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, 2019

☐	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 every Interactive Data File required to be submitted 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 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~~	☐	~~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. ☐

Securities registered pursuant to Section 12(b) of the Act:


	Trading
Title of Each Class	~~Trading~~ Symbol(s)	Name of Each Exchange On Which Registered
~~Registered~~

Common Stock, $0.0001 par value	GFN	NASDAQ Global Market

9.00% Series C Cumulative Redeemable Perpetual Preferred Stock (Liquidation Preference $100 per share)	GFNCP	NASDAQ Global Market

8.125% Senior Notes due 2021	GFNSL	NASDAQ Global Market


		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.

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: ~~30,341,321~~30,605,348 shares outstanding as of ~~May 2, 2019.~~February 6, 2020.

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	29	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41	42

Item 4.	Controls and Procedures	41	42

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	42	43

Item 1A.	Risk Factors	42	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42	43

Item 3.	Defaults Upon Senior Securities	42	43

Item 4.	Mine Safety Disclosures	42	43

Item 5.	Other Information	42	43

Item 6.	Exhibits	42	43

SIGNATURES		44	45

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


	June 30, 2018		March 31, 2019
					June 30, 2019		December 31, 2019
Assets
Cash and cash equivalents	$	21,617	$	6,814	$	10,359	$	10,067
Trade and other receivables, net of allowance for doubtful accounts of $5,687 and $5,843 at June 30, 2018 and March 31, 2019, respectively		50,525		54,912
Trade and other receivables, net of allowance for doubtful accounts of $5,490 and $5,359 at June 30, 2019 and December 31, 2019, respectively						56,204		51,372
Inventories		22,731		36,962		29,077		31,436
Prepaid expenses and other		8,023		11,384		9,823		9,383
Property, plant and equipment, net		22,310		23,272		22,895		24,578
Lease fleet, net		429,388		455,634		456,822		466,274
Operating lease assets						—		70,149
Goodwill		109,943		111,403		111,323		111,275
Other intangible assets, net		25,150		22,774		21,809		19,743

Total assets	$	689,687	$	723,155	$	718,312	$	794,277


Liabilities
Trade payables and accrued liabilities	$	50,545	$	46,169	$	48,460	$	43,843
Income taxes payable		361		—		506		302
Unearned revenue and advance payments		19,226		21,825		22,671		29,028
Operating lease liabilities						—		70,727
Senior and other debt, net		427,218		424,670		411,141		398,423
Fair value of bifurcated derivatives in Convertible Note		15,583		18,041		19,782		14,888
Deferred tax liabilities		34,969		38,969		38,711		44,114

Total liabilities		547,902		549,674		541,271		601,325


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 at June 30, 2018 and $40,702 at March 31, 2019		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 30,341,321 at March 31, 2019		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, 2019 and December 31, 2019						40,100		40,100
Common stock, $.0001 par value: 100,000,000 shares authorized; 30,471,406 shares issued and outstanding at June 30, 2019 and 30,604,348 at December 31, 2019						3		3

Additionalpaid-in capital		139,547		184,141		183,933		183,555

Accumulated other comprehensive loss		(17,091)		(17,287)		(18,755)		(18,858)

Accumulated deficit		(21,278)		(33,980)		(28,744)		(12,352)


Total General Finance Corporation stockholders’ equity		141,281		172,977		176,537		192,448

Equity of noncontrolling interests		504		504		504		504


Total equity		141,785		173,481		177,041		192,952

Total liabilities and equity	$	689,687	$	723,155	$	718,312	$	794,277

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,
	2018		2019		2018		2019		2018			2019			2018			2019

Revenues
Sales:
Lease inventories and fleet	$	27,251	$	25,204	$	88,698	$	92,653	$	31,813		$	29,741		$	67,449		$	58,532
Manufactured units		2,349		1,432		6,332		7,941		2,671			1,583			6,509			3,756

		29,600		26,636		95,030		100,594		34,484			31,324			73,958			62,288
Leasing		54,821		59,573		158,438		181,400		63,509			60,785			121,827			119,718

		84,421		86,209		253,468		281,994		97,993			92,109			195,785			182,006


Costs and expenses
Cost of sales:
Lease inventories and fleet (exclusive of the items shown separately below)		19,729		18,100		64,039		68,210		23,289			21,600			50,110			41,816
Manufactured units		2,126		1,231		6,266		6,600		2,271			1,637			5,369			3,464
Direct costs of leasing operations		22,684		22,923		65,690		68,851		23,574			22,761			45,928			45,619
Selling and general expenses		18,996		20,647		56,224		60,310		20,350			20,483			39,663			41,138
Depreciation and amortization		10,014		10,897		29,671		31,952		11,054			8,609			21,055			18,020


Operating income		10,872		12,411		31,578		46,071		17,455			17,019			33,660			31,949

Interest income		43		27		81		108		33			180			81			366
Interest expense		(9,398)		(10,207)		(24,667)		(27,700)		(8,868	)		(6,930	)		(17,493	)		(14,254	)
Change in valuation of bifurcated derivatives in Convertible Note (Note 5)		(504)		(1,131)		(2,221)		(22,829)		(9,332	)		3,902			(21,698	)		4,894
Foreign exchange and other		(1,348)		(3)		(2,685)		(3,296)		(1,782	)		264			(3,293	)		(309	)

		(11,207)		(11,314)		(29,492)		(53,717)		(19,949	)		(2,584	)		(42,403	)		(9,303	)


Income (loss) before provision for income taxes		(335)		1,097		2,086		(7,646)		(2,494	)		14,435			(8,743	)		22,646

Provision for income taxes		228		1,429		519		5,056		1,712			3,994			3,627			6,254


Net income (loss)		(563)		(332)		1,567		(12,702)		(4,206	)		10,441			(12,370	)		16,392

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

Noncontrolling interests		—		—		801		—

Net income (loss) attributable to common stockholders									$	(5,128	)	$	9,519		$	(14,214	)	$	14,548


Net loss attributable to common stockholders	$	(1,485)	$	(1,254)	$	(398)	$	(15,468)


Net loss per common share:
Net income (loss) per common share:
Basic	$	(0.06)	$	(0.04)	$	(0.02)	$	(0.53)	$	(0.17	)	$	0.31		$	(0.50	)	$	0.48
Diluted		(0.06)		(0.04)		(0.02)		(0.53)		(0.17	)		0.30			(0.50	)		0.46


Weighted average shares outstanding:
Basic		26,301,706		29,975,295		26,210,697		29,084,947		29,907,679			30,253,075			28,649,451			30,229,164
Diluted		26,301,706		29,975,295		26,210,697		29,084,947		29,907,679			31,537,637			28,649,451			31,433,274

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 December 31,					Six Months Ended December 31,

	Quarter Ended March 31,				Nine Months Ended March 31,				2018			2019		2018			2019
	2018		2019		2018		2019

Net income (loss)	$	(563)	$	(332)	$	1,567	$	(12,702)	$	(4,206	)	$	10,441	$	(12,370	)	$	16,392

Other comprehensive income (loss):
Change in fair value change of interest rate swap, net of income tax effect of $78 and $34 and $7 and $94 in the quarter and nine months ended March 31, 2018 and 2019, respectively		(184)		(135)		(100)		(170)
Change in fair value change of interest rate swap, net of income tax effect of $46 and $88 and $246 and $16 in the quarter and six months ended December 31, 2018 and 2019, respectively										(21	)		421		(35	)		(37	)

Cumulative translation adjustment		(138)		416		3,491		(26)		(783	)		1,728		(442	)		(66	)


Total comprehensive income (loss)		(885)		(51)		4,958		(12,898)		(5,010	)		12,590		(12,847	)		16,289

Allocated to noncontrolling interests		—		—		(1,095)		—		—			—		—			—


Comprehensive income (loss) allocable to General Finance Corporation stockholders	$	(885)	$	(51)	$	3,863	$	(12,898)	$	(5,010	)	$	12,590	$	(12,847	)	$	16,289

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
— — 1,067 — — 1,067 591 1,658
Preferred stock dividends
— — (922) — — (922) — (922)
Dividends and distributions by subsidiaries
— — — — — — (1,038) (1,038)
Net loss
— — — — (43) (43) (801) (844)
Fair value change in derivative, net of related tax effect
— — — 64 — 64 61 125
Cumulative translation adjustment
— — — 2,043 — 2,043 1,835 3,878

Total comprehensive income
— — — — — 2,064 1,095 3,159

Acquisition of noncontrolling interest in Royal Wolf
— — 17,744 (4,748) — 12,996 (88,246) (75,250)

Balance at September 30, 2017
$ 40,100 $ 3 $ 138,259 $ (14,996) $ (13,015) $ 150,351 $ 504 $ 150,855

Share-based compensation
— — 439 — — 439 — 439
Preferred stock dividends
— — (922) — — (922) — (922)
Issuance of 22,500 shares of common stock on exercises of stock options
— — 34 — — 34 — 34
Grant of 35,430 shares of restricted stock
— — — — — — — —
Net income
— — — — 2,974 2,974 — 2,974
Fair value change in derivative, net of related tax effect
— — — (41) — (41) — (41)
Cumulative translation adjustment
— — — (249) — (249) — (249)

Total comprehensive income
— — — — — 2,684 — 2,684

Acquisition of noncontrolling interest in Royal Wolf
— — 523 — — 523 — 523

Balance at December 31, 2017
$ 40,100 $ 3 $ 138,333 $ (15,286) $ (10,041) $ 153,109 $ 504 $ 153,613

Share-based compensation
— — 889 — — 889 — 889
Preferred stock dividends
— — (922) — — (922) — (922)
Issuance of 40,863 shares of common stock on exercises of stock options
— — 127 — — 127 — 127
Grant of 42,773 shares of common stock
— — — — — — — —
Refund from terminated Royal Wolf LTI Plan trust
— — 338 — — 338 — 338
Net loss
— — — — (563) (563) — (563)
Fair value change in derivative, net of related tax effect
— — — (184) — (184) — (184)
Cumulative translation adjustment
— — — (138) — (138) — (138)

Total comprehensive loss
— — — — — (885) — (885)

Acquisition of noncontrolling interest in Royal Wolf
— — 13 — — 13 — 13

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


	Cumulative				Additional		Accumulated Other				Total General Finance Corporation		Equity of
	Preferred Stock		Common Stock		Paid-In Capital		Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ Equity		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		—		—		678		—		—		678		—		678

Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)

Issuance of 101,369 shares of common stock on exercises of stock options		—		—		634		—		—		634		—		634

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)		—		—		44,506		—		—		44,506		—		44,506

Net loss		—		—		—		—		(8,164)		(8,164)		—		(8,164)

Fair value change in derivative, net of related tax effect		—		—		—		(14)		—		(14)		—		(14)

Cumulative translation adjustment		—		—		—		341		—		341		—		341


Total comprehensive loss		—		—		—		—		—		(7,837)		—		(7,837)


Balance at September 30, 2018	$	40,100	$	3	$	184,443	$	(16,764)	$	(29,442)	$	178,340	$	504	$	178,844


Share-based compensation		—		—		663		—		—		663		—		663

Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)

Issuance of 41,094 shares of common stock on exercises of stock options		—		—		222		—		—		222		—		222

Grant of 24,855 shares of restricted stock		—		—		—		—		—		—		—		—

Net loss		—		—		—		—		(4,206)		(4,206)		—		(4,206)

Fair value change in derivative, net of related tax effect		—		—		—		(21)		—		(21)		—		(21)

Cumulative translation adjustment		—		—		—		(783)		—		(783)		—		(783)


Total comprehensive loss		—		—		—		—		—		(5,010)		—		(5,010)


Balance at December 31, 2018	$	40,100	$	3	$	184,406	$	(17,568)	$	(33,648)	$	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 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, 2018 $     40,100 $   3 $ 139,547 $ (17,091) $ (21,278) $ 141,281 $ 504 $         141,785
Share-based compensation
— — 678 — — 678 — 678
Preferred stock dividends
— — (922) — — (922) — (922)
Issuance of 101,369 shares of common stock on exercises of stock options
— — 634 — — 634 — 634
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)
— — 44,506 — — 44,506 — 44,506
Net loss
— — — — (8,164) (8,164) — (8,164)
Fair value change in derivative, net of related tax effect
— — — (14) — (14) — (14)
Cumulative translation adjustment
— — — 341 — 341 — 341

Total comprehensive loss
— — — — — (7,837) — (7,837)

Balance at September 30, 2018
$ 40,100 $ 3 $ 184,443 $ (16,764) $ (29,442) $ 178,340 $ 504 $ 178,844

Share-based compensation
— — 663 — — 663 — 663
Preferred stock dividends
— — (922) — — (922) — (922)
Issuance of 41,094 shares of common stock on exercises of stock options
— — 222 — — 222 — 222
Grant of 24,855 shares of restricted stock
— — — — — — — —
Net loss
— — — — (4,206) (4,206) — (4,206)
Fair value change in derivative, net of related tax effect
— — — (21) — (21) — (21)
Cumulative translation adjustment
— — — (783) — (783) — (783)

Total comprehensive loss
— — — — — (5,010) — (5,010)

Balance at December 31, 2018
$ 40,100 $ 3 $ 184,406 $ (17,568) $ (33,648) $ 173,293 $ 504 $ 173,797

Share-based compensation — — 655 — — 655 — 655
Preferred stock dividends — — (922) — — (922) — (922)
Issuance of 500 shares of common stock on exercises of stock options
— — 2 — — 2 — 2
Grant of 31,000 shares of restricted stock
— — — — — — — —
Vesting of restricted stock units into 66,073 shares of common stock
— — — — — — — —
Net loss — — — — (332) (332) — (332)
Fair value change in derivative, net of related tax effect
— — — (135) — (135) — (135)
Cumulative translation adjustment
— — — 416 — 416 — 416

Total comprehensive loss
— — — — — (51) — (51)

Balance at March 31, 2019
$     40,100 $     3 $ 184,141 $ (17,287) $ (33,980) $ 172,977 $ 504 $         173,481


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

Balance at June 30, 2019	$	40,100	$	3	$	183,933	$	(18,755)	$	(28,744)	$	176,537	$	504	$	177,041

Share-based compensation		—		—		683		—		—		683		—		683

Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)

Issuance of 47,500 shares of common stock on exercises of stock options		—		—		85		—		—		85		—		85

Forfeiture of 1,000 shares of restricted stock		—		—		—		—		—		—		—		—

Vesting of restricted stock units into 55,957 shares of common stock		—		—		—		—		—		—		—		—

Net income		—		—		—		—		5,951		5,951		—		5,951

Fair value change in derivative, net of related tax effect		—		—		—		(458)		—		(458)		—		(458)

Cumulative translation adjustment		—		—		—		(1,794)		—		(1,794)		—		(1,794)


Total comprehensive income		—		—		—		—		—		3,699		—		3,699


Balance at September 30, 2019	$	40,100	$	3	$	183,779	$	(21,007)	$	(22,793)	$	180,082	$	504	$	180,586


Share-based compensation		—		—		685		—		—		685		—		685

Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)

Issuance of 2,500 shares of common stock on exercises of stock options		—		—		13		—		—		13		—		13

Grant of 27,985 shares of restricted stock		—		—		—		—		—		—		—		—

Net income		—		—		—		—		10,441		10,441		—		10,441

Fair value change in derivative, net of related tax effect		—		—		—		421		—		421		—		421

Cumulative translation adjustment		—		—		—		1,728		—		1,728		—		1,728


Total comprehensive income		—		—		—		—		—		12,590		—		12,590


Balance at December 31, 2019	$	40,100	$	3	$	183,555	$	(18,858)	$	(12,352)	$	192,448	$	504	$	192,952

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, except shares)

(Unaudited)


	Nine Months Ended March 31,				Six Months Ended December 31,
	2018		2019		2018		2019

Net cash provided by operating activities (Note 10)	$	32,856	$	27,980	$	19,373	$	37,460


Cash flows from investing activities:
Business acquisitions, net of cash acquired		(14,397)		(17,077)		(16,060)		—
Acquisition of the noncontrolling interest in Royal Wolf		(73,251)		—
Proceeds from sales of property, plant and equipment		72		244		228		407
Purchases of property, plant and equipment		(3,068)		(5,855)		(3,660)		(5,279)
Proceeds from sales of lease fleet		19,505		20,635		13,797		14,938
Purchases of lease fleet		(37,979)		(53,681)		(35,503)		(32,805)
Other intangible assets		(126)		(105)		(38)		(104)

Net cash used in investing activities		(109,244)		(55,839)		(41,236)		(22,843)


Cash flows from financing activities:
Repayments of equipment financing activities		(384)		(342)
Repayment of Credit Suisse Term Loan		(10,000)		—
Repayment of ANZ/CBA Credit Facility		(81,521)		—
Proceeds from issuance of Bison Capital Notes		80,000		—
Repayment of Bison Capital Senior Term Note		—		(63,311)
Proceeds from senior and other debt borrowings, net		100,228		79,938
Repayments of equipment financing activities, net						(211)		(328)
Proceeds from (repayments of) senior and other debt borrowings, net						7,802		(12,849)
Deferred financing costs		(3,836)		(427)		(427)		—
Proceeds from issuances of common stock		161		858		856		98
Dividends and distributions by subsidiaries		(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		81,182		13,950
Net cash provided by (used in) financing activities						6,176		(14,923)


Net increase (decrease) in cash		4,794		(13,909)
Net decrease in cash						(15,687)		(306)

Cash and equivalents at beginning of period		7,792		21,617		21,617		10,359

The effect of foreign currency translation on cash		(1,759)		(894)		(82)		14


Cash and equivalents at end of period	$	10,827	$	6,814	$	5,848	$	10,067

Non-cash investing and financing activities:

The Company includednon-cash holdback and other adjustment amounts totaling ~~$919 and $1,734~~$1,634 as part of the consideration for business acquisitions during the ~~nine~~six months ended ~~March~~December 31, ~~2018 and 2019, respectively (see Note 4).~~2018.

On September 10, 2018, the Company forced the conversion of the aggregate $26,000 principal balance of the Bison Capital Convertible Note into 3,058,824 shares of GFN common stock (see Note 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, Royal Wolf Holdings Pty Ltd, an Australian corporation, which was dissolved in June 2019 (“RWH”), Royal Wolf Trading Australia Pty Limited, an Australian corporation, and ~~its Australian and~~Royalwolf Trading New Zealand ~~subsidiaries~~Limited, a New Zealand Corporation (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, ~~2018~~2019 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, ~~2019.~~2020. 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, ~~2018~~2019 filed with the Securities and Exchange Commission (“SEC”).

Unless otherwise indicated, references to “FY ~~2018”~~2019” and “FY ~~2019”~~2020” are to the ~~nine~~six months ended ~~March 31,~~December 30, 2018 and 2019, respectively. Certain amounts have been reclassified or revised to conform with the current year presentation. The most significant are the rates disclosed at June 30, 2019 in the table for the open interest rate swap contract in Note 6.

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, derivative liability valuation 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,

	2018		2019		2019		2019

Finished goods	$	18,971	$	32,255	$	25,576	$	26,564
Work in progress		1,442		2,389		1,275		2,357
Raw materials		2,318		2,318		2,226		2,515

	$	22,731	$	36,962	$	29,077	$	31,436

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,

			2018		2019				2019		2019

Land		—	$	2,168	$	2,168		—	$	2,168	$	2,168
Building and improvements		10 — 40 years		4,893		4,893		10 — 40 years		4,893		4,893
Transportation and plant equipment (including capital lease assets)		3 — 20 years		43,078		47,340
Transportation and plant equipment (including finance lease assets)								3 — 20 years		47,433		49,046
Furniture, fixtures and office equipment		3 — 10 years		11,959		13,251		3 — 10 years		13,786		14,075

				62,098		67,652				68,280		70,182
Less accumulated depreciation and amortization				(39,788)		(44,380)				(45,385)		(45,604)

			$	22,310	$	23,272			$	22,895	$	24,578

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, ~~2018~~2019 and ~~March~~December 31, 2019, the gross costs of the lease fleet were ~~$555,263,000~~$598,757,000 and ~~$595,586,000,~~$617,108,000, 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, ~~2018~~2019 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 lives (trademark and trade name) and finite lives (primarily customer base and lists,non-compete agreements and deferred financing costs), as follows (in thousands):


	June 30, 2018						March 31, 2019						June 30, 2019							December 31, 2019

	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	$	5,484	$	(453)	$	5,031	$	5,486	$	(453	)	$	5,033	$	5,486	$	(453	)	$	5,033
Customer base and lists		29,057		(14,150)		14,907		30,908		(16,396)		14,512		31,069		(17,174	)		13,895		30,753		(18,253	)		12,500
Non-compete agreements		9,005		(7,130)		1,875		8,774		(7,898)		876		8,782		(8,031	)		751		8,654		(8,094	)		560
Deferred financing costs		3,522		(1,905)		1,617		3,563		(2,174)		1,389		3,563		(2,290	)		1,273		3,521		(2,481	)		1,040
Other		4,683		(2,965)		1,718		4,303		(3,337)		966		4,328		(3,471	)		857		2, 803		(2,193	)		610

	$	51,753	$	(26,603)	$	25,150	$	53,032	$	(30,258)	$	22,774	$	53,228	$	(31,419	)	$	21,809	$	51,217	$	(31,474	)	$	19,743

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,

	2018		2019		2018		2019		Quarter Ended December 31,				Six Months Ended December 31,
									2018		2019		2018		2019
Basic		26,301,706		29,975,295		26,210,697		29,084,947		29,907,679		30,253,075		28,649,451		30,229,164
Dilutive effect of common stock equivalents		—		—		—		—		—		1,284,562		—		1,204,110

Diluted		26,301,706		29,975,295		26,210,697		29,084,947		29,907,679		31,537,637		28,649,451		31,433,274

Potential common stock equivalents totaling ~~5,681,959~~2,188,412 for both the quarter ended ~~March~~December 31, 2018 and FY ~~2018, respectively,~~2019, 756,411 and ~~2,167,371~~836,863 for ~~both~~ the quarter ended ~~March~~December 31, 2019 and FY ~~2019~~2020, respectively, and have been excluded from the computation of diluted earnings per share because the effect is anti-dilutive.

Revenue from Contracts with Customers

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 well as provides other ancillary products and services. The Company recognizes revenue in accordance with two accounting standards. The rental revenue portions of the Company’s revenues that arise from lease arrangements are accounted for in accordance with Topic ~~840,~~842,Leases. Revenues determined to benon-lease related, including sales of lease inventories and fleet, sales of manufactured units and rental-related services, 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 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 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.~~842. 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 ~~March~~December 31, ~~2019~~2018 and FY 2019 and the quarter ended ~~March~~December 31, ~~2018~~2019 and FY ~~2018~~2020 were ~~$13,855,000~~$14,811,000 and ~~$41,560,000~~$27,811,000 and ~~$12,114,000~~$14,242,000 and ~~$34,963,000,~~$27,752,000, respectively. A small portion of the rental-related services, include subleasing, special events leases and other miscellaneous streams, are accounted for under Topic ~~840.~~842. For contracts that have multiple performance obligations, revenue

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

is allocated to each performance obligation in the contract based on the Company’s best estimate of the 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 plus an estimated margin to each performance obligation.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The Company did not elect the practical expedient for lessor accounting.

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 inupon the ~~period billed.~~return of the equipment. Customers may utilize our equipment transportation services and otheron-site services in 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 ~~March~~June 30, 2019 and December 31, 2019, ~~and June 30, 2018,~~ we had approximately ~~$21,825,000~~$22,671,000 and ~~$19,226,000,~~$29,028,000, respectively, of unearned rental revenue included in ~~trade payables~~unearned revenue and ~~accrued liabilities~~advance payments in the accompanying consolidated balance sheets. Revenues of ~~$1,005,000~~$2,038,000 and ~~$11,405,000,~~$12,859,000, which were included in the unearned rental revenue balance at June 30, ~~2018,~~2019, were recognized during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, respectively. ~~We expect~~The Company’s uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future service revenues that are expected to ~~perform~~be recognized within twelve months, the ~~remaining~~Company has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is generally variable based on the costs ultimately incurred to provide those services and ~~recognize~~therefore we are applying the ~~unearned rental revenue generally within the next twelve months.~~optional exemption to omit disclosure of such amounts.

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

Sales of new modular buildings not manufactured by the Company are typically covered by warranties provided by the manufacturer of the products sold. Certain sales of manufactured units are covered by assurance-type warranties and as of ~~March~~June 30, 2019 and December 31, 2019, ~~and June 30, 2018,~~ the Company had ~~$238,556~~$219,331 and ~~$238,956,~~$206,260, respectively, of warranty reserve included in 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 March 31, 2019


   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
     $         14,386    $ -    $ 14,386    $ -    $ - $     14,386    $     10,818    $ 25,204
Sales manufactured units
   -    -    -    2,736    (1,304 ) 1,432    -    1,432


Totalnon-lease revenues
   14,386    -    14,386    2,736    (1,304 ) 15,818    10,818    26,636


Leasing:

Rental revenue
   22,519    5,906    28,425    -    (424 ) 28,001    12,872    40,873
Rental-related services
   9,289    5,508    14,797    -    - 14,797    3,903    18,700


Total leasing revenues
   31,808    11,414    43,222    -    (424 ) 42,798    16,775    59,573


Total revenues
     $ 46,194    $     11,414    $     57,608    $         2,736    $ (1,728 ) $ 58,616    $ 27,593    $ 86,209

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

   Nine Months Ended March 31, 2019


   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
     $ 53,949    $ -    $ 53,949    $ -    $ - $ 53,949    $ 38,704    $       92,653
Sales manufactured units
   -    -    -    10,670    (2,729 ) 7,941    -    7,941


Totalnon-lease revenues
   53,949    -    53,949    10,670    (2,729 ) 61,890    38,704    100,594


Leasing:

Rental revenue
   68,483    20,029    88,512    -    (1,515 ) 86,997    37,958    124,955
Rental-related services
   27,980    17,301    45,281    -    - 45,281    11,164    56,445


Total leasing revenues
   96,463    37,330    133,793    -    (1,515 ) 132,278    49,122    181,400


Total revenues
     $         150,412    $ 37,330    $     187,742    $ 10,670    $ (4,244 ) $     194,168    $     87,826    $ 281,994


   Quarter Ended March 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
     $ 13,667    $ 20    $ 13,687    $ -    $ - $ 13,687    $ 13,564    $ 27,251
Sales manufactured units
   -    -    -    3,272    (923 ) 2,349    -    2,349


Totalnon-lease revenues
   13,667    20    13,687    3,272    (923 ) 16,036    13,564    29,600


Leasing:

Rental revenue
   18,885    5,991    24,876    -    (304 ) 24,572    12,881    37,453
Rental-related services
   9,183    4,375    13,558    -    - 13,558    3,810    17,368


Total leasing revenues
   28,068    10,366    38,434    -    (304 ) 38,130    16,691    54,821


Total revenues
     $ 41,735    $ 10,386    $ 52,121    $ 3,272    $ (1,227 ) $ 54,166    $ 30,255    $ 84,421


   Nine Months Ended March 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
     $ 39,005    $ 20    $ 39,025    $ -    $ - $ 39,025    $ 49,673    $ 88,698
Sales manufactured units
   -    -    -    9,856    (3,524 ) 6,332    -    6,332


Totalnon-lease revenues
   39,005    20    39,025    9,856    (3,524 ) 45,357    49,673    95,030


Leasing:

Rental revenue
   56,201    16,075    72,276    -    (797 ) 71,479    37,433    108,912
Rental-related services
   26,214    12,199    38,413    -    - 38,413    11,113    49,526


Total leasing revenues
   82,415    28,274    110,689    -    (797 ) 109,892    48,546    158,438


Total revenues
     $ 121,420    $ 28,294    $ 149,714    $ 9,856    $ (4,321 ) $ 155,249    $ 98,219    $ 253,468

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Disaggregated Rental Revenue

In the following tables, total revenue is disaggregated by revenue type for the periods indicated. The tables also include a reconciliation of the disaggregated rental revenue to the Company’s reportable segments (in thousands).


	Quarter Ended December 31, 2019


	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	$	16,576	$	35	$	16,611	$	-	$	-	$	16,611	$	13,130	$	29,741
Sales manufactured units		-		-		-		3,068		(1,485)		1,583		-		1,583

Totalnon-lease revenues		16,576		35		16,611		3,068		(1,485)		18,194		13,130		31,324


Leasing:
Rental revenue		26,530		3,396		29,926		-		(103)		29,823		12,225		42,048
Rental-related services		10,919		3,230		14,149		-		-		14,149		4,588		18,737

Total leasing revenues		37,449		6,626		44,075		-		(103)		43,972		16,813		60,785


Total revenues	$	54,025	$	6,661	$	60,686	$	3,068	$	(1,588)	$	62,166	$	29,943	$	92,109


	Six Months Ended December 31, 2019


	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	$	33,494	$	35	$	33,529	$	-	$	-	$	33,529	$	25,003	$	58,532
Sales manufactured units		-		-		-		6,574		(2,818)		3,756		-		3,756

Totalnon-lease revenues		33,494		35		33,529		6,574		(2,818)		37,285		25,003		62,288


Leasing:
Rental revenue		51,784		7,878		59,662		-		(421)		59,241		24,168		83,409
Rental-related services		21,267		7,131		28,398		-		-		28,398		7,911		36,309

Total leasing revenues		73,051		15,009		88,060		-		(421)		87,639		32,079		119,718


Total revenues	$	106,545	$	15,044	$	121,589	$	6,574	$	(3,239)	$	124,924	$	57,082	$	182,006


	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

~~Recently Issued~~Implemented Accounting ~~Pronouncements~~Pronouncement – Lease Accounting

In February 2016, the FASB issued new lease accounting guidance in ASUNo. 2016-02,Leases (Topic 842). This new ~~guidance~~standard 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,~~accounting standard, as updated, ~~by ASUNo. 2018-01~~ ~~(January 2018), ASUNo. 2018-10~~ ~~(July 2018), ASUNo. 2018-11~~ ~~(July 2018), ASUNo. 2018-20~~ ~~(December 2018) and ASUNo. 2019-01~~ ~~(March 2019), would eliminate~~eliminated 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~~is substantially unchanged from the previous lease requirements under U.S. GAAP.

The Company adopted 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 applyeffective July 1, 2019, utilizing a modified retrospective transition ~~approach. During FY 2018,~~approach and using the ~~Company evaluated this~~effective date as the date of initial application. As a result, financial information was not updated and the disclosures required under the new accounting standard was not provided for dates 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~~periods before July 1, ~~2018. At that date,~~2019. The accounting standard included optional transitional practical expedients intended to simplify its adoption and the Company ~~had over 120 real estate leases worldwide and evaluated each~~adopted the package of ~~these leases in accordance with~~practical expedients, which allowed it to retain the ~~new~~historical lease ~~accounting standard~~classification determined under ~~ASC Topic 842.~~legacy U.S. GAAP, as well as relief from reviewing expired or existing contracts to determine if they contain leases. As of July 1, ~~2018, the Company estimates that~~2019, the right of use ~~asset~~assets (operating lease assets) related to beoperating leases recorded on ~~its~~the Company’s consolidated balance sheet ~~would be approximately $59.0 million to $68.3 million~~was $70,797,000 and ~~that~~ the related ~~liability would be approximately $60.8 million to $70.2 million related to operating leases.~~liabilities (operating lease liabilities) was $71,298,000. The difference between the right of use ~~asset~~assets and related lease ~~liability~~liabilities is predominantly deferred ~~rent~~rent. The adoption of this accounting standard did not materially impact the Company’s consolidated statements of operations or cash flows.

Operating Lease Assets and ~~other related~~Liabilities

We lease ~~expenses under~~our corporate office, certain administrative offices, and certain branch locations through the ~~new~~United States, Canada, and Asia-Pacific. Additionally, we lease equipment to support our operations, including vehicles and office equipment. For operating leases with an initial term greater than twelve months, the Company recognizes a lease asset and liability at commencement date. The Company follows the short-term lease exception as an accounting ~~standard. The difference in the ranges is due to the presumed renewal~~policy; therefore, leases with an original term of ~~leases whereby the exercise of the renewal option is twelve~~12 months or less ~~from July 1, 2018.~~are not recognized on the balance sheet. Lease assets are initially measured at cost, which includes the initial amount of the lease liability, plus any initial direct costs incurred, less lease incentives received. The liability is initially and subsequently measured as the present value of the unpaid lease payments. The Company ~~will continue to evaluate existing renewal options~~uses estimates and judgments in ~~excess~~the determination of ~~one year as to~~our lease liabilities. Key estimates and judgments include 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~~following:

Lease Discount Rate – The Company is ~~evaluating its proposed transition method~~required to discount unpaid fixed lease payments using the interest rate implicit in ~~accordance with guidance issued by~~ the ~~FASB in July 2018.~~lease or, if that rate cannot be readily determined, the incremental borrowing rate, which would typically be the senior lending borrowing rate at the respective geographic venue of the operating lease.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Lease Term – The Company ~~will continue this effort in a manner~~includes thenon-cancellable period of the lease, plus any additional periods covered by an extension of the lease that are reasonably certain to be ~~appropriately prepared for its implementation on or before July 1, 2019.~~exercised. The Company expects to exercise options to extend many operating leases after considering the relevant economic factors.

~~In August 2017, the FASB issued ASUNo. 2017-12,~~~~Derivatives and Hedging (Topic 815)~~Fixed Payments – ~~Targeted Improvements to Accounting for Hedging Activities~~~~. ASUNo. 2017-12~~ ~~expands hedge accounting for bothnon-financial~~ ~~and financial risk components and refines~~Lease payments included in the measurement of ~~hedge results~~the lease liability include fixed payments owed over the lease term, termination penalties if it is expected that a termination option will be exercised, the price to purchase the underlying asset if it is reasonably certain that the purchase option will be exercised and residual value guarantees, if applicable.

Future payments of operating lease liabilities at December 31, 2019 are as follows (in thousands):


Year Ending December 31,
2020	$	12,132
2021		10,541
2022		9,674
2023		8,169
2024		7,320
Thereafter		62,162

Total commitments		109,998
Less – interest		(39,271)

	$	70,727

Non-cancellable operating lease rentals at June 30, 2019 are payable as follows (in thousands):


Year Ending June 30,
2020	$	11,655
2021		9,198
2022		6,585
2023		4,992
2024		3,103
Thereafter		9,091

	$	44,624

Lease Expense and Activity

Payments due under lease contracts include fixed payments plus, if applicable, variable payments. Fixed payments under leases are recognized on a straight-line basis over the term of the lease, including any periods of free rent. Variable expenses associated with leases are recognized when they are incurred. For real estate leases, variable payments include such items as allocable property taxes, local sales and business taxes, and common area maintenance charges. Variable payments associated with equipment leases include such items as maintenance services provided by the lessor and local sales and business taxes. The Company has elected the accounting policy to not separate lease components andnon-lease components. All expenses for operating leases are recognized within the costs and expenses in ~~an attempt~~determining operating income.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to ~~better reflect an entity’s hedging strategies.~~ Condensed Consolidated Financial Statements

(Unaudited)

Operating lease activity during the quarter ended December 31, 2019 and FY 2020 was as follows (in thousands):


	Quarter Ended		Six Months Ended
	December 31, 2019
Expense:
Short-term lease expense	$	898	$	1,823
Fixed lease expense		3,267		6,490
Variable lease expense		467		730
Sublease income		(1,286)		(2,449)

	$	3,346	$	6,594


Cash paid and new or modified operating lease information:
Operating cash flows from operating leases	$	3,028	$	5,960
Net operating lease assets obtained in exchange for new or modified operating lease liabilities		2,328		3,709

The ~~ASU also amends~~weighted-average remaining lease term and weighted average discount rate for operating leases at December 31, 2019 was 12.7 years and 6.5%, respectively. Rental expense onnon-cancellable operating leases during 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~~quarter ended December ~~15,~~31, 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 ASU~~No. 2017-12~~ ~~will have on the consolidated financial statements~~FY 2019 was $3,321,000 and ~~related disclosures, but does not currently believe it will be significant.~~$6,601,000, respectively.

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, ~~2018~~2019 and ~~March~~December 31, 2019, 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, ~~2018~~2019 and ~~March~~December 31, 2019, 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. 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~~pari passu with the Series B Preferred Stock. The Series C Preferred Stock is listed on NASDAQ under the symbol “GFNCP.”

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Dividends

As of ~~March~~December 31, 2019, since issuance, dividends paid or payable totaled ~~$99,000~~$105,000 for the Series B Preferred Stock and dividends paid totaled ~~$20,850,000~~$23,580,000 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 2, 2017, Royal Wolf paid a special dividend of AUS$0.0265 per RWH share to shareholders of record on July 18, 2017. The consolidated financial statements reflect the amount of the dividend pertaining to the noncontrolling interest.

Note 4. Acquisitions

The Company can enhance its business and market share by entering into new markets in various ways, including starting up a new location or acquiring a business consisting of container, modular unit or mobile office assets of another entity. An acquisition generally provides the Company with operations that enables it to at least cover existing overhead costs and is preferable to astart-up or greenfield location. The ~~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 businesses from the dates of acquisition.

~~FY 2019 Acquisitions~~

On 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 and trailer business of Delmarva Trailer Sales and Rentals, Inc. (“Delmarva”) for approximately $358,000, which included a general indemnity and other adjustment amounts of $50,000. Delmarva is located in Elkridge (Baltimore/D.C. area), Maryland.

~~On September 21, 2018, the Company, throughPac-Van,~~ purchased the container and 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 and~~Opa-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 March 27, 2019, the Company, throughPac-Van,~~ purchased the container and trailer business of BBS Leasing, LLP (“BBS Leasing”) for approximately $1,117,000, which included a general indemnity and other adjustment amounts of $100,000. BBS Leasing is located in Fort Worth, Texas.

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

Spacewise NZ
July 2,
2018

Delmarva
August 9,
2018

Instant Storage
September 21,
2018

Tilton
October 5,
2018

BBS Leasing
March 27,
2019
       Total


Fair value of the net tangible assets acquired and liabilities assumed:

Trade and other receivables
     $ —    $ —    $ —    $ —    $ —    $ —
Inventories
   995    157    555    318    355    2,380
Property, plant and equipment
   79    38    465    329    —    911
Lease fleet
   6,834    893    3,013    2,775    234    13,749
Unearned revenue and advance payments
   (5)    (112)    (289)    (260)    (35)    (701)
Deferred income taxes
   (225)    —    —    —    —    (225)


Total net tangible assets acquired and liabilities assumed
   7,678    976    3,744    3,162    554    16,114
Fair value of intangible assets acquired:

Non-compete agreement
   67    7    44    42    15    175
Customer lists/relationships
   734    —    369    576    254    1,933
Other
   —    —    (306)    —    —    (306)
Goodwill
   —    —    717    1,651    294    2,662


Total intangible assets acquired
   801    7    824    2,269    563    4,464


Total purchase consideration
     $ 8,479    $ 983    $ 4,568    $ 5,431    $ 1,117    $ 20,578

~~The FY 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 as~~non-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 Instant Storage, Tilton and BBS Leasing acquisitions are deductible for U.S. income tax purposes.~~

The Company incurred approximately ~~$20,000~~$58,000 and ~~$84,000~~$123,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively; and ~~$162,000~~$189,000 and ~~$285,000~~$512,000 during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, 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.

There were no acquisitions consummated in FY 2020.

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 (subsequently replaced by GFNAPH) and its subsidiaries and a syndicate led by 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 senior secured credit facility and repaid the ANZ/CBA Credit Facility on November 3, 2017. The senior secured credit facility, as amended ~~on June 25, 2018 and March 22, 2019~~ (the “Deutsche Bank Credit Facility”), consists of a ~~$30,530,000~~$30,161,000 (AUS$43,000,000) Facility A that will amortize semi-annually; a ~~$82,714,000~~$81,715,000 (AUS$116,500,000) Facility B that has no scheduled amortization; a ~~$14,200,000~~$14,028,000 (AUS$20,000,000) revolving Facility C that is used for working capital, capital

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

expenditures and general corporate purposes; and a ~~$26,625,000~~$26,303,000 (AUS$37,500,000) revolving Term Loan Facility D. Borrowings bear interest at the three-month bank bill swap interest rate in Australia (“BBSY”), plus a margin of 4.25% to 5.50% per annum, as determined by net leverage, as defined. In addition, financing fees totaling ~~$2,038,700~~$2,014,000 (AUS$2,871,400) are payable quarterly in advance through maturity. The Deutsche Bank Credit Facility is secured by substantially all of the assets of Royal Wolf and by the pledge of all the capital stock of GFNAPH and its subsidiaries and matures on November 2, 2023. However, an exit fee of ~~$746,600~~$737,600 (AUS$1,051,600) is due on November 3, 2020 from the original November 3, 2017 financing. Prepayment penalties equal to 3.0% and 1.0% of any amount prepaid under the Deutsche Bank Credit Facility will expire on March 22, 2020 and 2021, with no prepayment penalty due after March 22, 2021.

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. The Deutsche Bank Credit Facility Agreement also requires Royal Wolf to prepay amounts borrowed by a percentage of excess cash flow, as defined, as of the end of each fiscal year, depending on the net leverage ratio as of such date.

At ~~March~~December 31, 2019, borrowings under the Deutsche Bank Credit Facility totaled ~~$140,785,000~~$129,558,000 (AUS$~~198,291,000)~~184,708,000), net of deferred financing costs of ~~$1,331,000~~$692,000 (AUS$~~1,874,000)~~987,000), and availability, including cash at the bank, totaled ~~$14,337,000~~$21,723,000 (AUS$~~20,193,000)~~30,970,000).

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The above amounts were translated based upon the exchange rate of one Australian dollar to ~~0.709992~~0.701415 U.S. dollar and one New Zealand dollar to ~~0.681018~~0.673579 U.S. dollar at ~~March~~December 31, 2019.

Bison Capital Notes

General

On September 19, 2017, Bison Capital Equity Partners V, L.P and its affiliates (“Bison Capital”), GFN, GFN U.S., GFNAPH and 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, 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 had a maturity of five years and bore interest from the date of issuance, payable quarterly in arrears beginning on January 2, 2018. The Bison Capital Notes may have been 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 have elected to defer interest under the Bison Capital Notes until the second anniversary of issuance. Interest on the Bison Capital Notes were payable in Australian dollars, but the principal was to be repaid in U.S. dollars. The Bison Capital Notes were 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 were subject to all terms, conditions and covenants set forth in the Amended Securities Purchase Agreement. The Amended Securities Purchase Agreement contained 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 have been repaid upon a change of control, as defined. GFNAPF was dissolved in September 2018.

On March 25, 2019, the Senior Term Note was repaid in full by proceeds totaling $63,311,000 (AUS$89,804,000) borrowed under the Deutsche Bank Credit Facility, which included interest the Company elected to defer and a prepayment fee of two percent.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Convertible Note

At any time prior to maturity, Bison Capital may 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 exceeds $600,000 over 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. Such a conversion threshold occurred on September 5, 2018, and on September 6, 2018 the Company elected to force the conversion 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 Convertible Note included a provision which required GFNAPH to pay Bison Capital, via the payment of principal, interest and the realized value of GFN common stock received after conversion of the Convertible Note, a minimum return of 1.75 times the original principal amount.Although the conversion feature of this minimum return provision was included in the conversion rights derivative discussed below, as a result of the forced conversion, this embedded derivative with a fair value of $8,918,000 at September 10, 2018 remains bifurcated and separately accounted for on a standalone basis. The Company determined the fair value using a valuation model and market prices and will reassess its value at each reporting period, with any changes in value reported in the accompanying consolidated statements of operations. At ~~March~~December 31, 2019, the fair value of this bifurcated derivative was ~~$18,041,000.~~$14,888,000. 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 after the conversion of the Convertible Note, then 50% of the interest 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 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 holders may satisfy such obligations by returning to GFN shares of GFN common stock with an aggregate value equivalent to the Price Increase.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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, met the definition of a derivative and none of the exceptions applied. As a result, the Company separately 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 determined the fair value of the bifurcated derivative using a valuation model and market prices and reassessed its fair value at the end of each reporting period, with any changes in value reported in the accompanying consolidated statements of operations. At September 10, 2018, prior to conversion, the fair value of this bifurcated derivative was $29,288,000, of which $20,370,000 was extinguished upon the conversion of the Convertible Note into shares of the Company’s common stock. The value of the shares received was recorded as a benefit to equity of $44,506,000 in FY 2019.

North America Senior Credit Facility

~~The~~At December 31, 2019, the North America leasing(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) ~~have~~had a combined $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 was also a separate loan agreement with Great American Capital Partners (“GACP”), where GACP provided aFirst-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 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 through borrowings from the Wells Fargo Credit Facility and all terms and provisions relating to the 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 the Company’s North American leasing and manufacturing operations. 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

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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 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, 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, 2019, borrowings and availability under the Wells Fargo Credit Facility totaled ~~$201,800,000~~$182,247,000 and ~~$51,937,000,~~$73,491,000, respectively.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to 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 $77,390,000 ($~~75,824,000~~76,184,000 and ~~$76,038,000,~~$76,473,000, net of unamortized debt issuance costs of ~~$1,566,000~~$1,206,000 and ~~$1,352,000,~~$917,000, at June 30, ~~2018~~2019 and ~~March~~December 31, 2019, 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~~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~~indenture entered into by and between the Company and the Trustee dated as of June 18, 2014 (the “Base 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 finance/capital lease (the classification of such leases changed upon adoption of a new accounting standard, as discussed in Note 2) agreement, or such new finance/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~~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. 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% (102.031% at December 31, 2019) 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.

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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 ~~March~~December 31, 2019, equipment financing and other debt totaled ~~$6,047,000.~~$10,145,000.

The Company was in compliance with the financial covenants under all its credit facilities as of ~~March~~December 31, 2019.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The weighted-average interest rate in the Asia-Pacific area was ~~10.4%~~8.9% and ~~10.0%~~9.4% during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively, and ~~13.7%~~7.7% and ~~10.7%~~7.8% during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, 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 ~~6.2%~~7.2% and 6.9% during the quarter ended December 31, 2018 and FY 2019, respectively, and 5.8% and 6.0% during the quarter ended ~~March 31, 2018 and FY 2018, respectively, and 6.2% and 6.7% during the quarter ended March~~December 31, 2019 and FY ~~2019,~~2020, 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, 2018		March 31, 2019			Balance Sheet Classification	June 30, 2019				December 31, 2019


Swap Contracts		Trade payables and accrued liabilities	$	223	$	451		Trade payables and accrued liabilities	$			2,233	$			2,286

Forward-Exchange Contracts		Trade and other receivables		298		20		Trade and other receivables		2				—

		Trade payables and accrued liabilities		—		5		Trade payables and accrued liabilities		18				278

Bifurcated Derivatives		Fair value of bifurcated derivatives in Convertible Note		15,583		18,041		Fair value of bifurcated derivatives in Convertible Note		19,782				14,888


									Quarter Ended December 31,				Six Months Ended December 31,
Type of Derivative Contract								Statement of Operations Classification	2018		2019		2018		2019

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

Forward Exchange Contracts								Unrealized foreign currency exchange gain (loss) included in “Foreign exchange and other”		(34)		(587)		(127)		(256)

Bifurcated Derivatives								Change in valuation of bifurcated derivatives in Convertible Note		(9,332)		3,902		(21,698)		4,894

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

Statement of Operations
Classification
           2018                    2019                    2018                    2019
Swap Contracts
   Unrealized gain (loss) included in “Interest expense”      $ 9    $ —      $ 9    $ —
Forward Exchange
Contracts
   Unrealized foreign currency exchange gain (loss) included in “Foreign exchange and other”    10    (152)    402    (279)
Bifurcated Derivatives
   Change in valuation of bifurcated derivatives in Convertible Note    (504)    (1,131)    (2,221)    (22,829)

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. InDuring the year ended June 30, 2017 (“FY 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 FYthe year ended June 30, 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 recorded in~~April 2019, this interest ~~expense an unrealized gain of $9,000 for the portion considered ineffective.~~swap contract was amended and extended. There was no ineffective portion recorded in FY ~~2019.~~2019 and FY 2020.

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, ~~2018~~2019 and ~~March~~December 31, 2019, the open interest rate swap contracts were as follows (dollars in thousands):


					June 30,		December 31,
	June 30,		March 31,
					2019		2019
	2018		2019
Notional amounts	$	37,055	$	35,450	$	70,287	$	70,142
Fixed/Strike Rates		7.414%		7.414%		7.42%		7.17%
Floating Rates		7.16%		6.821%		6.70%		6.14%
Fair Value of Combined Contracts	$	(223)	$	(451)	$	(2,233)	$	(2,286)

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.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The forward currency and 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, ~~2018,~~2019, there were 21 open forward exchange contracts that mature between July 2019 and October 2019; and, as of December 31, 2019, there were 32 open forward exchange contracts that mature between ~~July 2018~~January 2020 and ~~November 2018; and, as of March 31, 2019, there were 39 open forward exchange contracts that mature between~~ May ~~2019 and August 2019,~~2020, as follows (dollars in thousands):


					June 30,		December 31,
	June 30,		March 31,
					2019		2019
	2018		2019
Notional amounts	$	8,950	$	5,769	$	9,305	$	12,421
Exchange/Strike Rates (AUD to USD)		0.68142 – 0.80004		0.67233 – 0.72032		0.67313 – 0.72039		0.62766 – 0.69982

Fair Value of Combined Contracts	$	298	$	15	$	(16)	$	(278)

For the quarter ended ~~March~~December 31, 2018 and 2019, net unrealized and realized foreign exchange gains (losses) totaled ~~$(1,390,000)~~$(1,644,000) and ~~$37,000~~$(112,000) and ~~$6,602,000~~$881,000 and ~~$(6,454,000)~~$(28,000), respectively. In FY ~~2018~~2019 and FY ~~2019,~~2020, net unrealized and realized foreign exchange gains (losses) totaled ~~$(2,722,000)~~$(1,268,000)and ~~$(369,000)~~$(3,687,000), and ~~$5,334,000~~$(5,000) and ~~$(10,141,000)~~$(45,000), respectively.

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 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, which 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, ~~2018~~2019 was determined to be approximately ~~$423,029,000.~~$402,245,000 (carrying value of $406,499,000, gross of deferred financing costs of $2,314,000). The Company also determined that the fair value of its other debt of ~~$6,652,000~~$6,956,000 at June 30, ~~2018~~2019 approximated or would not vary significantly from their carrying values. The Company believes that market conditions at ~~March~~December 31, 2019 have not changed significantly from June 30, ~~2018.~~2019. 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, 2019 would not vary significantly from the proportion determined at June 30, ~~2018.~~2019.

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 and ~~$84,000~~$55,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively; and ~~$29,000~~$28,000 and ~~$84,000~~$55,000 during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, 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 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~~$38,000 and ~~$98,000~~$100,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively; and $38,000 and ~~$138,000~~$76,000 during the quarter ended ~~March~~December 31, 2019 and FY 2020, respectively. FY 2019 ~~respectively.~~includes an estimated property taxcatch-up of $29,000 paid directly to the landlord.

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. The 2006 Plan expired on June 30, 2016 and the 2009 Plan ~~will expire~~expired 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.”

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, 2019, ~~827,559~~670,489 shares remained available for grant.

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

At ~~March~~December 31, 2019, 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 ~~2019~~2020 follows:

   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
   3,249    10.34
Exercised
   (142,963)    6.01
Forfeited or expired
   (9,000)    6.50



Outstanding at March 31, 2019
   1,676,196    $ 4.39    5.3


Vested and expected to vest at March 31, 2019
   1,676,196    $ 4.39    5.3


Exercisable at March 31, 2019
   1,360,361    $ 4.03    4.6

~~At March 31, 2019, outstanding time-based options and performance-based options totaled 1,087,972 and 588,224, respectively. Also at that date,~~


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


Outstanding at June 30, 2019		1,676,196	$	4.39
Granted		—		—
Exercised		(50,000)		1.97
Forfeited or expired		—		—

Outstanding at December 31, 2019		1,626,196	$	4.47		4.6


Vested and expected to vest at December 31, 2019		1,626,196	$	4.47		4.6


Exercisable at December 31, 2019		1,446,395	$	4.17		4.2

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2019, outstanding time-based options and performance-based options totaled 1,057,972 and 568,224, respectively. Also at that date, the Company’s market price for its common stock was ~~$9.33~~$11.07 per share, which was above the exercise prices of ~~substantially~~ all of the outstanding stock options, and the intrinsic value of the outstanding stock options at that date was ~~$8,514,800.~~$11,208,000. Share-based compensation of ~~$8,755,000~~$9,263,000 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, 2019. At that date, there remains ~~$860,000~~$352,000 of unrecognized compensation expense to be recorded on a straight-line basis over the remaining weighted-average vesting period of ~~0.9~~0.3 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 and~~States. Effective July 1, 2017, the tax effect of the ~~difference between the~~ U.S. income tax deduction ~~and~~in excess of 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, 2018		379,850	$	6.32		211,763	$	7.15
Nonvested at June 30, 2019										329,417	$	8.28		139,187	$	7.62
Granted		55,855		11.11		20,590		10.34		27,985		10.72		—		—
Vested		(83,717)		5.46		(66,073)		7.15		(24,855)		12.07		(55,957)		7.35
Forfeited		—		—		(27,093)		7.15		(1,000)		10.34		—		—

Nonvested at March 31, 2019		351,988	$	7.29		139,187	$	7.62
Nonvested at December 31, 2019										331,547	$	8.19		83,230	$	7.81

Share-based compensation of ~~$4,168,000~~$5,271,000 and ~~$693,000~~$1,134,000 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, 2019. At that date, there remains ~~$1,843,000~~$1,969,000 for the restricted stock and ~~$861,000~~$400,000 for the RSU of unrecognized compensation expense to be recorded on a straight-line basis over the remaining vesting period of less than a year to ~~2.9~~2.45 years for the restricted stock and ~~1.3~~less than a year to ~~2.5~~1.7 years for the 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 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 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 the open market. In FY 2018, share-based compensation of $1,207,000 related to the LTI Plan had been recognized in the consolidated statements of

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

operations, with a corresponding benefit to equity. In addition, in the 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, ~~2018~~2019 and ~~March~~December 31, 2019, reported liability totaled ~~$691,000~~$1,335,000 and ~~$1,091,000,~~$1,069,000, 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.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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,
   2018    2019


Cash flows from operating activities

Net loss
   $ 1,567    $ (12,702)
Adjustments to reconcile net income loss to cash flows from operating activities:

Gain on sales and disposals of property, plant and equipment
   (11)    (76)
Gain on sales of lease fleet
   (5,407)    (6,219)
Gains on bargain purchases of businesses
   —    (1,767)
Unrealized foreign exchange loss (gain)
   2,722    (5,334)
Non-cash realized foreign exchange loss on forced conversion of Convertible Note
   —    3,554
Unrealized (gain) loss on forward exchange contracts
   (402)    279
Unrealized gain on interest rate swap
   (9)    —
Change in valuation of bifurcated derivatives in Convertible Note
   2,221    22,829
Depreciation and amortization
   30,123    32,256
Amortization of deferred financing costs
   1,822    2,446
Accretion of interest
   596    (529)
Interest deferred on Senior Term Note
   —    4,798
Share-based compensation expense
   2,986    1,996
Deferred income taxes
   (1,386)    4,233
Changes in operating assets and liabilities (excluding assets and liabilities from acquisitions):

Trade and other receivables, net
   (9,129)    (4,858)
Inventories
   851    (12,456)
Prepaid expenses and other
   (1,195)    (3,404)
Trade payables, accrued liabilities and unearned revenues
   6,668    3,225
Income taxes
   839    (291)


    Net cash provided by operating activities
     $           32,856    $         27,980

~~GENERAL FINANCE CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~


	Six Months Ended December 31,
	2018		2019
Cash flows from operating activities
Net income (loss)	$	(12,370)	$	16,392
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Gain on sales and disposals of property, plant and equipment		(75)		(177)
Gain on sales of lease fleet		(4,229)		(4,738)
Gains on bargain purchases of businesses		(1,767)		—
Unrealized foreign exchange loss		1,268		5
Non-cash realized foreign exchange loss on forced conversion of Convertible Note		3,554		—
Unrealized loss on forward exchange contracts		127		256
Change in valuation of bifurcated derivatives in Convertible Note		21,698		(4,894)
Depreciation and amortization		21,258		18,218
Amortization of deferred financing costs		1,420		927
Accretion of interest		(555)		—
Interest deferred on Senior Term Note		3,191		—
Share-based compensation expense		1,341		1,368
Deferred income taxes		3,251		5,242
Changes in operating assets and liabilities (excluding assets and liabilities from acquisitions):
Trade and other receivables, net		(4,852)		4,872
Inventories		(12,937)		(2,316)
Prepaid expenses and other		(2,488)		(588)
Trade payables, accrued liabilities and unearned revenues		2,011		3,091
Income taxes		(473)		(198)

Net cash provided by operating activities	$	19,373	$	37,460

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, operating lease assets and goodwill; as attributed to its geographic and operating segments (in thousands):

   Quarter Ended March 31, 2019
   North America
   Leasing
       Pac-Van    Lone Star    Combined    Manufacturing
Corporate
and
Intercompany
Adjustments
   Total    Asia – Pacific
Leasing        Consolidated




Revenues:
Sales      $ 14,386    $ -    $ 14,386    $ 2,736    $ (1,304)    $ 15,818        $ 10,818      $ 26.636
Leasing    31,808    11,414    43,222    -    (424)    42,798      16,775      59,573






     $ 46,194    $ 11,414    $ 57,608    $ 2,736    $ (1,728)    $ 58,616        $ 27,593      $ 86,209






Share-based compensation      $ 86    $ 9    $ 95    $ 7    $ 393    $ 495        $ 160      $ 655






Depreciation and amortization      $ 3,950    $ 2,403    $ 6,353    $ 101    $ (189)    $ 6,265        $ 4,733      $ 10,998






Operating income      $ 8,154    $ 2,708    $ 10,862    $ (91)    $ (1,484)    $ 9,287        $ 3,124      $ 12,411






Interest income      $ -    $ -    $ -    $ -    $ 3    $ 3        $ 24      $ 27






Interest expense      $ 2,680    $ 250    $ 2,930    $ 53    $ 1,716    $ 4,699        $ 5,508      $ 10,207






   Nine Months Ended March 31, 2019
   North America
   Leasing
   Pac-Van    Lone Star    Combined    Manufacturing    Corporate
and
Intercompany
Adjustments    Total    Asia – Pacific
Leasing        Consolidated




Revenues:
Sales      $ 53,949    $ -    $ 53,949    $ 10,670    $ (2,729)    $ 61,890        $ 38,704      $ 100,594
Leasing    96,463    37,330        133,793    -    (1,515)        132,278          49,122          181,400






     $     150,412    $     37,330    $ 187,742    $     10,670    $ (4,244)    $ 194,168        $ 87,826      $ 281,994






Share-based compensation      $ 234    $ 23    $ 257    $ 19    $ 1,176    $ 1,452        $ 544      $ 1,996

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


																			Quarter Ended December 31, 2019

																			North America

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

Revenues:

Sales																			$	16,576	$	35	$	16,611	$	3,068	$	(1,485)	$	18,194	$	13,130	$	31,324

Leasing																				37,449		6,626		44,075		-		(103)		43,972		16,813		60,785


																			$	54,025	$	6,661	$	60,686	$	3,068	$	(1,588)	$	62,166	$	29,943	$	92,109


Share-based compensation																			$	106	$	12	$	118	$	9	$	375	$	502	$	183	$	685


Depreciation and amortization	$	11,455	$	7,153	$	18,608	$	304		$	(562	)	$	18,350	$	13,906	$	32,256	$	4,079	$	1,653	$	5,732	$	97	$	(179)	$	5,650	$	3,056	$	8,706


Operating income	$	28,962	$	11,730	$	40,692	$	518		$	(4,116	)	$	37,094	$	8,977	$	46,071	$	13,412	$	650	$	14,062	$	(203)	$	(1,486)	$	12,373	$	4,646	$	17,019


Interest income	$	-	$	-	$	-	$	-		$	5		$	5	$	103	$	108	$	-	$	-	$	-	$	-	$	1	$	1	$	179	$	180


Interest expense	$	8,511	$	939	$	9,450	$	212		$	5,126		$	14,788	$	12,912	$	27,700	$	2,428	$	78	$	2,506	$	30	$	1,717	$	4,253	$	2,677	$	6,930


Additions to long-lived assets	$	39,112	$	1,771	$	40,883	$	20		$	(162	)	$	40,741	$	18,795	$	59,536


	At March 31, 2019

Long-lived assets	$	293,773	$	46,038	$	339,811	$	1,800		$	(9,693	)	$	331,918	$	146,988	$	478,906


Goodwill	$	64,336	$	20,782	$	85,118	$	-		$	-		$	85,118	$	26,285	$	111,403


	At June 30, 2018
Long-lived assets	$	264,651	$	49,352	$	314,003	$	2,083		$	(10,099	)	$	305,987	$	145,711	$	451,698

Goodwill	$	61,693	$	20,782	$	82,475	$	-		$	-		$	82,475	$	27,468	$	109,943


	Quarter Ended March 31, 2018
																			Six Months Ended December 31, 2019
	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	$	13,667	$	20	$	13,687	$	3,272		$	(923	)	$	16,036	$	13,564	$	29,600	$	33,494	$	35	$	33,529	$	6,574	$	(2,818)	$	37,285	$	25,003	$	62,288

Leasing		28,068		10,366		38,434		—			(304	)		38,130		16,691		54,821		73,051		15,009		88,060		-		(421)		87,639		32,079		119,718


	$	41,735	$	10,386	$	52,121	$	3,272		$	(1,227	)	$	54,166	$	30,255	$	84,421	$	106,545	$	15,044	$	121,589	$	6,574	$	(3,239)	$	124,924	$	57,082	$	182,006


Share-based compensation	$	69	$	11	$	80	$	11		$	684		$	775	$	114	$	889	$	211	$	24	$	235	$	18	$	749	$	1,002	$	366	$	1,368


Depreciation and amortization	$	3,546	$	2,309	$	5,855	$	117		$	(183	)	$	5,789	$	4,342	$	10,131	$	8,099	$	3,270	$	11,369	$	198	$	(358)	$	11,209	$	7,009	$	18,218


Operating income	$	6,611	$	2,688	$	9,299	$	(17	)	$	(1,588	)	$	7,694	$	3,178	$	10,872	$	25,190	$	2,541	$	27,731	$	(27)	$	(3,104)	$	24,600	$	7,349	$	31,949


Interest income	$	-	$	-	$	-	$	-		$	2		$	2	$	41	$	43	$	-	$	-	$	-	$	-	$	2	$	2	$	364	$	366


Interest expense	$	2,380	$	452	$	2,832	$	94		$	1,699		$	4,625	$	4,773	$	9,398	$	5,057	$	205	$	5,262	$	66	$	3,434	$	8,762	$	5,492	$	14,254


Additions to long-lived assets																			$	29,645	$	813	$	30,458	$	32	$	(313)	$	30,177	$	7,907	$	38,084

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)



																			At December 31, 2019

Long-lived assets																			$	318,076	$	42,843	$	360,919	$	1,541	$	(9,561)	$	352,899	$	137,953	$	490,852


Operating lease assets																			$	27,660	$	2,588	$	30,248	$	304	$	315	$	30,867	$	39,282	$	70,149


Goodwill																			$	64,525	$	20,782	$	85,307	$	—	$	—	$	85,307	$	25,968	$	111,275


																			At June 30, 2019

Long-lived assets																			$	301,233	$	44,694	$	345,927	$	1,707	$	(9,606)	$	338,028	$	141,689	$	479,717


Goodwill																			$	64,517	$	20,782	$	85,299	$	—	$	—	$	85,299	$	26,024	$	111,323


																			Quarter Ended December 31, 2018
	Nine Months Ended March 31, 2018
																			North America
	North America
																			Leasing
	Leasing
	Pac-Van		Lone Star		Combined		Manufacturing			Corporate and Intercompany Adjustments			Total		Asia – Pacific Leasing		Consolidated		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	$	17,105	$	-	$	17,105	$	3,617	$	(946)	$	19,776	$	14,708	$	34,484

Leasing		82,415		28,274		110,689		-			(797	)		109,892		48,546		158,438		34,261		13,102		47,363		-		(587)		46,776		16,733		63,509


	$	121,420	$	28,294	$	149,714	$	9,856		$	(4,321	)	$	155,249	$	98,219	$	253,468	$	51,366	$	13,102	$	64,468	$	3,617	$	(1,533)	$	66,552	$	31,441	$	97,993


Share-based compensation	$	242	$	31	$	273	$	37		$	1,355		$	1,665	$	1,321	$	2,986	$	74	$	7	$	81	$	6	$	384	$	471	$	192	$	663


Depreciation and amortization	$	10,542	$	6,840	$	17,382	$	452		$	(548	)	$	17,286	$	12,837	$	30,123	$	3,841	$	2,386	$	6,227	$	101	$	(189)	$	6,139	$	5,016	$	11,155


Operating income	$	20,627	$	5,328	$	25,955	$	(680	)	$	(3,929	)	$	21,346	$	10,232	$	31,578	$	11,079	$	4,149	$	15,228	$	121	$	(1,331)	$	14,018	$	3,437	$	17,455


Interest income	$	-	$	-	$	-	$	-		$	8		$	8	$	73	$	81	$	-	$	-	$	-	$	-	$	2	$	2	$	31	$	33


Interest expense	$	6,631	$	1,372	$	8,003	$	294		$	5,592		$	13,889	$	10,778	$	24,667	$	3,240	$	340	$	3,580	$	76	$	1,711	$	5,367	$	3,501	$	8,868


Additions to long-lived assets	$	25,355	$	2,973	$	28,328	$	5		$	(252	)	$	28,081	$	12,966	$	41,047

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


Revenues:

Sales	$	39,563	$	-	$	39,563	$	7,934	$	(1,425)	$	46,072	$	27,886	$	73,958

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


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


Share-based compensation	$	148	$	14	$	162	$	12	$	783	$	957	$	384	$	1,341


Depreciation and amortization	$	7,505	$	4,750	$	12,255	$	203	$	(373)	$	12,085	$	9,173	$	21,258


Operating income	$	20,808	$	9,022	$	29,830	$	609	$	(2,632)	$	27,807	$	5,853	$	33,660


Interest income	$	—	$	—	$	—	$	—	$	2	$	2	$	79	$	81


Interest expense	$	5,831	$	689	$	6,520	$	159	$	3,410	$	10,089	$	7,404	$	17,493


Additions to long-lived assets	$	25,997	$	1,501	$	27,498	$	5	$	(101)	$	27,402	$	11,761	$	39,163

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 ~~$923,000~~$946,000 and ~~$3,524,000~~$1,425,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively; and ~~$1,304,000~~$1,485,000 and ~~$2,729,000~~$2,818,000 during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, 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 ~~$271,000~~$554,000 and ~~$698,000~~$1,025,000 during the quarter ended ~~March~~December 31, 2018 and FY ~~2018,~~2019, respectively; and ~~$391,000~~$70,000 and ~~$1,416,000~~$355,000 during the quarter ended ~~March~~December 31, 2019 and FY ~~2019,~~2020, respectively.

Note 12. Subsequent Events

On ~~April 12, 2019,~~January 16, 2020, 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, 2019 through ~~April 29, 2019,~~January 30, 2020, and is payable on ~~April 30, 2019~~January 31, 2020 to holders of record as of ~~April 29, 2019.~~

~~On May 7, 2019, the Company, throughPac-Van,~~ ~~purchased the container and trailer business of Pier Mobile Storage, Inc. (“Pier Mobile”) for approximately $1,724,000. Pier Mobile operates from three locations in Kentucky.~~January 30, 2020.

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, ~~2018~~2019 (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, Royal Wolf Holdings Pty Ltd, an Australian corporation, which was dissolved in June 2019 (“RWH”), Royal Wolf Trading Australia Pty Limited, an Australian corporation, and ~~its Australian and~~Royalwolf Trading New Zealand ~~subsidiaries~~Limited, a New Zealand Corporation (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 (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, 2019, our two geographic leasing operations primarily lease and sell their products through 2324 customer service centers (“CSCs”) in Australia, 1415 CSCs in New Zealand, 6162 branch locations in the United States and three branch locations in Canada. At that date, we had ~~285~~280 and ~~673~~705 employees and ~~47,270~~46,455 and ~~51,487~~55,135 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 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, 2019 (“QE FY ~~2019”~~2020”) Compared to Quarter Ended ~~March~~December 31, 2018 (“QE FY ~~2018”~~2019”)

Revenues.Revenues ~~increased~~decreased by ~~$1.8~~$5.9 million, or 2%6%, to ~~$86.2~~$92.1 million in QE FY ~~2019~~2020 from ~~$84.4~~$98.0 million in QE FY ~~2018.~~2019. This consisted of ~~an increase~~a decrease of ~~$5.4~~$3.3 million, or ~~10%~~5%, in revenues in our North American leasing operations, a decrease of ~~$2.7~~$1.5 million, or 9%5%, in revenues in the Asia-Pacific area and a decrease of ~~$0.9~~$1.1 million, or ~~39%~~41%, 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 QE FY 2020 versus QE 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 QE FY ~~2019~~2020 was ~~$0.7126~~$0.6840 U.S. dollar compared to ~~$0.7862~~$0.7172 U.S. dollar during QE FY ~~2018.~~2019. In Australian dollars, total revenues in the Asia-Pacific area ~~increased~~decreased slightly by ~~approximately 1%~~less than one percent in QE FY ~~2019~~2020 from QE FY ~~2018.~~2019.

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 ~~$4.4~~$3.1 million, or ~~11%~~6%, in QE FY ~~2019~~2020 from QE FY ~~2018; particularly~~2019; primarily in the construction, commercial and ~~commercial~~retail sectors, which increased by an aggregate ~~$4.4~~$4.9 million between the ~~periods.~~periods; offset somewhat by decreases totaling $1.3 million in the industrial, education and services sectors. At Lone Star, revenues ~~increased~~decreased by ~~$1.0~~$6.4 million, or approximately ~~10%~~49%, from ~~$10.4~~$13.1 million in QE FY ~~2018~~2019 to ~~$11.4~~$6.7 million in QE FY ~~2019.~~2020. The revenue decrease in the Asia-Pacific area occurred primarily because ~~QE FY 2018 included one large sale in the utilities sector totaling approximately $1.8 million (approximately AUS$2.3 million) that was not replicated in QE FY 2019 and~~of the translation effect of the weaker Australian dollar between the periods, as discussed above. In local Australian dollars, ~~revenues~~revenue between the periods ~~increased~~decreased by AUS$~~0.2~~0.1 million, ~~primarily~~with decreases in the construction, consumer, moving (removals) and storage and utilities sectors aggregating AUS$4.1 million being substantially offset by increases in the transportation and ~~education~~government sectors ~~which increased by an aggregate~~totaling AUS$~~3.2 million; and was substantially offset by a total decrease of AUS$2.6 million in the utilities, special events and consumer sectors.~~3.9 million.

Sales and leasing revenues represented ~~30% and 70% of totalnon-manufacturing~~ ~~revenues, respectively, in QE FY 2019, compared to~~ 33% and 67% of totalnon-manufacturing revenues, respectively, in both QE FY ~~2018.~~2020 and QE FY 2019.

Non-manufacturing sales during QE FY ~~2019~~2020 amounted to ~~$25.2~~$29.7 million, compared to ~~$27.3~~$31.8 million during QE FY ~~2018;~~2019; representing a decrease of $2.1 million, or 8%7%. This consisted of ~~an increase~~a decrease of ~~$0.7~~$0.5 million, or 5%3%, in our North American leasing operations and a decrease of ~~$2.8~~$1.6 million, or ~~21%~~11%, in sales in the Asia-Pacific area. The ~~decrease in~~decreasein the Asia-Pacific area was comprised of a decrease of ~~$3.3~~$2.2 million ($~~1.8~~2.0 million decrease due to lower unit sales, ~~$0.5~~$0.2 million ~~decrease~~increase due to ~~lower~~higher average prices and a ~~$1.0~~$0.4 million decrease due to foreign exchange movements) in the CSC operations and an increase of ~~$0.5~~$0.6 million in the national accounts group ($~~0.8~~1.7 million decrease due to lower unit sales, $2.5 million increase due to higher ~~unit sales, $0.2 million decrease due to lower~~ average prices and a ~~$0.1~~$0.2 million decrease due to foreign exchange movements) ~~in the national accounts group. As discussed above,~~. The translation of sales in the Asia-Pacific area ~~decreased between the periods due to one large sale in the utilities sector during QE FY 2018 that~~ was ~~not replicated in QE FY 2019 and~~adversely impacted by the weaker Australian ~~dollar.~~dollar when comparing QE FY 2020 to QE FY 2019. In Australian dollars, total sales in the Asia-Pacific area decreased by ~~12%~~approximately 6% in QE FY ~~2019~~2020 from QE FY ~~2018,~~2019, primarily in the ~~utilities,~~consumer, construction, ~~consumer~~moving (removals) and ~~special events~~storage, defense and utilities sectors, which decreased by an aggregate AUS$~~3.6~~4.9 million; and was ~~partially~~ offset somewhat by an increase of AUS$~~2.5~~3.6 million in the ~~education and~~ transportation ~~sectors.~~sector. In our North American leasing operations, the sales ~~increase~~decrease in QE FY ~~2019~~2020 from QE FY ~~2018~~2019 was primarily in the industrial, government, education and ~~construction~~services sectors, which ~~increased~~decreased by an aggregate ~~$1.6~~$2.0 million between the periods; offset somewhat ~~by decreases~~be a total increase of $1.7 million in the ~~oil~~construction and ~~gas, mining, and services sectors, which decreased by a total of $0.9 million.~~commercial sectors. The decrease at Southern Frac was due primarily ~~due~~ from reduced sales of ~~specialty~~liquid containment tanks and chassis, which decreased by an aggregate ~~$1.0~~$1.6 million in QE FY ~~2019~~2020 from QE FY ~~2018.~~2019; offset somewhat by increases in trash hoppers and other totaling $0.5 million.

Leasing revenues totaled ~~$59.6~~$60.8 million in QE FY ~~2019, an increase~~2020, a decrease of ~~$4.8~~$2.7 million, or 9%4%, from ~~$54.8~~$63.5 million in QE FY ~~2018.~~2019. This consisted of ~~increases~~a decrease of ~~$4.7~~$2.8 million, or ~~12%~~6%, in North America and a slight increase of $0.1 million, or ~~approximately 1%,~~less than one percent, in the Asia-Pacific area. In Australian dollars, leasing revenues actually increased by ~~11%~~5% percent in the Asia-Pacific area in QE FY ~~2019~~2020 from QE FY ~~2018.~~2019.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 82% and ~~80%~~79%, respectively, during QE FY ~~2019,~~2020, as compared to ~~85%~~86% and ~~80%~~78%, respectively, in QE FY ~~2018.~~2019. The overall average utilization was ~~82%~~81% in QE FY ~~2019~~2020 and 84% in QE FY ~~2018;~~2019; but the average monthly lease rate of containers increased to AUS$~~166~~168 in QE FY ~~2019~~2020 from AUS$~~162~~163 in QE FY ~~2018,~~2019, caused primarily by higher average lease rates in portable storage and building containers between the periods. ~~In addition,~~However, the composite average monthly number of units

on lease was over ~~2,600 higher~~960 lower in QE FY ~~2019,~~2020, as compared to QE FY ~~2018.~~2019. Locally, in Australian dollars, leasing revenue remained constant or increased across most ~~of the~~ sectors in QE FY 2020 versus QE FY 2019, but particularly in the ~~transportation, construction,~~ consumer, education, government and ~~industrial~~moving (removals) and storage sectors, which increased between the periods by an aggregate AUS$~~1.7~~1.0 million.

In our North American leasing operations, average utilization rates were ~~76%~~79%, ~~83%~~80%, ~~74%~~57%, 84% and ~~84%~~82% and average monthly lease rates were ~~$113, $354, $921, $323~~$130, $394, $768, $370 and ~~$788~~$882 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during QE FY ~~2019;~~2020; as compared to ~~74%~~85%, ~~81%, 82%~~85%, 80%, 86% and ~~84%~~85% and average monthly lease rates ~~of $118, $336, $805, $292~~were $125, $364, $1,012, $318 and ~~$766~~$775 for storage containers, office containers, frac tank containers, mobile offices and modular units in QE FY ~~2018,~~2019, respectively. The average composite utilization rate was ~~79%~~75% QE FY ~~2019~~2020 and ~~76%~~83% in QE FY ~~2018,~~2019, and the composite average monthly number of units on lease was over ~~7,000 higher~~1,100higher in QE FY ~~2019~~2020 as compared to QE FY ~~2018.~~ 2019.The ~~increase~~decrease in leasing revenues between the periods was ~~across most sectors, but~~ primarily in the oil and gas ~~commercial, construction and retail sectors,~~sector, which ~~increased~~in QE FY 2020 was $6.4 million below QE FY 2019, substantially all attributable to Lone Star; but this decrease was partially offset by an aggregate ~~$4.6~~$3.6 million increase in QE FY 2019 from QE FY 2018. Excluding Lone Star, total leasing revenues of our North American leasing operations increased by approximately $3.7 million, or approximately 13%, in QE FY 2019 from QE FY 2018.the construction, industrial, commercial and retail sectors.

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 ~~$1.6~~$1.7 million from ~~$19.7~~$23.3 million during QE FY ~~2018~~2019 to ~~$18.1~~$21.6 million during QE FY ~~2019,~~2020, and our gross profit percentage from thesenon-manufacturing sales ~~was 28%~~remained constant at 27% during both periods. However, 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 ~~$1.2~~$1.6 million in QE FY 2020, as compared to $2.3 million in QE FY 2019, ~~as compared to $2.1~~resulting in a gross loss of under $0.1 million in QE FY ~~2018, resulting in~~2020 versus a gross margin ~~gain~~ of ~~$0.2~~$0.4 million in ~~both~~QE FY 2019. The gross loss in QE FY 2020 was due to the reduced sales discussed above and less than optimum production levels. In QE FY 2019, ~~and QE FY 2018~~the gross margin percentage was 15%.

Direct Costs of Leasing Operations and Selling and General Expenses.Direct costs of leasing operations and selling and general expenses ~~increased~~decreased by ~~$1.9~~$0.7 million from ~~$41.7~~$43.9 million during QE FY ~~2018~~2019 to ~~$43.6~~$43.2 million during QE FY ~~2019; and, as~~2020. As a percentage of revenues, these costs ~~also~~ increased to ~~51%~~47% during QE FY ~~2019~~2020 from ~~49%~~45% in QE FY ~~2018. The increase as a percentage of~~2019 due to our infrastructure not decreasing with the lower revenues. Lower leasing revenues ~~is more reflective of~~due primarily to the ~~impact of the reduced sales from~~soft oil and gas market in North America adversely impacted revenues during QE FY ~~2018 to QE FY 2019 as opposed to the operating infrastructure not proportionately increasing with the Company’s business growth.~~2020.

Depreciation and Amortization.Depreciation and amortization ~~increased~~decreased by ~~$0.9~~$2.5 million to ~~$10.9~~$8.6 million in QE FY ~~2019~~2020 from ~~$10.0~~$11.1 million in QE FY ~~2018.~~2019. The ~~increase between the periods~~decrease was in both geographic venues, ~~with~~$0.6 million in North America and $1.9 million in the Asia-Pacific area, ~~increasing~~impacted by ~~$0.4 million and North America increasing by $0.5 million, as a result~~the effect of ~~our increased investment~~certain intangible assets becoming fully amortized. The decrease in the ~~lease fleet and business acquisitions.~~Asia-Pacific also included the translation effect of a weaker Australian dollar to the U.S. dollar in QE FY 2020 versus QE FY 2019.

Interest Expense. Interest expense of ~~$10.2~~$6.9 million in QE FY ~~2019, increased~~2020 decreased by ~~$0.8~~$2.0 million from ~~$9.4~~$8.9 million in QE FY ~~2018.~~2019. In North America, QE FY 2020 interest expense decreased by $1.2 million from QE FY 2019 due primarily to the weighted-average interest rate of 5.8% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in QE FY 2020 being lower than the 7.2% in QE FY 2019. In the Asia-Pacific area, QE FY ~~2019~~2020 interest expense was ~~$0.7~~$0.8 million ~~higher~~lower from QE FY ~~2018~~2019 due ~~primarily~~ to both lower average borrowings and a ~~higher~~lower weighted-average interest rate between the periods, ~~offset somewhat by lower average borrowings and~~as well as the translation effect of a weaker Australian dollar between the periods. The weighted-average interest rate was ~~13.7%~~7.7% (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~~2020 versus ~~10.4%~~8.9% in QE FY 2018. In North America, QE FY 2019 interest expense increased slightly by $0.1 million from QE FY 2018 due primarily to higher average borrowings between the periods. The weighted-average interest rate (which does not include the effect of the accretion of interest and amortization of deferred financing costs) was 6.2% in both QE FY 2019 and QE FY 2018.2019.

Change in Valuation of Bifurcated Derivatives.~~QE FY 2019 and QE FY 2018 include~~QEFY 2020 includes anon-cash ~~charge~~benefit of ~~$1.1~~$3.9 million ~~and $0.5 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). versus a charge of $9.3 million in QE FY 2019.

Foreign Currency Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was ~~0.7807~~0.7029 at ~~December 31, 2017, 0.7686 at March 31,~~September 30, 2018, 0.7055 at December ~~31,~~30, 2018, 0.675382 at September 30, 2019 and ~~0.7099~~0.701415 at ~~March~~December 31, 2019. In QE FY ~~2018~~2019 and QE FY ~~2019,~~2020, net unrealized and realized foreign exchange gains (losses) totaled ~~$6,602,000~~$(1,644,000) and ~~$(6,454,000)~~$(112,000) and ~~$(1,390,000)~~$881,000 and ~~$37,000,~~$(28,000), respectively. In addition, in QE FY ~~2018~~2019 and QE FY ~~2019,~~2020, net unrealized exchange gains on forward exchange contracts totaled ~~$10,000~~$(34,000) and ~~$(152,000)~~$(587,000), respectively.

Income Taxes.Our income tax provision for QE FY 2020 and QE FY 2019, which derived ~~a very high~~an effective tax rate ~~on a pretax loss, was greater~~of 27.7% and 68.6%, respectively, differed from than ~~the benefit that would have been derived from~~ the U.S. federal statutory rate of 21% primarily as a result of nontaxable or nondeductible ~~expenses~~items 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 68.1%~~Additionally, in ~~QE FY 2018 and was comprised of:~~

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

~~(ii) A net tax charge of $191,000 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 ~~(28% in QE FY 2018)~~ 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 $67,000~~jurisdictions and for equity plan activity that is currently recognized in the consolidated statements of operations.

Preferred Stock Dividends.In both QE FY ~~2019~~2020 and QE FY ~~2018,~~2019, we paid dividends of $0.9 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

Net ~~Loss~~Income (Loss) Attributable to Common Stockholders.Net ~~loss~~income attributable to common stockholders was ~~$1.3~~$9.5 million in FY 2020 versus a net loss of $5.1 million in QE FY 2019, ~~versus $1.5 million in QE FY 2018, an~~a significant improvement ~~between the periods~~ of ~~$0.2~~approximately $14.6 million. This was primarily due to thenon-cash benefit for the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible Note of $3.9 million, versus a charge of $9.3 million in QE FY 2019, as well as lower interest expense and higher operating profit in the Asia-Pacific area; offset somewhat by the lower operating profit in North ~~America and reduced foreign exchange and other charges between the periods, substantially offset by increased interest expense and higher income taxes.~~America.

~~Nine~~Six Months Ended ~~March~~December 31, 2019 (“FY ~~2019”~~2020”) Compared to ~~Nine~~Six Months Ended ~~March~~December 31, 2018 (“FY ~~2018”~~2019”)

Revenues.Revenues ~~increased~~decreased by ~~$28.6~~$13.8 million, or ~~11%~~7%, to ~~$282.0~~$182.0 million in FY ~~2019~~2020 from ~~$253.4~~$195.8 million in FY ~~2018.~~2019. This consisted of ~~an increase~~a decrease of ~~$37.3~~$7.9 million, or ~~25%~~6%, in revenues in our North American leasing operations, a decrease of ~~$10.4~~$3.2 million, or ~~11%~~5%, in revenues in the Asia-Pacific area and ~~an increase~~a decrease of ~~$1.7~~$2.7 million, or ~~27%~~42%, 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~~2020 versus FY ~~2018~~2019 reduced the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during FY ~~2019~~2020 was ~~$0.7205~~$0.6848 U.S. dollar compared to ~~$0.7816~~$0.7243 U.S. dollar during FY ~~2018.~~2019. In Australian dollars, total revenues in the Asia-Pacific area ~~decreased~~actually increased slightly by 3%less than one percent in FY ~~2019~~2020 from FY ~~2018.~~2019.

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 ~~$28.3~~$3.0 million, or ~~23%~~3%, in FY ~~2019~~2020 from FY ~~2018;~~2019; primarily in the ~~industrial,~~construction, commercial ~~construction, education~~ and ~~oil and gas~~retail sectors, which increased by an aggregate ~~$24.0~~$10.4 million between the ~~periods.~~periods; offset somewhat by decreases totaling $7.0 million in the industrial, education and mining sectors. At Lone Star, revenues ~~increased~~decreased by ~~$9.0~~$10.9 million, or ~~32%~~42%, from ~~$28.3~~$25.9 million in FY ~~2018~~2019 to ~~$37.3~~$15.0 million in FY ~~2019.~~2020. The revenue decrease in the Asia-Pacific area occurred primarily because FY 2018 included three large sales, one in the transportation and two in the utilities sectors, totaling approximately $12.3 million (approximately AUS$16.0 million) that were not replicated in FY 2019 andof the translation effect of the weaker Australian dollar between the periods, as discussed above. In local Australian dollars, ~~revenues~~revenue between the periods ~~decreased~~actually increased by just under AUS$~~4.0~~0.1 million, primarily in the ~~utilities sector,~~mining, government, education, transportation and industrial sectors, which ~~decreased~~increased by ~~an aggregate~~ AUS$~~8.7~~7.4 million; ~~and was partially~~substantially offset by ~~a total increase of~~decreases totaling AUS$~~4.1~~7.0 million in the ~~education and~~construction, consumer, defense, moving (removals) and storage and utilities sectors.

Sales and leasing revenues represented ~~34%~~33% and ~~66%~~67% of totalnon-manufacturing revenues, respectively, in FY ~~2019,~~2020, compared to 36% and 64% of totalnon-manufacturing revenues, respectively in FY ~~2018.~~2019.

Non-manufacturing sales during FY ~~2019~~2020 amounted to ~~$92.6~~$58.5 million, compared to ~~$88.7~~$67.5 million during FY ~~2018;~~2019; representing ~~an increase~~a decrease of ~~$3.9~~$9.0 million, or 4%13%. This consisted of ~~an increase~~a decrease of ~~approximately $14.9~~$6.1 million, or ~~approximately 38%~~15%, in our North American leasing operations and a decrease of ~~$11.0~~$2.9 million, or ~~22%~~10%, in sales in the Asia-Pacific area. The decrease in the Asia-Pacific area was comprised primarily of a decrease of ~~$11.7~~$3.5 million ($~~5.7~~3.5 million decrease due to lower unit sales, ~~$3.4~~$1.0 million ~~decrease~~increase due to ~~lower~~higher average prices and a ~~$2.6~~$1.0 million decrease due to foreign exchange movements) in the CSC operations and an increase of ~~$0.7~~$0.6 million in the national accounts group ($~~16.0~~2.7 million decrease due to lower unit sales, $3.7 million increase due to higher ~~unit sales, $14.7 million decrease due to lower~~ average prices and a ~~$0.6~~$0.4 million decrease due to foreign exchange movements) ~~in the national accounts group. As discussed above,~~. The translation of sales in the Asia-Pacific area ~~decreased between the periods due to three large sales in the transportation and utilities sectors in FY 2018 that were not replicated in FY 2019 and~~was adversely impacted by the weaker Australian ~~dollar.~~dollar when comparing FY 2020 to FY 2019. In Australian dollars, total sales in the Asia-Pacific area decreased by ~~16%~~6% in FY ~~2019~~2020 from FY ~~2018,~~2019, primarily in the ~~transportation,~~consumer, construction, defense, moving (removals) and storage and utilities ~~construction and consumer~~ sectors, which decreased by an aggregate AUS$~~12.6~~8.4 million; and was partially offset by ana total increase of AUS$~~2.5~~5.9 million in the ~~moving (removals)~~transportation, mining and ~~storage sector.~~government sectors. In our North American leasing operations, the sales ~~increase~~decrease in FY ~~2019~~2020 from FY ~~2018~~2019 was across most sectors, but ~~particularly~~primarily in the industrial, ~~commercial,~~ education, ~~construction~~mining and ~~government~~services sectors, which ~~increased~~decreased by an aggregate ~~$14.6~~$8.5 million between the ~~periods.~~periods; offset somewhat be a total increase of $2.8 million in the construction and commercial sectors. 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~~decrease at Southern Frac was due primarily from reduced sales of ~~specialty~~liquid containment tanks and chassis, which ~~increased~~decreased by an aggregate ~~$3.2~~$3.8 million in FY ~~2019~~2020 from FY ~~2018,~~2019; offset somewhat by ~~a reduction of approximately $1.6 million~~increases in ~~the sales of frac tanks.~~trash hoppers and other totaling $1.1 million.

Leasing revenues totaled ~~$181.4~~$119.7 million in FY ~~2019, an increase~~2020, a decrease of ~~$23.0~~$2.1 million, or ~~15%~~2%, from ~~$158.4~~$121.8 million in FY ~~2018.~~2019. This consisted of ~~increases~~a decrease of ~~$22.4~~$1.8 million, or ~~20%~~2%, in North America and ~~$0.6~~a decrease of $0.3 million, or 1%, in the ~~Asia- Pacific~~Asia-Pacific area. In Australian dollars, leasing revenues actually increased by ~~10%~~5% percent in the Asia-Pacific area in FY ~~2019~~2020 from FY ~~2018.~~2019.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was ~~84%~~81% and ~~73%~~70%, respectively, during FY ~~2019,~~2020, as compared to 85% and ~~72%~~70%, respectively, in FY ~~2018.~~2019. The overall average utilization was 79% in FY 2020 and 82% in FY ~~2019 and 83% in FY 2018;~~2019; but the average monthly lease rate of containers increased to AUS$~~164~~166 in FY ~~2019~~2020 from AUS$~~160~~163 in FY ~~2018,~~2019, caused primarily by higher average lease rates in portable storage and building containers between the periods. ~~In addition,~~However, the composite average monthly number of units on lease was over ~~2,700 higher~~750 lower in FY ~~2019,~~2020, as compared to FY ~~2018.~~2019. Locally, in Australian dollars, leasing revenue remained ~~relatively~~ constant or increased across most ~~of the~~ sectors in FY 2020 versus FY 2019, but particularly in the ~~mining, transportation,~~ consumer, industrial, retail, government, moving (removals) and ~~construction~~storage and education sectors, which increased between the periods by an aggregate AUS$~~4.5~~2.1 million.

In our North American leasing operations, average utilization rates were ~~80%~~78%, ~~85%~~81%, ~~79%~~60%, 85% and ~~85%~~82% and average monthly lease rates were ~~$120, $358, $983, $315~~$125, $389, $818, $360 and ~~$772~~$865 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during FY ~~2018;~~2020; as compared to ~~77%,~~ 82%, ~~77%~~86%, 81%, 86% and ~~83%~~85% and average monthly lease rates ~~of $122, $339, $747, $291~~were $123, $361, $1,013, $311 and ~~$767~~$764 for storage containers, office containers, frac tank containers, mobile offices and modular units in FY ~~2018,~~2019, respectively. The average composite utilization rate was ~~80%~~76% FY ~~2019~~2020 and ~~77%~~82% in FY ~~2018,~~2019, and the composite average monthly number of units on lease was over ~~7,100 higher~~2,750higher in FY ~~2019~~2020 as compared to FY ~~2018.~~ 2019.The ~~increase~~decrease in leasing revenues between the periods was ~~across most sectors, but particularly~~primarily in the oil and gas ~~commercial, construction, industrial and retail sectors,~~sector, which ~~increased~~in FY 2020 was approximately $10.9 million below FY 2019, substantially all attributable to Lone Star; but this decrease was substantially offset by an aggregate ~~$22.9~~$9.0 million ~~in FY 2019 from FY 2018, and was partially offset by a decrease of $1.5 million~~increase in the ~~mining sector. Excluding Lone Star, total leasing revenues of our North American leasing operations increased by approximately $13.4 million, or 16%, in FY 2019 from FY 2018.~~construction, commercial, education, retail and industrial sectors.

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~~decreased by ~~$4.2~~$8.3 million from ~~$64.0~~$50.1 million during FY ~~2018~~2019 to ~~$68.2~~$41.8 million during FY ~~2019,~~2020, and our gross profit percentage from thesenon-manufacturing sales ~~deteriorated~~increased to 29% in FY 2020 from 26% in FY ~~2019 from 28% in FY 2018.~~2019. 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 ~~$6.6~~$3.5 million in FY ~~2019,~~2020, as compared to ~~$6.3~~$5.4 million in FY ~~2018,~~2019, resulting in a gross margin ~~gain~~ of ~~approximately $1.4~~$0.3 million in FY 2020 versus a gross margin of $1.1 million in FY 2019, ~~versus~~resulting in a ~~slight~~ gross margin ~~gain~~percentage of 8% and approximately 17%, respectively. The lower gross margin in FY ~~2018. Increased manufacturing~~2020 from FY 2019 was due to the reduced sales ~~(including a favorable mix of higher margin specialty tanks~~discussed above and ~~chassis) and~~less than optimum production ~~levels, as well as improved efficiency, between the periods were the primary factors in the improvement in the gross margin.~~levels.

Direct Costs of Leasing Operations and Selling and General Expenses.Direct costs of leasing operations and selling and general expenses increased by ~~$7.3~~$1.2 million from ~~$121.9~~$41.7 million during FY ~~2018~~2019 to ~~$129.2~~$43.5 million during FY ~~2019.~~2020. As a percentage of revenues, ~~however,~~ these costs ~~decreased~~increased to ~~46%~~48% during FY 2020 from 44% in FY 2019 due to our infrastructure not decreasing with the lower revenues. Large sales during FY 2019 ~~from 48%~~not replicated in FY ~~2018~~2020 and lower leasing revenues due primarily to the ~~higher revenues being primarily driven by increases in revenues~~soft oil and gas market in North America adversely impacted revenues during FY 2020, but did not result in significant actions to reduce our infrastructure. We do not make significant infrastructure changes unless we believe the economic and ~~average units on lease and rates between the periods~~market conditions causing these adverse factors are long-term in ~~both geographic venues without a proportionate cost increase in the infrastructure.~~nature.

Depreciation and Amortization.Depreciation and amortization ~~increased~~decreased by ~~$2.3~~$3.1 million to ~~$32.0~~$18.0 million in FY ~~2019~~2020 from ~~$29.7~~$21.1 million in FY ~~2018.~~2019. The ~~increase between the periods~~decrease was in both geographic venues, ~~with~~$0.9 million in North America and $2.2 million in the Asia-Pacific area, ~~increasing by $1.1 million and North America increasing by $1.2 million, as a result~~which were impacted from the effect of ~~our increased investment~~certain intangible assets becoming fully amortized. The decrease in the ~~lease fleet and business acquisitions.~~Asia-Pacific also included the translation effect of a weaker Australian dollar to the U.S. dollar in FY 2020 versus FY 2019.

Interest Expense. Interest expense of ~~$27.7~~$14.3 million in FY ~~2019 increased~~2020 decreased by ~~$3.0~~$3.2 million from ~~$24.7~~$17.5 million in FY ~~2018.~~2019. In North America, FY 2020 interest expense decreased by $1.3 million from FY 2019 due primarily to the weighted-average interest rate of 6.0% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in FY 2020 being lower than the 6.9% in FY 2019. In the Asia-Pacific area, FY ~~2019~~2020 interest expense was ~~$2.1~~$1.9 million ~~higher~~lower from FY ~~2018~~2019 due to both ~~higher~~lower average borrowings and a ~~higher~~lower weighted-average interest rate between the periods, ~~which more than offset~~as well as the translation effect of a weaker Australian dollar between the periods. The weighted-average interest rate was ~~10.7%~~7.8% (which does not include the effect of translation, interest rate swap contracts and options and the amortization of deferred financing costs) in FY ~~2019~~2020 versus ~~10.0%~~9.4% in FY 2018. In North America, FY 2019 interest expense increased by $0.9 million from FY 2018 due primarily to the weighted-average interest rate of 6.7% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in FY 2019 being higher than the 6.0% in FY 2018, offset somewhat by lower average borrowings between the periods.2019.

Change in Valuation of Bifurcated Derivatives.FY ~~2019 and FY 2018 include~~2020 includes anon-cash ~~charges~~benefit of ~~$22.8~~$4.9 million ~~and $2.2 million, respectively,~~ for ~~the loss on~~ the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible ~~Note.~~Note (see Note 5 of Notes to Condensed Consolidated Financial Statements) versus a charge of $21.7 million in FY 2019.

Foreign Currency Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was ~~0.7687 at June 30, 2017, 0.7686 at March 31, 2018,~~ 0.7411 at June 30, 2018, 0.7055 at December 31, 2018, 0.7029 at June 30, 2019 and ~~0.7099~~0.701415 at ~~March~~December 31, 2019. In FY ~~2018~~2019 and FY ~~2019,~~2020, net unrealized and realized foreign exchange gains (losses) totaled ~~$(2,722,000)~~$(1,268,000) and ~~$(369,000)~~$(3,687,000) and ~~$5,334,000~~$(5,000) and ~~$(10,141,000)~~$(45,000), 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.~~equity (see Note 5 of Notes to Condensed Consolidated Financial Statements). In addition, in FY ~~2018~~2019 and FY ~~2019,~~2020, net unrealized exchange gains on forward exchange contracts totaled ~~$402,000~~$(127,000) and ~~$(279,000)~~$(256,000), respectively.

Income Taxes.Our income tax provision for FY 2020 and FY 2019, which derived ~~a very high~~an effective tax rate ~~on a relatively small pretax income, was significantly greater~~of 27.6% and 41.5%, respectively, differed from than ~~the provision that would have been derived from~~ the U.S. federal statutory rate of 21% primarily as a result of nontaxable or nondeductible ~~expenses~~items 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 ~~(see Note 5 of Notes to Condensed Consolidated Financial statements). Our effective income tax rate was 24.9%~~ in FY ~~2018 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 off2019. Additionally, 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 $0.3 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 ~~(28% in FY 2018)~~ 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. FY 2019 included a tax benefit of $262,000~~jurisdictions and for equity plan activity that is currently recognized in the consolidated statements of operations. ~~In addition, because it was not significant, FY 2018 included a $135,000 benefit for the cumulative-effect adjustment for previously unrecognized excess tax benefits and thetax-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~~

Preferred Stock Dividends.In both FY ~~2019~~2020 and FY ~~2018,~~2019, we paid dividends of ~~$2.8~~$1.8 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

~~Noncontrolling Interests.~~~~In FY 2018, prior to acquiring all the shares of Royal Wolf that we did not own, noncontrolling interests in the Royal Wolf operations were a decrease of $0.8 million to the net loss.~~

Net ~~Loss~~Income (Loss) Attributable to Common Stockholders.Net ~~loss~~income attributable to common stockholders was ~~$15.5~~$14.5 million in FY 2020 versus a net loss of $14.2 million in FY 2019, ~~versus $0.4 million in FY 2018, an additional loss between the periods~~a significant improvement of ~~$15.1~~approximately $28.7 million. This was primarily due to thenon-cash ~~charge~~benefit for the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible Note of $4.9 million versus a charge of $21.7 million in FY 2019, as well as lower interest expense and higher operating profit in the Asia-Pacific area, ~~and higher interest expense and income taxes;~~ offset somewhat by ~~higher~~the lower 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,				Quarter Ended December 31,				Six Months Ended December 31,

	2018		2019		2018		2019		2018		2019		2018		2019

Net income (loss)	$	(563)	$	(332)	$	1,567	$	(12,702)	$	(4,206)	$	10,441	$	(12,370)	$	16,392
Add (deduct) —
Provision for income taxes		228		1,429		519		5,056		1,712		3,994		3,627		6,254
Change in valuation of bifurcated derivatives in Convertible Note		504		1,131		2,221		22,829		9,332		(3,902)		21,698		(4,894)
Foreign exchange and other		1,348		3		2,685		3,296
Foreign currency exchange and other loss (gain)										1,782		(264)		3,293		309
Interest expense		9,398		10,207		24,667		27,700		8,868		6,930		17,493		14,254
Interest income		(43)		(27)		(81)		(108)		(33)		(180)		(81)		(366)
Depreciation and amortization		10,131		10,998		30,123		32,256		11,155		8,706		21,258		18,218
Share-based compensation expense		889		655		2,986		1,996		663		685		1,341		1,368
Refinancing costs not capitalized		—		58		—		506		448		—		448		—

Adjusted EBITDA	$	21,892	$	24,122	$	64,687	$	80,829	$	29,721	$	26,410	$	56,707	$	51,535

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 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 (subsequently replaced by GFNAPH) and its subsidiaries and a syndicate led by 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 senior secured credit facility and repaid the ANZ/CBA Credit Facility on November 3, 2017. The senior secured credit facility, as amended ~~on June 25, 2018 and March 22, 2019~~ (the “Deutsche Bank Credit Facility”), consists of a ~~$30,530,000~~$30,161,000 (AUS$43,000,000) Facility A that will amortize semi-annually; a ~~$82,714,000~~$81,715,000 (AUS$116,500,000) Facility B that has no scheduled amortization; a ~~$14,200,000~~$14,028,000 (AUS$20,000,000) revolving Facility C that is used for working capital, capital expenditures and general corporate purposes; and a ~~$26,625,000~~$26,303,000 (AUS$37,500,000) revolving Term Loan Facility D. Borrowings bear interest at the three-month bank bill swap interest rate in Australia (“BBSY”), plus a margin of 4.25% to 5.50% per annum, as determined by net leverage, as defined. The Deutsche Bank Credit Facility is secured by substantially all of the assets of Royal Wolf and by the pledge of all the capital stock of GFNAPH and its subsidiaries and matures on November 2, ~~2023~~2023.

Bison Capital Notes

On September 19, 2017, Bison Capital Equity Partners V, L.P and its affiliates (“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 Consolidated Financial Statements), to acquire the 49,188,526 publicly-traded shares of RWH not owned by us 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. GFNAPF was dissolved in September 2018.

On March 25, 2019, the Senior Term Note was repaid in full by proceeds borrowed under the Deutsche Bank Credit Facility, which included interest we elected to defer.

North America Senior Credit Facility

Our North America leasing(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined $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 was also a separate loan agreement with Great American Capital Partners (“GACP”), where GACP provided aFirst-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 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 FILO Term Loan were terminated within the credit agreement.

Borrowings under the Wells Fargo Credit Facility accrue interest, at the our 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 bore interest at 11.00% above the LIBOR rate, with a LIBOR rate floor of 1.00%. 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, 2019, our required principal and other obligations payments for the twelve months ending ~~March~~December 31, 2020 and the subsequent three twelve-month periods are as follows (in thousands):


	Twelve Months Ending March 31,								Twelve Months Ending December 31,

	2020		2021		2022		2023		2020		2021		2022		2023

Deutsche Bank Credit Facility	$	6,106	$	6,106	$	6,106	$	6,106	$	5,684	$	5,684	$	5,684	$	113,198
Wells Fargo Credit Facility		—		—		201,800		—		—		—		182,247		—
Senior Notes		—		77,390		—		—		—		77,390		—		—
Other		3,836		1,111		385		613		4,272		1,745		1,872		1,290

	$	9,942	$	84,607	$	208,291	$	6,719	$	9,956	$	84,819	$	189,803	$	114,488

Reference is made to Notes 3 and 5 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.~~lenders.

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,
					2018		2019
	2018		2019

Net cash provided by operating activities	$	32,856	$	27,980	$	19,373	$	37,460



Net cash used in investing activities	$	(109,244)	$	(55,839)	$	(41,236)	$	(22,843)


Net cash provided (used in) by financing activities					$	6,176	$	(14,923)

Net cash provided by financing activities	$	81,182	$	13,950

Cash Flow for FY ~~2019~~2020 Compared to FY ~~2018~~2019

Operating activities. Our operations provided cash of ~~$28.0~~$37.5 million during FY 2020 versus $19.4 million during FY 2019, ~~versus $32.9 million during FY 2018, a decrease~~an increase of ~~$4.9~~$18.1 million between the periods. ~~The~~Net income in FY 2020 of $16.4 million was a significant improvement of $28.8 million from the net loss in FY 2019 of ~~$12.7 million was $14.3 million worse than the net income in FY 2018 of $1.6~~$12.4 million and our management of operating assets and liabilities in FY ~~2019,~~2020, when compared to FY ~~2018,~~2019, further ~~reduced~~increased cash by ~~approximately $15.8~~$23.6 million. Historically we have experienced significant variations in operating assets and liabilities between periods when conducting our business in due course. In ~~FY 2019, we invested more in our fleet inventory than in the prior year to anticipate the demands of our expanding business. In~~ addition, thenon-cash gains on the bargain purchases of two businesses ~~one~~we acquired in ~~each geographic venue (see Note 4 of Notes to Condensed Consolidated Financial Statements), reduced~~FY 2019 improved our cash ~~from operating activities~~between the periods by $1.8 million as we did not make any such acquisitions in FY ~~2019; andnon-cash~~ ~~share-based compensation also decreased operating cash flows by $1.0 million between the periods. Share-based compensation was $2.0 million in FY 2019 versus $3.0 million in FY 2018. Also,~~2020. However, net unrealized gains and losses from foreign exchange and 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, ~~further~~ decreased operating cash flow by ~~$7.4~~approximately $1.1 million between the periods, from a net cash increase of ~~$2.3~~$1.4 million in FY ~~2018~~2019 to a net cash ~~decrease~~increase of ~~$5.1~~$0.3 million in FY ~~2019. However,~~2020. More significantly, cash from operating activities between the periods ~~significantly increased~~decreased by ~~$24.2~~$26.6 million as a result ofnon-cash adjustments ~~of $22.8 million in FY 2019~~ relating to the change in the valuation of the stand-alone bifurcated derivatives in the Bison Capital Convertible Note, ~~versus $2.2~~which increased cash by $21.7 million in FY ~~2018,~~2019 versus reducing cash by $4.9 million in FY 2020, and the~~non-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)., which increased cash in FY 2019 by $3.6 million. 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~~decreased cash between the periods by ~~$1.7~~$6.2 million, from an aggregate ~~$32.5~~$25.3 million increase in FY ~~2018~~2019 to ~~$34.2~~a $19.1 million increase in FY ~~2019; and operating cash flows were further enhanced by $5.6 million between the periods for deferred income taxes.~~2020. Deferred income taxes increased cash flows in FY 2020 by $5.2 million, versus $3.3 million in FY 2019, ~~by $4.2~~an increase of $1.9 million ~~versus reducing cash by $1.4 million in~~between the periods. During both FY ~~2018. During FY 2019~~2020 and FY ~~2018,~~2019, the net gain on the sales of lease fleet reduced operating cash flows by ~~$6.2 million~~over $4.0 million; and, ~~$5.4 million, respectively.~~in both periods,non-cash share-based compensation increased operating cash flows by approximately $1.4 million.

Investing Activities. ~~Net cash~~Cash used in investing activities was ~~$55.8~~$22.8 million during FY ~~2019,~~2020, as compared to ~~$109.2~~$41.2 million used during FY ~~2018,~~2019, resulting in a net reduction in cash used between the periods of ~~$53.4~~$18.4 million. ~~In FY 2018, we used $73.3 million and $14.4 million of cash to acquire the noncontrolling interest of Royal Wolf and~~We did not make ~~three business~~any acquisitions in ~~North America, respectively;~~FY 2020, whereas in FY 2019 we made ~~five~~four business acquisitions, ~~four~~three in North America and one in the Asia-Pacific area, for ~~$17.1 million (see Note 4 of Notes to Condensed Consolidated Financial Statements).~~$16.1 million. Purchases of property, plant and equipment, or rolling stock (maintenance capital expenditures), were ~~$5.9~~$5.3 million in FY 2020 and $3.7 million in FY 2019, ~~and $3.1 million in FY 2018,~~ an increase of ~~$2.8 million.~~$1.6 million, primarily in our North American leasing operations. 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 ~~$33.0~~$17.9 million in FY 2020, as compared to $21.7 million in FY 2019, ~~as compared to $18.5 million in FY 2018, an increase~~a decrease of ~~$14.5~~$3.8 million. In FY ~~2019,~~2020, net capital expenditures of lease fleet were approximately ~~$24.2~~$17.3 million in North America, as compared to ~~$16.0~~$16.6 million in FY ~~2018,~~2019, an increase of ~~$8.2~~$0.7 million; and net capital expenditures of lease fleet in the Asia Pacific totaled ~~$8.8~~$0.6 million in FY 2020, versus a net investment of $5.1 million in FY 2019, ~~versus $2.5 million in FY 2018, an increase~~a decrease of ~~$6.3~~$4.5 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~~Cash used in financing activities was ~~$14.0~~$14.9 million during FY ~~2019,~~2020, as compared to ~~$81.2~~$6.2 million of cash provided during FY ~~2018,~~2019, a decrease to cash between the periods of ~~$67.2~~$21.1 million. In FY ~~2018,~~2020 we ~~issued the Bison Capital Notes for proceeds totaling $80.0~~repaid a net $13.2 million ~~to, among~~on our senior debt and other ~~things, acquire the noncontrolling interest of Royal Wolf (see above) and repay the principal of $10.0~~borrowings versus borrowing a net $7.6 million ~~due under the term loan to Credit Suisse (see Note 5 of Notes to Condensed Consolidated Financial Statements). In~~in FY ~~2019 and FY 2018, financing activities also included net borrowings of $79.9 million and $99.8 million, respectively, on existing credit facilities.~~2019. These financing activities on our existing credit facilities were primarily to fund our investment in the container lease fleet, make business acquisitions, pay dividends and manage our operating assets and liabilities. In addition, in FY 2019, $63.3 million was borrowed under the Deutsche Bank Credit Facility to repay the Senior Term Note; and, 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 ~~$2.8~~$1.8 million was used during both periods to pay dividends on primarily our Series C Preferred ~~Stock; and, in FY 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).~~Stock. In FY ~~2019,~~2020, we received proceeds of ~~$0.9 million~~$98,000 from issuances of common stock on the exercises of stock options versus ~~$0.2~~$0.9 million in FY ~~2018.~~2019.

Asset Management

Receivables and inventories were ~~$54.9~~$51.4 million and ~~$37.0~~$31.4 million at ~~March~~December 31, 2019 and ~~$50.5~~$56.2 million and ~~$22.7~~$29.1 million at June 30, ~~2018,~~2019, respectively. At ~~March~~December 31, 2019, DSO in trade receivables were 4039 days and 5140 days in the Asia-Pacific area and our North American leasing operations, as compared to 3534 days and 4746 days at June 30, ~~2018,~~2019, 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 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 ~~$455.6~~$466.3 million at ~~March~~December 31, 2019, as compared to ~~$429.4~~$456.8 million at June 30, ~~2018.~~2019. At ~~March~~December 31, 2019, we had ~~98,757~~101,590 units ~~(25,114~~(24,257 units in retail operations in Australia, ~~9,438~~9,973 units in national account group operations in Australia, ~~12,718~~12,225 units in New Zealand, which are considered retail; and ~~51,487~~55,135 units in North America) in our lease fleet, as compared to ~~85,812~~99,743 units ~~(24,037~~(25,355 units in retail operations in Australia, ~~8,046~~9,254 units in national account group operations in Australia, ~~10,222~~12,574 units in New Zealand, which are considered retail; and ~~43,507~~52,560 units in North America) at June 30, ~~2018.~~2019. At those dates, ~~76,632~~78,637 units ~~(20,331~~(19,607 units in retail operations in Australia, ~~6,735~~8,789 units in national account group operations in Australia, ~~10,564~~10,426 units in New Zealand, which are considered retail; and ~~39,002~~39,815 units in North America); and ~~68,712~~77,214 units ~~(20,102~~(20,376 units in retail operations in Australia, ~~5,038~~5,931 units in national account group operations in Australia, ~~8,705~~10,196 units in New Zealand, which are considered retail; and ~~34,867~~40,711 units in North America) were on lease, respectively.

In the Asia-Pacific area, the lease fleet was comprised of ~~39,567~~38,855 storage and freight containers and ~~7,703~~7,600 portable building containers at ~~March~~December 31, 2019; and ~~34,507~~39,616 storage and freight containers and ~~7,798~~7,567 portable building containers at June 30, ~~2018.~~2019. At those dates, units on lease were comprised of ~~32,731~~33,894 storage and freight containers and ~~4,899~~4,928 portable building containers; and ~~28,301~~31,610 storage and freight containers and ~~5,544~~4,893 portable building containers, respectively.

In North America, the lease fleet was comprised of ~~36,513~~39,393 storage containers,~~5,111~~5,989 office containers (GLOs), ~~4,216~~4,206 portable liquid storage tank containers, ~~4,471~~4,364 mobile offices and ~~1,176~~1,183 modular units at ~~March~~December 31, 2019; and ~~29,518~~37,304 storage containers,~~4,216~~5,426 office containers (GLOs), ~~4,147~~4,215 portable liquid storage tank containers, ~~4,447~~4,436 mobile offices and 1,179 modular units at June 30, ~~2018.~~2019. At those dates, units on lease were comprised of ~~26,927~~28,351 storage containers, ~~4,269~~4,690 office containers, ~~3,003 portable liquid storage tank containers,3,816 mobile offices and 987 modular units; and 23,040 storage containers, 3,620 office containers, 3,405~~2,238 portable liquid storage tank containers, ~~3,792~~3,571 mobile offices and ~~1,010modular~~965 modular units; and 28,561 storage containers, 4,437 office containers, 2,793 portable liquid storage tank containers, 3,931 mobile offices and 989 modular 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, ~~2018.~~2019.

Impact of Recently Issued Accounting Pronouncements

Effective July 1, 2019, we adopted Accounting Standard Update (“ASU”)No. 2016-02,Leases (Topic 842). Reference is made to Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of the adoption of this accounting standard, as well as any recently issued accounting pronouncements that could potentially impact us.

Item 3. Quantitative and Qualitative Disclosures 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 Rules~~Rules~~ 13a-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.

We have restated our previously issued condensed consolidated financial statements for the quarters ended September 30, 2018 and December 31, 2018. Specifically, the accounting for the valuation of the minimum return provision in the Convertible Note Based on September 10, 2018 (see Note 5 of Notes to Condensed Consolidated Financial Statements) should have been a charge through the condensed consolidated statements of operations instead of directly to equity. The accounting for this valuation was identified during our third quarter, corrected, and the condensed consolidated financial statements included in this Quarterly Report on Form~~10-Q~~ ~~reflect the proper accounting for this bifurcated derivative. In light of our determination~~ that there were material inaccuracies in the financial information for the quarter ended September 30, 2018, and for the six months ended December 31, 2018, both of which were included in the original Quarterly Report for the quarters ended September 30, 2018 and December 31, 2018, respectively,evaluation, our Chief Executive Officer and Chief Financial Officer ~~have~~ concluded that a control deficiency that existed at June 30, 2018 with respect to the identification, interpretation and application of accounting for highly technical or non-routine and complex accounting transactions constituted a material weakness in internal control over financial reporting.

~~We have enhanced~~ our disclosure controls and procedures ~~to properly identify, interpret and apply~~were effective at the accounting for derivatives. As part of this process, we have designated key finance personnel to participate in derivative accounting training and will also implement a formal continuing education program to ensure our key finance personnel are adequately trained and that they maintain competencies with not only current accounting and reporting requirements, but to monitor new FASB and SEC accounting and reporting rules to ensure timely review, education, assessment, and adoption. On highly technical or~~non-routine~~ ~~and complex accounting transactions, we will engage third-party advisors with the requisite skills and technical expertise to assist us in assessing, performing and reviewing such transactions.~~

~~Other than the changes made to address the material deficiency described above, there~~reasonable assurance level. There were no changes in ~~the Company’s~~our internal control over financial reporting ~~that occurred~~ during the quarter ended ~~March~~December 31, 2019 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, ~~2018,~~2019, as filed with the SEC on September ~~7, 2018~~12, 2019 (“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~~		Second Amendment and Restatement Deed dated March 22, 2019 among GFN Asia Pacific Holdings Pty Ltd., Royal Wolf Holdings Pty Limited, Royal Wolf Trading Australia Pty Limited, Royalwolf Trading New Zealand Limited, Deutsche Bank AG, Sydney Branch, CSL Fund (PB) Lux Sarl II, CSL Fund (PB) Holdings Lux Sarl II, CSL Fund (PB) Holdings B Lux Sarl II, CSL Fund (PB) Holdings C Lux Sarl II, Aiguilles Rouges Lux Sarl II, Core Senior Lending Fund~~(A-A)~~ ~~Lux SARL II, Core Senior Lending Fund Lux SARL II, Kitty Hawk Credit Lux SARL II, GIM, L.P., Perpetual Corporate Trust Limited and P.T. Limited (incorporated by reference to Registrant’s Form8-K~~ ~~filed March 27, 2019)~~

~~10.2~~		~~Combined Security Agreement dated March 22, 2019 between GFN Asia Pacific Holdings Pty Ltd and P.T. Limited 2018 (incorporated by reference to Registrant’sForm 8-K~~ ~~filed March 27, 2019)~~

31.1		Certification of Chief Executive Officer Pursuant to SEC Rule~~Rule~~ 13a-14(a)/15d-14(a)

31.2		Certification of Chief Financial Officer Pursuant to SEC Rule~~Rule~~ 13a-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 Form~~Form~~ 10-Q for the quarter ended ~~March~~December 31, 2019, 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: ~~May 14, 2019~~February 10, 2020				GENERAL FINANCE CORPORATION

				~~GENERAL FINANCE CORPORATION~~ By: ~~/s/~~/s/ Jody E. Miller Jody E. Miller Chief Executive Officer

				By: ~~/s/~~/s/ Charles E. Barrantes Charles E. Barrantes Chief Financial Officer

4445


	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		—		—		1,067		—		—		1,067		591		1,658
Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)
Dividends and distributions by subsidiaries		—		—		—		—		—		—		(1,038)		(1,038)
Net loss		—		—		—		—		(43)		(43)		(801)		(844)
Fair value change in derivative, net of related tax effect		—		—		—		64		—		64		61		125
Cumulative translation adjustment		—		—		—		2,043		—		2,043		1,835		3,878

Total comprehensive income		—		—		—		—		—		2,064		1,095		3,159

Acquisition of noncontrolling interest in Royal Wolf		—		—		17,744		(4,748)		—		12,996		(88,246)		(75,250)

Balance at September 30, 2017	$	40,100	$	3	$	138,259	$	(14,996)	$	(13,015)	$	150,351	$	504	$	150,855

Share-based compensation		—		—		439		—		—		439		—		439
Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)
Issuance of 22,500 shares of common stock on exercises of stock options		—		—		34		—		—		34		—		34
Grant of 35,430 shares of restricted stock		—		—		—		—		—		—		—		—
Net income		—		—		—		—		2,974		2,974		—		2,974
Fair value change in derivative, net of related tax effect		—		—		—		(41)		—		(41)		—		(41)
Cumulative translation adjustment		—		—		—		(249)		—		(249)		—		(249)

Total comprehensive income		—		—		—		—		—		2,684		—		2,684

Acquisition of noncontrolling interest in Royal Wolf		—		—		523		—		—		523		—		523

Balance at December 31, 2017	$	40,100	$	3	$	138,333	$	(15,286)	$	(10,041)	$	153,109	$	504	$	153,613

Share-based compensation		—		—		889		—		—		889		—		889
Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)
Issuance of 40,863 shares of common stock on exercises of stock options		—		—		127		—		—		127		—		127
Grant of 42,773 shares of common stock		—		—		—		—		—		—		—		—
Refund from terminated Royal Wolf LTI Plan trust		—		—		338		—		—		338		—		338
Net loss		—		—		—		—		(563)		(563)		—		(563)
Fair value change in derivative, net of related tax effect		—		—		—		(184)		—		(184)		—		(184)
Cumulative translation adjustment		—		—		—		(138)		—		(138)		—		(138)

Total comprehensive loss		—		—		—		—		—		(885)		—		(885)

Acquisition of noncontrolling interest in Royal Wolf		—		—		13		—		—		13		—		13

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


	Quarter Ended March 31, 2019


	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	$	14,386	$	-	$	14,386	$	-	$	-		$	14,386	$	10,818	$	25,204
Sales manufactured units		-		-		-		2,736		(1,304	)		1,432		-		1,432

Totalnon-lease revenues		14,386		-		14,386		2,736		(1,304	)		15,818		10,818		26,636


Leasing:
Rental revenue		22,519		5,906		28,425		-		(424	)		28,001		12,872		40,873
Rental-related services		9,289		5,508		14,797		-		-			14,797		3,903		18,700

Total leasing revenues		31,808		11,414		43,222		-		(424	)		42,798		16,775		59,573


Total revenues	$	46,194	$	11,414	$	57,608	$	2,736	$	(1,728	)	$	58,616	$	27,593	$	86,209


	Nine Months Ended March 31, 2019


	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	$	53,949	$	-	$	53,949	$	-	$	-		$	53,949	$	38,704	$	92,653
Sales manufactured units		-		-		-		10,670		(2,729	)		7,941		-		7,941

Totalnon-lease revenues		53,949		-		53,949		10,670		(2,729	)		61,890		38,704		100,594


Leasing:
Rental revenue		68,483		20,029		88,512		-		(1,515	)		86,997		37,958		124,955
Rental-related services		27,980		17,301		45,281		-		-			45,281		11,164		56,445

Total leasing revenues		96,463		37,330		133,793		-		(1,515	)		132,278		49,122		181,400


Total revenues	$	150,412	$	37,330	$	187,742	$	10,670	$	(4,244	)	$	194,168	$	87,826	$	281,994


	Quarter Ended March 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	$	13,667	$	20	$	13,687	$	-	$	-		$	13,687	$	13,564	$	27,251
Sales manufactured units		-		-		-		3,272		(923	)		2,349		-		2,349

Totalnon-lease revenues		13,667		20		13,687		3,272		(923	)		16,036		13,564		29,600


Leasing:
Rental revenue		18,885		5,991		24,876		-		(304	)		24,572		12,881		37,453
Rental-related services		9,183		4,375		13,558		-		-			13,558		3,810		17,368

Total leasing revenues		28,068		10,366		38,434		-		(304	)		38,130		16,691		54,821


Total revenues	$	41,735	$	10,386	$	52,121	$	3,272	$	(1,227	)	$	54,166	$	30,255	$	84,421


	Nine Months Ended March 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	$	39,005	$	20	$	39,025	$	-	$	-		$	39,025	$	49,673	$	88,698
Sales manufactured units		-		-		-		9,856		(3,524	)		6,332		-		6,332

Totalnon-lease revenues		39,005		20		39,025		9,856		(3,524	)		45,357		49,673		95,030


Leasing:
Rental revenue		56,201		16,075		72,276		-		(797	)		71,479		37,433		108,912
Rental-related services		26,214		12,199		38,413		-		-			38,413		11,113		49,526

Total leasing revenues		82,415		28,274		110,689		-		(797	)		109,892		48,546		158,438


Total revenues	$	121,420	$	28,294	$	149,714	$	9,856	$	(4,321	)	$	155,249	$	98,219	$	253,468


	Spacewise NZ July 2, 2018		Delmarva August 9, 2018		Instant Storage September 21, 2018		Tilton October 5, 2018		BBS Leasing March 27, 2019		Total

Fair value of the net tangible assets acquired and liabilities assumed:
Trade and other receivables	$	—	$	—	$	—	$	—	$	—	$	—
Inventories		995		157		555		318		355		2,380
Property, plant and equipment		79		38		465		329		—		911
Lease fleet		6,834		893		3,013		2,775		234		13,749
Unearned revenue and advance payments		(5)		(112)		(289)		(260)		(35)		(701)
Deferred income taxes		(225)		—		—		—		—		(225)

Total net tangible assets acquired and liabilities assumed		7,678		976		3,744		3,162		554		16,114

Fair value of intangible assets acquired:
Non-compete agreement		67		7		44		42		15		175
Customer lists/relationships		734		—		369		576		254		1,933
Other		—		—		(306)		—		—		(306)
Goodwill		—		—		717		1,651		294		2,662

Total intangible assets acquired		801		7		824		2,269		563		4,464

Total purchase consideration	$	8,479	$	983	$	4,568	$	5,431	$	1,117	$	20,578


		Quarter Ended March 31,				Nine Months Ended March 31,
Type of Derivative Contract	Statement of Operations Classification	2018		2019		2018		2019

Swap Contracts	Unrealized gain (loss) included in “Interest expense”	$	9	$	—	$	9	$	—

Forward Exchange Contracts	Unrealized foreign currency exchange gain (loss) included in “Foreign exchange and other”		10		(152)		402		(279)

Bifurcated Derivatives	Change in valuation of bifurcated derivatives in Convertible Note		(504)		(1,131)		(2,221)		(22,829)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company