Quarterly Report (10-q)

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Table of Contents

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

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

For the transition period from __________________ to ______________________.

Commission file number 001-32845

(Exact Name of Registrant as Specified in its Charter)


Delaware	32-0163571
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

39 East Union Street

Pasadena, CA 91103

(Address of Principal Executive Offices)

(626) 584-9722

(Registrant’s Telephone Number, Including Area Code)

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


Yes ☒	No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-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, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-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	Symbol(s)	Name of Each Exchange On Which 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

7.875% Senior Notes due 2025	GFNSZ	NASDAQ Global Market

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-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: 30,240,951 shares outstanding as of May 3, 2021.

Table of Contents

GENERAL FINANCE CORPORATION

INDEX TO FORM 10-Q


PART I.	FINANCIAL INFORMATION

Item 1.		Financial Statements	3

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.		Controls and Procedures	47

PART II.	OTHER INFORMATION

Item 1.		Legal Proceedings	49

Item 1A.		Risk Factors	49

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.		Defaults Upon Senior Securities	49

Item 4.		Mine Safety Disclosures	49

Item 5.		Other Information	49

Item 6.		Exhibits	49

SIGNATURES			51

Table of Contents

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, 2020		March 31, 2021
Assets
Cash and cash equivalents	$	17,478	$	10,702
Trade and other receivables, net of allowance for doubtful accounts of $5,972 and $5,811 at June 30, 2020 and March 31, 2021, respectively		44,066		40,549
Inventories		20,928		33,869
Prepaid expenses and other		8,207		14,095
Property, plant and equipment, net		24,396		26,014
Lease fleet, net		458,727		467,106
Operating lease assets		66,225		79,215
Goodwill		97,224		100,051
Other intangible assets, net		18,771		17,163
Total assets	$	756,022	$	788,764

Liabilities
Trade payables and accrued liabilities	$	46,845	$	42,471
Income taxes payable		645		1,287
Unearned revenue and advance payments		24,642		30,810
Operating lease liabilities		67,142		81,058
Senior and other debt, net		379,798		367,020
Fair value of bifurcated derivatives in Convertible Note		18,325		12,802
Deferred tax liabilities		43,708		49,227
Total liabilities		581,105		584,675

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, 2020 and $40,702 at March 31, 2021		40,100		40,100
Common stock, $.0001 par value: 100,000,000 shares authorized; 30,880,531 shares issued and 29,968,766 shares outstanding at June 30, 2020 and 31,152,716 shares issued and 30,240,951 shares outstanding at March 31, 2021		3		3
Additional paid-in capital		183,051		181,993
Accumulated other comprehensive loss		(22,106)		(16,402)
Retained earnings (Accumulated deficit)		(20,790)		3,736
Treasury stock, at cost; 911,765 shares at June 30, 2020 and March 31, 2021		(5,845)		(5,845)
Total General Finance Corporation stockholders’ equity		174,413		203,585
Equity of noncontrolling interests		504		504
Total equity		174,917		204,089
Total liabilities and equity	$	756,022	$	788,764

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

Table of Contents

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	Quarter Ended March 31,				Nine Months Ended March 31,
	2020		2021		2020		2021
Revenues
Sales:
Lease inventories and fleet	$	29,702	$	32,603	$	88,234	$	92,474
Manufactured units		2,524		332		6,280		1,235
		32,226		32,935		94,514		93,709
Leasing		57,744		57,071		177,462		167,771
		89,970		90,006		271,976		261,480

Costs and expenses
Cost of sales:
Lease inventories and fleet (exclusive of the items shown separately below)		21,444		22,549		63,260		65,058
Manufactured units		1,977		380		5,441		1,449
Direct costs of leasing operations		22,968		21,909		68,587		63,838
Selling and general expenses		20,695		20,757		61,833		60,304
Depreciation and amortization		8,613		9,300		26,633		27,760

Operating income		14,273		15,111		46,222		43,071

Interest income		153		150		519		452
Interest expense		(5,981)		(5,212)		(20,235)		(17,595)
Change in valuation of bifurcated derivatives in Convertible Note (Note 5)		(11,259)		3,622		(6,365)		5,523
Foreign exchange and other		(2,096)		1,293		(2,405)		549
		(19,183)		(147)		(28,486)		(11,071)

Income (loss) before provision for income taxes		(4,910)		14,964		17,736		32,000

Provision for income taxes		3,715		3,777		9,969		7,474

Net income (loss)		(8,625)		11,187		7,767		24,526

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

Net income (loss) attributable to common stockholders	$	(9,547)	$	10,265	$	5,001	$	21,760

Net income (loss) per common share:
Basic	$	(0.32)	$	0.34	$	0.17	$	0.73
Diluted		(0.32)		0.33		0.16		0.71

Weighted average shares outstanding:
Basic		30,294,868		29,807,448		30,250,904		29,758,221
Diluted		30,294,868		31,017,679		31,452,877		30,794,975

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

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/LOSS

(In thousands, except share and per share data)

(Unaudited)


	Quarter Ended March 31,				Nine Months Ended December 31,
	2020		2021		2020		2021

Net income (loss)	$	(8,625)	$	11,187	$	7,767	$	24,526

Other comprehensive income (loss):
Change in fair value change of interest rate swap, net of income tax effect of $178 and $194 and $171 and $254 in the quarter and nine months ended March 31, 2020 and 2021, respectively		(219)		435		(256)		336

Cumulative translation adjustment		(4,296)		(1,037)		(4,362)		5,368

Total comprehensive income (loss)		(13,140)		10,585		3,149		30,230
Allocated to noncontrolling interests		—		—		—		—

Comprehensive income (loss) allocable to General Finance Corporation stockholders	$	(13,140)	$	10,585	$	3,149	$	30,230

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

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share and share data)

(Unaudited)


											Total
							Accumulated				General Finance
	Cumulative				Additional		Other				Corporation		Equity of
	Preferred		Common		Paid-In		Comprehensive		Accumulated		Stockholders’		Noncontrolling		Total
	Stock		Stock		Capital		Income (Loss)		Deficit		Equity		Interests		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
Share-based compensation		—		—		647		—		—		647		—		647
Preferred stock dividends		—		—		(922)		—		—		(922)		—		(922)
Issuance of 1,000 shares of common stock on exercises of stock options		—		—		2		—		—		2		—		2
Grant of 17,000 shares of restricted stock		—		—		—		—		—		—		—		—
Vesting of restricted stock units into 3,433 shares of common stock		—		—		—		—		—		—		—		—
Net loss		—		—		—		—		(8,625)		(8,625)		—		(8,625)
Fair value change in derivative, net of related tax effect		—		—		—		(219)		—		(219)		—		(219)
Cumulative translation adjustment		—		—		—		(4,296)		—		(4,296)		—		(4,296)
Total comprehensive loss		—		—		—		—		—		(13,140)		—		(13,140)
Balance at March 31, 2020	$	40,100	$	3	$	183,282	$	(23,373)	$	(20,977)	$	179,035	$	504	$	179,539

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

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share and share data)

(Unaudited)


													Total
							Accumulated						General Finance
	Cumulative				Additional		Other						Corporation		Equity of
	Preferred		Common		Paid-In		Comprehensive		Accumulated				Stockholders’		Noncontrolling		Total
	Stock		Stock		Capital		Income (Loss)		Deficit		Treasury Stock		Equity		Interests		Equity
Balance at June 30, 2020	$	40,100	$	3	$	183,051	$	(22,106)	$	(20,790)	$	(5,845)	$	174,413	$	504	$	174,917
Share-based compensation		—		—		524		—		—		—		524		—		524
Preferred stock dividends		—		—		(922)		—		—		—		(922)		—		(922)
Issuance of 132,100 shares of common stock on exercises of stock options		—		—		143		—		—		—		143		—		143
Vesting of restricted stock units into 74,359 shares of common stock		—		—		—		—		—		—		—		—		—
Net income		—		—		—		—		4,083		—		4,083		—		4,083
Fair value change in derivative, net of related tax effect		—		—		—		(87)		—		—		(87)		—		(87)
Cumulative translation adjustment		—		—		—		1,753		—		—		1,753		—		1,753
Total comprehensive income		—		—		—		—		—		—		5,749		—		5,749
Balance at September 30, 2020	$	40,100	$	3	$	182,796	$	(20,440)	$	(16,707)	$	(5,845)	$	179,907	$	504	$	180,411
Share-based compensation		—		—		514		—		—		—		514		—		514
Preferred stock dividends		—		—		(922)		—		—		—		(922)		—		(922)
Issuance of 18,000 shares of common stock on exercises of stock options		—		—		46		—		—		—		46		—		46
Grant of 34,480 shares of restricted stock		—		—		—		—		—		—		—		—		—
Net income		—		—		—		—		9,256		—		9,256		—		9,256
Fair value change in derivative, net of related tax effect		—		—		—		(12)		—		—		(12)		—		(12)
Cumulative translation adjustment		—		—		—		4,652		—		—		4,652		—		4,652
Total comprehensive income		—		—		—		—		—		—		13,896		—		13,896
Balance at December 31, 2020	$	40,100	$	3	$	182,434	$	(15,800)	$	(7,451)	$	(5,845)	$	193,441	$	504	$	193,945
Share-based compensation		—		—		477		—		—		—		477		—		477
Preferred stock dividends		—		—		(922)		—		—		—		(922)		—		(922)
Issuance of 1,000 shares of common stock on exercises of stock options		—		—		4		—		—		—		4		—		4
Grant of 4,500 shares of restricted stock		—		—		—		—		—		—		—		—		—
Vesting of restricted stock units into 7,746 shares of common stock		—		—		—		—		—		—		—		—		—
Net income		—		—		—		—		11,187		—		11,187		—		11,187
Fair value change in derivative, net of related tax effect		—		—		—		435		—		—		435		—		435
Cumulative translation adjustment		—		—		—		(1,037)		—		—		(1,037)		—		(1,037)
Total comprehensive income		—		—		—		—		—		—		10,585		—		10,585
Balance at March 31, 2021	$	40,100	$	3	$	181,993	$	(16,402)	$	3,736	$	(5,845)	$	203,585	$	504	$	204,089

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

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except shares)

(Unaudited)


	Nine Months Ended March 31,
	2020		2021
Net cash provided by operating activities (Note 10)	$	53,120	$	33,463

Cash flows from investing activities:
Business acquisitions, net of cash acquired		(2,239)		(1,854)
Proceeds from sales of property, plant and equipment		416		364
Purchases of property, plant and equipment		(7,045)		(6,496)
Proceeds from sales of lease fleet		22,556		30,433
Purchases of lease fleet		(43,640)		(34,481)
Other intangible assets		(124)		(47)
Net cash used in investing activities		(30,076)		(12,081)

Cash flows from financing activities:
Repayments of equipment financing activities, net		(496)		(181)
Repayments of senior and other debt borrowings, net		(17,338)		(14,567)
Proceeds from issuance of 7.875% Senior Notes		—		69,000
Redemption of 8.125% Senior Notes		—		(77,390)
Deferred financing costs		(80)		(3,916)
Proceeds from issuances of common stock		100		193
Preferred stock dividends		(2,766)		(2,766)
Net cash used in financing activities		(20,580)		(29,627)

Net decrease (decrease) in cash		2,464		(8,245)

Cash and equivalents at beginning of period		10,359		17,478

The effect of foreign currency translation on cash		(1,080)		1,469

Cash and equivalents at end of period	$	11,743	$	10,702

Non-cash investing and financing activities:

The Company included non-cash holdback and other adjustments totaling $263 and $150 as part of the consideration for business acquisitions during the nine months ended March 31, 2020 and 2021, respectively.

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

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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 Royalwolf Trading New Zealand 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 (or Pan-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 of Pac-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 Form 10-Q and Article 10 of Regulation 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, 2020 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, 2021, particularly in light of the pandemic caused by the novel strain of coronavirus (COVID-19). The Company believes its business is essential, which allows it to continue to serve customers that remain operational. However, if the Company is required to close a certain number of its locations or a number of its employees cannot work because of illness or otherwise, its business could be materially adversely affected in a rapid manner. Similarly, if customers experience adverse business consequences due to the COVID-19 pandemic, including being required to shut down their operations, demand for the Company’s services and products could also be materially adversely affected in a rapid manner. 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 Form 10-K for the fiscal year ended June 30, 2020 filed with the Securities and Exchange Commission (“SEC”).

Unless otherwise indicated, references to “FY 2020” and “FY 2021” are to the nine months ended March 31, 2020 and 2021, respectively.

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. The Company believes the estimates and assumptions underlying the accompanying consolidated financial statements are reasonable and supportable based on the information available at the time the financial statements were prepared. However, uncertainty over the impact COVID-19 will have on the global economy and the Company’s business in particular makes many of the estimates and assumptions reflected in these consolidated financial statements inherently less certain. Therefore, actual results may ultimately differ from those estimates to a greater degree than historically.

Inventories

Inventories are comprised of the following (in thousands):


	June 30,		March 31,
	2020		2021
Finished goods	$	17,347	$	30,299
Work in progress		1,161		939
Raw materials		2,420		2,631
	$	20,928	$	33,869

Property, Plant and Equipment

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


	Estimated		June 30,		March 31,
	Useful Life		2020		2021
Land		—	$	2,168	$	2,168
Building and improvements		10 — 40 years		4,899		4,908
Transportation and plant equipment (including finance lease assets - see Note 9)		3 — 20 years		50,497		55,711
Furniture, fixtures and office equipment		3 — 10 years		14,583		15,489
				72,147		78,276
Less accumulated depreciation and amortization				(47,751)		(52,262)
			$	24,396	$	26,014

Depreciation expense on property, plant and equipment totaled $1,609,000 and $4,936,000 for the quarter ended March 31, 2020 and FY 2020, respectively; and $1,725,000 and $5,190,000 for the quarter ended March 31, 2021 and FY 2021, respectively.

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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, 2020 and March 31, 2021, the gross costs of the lease fleet were $613,358,000 and $639,105,000, respectively. Depreciation expense on lease fleet totaled $6,185,000 and $19,151,000 for the quarter ended March 31, 2020 and FY 2020, respectively; and $6,900,000 and $20,550,000 for the quarter ended March 31, 2021 and FY 2021, 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 North American oil and gas market has been, and the Company expects it to continue to be, highly cyclical, generally fluctuating in correlation with the price of West Texas Intermediate Crude (“WTI”). The decrease in demand caused by, among other things, the COVID-19 pandemic resulted in a substantial decline in WTI prices and drilling activity. Specifically impacting the Company is a reduction in drilling activity of oil wells located in the Permian and Eagle Ford shales basins in Texas, the two primary basins in which it operates. At June 30, 2020, the Company’s annual impairment test for Lone Star, which does its business in the Permian and Eagle Ford shales basins, determined that the implied value of goodwill at Lone Star, based on a discounted cash flow basis, was less than its carrying value and, as a result, a $14,160,000 impairment charge was recorded. The Company’s annual impairment assessment at June 30, 2020 for its other operating units concluded that the fair value of the goodwill for each of them was greater than their respective carrying amounts.

At March 31, 2021, the Company determined that qualitative factors in its North American leasing operations pertaining to conditions in the oil and gas market did not change significantly since June 30, 2020 and, as a result, a quantitative impairment analysis for Lone Star was not required.

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.

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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, 2020						March 31, 2021
	Gross						Gross
	Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trademark and trade name	$	5,486	$	(453)	$	5,033	$	5,486	$	(453)	$	5,033
Customer base and lists		31,691		(19,612)		12,079		31,870		(21,645)		10,225
Non-compete agreements		8,651		(8,226)		425		8,634		(8,318)		316
Deferred financing costs		3,643		(2,769)		874		4,413		(3,078)		1,335
Other		2,828		(2,468)		360		3,162		(2,908)		254
	$	52,299	$	(33,528)	$	18,771	$	53,565	$	(36,402)	$	17,163

Amortization expense related to amortizable intangible assets, other than deferred financing costs, totaled $918,000 and $2,843,000 for the quarter ended March 31, 2020 and FY 2020, respectively; and $776,000 and $2,321,000 for the quarter ended March31, 2021 and FY 2021, respectively. Amortization expense, which is included in interest expense, related to deferred financing costs recorded as amortizable intangible assets totaled $120,000 and $353,000 for the quarter ended March 31, 2020 and FY 2020, respectively; and $72,000 and $309,000 for the quarter ended March 31, 2021 and FY 2021, respectively.

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 842, Leases. Revenues determined to be non-lease related, including sales of lease inventories and fleet, sales of manufactured units and rental-related services, are accounted for in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

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 or 30-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 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 31, 2020 and FY 2020 and the quarter ended March 31, 2021 and FY 2021 were $14,054,000 and $41,806,000 and $12,004,000 and $35,098,000, respectively. A small portion of the rental-related services, include subleasing, special events leases and other miscellaneous streams, are accounted for under Topic 842. For contracts that have multiple performance obligations, revenue is allocated to each performance obligation in the contract based on the Company’s best estimate of the 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. 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,

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

customers are typically billed a cancellation fee, which is recorded as rental revenue upon the return of the equipment. Customers may utilize our equipment transportation services and other on-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 other on-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 June 30, 2020 and March 31, 2021, we had approximately $24,642,000 and $30,810,000, respectively, of unearned rental revenue included in unearned revenue and advance payments in the accompanying consolidated balance sheets. Revenues of $1,348,000 and $14,207,000, which were included in the unearned rental revenue balance at June 30, 2019, were recognized during the quarter ended March 31, 2020 and FY 2020, respectively. Revenues of $1,835,000 and $16,031,000, which were included in the unearned rental revenue balance at June 30, 2020, were recognized during the quarter ended March 31, 2021 and FY 2021, respectively. The Company’s uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future service revenues that are expected to be recognized within twelve months, the 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 therefore we are applying the 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 June 30, 2020 and March 31, 2021, the Company had $136,394 and $42,676, respectively, of warranty reserve included in trade payables and accrued liabilities in the accompanying consolidated balance sheets.

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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 March 31, 2021
	North America
									Corporate and				Asia –
	Leasing								Intercompany				Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	18,159	$	226	$	18,385	$	—	$	—	$	18,385	$	14,218	$	32,603
Sales manufactured units		—		—		—		1,937		(1,605)		332		—		332
Total non-lease revenues		18,159		226		18,385		1,937		(1,605)		18,717		14,218		32,935

Leasing:
Rental revenue		25,614		1,334		26,948		—		(53)		26,895		13,856		40,751
Rental-related services		10,570		1,506		12,076		—		—		12,076		4,244		16,320
Total leasing revenues		36,184		2,840		39,024		—		(53)		38,971		18,100		57,071

Total revenues	$	54,343	$	3,066	$	57,409	$	1,937	$	(1,658)	$	57,688	$	32,318	$	90,006


	Nine Months Ended March 31, 2021
	North America
									Corporate and				Asia –
	Leasing								Intercompany				Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	53,496	$	253	$	53,749	$	—	$	—	$	53,749	$	38,725	$	92,474
Sales manufactured units		—		—		—		5,452		(4,217)		1,235		—		1,235
Total non-lease revenues		53,496		253		53,749		5,452		(4,217)		54,984		38,725		93,709

Leasing:
Rental revenue		77,203		4,122		81,325		—		(201)		81,124		39,323		120,447
Rental-related services		31,770		3,595		35,365		—		—		35,365		11,959		47,324
Total leasing revenues		108,973		7,717		116,690		—		(201)		116,489		51,282		167,771

Total revenues	$	162,469	$	7,970	$	170,439	$	5,452	$	(4,418)	$	171,473	$	90,007	$	261,480

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	Quarter Ended March 31, 2020
	North America
									Corporate and				Asia –
	Leasing								Intercompany				Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	15,155	$	—	$	15,155	$	—	$	—	$	15,155	$	14,547	$	29,702
Sales manufactured units		—		—		—		3,505		(981)		2,524		—		2,524
Total non-lease revenues		15,155		—		15,155		3,505		(981)		17,679		14,547		32,226

Leasing:
Rental revenue		23,981		3,804		27,785		—		(103)		27,682		11,971		39,653
Rental-related services		9,916		4,293		14,209		—		—		14,209		3,882		18,091
Total leasing revenues		33,897		8,097		41,994		—		(103)		41,891		15,853		57,744

Total revenues	$	49,052	$	8,097	$	57,149	$	3,505	$	(1,084)	$	59,570	$	30,400	$	89,970


	Nine Months Ended March 31, 2020
	North America
									Corporate and				Asia –
	Leasing								Intercompany				Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated

Non-lease:
Sales lease inventories and fleet	$	48,649	$	35	$	48,684	$	—	$	—	$	48,684	$	39,550	$	88,234
Sales manufactured units		—		—		—		10,079		(3,799)		6,280		—		6,280
Total non-lease revenues		48,649		35		48,684		10,079		(3,799)		54,964		39,550		94,514

Leasing:
Rental revenue		75,765		11,681		87,446		—		(524)		86,922		36,139		123,061
Rental-related services		31,183		11,425		42,608		—		—		42,608		11,793		54,401
Total leasing revenues		106,948		23,106		130,054		—		(524)		129,530		47,932		177,462

Total revenues	$	155,597	$	23,141	$	178,738	$	10,079	$	(4,323)	$	184,494	$	87,482	$	271,976

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,
	2020	2021	2020	2021
Basic	30,294,868	29,807,448	30,250,904	29,758,221
Dilutive effect of common stock equivalents	—	1,210,231	1,201,973	1,036,754
Diluted	30,294,868	31,017,679	31,452,877	30,794,975

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Potential common stock equivalents totaling 2,049,340 and 847,367 for the quarter ended March 31, 2020 and FY 2020, respectively; and 702,924 and 876,401 for the quarter ended March 31, 2021 and FY 2021, respectively, have been excluded from the computation of diluted earnings per share because the effect is anti-dilutive.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which aims to simplify the accounting for income taxes by removing a number of exceptions currently provided for in Topic 740 and amending certain other requirements. This new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company does not expect the adoption of this accounting standard to be material on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which is elective, and provides for optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company is currently evaluating the impact of reference rate reform and potential impact of adoption of these elective practical expedients on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This new standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the impact of this on its consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which is elective, and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. The Company is currently evaluating the impact of reference rate reform and potential impact of adoption of these elective practical expedients on its consolidated financial statements.

Note 3. Equity Transactions

Preferred Stock

Upon issuance of shares of preferred stock, the Company records the liquidation value as the preferred equity in the consolidated balance sheet, with any underwriting discount and issuance or offering costs recorded as a reduction in additional paid-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, 2020 and March 31, 2021, 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.

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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, 2020 and March 31, 2021, 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. 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 or non-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 pari passu with the Series B Preferred Stock. The Series C Preferred Stock is listed on NASDAQ under the symbol “GFNCP.”

Dividends

As of March 31, 2021, since issuance, dividends paid or payable totaled $115,000 for the Series B Preferred Stock and dividends paid totaled $28,160,000 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.

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 a start-up or greenfield location. The accompanying consolidated financial statements include the operations of acquired businesses from the dates of acquisition.

FY 2021 Acquisition

On December 4, 2020, the Company, through Pac-Van, purchased the storage container and storage trailer business of Jackson Container & Trailer Rental, Inc. (“Jackson Container”) for approximately $2,004,000, which included a general indemnity

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holdback of $150,000. Jackson Container is located in New Orleans, Louisiana. The allocation to tangible and intangible assets acquired and liabilities assumed based on their estimated fair market values was as follows (in thousands):


	Jackson Container
	December 4, 2020
Fair value of the net tangible assets acquired and liabilities assumed:
Inventories	$	388
Property, plant and equipment		204
Lease fleet		1,414
Unearned revenue and advance payments		(133)
Total net tangible assets acquired and liabilities assumed		1,873

Fair value of intangible assets acquired:
Non-compete agreement		13
Customer lists/relationships		110
Goodwill		8
Total intangible assets acquired		131
Total purchase consideration	$	2,004

The FY 2021 operating results prior to and since the respective date of acquisition were not considered significant.

Goodwill recognized is attributable primarily to expected corporate synergies, the assembled workforce and other factors. The goodwill recognized in the Jackson Container acquisition is deductible for U.S. income tax purposes

The Company incurred approximately $47,000 and $559,000 during the quarter ended March 31, 2020 and FY 2020, respectively, and $135,000 and $150,000 during the quarter ended March 31, 2021 and FY 2021, of incremental transaction costs associated with acquisition-related activity that were expensed as incurred and are included in selling and general expenses in the accompanying consolidated statements of operations.

Note 5. Senior and Other Debt

Asia-Pacific Leasing Senior Credit Facility

The Company’s operations in the Asia-Pacific area had an AUS$150,000,000 secured senior credit facility, as amended, under a common terms deed arrangement with the Australia and New Zealand Banking Group Limited (“ANZ”) and Commonwealth Bank of Australia (“CBA”) (the “ANZ/CBA Credit Facility”). On October 26, 2017, RWH (subsequently replaced by GFNAPH) and its subsidiaries and a syndicate led by Deutsche Bank AG, Sydney Branch (“Deutsche Bank”) 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 (the “Deutsche Bank Credit Facility”), consists of a $32,715,400 (AUS$43,000,000) Facility A that will amortize semi-annually; a $88,636,000 (AUS$116,500,000) Facility B that has no scheduled amortization; a $15,216,500 (AUS$20,000,000) revolving Facility C that is used for working capital, capital expenditures and general corporate purposes; and a $28,530,900 (AUS$37,500,000) revolving Term Loan Facility D. Borrowings bear interest at the three-month bank bill swap interest rate in Australia (“BBSW”), plus a margin of 4.25% to 5.50% per annum, as determined by net leverage, as defined. In addition, financing fees totaling $2,184,600 (AUS$2,871,400) are payable quarterly in advance through maturity; and an exit fee of AUS$1,051,600, which was due on November 3, 2020 from the original November 3, 2017 financing, was paid in FY 2021. 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. Prepayment penalties equal to 1.0% of any amount prepaid under the Deutsche Bank Credit Facility will expire on March 22, 2021, with no prepayment penalty due after March 22, 2021.

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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 other non-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 31, 2021, borrowings under the Deutsche Bank Credit Facility totaled $119,840,000 (AUS$157,513,000) and availability, including cash at the bank, totaled $35,674,000 (AUS$46,889,000).

The above amounts were translated based upon the exchange rate of one Australian dollar to 0.760824 U.S. dollar and one New Zealand dollar to 0.699005 U.S. dollar at March 31, 2021.

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 “Original 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 Original 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 a term loan to Credit Suisse AG, to acquire the 49,188,526 publicly-traded shares of RWH not owned by the Company and to pay all related fees and expenses. GFNAPF was dissolved in September 2018.

By Letter of Instruction dated September 25, 2017, Bison Capital instructed GFN to transfer the interests in the Original Convertible Note and to issue four new secured senior convertible notes: a $7,750,000 secured senior convertible note held by Teachers Insurance and Association of America (the “TIAA Convertible Note”), a $7,750,000 secured senior convertible note held by General Electric Pension Trust (the “GEPT Convertible Note) and two secured senior convertible notes totaling $10,500,000 held by Bison Capital (the “Bison Convertible Notes”). Collectively, these four new secured senior convertible notes are referred to as the “Convertible Notes.”

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.

Convertible Notes

At any time prior to maturity, the holders may have converted unpaid principal and interest under the Convertible Notes 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 Notes. If GFN common stock traded above 150% of the conversion price over 30 consecutive trading days and the aggregate dollar value of all GFN common stock traded on NASDAQ exceeded $600,000 over the last 20 consecutive days of the same 30-day period, GFN may have forced the holders to convert all or a portion of the Convertible Notes. 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 Notes into a total of 3,058,824 shares of the Company’s common stock effective September 10, 2018. The Convertible Notes included a provision which required GFNAPH to pay the holders, via the payment of principal, interest and the realized value of GFN common stock received after conversion of the Convertible Notes, a minimum return of 1.75 times the original principal amount. In the event that the holders of the Convertible Notes receive aggregate proceeds in excess of $48,900,000 from the sale of GFN common stock received after the conversion of the Convertible Notes, then 50% of the interest actually paid to the holders (such amount, the “Price Increase”) shall be

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repaid by the holders of the Convertible Notes 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 holders in the sale of such shares. The holders of the Convertible Notes may satisfy such obligations by returning to GFN shares of GFN common stock with an aggregate value equivalent to the Price Increase. 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.

The Company evaluated the Convertible Notes at 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 Notes, 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 Notes. 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 Notes 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 the year ended June 30, 2019.

In June 2020, General Electric Pension Trust (‘GEPT”) elected to sell the 911,765 shares of GFN common stock they own from the conversion of the GEPT Convertible Note. At a meeting on June 18, 2020, the GFN Board of Directors approved GFN buying GEPT’s shares (versus an open market sale by GEPT), as well as entering into an agreement with GEPT to satisfy their remaining minimum return liability in two equal payments, the first one due October 1, 2020 and the second one on January 1, 2021, as well as approving that the bifurcated minimum return derivative liability will be assumed by GFN U.S. effective June 30, 2020. The shares were purchased by the Company at a closing market price on June 22, 2020 of $6.40, resulting in realized gross proceeds to GEPT of $5,835,000, and leaving a remaining minimum return liability of $6,843,000. The GFN shares purchased from GEPT, plus commission of $10,000, was recorded as treasury stock and the minimum return liability due GEPT is included in trade payables and accrued liabilities in the accompanying consolidated balance sheets. The entire bifurcated minimum return derivative liability was revalued at June 22, 2020, and the difference of $436,000 between this valuation and the previous valuation at March 31, 2020 was recognized as a loss in the consolidated statements of operations during the fourth quarter of FY 2020. In addition, the difference of $1,081,000 between the remaining minimum return liability of $6,843,000 due GEPT and its value at June 22, 2020 prior to its assumption by GFN was recognized as a gain in the consolidated statements of operations during the fourth quarter of the fiscal year ended June 30, 2020. At March 31, 2021, the fair value of the bifurcated minimum return derivative liability for the remaining 2,147,059 shares remaining from the conversion of the TIAA Convertible Note and Bison Convertible Notes was $12,802,000.

North America Senior Credit Facility

At March 31, 2021, the North America leasing (Pac-Van and Lone Star) and manufacturing operations (Southern Frac) had a combined $285,000,000 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 CIBC Bank USA, KeyBank, National Association, Bank Hapoalim, B.M., Associated Bank and Bank of the West (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 December 14, 2025, assuming the Company’s publicly-traded senior notes due October 31, 2025 (see below) are extended to a date not earlier than March 14, 2026, or have been repaid in full or refinanced or replaced on terms satisfactory to the Wells Fargo Credit Facility; otherwise the Wells Fargo Credit Facility would mature on July 31, 2025.

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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 that Pac-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) $8,000,000 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 of Pac-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, as defined, or the LIBOR rate, as defined, with a minimum of 0.5%; plus an applicable margin range of 2.50% to 3.00% based on the average excess availability. The Wells Fargo Credit Facility also specifies the future conditions under which the current LIBOR-based interest rate could be replaced in the future with an alternate benchmark interest rate. There is an unused commitment fee of 0.250% - 0.375%, based on the average revolver usage. 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 composite minimum utilization covenant and a covenant that would require repayment upon a change in control, as defined. At March 31, 2021, borrowings and availability under the Wells Fargo Credit Facility totaled $171,223,000 and $94,031,000, respectively.

Senior Notes

On June 18, 2014, the Company completed the sale of unsecured senior notes (the “2021 Senior Notes”) in a public offering for an aggregate principal amount of $72,000,000. The 2021 Senior Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof and pursuant to the first supplemental indenture (the “First Supplemental Indenture”) dated as of June 18, 2014 by and between the Company and Wells Fargo, as trustee (the “Original Trustee”). The First Supplemental Indenture supplements the indenture entered into by and between the Company and the Original Trustee dated as of June 18, 2014 (the “Base Indenture”). 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. 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 agreement, or such new finance/capital lease obligations as the Company may enter into from time to time. As a result of the successful consent solicitation, the Company and the Original Trustee entered into the second supplemental indenture dated October 31, 2018 (the “Second Supplemental Indenture” and, together with the Base Indenture and First Supplemental Indenture, the “Existing Indenture”). The 2021 Senior Notes bore interest at the rate of 8.125% per annum and were scheduled to mature on July 31, 2021. Prior to December 31, 2020, an aggregate principal amount of $65,800,000 of the 2021 Senior Notes were redeemed (see below) and the remaining principal balance of $11,590,000, plus accrued interest through the redemption date of January 15, 2021, was effectively defeased by the transfer of funds to the Original Trustee (see Note 12) through borrowings on the Wells Fargo Credit Facility. As a result, the Company has reflected the 2021 Senior Notes as fully repaid at December 31, 2020, and has written off the related unamortized debt issuance costs of $386,000 at November 30, 2020 through interest expense in accompanying consolidated financial statements. On January 15, 2021, the Company redeemed the remaining $11,590,000 of the issued and outstanding principal amount of the 2021 Senior Notes in accordance with the optional redemption provisions in the Existing Indenture governing the 2021 Senior Notes.

On October 27, 2020, the Company completed the sale of unsecured senior notes (the “2025 Senior Notes”) in a public offering for $60,000,000, which represented 100% of the aggregate principal amount. On November 16, 2020, the underwriters exercised their full over-allotment option of $9,000,000, which also represented 100% of the aggregate principal amount. Total net proceeds were $65,853,000, after deducting underwriting discounts and offering costs of approximately $3,147,000. The Company

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used $65,800,000 of the net proceeds to redeem the majority of the 2021 Senior Notes (see above). The 2025 Senior Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof and pursuant to the third supplemental indenture (the “Third Supplemental Indenture” and, together with the Existing Indenture, the “Indenture”) by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). At March 31, 2021, the 2025 Senior Notes totaled $66,116,000, net of unamortized debt issuance costs of $2,884,000.

The 2025 Senior Notes bear interest at the rate of 7.875% per annum, mature on October 31, 2025 and are not subject to any sinking fund. Interest on the 2025 Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31, commencing on January 31, 2021. The 2025 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 2025 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 2025 Senior Notes are structurally subordinated to all existing and future liabilities of the Company’s subsidiaries and are not guaranteed by any of the Company’s subsidiaries.

The Company may, prior to October 31, 2022, redeem the 2025 Senior Notes in whole or in part upon the payment of 100% of the principal amount of the 2025 Senior Notes being redeemed, plus a “make-whole” price described in the Indenture, and accrued interest and unpaid interest to, but not including, the date of redemption. In addition, the Company may redeem up to 35% of the aggregate outstanding principal amount of the 2025 Senior Notes before October 31, 2022 with the net cash proceeds from certain equity offerings at a redemption price of 107.875% of the principal amount plus accrued and unpaid interest to the date of redemption.

If the Company experiences a change in control, as defined in the Indenture, it must offer to purchase the 2025 Senior Notes at 101% of the principal amount plus accrued and unpaid interest to the date of purchase. If the Company engages in asset sales, as defined in the Indenture, it generally must invest the net cash proceeds from such sales in its business within a period of time, prepay debt under the Wells Fargo Credit Facility or make an offer to purchase a principal amount of the 2025 Senior Notes equal to the excess net cash proceeds. The purchase price of the 2025 Senior Notes will be 100% of their principal amount, plus accrued but unpaid interest.

The Company may, at its option, at any time and from time to time, on or after October 31, 2022, redeem the 2025 Senior Notes in whole or in part. The 2025 Senior Notes will be redeemable at a redemption price initially equal to 104.5% of the principal amount of the 2025 Senior Notes (and which declines each year on October 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 2025 Senior Notes.

The Indenture contains covenants which, among other things, limit the Company’s ability to make certain payments, to pay dividends and to incur additional indebtedness if the incurrence of such indebtedness would cause the company’s consolidated fixed charge coverage ratio, as defined in the Indenture, to be below 2.0 to 1.0. The 2025 Senior Notes are listed on NASDAQ under the symbol “GFNSZ.”

Other

At March 31, 2021, equipment financing (finance lease liabilities - see Note 9) and other debt totaled $9,841,000.

The Company was in compliance with the financial covenants under all its credit facilities as of March 31, 2021.

The weighted-average interest rate in the Asia-Pacific area was 6.2% and 7.3% during the quarter ended March 31, 2020 and FY 2020, respectively, and 7.0% and 7.1% during the quarter ended March 31, 2021 and FY 2021, respectively; which does not include the effect of translation, amortization of deferred financing costs and accretion. The weighted-average interest rate in North America was 5.4% and 5.8% during the quarter ended March 31, 2020 and FY 2020, respectively, and 4.5% and 5.0% during the quarter ended March 31, 2021 and FY 2021, respectively; which does not include the effect of the amortization of deferred financing costs and accretion.

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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)
Type of Derivative Contract	Balance Sheet Classification	June 30, 2020		March 31, 2021
Swap Contracts	Trade payables and accrued liabilities	$	3,456	$	2,975
Forward-Exchange Contracts	Trade and other receivables		—		52
Forward-Exchange Contracts	Trade payables and accrued liabilities		258		63
Bifurcated Derivatives	Fair value of bifurcated derivatives in Convertible Note		18,325		12,802


		Quarter Ended				Nine Months Ended
Type of	Statement of Operations	March 31,				March 31,
Derivative Contract	Classification	2020		2021		2020		2021
Forward Exchange Contracts	Unrealized foreign currency exchange gain (loss) included in “Foreign exchange and other”	$	587	$	1,246	$	331	$	304
Bifurcated Derivatives	Change in valuation of bifurcated derivatives in Convertible Note		(11,259)		3,622		(6,365)		5,523

Interest Rate Swap Contract

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. During the year ended June 30, 2017 (“FY 2017”), the Company entered into two interest rate swaps that were designated as cash flow hedges. In January 2018, the Company entered into an interest rate swap contract that was 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

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recorded in interest expense in the consolidated statement of operations. In April 2019, this interest swap contract was amended and extended. There was no ineffective portion recorded in FY 2020 and FY 2021.

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, 2020 and March 31, 2021, the open interest rate swap contracts were as follows (dollars in thousands):


	June 30,			March 31,
	2020			2021
Notional amounts	$	68,777		$	76,082
Fixed/Strike Rates		7.17	%		6.92	%
Floating Rates		5.35	%		5.035	%
Fair Value of Combined Contracts	$	(3,456)		$	(2,975)

Foreign Currency Risk

The Company has transactional currency exposures. Such exposure arises from sales or purchases in currencies other than the functional currency. The currency giving rise to this risk is primarily U.S. dollars. Royal Wolf has a bank account denominated in U.S. dollars into which a small number of customers pay their debts. This is a natural hedge against fluctuations in the exchange rate. The funds are then used to pay suppliers, avoiding the need to convert to Australian dollars. Royal Wolf uses forward currency and participating forward contracts to eliminate the currency exposures on the majority of its transactions denominated in foreign currencies, either by transaction if the amount is significant, or on a general cash flow hedge basis. The forward currency and 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, 2020, there were 13 open forward exchange contracts that mature between July 2020 and October 2020; and, as of March 31, 2021, there were 20 open forward exchange contracts that mature between April 2021 and August 2021, as follows (dollars in thousands):


	June 30,		March 31,
	2020		2021
Notional amounts	$	3,087	$	12,666
Exchange/Strike Rates (AUD to USD)		0.56516 – 0.68863		0.71008 – 0.77540
Fair Value of Combined Contracts	$	(258)	$	(11)

For the quarter ended March 31, 2020 and 2021, net unrealized and realized foreign exchange gains (losses) totaled $(2,627,000) and $(59,000) and $36,000 and $16,000, respectively. In FY 2020 and FY 2021, net unrealized and realized foreign exchange gains (losses) totaled $(2,632,000) and $(104,000) and $179,000 and $57,000, 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, 2020 was determined to be approximately $366,554,000 (carrying value of $372,697,000, gross

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of deferred financing costs of $896,000). The Company also determined that the fair value of its other debt of $7,997,000 at June 30, 2020 approximated or would not vary significantly from their carrying values. The Company believes that market conditions at March 31, 2021 have not changed significantly from June 30, 2020. Therefore, the proportion of the fair value to the carrying value of the Company’s senior credit facilities and other debt at March 31, 2021 would not vary significantly from the proportion determined at June 30, 2020.

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 $83,000 during both the quarter ended March 31, 2020 and 2021, and FY 2020 and FY 2021, respectively.

The premises of Pac-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 a month-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 three two-year options, with the monthly rental increasing at each option period from $11,420 to $12,590 per month. On August 4, 2020, the Company exercised the first option to renew the lease for an additional two-year term commencing January 1, 2021. Rental payments on these premises totaled $40,000 and $116,000 during the quarter ended March 31, 2020 and FY 2020, respectively; and $40,000 and $120,000 during the quarter ended March 31, 2021 and FY 2021, respectively.

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 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.”

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All grants to-date consist of incentive and non-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 31, 2021, 321,220 shares remained available for grant.

On February 9, 2021 (the “February 2021 Grant”), the Company granted 1,879 time-based and 1,879 performance-based options to a key employee of Royal Wolf to purchase a total of 3,758 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $10.00 per share. The options under the February 2021 Grant vest over 31 - 36 months from the date of grant, with the vesting of the performance-based options subject to the attainment of the targets. The fair value of the stock options in the February 2020 Grant was $5.41, determined using the Black-Scholes option-pricing model using the following assumptions: a risk-free interest rate of 0.89%, an expected life of 7.5 years, an expected volatility of 52.25% and no expected dividend.

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


Fair value of stock options		$0.81 - $6.35

Assumptions used:
Risk-free interest rate		0.89% - 4.8%
Expected life (in years)		7.5
Expected volatility		26.5% - 84.6%
Expected dividends		—

At March 31, 2021, there were no significant outstanding stock options held by non-employee consultants that were not fully vested. A summary of the Company’s stock option activity and related information for FY 2021 follows:


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

Outstanding at June 30, 2020	1,599,541	$	4.54
Granted	3,758		10.00
Exercised	(151,100)		1.26
Forfeited or expired	—		—
Outstanding at March 31, 2021	1,452,199	$	4.89	3.9

Vested and expected to vest at March 31, 2021	1,452,199	$	4.89	3.9

Exercisable at March 31, 2021	1,452,199	$	4.89	3.9

At March 31, 2021, outstanding time-based options and performance-based options totaled 1,029,974 and 422,225, respectively. Also at that date, the Company’s market price for its common stock was $12.15 per share, which was above the exercise prices of all of the outstanding stock options, and the intrinsic value of the outstanding stock options at that date was $10,443,000. Share-based compensation of $9,619,000 related to stock options has been recognized in the consolidated statements of operations, with a corresponding benefit to equity, from inception through March 31, 2021. At that date, there remains $33,000 of unrecognized compensation expense to be recorded on a straight-line basis over the remaining weighted-average vesting period of 2.1 years.

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A deduction is not allowed for U.S. income tax purposes with respect to non-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. The tax effect of the U.S. income tax deduction 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
		Weighted-Average			Weighted-Average
		Grant Date Fair			Grant Date Fair
	Shares	Value		Shares	Value
Nonvested at June 30, 2020	408,099	$	8.00	108,928	$	8.18
Granted	38,980		8.85	33,411		10.00
Vested	(43,651)		10.47	(82,105)		7.68
Forfeited	—		—	(2,706)		9.49
Nonvested at March 31, 2021	403,428	$	7.82	57,528	$	9.89

Share-based compensation of $7,237,000 and $1,615,000 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 31, 2021. At that date, there remains $2,083,000 for the restricted stock and $530,000 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 2.86 years for both the restricted stock and the RSU.

Note 9. Commitments and Contingencies

Leases

In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). This new 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 accounting standard, as updated, eliminated the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 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 the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 is substantially unchanged from the previous lease requirements under U.S. GAAP.

The Company adopted ASU No. 2016-02 effective July 1, 2019, utilizing a modified retrospective transition approach and using the 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 periods before July 1, 2019. The accounting standard included optional transitional practical expedients intended to simplify its adoption and the Company adopted the package of practical expedients, which allowed it to retain the historical lease classification determined under legacy U.S. GAAP, as well as relief from reviewing expired or existing contracts to determine if they contain leases. As of July 1, 2019, the right of use assets (operating lease assets) related to operating leases recorded on the Company’s consolidated balance sheet was $70,797,000 and the related liabilities (operating lease liabilities) was $71,298,000. The difference between the right of use assets and related lease liabilities is predominantly deferred rent. The adoption of this accounting standard did not materially impact the Company’s consolidated statements of operations or cash flows.

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Operating Lease Assets and Liabilities

We lease our corporate office, certain administrative offices, and certain branch locations through the 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 policy; therefore, leases with an original term of 12 months or less 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 uses estimates and judgments in the determination of our lease liabilities. Key estimates and judgments include the following:

Lease Discount Rate – The Company is required to discount unpaid fixed lease payments using the interest rate implicit in the 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.

Lease Term – The Company includes the non-cancellable period of the lease, plus any additional periods covered by an extension of the lease that are reasonably certain to be exercised. The Company expects to exercise options to extend many operating leases after considering the relevant economic factors.

Fixed Payments – Lease payments included in the measurement of 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 June 30, 2020 and March 31, 2021 are as follows (in thousands):


Year Ending June 30,
2021	$	11,628
2022		10,336
2022		9,121
2024		7,858
2025		6,750
Thereafter		57,190
Total commitments		102,883
Less – effect of discounting		(35,741)
	$	67,142


Year Ending March 31,
2022	$	12,947
2023		11,877
2024		10,092
2025		8,867
2026		8,019
Thereafter		71,904
Total commitments		123,706
Less – effect of discounting		(42,648)
	$	81,058

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Operating 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 and non-lease components. All expenses for operating leases are recognized within the costs and expenses in determining operating income.

Operating lease activity during the periods was as follows (in thousands):


	Quarter Ended March 31,				Nine Months Ended March 31,
	2020		2021		2020		2021
Expense:
Short-term lease expense	$	957	$	960	$	2,780	$	2,615
Fixed lease expense		3,296		3,707		9,786		10,803
Variable lease expense		313		366		1,043		1,155
Sublease income		(1,120)		(1,214)		(3,569)		(3,493)
	$	3,446	$	3,819	$	10,040	$	11,080

Cash paid and new or modified operating lease information:
Operating cash flows from operating leases	$	2,973	$	3,427	$	8,933	$	9,985
Net operating lease assets obtained in exchange for new or modified operating lease liabilities		499		3,967		4,208		15,758

The weighted-average remaining lease term and weighted average discount rate for operating leases at June 30, 2020 and March 31, 2021 was 12.6 years and 6.3%, and 13.2 years and 6.3%, respectively.

Finance Leases

Specific criteria differentiate a finance lease from an operating lease, but generally leases under which substantially all the risks and benefits incidental to ownership of the leased assets are assumed by the Company are classified as finance leases. At adoption of ASU No. 2016-02, all previously classified capital leases were classified as finance leases. In the accompanying consolidated balance sheets, finance lease assets are included in property, plant and equipment (see Note 2), while finance lease liabilities are included in senior and other debt (see Note 5). Finance leased assets as of June 30, 2020 and March 31, 2021, include gross costs of $8,650,000 and $11,995,000, and accumulated amortization of $2,871,000 and $3,740,000 resulting in a net book value of $5,779,000 and $8,255,000, respectively.

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, 2020 and March 31, 2021, reported liability totaled $1,278,000 and $1,206,000, respectively, and has been recorded in the caption “Trade payables and accrued liabilities” in the accompanying consolidated balance sheets.

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 a case-by-case basis as they arise. Reserves are established, as required, based on its assessment of its exposure. The Company has insurance policies to cover general liability and workers compensation related claims. In the opinion of management, the ultimate amount of liability not covered by insurance under pending litigation and claims, if any, will not have a material adverse effect on our financial position, operating results or cash flows.

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

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


	Nine Months Ended March 31,
	2020		2021
Cash flows from operating activities
Net income	$	7,767	$	24,526
Adjustments to reconcile net income loss to cash flows from operating activities:
Gain on sales and disposals of property, plant and equipment		(220)		(263)
Gain on sales of lease fleet		(7,029)		(10,560)
Unrealized foreign exchange loss (gain)		2,632		(179)
Unrealized gain on forward exchange contracts		(331)		(304)
Change in valuation of bifurcated derivatives in Convertible Note		6,365		(5,523)
Depreciation and amortization		26,930		28,061
Amortization of deferred financing costs		1,388		1,477
Share-based compensation expense		2,015		1,515
Deferred income taxes		8,211		5,142
Changes in operating assets and liabilities (excluding assets and liabilities from acquisitions):
Trade and other receivables, net		7,265		5,259
Inventories		1,854		(11,654)
Prepaid expenses and other		(1,283)		(2,848)
Trade payables, accrued liabilities and unearned revenues		(2,682)		(2,222)
Income taxes		238		1,036
Net cash provided by operating activities	$	53,120	$	33,463

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 of Pac-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).

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The tables below represent the Company’s revenues from external customers, share-based compensation expense, impairment of goodwill, 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, 2021
	North America
	Leasing
									Corporate
									and
									Intercompany				Asia – Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated
Revenues:
Sales	$	18,159	$	226	$	18,385	$	1,937	$	(1,605)	$	18,717	$	14,218	$	32,935
Leasing		36,184		2,840		39,024		—		(53)		38,971		18,100		57,071
	$	54,343	$	3,066	$	57,409	$	1,937	$	(1,658)	$	57,688	$	32,318	$	90,006

Share-based compensation	$	121	$	14	$	135	$	12	$	265	$	412	$	65	$	477

Depreciation and amortization	$	4,214	$	2,148	$	6,362	$	101	$	(180)	$	6,283	$	3,118	$	9,401

Operating income (loss)	$	12,316	$	(1,468)	$	10,848	$	(137)	$	(1,094)	$	9,617	$	5,494	$	15,111

Interest income	$	—	$	—	$	—	$	—	$	—	$	—	$	150	$	150

Interest expense	$	1,490	$	59	$	1,549	$	13	$	1,516	$	3,078	$	2,134	$	5,212

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Nine Months Ended March 31, 2021
	North America
	Leasing
									Corporate
									and
									Intercompany				Asia – Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated
Revenues:
Sales	$	53,496	$	253	$	53,749	$	5,452	$	(4,217)	$	54,984	$	38,725	$	93,709
Leasing		108,973		7,717		116,690		—		(201)		116,489		51,282		167,771
	$	162,469	$	7,970	$	170,439	$	5,452	$	(4,418)	$	171,473	$	90,007	$	261,480

Share-based compensation	$	359	$	44	$	403	$	36	$	915	$	1,354	$	161	$	1,515

Depreciation and amortization	$	12,438	$	6,487	$	18,925	$	301	$	(539)	$	18,687	$	9,374	$	28,061

Operating income (loss)	$	37,323	$	(4,889)	$	32,434	$	(508)	$	(3,652)	$	28,274	$	14,797	$	43,071

Interest income	$	—	$	—	$	—	$	—	$	—	$	—	$	452	$	452

Interest expense	$	4,550	$	124	$	4,674	$	38	$	5,981	$	10,693	$	6,902	$	17,595

Additions to long-lived assets	$	30,680	$	111	$	30,791	$	78	$	(409)	$	30,460	$	10,517	$	40,977

	At March 31, 2021
Long-lived assets	$	329,618	$	34,940	$	364,558	$	1,138	$	(9,020)	$	356,676	$	136,444	$	493,120

Operating lease assets	$	23,086	$	2,245	$	25,331	$	152	$	193	$	25,676	$	53,539	$	79,215

Goodwill	$	65,233	$	6,622	$	71,855	$	—	$	—	$	71,855	$	28,196	$	100,051

	At June 30, 2020
Long-lived assets	$	320,956	$	40,234	$	361,190	$	1,361	$	(9,145)	$	353,406	$	129,717	$	483,123

Operating lease assets	$	25,602	$	2,441	$	28,043	$	244	$	267	$	28,554	$	37,671	$	66,225

Goodwill	$	65,123	$	6,622	$	71,745	$	—	$	—	$	71,745	$	25,479	$	97,224

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Quarter Ended March 31, 2020
	North America
	Leasing
									Corporate
									and
									Intercompany				Asia – Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated
Revenues:
Sales	$	15,155	$	—	$	15,155	$	3,505	$	(981)	$	17,679	$	14,547	$	32,226
Leasing		33,897		8,097		41,994		—		(103)		41,891		15,853		57,744
	$	49,052	$	8,097	$	57,149	$	3,505	$	(1,084)	$	59,570	$	30,400	$	89,970

Share-based compensation	$	97	$	11	$	108	$	9	$	334	$	451	$	196	$	647
Depreciation and amortization	$	4,104	$	1,556	$	5,660	$	99	$	(179)	$	5,580	$	3,132	$	8,712
Operating income	$	9,316	$	1,629	$	10,945	$	385	$	(1,474)	$	9,856	$	4,417	$	14,273
Interest income	$	—	$	—	$	—	$	—	$	—	$	—	$	153	$	153
Interest expense	$	2,056	$	61	$	2,117	$	23	$	1,716	$	3,856	$	2,125	$	5,981


	Nine Months Ended March 31, 2020
	North America
	Leasing
									Corporate
									and
									Intercompany				Asia – Pacific
	Pac-Van		Lone Star		Combined		Manufacturing		Adjustments		Total		Leasing		Consolidated
Revenues:
Sales	$	48,649	$	35	$	48,684	$	10,079	$	(3,799)	$	54,964	$	39,550	$	94,514
Leasing		106,948		23,106		130,054		—		(524)		129,530		47,932		177,462
	$	155,597	$	23,141	$	178,738	$	10,079	$	(4,323)	$	184,494	$	87,482	$	271,976

Share-based compensation	$	308	$	35	$	343	$	27	$	1,083	$	1,453	$	562	$	2,015
Depreciation and amortization	$	12,203	$	4,826	$	17,029	$	297	$	(537)	$	16,789	$	10,141	$	26,930
Operating income	$	34,506	$	4,170	$	38,676	$	358	$	(4,578)	$	34,456	$	11,766	$	46,222
Interest income	$	—	$	—	$	—	$	—	$	2	$	2	$	517	$	519
Interest expense	$	7,113	$	266	$	7,379	$	89	$	5,150	$	12,618	$	7,617	$	20,235
Additions to long-lived assets	$	38,728	$	892	$	39,620	$	41	$	(388)	$	39,273	$	11,412	$	50,685

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 $981,000 and $3,799,000 during the quarter ended March 31, 2020 and FY 2020, respectively; and $1,605,000 and $4,217,000 during the quarter ended March 31, 2021 and FY 2021, respectively. Intrasegment net revenues in the North American leasing operations related to primarily the leasing of portable liquid storage containers from Pac-Van to Lone Star totaled $70,000 and $425,000 during the quarter ended March 31, 2020 and FY 2020, respectively; and $20,000 and $102,000 during the quarter ended March 31, 2021 and FY 2021, respectively.

Note 12. Subsequent Events

On April 9, 2021, the Company announced that its Board of Directors declared a cash dividend of $2.225 per share on the Series C Preferred Stock (see Note 3). The dividend is for the period commencing on January 31, 2021 through April 29, 2021, and is payable on April 30, 2021 to holders of record as of April 29, 2021.

On April 15, 2021, United Rentals (North America), Inc. (“United Rentals”), UR Merger Sub VI Corporation, a wholly-owned subsidiary of United Rentals (“Merger Sub”), and GFN entered into a definitive merger agreement under which Merger Sub will acquire all of GFN’s outstanding common stock for $19.00 per share in cash. United Rentals, through Merger Sub, commenced a

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GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

tender offer on April 26, 2021 and following its completion, Merger Sub will merge with and into GFN and shares of GFN common stock that have not been tendered and purchased in the tender offer will be converted into the right to receive $19.00 per share in cash. The merger is subject to customary closing conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other regulatory approvals.

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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 Form 10-K for the fiscal year ended June 30, 2020 (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 Form 10-Q. This Quarterly Report on Form 10-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 at www.generalfinance.com that 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 Royalwolf Trading New Zealand 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 (or Pan-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 of Pac-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 31, 2021, our two geographic leasing operations primarily lease and sell their products through 24 customer service centers (“CSCs”) in Australia, 16 CSCs in New Zealand, 63 branch locations in the United States and three branch locations in Canada. At that date, we had 279 and 651 employees and 44,650 and 55,789 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

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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 are re-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 manufactured 500-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.

COVID-19

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China and has since spread to a number of other countries, including the United States, Canada, Australia and New Zealand. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic has not had a significant impact on our core mobile storage business, but has had a significant impact in our liquid containment business in the oil and gas sector. While conditions in this sector have improved somewhat recently, at the outset the decrease in demand caused by the COVID-19 pandemic and the political tensions between several large oil producing countries caused an even further decline in oil and gas prices in an already soft market. A significant portion of our leasing revenues of our liquid containment business in North America are derived from customers in the oil and gas industry, particularly those doing business in the Permian and Eagle Ford basins in Texas, who are typically adversely affected when this industry is in a downward economic cycle. We have also seen reductions in construction activity, including suspensions, postponements and some cancellations of projects, in both geographic venues. Efforts to contain the spread of COVID-19 continue, including the commencement of vaccinations. Many countries, including the United States, Canada, Australia and New Zealand, still have some level of restrictions on, among other things, international travel, social gatherings and businesses not considered essential. The existence of the COVID-19 pandemic, the fear associated with the COVID-19 pandemic and the reactions of governments and private sectors around the world in response to the COVID-19 pandemic have impeded a great number of businesses (including ours, our customers and our vendors) to conduct normal business operations. We believe that our business is essential, which allows us to continue to serve customers that remain operational. However, if we are required to close a certain number of our locations or a number of our employees cannot work because of illness or otherwise, our business could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to the COVID-19 pandemic, including being required to shut down their operations, demand for our services and products could also be materially adversely affected in a rapid manner. The situation will likely become more critical if prolonged. We have curtailed domestic and international travel, promoted social distancing and work-from-home practices, implemented restrictions on investing and spending, and laid the groundwork for other potential cost-cutting measures. We continue to monitor the situation, but the situation of the COVID-19 pandemic continues to evolve and, therefore, it remains difficult to reasonably predict the extent to which our results of operations, liquidity and financial condition will ultimately be impacted.

Results of Operations

Quarter Ended March 31, 2021 (“QE 2021”) Compared to Quarter Ended March 31, 2020 (“QE 2020”)

Revenues. Revenues were $90.0 million in both QE FY 2021 and QE FY 2020. This consisted of a slight increase of $0.2 million in revenues in our North American leasing operations, an increase of $1.9 million, or 6%, in revenues in the Asia-Pacific area and a decrease of $2.2 million, or 88%, in manufacturing revenues from Southern Frac. The effect of the average currency exchange rate of a stronger Australian dollar relative to the U.S. dollar in QE FY 2021 versus QE FY 2020 increased the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during QE FY 2021 was $0.7727 U.S. dollar compared

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to $0.6588 U.S. dollar during QE FY 2020. In Australian dollars, total revenues in the Asia-Pacific area actually decreased by 9% in QE FY 2021 from QE FY 2020.

Excluding Lone Star (doing business solely in the oil and gas sector), total revenues of our North American leasing operations increased by approximately $5.3 million, or 11%, in QE FY 2021 from QE FY 2020 as a result of across the board increases in most sectors; offset somewhat by decreases totaling $1.4 million in the oil and gas and industrial sectors. At Lone Star, revenues decreased by $5.1 million, or approximately 63%, from $8.1 million in QE FY 2020 to $3.0 million in QE FY 2021. As discussed above, revenues in the Asia-Pacific area benefited between the periods because of the translation effect of the stronger Australian dollar. In local Australian dollars, revenue between the periods decreased by AUS$4.1 million, primarily in the transportation (intermodal), utilities, construction and consumer sectors.

Sales and leasing revenues represented 36% and 64% of total non-manufacturing revenues in QE FY 2021, as compared to 34% and 66% in QE FY 2020, respectively.

Non-manufacturing sales during QE FY 2021 amounted to $32.6 million, compared to $29.7 million during QE FY 2020, representing an increase of $2.9 million, or 10%; and comprised of an increase in our North American leasing operations of $3.2 million and a decrease in the Asia Pacific area of $0.3 million. The decrease in sales in the Asia-Pacific area was comprised of a decrease of $1.4 million in the CSC operations ($2.9 million decrease due to lower unit sales, $0.4 million increase due to higher average prices and a $1.1 million increase due to foreign exchange movements); offset somewhat by an increase of $1.1 million in the national accounts group ($5.9 million increase due to higher unit sales, $5.7 million decrease due to lower average prices and a $0.9 million increase due to foreign exchange movements). The translation of sales in the Asia-Pacific area was beneficially impacted by the stronger Australian dollar when comparing QE FY 2021 to QE FY 2020. In Australian dollars, total sales in the Asia-Pacific area decreased by 16% in QE FY 2021 from QE FY 2020; primarily in the transportation, utilities, consumer and mining sectors, which decreased by an aggregate AUS$3.3 million. In QE FY 2021, the transportation sector included two large sales totaling AUS$7.1 million; whereas in QE FY 2020, the transportation sector included three large sales totaling AUS$9.2 million and the utilities sector included one large sale for AUS$1.3 million. In our North American operations, the increase in non-manufacturing sales between the periods was across the board in most sectors; offset somewhat by a decrease in the industrial sector of $1.0 million. The reduction in manufacturing sales at Southern Frac between the periods was in liquid containment tanks and specialty trailers, which decreased by $2.2 million.

Leasing revenues totaled $57.1 million in QE FY 2021, a decrease of $0.7 million, or 1%, from $57.8 million in QE FY 2020. This consisted of a decrease of $2.9 million, or 7%, in North America and an increase of $2.2 million, or 14%, in the Asia-Pacific area. In Australian dollars, leasing revenues actually decreased by 3% percent in the Asia-Pacific area in QE FY 2021 from QE FY 2020.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 85% and 88%, respectively, during QE FY 2021; and 82% and 78%, respectively, during QE FY 2020. The overall average utilization was 85% in QE FY 2021 and 81% in QE FY 2020; and the average monthly lease rate of containers decreased to AUS$167 in QE FY 2021 from AUS$169 in QE FY 2020, caused primarily by a proportionately lower average lease rate in freight containers between the periods. However, the composite average monthly number of units on lease was over 400 higher in QE FY 2021, as compared to QE FY 2020. Locally, in Australian dollars, leasing revenue decreased between the periods by an aggregate AUS$0.6 million, primarily in the construction, special events and moving (removals) sectors, which decreased by approximately AUS$1.6 million; offset somewhat by increases totaling AUS$1.1 million in the education, industrial, mining and rental sectors.

In our North American leasing operations, average utilization rates were 75%, 83%, 37%, 81% and 82% and average monthly lease rates were $119, $411, $485, $410 and $920 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during QE FY 2021; as compared to 69%, 79%, 50%, 81% and 82% and average monthly lease rates were $117, $385, $838, $378 and $893 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during QE FY 2020. The average composite utilization rate was 74% in QE FY 2021 and 71% in QE FY 2020, and the composite average monthly number of units on lease was over 2,250 higher in QE FY 2021 as compared to QE FY 2020. The decrease in leasing revenues between the periods was primarily in the oil and gas and sector, which in QE FY 2021 was $5.8 million below QE FY 2020, substantially attributable to Lone Star; partially offset by increases across the board in most of the other sectors.

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Cost of Sales. Cost of sales from our lease inventories and fleet (which is the cost related to our sales revenues only and exclusive of the line items discussed below) increased by $1.1 million from $21.4 million during QE FY 2020 to $22.5 million during QE FY 2021, and our gross profit percentage from these non-manufacturing sales increased to 31% in QE FY 2021 from 28% in QE FY 2020. Fluctuations in gross profit percentage between periods is not unusual as a significant amount of our non-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 $0.4 million in QE FY 2021, as compared to $2.0 million in QE FY 2020, resulting in a slight gross loss during QE FY 2021 versus a gross profit of $0.5 million in QE FY 2020. The decrease in manufacturing gross margin in QE FY 2021 from QE FY 2020 was due to the reduced sales discussed above and less than optimal production levels.

Direct Costs of Leasing Operations and Selling and General Expenses. The total of direct costs of leasing operations and selling and general expenses decreased by $1.0 million from $43.7 million during QE FY 2020 to $42.7 million during QE FY 2021. As a percentage of revenues, these costs decreased to 47% during QE FY 2021 from 49% in QE FY 2020. Reduced revenues during QE FY 2021 from QE FY 2020, particularly lower leasing revenues due primarily to the soft oil and gas market in North America, adversely impacted us during QE FY 2021; but did not result in reduced margins from our core infrastructure. As discussed above in “COVID-19,” we are monitoring the situation, including implementing restrictions on investing and spending. The impact of the COVID-19 pandemic continues to evolve and, therefore, we cannot reasonably predict at this time the extent to which our infrastructure will ultimately be impacted.

Depreciation and Amortization. Depreciation and amortization increased by $0.7 million to $9.3 million in QE FY 2021 from $8.6 million in QE FY 2020. The increase between the periods was in North America, which made significantly more investments in its fleet than the Asia Pacific. The Asia-Pacific was enhanced by the translation effect of a stronger Australian dollar to the U.S. dollar in QE FY 2021 versus QE FY 2020. In Australian dollars, depreciation and amortization was AUS$4.0 million in QE FY 2021 versus AUS$4.7 million in QE FY 2020.

Interest Expense. Interest expense in QE FY 2021 was $5.2 million, a decrease of $0.8 million from $6.0 million in QE FY 2020. In North America, QE FY 2021 interest expense decreased by $0.8 million from QE FY 2020 due to both a lower weighted-average interest rate and average borrowings between the periods. The weighted-average interest rate was 4.5% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in QE FY 2021 versus 5.4% in QE FY 2020. In the Asia-Pacific area, interest expense was $2.1 million in both QE FY 2021 and QE FY 2020 as lower average borrowings were offset by a higher weighted-average interest rate and a stronger Australian dollar between the periods. The weighted-average interest rate was 7.0% (which does not include the effect of translation, interest rate swap contracts and options and the amortization of deferred financing costs) in QE FY 2021 versus 6.2% in QE FY 2020. In Australian dollars, interest expense was AUS$2.8 million in QE FY 2021 versus AUS$3.2 million in QE FY 2020.

Change in Valuation of Bifurcated Derivatives. QE FY 2021 includes a non-cash benefit of $3.6 million for the change in the valuation of the stand-alone bifurcated derivatives (see Note 5 of Notes to Condensed Consolidated Financial Statements), a $14.9 million increase from the QE FY 2020 non-cash charge of $11.3 million.

Foreign Currency Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was 0.701415 at December 31, 2019, 0.614241 at March 31, 2020, 0.770905 at December 31, 2020 and 0.760824 at March 31, 2021. In QE FY 2020 and QE FY 2021, net unrealized and realized foreign exchange gains (losses) totaled $(2,627,000) and $(59,000) and $36,000 and $16,000, respectively. In addition, in QE FY 2020 and QE FY 2021, net unrealized exchange gains (losses) on forward exchange contracts totaled $587,000 and $1,246,000, respectively.

Income Taxes. Our income tax provision for QE FY 2021 and QE FY 2020 derived effective tax rates differing from the U.S. federal statutory rate of 21%, primarily as a result of nontaxable or nondeductible items for the change in the valuation of the bifurcated derivatives in the Convertible Notes. Additionally, in both periods, the effective tax rate also differs from the U.S. federal tax rate because of state income taxes from the filing of tax returns in multiple U.S. states and the effect of doing business and filing income tax returns in foreign jurisdictions and for equity plan activity that is currently recognized in the consolidated statements of operations.

Preferred Stock Dividends. In both QE FY 2021 and QE FY 2020, we paid dividends of $0.9 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

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Net Income Attributable to Common Stockholders. Net income attributable to common stockholders was $10.3 million in QE FY 2021 versus a net loss of $9.5 million in QE FY 2020, an increase of $19.8 million. This increase in QE FY 2021 from QE FY 2020 was primarily due to a higher operating profit in the Asia-Pacific area, the greater non-cash benefit for the change in the valuation of the stand-alone bifurcated derivatives and a lower interest expense; offset somewhat by a lower operating profit in North America.

Nine Months Ended March 31, 2021 (“FY 2021”) Compared to Nine Months Ended March 31, 2020 (“FY 2020”)

Revenues. Revenues decreased by $10.5 million, or 4%, to $261.5 million in FY 2021 from $272.0 million in FY 2020. This consisted of a decrease of $7.9 million, or 4%, in revenues in our North American leasing operations, an increase of $2.5 million, or 3%, in revenues in the Asia-Pacific area and a decrease of $5.1 million, or 81%, in manufacturing revenues from Southern Frac. The effect of the average currency exchange rate of a stronger Australian dollar relative to the U.S. dollar in FY 2021 versus FY 2020 increased the translation of revenues from the Asia-Pacific area. The average currency exchange rate of one Australian dollar during FY 2021 was $0.7395 U.S. dollar compared to $0.6762 U.S. dollar during FY 2020. In Australian dollars, total revenues in the Asia-Pacific area actually decreased by 6% in FY 2021 from FY 2020.

Excluding Lone Star (doing business solely in the oil and gas sector), total revenues of our North American leasing operations increased by 5% in FY 2021 from FY 2020 as a result of across the board increases in most sectors; offset somewhat by decreases totaling $5.3 million in the oil and gas and industrial sectors. At Lone Star, revenues decreased by $15.1 million, or approximately 65%, from $23.1 million in FY 2020 to $8.0 million in FY 2021. As discussed above, revenues in the Asia-Pacific area benefited between the periods because of the translation effect of the stronger Australian dollar. In local Australian dollars, revenue between the periods actually decreased by AUS$7.7 million, primarily in the transportation (intermodal) sector, which decreased by AUS$8.4 million; offset somewhat by an increase of AUS$1.1 million in the mining sector.

Sales and leasing revenues represented 36% and 64% of total non-manufacturing revenues in FY 2021, as compared to 33% and 67% in FY 2020, respectively.

Non-manufacturing sales during FY 2021 amounted to $92.5 million, compared to $88.2 million during FY 2020, representing an increase of $4.3 million, or 5%; and comprised of an increase in our North American leasing operations of $5.1 million and a decrease in the Asia Pacific area of $0.8 million. The decrease in sales in the Asia-Pacific area was comprised of a decrease of $1.7 million in the CSC operations ($3.2 million decrease due to lower unit sales, $0.7 million increase due to lower average prices and a $2.2 million increase due to foreign exchange movements); offset somewhat by an increase of $0.9 million in the national accounts group ($2.5 million increase due to higher unit sales, $2.7 million decrease due to lower average prices and a $1.1 million increase due to foreign exchange movements). The translation of sales in the Asia-Pacific area was beneficially impacted by the stronger Australian dollar when comparing FY 2021 to FY 2020. In Australian dollars, total sales in the Asia-Pacific area decreased by 10% in FY 2021 from FY 2020, primarily in the transportation, government and industrial sectors, which decreased by an aggregate AUS$9.5 million; offset somewhat by a total increase of AUS$3.7 million in the construction, utilities, mining and defense sectors. In FY 2021, the transportation sector included three large sales totaling AUS$8.7 million and the utilities sector included one large sale for AUS$2.2 million; whereas in FY 2020, the transportation sector included six large sales totaling AUS$17.4 million and the utilities sector included one large sale for AUS$1.3 million. In our North American operations, the increase in non-manufacturing sales between the periods was across the board in most sectors; offset somewhat by a decrease in the industrial and oil and gas sectors totaling $2.8 million. The reduction in manufacturing sales at Southern Frac between the periods was due primarily in liquid containment and specialty tanks, as well miscellaneous parts, which decreased by $5.4 million; offset somewhat by increased sales of GLOs of $0.3 million.

Leasing revenues totaled $167.8 million in FY 2021, a decrease of $9.7 million, or 5%, from $177.5 million in FY 2020. This consisted of a decrease of $13.0 million, or 7%, in North America and an increase of $3.3 million, or 7%, in the Asia-Pacific area. In Australian dollars, leasing revenues actually decreased by 2% percent in the Asia-Pacific area in FY 2021 from FY 2020.

In the Asia-Pacific area, average utilization in the retail and the national accounts group operations was 83% and 78%, respectively, during FY 2021; and 81% and 73%, respectively, during FY 2020. The overall average utilization was 82% in FY 2021 and 80% in FY 2020; and the average monthly lease rate of containers increased to AUS$170 in FY 2021 from AUS$167 in FY 2020, caused primarily by higher average lease rates in storage and portable building containers between the periods. However, the

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composite average monthly number of units on lease was over 350 lower in FY 2021, as compared to FY 2020. Locally, in Australian dollars, leasing revenue decreased between the periods by AUS$1.6 million, primarily in the construction, special events and moving sectors, which decreased by an aggregate AUS$3.3 million; offset somewhat by increases totaling AUS$1.8 million in the health, government, rental, mining and industrial sectors.

In our North American leasing operations, average utilization rates were 76%, 83%, 31%, 81% and 82% and average monthly lease rates were $123, $413, $511, $407 and $928 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during FY 2021; as compared to 75%, 80%, 56%, 84% and 82% and average monthly lease rates were $123, $387, $819, $365 and $874 for storage containers, office containers, frac tank containers, mobile offices and modular units, respectively, during FY 2020, respectively. The average composite utilization rate was 73% in FY 2021 and 74% in FY 2020, and the composite average monthly number of units on lease was over 400 higher in FY 2021 as compared to FY 2020. The decrease in leasing revenues between the periods was primarily in the oil and gas sector, which in FY 2021 was $18.1 million below FY 2020, substantially attributable to Lone Star; partially offset by increases across the board in most of the other 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 by $1.8 million from $63.3 million during FY 2020 to $65.1 million during FY 2021, but our gross profit percentage from these non-manufacturing sales increased to 30% in FY 2021 from 28% in FY 2020. Fluctuations in gross profit percentage between periods is not unusual as a significant amount of our non-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 $1.4 million in FY 2021, as compared to $5.4 million in FY 2020, resulting in a gross loss of $0.2 million in FY 2021 versus a gross profit of $0.9 million in FY 2020. The decrease in manufacturing gross margin in FY 2021 from FY 2020 was due to the reduced sales discussed above and less than optimal production levels.

Direct Costs of Leasing Operations and Selling and General Expenses. The total of direct costs of leasing operations and selling and general expenses decreased by $6.3 million from $130.4 million during FY 2020 to $124.1 million during FY 2021. As a percentage of revenues, these costs decreased to 47% during FY 2021 from 48% in FY 2020. Reduced revenues during FY 2021 from FY 2020, particularly lower leasing revenues due primarily to the soft oil and gas market in North America, adversely impacted us during FY 2021; but did not result in reduced margins from our core infrastructure. We do not make significant infrastructure changes unless we believe the economic and market conditions causing these adverse factors are long-term in nature. As discussed above in “COVID-19,” we are monitoring the situation, including implementing restrictions on investing and spending. The impact of the COVID-19 pandemic continues to evolve and, therefore, we cannot reasonably predict at this time the extent to which our infrastructure will ultimately be impacted.

Depreciation and Amortization. Depreciation and amortization increased by $1.2 million to $27.8 million in FY 2021 from $26.6 million in FY 2020. The increase between the periods was comprised of a $1.9 million increase in North America, which made significantly more investments in its fleet than the Asia Pacific, and a $0.7 million reduction in the Asia-Pacific area. The reduction in the Asia-Pacific was partially offset by the translation effect of a stronger Australian dollar to the U.S. dollar in FY 2021 versus FY 2020. In Australian dollars, depreciation and amortization was AUS$12.7 million in FY 2021 versus AUS$15.0 million in FY 2020.

Interest Expense. Interest expense in FY 2021 was $17.6 million, a decrease of $2.6 million from $20.2 million in FY 2020. In North America, FY 2021 interest expense decreased by $1.9 million from FY 2020 due to both lower average borrowings and a lower weighted-average interest rate between the periods. The weighted-average interest rate was 5.0% (which does not include the effect of the accretion of interest and amortization of deferred financing costs) in FY 2021 versus 5.8% in FY 2020. FY 2021 included an additional $0.6 million of interest in North America from having both public issuances of Senior Notes outstanding for a period of time prior to the redemption of the 8.125% Senior Notes (see Note 5 of Note to Condensed Consolidated Financial Statements). Further, interest expense includes an additional $0.4 million due primarily to the write-off of unamortized deferred financing costs as a result of the redemption of the 8.125% Senior Notes. In the Asia-Pacific area, FY 2021 interest expense was $0.7 million lower from FY 2020 also due to both lower average borrowings and a lower weighted-average interest rate between the periods, offset somewhat by the translation effect of a stronger Australian dollar between the periods. The weighted-average interest rate was 7.1% (which does not include the effect of translation, interest rate swap contracts and options and the amortization of deferred financing costs) in FY 2021 versus 7.3% in FY 2020. In Australian dollars, interest expense was AUS$9.4 million in FY 2021 versus AUS$11.2 million in FY 2020.

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Change in Valuation of Bifurcated Derivatives. FY 2021 includes a non-cash benefit of $5.5 million for the change in the valuation of the stand-alone bifurcated derivatives (see Note 5 of Notes to Condensed Consolidated Financial Statements), an $11.9 million increase from the FY 2020 non-cash charge of $6.4 million.

Foreign Currency Exchange and Other. The currency exchange rate of one Australian dollar to one U.S. dollar was 0.7029 at June 30, 2019, 0.614241 at March 31, 2020, 0.687771 at June 30, 2020 and 0.760824 at March 31, 2021. In FY 2020 and FY 2021, net unrealized and realized foreign exchange gains (losses) totaled $(2,632,000) and $(104,000) and $179,000 and $57,000, respectively. In addition, in FY 2020 and FY 2021, net unrealized exchange gains (losses) on forward exchange contracts totaled $331,000 and $304,000, respectively.

Income Taxes. Our income tax provision for FY 2021 and FY 2020 derived effective tax rates differing from the U.S. federal statutory rate of 21%, primarily as a result of nontaxable or nondeductible items for the change in the valuation of the bifurcated derivatives in the Convertible Notes. Additionally, in both periods, the effective tax rate also differs from the U.S. federal tax rate because of state income taxes from the filing of tax returns in multiple U.S. states and the effect of doing business and filing income tax returns in foreign jurisdictions and for equity plan activity that is currently recognized in the consolidated statements of operations.

Preferred Stock Dividends. In both FY 2021 and FY 2020, we paid dividends of $2.8 million primarily on our 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock.

Net Income Attributable to Common Stockholders. Net income attributable to common stockholders was $21.8 million in FY 2021 versus $5.0 million in FY 2020, an increase of $16.8 million. This increase in FY 2021 from FY 2020 was primarily due to a higher operating profit in the Asia-Pacific area, the greater non-cash benefit for the change in the valuation of the stand-alone bifurcated derivatives and a lower interest expense; offset somewhat by a 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 other non-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 a non-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 or non-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

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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,
	2020		2021		2020		2021
Net income (loss)	$	(8,625)	$	11,187	$	7,767	$	24,526
Add (deduct) —
Provision for income taxes		3,715		3,777		9,969		7,474
Change in valuation of bifurcated derivatives in Convertible Note		11,259		(3,622)		6,365		(5,523)
Foreign exchange and other		2,096		(1,293)		2,405		(549)
Interest expense		5,981		5,212		20,235		17,595
Interest income		(153)		(150)		(519)		(452)
Depreciation and amortization		8,712		9,401		26,930		28,061
Share-based compensation expense		647		477		2,015		1,515
Refinancing costs not capitalized		—		6		—		303
Adjusted EBITDA	$	23,632	$	24,995	$	75,167	$	72,950

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 the start-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 a branch-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”), 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 (the “Deutsche Bank Credit Facility”), consists of a $32,715,400 (AUS$43,000,000) Facility A that will amortize semi-annually; a $88,636,000 (AUS$116,500,000) Facility B that has no scheduled amortization; a $15,216,500 (AUS$20,000,000) revolving Facility C that is used for working capital, capital expenditures and general corporate purposes; and a $28,530,900 (AUS$37,500,000) revolving Term Loan Facility D. Borrowings bear interest at the three-month bank bill swap interest rate in Australia (“BBSW”), 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.

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North America Senior Credit Facility

Our North America leasing (Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined $285,000,000 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 CIBC Bank USA, KeyBank, National Association, Bank Hapoalim, B.M., Associated Bank and Bank of the West (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 December 14, 2025, assuming our publicly-traded senior notes due October 31, 2025 (see below) are extended to a date not earlier than March 14, 2026, or have been repaid in full or refinanced or replaced on terms satisfactory to the Wells Fargo Credit Facility; otherwise the Wells Fargo Credit Facility would mature on July 31, 2025.

Borrowings under the Wells Fargo Credit Facility accrue interest, at our option, either at the base rate, as defined, or the LIBOR rate, as defined, with a minimum of 0.5%; plus an applicable margin range of 2.50% to 3.00% based on the average excess availability. The Wells Fargo Credit Facility also specifies the future conditions under which the current LIBOR-based interest rate could be replaced in the future with an alternate benchmark interest rate. There is an unused commitment fee of 0.250% - 0.375%, based on the average revolver usage.

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 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 that Pac-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) $8,000,000 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 of Pac-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.

Senior Notes

On June 18, 2014, we completed the sale of unsecured senior notes (the “2021 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. The 2021 Senior Notes bore interest at the rate of 8.125% per annum and were scheduled to mature on July 31, 2021. Prior to December 31, 2020, an aggregate principal amount of $65,800,000 of the 2021 Senior Notes were redeemed (see below) and the remaining principal balance of $11,590,000, plus accrued interest through the redemption date of January 15, 2021, was effectively defeased by the transfer of funds to Wells Fargo, the trustee. On January 15, 2021, we redeemed the remaining $11,590,000 of the issued and outstanding principal amount of the 2021 Senior Notes.

On October 27, 2020, we completed the sale of unsecured senior notes (the “2025 Senior Notes”) in a public offering for $60,000,000, which represented 100% of the aggregate principal amount. On November 16, 2020, the underwriters exercised their full over-allotment option of $9,000,000, which also represented 100% of the aggregate principal amount. Total net proceeds were $65,853,000, after deducting underwriting discounts and offering costs of approximately $3,147,000. We used $65,800,000 of the net proceeds to redeem the majority of the 2021 Senior Notes (see above). The 2025 Senior Notes bear interest at the rate of 7.875% per annum, mature on October 31, 2025 and are not subject to any sinking fund. Interest on the 2025 Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31, commencing on January 31, 2021. The 2025 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 our existing and future subordinated debt. The 2025 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 2025 Senior Notes are structurally subordinated to all existing and future liabilities of the Company’s subsidiaries and are not guaranteed by any of our subsidiaries.

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As of March 31, 2021, our required principal and other obligations payments for the twelve months ending March 31, 2022 and the subsequent three twelve-month periods are as follows (in thousands):


	Twelve Months Ending March 31,
	2022		2023		2024		2025
Deutsche Bank Credit Facility	$	4,538	$	4,538	$	110,764	$	—
Wells Fargo Credit Facility		—		—		—		—
2025 Senior Notes		—		—		—		—
Other		2,461		2,781		2,261		1,563
	$	6,999	$	7,319	$	113,025	$	1,563

Reference is made above for a discussion on the COVID-19 pandemic and 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 subsequent events.

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.

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


	Nine Months Ended March 31,
	2020		2021
Net cash provided by operating activities	$	53,120	$	33,463

Net cash used in investing activities	$	(30,076)	$	(12,081)

Net cash used in financing activities	$	(20,580)	$	(29,627)

Cash Flow for FY 2021 Compared to FY 2020

Operating activities. Our operations provided cash of $33.5 million during FY 2021 versus $53.1 million during FY 2020, a decrease of $19.6 million between the periods. Net income in FY 2021 of $24.5 million was $16.7 million significantly more than the net income in FY 2020 of $7.8 million, but the changes in operating assets and liabilities during FY 2021, when compared to FY 2020, reduced cash by $15.8 million. Historically we have experienced significant variations in operating assets and liabilities between periods when conducting our business in due course. In addition, cash from operating activities between the periods were further

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reduced by $11.9 million between the periods as a result of the non-cash adjustment relating to the change in the valuation of the stand-alone bifurcated derivatives in the Convertible Notes (see Note 5 of Notes to Condensed Consolidated Financial Statements), which decreased cash by $5.5 million in FY 2021 versus increasing cash by $6.4 million in FY 2020. During FY 2021 and FY 2020, the net gain on the sales of lease fleet reduced operating cash flows by $10.6 million and $7.0 million, respectively, a decrease of $3.6 million between the periods; and 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 are non-cash addbacks for cash flow purposes, also decreased operating cash flow by $2.8 million between the periods, from a net cash increase of $2.3 million in FY 2020 to a net cash decrease of $0.5 million in FY 2021. Further, deferred income taxes decreased cash flows in FY 2021 by $5.1 million as compared to $8.2 million in FY 2020, a decrease of approximately $3.1 million between the periods; and non-cash share-based compensation increased operating cash flows by $1.5 million in FY 2021 versus $2.0 million in FY 2020, a decrease of $0.5 million between the periods. However, depreciation and amortization and the amortization of deferred financing costs increased cash between the periods by $1.2 million, from an aggregate $28.3 million increase in FY 2020 to an aggregate $29.5 million increase in FY 2021.

Investing Activities. Cash used in investing activities was $12.1 million during FY 2021, as compared to $30.1 million used during FY 2020, resulting in a net decrease in cash used between the periods of $18.0 million. In both FY 2021 and FY 2020, we made one acquisition in North America for $1.9 million (see Note 4 of Notes to Condensed Consolidated Financial Statements) and $2.2 million, respectively. Purchases of property, plant and equipment, or rolling stock (maintenance capital expenditures), were $6.5 million in FY 2021 as compared to $7.0 million in FY 2020, a decrease of $0.5 million in primarily our North American leasing operations. In both periods, proceeds from sales of property, plant and equipment were approximately $0.4 million. Net capital expenditures of lease fleet (purchases, net of proceeds from sales of lease fleet) were $4.0 million in FY 2021, as compared to $21.1 million in FY 2020, a decrease of $17.1 million in net fleet investment. In FY 2021, net capital expenditures of lease fleet were approximately $6.1 million in North America, as compared to $20.7 million in FY 2020, a decrease of $14.6 million; and net capital expenditures of lease fleet in the Asia Pacific totaled a negative $2.1 million in FY 2021, versus $0.4 million in FY 2020, a decrease of $2.5 million in net fleet investment. 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. Cash used in financing activities was $29.6 million during FY 2021, as compared to $20.6 million of cash used during FY 2020, an increase in the cash used between the periods of $9.0 million. In FY 2021, cash provided from financing activities included gross proceeds of $69.0 million from the successful public offering of our 7.875% Senior Notes due in October 2025, which net proceeds of $65.8 million were used to redeem the majority of our 8.125% Senior Notes with an aggregate principal balance of $77.4 million (see Note 5 of Notes to Condensed Consolidated Financial Statements). In FY 2021, we repaid a net $14.7 million on our equipment financing, senior and other debt versus repaying a net $17.8 million in FY 2020. Included in the net repayment in FY 2021 was $11.6 million that was borrowed on the Wells Fargo Credit Facility to redeem the remaining principal balance of the 8.125% Senior Notes. We incurred deferred financing costs aggregating $3.9 million in FY 2021 pertaining to the public offering of the 7.875% Senior Notes and for the amendment of the Wells Fargo Credit Facility. Cash of $2.8 million was used during both periods to pay dividends on primarily our Series C Preferred Stock and we received proceeds of $193,000 and $100,000 in FY 2021 and FY 2020, respectively, from issuances of common stock on exercises of stock options. Other than the redemption of the 8.125% Senior Notes, our financing activities were primarily to fund our investment in the container lease fleet, make business acquisitions, pay dividends on our preferred stock and manage our operating assets and liabilities.

Asset Management

Receivables and inventories were $40.5 million and $33.9 million at March 31, 2021 and $44.1 million and $20.9 million at June 30, 2020, respectively. At March 31, 2021, DSO in trade receivables were 32 days and 36 days in the Asia-Pacific area and our North American leasing operations, as compared to 43 days and 40 days at June 30, 2020, respectively. 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. As further discussed above in “COVID-19,” if our customers experience adverse business consequences due to the COVID-19 pandemic, including being required to shut down their operations, demand for our services and products could also be materially adversely affected in a rapid manner, including the increase of DSO in trade receivables.

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The net book value of our total lease fleet was $467.1 million at March 31, 2021, as compared to $458.7 million at June 30, 2020. At March 31, 2021, we had 100,439 units (23,857 units in retail operations in Australia, 8,908 units in national account group operations in Australia, 11,885 units in New Zealand, which are considered retail; and 55,789 units in North America) in our lease fleet, as compared to 100,645 units (24,147 units in retail operations in Australia, 8,946 units in national account group operations in Australia, 12,370 units in New Zealand, which are considered retail; and 55,182 units in North America) at June 30, 2020. At those dates, 80,019 units (20,299 units in retail operations in Australia, 7,298 units in national account group operations in Australia, 10,243 units in New Zealand, which are considered retail; and 42,179 units in North America); and 72,983 units (19,505 units in retail operations in Australia, 5,255 units in national account group operations in Australia, 10,149 units in New Zealand, which are considered retail; and 38,074 units in North America) were on lease, respectively.

In the Asia-Pacific area, the lease fleet was comprised of 37,804 storage and freight containers and 6,846 portable building containers at March 31, 2021; and 38,317 storage and freight containers and 7,146 portable building containers at June 30, 2020. At those dates, units on lease were comprised of 33,357 storage and freight containers and 4,483 portable building containers; and 29,839 storage and freight containers and 5,070 portable building containers, respectively.

In North America, the lease fleet was comprised of 39,483 storage containers, 6,813 office containers (GLOs), 4,171 portable liquid storage tank containers, 4,156 mobile offices and 1,166 modular units at March 31, 2021; and 39,169 storage containers, 6,355 office containers (GLOs), 4,194 portable liquid storage tank containers, 4,291 mobile offices and 1,173 modular units at June 30, 2020. At those dates, units on lease were comprised of 30,388 storage containers, 5,746 office containers (GLOs), 1,632 portable liquid storage tank containers, 3,456 mobile offices and 957 modular units; and 27,472 storage containers, 5,184 office containers (GLOs), 1,000 portable liquid storage tank containers, 3,474 mobile offices and 944 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 any off-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 from mid-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 of Pac-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

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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, we re-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. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available at the time the financial statements were prepared. However, uncertainty over the impact COVID-19 will have on the global economy and our business in particular makes many of the estimates and assumptions reflected in these consolidated financial statements inherently less certain. Therefore, actual results may ultimately differ from those estimates to a greater degree than historically.

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 Operations and 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 Form 10-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, 2020.

Impact of Recently Issued Accounting Pronouncements

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 the Exchange Act. In designing and

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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. Based on our evaluation under the criteria in Internal Control — Integrated Framework (2013), we concluded that our internal control over financial reporting was, in all material respects, effective as of March 31, 2021. Please see below for a discussion of the Company’s remediation status of a previously reported material weakness.

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 Rule 13a-15(b), as of the end of the period covered by this report. During the fourth quarter of FY 2020, we uncovered irregularities by the manager at one of our smaller CSC locations in the Asia-Pacific area that occurred over a period of several years whereby he sold containers off the books and received the proceeds from the sales personally. While the effect of the theft did not have a significant effect on our results of operations or financial position, we concluded there is a material weakness in the Company’s procedures and controls surrounding existence of fleet assets at Royal Wolf’s small, medium and agent locations which were not designed with adequate segregation of duties.

As a result of the foregoing, we enhanced our controls and procedures to, among other things, increase the frequency of inventory and fleet counts at our small and medium-sized locations by at least two people, one of whom must be independent from the location, provide for unannounced physical counts and strengthened controls over agent locations and IT access. We have found these enhanced internal controls to be designed and operating effectively. As a result, we have concluded that the material weakness has been remediated as of March 31, 2021. Except for the changes in connection with the remediation of the aforementioned material weakness discussed above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 Form 10-K for the year ended June 30, 2020, as filed with the SEC on September 10, 2020 (“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.

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EXHIBIT INDEX


Exhibit Number		Exhibit Description
31.1		Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)
31.2		Certification of Chief Financial Officer Pursuant to SEC 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 10-Q for the quarter ended March 31, 2021, 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.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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 5, 2021	GENERAL FINANCE CORPORATION


	By:	/s/ Jody E. Miller
		Jody E. Miller
		Chief Executive Officer


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