontrolling interest in Royal Wolf — — 18,280 (4,748) — 13,532 (88,246) (74,714)

Balance at March 31, 2018   $ 40,100   $ 3   $ 138,778   $ (15,608)   $ (10,604)   $ 152,669   $ 504   $ 153,173


	Cumulative Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total General Finance Corporation Stockholders’ Equity		Equity of Noncontrolling Interests		Total Equity


Balance at June 30, 2018	$	40,100	$	3	$	139,547	$	(17,091)	$	(21,278)	$	141,281	$	504	$	141,785

Share-based compensation		—		—		1,341		—		—		1,341		—		1,341

Preferred stock dividends		—		—		(1,844)		—		—		(1,844)		—		(1,844)

Issuance of 142,463 shares of common stock on exercises of stock options		—		—		856		—		—		856		—		856
Grant of 24,855 shares of restricted stock		—		—		—		—		—		—		—		—

Vesting of restricted stock units into 66,073 shares of common stock		—		—		—		—		—		—		—		—

Forced conversion of Convertible Note into 3,058,824 shares of common stock (Note 5)		—		—		35,588		—		—		35,588		—		35,588

Net loss		—		—		—		—		(3,452)		(3,452)		—		(3,452)

Fair value change in derivative, net of related tax effect		—		—		—		(35)		—		(35)		—		(35)

Cumulative translation adjustment		—		—		—		(442)		—		(442)		—		(442)


Total comprehensive income		—		—		—		—		—		(3,929)		—		(3,929)


Balance at December 31, 2018	$	40,100	$	3	$	175,488	$	(17,568)	$	(24,730)	$	173,293	$	504	$	173,797

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)~~thousands, except shares)

(Unaudited)


	Nine Months Ended March 31,				Six Months Ended December 31,
	2017		2018		2017		2018

Net cash provided by operating activities (Note 10)	$	20,100	$	32,856	$	14,615	$	19,373


Cash flows from investing activities:
Business acquisitions, net of cash acquired		(4,993)		(14,397)		(11,335)		(16,060)
Acquisition of the noncontrolling interest in Royal Wolf		—		(73,251)		(73,251)		—
Proceeds from sales of property, plant and equipment		191		72		34		228
Purchases of property, plant and equipment		(2,644)		(3,068)		(2,154)		(3,660)
Proceeds from sales of lease fleet		16,321		19,505		12,784		13,797
Purchases of lease fleet		(34,892)		(37,979)		(25,702)		(35,503)
Other intangible assets		(449)		(126)		(89)		(38)

Net cash used in investing activities		(26,466)		(109,244)		(99,713)		(41,236)


Cash flows from financing activities:
Repayments of equipment financing activities		(382)		(384)		(251)		(211)
Repayment of Credit Suisse Term Loan		—		(10,000)		(10,000)		—
Repayment of ANZ/CBA Credit Facility		—		(81,521)		(81,521)		—
Proceeds from issuance of Bison Capital Notes		—		80,000		80,000		—
Proceeds from senior and other debt borrowings, net		11,339		100,228		102,235		7,802
Deferred financing costs		(2,291)		(3,836)		(3,819)		(427)
Proceeds from issuances of common stock		54		161		34		856
Dividends and distributions by subsidiaries		(939)		(1,038)		(1,038)		—
Refund from terminated Royal Wolf LTI Plan trust		—		338
Preferred stock dividends		(2,766)		(2,766)		(1,844)		(1,844)

Net cash provided by financing activities		5,015		81,182		83,796		6,176


Net increase (decrease) in cash		(1,351)		4,794
Net decrease in cash						(1,302)		(15,687)

Cash and equivalents at beginning of period		9,342		7,792		7,792		21,617

The effect of foreign currency translation on cash		231		(1,759)		(983)		(82)


Cash and equivalents at end of period	$	8,222	$	10,827	$	5,507	$	5,848

Non-cash investing and financing activities:

The Company includednon-cash holdback and other adjustment amounts totaling ~~$376~~$612 and ~~$919~~$1,634 as part of the consideration for business acquisitions during the ~~nine months~~quarter ended ~~March~~December 31, 2017 and 2018, respectively (see Note 4).

On ~~February 7, 2017,~~September 10, 2018, the Board of Directors of Royal Wolf declared a dividend of AUS $0.025 per RWH share payable on April 4, 2017 to shareholders of record on March 16, 2017, respectively. The condensed consolidated financial statements accruedCompany forced the ~~amount~~conversion of the ~~dividend pertaining to~~aggregate $26,000 principal balance of the ~~noncontrolling interest, which totaled $940 (AUS $1,230), as a charge directly to the equity~~Convertible Note into 3,058,824 shares of ~~noncontrolling interests at March 31, 2017~~GFN common stock (see Note 3)5).

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 subsidiary, Southern Frac, LLC, a Texas limited liability company (collectively “Southern Frac”);Pac-Van, Inc., an Indiana corporation, and its Canadian subsidiary, PV Acquisition Corp., an Alberta corporation (collectively“Pac-Van”); and Lone Star Tank Rental Inc., a Delaware corporation (“Lone Star”); GFN Asia Pacific Holdings Pty Ltd, an Australian corporation (“GFNAPH”), and its subsidiaries, ~~GFN Asia Pacific Finance Pty Ltd, an Australian corporation (“GFNAPF”),~~ Royal Wolf Holdings ~~Limited,~~Pty Ltd, an Australian corporation (“RWH”), and its Australian and New Zealand subsidiaries (collectively, “Royal Wolf”).

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 and other steel-related products).

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 to Form10-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, ~~2017~~2018 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, ~~2018.~~2019. 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, ~~2017~~2018 filed with the Securities and Exchange Commission (“SEC”).

Unless otherwise indicated, references to “FY ~~2017”~~2018” and “FY ~~2018”~~2019” are to the ~~nine~~six months ended ~~March~~December 31, 2017 and 2018, 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):


	June 30,		March 31,		June 30,		December 31,

	2017		2018		2018		2018

Finished goods	$	25,564	$	25,574	$	18,971	$	33,721
Work in progress		1,844		1,334		1,442		1,062
Raw materials		2,240		2,300		2,318		2,195

	$	29,648	$	29,208	$	22,731	$	36,978

Property, Plant and Equipment

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


	Estimated Useful Life		June 30,		March 31,		Estimated Useful Life		June 30,		December 31,

			2017		2018				2018		2018

Land		—	$	2,168	$	2,168		—	$	2,168	$	2,168
Building and improvements		10 — 40 years		4,890		4,893		10 — 40 years		4,893		4,893
Transportation and plant equipment (including capital lease assets)		3 — 20 years		39,899		43,220		3 — 20 years		43,078		45,913
Furniture, fixtures and office equipment		3 — 10 years		10,683		11,608		3 — 10 years		11,959		12,866

				57,640		61,889				62,098		65,840
Less accumulated depreciation and amortization				(34,252)		(39,158)				(39,788)		(42,602)

			$	23,388	$	22,731			$	22,310	$	23,238

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, ~~2017~~2018 and ~~March~~December 31, 2018, the gross costs of the lease fleet were ~~$534,197,000~~$555,263,000 and ~~$559,851,000,~~$583,619,000, 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 in accordance with 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 on an annual basis 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 the reporting unit is less than its carrying amount. The Company’s annual impairment assessment at June 30, ~~2017~~2018 concluded that the fair value of the goodwill of each of its reporting units was greater than their respective carrying amounts. Determining the fair value of a reporting unit requires 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):


	June 30, 2017							March 31, 2018							June 30, 2018						December 31, 2018

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Trademark and trade name	$	5,486	$	(453	)	$	5,033	$	5,486	$	(453	)	$	5,033	$	5,486	$	(453)	$	5,033	$	5,484	$	(453)	$	5,031
Customer base and lists		47,647		(31,223	)		16,424		49,452		(33,865	)		15,587		29,057		(14,150)		14,907		30,638		(15,616)		15,022
Non-compete agreements		9,622		(6,678	)		2,944		9,862		(7,661	)		2,201		9,005		(7,130)		1,875		8,751		(7,513)		1,238
Deferred financing costs		4,855		(2,250	)		2,605		3,522		(1,796	)		1,726		3,522		(1,905)		1,617		3,563		(2,057)		1,506
Other		4,006		(2,243	)		1,763		4,379		(2,838	)		1,541		4,683		(2,965)		1,718		4,211		(3,157)		1,054

	$	71,616	$	(42,847	)	$	28,769	$	72,701	$	(46,613	)	$	26,088	$	51,753	$	(26,603)	$	25,150	$	52,647	$	(28,796)	$	23,851

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, vested 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 related to stock options,non-vested equity shares, restricted stock units and convertible debt. The following is a reconciliation of weighted average shares outstanding used in calculating earnings per common share:


	Quarter Ended March 31,				Nine Months Ended March 31,				Quarter Ended December 31,				Six Months Ended December 31,

	2017		2018		2017		2018		2017		2018		2017		2018

Basic		26,404,450		26,301,706		26,307,066		26,210,697		26,636,594		29,907,679		26,624,141		28,649,451
Dilutive effect of common stock equivalents		—		—		—		—		674,807		—		673,125		—

Diluted		26,404,450		26,301,706		26,307,066		26,210,697		27,311,401		29,907,679		27,297,266		28,649,451

Potential common stock equivalents totaling ~~1,734,952~~4,415,574 and 4,417,256 for the quarter ended December 31, 2017 and FY 2018, respectively, and 2,188,412 for both the quarter ended ~~March 31, 2017 and FY 2017 and 5,681,959 for both the quarter ended March~~December 31, 2018 and FY ~~2018, respectively,~~2019 have been excluded from the computation of diluted earnings per share because the effect is anti-dilutive.

~~Recently Enacted U.S. Federal Tax Legislation~~Revenue from Contracts with Customers

~~Introduced initially~~The Company leases and sells new and used storage, office, building and portable liquid storage tank containers, modular buildings and mobile offices to its customers, as ~~the Tax Cuts~~well as provides other ancillary products and ~~Jobs Act, the Act to Provide for Reconciliation Pursuant to Titles II and V~~services. The Company recognizes revenue in accordance with two accounting standards. The portions of the ~~Concurrent Resolution~~Company’s revenues that arise from lease arrangements are accounted for in accordance with Topic 840,Leases. Revenues determined to benon-lease related are accounted for in accordance with ASUNo. 2014-09,Revenue from Contracts with Customers(Topic 606), which was adopted by the Company under the modified retrospective method at July 1, 2018. The adoption did not have a material impact on the ~~Budget~~Company’s consolidated financial statements, nor was there a significant cumulative effect of initially applying the new standard.

Our portable storage and modular space rental customers are generally billed in advance for ~~Fiscal Year~~services, which generally includes fleet pickup. Liquid containment rental customers are typically billed in arrears monthly and sales transactions are generally billed upon transfer of the sold items. Payments from customers are generally due upon receipt or30-day payment terms. Specific customers have extended terms for payment, but no terms are greater than one year from the invoice date.

Leasing Revenue

Typical rental contracts include the direct rental of fleet, which is accounted for under Topic 840. Rental-related services include fleet delivery and fleet pickup, as well as other ancillary services, which are primarily accounted for under Topic 606. The total amounts of rental-related services related to Topic 606 recognized during the quarter ended December 31, 2018 ~~(the “Act”) was enacted on December 22, 2017. The Act applies to corporations generally beginning with taxable years starting after~~and FY 2019 and the quarter ended December 31, 2017 ~~or the fiscal year ending June 30, 2019 for the Company,~~ and reduces the corporate tax rate from a graduated set of rates with a maximum 35% tax rate to a flat 21% tax rate. Additionally, the Act introduces other changes that impact corporations, including a net operating loss (“NOL”) deduction annual limitation, an interest expense deduction annual limitation, eliminationFY 2018 were $14,811,000 and $27,811,000 and $11,917,000 and $22,847,000, respectively. A small portion of the ~~alternative minimum tax,~~rental-related services, include subleasing, special events leases and ~~immediate expensing~~other miscellaneous streams, are accounted for under Topic 840. For contracts that have multiple performance obligations, revenue is allocated to each performance obligation in the contract based on the Company’s best estimate of the ~~full~~standalone selling prices of each distinct performance obligation. The standalone selling price is determined using methods and assumptions developed consistently across similar customers and markets generally applying an expected cost ~~of qualified property. The Act also introduces~~plus an ~~international tax reform that moves the U.S. toward a territorial system, in which income earned in other countries will generally not be subject~~estimated margin to ~~U.S. taxation. However, the accumulated foreign earnings of certain foreign corporations will be subject to aone-time~~ transition tax, which can be elected to be paid over an eight-year tax transition period, using specified percentages, or in one lump sum. NOL and foreign tax credit (“FTC”) carryforwards can be used to offset the transition tax liability. Any transition tax to be paid on accumulated foreign earnings is not expected to be significant since the Company has available NOL and FTC carryforwards to offset any transitional taxes that would be otherwise payable. each performance obligation.

~~In accordance with ASC Topic 740,~~~~Income Taxes~~~~, the Companyre-measured~~ its deferred income tax assets and liabilities for, among other things, temporary differences and NOL and FTC carryforwards reasonably estimated to be existing at December 22, 2017, from the current statutory rate of 35% to the new corporate rate of either 28% (if the temporary timing differences are expected to roll off in FY 2018) or 21 percent (if the temporary timing differences and NOL carryforwards are expected to remain as of June 30, 2018).

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~This~~Rental contracts are based on a monthly rate for our portable storage and modular space fleet and a daily rate for our liquid containment fleet. Rental revenue is recognized ratably over the rental period. The rental continues until the end of the initial term of the lease or when cancelled by the customer or the Company. If equipment is returned prior to the end of the contractual lease period, customers are typically billed a cancellation fee, which is recorded as rental revenue in the period billed. Customers may utilize our equipment transportation services and other~~re-measurement~~on-site ~~resulted~~services in ~~an estimated benefit~~conjunction with the rental of equipment, but are not required to do so. Given the short duration of these services, equipment transportation services and otheron-site services revenue of a rented unit is recognized in leasing revenue upon completion of the service.

Non-Lease Revenue

Non-lease revenues consist primarily of the sale of new and used units, and to a lesser extent, sales of manufactured units are all accounted for under Topic 606. Sales contracts generally have a single performance obligation that is satisfied at the time of delivery, which is the point in time control over the unit transfers and the Company is entitled to consideration due under the contract with its customer.

Contract Costs and Liabilities

The Company incurs commission costs to obtain rental contracts and for sales of new and used units. We expect the period benefitted by each commission to be less than one year. Therefore, we have applied the practical expedient for incremental costs of obtaining a contract and expense commissions as incurred.

When customers are billed in advance for rentals, end of lease services, and deposit payments, we defer revenue and reflect unearned rental revenue at the end of the period. As of December 31, 2018 and June 30, 2018, we had approximately ~~$6,500,000, which was recognized through the provision (benefit) for income taxes~~$20,208,000 and $19,226,000, respectively, of unearned rental revenue included in trade payables and accrued liabilities in the accompanying consolidated ~~statements~~balance sheets. Revenues of ~~operations as a discrete item~~$1,755,000 and $10,401,000, which were included in the unearned rental revenue balance at June 30, 2018, were recognized during the quarter ended December 31, ~~2017. This estimated tax benefit was offset~~2018 and FY 2019, respectively. We expect to perform the remaining performance obligations and recognize the unearned rental revenue generally within the next twelve months.

Sales taxes charged to customers are excluded from revenues and expenses.

Sales of new modular buildings not manufactured by ~~approximately $5,200,000 for both the estimated transition tax and a valuation allowance that was established to offset previously recognized FTC carryforward deferred tax assets that~~ the Company ~~believes will not be realized, and other adjustments totaling approximately $550,000. Both~~are typically covered by warranties provided by the estimated transition tax and valuation allowance are considered provisional amounts that require further analysis. These provisional amounts are subject to adjustment during a measurement period which should not extend beyond one year from the enactment datemanufacturer of the ~~Act~~products sold. Certain sales of manufactured units are covered by assurance-type warranties and as of December 31, 2018 and June 30, 2018, the Company had $238,902 and $238,956, respectively, of warranty reserve included in ~~accordance with Staff Accounting Bulletin No. 118.~~trade payables and accrued liabilities in the accompanying consolidated balance sheets.

Disaggregated Rental Revenue

In the following table, total revenue is disaggregated by revenue type for the periods indicated. The table also includes a reconciliation of the disaggregated rental revenue to our reportable segments.


	Quarter Ended December 31, 2018

	North America

	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated


Non-lease:
Sales lease inventories and fleet	$	17,105	$	-	$	17,105	$	-	$	-	$	17,105	$	14,708	$	31,813
Sales manufactured units		-		-		-		3,617		(946)		2,671		-		2,671

Totalnon-lease revenues		17,105		-		17,105		3,617		(946)		19,776		14,708		34,484


Leasing:
Rental revenue		24,277		6,819		31,096		-		(587)		30,509		12,868		43,377
Rental-related services		9,984		6,283		16,267		-		-		16,267		3,865		20,132

Total leasing revenues		34,261		13,102		47,363		-		(587)		46,776		16,733		63,509


Total revenues	$	51,366	$	13,102	$	64,468	$	3,617	$	(1,533)	$	66,552	$	31,441	$	97,993

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Six Months Ended December 31, 2018

	North America

	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	39,563	$	-	$	39,563	$	-	$	-	$	39,563	$	27,886	$	67,449
Sales manufactured units		-		-		-		7,934		(1,425)		6,509		-		6,509

Totalnon-lease revenues		39,563		-		39,563		7,934		(1,425)		46,072		27,886		73,958


Leasing:
Rental revenue		45,963		14,123		60,086		-		(1,091)		58,995		25,086		84,081
Rental-related services		18,692		11,793		30,485		-		-		30,485		7,261		37,746

Total leasing revenues		64,655		25,916		90,571		-		(1,091)		89,480		32,347		121,827


Total revenues	$	104,218	$	25,916	$	130,134	$	7,934	$	(2,516)	$	135,552	$	60,233	$	195,785


	Quarter Ended December 31, 2017

	North America

	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	13,510	$	-	$	13,510	$	-	$	-	$	13,510	$	22,555	$	36,065
Sales manufactured units		-		-		-		3,505		(1,425)		2,080		-		2,080

Totalnon-lease revenues		13,510		-		13,510		3,505		(1,425)		15,590		22,555		38,145


Leasing:
Rental revenue		19,512		5,467		24,979		-		(277)		24,702		12,400		37,102
Rental-related services		8,796		4,092		12,888		-		-		12,888		3,995		16,883

Total leasing revenues		28,308		9,559		37,867		-		(277)		37,590		16,395		53,985


Total revenues	$	41,818	$	9,559	$	51,377	$	3,505	$	(1,702)	$	53,180	$	38,950	$	92,130


	Six Months Ended December 31, 2017

	North America

	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	25,338	$	-	$	25,338	$	-	$	-	$	25,338	$	36,109	$	61,447
Sales manufactured units		-		-		-		6,584		(2,601)		3,983		-		3,983

Totalnon-lease revenues		25,338		-		25,338		6,584		(2,601)		29,321		36,109		65,430


Leasing:
Rental revenue		37,316		10,083		47,399		-		(493)		46,906		24,552		71,458
Rental-related services		17,031		7,825		24,856		-		-		24,856		7,303		32,159

Total leasing revenues		54,347		17,908		72,255		-		(493)		71,762		31,855		103,617


Total revenues	$	79,685	$	17,908	$	97,593	$	6,584	$	(3,094)	$	101,083	$	67,964	$	169,047

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recently Issued Accounting Pronouncements

~~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 ASU~~2014-09~~ ~~revenue recognition model virtually replaces all existing revenue recognition guidance and applies to all companies that enter into contracts with customers to transfer goods or services. ASU2014-09~~ ~~(as updated by ASU2015-14~~ ~~in August 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 ASU~~2014-09~~ ~~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. While the Company continues to evaluate the requirements ofASU-204.09,~~ it believes the majority of its revenues, as it relates to contractual rental revenue, is excluded from the scope of this ASU and the accounting for the remaining revenue streams will not be materially affected. Accordingly, the Company does not expect the adoption of ASU~~2014-09~~ will have a material impact on its consolidated financial statements. Additionally, the Company intends to utilize the modified retrospective adoption and recognize the cumulative effect of initially applying ASU~~2014-09,~~ ~~if significant, as an adjustment to the opening balance of accumulated deficit at the date of initial application.~~

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, as updated by ASUNo. 2018-01 (January 2018), ASUNo. 2018-10 (July 2018) and ASUNo. 2018-11 (July 2018), 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. During FY ~~2017,~~2018, the Company evaluated this new accounting standard and engaged professionals in the new lease accounting implementation and related real estate consulting industry to assist in determining the effect of the new standard as of July 1, ~~2017. The~~2018. At that date, the Company ~~currently has~~had over ~~100~~120 real estate leases worldwide and evaluated each of these leases in accordance with the new lease accounting standard under ASC Topic 842. As of July 1, ~~2017,~~2018, the Company estimates that the right of use asset to be recorded on its consolidated balance sheet would be approximately ~~$34.0~~$59.0 million to ~~$37.0~~$68.3 million and that the related liability would be approximately ~~$35.0~~$60.8 million to ~~$39.0~~$70.2 million related to operating leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard. The difference in the ranges is due to the presumed renewal of leases whereby the exercise of the renewal option is twelve months or less from July 1, ~~2017.~~2018. The Company will continue to evaluate existing renewal options in excess of one year as to the probability of exercising renewal options and is currently evaluating its equipment and other finance leases and its lessor accounting under the new standard. In addition, the Company is evaluating its proposed transition method in accordance with guidance issued by the FASB in July 2018. The Company will continue this effort in a manner to be appropriately prepared for its implementation on or before July 1, 2019.

~~In March 2016, the FASB issued ASUNo. 2016-09,~~~~Compensation – Stock Compensation (Topic 718)~~. Under ASU No. 2016-09, all excess tax benefits and tax deficiencies related to equity compensation will be recognized in the income statement as they occur. This will replace the current guidance, which requires tax benefits that exceed compensation cost (windfalls) to be recognized in equity, and tax deficiencies (shortfalls) to be recognized in equity to the extent of previously recognized windfalls.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~It will also eliminate the need to maintain a “windfall pool,” and will remove the requirement to delay recognizing a windfall until it reduces current taxes payable. ASUNo. 2016-09~~ will also change the cash flow presentation of excess tax benefits, classifying them as operating inflows, consistent with other cash flows related to income taxes. In addition, this ASU allows a policy election to either continue to reduce share-based compensation expense for forfeitures in future periods, or to recognize forfeitures as they occur. The Company implemented ASU~~No. 2016-09~~ in FY 2018, elected to recognize forfeitures as they occur and, because it was not significant, recorded the $99,000 tax charge for the cumulative-effect adjustment for previously unrecognized excess tax benefits and the~~tax-effect~~ of the difference between the fair value estimate of awards historically expected to be forfeited and the fair value estimate of awards actually forfeited in the accompanying consolidated statement of operations. The tax effect for excess tax benefits and forfeitures in FY 2018 was a tax charge of $205,000.

In August 2017, the FASB issued ASUNo. 2017-12,Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities. ASUNo. 2017-12 expands hedge accounting for bothnon-financial and financial risk components and refines the measurement of hedge results in an attempt to better reflect an entity’s hedging strategies. The ASU also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of ASUNo. 2017-12 for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, though early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company is evaluating the effect that ASUNo. 2017-12 will have on the consolidated financial statements and related disclosures, but does not currently believe it will be significant.

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, ~~2017~~2018 and ~~March~~December 31, 2018, the Company had outstanding 100 shares of Series B Preferred Stock with an aggregate liquidation preference totaling $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 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.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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, ~~2017~~2018 and ~~March~~December 31, 2018, the Company had outstanding 400,000 shares of Series C Preferred Stock with an aggregate liquidation preference totaling ~~$40,620,000 and $40,600,000, respectively.~~$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 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.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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 ~~March~~December 31, 2018, since issuance, dividends paid or payable totaled ~~$91,000~~$97,000 for the Series B Preferred Stock and dividends paid totaled ~~$17,200,000~~$19,938,000 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.

Royal Wolf Dividends

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 and on February 7, 2017, the Board of Directors of Royal Wolf declared a dividend of AUS$0.025 per RWH share payable on April 4, 2017 to shareholders of record on March 16, 2017. On August 2, 2017, Royal Wolf paid a special dividend of AUS$0.0265 per RWH share to shareholders of record on July 18, ~~2017 (see Note 4).~~2017. The consolidated financial statements reflect the amount of the dividend pertaining to the noncontrolling interest.

Note 4. Acquisitions

~~Acquisition of Noncontrolling Interest of Royal Wolf~~

~~On July 12, 2017, the Company announced that it commenced, through GFNAPH, anoff-market~~ takeover offer and entered into a binding takeover bid implementation agreement with the independent directors of RWH to acquire the approximately 49.2 million ordinary (common) shares of RWH not owned by the Company. The takeover offer was for AUS$1.83 per share in cash, less a special dividend declared by RWH of AUS$0.0265 per share (see Note 3), for total purchase consideration to be paid by the Company of AUS$88,712,000 ($70,401,000), or AUS$1.8035 per share. For the takeover offer, the Company used AUS$2,516,000 ($1,997,000) borrowed under its North America senior secured revolving credit facility (see Note 5) and received financing totaling $80,000,000 from Bison Capital Equity Partners V, L.P. (“Bison Capital”) and its affiliates, of which $10,000,000 was used for the repayment of the term loan due to Credit Suisse AG, Singapore Branch (“Credit Suisse”) (See Note 5). At September 8, 2017, the closing of the takeover bid offer period, the Company received valid acceptances for approximately 48.1 million shares, which in combination with the 51.2 million RWH shares previously owned by the Company represented approximately 99% of the total shares outstanding. The Company deposited in escrow the entire amount of the purchase consideration required to acquire all 49.2 million of the RWH shares owned by the noncontrolling interest shareholders, with owners of the 48.1 million shares accepting the takeover bid offer paid on or before September 29, 2017, and the remaining 1.1 million shares paid on or around October 31, 2017.

The accounting for the purchase consideration and total transaction-related costs of $70,402,000 and $2,299,000 (net of income tax effect of $550,000), respectively, as well as the adjustment to the accumulated other comprehensive income (loss) and reclassification of the noncontrolling interest of Royal Wolf to the Company’s equity accounts, have been recorded as equity transactions in the accompanying consolidated balance sheet in FY 2018.

~~FY 2018 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 acquisition(s) discussed below were completed primarily to expand the Company’s container lease fleet. The accompanying consolidated financial statements include the operations of the acquired ~~business(es)~~businesses from the dates of acquisition.

FY 2019 Acquisitions

On ~~September 1, 2017,~~July 2, 2018, the Company, through Royal Wolf, purchased the container business of Spacewise (N.Z.) Limited (“Spacewise NZ”), for approximately $7,337,000 (NZ$10,901,000) which included holdback and other adjustment amounts totaling approximately $615,000 (NZ$914,000). Spacewise operates from eight major locations in New Zealand.

On August 9, 2018, the Company, throughPac-Van, purchased the container ~~businesses~~and trailer business of ~~Advantage Storage~~Delmarva Trailer ~~LLC~~Sales and ~~Big Star Container, LLC (collectively “Advantage”~~Rentals, Inc. (“Delmarva”) for approximately ~~$1,576,000,~~$358,000, which included a general indemnity ~~holdback~~and other adjustment amounts of ~~$155,000. Advantage~~$50,000. Delmarva is located in ~~Austin~~Elkridge (Baltimore/D.C. area), Maryland.

On September 21, 2018, the Company, throughPac-Van, purchased the container and ~~San Antonio, Texas.~~trailer business of Instant Storage and Instant Storage of Florida, Inc. (“Instant Storage”) for approximately $4,568,000, which included a general indemnity and other adjustment amounts of $464,000. Instant Storage is located in Bakersfield, California andOpa-Locka (Miami area), Florida.

On October 5, 2018, the Company, throughPac-Van, purchased the container and trailer business of Tilton Trailer Rental Corp. (“Tilton”) for approximately $5,431,000, which included a general indemnity and other adjustment amounts of $505,000. Tilton is located in Tilton, New Hampshire.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~On December 1, 2017, the Company, throughPac-Van,~~ purchased the container and mobile office business of Gauthier Homes, Inc. (“Gauthier”) for approximately $10,371,000, which included a general indemnity holdback of $457,000. Gauthier is located in Carencro (Lafayette) and Houma, Louisiana.

~~On January 26, 2018, the Company, throughPac-Van,~~ purchased the container and storage trailer business of Lucky’s Lease, Inc. (“Lucky’s”) for approximately $3,369,000, which included a general indemnity and other holdbacks of $307,000. Lucky’s is located in South Royalton, Vermont.

The preliminary allocation for the acquisition in FY ~~2018~~2019 to tangible and intangible assets acquired and liabilities assumed based on their estimated fair market values was as follows (in thousands):


	Advantage September 1, 2017		Gauthier December 1, 2017		Lucky’s Lease January 26, 2018		Spacewise NZ July 2, 2018		Delmarva August 9, 2018		Instant Storage September 21, 2018		Tilton October 5, 2018		Total

Fair value of the net tangible assets acquired and liabilities assumed:
Trade and other receivables	$	—	$	390	$	—	$	—	$	—	$	—	$	—	$	—
Inventories		234		444		203		995		157		555		318		2,025
Property, plant and equipment		55		339		135		79		38		465		329		911
Lease fleet		558		4,216		1092		6,834		893		3,013		2,775		13,515
Unearned revenue and advance payments		(25)		(237)		(36)		(5)		(112)		(289)		(260)		(666)
Deferred income taxes								(225)		—		—		—		(225)

Total net tangible assets acquired and liabilities assumed		822		5,152		1,394		7,678		976		3,744		3,162		15,560

Fair value of intangible assets acquired:
Non-compete agreement		56		143		44		67		7		44		42		160
Customer lists/relationships		97		1,085		676		734		—		369		576		1,679
Other		—		250		—		—		—		(306)		—		(306)
Goodwill		601		3,741		1,255		—		—		717		1,651		2,368

Total intangible assets acquired		754		5,219		1,975		801		7		824		2,269		3,901

Total purchase consideration	$	1,576	$	10,371	$	3,369	$	8,479	$	983	$	4,568	$	5,431	$	19,461

The FY ~~2018~~2019 operating results prior to and since the respective date of acquisition were not considered significant.

The estimated fair value of the tangible and intangible assets acquired and liabilities assumed exceeded the purchase prices of Spacewise NZ and Delmarva resulting in estimated bargain purchase gains of $1,142,000 and $625,000, respectively. These gains have been recorded asnon-operating income in the accompanying consolidated statements of operations.

Goodwill recognized is attributable primarily to expected corporate synergies, the assembled workforce and other factors. The goodwill recognized in the ~~FY 2018~~Instant Storage and Tilton acquisitions isare deductible for U.S. income tax purposes.

The Company incurred approximately ~~$1,000~~$53,000 and ~~$38,000~~$64,000 during the quarter ended ~~March~~December 31, 2017 and FY ~~2017, respectively,~~2018, respectively; and ~~$20,000~~$58,000 and ~~$84,000~~$123,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, 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

The Company’s operations in the Asia-Pacific area had an AUS$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”). On October 26, 2017, RWH and its subsidiaries, Deutsche Bank AG, Sydney Branch (“Deutsche Bank”), CSL Fund (PB) Lux Sarl II, Aiguilles Rouges Lux Sarl II, Perpetual Corporate Trust Limited and P.T. Limited entered into a Syndicated Facility Agreement (the “Syndicated Facility Agreement”). Pursuant to the Syndicated Facility Agreement, the parties entered into a three-year, ~~$96,072,500~~$88,190,000 (AUS$125,000,000) senior secured credit facility (the “Deutsche Bank Credit Facility”) and repaid the ANZ/CBA Credit Facility on November 3, 2017. The Deutsche Bank Credit Facility ~~consists~~initially consisted of a ~~$15,371,600~~$14,110,000 (AUS$20,000,000) Facility A that will amortize semi-annually; a ~~$65,329,300~~$59,970,000 (AUS$85,000,000) Facility B that has no scheduled amortization; and a ~~$15,371,600~~$14,110,000 (AUS$20,000,000) revolving Facility C that is used for working capital, capital expenditures and general corporate purposes.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes~~ On June 25, 2018, RWH and its subsidiaries amended the Deutsche Bank Credit Facility to ~~Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~The amounts~~increase by approximately $6,714,000 (NZ$10,000,000) the amount that can be borrowed under Facility B. Borrowings bear interest at the rate of 5.0% per annum until delivery of the first compliance certificate and thereafter at the bank bill swap interest rate in Australia (“BBSY”), plus a margin of 4.25% to 5.50% per annum, as determined by net leverage. The Deutsche Bank Credit

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Facility is secured by substantially all of the assets and by the pledge of all the capital stock of the subsidiaries of RWH ~~and its subsidiaries~~ and matures on November 3, 2020, at which time an exit fee of up to ~~$865,000~~approximately $1,446,000 (A$~~1,125,000)~~2,050,000) is owed depending on the final amounts borrowed. In addition, the Deutsche Bank Credit Facility is subject to certain financial and other customary covenants, including, among other things, compliance with specified net leverage and debt requirement or fixed charge ratios based on earnings before interest, income taxes, impairment, depreciation and amortization and othernon-operating costs and income (“EBITDA”), as defined.

At ~~March~~December 31, 2018, the Deutsche Bank Credit Facility totaled ~~$81,206,000~~$71,297,000 (A$~~105,658,000)~~101,055,000), net of deferred financing costs of ~~$2,195,000,~~$1,527,000 (A$2,164,000), and availability, ~~under~~including cash at the ~~revolving Facility C~~bank, totaled ~~$18,052,000~~$15,060,000 (AUS$~~23,487,000)~~21,346,000).

The above amounts were translated based upon the exchange rate of one Australian dollar to ~~$0.76858~~0.705524 U.S. dollar and one New Zealand dollar to 0.671371 U.S. dollar at ~~March~~December 31, 2018.

Bison Capital Notes

General

On September 19, 2017, Bison Capital, GFN, GFN U.S., GFNAPH and ~~GFNAPF,~~GFN Asia Pacific Finance Pty Ltd, an Australian corporation (“GFNAPF”), entered into that certain Amended and Restated Securities Purchase Agreement dated September 19, 2017 (the “Amended Securities Purchase Agreement”). On September 25, 2017, pursuant to the Amended Securities Purchase Agreement, GFNAPH and GFNAPF issued and sold to Bison an 11.9% secured senior convertible promissory note dated September 25, 2017 in the original principal amount of $26,000,000 (the “Convertible Note”) and an 11.9% secured senior promissory note dated September 25, 2017 in the original principal amount of $54,000,000 (the “Senior Term Note” and collectively with the Convertible Note, the “Bison Capital Notes”). Net proceeds from the sale of the Bison Capital Notes were used to repay in full all principal, interest and other amounts due under the term loan to Credit Suisse, ~~(see below),~~ to acquire the 49,188,526 publicly-traded shares of RWH not owned by the Company and to pay all related fees and expenses.

The Bison Capital Notes have a maturity of five years and bear interest from the date of issuance, payable quarterly in arrears beginning on January 2, 2018. The Bison Capital Notes may be prepaid at 102% of the original principal amount, plus accrued interest, after the first anniversary and prior to the second anniversary of issuance, at 101% of the original principal amount, plus accrued interest, after the second anniversary and prior to the third anniversary of issuance and with no prepayment premium after the third anniversary of issuance. The Company may elect to defer interest under the Bison Capital Notes until the second anniversary of issuance. Interest on the Bison Capital Notes are payable in Australian dollars, but the principal must be repaid in U.S. dollars. The Bison Capital Notes are secured by a first priority security interest over all of the assets of GFN U.S., GFNAPH and GFNAPF, by the pledge by GFN U.S. of the capital stock of GFNAPH and GFNAPF and by of all of the capital stock of RWH. The Bison Capital Notes are subject to all terms, conditions and covenants set forth in the Amended Securities Purchase Agreement. The Amended Securities Purchase Agreement contains certain financial and other customary and restrictive covenants, including, among other things, a minimum EBITDA requirement to equal or exceed AUS$30,000,000 per trailing12-month period. In addition, the Bison Capital Notes must be repaid upon a change of control, as defined. GFNAPF was dissolved in September 2018.

At ~~March~~December 31, 2018, ~~the principal balance of~~ the Senior Term Note ~~was $55,669,000,~~totaled $59,916,000, net of deferred financing costs of $547,000, which includes interest the Company has elected to defer.

Convertible Note

At any time prior to maturity, Bison Capital may ~~convert~~have converted unpaid principal and interest under the Convertible Note into shares of GFN common stock based upon a price of $8.50 per share (3,058,824 shares based on the original $26,000,000 principal amount), subject to adjustment as described in the Convertible Note. If GFN common stock trades above 150% of the conversion price over 30 consecutive trading days and the aggregate dollar value of all GFN common stock traded on NASDAQ ~~exceed~~exceeds $600,000 over ~~a period of~~the last 20 consecutive days of the same30-day period, GFN may force Bison Capital to convert all or a portion of the Convertible Note. ~~The Convertible Note also provides that Bison Capital shall not be entitled,~~Such a conversion threshold occurred on September 5, 2018, and ~~GFN shall not be obligated,~~on September 6, 2018 the Company elected to ~~convert~~force the conversion and delivered a notice to the holders requiring the conversion of the Convertible Note into 3,058,824 shares of ~~GFN~~the Company’s common stock if such conversion would result in holders of the Convertible Note beneficially owning in excess of 5,200,000 shares of GFN common stock, or approximately 19.5% of the number of shares of GFN common stock outstanding immediately prior to issuance of the Convertible Note.effective September 10, 2018. The Convertible Note grants Bison Capital and holders of the Convertible Note a preemptive right to invest in any issuance GFN equity securities, options or warrants to maintain its proportionate interest in GFN common stock, after giving effect to the conversion of the entire Convertible Note. In addition, the Convertible Note includesincluded a provision which ~~requires~~required GFNAPH ~~and GFNAPF~~ to pay Bison Capital, via the payment of principal, interest and the realized value of GFN common stock received ~~upon~~after conversion ~~of all or a portion~~ of the Convertible Note, a minimum return of 1.75 times the original ~~$26,000,000~~ principal amount. ~~This~~As a result of the forced conversion, the Company determined that this minimum ~~rate~~return provision was an embedded derivative with a fair value of ~~return~~$8,918,000 at September 10, 2018 that required to be separately accounted on a standalone basis. The Company determined the fair value using a valuation model and market prices and will ~~be recorded~~reassess its value at ~~$806,000~~each reporting period, with any changes in value reported in the accompanying consolidated statements of operations. At December 31, 2018, the fair value of this

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~per year, or $201,500 per quarter, as an accretion in the accompanying consolidated statements of operations. The Convertible Note must also be repaid upon a change of control, as defined.~~bifurcated derivative was $16,910,000. In the event that Bison Capital or holders of the Convertible Note receive aggregate proceeds in excess of $48,900,000 from the sale of GFN common stock received ~~from~~after the conversion of the Convertible Note, then 50% of the interest ~~accrued and~~ actually paid to Bison Capital (such amount, the “Price Increase”) shall be repaid by Bison Capital or holders of the Convertible Note by either (i) paying such Price Increase to GFNAPH ~~or GFNAPF~~ in the form of cash, (ii) returning to GFN shares of GFN Common Stock with a value equal to the Price Increase or (iii) any combination of (i) or (ii) above that if the aggregate equals the Price Increase. The value of the GFN common stock for purposes of the return of shares to GFN shall be deemed to be the average price per share of GFN common stock realized by the Convertible Note holder in the sale of such shares. The Convertible Note ~~holder~~holders may satisfy such obligations by returning to GFN shares of GFN common stock with an aggregate value equivalent to the Price Increase.

The Company evaluated the Convertible Note at its issuance and determined that certain conversion rights were an embedded derivative that required bifurcation because they were not deemed to be clearly and closely related to the Convertible Note. As a result, the Company separately ~~accounts~~accounted for these conversion rights as a standalone derivative. As of the date of issuance on September 25, 2017, the fair value of this bifurcated derivative was determined to be $1,864,000, resulting in a principal balance of $24,136,000 for the Convertible Note. The Company ~~determines~~determined the fair value of the bifurcated derivative using a valuation model and market prices and ~~reassesses~~reassessed its fair value at the end of each reporting period, ~~or more frequently as deemed necessary,~~ with any changes in value reported in the accompanying consolidated statements of operations. At ~~March 31,~~September 10, 2018, prior to conversion, the fair value of this bifurcated derivative was ~~$4,085,000~~$20,370,000 and the ~~principal balance~~conversion of the Convertible Note ~~was $24,539,000, which includes accretion for~~into shares of the ~~minimum rate~~Company’s common stock and reversal of ~~return.~~

~~At March 31, 2018, the Bison Capital Notes totaled $79,147,000, net~~this bifurcated derivative resulted in a benefit to equity of ~~deferred financing costs of $1,061,000.~~$44,506,000 in FY 2019.

North America Senior Credit Facility

The North America leasing(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined ~~$237,000,000~~$260,000,000 senior secured revolving credit facility, as amended, with a syndicate led by Wells Fargo Bank, National Association (“Wells Fargo”) that also includes East West Bank, CIT Bank, N.A., the Canadian Imperial Bank of Commerce (“CIBC”), KeyBank, National Association, Bank Hapoalim B.M. and Associated Bank, N.A. (the “Wells Fargo Credit Facility”). In addition, the Wells Fargo Credit Facility provides an accordion feature that may be exercised by the syndicate, subject to the terms in the credit agreement, to increase the maximum amount that may be borrowed by an additional $25,000,000. The Wells Fargo Credit Facility matures on March 24, 2022, assuming the Company’s publicly-traded senior notes due July 31, 2021(see below) are extended at least 90 days past this scheduled maturity date; otherwise the Wells Fargo Credit Facility would mature on March 24, 2021. There iswas also a separate loan agreement with Great American Capital Partners (“GACP”), where GACP provided a ~~First In Last Out~~First-In,Last-Out Term Loan (”(“FILO Term Loan”) within the Wells Fargo Credit Facility in the amount of $20,000,000 ~~and inclusive in the $237,000,000 total amount. The FILO Term Loan has~~that had the same maturity date and ~~commences~~commenced principal amortization on October 1, 2018 at $500,000 per quarter. ~~The~~On December 24, 2018, the FILO Term Loan, ~~has~~with a principal balance of $19,500,000, including accrued interest and prepayment fee of ~~3.00% of~~one percent, was repaid in full through borrowings from the ~~prepaid amount if prepaid prior~~Wells Fargo Credit Facility and all terms and provisions relating to the ~~first anniversary, 2.00% of~~FILO Term Loan were terminated within the ~~prepaid amount if prepaid prior to the second anniversary and 1.00% of the prepaid amount if prepaid prior to the third anniversary.~~credit agreement.

The Wells Fargo Credit Facility is secured by substantially all of the rental fleet, inventory and other assets of the Company’s North American leasing and manufacturing operations. The FILO Term Loan also contains a first priority lien on the same collateral, but on a “last out basis,” after all of the outstanding obligations to the primary lenders in the Wells Fargo Credit Facility have been satisfied. The Wells Fargo Credit Facility effectively not only finances the North American operations, but also the funding requirements for the Series C Preferred Stock (see Note 3) and the publicly-traded unsecured senior notes. 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; and (b) $6,300,000 for the public offering of unsecured senior notes or the actual amount of annual interest required to be paid; provided 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%. The FILO Term Loan that was within the Wells Fargo Credit Facility ~~bears~~bore interest at 11.00% above the LIBOR rate, with a LIBOR rate floor of 1.00%. The Wells Fargo Credit Facility contains, among other things, certain financial covenants, including fixed charge coverage ratios, and other covenants,

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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 ~~March~~December 31, 2018, borrowings and availability under the Wells Fargo Credit Facility totaled ~~$195,631,000~~$197,458,000 and ~~$35,431,000,~~$56,279,000, respectively.

~~Credit Suisse Term Loan~~

On March 31, 2014, the Company 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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to it. The Credit Suisse Term Loan provided that the amount borrowed would bear interest at LIBOR plus 7.50% per year, would be payable quarterly and that all principal and interest would mature on July 1, 2018. In addition, the Credit Suisse Term Loan was secured by a first ranking pledge over substantially all shares of RWH owned by GFN U.S., required 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 to~~six-months~~ interest be deposited in an interest reserve account pledged to secure repayment of all amounts borrowed. The Company had repaid, prior to maturity, $15,000,000 of the outstanding borrowings of the Credit Suisse Term Loan and, as of June 30, 2017, $9,920,000 remained outstanding, net of unamortized debt issuance costs of $80,000. On September 25, 2017, in connection with the acquisition of the noncontrolling interest of Royal Wolf (see Note 4), the Credit Suisse Term Loan was fully repaid.Condensed Consolidated Financial Statements

(Unaudited)

Senior Notes

On June 18, 2014, the Company completed the sale of unsecured senior notes (the “Senior Notes”) in a public offering for an aggregate principal amount of $72,000,000. On April 24, 2017, the Company completed the sale of a“tack-on” offering of its publicly-traded Senior Notes for an aggregate principal amount of $5,390,000 that was priced at $24.95 per denomination. Net proceeds were $5,190,947, after deducting an aggregate original issue discount (“OID”) of $10,780 and underwriting discount of $188,273. In both offerings, the Company used at least 80% of the gross proceeds to reduce indebtedness atPac-Van and Lone Star under the Wells Fargo Credit Facility in order to permit the payment of intercompany dividends byPac-Van and Lone Star to GFN to fund the interest requirements of the Senior Notes. For the‘tack-on” offering, this amounted to $4,303,376 of the net proceeds. The Company has total outstanding publicly-traded Senior Notes in an aggregate principal amount of $77,390,000 ($~~75,319,000~~75,824,000 and ~~$75,697,000,~~$75,894,000, net of unamortized debt issuance costs of ~~$2,071,000~~$1,566,000 and ~~$1,693,000,~~$1,496,000, at June 30, ~~2017~~2018 and ~~March~~December 31, 2018, respectively).

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 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.

On October 31, 2018, the Company successfully completed a consent solicitation to amend the Base Indenture and First Supplemental Indenture to permit the Company to incur additional indebtedness from time to time, including pursuant to its existing Wells Fargo Credit Facility and existing master capital lease agreement, or such new capital lease obligations as the Company may enter into from time to time. The consent of at least a majority in the aggregate principal amount outstanding of the Senior Notes as of the record date (as defined in the consent solicitation statement dated October 16, 2018) was required to approve the proposed amendments and the Company received consents from approximately 63.3% of the holders of the Senior Notes. Upon the terms and subject to the conditions described in the consent solicitation statement, the Company made cash payments totaling $195,820, or $0.10 per $25 of Senior Notes held by each holder as of the record date who had validly delivered consent. As a result of the successful consent solicitation, the Company and the Trustee entered into the Second Supplemental Indenture dated October 31, 2018 (the “Second Supplemental Indenture” and, together with the Base Indenture and First Supplemental Indenture, the “Indenture”).

The Company had an option, prior to July 31, 2017, to 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 have redeemed 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. ~~The Company has not redeemed any of its Senior Notes as July 31, 2017.~~

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 Company has not redeemed any of its 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.”

Other

At December 31, 2018, equipment financing and other debt totaled $7,455,000.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Other~~

~~At March 31, 2018, other debt totaled $7,742,000.~~

The Company was in compliance with the financial covenants under all its credit facilities as of ~~March~~December 31, 2018.

The weighted-average interest rate in the Asia-Pacific area was ~~4.9%~~9.9% and ~~10.4% and 4.9% and 10.0% in~~7.3% during the quarter ended ~~March~~December 31, 2017 and FY 2018, respectively, and 8.9% and 9.4% during the quarter ended December 31, 2018 and in FY ~~2017 and FY 2018,~~2019, respectively; which does not include the effect of translation, derivative valuation, amortization of deferred financing costs and accretion. The weighted-average interest rate in North America was ~~5.2% and 6.2% and 5.0%~~5.9% and 6.0% induring the quarter ended ~~March~~December 31, ~~2017 and 2018 and in FY~~ 2017 and FY 2018, respectively, and 7.2% and 6.9% during the quarter ended December 31, 2018 and FY 2019, respectively; which does not include the effect of the amortization of deferred financing costs and accretion.

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):


Derivative – Fair Value (Level 2)	Derivative – Fair Value (Level 2)						Derivative – Fair Value (Level 2)
Type of Derivative Contract		Balance Sheet Classification	June 30, 2017		�� March 31, 2018			Balance Sheet Classification	June 30, 2018		December 31, 2018


Swap Contracts		Trade payables and accrued liabilities		$ 96		$ 255		Trade payables and accrued liabilities	$	223	$	272

Forward-Exchange Contracts		Trade and other receivables		—		20		Trade and other receivables		298		179

Forward-Exchange Contracts		Trade payables and accrued liabilities		299		7
								Trade payables and accrued liabilities		—		14

Bifurcated Derivatives								Fair value of bifurcated derivatives in Convertible Note		15,583		16,910

      Quarter Ended
March 31,    Nine Months Ended
March 31,
Type of Derivative
Contract

Statement of Operations
Classification
           2017                    2018                    2017                    2018




Swap Contracts
   Unrealized gain (loss) included in interest expense      $ —    $ 9      $ —    $ 9




Forward Exchange Contracts
   Unrealized foreign currency exchange gain (loss) and other      $ (156)    $ 10      $ 279    $ 402

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


		Quarter Ended December 31,				Six Months Ended December 31,
Type of Derivative Contract	Statement of Operations Classification	2017		2018		2017		2018

Swap Contracts	Unrealized gain (loss) included in “Interest expense”	$	(3)	$	—	$	—	$	—

Forward Exchange Contracts	Unrealized foreign currency exchange gain (loss) included in “Foreign exchange and other”		182		(34)		392		(127)
Bifurcated Derivatives	Change in valuation of bifurcated derivatives in Convertible Note		(1,717)		(9,332)		(1,717)		(12,780)

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 has entered into interest rate swaps and interest rate options, in which the Company agreed 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 were designated to hedge changes in the interest rate of a portion of the outstanding borrowings in the Asia-Pacific area. In the year ended June 30, 2017 (“FY ~~2017,~~2017”), the Company entered into two interest rate swaps that were designated as cash flow hedges. The Company expected these derivatives to remain effective during their remaining terms, but recorded any changes in the portion of the hedges considered ineffective in interest expense in the consolidated statement of operations. There was no ineffective portion recorded in FY 2017 and only a nominal gain in FY ~~2018,~~2018. During the quarter ended December 31, 2017, these two interest rate swap contracts were closed, with the Company incurring break costs of $148,000. In January 2018, the Company entered into another interest rate swap contract that was also designated as a cash flow hedge. The Company expects this derivative to remain highly effective during its term; however, any changes in the portion of the hedge considered ineffective would also be recorded in interest expense in the consolidated statement of operations. ~~In the quarter ended March 31, 2018, the Company~~There was no ineffective portion recorded in ~~interest expense an unrealized gain of $9,000 for the portion considered ineffective.~~FY 2019 and FY 2018.

The Company’s interest rate derivative instruments were not traded on a market exchange; therefore, the fair values were 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, ~~2017~~2018 and ~~March~~December 31, 2018, the open interest rate swap contracts were as follows (dollars in thousands):


					June 30,		December 31,
	June 30,		March 31,
					2018		2018
	2017		2018
Notional amounts	$	30,748	$	38,529	$	37,055	$	35,276
Fixed/Strike Rates		2.0025% - 2.2900%		7.41%		7.414%		7.414%
Floating Rates		1.6650%		7.08%		7.16%		7.14%
Fair Value of Combined Contracts	$	(96)	$	(255)	$	(223)	$	(272)

Foreign Currency Risk

The Company has transactional currency exposures. Such exposure arises from sales or purchases in currencies other than the functional currency. The currency giving rise to this risk is primarily U.S. dollars. Royal Wolf has a bank account denominated in U.S. dollars into which a small number of customers pay their debts. This is a natural hedge against fluctuations in the exchange rate. The funds are then used to pay suppliers, avoiding the need to convert to Australian dollars. Royal Wolf uses forward currency and participating forward contracts to eliminate the currency exposures on the majority of its transactions denominated in foreign currencies, either by transaction if the amount is significant, or on a general cash flow hedge basis. The forward currency and

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

participating forward contracts are always in the same currency as the hedged item. The Company believes that financial instruments designated as foreign currency hedges are highly effective. However documentation of such as required by ASC Topic 815 does not exist. Therefore, all movements in the fair values of these hedges are reported in the statement of operations in the period in which fair values change. As of June 30, ~~2017,~~2018, there were 1632 open forward exchange contracts that mature between July ~~2017~~2018 and ~~December 2017;~~November 2018; and, as of ~~March~~December 31, 2018, there were 1232 open forward exchange contracts that mature between ~~April 2018~~January 2019 and ~~July 2018,~~June 2019, as follows (dollars in thousands):


	June 30,		March 31,		June 30,		December 31,

	2017		2018		2018		2018
Notional amounts	$	7,687	$	2,377	$	8,950	$	9,167
Exchange/Strike Rates (AUD to USD)		0.69304 – 0.75650		0.69785 – 0.79980		0.68142 – 0.80004		0.65362 –0.73675
Fair Value of Combined Contracts	$	(299)	$	13	$	298	$	165

For the quarter ended ~~March~~December 31, 2017 and 2018, net unrealized and realized foreign exchange gains (losses) totaled ~~$39,000~~$(348,000) and ~~$(33,000)~~$24,000 and ~~$(1,390,000)~~$(1,644,000) and ~~$37,000,~~$(112,000), respectively. In FY ~~2017~~2018 and FY ~~2018,~~2019, net unrealized and realized foreign exchange gains (losses) totaled ~~$(506,000)~~$(1,332,000)and ~~$84,000,~~$(406,000), and ~~$(2,722,000)~~$(1,268,000) and ~~$(369,000)~~$(3,687,000), respectively.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Fair Value of Other Financial Instruments

The fair value of the Company’s borrowings under the Senior Notes was determined based on a Level 1 input and for borrowings under its senior credit facilities and Credit Suisse Term Loan determined based on Level 3 inputs; including a comparison to a group of comparable industry debt issuances (“Industry Comparable Debt Issuances”) and a study of credit (“Credit Spread Analysis”). Under the Industry Comparable Debt Issuance method, the Company compared the debt facilities to several industry comparable debt issuances. This method consisted of an analysis of the offering yields compared to the current yields on publicly traded debt securities. Under the Credit Spread Analysis, the Company first examined the implied credit spreads, ofwhich are based on data published by the United States Federal Reserve. Based on this analysis the Company was able to assess the credit market. The fair value of the Company’s senior credit facilities as of June 30, ~~2017~~2018 was determined to be approximately ~~$347,236,000.~~$423,029,000. The Company also determined that the fair value of its other debt of ~~$8,402,000~~$6,652,000 at June 30, ~~2017~~2018 approximated or would not vary significantly from their carrying values. The Company believes that market conditions at ~~March~~December 31, 2018 have not changed significantly from June 30, ~~2017.~~2018. Therefore, the proportion of the fair value to the carrying value of the Company’s senior credit facilities and other debt at ~~March~~December 31, 2018 would not vary significantly from the proportion determined at June 30, ~~2017.~~2018.

Under the provisions of FASB ASC Topic 825,Financial Instruments,the carrying value of the Company’s other financial instruments (consisting primarily of cash and cash equivalents, net receivables, trade payables and accrued liabilities) approximate fair value.

Note 7. Related-Party Transactions

Effective January 31, 2008, the Company entered into a lease with an affiliate of the Company’s then Chief Executive Officer (now Executive Chairman of the Board of Directors) for its corporate headquarters in Pasadena, California. The rent is $7,393 per month, effective March 1, 2009, plus allocated charges for common area maintenance, real property taxes and insurance, for approximately 3,000 square feet of office space. The term of the lease is five years, with two five-year renewal options, and the rent is adjusted yearly based on the consumer price index. On October 11, 2012, the Company exercised the first option to renew the lease for an additional five-year term commencing February 1, 2013 and on August 7, 2017, it exercised its second option for an additional five-year term commencing on February 1, 2018. Rental payments were ~~$28,000~~$29,000 and $56,000 during ~~both~~ the ~~quarters~~quarter ended ~~March~~December 31, 2017 and FY 2018, respectively; and $28,000 and $55,000 during the quarter ended December 31, 2018 and ~~$84,000 during both~~ FY ~~2017 and FY 2018.~~2019, respectively.

The premises ofPac-Van’s Las Vegas branch are owned by and were leased from the then acting branch manager through December 31, 2016. From January 1, 2017 through May 12, 2017, the use of the premises was rented ~~from the acting branch manager~~ on amonth-to-month basis. Effective May 12, 2017, the Company entered into a lease agreement through December 31, 2020 for rental of $10,876 per month and the right to extend the term of the lease for threetwo-year options, with the monthly rental increasing at each option period from $11,420 to $12,590 per month. Rental payments on these premises totaled $33,000 and $65,000 during ~~both~~ the ~~quarters~~quarter ended ~~March~~December 31, ~~2017 and 2018 and $92,000 and $98,000 during FY~~ 2017 and FY 2018, respectively; and $38,000 and $100,000 during the quarter ended December 31, 2018 and FY 2019, respectively.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 8. Equity Plans

On September 11, 2014, the Board of Directors of the Company adopted the 2014 Stock Incentive Plan (the “2014 Plan”), which was approved by the stockholders at the Company’s annual meeting on December 4, 2014 and amended and restated by the stockholders at the annual meeting on December 3, 2015. The 2014 Plan is an “omnibus” incentive plan permitting a variety of equity programs designed to provide flexibility in implementing equity and cash awards, including incentive stock options, nonqualified stock options, restricted stock grants(“non-vested equity shares”), restricted stock units, stock appreciation rights, performance stock, performance units and other stock-based awards. Participants in the 2014 Plan may be granted any one of the equity awards or any combination of them, as determined by the Board of Directors or the Compensation Committee. Upon the approval of the 2014 Plan by the stockholders, the Company suspended further grants under its previous equity plans, the General Finance Corporation 2006 Stock Option Plan (the “2006 Plan”) and the 2009 Stock Incentive Plan (the “2009 Plan”) (collectively the “Predecessor Plans”), which had a total of 2,500,000 shares reserved for grant. Any stock options which are forfeited under the Predecessor Plans will become available for grant under the 2014 Plan, but the total number of shares available under the 2014 Plan will not exceed the 1,500,000 shares reserved for grant under the 2014 Plan, plus any options which were forfeited or are available for grant under the Predecessor Plans. If not sooner terminated by the Board of Directors, the 2014 Plan will expire on December 4, 2024, which is the tenth anniversary of the date it was approved by the Company’s stockholders.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The 2006 Plan expired on June 30, 2016 and the 2009 Plan will expire on December 10, 2019. On December 7, 2017, the stockholders approved an amendment unanimously approved by the Board of Directors of the Company that increased the number of shares reserved for issuance under the 2014 Plan by 1,000,000 shares, from 1,500,000 to 2,500,000 shares of common stock, plus any options which were forfeited or are available for grant under the 2009 Plan. The Predecessor Plans and the 2014 Plan are referred to collectively as the “Stock Incentive Plan.”

There have been no grants or awards of stock appreciation rights, performance stock or performance units under the Stock Incentive Plan. All grantsto-date consist of incentive andnon-qualified stock options that vest over a period of up to five years (“time-based”),non-qualified stock options that vest over varying periods that are dependent on the attainment of certain defined EBITDA and other targets (“performance-based”),non-vested equity shares (“restricted stock”) and restricted stock units (“RSU”). At ~~March~~December 31, 2018, ~~960,948~~855,305 shares remained available for grant.

On December 15, 2017 (the “December 2017 Grant”), the Company granted time-based options to an officer of GFN to purchase 225,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $6.25 per share. The options under the December 2017 Grant vest over 36 months from the date of grant. The fair value of the stock options in the December 2017 Grant was $3.45, determined using the Black-Scholes option-pricing model using the following assumptions: a risk-free interest rate of 2.26%, ~~an expected life of 7.5 years, an expected volatility of 50.5% and no expected dividend.~~

On February 6, 2018 (the “February 2018 Grant”), the Company granted time-based options to a key employee of Royal Wolf to purchase 81,280 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $7.15 per share. The options under the February 2018 Grant vest over 28.8 months from the date of grant. The fair value of the stock options in the February 2018 Grant was $4.00, determined using the Black-Scholes option-pricing model using the following assumptions: a risk-free interest rate of 2.66%, ~~an expected life of 7.5 years, an expected volatility of 50.5% and no expected dividend.~~

Since inception, the range of the fair value of the stock options granted (other than tonon-employee consultants) and the assumptions used are as follows:



Fair value of stock options		$0.81 - $6.35

~~Assumptions used:~~

	Assumptions used:
	Risk-free interest rate		1.19% - 4.8%
	Expected life (in years)		7.5
	Expected volatility		26.5% - 84.6%
	Expected dividends		—

At ~~March~~December 31, 2018, there were no significant outstanding stock options held bynon-employee consultants that were not fully vested. A summary of the Company’s stock option activity and related information for FY ~~2018~~2019 follows:

Number of
Options
(Shares)
   Weighted-
    Average
Exercise
Price    Weighted-
Average
Remaining
Contractual
Term (Years)



Outstanding at June 30, 2017
       2,061,057    $ 4.92
Granted
   306,280    6.49
Exercised
   (63,363)    2.54
Forfeited or expired
   (304,500)    8.97



Outstanding at March 31, 2018
       1,999,474    $ 4.62    5.7



Vested and expected to vest at March 31, 2018        1,999,474    $ 4.62    5.7



Exercisable at March 31, 2018
   1,396,115    $ 4.14    4.3


	Number of Options (Shares)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)


Outstanding at June 30, 2018		1,824,910	$	4.52
Granted		—		—
Exercised		(142,463)		6.01
Forfeited or expired		(9,000)		6.50

Outstanding at December 31, 2018		1,673,447	$	4.38		5.5


Vested and expected to vest at December 31, 2018		1,673,447	$	4.38		5.5


Exercisable at December 31, 2018		1,285,861	$	3.97		4.6

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At ~~March~~December 31, 2018, outstanding time-based options and performance-based options totaled ~~1,344,594~~1,086,847 and ~~654,880,~~586,600, respectively. Also at that date, the Company’s market price for its common stock was ~~$7.25~~$10.11 per share, which was ~~at or below~~above the exercise prices of ~~3.7%~~all of the outstanding stock ~~options. The~~options, and the intrinsic value of the outstanding stock options at that date was ~~$5,606,000.~~$9,823,000. Share-based compensation of ~~$7,945,000~~$8,566,000 related to stock options has been recognized in the consolidated statements of operations, with a corresponding benefit to equity, from inception through ~~March~~December 31, 2018. At that date, there remains ~~$1,654,000~~$1,031,000 of unrecognized compensation expense to be recorded on a straight-line basis over the remaining weighted-average vesting period of ~~1.5~~1.2 years.

A deduction is not allowed for U.S. income tax purposes with respect tonon-qualified options granted in the United States until the stock options are exercised or, with respect to incentive stock options issued in the United States, unless the optionee makes a disqualifying disposition of the underlying shares. The amount of any deduction will be the difference between the fair value of the Company’s common stock and the exercise price at the date of exercise. Accordingly, there is a deferred tax asset recorded for the U.S. tax effect of the financial statement expense recorded related to stock option grants in the United ~~States. Effective July 1, 2017,~~States and the tax effect of the difference between the U.S. income tax deduction ~~in excess of~~and the financial statement expense ~~if any,~~ will be recorded ~~as a benefit~~ in the consolidated statement of operations.

A summary of the Company’s restricted stock and RSU activity follows:


	Restricted Stock				RSU				Restricted Stock				RSU
									Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value

Nonvested at June 30, 2017		480,310	$	4.54		—	$	—
Nonvested at June 30, 2018										379,850	$	6.32		211,763	$	7.15
Granted		35,430		6.35		211,763		7.15		24,855		12.07		—		—
Vested		(103,842)		3.11		—		—		(35,430)		6.35		(66,073)		7.15
Forfeited		—		—		—		—		—		—		—		—

Nonvested at March 31, 2018		411,898	$	4.73		211,763	$	7.15
Nonvested at December 31, 2018										369,275	$	6.71		145,690	$	7.15

Share-based compensation of ~~$2,909,000~~$3,827,000 and ~~$94,000~~$568,000 related to restricted stock and RSU, respectively, has been recognized in the consolidated statements of operations, with a corresponding benefit to equity, from inception through ~~March~~December 31, 2018. At that date, there remains ~~$1,484,000~~$1,863,000 for the restricted stock and ~~$1,420,000~~$947,000 for the RSU of unrecognized compensation expense to be recorded on a straight-line basis over the remaining vesting period of ~~over approximately 0.54~~less than a year ~~– 2.25~~to 2.5 years ~~and 2.25 years, respectively,~~ for the restricted stock and ~~RSU.~~

~~On January 2, 2018,~~1.5 years for the Company granted a total of 42,773 equity shares to an officer of GFN at a value equal to the closing market price of the Company’s common stock as of that date, or $6.80 per share. The fair value of this equity share grant of $291,000 has been recognized as share-based compensation in the consolidated statements of operations, with a corresponding benefit to equity.RSU.

Royal Wolf Long Term Incentive Plan

Royal Wolf established the Royal Wolf Long Term Incentive Plan (the “LTI Plan”) in conjunction with its initial public offering in May 2011. Under the LTI Plan, the RWH Board of Directors may have granted, at its discretion, options, performance rights and/or restricted shares of RWH capital stock to Royal Wolf employees and executive directors. Vesting terms and conditions were up to four years and, generally, were subject to performance criteria based primarily on enhancing shareholder returns using a number of key financial benchmarks, including EBITDA. In addition, unless the RWH Board determined otherwise, if an option, performance right or restricted share had not lapsed or been forfeited earlier, it would have terminated at the seventh anniversary from the date of grant. It was intended that up to one percent of RWH’s outstanding capital stock would be reserved for grant under the LTI Plan and a trust was established to hold RWH shares for this purpose. However, since the Company held more than 50% of the outstanding shares of RWH capital stock, RWH shares reserved for grant under the LTI Plan were purchased in the open market. The LTI Plan, among other provisions, did not permit the transfer, sale, mortgage or encumbering of options, performance rights and restricted shares without the prior approval of the RWH Board. In the event of a change of control, the RWH Board, at its discretion, would have determined whether, and how many, unvested options, performance rights and restricted shares would have vested. In addition, if, in the RWH Board’s opinion, a participant acted fraudulently or dishonestly or was in breach of his obligations to Royal Wolf, the RWH Board may have deemed any options, performance rights and restricted shares held by or reserved for the participant to have lapsed or been forfeited.

With the Company’s acquisition of the noncontrolling interest of Royal Wolf (see Note 4)5), the LTI Plan was terminated in September 2017 and the RWH Board determined that 582,370 performance rights were deemed vested, resulting in payments totaling A$1,066,000 ($835,000) to participants. At the date of its termination, Royal Wolf had granted, net of forfeitures, 2,582,723

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

performance rights to key management personnel under the LTI Plan. Also, through the date of termination, 677,953 of the performance rights had been converted into RWH capital stock through purchases in

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

the open market. In FY ~~2017 and FY~~ 2018, share-based compensation of ~~$(522,000) and~~ $1,207,000 ~~respectively,~~ related to the LTI Plan had been recognized in the consolidated statements of operations, with a corresponding benefit to equity. In addition, in FYthe quarter ended March 31, 2018, $338,000 (A$458,000) was refunded back to Royal Wolf by the trust established to make the open market purchases of RWH shares reserved for grant under the LTI Plan. This refund was recorded as a benefit to equity.

Note 9. Commitments and Contingencies

Self-Insurance

The Company has insurance policies to cover auto liability, general liability, directors and officers liability and workers compensation-related claims. Effective on February 1, 2017, the Company became self-insured for auto liability and general liability through GFNI, a wholly-owned captive insurance company, up to a maximum of $1,200,000 per policy period. Claims and expenses are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. At June 30, ~~2017~~2018 and ~~March~~December 31, 2018, reported liability totaled ~~$129,000~~$691,000 and ~~$289,000,~~$963,000, respectively, and has been recorded in the caption “Trade payables and accrued liabilities” in the accompanying consolidated balance sheets.

Other Matters

The Company is not involved in any material lawsuits or claims arising out of the normal course of business. The nature of its business is such that disputes can occasionally arise with employees, vendors (including suppliers and subcontractors) and customers over warranties, contract specifications and contract interpretations among other things. The Company assesses these matters on acase-by-case basis as they arise. Reserves are established, as required, based on its assessment of its exposure. The Company has insurance policies to cover general liability and workers compensation related claims. In the opinion of management, the ultimate amount of liability not covered by insurance under pending litigation and claims, if any, will not have a material adverse effect on our financial position, operating results or cash flows.

Note 10. Cash Flows from Operating Activities and Other Financial Information

The following table provides a detail of cash flows from operating activities (in thousands):


	Nine Months Ended March 31,				Six Months Ended December,
	2017		2018		2017		2018

Cash flows from operating activities
Net income (loss)	$	(445)	$	1,567
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Net income ( loss)					$	2,130	$	(3,452)
Adjustments to reconcile net income loss to cash flows from operating activities:
Gain on sales and disposals of property, plant and equipment		(137)		(11)		(5)		(75)
Gain on sales of lease fleet		(1,611)		(5,407)		(3,746)		(4,229)
Gains on bargain purchases of businesses						—		(1,767)
Unrealized foreign exchange loss		506		2,722		1,332		1,268
Unrealized gain on forward exchange contracts		(279)		(402)
Unrealized gain on interest rate swap		—		(9)
Change in valuation of bifurcated derivative in Convertible Note		—		2,221
Non-cash realized foreign exchange loss on forced conversion of Convertible Note						—		3,554
Unrealized (gain) loss on forward exchange contracts						(392)		127
Change in valuation of bifurcated derivatives in Convertible Note						1,717		12,780
Depreciation and amortization		29,831		30,123		19,992		21,258
Amortization of deferred financing costs		1,183		1,822		1,302		1,420
Accretion of interest		224		596		344		(555)
Interest deferred on Senior Term Note						—		3,191
Share-based compensation expense		842		2,986		2,097		1,341
Deferred income taxes		(1,627)		(1,386)		(1,402)		3,251
Changes in operating assets and liabilities (excluding assets and liabilities from acquisitions):
Trade and other receivables, net		(3,022)		(9,129)		(10,424)		(4,852)
Inventories		5,087		851		(2,731)		(12,937)
Prepaid expenses and other		(913)		(1,195)		562		(2,488)
Trade payables, accrued liabilities and unearned revenues		(8,824)		6,668		3,038		2,011
Income taxes		(715)		839		801		(473)

Net cash provided by operating activities	$	20,100	$	32,856	$	14,615	$	19,373

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 11. Segment Reporting

We have two geographic areas that include four operating segments; the Asia-Pacific area, consisting of the leasing operations of Royal Wolf, and North America, consisting of the combined leasing operations ofPac-Van and Lone Star, and the manufacturing operations of Southern Frac. Discrete financial data on each of the Company’s products is not available and it would be impractical to collect and maintain financial data in such a manner. In managing the Company’s business, senior management focuses on primarily growing its leasing revenues and operating cash flow (EBITDA), and investing in its lease fleet through capital purchases and acquisitions.

Transactions between reportable segments included in the tables below are recorded on an arms-length basis at market in conformity with U.S. GAAP and the Company’s significant accounting policies (see Note 2). The tables below represent the Company’s revenues from external customers, share-based compensation expense, depreciation and amortization, operating income, interest income and expense, expenditures for additions to long-lived assets (consisting of lease fleet and property, plant and equipment), long-lived assets and goodwill; as attributed to its geographic and operating segments (in thousands):


	Quarter Ended March 31, 2018

	North America
																			Quarter Ended December 31, 2018
	Leasing																		North America
	Pac-Van		Lone Star		Combined		Manufacturing			Corporate and Intercompany Adjustments			Total		Asia – Pacific Leasing		Consolidated		Leasing
																			Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Revenues:

Sales	$	13,667	$	20	$	13,687	$	3,272		$	(923	)	$	16,036	$	13,564	$	29,600	$	17,105	$	-	$	17,105	$	3,617	$	(946)	$	19,776	$	14,708	$	34,484

Leasing		28,068		10,366		38,434		-			(304	)		38,130		16,691		54,821		34,261		13,102		47,363		-		(587)		46,776		16,733		63,509


	$	41,735	$	10,386	$	52,121	$	3,272		$	(1,227	)	$	54,166	$	30,255	$	84,421	$	51,366	$	13,102	$	64,468	$	3,617	$	(1,533)	$	66,552	$	31,441	$	97,993


Share-based compensation	$	69	$	11	$	80	$	11		$	684		$	775	$	114	$	889	$	74	$	7	$	81	$	6	$	384	$	471	$	192	$	663


Depreciation and amortization	$	3,546	$	2,309	$	5,855	$	117		$	(183	)	$	5,789	$	4,342	$	10,131	$	3,841	$	2,386	$	6,227	$	101	$	(189)	$	6,139	$	5,016	$	11,155


Operating income	$	6,611	$	2,688	$	9,299	$	(17	)	$	(1,588	)	$	7,694	$	3,178	$	10,872	$	11,079	$	4,149	$	15,228	$	121	$	(1,331)	$	14,018	$	3,437	$	17,455


Interest income	$	-	$	-	$	-	$	-		$	2		$	2	$	41	$	43	$	-	$	-	$	-	$	-	$	2	$	2	$	31	$	33


Interest expense	$	2,380	$	452	$	2,832	$	94		$	1,699		$	4,625	$	4,773	$	9,398	$	3,240	$	340	$	3,580	$	76	$	1,711	$	5,367	$	3,501	$	8,868


	Nine Months Ended March 31, 2018																		Six Months Ended December 31, 2018
																			North America
	North America																		Leasing
																			Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated
	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing			Corporate and Intercompany Adjustments			Total		Asia – Pacific Leasing		Consolidated


Revenues:

Sales	$	39,005	$	20	$	39,025	$	9,856		$	(3,524	)	$	45,357	$	49,673	$	95,030	$	39,563	$	-	$	39,563	$	7,934	$	(1,425)	$	46,072	$	27,886	$	73,958

Leasing		82,415		28,274		110,689		-			(797	)		109,892		48,546		158,438		64,655		25,916		90,571		-		(1,091)		89,480		32,347		121,827


	$	121,420	$	28,294	$	149,714	$	9,856		$	(4,321	)	$	155,249	$	98,219	$	253,468	$	104,218	$	25,916	$	130,134	$	7,934	$	(2,516)	$	135,552	$	60,233	$	195,785


Share-based compensation	$	242	$	31	$	273	$	37		$	1,355		$	1,665	$	1,321	$	2,986	$	148	$	14	$	162	$	12	$	783	$	957	$	384	$	1,341

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


Depreciation and amortization	$	10,542	$	6,840	$	17,382	$	452		$	(548	)	$	17,286	$	12,837	$	30,123	$	7,505	$	4,750	$	12,255	$	203	$	(373)	$	12,085	$	9,173	$	21,258


Operating income	$	20,627	$	5,328	$	25,955	$	(680	)	$	(3,929	)	$	21,346	$	10,232	$	31,578	$	20,808	$	9,022	$	29,830	$	609	$	(2,632)	$	27,807	$	5,853	$	33,660


Interest income	$	-	$	-	$	-	$	-		$	8		$	8	$	73	$	81	$	-	$	-	$	-	$	-	$	2	$	2	$	79	$	81


Interest expense	$	6,631	$	1,372	$	8,003	$	294		$	5,592		$	13,889	$	10,778	$	24,667	$	5,831	$	689	$	6,520	$	159	$	3,410	$	10,089	$	7,404	$	17,493


Additions to long-lived assets	$	25,355	$	2,973	$	28,328	$	5		$	(252	)	$	28,081	$	12,966	$	41,047	$	25,997	$	1,501	$	27,498	$	5	$	(101)	$	27,402	$	11,761	$	39,163


	At March 31, 2018																		At December 31, 2018

Long-lived assets	$	261,562	$	50,730	$	312,292	$	2,079		$	(10,207	)	$	304,164	$	155,279	$	459,443	$	286,678	$	47,482	$	334,160	$	1,886	$	(9,821)	$	326,225	$	145,467	$	471,692


Goodwill	$	61,487	$	20,782	$	82,269	$	-		$	-		$	82,269	$	28,430	$	110,699	$	64,016	$	20,782	$	84,798	$	-	$	-	$	84,798	$	26,126	$	110,924


	At June 30, 2017																		At June 30, 2018

Long-lived assets	$	244,973	$	52,158	$	297,131	$	2,526		$	(10,521	)	$	289,136	$	161,527	$	450,663	$	264,651	$	49,352	$	314,003	$	2,083	$	(10,099)	$	305,987	$	145,711	$	451,698


Goodwill	$	55,882	$	20,782	$	76,664	$	-		$	-		$	76,664	$	28,465	$	105,129	$	61,693	$	20,782	$	82,475	$	-	$	-	$	82,475	$	27,468	$	109,943


	Quarter Ended March 31, 2017

	North America
																			Quarter Ended December 31, 2017
	Leasing																		North America
	Pac-Van		Lone Star		Combined		Manufacturing			Corporate and Intercompany Adjustments			Total		Asia – Pacific Leasing		Consolidated		Leasing
																			Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Revenues:

Sales	$	11,721	$	-	$	11,721	$	1,677		$	(645	)	$	12,753	$	11,836	$	24,589	$	13,510	$	-	$	13,510	$	3,505	$	(1,425)	$	15,590	$	22,555	$	38,145

Leasing		24,411		4,624		29,035		-			(50	)		28,985		14,890		43,875		28,308		9,559		37,867		-		(277)		37,590		16,395		53,985


	$	36,132	$	4,624	$	40,756	$	1,677		$	(695	)	$	41,738	$	26,726	$	68,464	$	41,818	$	9,559	$	51,377	$	3,505	$	(1,702)	$	53,180	$	38,950	$	92,130


Share-based compensation	$	87	$	11	$	98	$	4		$	235		$	337	$	314	$	651	$	77	$	10	$	87	$	13	$	339	$	439	$	-	$	439


Depreciation and amortization	$	3,347	$	2,411	$	5,758	$	198		$	(180	)	$	5,776	$	4,268	$	10,044	$	3,485	$	2,293	$	5,778	$	137	$	(183)	$	5,732	$	3,936	$	9,668


Operating income	$	4,165		$(1,086)	$	3,079	$	(496	)	$	(1,085	)	$	1,498	$	2,112	$	3,610	$	8,151	$	1,942	$	10,093	$	(77)	$	(1,208)	$	8,808	$	6,251	$	15,059


Interest income	$	-	$	-	$	-	$	-		$	7		$	7	$	11	$	18	$	-	$	-	$	-	$	-	$	1	$	1	$	22	$	23


Interest expense	$	1,870	$	349	$	2,219	$	99		$	1,815		$	4,133	$	1,116	$	5,249	$	2,188	$	472	$	2,660	$	94	$	1,700	$	4,454	$	4,993	$	9,447

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Nine Months Ended March 31, 2017

	North America
																				Six Months Ended December 31, 2017
	Leasing																			North America
	Pac-Van		Lone Star			Combined		Manufacturing			Corporate and Intercompany Adjustments			Total		Asia – Pacific Leasing		Consolidated		Leasing
																				Pac-Van		Lone Star		Combined		Manufacturing		Corporate and Intercompany Adjustments		Total		Asia – Pacific Leasing		Consolidated

Revenues:

Sales	$	33,932	$	-		$	33,932	$	5,261		$	(1,472	)	$	37,721	$	35,384	$	73,105	$	25,338	$	-	$	25,338	$	6,584	$	(2,601)	$	29,321	$	36,109	$	65,430

Leasing		72,517		12,620			85,137		-			(146	)		84,991		45,493		130,484		54,347		17,908		72,255		-		(493)		71,762		31,855		103,617


	$	106,449	$	12,620		$	119,069	$	5,261		$	(1,618	)	$	122,712	$	80,877	$	203,589	$	79,685	$	17,908	$	97,593	$	6,584	$	(3,094)	$	101,083	$	67,964	$	169,047


Share-based compensation	$	234	$	31		$	265	$	48		$	737		$	1,050	$	(208)	$	842	$	173	$	20	$	193	$	26	$	671	$	890	$	1,207	$	2,097


Depreciation and amortization	$	10,232	$	7,258		$	17,490	$	594		$	(547	)	$	17,537	$	12,294	$	29,831	$	6,996	$	4,531	$	11,527	$	335	$	(365)	$	11,497	$	8,495	$	19,992


Operating income	$	14,412	$	(3,763	)	$	10,649	$	(1,847	)	$	(3,363	)	$	5,439	$	8,931	$	14,370	$	14,016	$	2,640	$	16,656	$	(663)	$	(2,341)	$	13,652	$	7,054	$	20,706


Interest income	$	-	$	-		$	-	$	-		$	16		$	16	$	38	$	54	$	-	$	-	$	-	$	-	$	6	$	6	$	32	$	38


Interest expense	$	5,240	$	924		$	6,164	$	274		$	5,443		$	11,881	$	3,215	$	15,096	$	4,251	$	920	$	5,171	$	200	$	3,893	$	9,264	$	6,005	$	15,269


Additions to long-lived assets	$	19,327	$	47		$	19,374	$	-		$	(180	)	$	19,194	$	18,342	$	37,536	$	17,041	$	2,439	$	19,480	$	-	$	(181)	$	19,299	$	8,557	$	27,856

Intersegment net revenues related to sales of primarily portable liquid storage containers and ground level offices from Southern Frac to the North American leasing operations totaled ~~$645,000~~$1,425,000 and ~~$1,472,000~~$2,601,000 during the quarter ended ~~March~~December 31, 2017 and FY ~~2017, respectively,~~2018, respectively; and ~~$923,000~~$946,000 and ~~$3,524,000~~$1,425,000 during the quarter ended ~~March~~December 31, 2018 and FY 2019, respectively. Intrasegment net revenues in the North American leasing operations related to primarily the leasing of portable liquid storage containers fromPac-Van to Lone Star totaled $244,000 and $427,000 during the quarter ended December 31, 2017 and FY 2018, respectively; and $554,000 and $1,025,000 during the quarter ended December 31, 2018 and FY 2019, respectively.

Note 12. Subsequent Events

On ~~April 17, 2018,~~January 16, 2019, the Company announced that its Board of Directors declared a cash dividend of ~~$2.225~~$2.30 per share on the Series C Preferred Stock (see Note 3). The dividend is for the period commencing on ~~January~~October 31, 2018 through ~~April 29, 2018,~~January 30, 2019, and is payable on ~~April 30, 2018~~January 31, 2019 to holders of record as of ~~April 27, 2018.~~January 30, 2019.

~~On April 6, 2018, the Company, throughPac-Van,~~ purchased the container and storage trailer business of Acorn Storage Trailers, Inc. (“Acorn”) for approximately $804,000, which included a general indemnity and other holdbacks of $117,000. Acorn is located in Bowling Green, Kentucky.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read together with the consolidated financial statements and the accompanying notes thereto, which are included in our Annual Report on Form10-K for the fiscal year ended June 30, ~~2017~~2018 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”), as well as the condensed consolidated financial statements included in this Quarterly Report on Form10-Q. This Quarterly Report on Form10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue” or the negative of such terms or other similar expressions. Risk factors that might cause or contribute to such discrepancies include, but are not limited to, those described in our Annual Report and other SEC filings. We maintain a web site atwww.generalfinance.comthat makes available, through a link to the SEC’s EDGAR system website, our SEC filings.

References to “we,” “us,” “our” or the “Company” refer to General Finance Corporation, a Delaware corporation (“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 subsidiary, Southern Frac, LLC, a Texas limited liability company (collectively “Southern Frac”);Pac-Van, Inc., an Indiana corporation, and its Canadian subsidiary, PV Acquisition Corp., an Alberta corporation (collectively“Pac-Van”); and Lone Star Tank Rental Inc., a Delaware corporation (“Lone Star”); GFN Asia Pacific Holdings Pty Ltd, an Australian corporation (“GFNAPH”), and its subsidiaries, ~~GFN Asia Pacific Finance Pty Ltd, an Australian corporation (“GFNAPF”),~~ Royal Wolf Holdings ~~Limited,~~Pty Ltd, an Australian corporation (“RWH”), and its Australian and New Zealand subsidiaries (collectively, “Royal Wolf”).

Overview

Founded in October 2005, we are a leading specialty rental services company offering portable (or mobile) storage, modular space and liquid containment solutions in these three distinct, but related industries, which we collectively refer to as the “portable services industry.”

We have two geographic areas that include four operating segments; 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 ~~(see above)~~(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 and other steel-related products). As of ~~March~~December 31, 2018, our two geographic leasing operations primarily lease and sell their products through 23 customer service centers (“CSCs”) in Australia, 1214 CSCs in New Zealand, 5760 branch locations in the United States and three branch locations in Canada. At that date, we had ~~252~~277 and ~~596~~664 employees and ~~42,791~~46,194 and ~~42,950~~50,406 lease fleet units in the Asia-Pacific area and North America, respectively.

Our lease fleet is comprised of three distinct specialty rental equipment categories that possess attractive asset characteristics and serve our customers’on-site temporary needs and applications. These categories match the sectors comprising the portable services industry.

Our portable storage category is segmented into two products: (1) storage containers, which primarily consist of new and used steel shipping containers under International Organization for Standardization (“ISO”) standards, that provide a flexible, low cost alternative to warehousing, while offering greater security, convenience and immediate accessibility; and (2) freight containers, which are ~~either~~ designed for transport of products either by road and rail and are only offered in our Asia-Pacific territory.

Our modular space category is segmented into three products: (1) office containers, which are referred to as portable container buildings in the Asia-Pacific, are either modified or specifically manufactured containers that provide self-contained office space with maximum design flexibility. Office containers in the United States are oftentimes referred to as ground level offices (“GLOs”); (2) modular buildings, which provide customers with flexible space solutions and are often modified to customer specifications and (3) mobile offices, which arere-locatable units with aluminum or wood exteriors and wood (or steel) frames on a steel carriage fitted with axles, and which allow for an assortment of“add-ons” to provide convenient temporary space solutions.

Our liquid containment category includes portable liquid storage tanks that are manufactured500-barrel capacity steel containers with fixed axles for transport. These units are regularly utilized for a variety of applications across a wide range of industries, including refinery, petrochemical and industrial plant maintenance, oil and gas services, environmental remediation and field services, infrastructure building construction, marine services, pipeline construction and maintenance, tank terminal services, waste management, wastewater treatment and landfill services.

Results of Operations

Quarter Ended ~~March~~December 31, 2018 (“QE FY ~~2018”~~2019”) Compared to Quarter Ended ~~March~~December 31, 2017 (“QE FY ~~2017”~~2018”)

Revenues.Revenues increased by ~~$15.9~~$5.9 million, or ~~23%~~6%, to ~~$84.4~~$98.0 million in QE FY ~~2018~~2019 from ~~$68.5~~$92.1 million in QE FY ~~2017.~~2018. This consisted of ~~increases~~an increase of ~~$11.0~~$12.8 million, or ~~27%~~25%, in revenues in our North American leasing operations, ~~$3.6~~a decrease of $7.5 million, ~~increase,~~ or ~~13%~~19%, in revenues in the Asia-Pacific area and ~~$1.3~~an increase of $0.6 million, or ~~130%~~29%, in manufacturing revenues from Southern Frac. The effect of the average currency exchange rate of ~~the stronger~~a weaker Australian dollar relative to the U.S. dollar in QEFY 2019 versus FY 2018 ~~versus QE FY 2017 enhanced~~reduced the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during QE FY ~~2018~~2019 was ~~$0.7862~~$0.7172 U.S. dollar compared to ~~$0.7578~~$0.7690 U.S. dollar during QE FY ~~2017.~~2018. In Australian dollars, total revenues in the Asia-Pacific area ~~increased~~decreased by 9%14% in QE FY ~~2018~~2019 from QE FY ~~2017.~~2018.

Excluding Lone Star (doing business solely in the oil and gas sector), total revenues of our North American leasing operations increased across most sectors by ~~$5.2~~$9.2 million, or ~~14%~~22%, in QE FY ~~2018~~2019 from QE FY ~~2017, primarily~~2018; particularly in the industrial, commercial, construction ~~industrial, mining~~ and ~~oil and gas~~education sectors, which increased by an aggregate ~~$4.9~~$6.9 million between the periods. At Lone Star, revenues ~~significantly~~ increased by ~~$5.8~~$3.5 million, or ~~126%~~approximately 37%, from ~~$4.6~~$9.6 million in QE FY ~~2017~~2018 to ~~$10.4~~$13.1 million in QE FY ~~2018.~~2019. The revenue ~~increase~~decrease in the Asia-Pacific area occurred because QE FY 2018 included two large sales, one each in the transportation and utilities sectors, totaling approximately $10.5 million (approximately AUS$13.7 million) that were not replicated in QE FY 2019 and the translation effect of the weaker Australian dollar between the periods, as discussed above. In local Australian dollars, revenues between the periods decreased by AUS$6.9 million, primarily in the ~~utilities, construction, industrial, mining~~transportation and ~~special events~~utilities sectors, which ~~increased between the periods~~decreased by ~~$4.2 million,~~an aggregate AUS$10.8 million; and was partially offset by a ~~decrease~~total increase of ~~$0.9~~AUS$3.3 million in the ~~transportation sector.~~construction and moving (removals) and storage sectors.

Sales and leasing revenues represented 33% and 67% of totalnon-manufacturing revenues, respectively, in QE FY ~~2018,~~2019, compared to ~~35%~~40% and ~~65%~~60% of totalnon-manufacturing revenues, respectively in QE FY ~~2017.~~2018.

Non-manufacturing sales during QE FY ~~2018~~2019 amounted to ~~$27.3~~$31.8 million, compared to ~~$23.6~~$36.0 million during QE FY ~~2017;~~2018; representing ~~an increase~~a decrease of ~~$3.7~~$4.2 million, or ~~16%~~12%. This consisted of ~~increases~~an increase of ~~$1.8~~$3.6 million, or ~~approximately 15%~~27%, in our North American leasing operations, and a decrease of $7.8 million, or 35%, in sales in the Asia-Pacific ~~area and $1.9 million, or 16%, in our North American leasing operations.~~area. The ~~increase~~decrease in the Asia-Pacific area was comprised of ~~increases~~a decrease of ~~$2.5~~$8.2 million ($~~2.0~~3.5 million decrease due to lower unit sales, ~~$4.1~~$4.0 million ~~increase~~decrease due to ~~higher~~lower average prices and a ~~$0.4~~$0.7 million ~~increase~~decrease due to foreign exchange movements) in the CSC operations and ~~$(0.7)~~an increase of $0.4 million ($~~1.0~~16.7 million increase due to higher unit sales, $16.0 million decrease due to lower ~~unit sales~~average prices and a $0.3 million ~~increase~~decrease due to ~~higher average prices)~~foreign exchange movements) in the national accounts ~~group, and occurred primarily~~group. As discussed above, sales in the ~~utilities, industrial and special events sectors, which increased~~Asia-Pacific area decreased between the periods ~~by $2.3 million and was partially offset by a decrease of $0.8 million~~due to two large sales in the transportation ~~sector.~~and utilities sectors in QE FY 2018 ~~included one large sale~~that were not replicated in ~~the utilities sector totaling approximately $1.8 million (approximately AUS$2.3 million) and~~ QE FY ~~2017 had one large sale of $0.9 million (AUS$1.1 million) in~~2019 and the ~~transportation sector.~~weaker Australian dollar. In Australian dollars, total sales in the Asia-Pacific area ~~increased~~decreased by ~~11%~~30% in QE FY ~~2018~~2019 from QE FY ~~2017.~~2018, primarily in the transportation and utilities sectors, which decreased by an aggregate AUS$10.9 million; and was partially offset by an increase of AUS$2.2 million in the moving (removals) and storage sector. In our North American leasing operations, the sales increase in QE FY ~~2018~~2019 from QE FY ~~2017~~2018 was ~~primarily~~across most sectors, but particularly in the ~~oil~~commercial and ~~gas, mining, construction and services~~education sectors, which increased by ~~a total of $1.8~~an aggregate $2.0 million between the periods. The increase at Southern Frac was due primarily from sales of ~~portable liquid containment~~specialty tanks and ~~other steel-based products~~chassis, which increased by an aggregate $1.2 million in QE FY ~~2018~~2019 from QE FY ~~2017. Sales~~2018, offset somewhat by a reduction of ~~portable liquid containment tanks and other steel-based products increased by 113% and 72%, respectively,~~$0.7 million in ~~QE FY 2018 from QE FY 2017.~~the sales of frac tanks.

Leasing revenues totaled ~~$54.8~~$63.5 million in QE FY ~~2018,~~2019, an increase of ~~$10.9~~$9.5 million, or ~~25%~~18%, from ~~$43.9~~$54.0 million in QE FY ~~2017.~~2018. This consisted of increases of ~~$9.1~~$9.2 million, or ~~approximately 31%~~24%, in ~~our~~ North ~~American leasing operations~~America and ~~$1.8~~$0.3 million, or ~~12%~~2%, in the Asia-Pacific area. In Australian dollars, leasing revenues increased by 8%9% percent in the Asia-Pacific area in QE FY ~~2018~~2019 from QE FY ~~2017.~~2018.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 86% and 78%, respectively, during QE FY 2019, as compared to 86% and 77%, respectively, in QE FY 2018. The overall average utilization was 84% in both QE FY 2019 and QE FY 2018; but the average monthly lease rate of containers increased to AUS$163 in QE FY 2019 from AUS$160 in QE FY 2018, caused primarily by higher average lease rates in portable storage and building containers between the periods. In addition, the composite average monthly number of units on lease

was over 3,100 higher in QE FY 2019, as compared to QE FY 2018. Locally, in Australian dollars, leasing revenue remained constant or increased across most of the sectors, but particularly in the retail, consumer, industrial and construction sectors, which increased between the periods by an aggregate AUS$1.5million.

In our North American leasing operations, average utilization rates were 85%, 85%, 80%, 86% and 85% and average monthly lease rates were $125, $364, $1,012, $318 and $775 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during QE FY 2019; as compared to 81%, 83%, 79%, 80% and 83% and average monthly lease rates of $130, $345, $729, $294 and $770 for storage containers, office containers, frac tank containers, mobile offices and modular units in QE FY 2018, respectively. The average composite utilization rate was 83% QE FY 2019 and 78% in QE FY 2018, and the composite average monthly number of units on lease was over 8,600 higher in QE FY 2019 as compared to QE FY 2018. The increase in leasing revenues between the periods was across most sectors, but primarily in the oil and gas, commercial and construction sectors, which increased by an aggregate $7.9 million in QE FY 2019 from QE FY 2018. Excluding Lone Star, total leasing revenues of our North American leasing operations increased by $5.6 million, or approximately 20%, in QE FY 2019 from QE FY 2018.

Cost of Sales. Cost of sales from our lease inventories and fleet (which is the cost related to our sales revenues only and exclusive of the line items discussed below) decreased by $2.6 million from $25.9 million during QE FY 2018 to $23.3 million during QE FY 2019, and our gross profit percentage from thesenon-manufacturing sales deteriorated slightly to 27% in QE FY 2019 from 28% in QE FY 2018. Fluctuations in gross profit percentage between periods is not unusual as a significant amount of ournon-manufacturing sales are out of the lease fleet which, among other things, would have varying sales prices and carrying values. Cost of sales from our manufactured products totaled $2.3 million in QE FY 2019, as compared to $2.0 million in QE FY 2018, resulting in a gross margin gain of $0.4 million in QE FY 2019 versus $0.1 million in QE FY 2018. Increased manufacturing sales (including a favorable mix of higher margin specialty tanks and chassis) and improved production efficiency between the periods were the primary factors in the $0.3 million improvement in the gross margin.

Direct Costs of Leasing Operations and Selling and General Expenses.Direct costs of leasing operations and selling and general expenses increased by $4.2 million from $39.7 million during QE FY 2018 to $43.9 million during QE FY 2019. As a percentage of revenues, these costs also increased to 45% during QE FY 2019 from 43% in QE FY 2018. However, this increase in the percentage of operating costs between the periods was due primarily to the significant beneficial effect on the percentage in QE FY 2018 from the two large sales in the Asia-Pacific area discussed above rather than deterioration in QE FY 2019.

Depreciation and Amortization.Depreciation and amortization increased by $1.5 million to $11.0 million in QE FY 2019 from $9.5 million in QE FY 2018, most of it in the Asia-Pacific area, which increased by $1.1 million between the periods. Depreciation and amortization in our North American operations increased by $0.4 million in QE FY 2019 from QE FY 2018. The increases were primarily as a result of our increased investment in the lease fleet and business acquisitions.

Interest Expense. Interest expense of $8.9 million in QE FY 2019 decreased by $0.5 million from $9.4 million in QE FY 2018. In the Asia-Pacific area, QE FY 2019 interest expense was $1.5 million lower from QE FY 2018 due to lower average borrowings, a lower weighted-average interest rate between the periods and the translation effect of a weaker Australian dollar between the periods. The weighted-average interest rate was 8.9% (which does not include the effect of translation, interest rate swap contracts and options and the amortization of deferred financing costs) in QE FY 2019 versus 9.9% in QE FY 2018. In North America, QE FY 2019 interest expense increased by $1.0 million from QE FY 2018 due primarily to the weighted-average interest rate of 7.2% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in QE FY 2019 being higher than the 5.9% in QE FY 2018, offset somewhat by lower average borrowings between the periods.

Change in Valuation of Bifurcated Derivatives.QE FY 2019 and QE FY 2018 include anon-cash charge of $9.3 million and $1.7 million, respectively, for the loss on the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible Note (see Note 5 of Notes to Condensed Consolidated Financial Statements).

Foreign Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was 0.7834 at September 30, 2017, 0.7807 at December 31, 2017, 0.7411 at June 30, 2018 and 0.7055 at December 31, 2018. In QE FY 2018 and QE FY 2019, net unrealized and realized foreign exchange gains (losses) totaled $(348,000) and $24,000 and $(1,644,000) and $(112,000), respectively. In addition, in QE FY 2018 and QE FY 2019, net unrealized exchange gains on forward exchange contracts totaled $182,000 and $(34,000), respectively.

Income Taxes.Our income tax provision for QE FY 2019, which derived an effective tax rate of 68.6% on a pretax loss, was greater than the benefit that would have been derived from the U.S. federal statutory rate of 21% primarily as a result of nondeductible expenses for (i) the loss on the change in the valuation of the bifurcated derivatives in the Bison Capital Convertible Note and (ii) thenon-cash realized foreign exchange loss prior its conversion to equity. Our effective income tax rate was 21.4% in QE FY 2018 and was comprised of:

(i) A provision of $1.3 million to derive ayear-to-date interim effective income tax rate of 38.6%;

(ii) As a result of the enactment on December 22, 2017 of the Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the “Act”), a tax benefit of $0.7 million for, among other things, there-measurement of approximately $6.5 million for our estimated deferred tax assets and liabilities for temporary differences and NOL and FTC carryforwards reasonably estimated to be existing at December 22, 2017, and from the current statutory rate of 35% to the new corporate rate of either 28% (if the temporary timing differences are expected to roll off in FY 2018) or 21 percent (if the temporary timing differences and NOL carryforwards are expected to remain as of June 30, 2018). This estimated tax benefit was offset by approximately $5.2 million for both the estimated transition tax on accumulated foreign earnings and a valuation allowance that was established to offset previously recognized FTC carryforward deferred tax assets that we believe will not be realized, and other adjustments totaling approximately $0.6 million; and

(iii) A net tax charge of $0.2 million for excess tax benefits and forfeitures on equity compensation awards.

In both periods, the effective tax rate also differs from the U.S. federal tax rate because of state income taxes from the filing of tax returns in multiple U.S. states and the effect of doing business and filing income tax returns in foreign jurisdictions. QE FY 2019 included a tax benefit of $81,000 for equity plan activity that is currently recognized in the consolidated statements of operations.

Preferred Stock Dividends.In both QE FY 2019 and QE FY 2018, we paid dividends of $0.9 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

Net Income (Loss) Attributable to Common Stockholders.Net loss attributable to common stockholders was $5.1 million in QE FY 2019 versus net income of $2.1 million in QE FY 2018, a loss between the periods of $7.2 million. This was primarily due to thenon-cash charge for the change in the valuation of the stand-alone bifurcated derivative in the Bison Capital Convertible Note, lower operating profit in the Asia-Pacific area, unrealized foreign exchange losses and higher income taxes; offset somewhat by higher operating profit in North America and the Asia-Pacific area and reduced interest expense.

Six Months Ended December 31, 2018 (“FY 2019”) Compared to Six Months Ended December 31, 2017 (“FY 2018”)

Revenues.Revenues increased by $26.8 million, or 16%, to $195.8 million in FY 2019 from $169.0 million in FY 2018. This consisted of an increase of $32.0 million, or 33%, in revenues in our North American leasing operations, a decrease of $7.7 million, or 11%, in revenues in the Asia-Pacific area and an increase of $2.5 million, or 63%, in manufacturing revenues from Southern Frac. The effect of the average currency exchange rate of a weaker Australian dollar relative to the U.S. dollar in FY 2019 versus FY 2018 reduced the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during FY 2019 was $0.7243 U.S. dollar compared to $0.7794 U.S. dollar during FY 2018. In Australian dollars, total revenues in the Asia-Pacific area decreased by 5% in FY 2019 from FY 2018.

Excluding Lone Star (doing business solely in the oil and gas sector), total revenues of our North American leasing operations increased across most sectors by $24.0 million, or 30%, in FY 2019 from FY 2018; primarily in the industrial, commercial, construction, education, mining and oil and gas sectors, which increased by an aggregate $21.6 million between the periods. At Lone Star, revenues increased by $8.0 million, or 45%, from $17.9 million in FY 2018 to $25.9 million in FY 2019. The revenue decrease in the Asia-Pacific area occurred because FY 2018 included two large sales, one each in the transportation and utilities sectors, totaling approximately $10.5 million (approximately AUS$13.7 million) that were not replicated in FY 2019 and the translation effect of the weaker Australian dollar between the periods, as discussed above. In local Australian dollars, revenues between the periods decreased by AUS$4.2 million, primarily in the transportation and utilities sectors, which decreased by an aggregate AUS$8.8 million; and was partially offset by a total increase of AUS$3.4 million in the industrial and moving (removals) and storage sectors.

Sales and leasing revenues represented 36% and 64% of totalnon-manufacturing revenues, respectively, in FY 2019, compared to 37% and 63% of totalnon-manufacturing revenues, respectively in FY 2018.

Non-manufacturing sales during FY 2019 amounted to $67.5 million, compared to $61.4 million during FY 2018; representing an increase of $6.1 million, or 10%. This consisted of an increase of approximately $14.3 million, or approximately 56%, in our North American leasing operations and a decrease of $8.2 million, or 23%, in sales in the Asia-Pacific area. The decrease in the Asia-Pacific area was comprised of a decrease of

$8.5 million ($3.9 million decrease due to lower unit sales, $3.0 million decrease due to lower average prices and a $1.6 million decrease due to foreign exchange movements) in the CSC operations and an increase of $0.3 million ($15.9 million increase due to higher unit sales, $15.2 million decrease due to lower average prices and a $0.4 million decrease due to foreign exchange movements) in the national accounts group. As discussed above, sales in the Asia-Pacific area decreased between the periods due to two large sales in the transportation and utilities sectors in FY 2018 that were not replicated in FY 2019 and the weaker Australian dollar. In Australian dollars, total sales in the Asia-Pacific area decreased by 17% in FY 2019 from FY 2018, primarily in the transportation, utilities and consumer sectors, which decreased by an aggregate AUS$10.0 million; and was partially offset by an increase of AUS$2.4 million in the moving (removals) and storage sector. In our North American leasing operations, the sales increase in FY 2019 from FY 2018 was across most sectors, but particularly in the industrial, commercial and education, mining and oil and gas sectors, which increased by an aggregate $12.9 million between the periods. FY 2019 included four large sales aggregating $7.1 million, one in the industrial sector for $5.5 million, two in the education sector for $1.0 million and one in the mining sector for $0.6 million. The increase at Southern Frac was due primarily from sales of specialty tanks and chassis, which increased by an aggregate $4.1 million in FY 2019 from FY 2018, offset somewhat by a reduction of $1.6 million in the sales of frac tanks.

Leasing revenues totaled $121.8 million in FY 2019, an increase of $18.2 million, or 18%, from $103.6 million in FY 2018. This consisted of increases of $17.7 million, or 25%, in North America and $0.5 million, or 2%, in the Asia-Pacific area. In Australian dollars, leasing revenues increased by 9% percent in the Asia-Pacific area in FY 2019 from FY 2018.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 85% and ~~80%~~70%, respectively, during QE FY ~~2018,~~2019, as compared to ~~85%~~86% and ~~73%~~69%, respectively, in QE FY ~~2017.~~2018. The overall average utilization ~~increased to 84% in QE FY 2018 from~~was 82% in QEboth FY ~~2017;~~2019 and FY 2018; but the average monthly lease rate of containers ~~was~~increased to AUS$~~162~~163 in QEFY 2019 from AUS$159 in FY 2018, ~~versus AUS$156~~caused primarily by higher average lease rates in ~~QE FY 2017. The~~portable storage and building containers between the periods. In addition, the composite average monthly number of units on lease was over ~~500~~2,700 higher in QE FY ~~2018,~~2019, as compared to QE FY ~~2017. Leasing revenues~~2018. Locally, in Australian dollars, leasing revenue remained constant or increased inacross most of the sectors, but ~~primarily~~particularly in the ~~construction,~~ mining, transportation, consumer, industrial and ~~special events~~construction sectors, which increased ~~in total by $1.4 million~~ between the ~~periods.~~periods by an aggregate AUS$2.7 million.

In our North American leasing operations, average utilization rates were ~~74%~~82%, 86%, 81%, ~~82%, 80%~~86% and ~~84%~~85% and average monthly lease rates were ~~$118, $336, $805, $292~~$123, $361, $1,013, $311 and ~~$766~~$764 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during QE FY 2018; as compared to ~~73%~~78%, ~~76%~~82%, ~~49%~~75%, ~~77%~~81% and ~~81%~~83% and average monthly lease rates ~~were $117, $325, $541, $282~~of $124, $342, $712, $290 and ~~$775~~$769 for storage containers, office containers, frac tank containers, mobile offices and modular units in QE FY ~~2017,~~2018, respectively. The average composite

utilization rate was ~~76% QE~~82% FY ~~2018~~2019 and ~~73%~~78% in QE FY ~~2017,~~2018, and the composite average monthly number of units on lease was over ~~4,700~~7,400 higher in QE FY ~~2018~~2019 as compared to QE FY ~~2017.~~2018. The increase in leasing revenues between the periods was ~~primarily~~across most sectors, but particularly in the oil and gas, commercial ~~construction~~ and ~~industrial~~construction sectors, which increased by an aggregate ~~$9.0~~$15.5 million ~~between the periods.~~in FY 2019 from FY 2018. Excluding Lone Star, total leasing revenues of our North American leasing operations increased by ~~$3.3~~$9.7 million, or ~~14%~~18%, in QE FY ~~2018~~2019 from QE FY ~~2017.~~2018.

Cost of Sales. Cost of sales from our lease inventories and fleet (which is the cost related to our sales revenues only and exclusive of the line items discussed below) increased by ~~$2.7~~$5.8 million from ~~$17.0~~$44.3 million during QE FY ~~2017~~2018 to ~~$19.7~~$50.1 million during QE FY ~~2018,~~2019, and our gross profit percentage from thesenon-manufacturing sales ~~was~~deteriorated to 26% in FY 2019 from 28% in ~~both QE~~ FY ~~2018~~2018. Fluctuations in gross profit percentage between periods is not unusual as a significant amount of ournon-manufacturing sales are out of the lease fleet which, among other things, would have varying sales prices and ~~QE FY 2017.~~carrying values. Cost of sales from our manufactured products totaled ~~$2.1~~$5.4 million in QE FY ~~2018,~~2019, as compared to ~~$1.4~~$4.1 million in QE FY ~~2017,~~2018, resulting in a gross margin gain of ~~$0.2~~$1.1 million ~~during QE~~in FY ~~2018 and~~2019 versus a gross margin loss of ~~$0.4~~approximately $0.1 million in QE FY ~~2017. Southern Frac’s profit in QE FY 2018 versus~~2018. Increased manufacturing sales (including a loss during QE FY 2017 was due primarily to the lack of production in QE FY 2017 from our portable liquid containment tanks and other steel-based products and sales mix. A greater amount of portable liquid containment tanks were sold out of inventory in QE FY 2018, and because these units had been written down to net realizable value, the gross profit effect was minimal. However, production levels on all steel-based products increased by 186% in QE FY 2018 from QE FY 2017 and included an increase in production and ultimate salefavorable mix of higher margin specialty ~~portable liquid containment tanks.~~tanks and chassis) and production levels, as well as improved efficiency, between the periods were the primary factors in the $1.2 million improvement in the gross margin.

Direct Costs of Leasing Operations and Selling and General Expenses.Direct costs of leasing operations and selling and general expenses increased ~~in the aggregate~~ by ~~$5.1~~$5.4 million from ~~$36.6~~$80.2 million during QE FY ~~2017~~2018 to ~~$41.7~~$85.6 million during QE FY ~~2018.~~2019. As a percentage of revenues, however, these costs decreased to ~~49%~~44% during QEFY 2019 from 47% in FY 2018 ~~from 53% in QE FY 2017~~ due ~~primarily~~ to the higher revenues being primarily driven by increases in revenues in North America and average units on lease and rates between the periods in both ~~North America and the Asia-Pacific area,~~geographic venues without a proportionate cost increase in ~~infrastructure costs.~~the infrastructure.

Depreciation and Amortization.Depreciation and amortization ~~of $10.0~~increased by $1.4 million to $21.1 million in QEFY 2019 from $19.7 million in FY 2018, ~~increased by $0.2~~with both geographic venues increasing $0.7 million ~~from $9.8 million in QE FY 2017, substantially all in North America due~~between the periods. The increases were primarily toas a result of our increased investment in the lease fleet and business acquisitions.

Interest Expense. Interest expense of ~~$9.4~~$17.5 million in QE FY ~~2018~~2019 increased by ~~$4.2~~$2.2 million from ~~$5.2~~$15.3 million in QE FY ~~2017.~~2018. In the Asia-Pacific area, ~~the higher~~FY 2019 interest expense ~~between the periods of $3.7~~was $1.4 million ~~was~~higher from FY 2018 due ~~primarily~~ to both higher average borrowings and a higher weighted-average interest rate between the periods, which more than offset the translation effect of ~~10.4%~~a weaker Australian dollar between the periods. The weighted-average interest rate was 9.4% (which does not include the effect of translation, interest rate swap contracts and options the accretion of interest and the amortization of deferred financing costs) in QE FY 2018 from the 4.9% in QE FY 2017, higher average borrowings and by a stronger Australian dollar between the periods. In North America, the higher interest expense of $0.5 million between the periods was due primarily to the weighted-average interest rate of 6.2% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in QE FY 2018 being higher than the 5.2% in QE FY 2017.

~~Foreign Currency Exchange and Other~~. The currency exchange rate of one Australian dollar to one U.S. dollar was $0.72068 at December 31, 2016, $0.76448 at March 31, 2017, $0.78068 at December 31, 2017 and $0.76858 at March 31, 2018. In QE FY 2017 and QE FY 2018, net unrealized and realized foreign exchange gains (losses) totaled $39,000 and $(33,000) and $(1,390,000) and $37,000, respectively. In addition, in QE FY 2017 and QE FY 2018, net unrealized exchange gains on forward exchange contracts totaled $(156,000) and $10,000, respectively. QE FY 2018 also includes a~~non-cash~~ ~~charge of $504,000 for the change in the valuation of the stand-alone bifurcated derivative in the Bison Capital Convertible Note (see Note 5 of Notes to Condensed Consolidated Financial Statements).~~

~~Income Taxes.~~~~Our income tax provision for QE FY 2018, which derived an effective tax rate of 68.1%, was comprised of:~~

~~(i) A net charge of $37,000 to derive ayear-to-date~~ ~~interim effective income tax rate of 46.6%; and~~

~~(iii) A net tax charge of $191,000 for the net of excess tax benefits and forfeitures on equity compensation awards (see Note 2 of Notes to Condensed Consolidated Financial Statements).~~

In addition to the above, the effective income tax rates in both periods (40.0% in QE FY 2017) differ from the U.S. federal tax rate of 28% in QE FY 2018 and 35% in QE FY 2017 primarily because of state income taxes from the filing of tax returns in multiple U.S. states and the effect of doing business and filing income tax returns in foreign jurisdictions; including some large nondeductible permanent differences in the Asia Pacific area, primarily the valuation of the embedded derivative.

~~Preferred Stock Dividends.~~~~In both QE FY 2018 and QE FY 2017, we paid $0.9 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.~~

~~Net Loss Attributable to Common Stockholders.~~Net loss attributable to common stockholders was $1.5 million in QE FY 2018 versus a net loss of $2.1 million in QE FY 2017, an improvement of approximately $0.6 million, primarily as a result of higher operating profit in both North America and the Asia-Pacific area; offset somewhat by higher interest expense, the charge for the change in the valuation of a stand-alone embedded derivative and an income tax charge versus an income tax benefit on the net loss in QE FY 2018.

~~Nine Months Ended March 31, 2018 (“FY 2018”) Compared to Nine Months March 31, 2017 (“FY 2017”)~~

~~The following compares our FY 2018 results of operations with our FY 2017 results of operations.~~

~~Revenues.~~Revenues increased by $49.8 million, or 24%, to $253.4 million in FY 2018 from $203.6 million in FY 2017. This consisted of increases of $30.0 million, or 25%, in revenues in our North American leasing operations, $17.3 million increase, or 21%, in revenues in the Asia-Pacific area and $2.5 million, or 66%, in manufacturing revenues from Southern Frac. The effect of the average currency exchange rate of the stronger Australian dollar relative to the U.S. dollar in FY 2018 versus FY 2017 enhanced the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during FY 2018 was $0.7816 U.S. dollar compared to $0.7551 U.S. dollar during FY 2017. In Australian dollars, total revenues in the Asia-Pacific area increased by 17% in FY 2018 from FY 2017.

Excluding Lone Star (doing business solely in the oil and gas sector), total revenues of our North American leasing operations increased by $14.3 million, or 13%, in FY 2018 from FY 2017, primarily in the commercial, construction, industrial, oil and gas, services and mining sectors, which increased by an aggregate $14.0 million between the periods, offset somewhat by reductions in primarily the education and retail sectors of $1.6 million. At Lone Star, revenues significantly increased by $15.7 million, or 125%, from $12.6 million in FY 2017 to $28.3 million in FY 2018. The revenue increase in the Asia-Pacific area occurred primarily in the utilities, transportation, construction, mining, wholesale and retail sectors, which increased between the periods by $20.2 million, and were partially offset by an aggregate decrease of $4.8 million in the oil and gas sector.

~~Sales and leasing revenues represented 36% and 64% of totalnon-manufacturing~~ ~~revenues, respectively, in FY 2018, compared to 35% and 65% of totalnon-manufacturing~~ ~~revenues, respectively in FY 2017.~~

~~Non-manufacturing~~ sales during FY 2018 amounted to $88.7 million, compared to $69.3 million during FY 2017; representing an increase of $19.4 million, or 28%. This consisted of increases of $14.3 million, or 40%, in sales in the Asia-Pacific area and $5.1 million, or 15%, in our North American leasing operations. The increase in the Asia-Pacific area was comprised of increases of $13.0 million ($2.9 million decrease due to lower unit sales, $14.6 million increase due to higher average prices and a $1.3 million increase due to foreign exchange movements) in the CSC operations and $1.3 million ($1.9 million decrease due to higher unit sales, $3.0 million increase due to higher average prices and a $0.2 million increase due to foreign exchange movements) in the national accounts group, and occurred primarily in the utilities, transportation, construction and mining sectors, which increased between the periods by $14.9 million and was partially offset by a decrease of $2.0 million in the oil and gas sector. FY 2018 included three large sales, one in the transportation sector and two in the utilities sector, totaling approximately $12.3 million (approximately AUS$16.0 million); whereas FY 2017 had two large sales, one each in the energy and transportation sectors, totaling $2.7 million (AUS$3.5 million). In Australian dollars, total sales in the Asia-Pacific area increased by 36% in FY 2018 from FY 2017. In our North American leasing operations, the sales increase in FY 2018 from FY 2017 was primarily in the commercial, construction, services and oil and gas sectors, which increased by a total of $4.9 million between the periods; offset somewhat by a decrease of $1.2 million in the education sector. The increase at Southern Frac was due primarily from sales of portable liquid containment tanks, which increased by 462% in FY 2018 from FY 2017, as sales on all other steel-based products decreased by 30% in FY 2018 from FY 2017.

Leasing revenues totaled $158.4 million in FY 2018, an increase of $27.9 million, or 21%, from $130.5 million in FY 2017. This consisted of increases of $24.9 million, or 29%, in North America and $3.0 million, or 7%, in the Asia-Pacific area. In Australian dollars, leasing revenues increased by 3% percent in the Asia-Pacific area in FY 2018 from FY 2017.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 85% and 72%, respectively, during FY 2018, as compared to 84% and 69%, respectively, in FY 2017. The overall average utilization increased to 83% in FY 2018 from 80% in FY 2017; and the average monthly lease rate of containers was AUS$160 in FY 2018 and AUS$158 in FY 2017. The composite average monthly number of units on lease was over 1,000 higher in FY 2018, as compared to FY 2017. The leasing revenue increase in the Asia-Pacific area occurred primarily in the construction, industrial, transportation and mining sectors, which increased between the periods by $4.5 million, and was partially offset by a decrease of $2.8 million in the oil and gas sector. FY 2017 included a recovery of $2.2 million (AUS$2.8) million from a lease settlement payment made by a former oil and gas customer.

In our North American leasing operations, average utilization rates were 77%, 82%, 77%, 81% and 83% and average monthly lease rates were $122, $339, $747, $291 and $767 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during FY 2018; as compared to 75%, 78%, 44%, 77% and 81% and average monthly lease rates were $123, $321, $505, $285 and $778 for storage containers, office containers, frac tank containers, mobile offices and modular units in FY 2017, respectively. The average composite utilization rate was 77% FY 2018 and 72% in FY 2017, and the composite average monthly number of units on lease was over 4,100 higher in FY 2018 as compared to FY 2017. The increase in leasing revenues between the periods was across the board, but primarily in the oil and gas, mining, commercial, construction and industrial sectors, which increased by $24.6 in FY 2018 from FY 2017. Excluding Lone Star, total leasing revenues of our North American leasing operations increased by $9.2 million, or 13%, in FY 2018 from FY 2017.

~~Cost of Sales.~~ Cost of sales from our lease inventories and fleet (which is the cost related to our sales revenues only and exclusive of the line items discussed below) increased by $15.0 million from $49.0 million during FY 2017 to $64.0 million during FY 2018, and our gross profit percentage from these~~non-manufacturing~~ sales deteriorated slightly to approximately 28% in FY 2018 from 29% in FY 2017. Cost of sales from our manufactured products totaled $6.3 million in FY 2018, as compared to $4.9 million in FY 2017, resulting in a slight gross profit in FY 2018 and a gross loss of $1.1 million during FY 2017.The low profitability or loss during both periods was due primarily to the lack of production from our portable liquid containment tanks and other steel-based products. A greater amount of portable liquid containment tanks were sold out of inventory in FY 2018, as compared to FY 2017, and because these units had been written down to net realizable value, the gross profit effect was minimal despite the increase in sales between the periods. In addition, production levels on all other steel-based products decreased by 34% in FY 2018 from FY 2017.

~~Direct Costs of Leasing Operations and Selling and General Expenses.~~Direct costs of leasing operations and selling and general expenses increased in the aggregate by $15.8 million from $106.1 million during FY 2017 to $121.9 million during FY 2018. As a percentage of revenues, however, these costs decreased to 48% during FY 2018 from 52% in FY 2017 due to the higher revenues being primarily driven by increases in average units on lease and rates between the periods in both North America and the Asia-Pacific area, without a proportionate increase in infrastructure costs.

~~Depreciation and Amortization.~~Depreciation and amortization increased by $0.5 million to $29.7 million in FY 2018 from $29.2 million in FY 2017, substantially all in the Asia-Pacific, which included the translation effect of a stronger Australian dollar to the U.S. dollar in FY 2018 versus FY 2017.

~~Interest Expense~~. Interest expense of $24.7 million in FY 2018 increased by $9.6 million from $15.1 million in FY 2017. In the Asia-Pacific area, the higher interest expense between the periods of $7.6 million was due primarily to a higher weighted-average interest rate of 10.0% (which does not include the effect of translation, interest rate swap contracts and options, the accretion of interest and the amortization of deferred financing costs) in FY ~~2018 from the 4.9%~~2019 versus 7.3% in FY ~~2017, higher average borrowings and by a stronger Australian dollar between the periods.~~2018. In North America, ~~the higher~~FY 2019 interest expense ~~of $2.0~~increased by $0.8 million ~~between the periods was~~from FY 2018 due primarily to the weighted-average interest rate of ~~6.0%~~6.9% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in FY ~~2018~~2019 being higher than the ~~5.0%~~6.0% in FY ~~2017.~~2018, offset somewhat by lower average borrowings between the periods.

Change in Valuation of Bifurcated Derivatives.FY 2019 and FY 2018 includenon-cash charges of $12.8 million and $1.7 million, respectively, for the loss on the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible Note.

Foreign ~~Currency~~ Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was ~~$0.74425 at June 30, 2016, $0.76448 at March 31, 2017, $0.76869~~0.7687 at June 30, 2017, 0.7807 at December 31, 2017, 0.7411 at June 30, 2018 and ~~$0.76858~~0.7055 at ~~March~~December 31, 2018. In FY ~~2017~~2018 and FY ~~2018,~~2019, net unrealized and realized foreign exchange gains (losses) totaled ~~$(506,000)~~$(1,332,000) and ~~$84,000,~~$(406,000) and ~~$(2,722,000)~~$(1,268,000) and ~~$(369,000)~~$(3,687,000), respectively. FY 2019 includes anon-cash realized foreign exchange loss of $3,554,000 related to the Bison Capital Convertible Note prior to its conversion to equity. In addition, in FY ~~2017~~2018 and FY ~~2018,~~2019, net unrealized exchange gains on forward exchange contracts totaled ~~$279,000~~$392,000 and ~~$402,000,~~$(127,000), respectively.

Income Taxes.Our income tax provision for FY ~~2018 also includes~~2019, which derived a~~non-cash~~ ~~charge~~ very high effective tax rate on a relatively small pretax income, was significantly greater than the provision that would have been derived from the U.S. federal statutory rate of ~~$2.2 million~~21% primarily as a result of nondeductible expenses for (i) the loss on the change in the valuation of the ~~stand-alone~~ bifurcated ~~derivative~~derivatives in the Bison Capital Convertible Note and (ii) thenon-cash realized foreign exchange loss prior its conversion to equity (see Note 5 of Notes to Condensed Consolidated Financial ~~Statements)~~statements).

~~Income Taxes.~~Our effective income tax ~~provision for~~rate was 12.0% in FY 2018 ~~which derived an effective tax rate of 24.9%,~~and was comprised of:

(i) A provision of $0.9 million for an interim effective income tax rate of 38.6%;

(ii) As a result of the enactment on December 22, 2017 of the Act, a tax benefit of $0.7 million for, among other things, there-measurement of approximately $6.5 million for our estimated deferred tax assets and liabilities for temporary differences and NOL and FTC carryforwards reasonably estimated to be existing at December 22, 2017, and from the current statutory rate of 35% to the new corporate rate of either 28% (if the temporary timing differences are expected to roll off in FY 2018) or 21 percent (if the temporary timing differences and NOL carryforwards are expected to remain as of June 30, 2018). This estimated tax benefit was offset by approximately $5.2 million for both the estimated transition tax on accumulated foreign earnings and a valuation allowance that was established to offset previously recognized FTC carryforward deferred tax assets that we believe will not be realized, and other adjustments totaling approximately $0.6 ~~million (see Note 2 of Notes to Condensed Consolidated Financial Statements);~~million; and

(iii) A net tax charge of ~~$0.3~~$0.1 million for ~~the net of~~ excess tax benefits and forfeitures on equity compensation ~~awards (see Note 2 of Notes to Condensed Consolidated Financial Statements).~~awards.

~~The effective income tax rate in FY 2017 was 40.0% and in~~In both periods, the effective tax rate also differs from the U.S. federal tax rate ~~of 28% in FY 2018 and 35% in FY 2017 primarily~~ because of state income taxes from the filing of tax returns in multiple U.S. states and the effect of doing business and filing income tax returns in foreign ~~jurisdictions; including some large nondeductible permanent differences~~jurisdictions. FY 2019 included a tax benefit of $195,000 for equity plan activity that is currently recognized in the ~~Asia Pacific area, primarily~~consolidated statements of operations. In addition, because it was not significant, FY 2018 included a $135,000 benefit for the ~~valuation~~cumulative-effect adjustment for previously unrecognized excess tax benefits and thetax-effect of the ~~embedded derivative.~~difference between the fair value estimate of awards historically expected to be forfeited and the fair value estimate of awards actually forfeited

Preferred Stock Dividends.In both FY ~~2018~~2019 and FY ~~2017,~~2018, we paid ~~$2.8~~dividends of $1.8 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

Noncontrolling Interests.~~Noncontrolling~~In FY 2018, prior to acquiring all the shares of Royal Wolf that we did not own, noncontrolling interests in the Royal Wolf ~~and, in FY 2017, Southern Frac results of~~ operations were ~~an increase~~a decrease of $0.8 million to ~~net income in FY 2018 and an increase to~~ the net ~~loss of $1.6 million in FY 2017.~~loss.

Net ~~Loss~~Income (Loss) Attributable to Common Stockholders.Net loss attributable to common stockholders was ~~$0.4~~$5.3 million in FY 2019 versus net income of $1.1 million in FY 2018, ~~versus~~ a ~~net~~ loss between the periods of ~~$4.9 million in FY 2017, an improvement of approximately $4.5 million,~~$6.4 million. This was primarily ~~as a result of higher operating profit in both North America and~~due to the ~~Asia-Pacific area; offset somewhat by higher interest expense and the charge~~non-cash charges for the change in the valuation of athe stand-alone ~~embedded derivative.~~bifurcated derivatives in the Bison Capital Convertible Note and realized foreign exchange loss prior to its conversion to equity, lower operating profit in the Asia-Pacific area, unrealized foreign exchange losses and higher interest expense and income taxes; offset somewhat by higher operating profit in North America.

Measures not in Accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”)

Earnings before interest, income taxes, impairment, depreciation and amortization and othernon-operating costs and income (“EBITDA”) and adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. These measures are not measurements of our financial performance under U.S. GAAP and should not be considered as alternatives to net income, income from operations or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating, investing or financing activities as a measure of liquidity. Adjusted EBITDA is anon-U.S. GAAP measure. We calculate adjusted EBITDA to eliminate the impact of certain items we do not consider to be indicative of the performance of our ongoing operations. You are encouraged to evaluate each adjustment and whether you consider each to be appropriate. In addition, in evaluating adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the expenses excluded from our presentation of adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual ornon-recurring items. We present adjusted EBITDA because we consider it to be an important supplemental measure of our performance and because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, many of which present EBITDA and a form of adjusted EBITDA when reporting their results. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or to reduce our indebtedness. We compensate for these limitations by relying primarily on our U.S. GAAP results and using adjusted EBITDA only supplementally. The following table shows our adjusted EBITDA and the reconciliation from net income (loss) (in thousands):

       Quarter Ended March 31,            Nine Months Ended March 31,
   2017    2018    2017    2018




Net income (loss)
     $ (1,071)      $ (563)      $ (445)      $ 1,567
Add (deduct) —

Provision (benefit) for income taxes
   (714)    228    (297)    519
Foreign currency exchange and other loss
   164    1,852    70    4,906
Interest expense
   5,249    9,398    15,096    24,667
Interest income
   (18)    (43)    (54)    (81)
Depreciation and amortization
   10,044    10,131    29,831    30,123
Share-based compensation expense
   651    889    842    2,986
Refinancing costs not capitalized
   437    —    437    —




Adjusted EBITDA
     $ 14,742      $ 21,892      $ 45,480      $ 64,687

     Quarter Ended December 31,      Six Months Ended December 31,




   2017    2018    2017    2018




Net income (loss)
   $                 2,974    $               (4,206)    $               2,130    $             (3,452)
Add (deduct) —

Provision for income taxes
   809    1,712    291    3,627
Change in valuation of bifurcated derivatives in Convertible Note
   1,717    9,332    1,717    12,780
Foreign currency exchange and other loss (gain)
   135    1,782    1,337    3,293
Interest expense
   9,447    8,868    15,269    17,493
Interest income
   (23)    (33)    (38)    (81)
Depreciation and amortization
   9,668    11,155    19,992    21,258
Share-based compensation expense
   439    663    2,097    1,341
Refinancing costs not capitalized
   —    448    —    448




Adjusted EBITDA
   $              25,166    $                 29,721    $             42,795    $             56,707

Our business is capital intensive, so from an operating level we focus primarily on EBITDA and adjusted EBITDA to measure our results. These measures provide us with a means to track internally generated cash from which we can fund our interest expense and fleet growth objectives. In managing our business, we regularly compare our adjusted EBITDA margins on a monthly basis. As capital is invested in our established branch (or CSC) locations, we achieve higher adjusted EBITDA margins on that capital than we achieve on capital invested to establish a new branch, because our fixed costs are already in place in connection with the established branches. The fixed costs are those associated with yard and delivery equipment, as well as advertising, sales, marketing and office expenses. With a new market or branch, we must first fund and absorb thestart-up costs for setting up the new branch facility, hiring and developing the management and sales team and developing our marketing and advertising programs. A new branch will have low adjusted EBITDA margins in its early years until the number of units on rent increases. Because of our higher operating margins on incremental lease revenue, which we realize on abranch-by-branch basis, when the branch achieves leasing revenues sufficient to cover the branch’s fixed costs, leasing revenues in excess of the break-even amount produce large increases in profitability and adjusted EBITDA margins. Conversely, absent significant growth in leasing revenues, the adjusted EBITDA margin at a branch will remain relatively flat on a period by period comparative basis.

Liquidity and Financial Condition

Though we have raised capital at the corporate level to primarily assist in the funding of acquisitions and lease fleet expenditures, as well as for general purposes, our operating units substantially fund their operations through secured ~~senior~~bank credit facilities that require compliance with various covenants. These covenants require our operating units to, among other things; maintain certain levels of interest or fixed charge coverage, EBITDA (as defined), utilization rate and overall leverage.

Asia-Pacific Leasing Senior Credit Facility

Our operations in the Asia-Pacific area had an AUS$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”). On October 26, 2017, RWH and its subsidiaries, Deutsche Bank AG, Sydney Branch (“Deutsche Bank”), CSL Fund (PB) Lux Sarl II, Aiguilles Rouges Lux Sarl II, Perpetual Corporate Trust Limited and P.T. Limited entered into a Syndicated Facility Agreement (the “Syndicated Facility Agreement”). Pursuant to the Syndicated Facility Agreement, the parties entered into a three-year, ~~$96,072,500~~$88,190,000 (AUS$125,000,000) senior secured credit facility (the “Deutsche Bank Credit Facility”) and repaid the ANZ/CBA Credit Facility on November 3, 2017. The Deutsche Bank Credit Facility ~~consists~~initially consisted of a ~~$15,371,600~~$14,110,000 (AUS$20,000,000) Facility A that will amortize semi-annually; a ~~$65,329,300~~$59,970,000 (AUS$85,000,000) Facility B that has no scheduled amortization; and a ~~$15,371,600~~$14,110,000 (AUS$20,000,000) revolving Facility C that is used for working capital, capital expenditures and general corporate purposes. On June 25, 2018, RWH and its subsidiaries amended the Deutsche Bank Credit Facility to increase by approximately $6,714,000 (NZ$10,000,000) the amount that can be borrowed under Facility B. The Deutsche Bank Credit Facility is secured by substantially all of the assets and by the pledge of all the capital stock of the subsidiaries of RWH ~~and its subsidiaries~~ and matures on November 3, 2020.

Bison Capital Notes

On September 19, 2017, Bison Capital, GFN, GFN U.S., GFNAPH and GFNAPF, entered into that certain Amended and Restated Securities Purchase Agreement dated September 19, 2017 (the “Amended Securities Purchase Agreement”). On September 25, 2017, pursuant to the Amended Securities Purchase Agreement, GFNAPH and GFNAPF issued and sold to Bison an 11.9% secured senior convertible promissory note dated September 25, 2017 in the original principal amount of $26,000,000 (the “Convertible Note”) and an 11.9% secured senior promissory note dated September 25, 2017 in the original principal amount of $54,000,000 (the “Senior Term Note” and collectively with the Convertible Note, the “Bison Capital Notes”). Net proceeds from the sale of the Bison Capital Notes were used to repay in full all principal, interest and other amounts due under the term loan to Credit Suisse (see Note 5 of Notes to ~~Condensed~~ Consolidated Financial Statements), to acquire the 49,188,526 publicly-traded shares of RWH not owned by the Company (see Note 4 of Notes to consolidated Financial Statements) and to pay all related fees and expenses. On September 6, 2018, we elected to force the conversion of the Convertible Note under its terms therein and delivered a notice to the holders requiring the conversion of the Convertible Note into 3,058,824 shares of the Company’s common stock effective September 10, 2018. The ~~Bison Capital Notes have~~Senior Term Note has a maturity of five years and ~~are~~is secured by a first priority security interest over all of the assets of GFN U.S., GFNAPH and GFNAPF, by the pledge by GFN U.S. of the capital stock of GFNAPH and GFNAPF and by of all of the capital stock of RWH. GFNAPF was dissolved in September 2018.

North America Senior Credit Facility

Our North America leasing(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined ~~$237,000,000~~$260,000,000 senior secured revolving credit facility, as amended, with a syndicate led by Wells Fargo Bank, National Association (“Wells Fargo”) that also includes East West Bank, CIT Bank, N.A., the Canadian Imperial Bank of Commerce (“CIBC”), KeyBank, National Association, Bank Hapoalim B.M. and Associated Bank, N.A. (the “Wells Fargo Credit Facility”). In addition, the Wells Fargo Credit Facility provides an accordion feature that may be exercised by the syndicate, subject to the terms in the credit agreement, to increase the maximum amount that may be borrowed by an additional $25,000,000. The Wells Fargo Credit Facility matures on March 24, 2022, assuming our publicly-traded senior notes due July 31, 2021(see below) are extended at least 90 days past this scheduled maturity date; otherwise the Wells Fargo Credit Facility would mature on March 24, 2021. There iswas also a separate loan agreement with Great American Capital Partners (“GACP”), where GACP provided a ~~First In Last Out~~First-In,Last-Out Term Loan (”(“FILO Term Loan”) within the Wells Fargo Credit Facility in the amount of $20,000,000 that had the same maturity date and ~~inclusive~~commenced principal amortization on October 1, 2018 at $500,000 per quarter. On December 24, 2018, the FILO Term Loan, with a principal balance of $19,500,000, including accrued interest and prepayment fee of one percent, was repaid in full and all terms and provisions relating to the ~~$237,000,000 total amount.~~FILO Term Loan were terminated within the credit agreement.

The Wells Fargo Credit Facility is secured by substantially all of the rental fleet, inventory and other assets of our North American leasing and manufacturing operations. The FILO Term Loan also contains a first priority lien on the same collateral, but on a “last out basis,” after all of the outstanding obligations to the primary lenders in the Wells Fargo Credit Facility have been satisfied. The Wells Fargo Credit Facility effectively

not only finances our North American operations, but also the funding requirements for the Series C Preferred Stock and the publicly-traded unsecured senior notes (see below). 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; and (b) $6,300,000 for the public offering of unsecured senior notes or the actual amount of annual interest required to be paid; provided 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.

Corporate Senior Notes

On June 18, 2014, we completed the sale of unsecured senior notes (the “Senior Notes”) in a public offering for an aggregate principal amount of $72,000,000. On April 24, 2017, we completed the sale of a“tack-on” offering of our publicly-traded Senior Notes for an aggregate principal amount of $5,390,000 that was priced at $24.95 per denomination. Net proceeds were $5,190,947, after deducting an aggregate original issue discount (“OID”) of $10,780 and underwriting discount of $188,273. In both offerings, we used at least 80% of the gross proceeds to reduce indebtedness atPac-Van and Lone Star under the Wells Fargo Credit Facility in order to permit the payment of intercompany dividends byPac-Van and Lone Star to GFN to fund the interest requirements of the Senior Notes. For the‘tack-on” offering, this amounted to $4,303,376 of the net proceeds. The Company has total outstanding publicly-traded Senior Notes in an aggregate principal amount of $77,390,000. The Senior Notes bear 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 our 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 our 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 our subsidiaries and are not guaranteed by any of our subsidiaries.

As of ~~March~~December 31, 2018, our required principal and other obligations payments for the twelve months ending ~~March~~December 31, 2019 and the subsequent three twelve-month periods are as follows (in thousands):


	Twelve Months Ending March 31,								Twelve Months Ending December 31,
	2019		2020		2021		2022		2019		2020		2021		2022

Deutsche Bank Credit Facility	$	5,149	$	5,149	$	73,103	$	—	$	3,311	$	1,670	$	67,843	$	—
Bison Capital Notes		—		—		—		—
Senior Term Note										—		—		—		60,463
Wells Fargo Credit Facility		1,000		2,000		2,000		190,631		—		—		—		197,458
Senior Notes		—		—		—		77,390		—		—		77,390		—
Other		4,193		1,949		660		226		4,635		1,517		559		641

	$	10,342	$	9,098	$	75,763	$	268,247	$	7,946	$	3,187	$	145,792	$	258,562

Reference is made to Notes 53 and 125 of Notes to ~~Condensed~~ Consolidated Financial Statements for further discussion of our equity transactions and senior and other debt, respectively, and Note 12 for a discussion of recent developments.

We currently do not pay a dividend on our common stock and do not intend on doing so in the foreseeable future.

Capital Deployment and Cash Management

Our business is capital intensive, and we acquire leasing assets before they generate revenues, cash flow and earnings. These leasing assets have long useful lives and require relatively minimal maintenance expenditures. Most of the capital we deploy into our leasing business historically has been used to expand our operations geographically, to increase the number of units available for lease at our branch and CSC locations and to add to the breadth of our product mix. Our operations have generally generated annual cash flow which would include, even in profitable periods, the deferral of income taxes caused by accelerated depreciation that is used for tax accounting.

As we discussed above, our principal source of capital for operations consists of funds available from the senior secured credit facilities at our operating units. We also finance a smaller portion of capital requirements through finance leases and lease-purchase contracts. We intend to continue utilizing our operating cash flow and net borrowing capacity primarily to expanding our container sale inventory and lease fleet through both capital expenditures and accretive acquisitions; as well as paying dividends on the Series C Preferred Stock and 8.00% Series B Cumulative Preferred Stock (“Series B Preferred Stock”), if and when declared by our Board of Directors. While we have always owned a majority interest in Royal Wolf and its results and accounts are included in our consolidated financial statements, access to its operating cash flows, cash on hand and other financial assets and the borrowing capacity under its senior credit facility are limited to us in North America contractually by its senior lenders and, to a certain extent, as a result of Royal Wolf having been a publicly-listed entity on the Australian Stock Exchange.

Supplemental information pertaining to our consolidated sources and uses of cash is presented in the table below (in thousands):


					Six Months Ended December 31,
	Nine Months Ended March 31,				2017		2018
	2017		2018
Net cash provided by operating activities	$	20,100	$	32,856	$	14,615	$	19,373


Net cash used in investing activities	$	(26,466)	$	(109,244)	$	(99,713)	$	(41,236)


Net cash provided by financing activities	$	5,015	$	81,182	$	83,796	$	6,176

Cash Flow for FY ~~2018~~2019 Compared to FY ~~2017~~2018

Operating activities. Our operations provided cash of ~~$32.9~~$19.4 million during FY 2019 versus $14.6 million during FY 2018, ~~versus $20.1 million during FY 2017,~~ an increase ~~in cash~~ of ~~$12.8~~$4.8 million between the periods. ~~Net~~The net loss in FY 2019 of $3.5 million was $5.6 million worse than the net income in FY 2018 of ~~$1.6~~$2.1 million ~~was $2.0 million higher than the net loss in FY 2017 of $0.4 million~~ and ~~in addition,~~ our management of operating assets and liabilities in FY ~~2018,~~2019, when compared to FY ~~2017,~~2018, further ~~increased~~reduced cash by ~~$6.4~~approximately $10.0 million. Historically we have experienced significant variations in operating assets and liabilities between periods when conducting our business in due course.~~Non-cash~~ ~~adjustments relating~~ In FY 2019, we invested more in our fleet inventory than in the prior year to ~~depreciation and amortization, including amortization~~anticipate the demands of ~~deferred financing costs, and accretion of interest also increased cash between~~our expanding business. In addition, the ~~periods by $1.3 million, from $31.2 million in FY 2017 to $32.5 million in FY 2018; and~~non-cash ~~share-based compensation~~gains on the bargain purchases of ~~$3.0 million~~two businesses, one in FY 2018 further increased operating cash flows by $2.2 million, when compared to $0.8 million in FY 2017. In the first quarter of FY 2017 a benefit of $0.7 million was recorded at Royal Wolf, primarily for the reversal of expenses recognized for unvested performance grants to key employees under its Long Term Incentive Planeach geographic venue (see Note 84 of Notes to Condensed Consolidated Financial Statements)~~. The~~, reduced our cash from operating activities by $1.8 million in FY 2019; andnon-cash ~~charge of $2.2 million for the change in the valuation of the stand-alone bifurcated derivative in the Convertible Note (see Note 5 of Notes to Condensed Consolidated Financial Statements) increased~~share-based compensation also decreased operating cash ~~flow~~flows by $0.8 million between the periods. Share-based compensation was $1.3 million in FY ~~2018 and, additionally,~~2019 versus $2.1 million in FY 2018. However, net unrealized gains and losses from foreign exchange and ~~derivative instruments~~foreign exchange contracts (see Note 6 of Notes to Condensed Consolidated Financial Statements), which affect operating results but arenon-cash addbacks for cash flow purposes, increased operating cash flow by ~~$2.1~~$0.5 million between the periods, from ~~$0.2~~a net cash increase of $0.9 million in FY ~~2017~~2018 to ~~$2.3~~a net cash increase of $1.4 million in FY 2019. Also, cash from operating activities between the periods significantly increased by $14.6 million as a result ofnon-cash adjustments of $12.8 million in FY 2019 relating to the change in the valuation of the stand-alone bifurcated derivatives in the Convertible Note, versus $1.7 million in FY 2018, and thenon-cash realized foreign exchange loss of $3.6 million prior to its conversion to equity in FY 2019 (see Note 5 of Notes to Condensed Consolidated Financial Statements). In addition,non-cash depreciation and amortization, including the amortization of deferred financing costs, accretion of interest and interest deferred on the Senior Term Note, increased cash between the periods by $3.7 million, from an aggregate $21.6 million in FY 2018 to $25.3 million in FY 2019; and operating cash flows were further enhanced by $4.7 million between the periods for deferred income taxes. Deferred income taxes increased cash in FY 2019 by $3.3 million versus reducing cash by $1.4 million in FY 2018. ~~Somewhat offsetting these increases were~~During FY 2019 and FY 2018, the net gain on the sales of lease fleet ~~which~~ reduced operating cash flows by ~~$5.4million in FY 2018 and by $1.6 million in FY 2017, a reduction of $3.8 million between the periods; and, additionally, operating cash flows were reduced bynon-cash~~ ~~adjustments for deferred income taxes in FY 2018 and FY 2017 of $1.4~~$4.2 million and ~~$1.6~~$3.7 million, respectively.

Investing Activities. Net cash used in investing activities was ~~$109.2~~$41.2 million during FY ~~2018,~~2019, as compared to ~~$26.5~~$99.7 million used during FY ~~2017,~~2018, resulting in a net ~~increase~~reduction in ~~the use of~~ cash used between the periods of ~~$82.7~~$58.5 million. In FY 2018, we used ~~$73.3~~$73.2 million and ~~$14.4~~$11.3 million of cash to acquire the noncontrolling interest of Royal Wolf and make ~~three~~two business acquisitions in North America, ~~respectively~~respectively; whereas in FY 2019 we made four business acquisitions, three in North America and one in the Asia-Pacific area, for $16.1 million (see Note 4 of Notes to Condensed Consolidated Financial Statements). ~~In FY 2017, we made three business acquisitions (two in North America and one in the Asia-Pacific area) for cash of $5.0 million.~~ Purchases of property, plant and equipment, or rolling stock (maintenance capital expenditures), were ~~$3.1~~$3.7 million in FY 2019 and $2.2 million in FY 2018, ~~and $2.6 million in FY 2017,~~ an increase of ~~$0.5~~$1.5 million. In both periods, proceeds from sales of property, plant and equipment were not significant. Net capital expenditures of lease fleet (purchases, net of proceeds from sales of lease fleet) were ~~$18.5~~$21.7 million in FY 2019 as compared to $12.9 million in FY 2018, ~~as compared to $18.6 million in FY 2017, a slight decrease~~an increase of ~~$0.1~~$8.8 million. In FY ~~2018,~~2019, net capital expenditures of lease fleet were approximately ~~$16.0~~$16.6 million in North America, as compared to ~~$8.3~~$11.6 million in FY ~~2017,~~2018, an increase of ~~$7.7~~$5.0 million; and net capital expenditures of lease fleet in the Asia Pacific totaled ~~$2.5~~$5.1 million in FY 2019, versus $1.3 million in FY 2018, ~~versus $10.3 million in FY 2017, a decrease~~an increase of ~~$7.8~~$3.8 million. The amount of cash that we use during any period in investing activities is almost entirely within management’s discretion and we have no significant long-term contracts or other arrangements pursuant to which we may be required to purchase at a certain price or a minimum amount of goods or services.

Financing Activities. Net cash provided from financing activities was ~~$81.2~~$6.2 million during FY ~~2018,~~2019, as compared to ~~$5.0~~$83.8 million provided during FY ~~2017, an increase~~2018, a decrease to cash between the periods of ~~$76.2~~$77.6 million. In FY 2018, we issued the Bison Capital Notes for proceeds totaling $80.0 million to, among other things, acquire the noncontrolling interest of Royal Wolf (see above) and repay the principal of $10.0 million due under the term loan to Credit Suisse (see Note 5 of Notes to Condensed Consolidated Financial Statements). ~~Cash of $2.8 million was used during both periods to pay dividends on primarily our Series C Preferred Stock and, in~~In FY ~~2018~~2019 and FY 2017, Royal Wolf paid a capital stock dividend of $1.0 million and $0.9 million, respectively, to the noncontrolling interests (see Note 3 of Notes to Condensed Consolidated Financial Statements). In FY 2018, ~~and FY 2017,~~ financing activities also included net borrowings of ~~$99.8~~$7.8 million and ~~$11.0~~$102.2 million, respectively, on existing credit facilities. These financing activities on our existing credit facilities were

primarily to ~~primarily~~ fund our investment in the container lease fleet, make business acquisitions, pay dividends and manage our operating assets and ~~liabilities and,~~liabilities. In addition, in FY 2018, $81.5 million was borrowed from the Deutsche Bank Credit Facility to repay the ANZ/CBA Credit Facility (see Note 5 of Notes to Condensed Consolidated Financial Statements). Deferred financing costs related to the Bison Capital Notes and Deutsche Bank Credit Facility totaled $3.8 million in FY 2018 versus $0.4 million in FY 2019, which primarily related to the Senior Notes consent solicitation and an amendment to Wells Fargo Credit Facility. Cash of $1.8 million was used during both periods to pay dividends on primarily our Series C Preferred Stock; and, in FY ~~2017,~~2018, Royal Wolf paid a capital stock dividend of $1.0 million to noncontrolling interests (see Note 3 of Notes to Condensed Consolidated Financial Statements). In FY 2019, we ~~paid deferred financing costs~~received proceeds of ~~$2.3~~$0.9 million ~~primarily for~~from issuances of common stock on the ~~amendment and extension~~exercises of ~~our senior secured credit facilities~~stock options versus only $34,000 in ~~both North America and the Asia-Pacific area.~~FY 2018.

Asset Management

Receivables and inventories were ~~$53.2~~$55.0 million and ~~$29.2~~$37.0 million at ~~March~~December 31, 2018 and ~~$44.4~~$50.5 million and ~~$29.6~~$22.7 million at June 30, ~~2017,~~2018, respectively. At ~~March~~December 31, 2018, DSO in trade receivables were 4739 days and 5245 days in the Asia-Pacific area and our North American leasing operations, as compared to 4935 days and 4647 days at June 30, ~~2017,~~2018, respectively. The $14.3 million increase in inventories was primarily due to the timing of receipts of sale and fleet units to fulfill known increased portable storage demand. Effective asset management is always a significant focus as we strive to apply appropriate credit and collection controls and maintain proper inventory levels to enhance cash flow and profitability.

The net book value of our total lease fleet was ~~$436.7~~$448.5 million at ~~March~~December 31, 2018, as compared to ~~$427.3~~$429.4 million at June 30, ~~2017.~~2018. At ~~March~~December 31, 2018, we had ~~85,741~~96,600 units ~~(24,321~~(24,564 units in retail operations in Australia, ~~8,107~~8,841 units in national account group operations in Australia, ~~10,363~~12,789 units in New Zealand, which are considered retail; and ~~42,950~~50,406 units in North America) in our lease fleet, as compared to ~~80,712~~85,812 units ~~(23,222~~(24,037 units in retail operations in Australia, ~~8,871~~8,046 units in national account group operations in Australia, ~~10,137~~10,222 units in New Zealand, which are considered retail; and ~~38,482~~43,507 units in North America) at June 30, ~~2017.~~2018. At those dates, ~~68,169~~81,046 units ~~(20,480~~(20,949 units in retail operations in Australia, ~~5,921~~7,746 units in national account group operations in Australia, ~~8,900~~10,891 units in New Zealand, which are considered retail; and ~~32,868~~41,460 units in North America); and ~~63,321~~68,712 units ~~(19,554~~(20,102 units in retail operations in Australia, ~~5,287~~5,038 units in national account group operations in Australia, ~~8,930~~8,705 units in New Zealand, which are considered retail; and ~~29,550~~34,867 units in North America) were on lease, respectively.

In the Asia-Pacific area, the lease fleet was comprised of ~~34,933~~38,535 storage and freight containers and ~~7,858~~7,659 portable building containers at ~~March~~December 31, 2018; and ~~34,625~~34,507 storage and freight containers and ~~7,605~~7,798 portable building containers at June 30, ~~2017.~~2018. At those dates, units on lease were comprised of ~~29,694~~34,384 storage and freight containers and ~~5,607~~5,202 portable building containers; and ~~28,280~~28,301 storage and freight containers and ~~5,491~~5,544 portable building containers, respectively.

In North America, the lease fleet was comprised of ~~29,054~~35,694 storage containers,~~4,095~~4,836 office containers (GLOs), ~~4,146~~4,219 portable liquid storage tank containers, ~~4,479~~4,484 mobile offices and ~~1,176~~1,173 modular units at ~~March~~December 31, 2018; and ~~25,175~~29,518 storage containers,~~3,552~~4,216 office containers (GLOs), ~~4,097~~4,147 portable liquid storage tank containers, ~~4,491~~4,447 mobile offices and ~~1,167~~1,179 modular units at June 30, ~~2017.~~2018. At those dates, units on lease were comprised of ~~21,392~~29,467 storage containers, ~~3,403~~3,976 office containers, ~~3,442~~3,260 portable liquid storage tank containers, ~~3,623~~3,765 mobile offices and ~~1,008~~992 modular units; ~~19,296~~and 23,040 storage containers, ~~2,885~~3,620 office containers, ~~2,672~~3,405 portable liquid storage tank containers, ~~3,732~~3,792 mobile offices and ~~965modular~~1,010modular units, respectively.

Contractual Obligations and Commitments

Our material contractual obligations and commitments consist of outstanding borrowings under our credit facilities discussed above and operating leases for facilities and office equipment. We believe that our contractual obligations have not changed significantly from those included in the Annual Report.

Off-Balance Sheet Arrangements

We do not maintain anyoff-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Seasonality

Although demand from certain customer segments can be seasonal, our operations as a whole are not seasonal to any significant extent. We experience a reduction in sales volumes at Royal Wolf during Australia’s summer holiday break frommid-December to the end of January, followed by February being a short working day month. However, this reduction in sales typically is counterbalanced by increased levels of lease revenues derived

from the removals, or moving and storage industry, which experiences its seasonal peak of personnel relocations during this same summer holiday break. Demand from some ofPac-Van’s customers can be seasonal, such as in the construction industry, which tends to increase leasing activity in the first and fourth quarters of our fiscal year; while customers in the retail industry tend to lease more units in the second quarter. Our business at Lone Star and Southern Frac, which has been significantly derived from the oil and gas industry, may decline in our second quarter months of November and December and our third quarter months of January and February, particularly if inclement weather delays, or suspends, customer projects.

Environmental and Safety

Our operations, and the operations of many of our customers, are subject to numerous federal and local laws and regulations governing environmental protection and transportation. These laws regulate such issues as wastewater, storm water and the management, storage and disposal of, or exposure to, hazardous substances. We are not aware of any pending environmental compliance or remediation matters that are reasonably likely to have a material adverse effect on our business, financial position or results of operations. However, the failure by us to comply with applicable environmental and other requirements could result in fines, penalties, enforcement actions, third party claims, remediation actions, and could negatively impact our reputation with customers. We have a company-wide focus on safety and have implemented a number of measures to promote workplace safety.

Impact of Inflation

We believe that inflation has not had a material effect on our business. However, during periods of rising prices and, in particular when the prices increase rapidly or to levels significantly higher than normal, we may incur significant increases in our operating costs and may not be able to pass price increases through to our customers in a timely manner, which could harm our future results of operations.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, were-evaluate all of our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods.

A comprehensive discussion of our critical and significant accounting policies and management estimates are included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operationsand in Note 2 of Notes to Consolidated Financial Statements in the Annual Report. Reference is also made to Note 2 of Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form10-Q for a further discussion of our significant accounting policies. We believe there have been no significant changes in our critical accounting policies, estimates and judgments since June 30, ~~2017.~~2018.

Impact of Recently Issued Accounting Pronouncements

Reference is made to Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements that could potentially impact us.

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges and other market-driven rates or prices. Exposure to interest rates and currency risks arises in the normal course of our business and we may use derivative financial instruments to hedge exposure to fluctuations in foreign exchange rates and interest rates. We believe we have no material market risks to our operations, financial position or liquidity as a result of derivative activities, including forward-exchange contracts.

Reference is made to Notes 5 and 6 of Notes to Condensed Consolidated Financial Statements for a discussion of our senior and other debt and financial instruments.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file and submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in accordance with SEC guidelines and that such information is communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rules13a-15(e) and15d-15(e) of the Exchange Act. In designing and evaluating our disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures in reaching that level of reasonable assurance.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as required by Exchange Act Rule13a-15(b), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level. There were no changes in our internal control over financial reporting during the quarter ended ~~March~~December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

In evaluating our forward-looking statements, readers should specifically consider risk factors that may cause actual results to vary from those contained in the forward-looking statements. Risk factors associated with our business are included, but not limited to, our Annual Report on Form10-K for the year ended June 30, ~~2017,~~2018, as filed with the SEC on September ~~8, 2017~~7, 2018 (“Annual Report”) and other subsequent filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

See Exhibit Index attached.

EXHIBIT INDEX


Exhibit Number		Exhibit Description

~~10.1~~ 3.1		~~Valenta Employment Agreement~~Amended and Restated Certificate of Designations, Preferences and Rights of 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock

4.1		Second Supplemental Indenture dated ~~January 1,~~as of October 31, 2018, between General Finance Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Registrant’s Form8-K filed ~~January 3,~~November 1, 2018)

~~10.2~~10.1		~~Miller Employment~~Amendment No. 8 to Amended and Restated Credit Agreement dated ~~January 1,~~as of December 24, 2018 among Wells Fargo Bank, National Association (“Wells Fargo”), East West Bank (“East West”), CIT Bank, N.A. (“CIT”), CIBC Bank USA (“CIBC”), Key Bank, National Association (“Key Bank”), Bank Hapoalim, B.M. (“BHI”), Associated Bank (“Associated” and collectively with Wells Fargo, East West, CIT, CIBC, Key Bank and BHI, the“Lenders”), Pac-Van, Inc., Lone Star Tank Rental Inc., GFN Realty Company, LLC and Southern Frac, LLC and the Guarantor Acknowledgement dated December 24, 2018 by PV Acquisition Corp. and GFN Manufacturing Corporation (incorporated by reference to Registrant’s Form8-K filed ~~January 3,~~December 26, 2018)

31.1		Certification of Chief Executive Officer Pursuant to SEC Rule13a-14(a)/15d-14(a)

31.2		Certification of Chief Financial Officer Pursuant to SEC Rule13a-14(a)/15d-14(a)

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350

101		The following materials from the Registrant’s Quarterly report on Form10-Q for the quarter ended ~~March~~December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income/Loss, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 11, 2019


~~Date: May 9, 2018~~						GENERAL FINANCE CORPORATION



By:		/s/ Jody E. Miller


					Jody E. Miller
						Chief Executive Officer



By:		/s/ Charles E. Barrantes


					Charles E. Barrantes
						Chief Financial Officer

4143


		Quarter Ended March 31,				Nine Months Ended March 31,
Type of Derivative Contract	Statement of Operations Classification	2017		2018		2017		2018


Swap Contracts	Unrealized gain (loss) included in interest expense	$	—	$	9	$	—	$	9


Forward Exchange Contracts	Unrealized foreign currency exchange gain (loss) and other	$	(156)	$	10	$	279	$	402