GENERAL FINANCE CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

Edgar Glimpses |
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  (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 atwww.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 ("RWH"), and its
Australian and New Zealand subsidiaries (collectively, "Royal Wolf").

Overview

Founded in , 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 , our two geographic leasing operations primarily lease and sell their
products through 23 customer service centers ("CSCs") in Australia, 14 CSCs in
New Zealand, 60 branch locations in the United States and three branch locations
in Canada. At that date, we had 277 and 664 employees and 46,194 and 50,406
lease fleet units in the Asia-Pacific area and North America, respectively.

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


Our portable storage category is segmented into two products: (1) storage
containers, which primarily consist of new and used steel shipping containers
under International Organization for Standardization ("ISO") standards, that
provide a flexible, low cost alternative to warehousing, while offering greater
security, convenience and immediate accessibility; and (2) freight containers,
which are 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.



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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.

Results of Operations

Quarter Ended ("QE FY 2019") Compared to Quarter Ended ("QE FY 2018")


Revenues. Revenues increased by $5.9 million, or 6%, to $98.0 million in QE FY
2019 from $92.1 million in QE FY 2018. This consisted of an increase of
$12.8 million, or 25%, in revenues in our North American leasing operations, a
decrease of $7.5 million, or 19%, in revenues in the Asia-Pacific area and an
increase of $0.6 million, or 29%, in manufacturing revenues from Southern Frac.
The effect of the average currency exchange rate of a weaker Australian dollar
relative to the U.S. dollar in FY 2019 versus FY 2018 reduced the translation of
revenues from the Asia-Pacific area. The average currency exchange rate of one
Australian dollar during QE FY 2019 was $0.7172 U.S. dollar compared to $0.7690
U.S. dollar during QE FY 2018. In Australian dollars, total revenues in the
Asia-Pacific area decreased by 14% in QE FY 2019 from QE FY 2018.

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

Sales and leasing revenues represented 33% and 67% of total non-manufacturingrevenues, respectively, in QE FY 2019, compared to 40% and 60% of total non-manufacturing revenues, respectively in QE FY 2018.


Non-manufacturing sales during QE FY 2019 amounted to $31.8 million, compared to
$36.0 million during QE FY 2018; representing a decrease of $4.2 million, or
12%. This consisted of an increase of $3.6 million, or 27%, in our North
American leasing operations, and a decrease of $7.8 million, or 35%, in sales in
the Asia-Pacific area. The decrease in the Asia-Pacific area was comprised of a
decrease of $8.2 million ($3.5 million decrease due to lower unit sales,
$4.0 million decrease due to lower average prices and a $0.7 million decrease
due to foreign exchange movements) in the CSC operations and an increase of
$0.4 million ($16.7 million increase due to higher unit sales, $16.0 million
decrease due to lower average prices and a $0.3 million decrease due to foreign
exchange movements) in the national accounts group. As discussed above, sales in
the Asia-Pacific area decreased between the periods due to two large sales in
the transportation and utilities sectors in QE FY 2018 that were not replicated
in QE FY 2019 and the weaker Australian dollar. In Australian dollars, total
sales in the Asia-Pacific area decreased by 30% in QE FY 2019 from QE FY 2018,
primarily in the transportation and utilities sectors, which decreased by an
aggregate AUS$10.9 million; and was partially offset by an increase of
AUS$2.2 million in the moving (removals) and storage sector. In our North
American leasing operations, the sales increase in QE FY 2019 from QE FY 2018
was across most sectors, but particularly in the commercial and education
sectors, which increased by an aggregate $2.0 million between the periods. The
increase at Southern Frac was due primarily from sales of specialty tanks and
chassis, which increased by an aggregate $1.2 million in QE FY 2019 from QE FY
2018, offset somewhat by a reduction of $0.7 million in the sales of frac tanks.

Leasing revenues totaled $63.5 million in QE FY 2019, an increase of
$9.5 million, or 18%, from $54.0 million in QE FY 2018. This consisted of
increases of $9.2 million, or 24%, in North America and $0.3 million, or 2%, in
the Asia-Pacific area. In Australian dollars, leasing revenues increased by 9%
percent in the Asia-Pacific area in QE FY 2019 from QE FY 2018.

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



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


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

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

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

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

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

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

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

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

(i) A provision of $1.3 million to derive a year-to-dateinterim effective income tax rate of 38.6%;




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

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


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

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

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

Six Months Ended ("FY 2019") Compared to Six Months Ended ("FY 2018")


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

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

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


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



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

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

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

In our North American leasing operations, average utilization rates were 82%,
86%, 81%, 86% and 85% and average monthly lease rates were $123, $361, $1,013,
$311 and $764 for storage containers, office containers, frac tank containers,
mobile offices and modular units, respectively, during FY 2018; as compared to
78%, 82%, 75%, 81% and 83% and average monthly lease rates of $124, $342, $712,
$290 and $769 for storage containers, office containers, frac tank containers,
mobile offices and modular units in FY 2018, respectively. The average composite
utilization rate was 82% FY 2019 and 78% in FY 2018, and the composite average
monthly number of units on lease was over 7,400 higher in FY 2019 as compared to
FY 2018. The increase in leasing revenues between the periods was across most
sectors, but particularly in the oil and gas, commercial and construction
sectors, which increased by an aggregate $15.5 million in FY 2019 from FY 2018.
Excluding Lone Star, total leasing revenues of our North American leasing
operations increased by $9.7 million, or 18%, in FY 2019 from FY 2018.

Cost of Sales. Cost of sales from our lease inventories and fleet (which is the
cost related to our sales revenues only and exclusive of the line items
discussed below) increased by $5.8 million from $44.3 million during FY 2018 to
$50.1 million during FY 2019, and our gross profit percentage from these
non-manufacturing sales deteriorated to 26% in FY 2019 from 28% in FY 2018.
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 $5.4 million in FY 2019, as
compared to $4.1 million in FY 2018, resulting in a gross margin gain of
$1.1 million in FY 2019 versus a gross margin loss of approximately $0.1 million
in FY 2018. Increased manufacturing sales (including a favorable mix of higher
margin specialty tanks and chassis) and production levels, as well as improved
efficiency, between the periods were the primary factors in the $1.2 million
improvement in the gross margin.

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

Depreciation and Amortization. Depreciation and amortization increased by
$1.4 million to $21.1 million in FY 2019 from $19.7 million in FY 2018, with
both geographic venues increasing $0.7 million between the periods. The
increases were primarily as a result of our increased investment in the lease
fleet and business acquisitions.



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Interest Expense. Interest expense of $17.5 million in FY 2019 increased by
$2.2 million from $15.3 million in FY 2018. In the Asia-Pacific area, FY 2019
interest expense was $1.4 million higher from FY 2018 due to both higher average
borrowings and a higher weighted-average interest rate between the periods,
which more than offset the translation effect of a weaker Australian dollar
between the periods. The weighted-average interest rate was 9.4% (which does not
include the effect of translation, interest rate swap contracts and options and
the amortization of deferred financing costs) in FY 2019 versus 7.3% in FY 2018.
In North America, FY 2019 interest expense increased by $0.8 million from FY
2018 due primarily to the weighted-average interest rate of 6.9% (which does not
include the effect of the accretion of interest and amortization of deferred
financing costs) in FY 2019 being higher than the 6.0% in FY 2018, offset
somewhat by lower average borrowings between the periods.

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

Foreign Exchange and Other. The currency exchange rate of one Australian dollar
to one U.S. dollar was 0.7687 at , 0.7807 at ,
0.7411 at  and 0.7055 at . In FY 2018 and FY 2019,
net unrealized and realized foreign exchange gains (losses) totaled $(1,332,000)
and $(406,000) and $(1,268,000) and $(3,687,000), respectively. FY 2019 includes
a non-cash realized foreign exchange loss of $3,554,000 related to the Bison
Capital Convertible Note prior to its conversion to equity. In addition, in FY
2018 and FY 2019, net unrealized exchange gains on forward exchange contracts
totaled $392,000 and $(127,000), respectively.

Income Taxes. Our income tax provision for FY 2019, which derived a very high
effective tax rate on a relatively small pretax income, was significantly
greater than the provision that would have been derived from the U.S. federal
statutory rate of 21% primarily as a result of nondeductible expenses for
(i) the loss on the change in the valuation of the bifurcated derivatives in the
Bison Capital Convertible Note and (ii) the non-cash realized foreign exchange
loss prior its conversion to equity (see Note 5 of Notes to Condensed
Consolidated Financial statements). Our effective income tax rate was 12.0% in
FY 2018 and was comprised of:

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


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

(iii) A net tax charge of $0.1 million for excess tax benefits and forfeitures on equity compensation awards.


In both periods, the effective tax rate also differs from the U.S. federal tax
rate because of state income taxes from the filing of tax returns in multiple
U.S. states and the effect of doing business and filing income tax returns in
foreign jurisdictions. FY 2019 included a tax benefit of $195,000 for equity
plan activity that is currently recognized in the consolidated statements of
operations. In addition, because it was not significant, FY 2018 included a
$135,000 benefit for the cumulative-effect adjustment for previously
unrecognized excess tax benefits and the tax-effect of the difference between
the fair value estimate of awards historically expected to be forfeited and the
fair value estimate of awards actually forfeited

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

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

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



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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 using adjusted EBITDA only
supplementally. The following table shows our adjusted EBITDA and the
reconciliation from net income (loss) (in thousands):



                                     Quarter Ended ,             

Six Months Ended ,

                                     2017                 2018                 2017                 2018

Net income (loss)               $         2,974     $        (4,206)       $        2,130     $       (3,452)
Add (deduct) -
Provision for income taxes                  809                1,712                  291               3,627
Change in valuation of
bifurcated derivatives in
Convertible Note                          1,717                9,332                1,717              12,780
Foreign currency exchange
and other loss (gain)                       135                1,782                1,337               3,293
Interest expense                          9,447                8,868               15,269              17,493
Interest income                            (23)                 (33)                 (38)                (81)
Depreciation and
amortization                              9,668               11,155               19,992              21,258
Share-based compensation
expense                                     439                  663                2,097               1,341
Refinancing costs not
capitalized                                   -                  448                    -                 448

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



Our business is capital intensive, so from an operating level we focus primarily
on EBITDA and adjusted EBITDA to measure our results. These measures provide us
with a means to track internally generated cash from which we can fund our
interest expense and fleet growth objectives. In managing our business, we
regularly compare our adjusted EBITDA margins on a monthly basis. As capital is
invested in our established branch (or CSC) locations, we achieve higher
adjusted EBITDA margins on that capital than we achieve on capital invested to
establish a new branch, because our fixed costs are already in place in
connection with the established branches. The fixed costs are those associated
with yard and delivery equipment, as well as advertising, sales, marketing and
office expenses. With a new market or branch, we must first fund and absorb 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-branchbasis, 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.



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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 , RWH and
its subsidiaries, Deutsche Bank AG, Sydney Branch ("Deutsche Bank"), CSL Fund
(PB) Lux Sarl II, Aiguilles Rouges Lux Sarl II, Perpetual Corporate Trust
Limited and P.T. Limited entered into a Syndicated Facility Agreement (the
"Syndicated Facility Agreement"). Pursuant to the Syndicated Facility Agreement,
the parties entered into a three-year, $88,190,000 (AUS$125,000,000) senior
secured credit facility (the "Deutsche Bank Credit Facility") and repaid the
ANZ/CBA Credit Facility on . The Deutsche Bank Credit Facility
initially consisted of a $14,110,000 (AUS$20,000,000) Facility A that will
amortize semi-annually; a $59,970,000 (AUS$85,000,000) Facility B that has no
scheduled amortization; and a $14,110,000 (AUS$20,000,000) revolving Facility C
that is used for working capital, capital expenditures and general corporate
purposes. On , RWH and its subsidiaries amended the Deutsche Bank
Credit Facility to increase by approximately $6,714,000 (NZ$10,000,000) the
amount that can be borrowed under Facility B. The Deutsche Bank Credit Facility
is secured by substantially all of the assets and by the pledge of all the
capital stock of the subsidiaries of RWH and matures on .

Bison Capital Notes


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

North America Senior Credit Facility


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

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



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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) $6,300,000 for the public
offering of unsecured senior notes or the actual amount of annual interest
required to be paid; provided that (i) the payment of such dividends does not
cause a default or event of default; (ii) each 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.

Corporate Senior Notes


On , we completed the sale of unsecured senior notes (the "Senior
Notes") in a public offering for an aggregate principal amount of $72,000,000.
On , we completed the sale of a "tack-on" offering of our
publicly-traded Senior Notes for an aggregate principal amount of $5,390,000
that was priced at $24.95 per denomination. Net proceeds were $5,190,947, after
deducting an aggregate original issue discount ("OID") of $10,780 and
underwriting discount of $188,273. In both offerings, we used at least 80% of
the gross proceeds to reduce indebtedness at Pac-Van and Lone Star under the
Wells Fargo Credit Facility in order to permit the payment of intercompany
dividends by Pac-Van and Lone Star to GFN to fund the interest requirements of
the Senior Notes. For the 'tack-on" offering, this amounted to $4,303,376 of the
net proceeds. The Company has total outstanding publicly-traded Senior Notes in
an aggregate principal amount of $77,390,000. The Senior Notes bear interest at
the rate of 8.125% per annum, mature on  and are not subject to any
sinking fund. Interest on the Senior Notes is payable quarterly in arrears on
, ,  and , commencing on . The
Senior Notes rank equally in right of payment with all of our existing and
future unsecured senior debt and senior in right of payment to all of its
existing and future subordinated debt. The Senior Notes are effectively
subordinated to any of our existing and future secured debt, to the extent of
the value of the assets securing such debt. The Senior Notes are structurally
subordinated to all existing and future liabilities of our subsidiaries and are
not guaranteed by any of our subsidiaries.

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



                                                      Twelve Months Ending December 31,
                                      2019                2020                2021                2022

Deutsche Bank Credit Facility $ 3,311 $ 1,670 $

      67,843       $           -
Senior Term Note                               -                  -                   -              60,463
Wells Fargo Credit Facility                    -                  -                   -             197,458
Senior Notes                                   -                  -              77,390                   -
Other                                      4,635              1,517                 559                 641

                                   $       7,946      $       3,187       $     145,792       $     258,562



Reference is made to Notes 3 and 5 of Notes to Consolidated Financial Statements
for further discussion of our equity transactions and senior and other debt,
respectively, and Note 12 for a discussion of recent developments.

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

Capital Deployment and Cash Management


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

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



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



                                                  Six Months Ended December 31,
                                                   2017                   2018

Net cash provided by operating activities    $           14,615     $       

19,373

Net cash used in investing activities $ (99,713) $ (41,236)



Net cash provided by financing activities    $           83,796     $       

6,176

Cash Flow for FY 2019 Compared to FY 2018


Operating activities. Our operations provided cash of $19.4 million during FY
2019 versus $14.6 million during FY 2018, an increase of $4.8 million between
the periods. The net loss in FY 2019 of $3.5 million was $5.6 million worse than
the net income in FY 2018 of $2.1 million and our management of operating assets
and liabilities in FY 2019, when compared to FY 2018, further reduced cash by
approximately $10.0 million. Historically we have experienced significant
variations in operating assets and liabilities between periods when conducting
our business in due course. In FY 2019, we invested more in our fleet inventory
than in the prior year to anticipate the demands of our expanding business. In
addition, the non-cash gains on the bargain purchases of two businesses, one in
each geographic venue (see Note 4 of Notes to Condensed Consolidated Financial
Statements), reduced our cash from operating activities by $1.8 million in FY
2019; and non-cash share-based compensation also decreased operating cash flows
by $0.8 million between the periods. Share-based compensation was $1.3 million
in FY 2019 versus $2.1 million in FY 2018. However, net unrealized gains and
losses from foreign exchange and foreign exchange contracts (see Note 6 of Notes
to Condensed Consolidated Financial Statements), which affect operating results
but are non-cash addbacks for cash flow purposes, increased operating cash flow
by $0.5 million between the periods, from a net cash increase of $0.9 million in
FY 2018 to a net cash increase of $1.4 million in FY 2019. Also, cash from
operating activities between the periods significantly increased by
$14.6 million as a result of non-cash adjustments of $12.8 million in FY 2019
relating to the change in the valuation of the stand-alone bifurcated
derivatives in the Convertible Note, versus $1.7 million in FY 2018, and the
non-cash realized foreign exchange loss of $3.6 million prior to its conversion
to equity in FY 2019 (see Note 5 of Notes to Condensed Consolidated Financial
Statements). In addition, non-cash depreciation and amortization, including the
amortization of deferred financing costs, accretion of interest and interest
deferred on the Senior Term Note, increased cash between the periods by
$3.7 million, from an aggregate $21.6 million in FY 2018 to $25.3 million in FY
2019; and operating cash flows were further enhanced by $4.7 million between the
periods for deferred income taxes. Deferred income taxes increased cash in FY
2019 by $3.3 million versus reducing cash by $1.4 million in FY 2018. During FY
2019 and FY 2018, the net gain on the sales of lease fleet reduced operating
cash flows by $4.2 million and $3.7 million, respectively.

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

Financing Activities. Net cash provided from financing activities was
$6.2 million during FY 2019, as compared to $83.8 million provided during FY
2018, a decrease to cash between the periods of $77.6 million. In FY 2018, we
issued the Bison Capital Notes for proceeds totaling $80.0 million to, among
other things, acquire the noncontrolling interest of Royal Wolf (see above) and
repay the principal of $10.0 million due under the term loan to Credit Suisse
(see Note 5 of Notes to Condensed Consolidated Financial Statements). In FY 2019
and FY 2018, financing activities also included net borrowings of $7.8 million
and $102.2 million, respectively, on existing credit facilities. These financing
activities on our existing credit facilities were



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

Asset Management


Receivables and inventories were $55.0 million and $37.0 million at  and $50.5 million and $22.7 million at , respectively. At
, DSO in trade receivables were 39 days and 45 days in the
Asia-Pacific area and our North American leasing operations, as compared to 35
days and 47 days at , respectively. The $14.3 million increase in
inventories was primarily due to the timing of receipts of sale and fleet units
to fulfill known increased portable storage demand. Effective asset management
is always a significant focus as we strive to apply appropriate credit and
collection controls and maintain proper inventory levels to enhance cash flow
and profitability.

The net book value of our total lease fleet was $448.5 million at , as compared to $429.4 million at . At , we
had 96,600 units (24,564 units in retail operations in Australia, 8,841 units in
national account group operations in Australia, 12,789 units in New Zealand,
which are considered retail; and 50,406 units in North America) in our lease
fleet, as compared to 85,812 units (24,037 units in retail operations in
Australia, 8,046 units in national account group operations in Australia, 10,222
units in New Zealand, which are considered retail; and 43,507 units in North
America) at . At those dates, 81,046 units (20,949 units in retail
operations in Australia, 7,746 units in national account group operations in
Australia, 10,891 units in New Zealand, which are considered retail; and 41,460
units in North America); and 68,712 units (20,102 units in retail operations in
Australia, 5,038 units in national account group operations in Australia, 8,705
units in New Zealand, which are considered retail; and 34,867 units in North
America) were on lease, respectively.

In the Asia-Pacific area, the lease fleet was comprised of 38,535 storage and
freight containers and 7,659 portable building containers at ;
and 34,507 storage and freight containers and 7,798 portable building containers
at . At those dates, units on lease were comprised of 34,384
storage and freight containers and 5,202 portable building containers; and
28,301 storage and freight containers and 5,544 portable building containers,
respectively.

In North America, the lease fleet was comprised of 35,694 storage containers,
4,836 office containers (GLOs), 4,219 portable liquid storage tank containers,
4,484 mobile offices and 1,173 modular units at ; and 29,518
storage containers, 4,216 office containers (GLOs), 4,147 portable liquid
storage tank containers, 4,447 mobile offices and 1,179 modular units at
. At those dates, units on lease were comprised of 29,467 storage
containers, 3,976 office containers, 3,260 portable liquid storage tank
containers, 3,765 mobile offices and 992 modular units; and 23,040 storage
containers, 3,620 office containers, 3,405 portable liquid storage tank
containers, 3,792 mobile offices and 1,010 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



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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 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.

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 .

Impact of Recently Issued Accounting Pronouncements

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




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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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World Economic Forum at Davos 2019 - Dominic Briggs General Partner Blockwall Management

Matt Bird sits down with Dominic Briggs, General Partner Blockwall Management at the World Economic Forum at Davos 2019

Emerging Growth

Q BioMed Inc

Q BioMed Inc is a biomedical acceleration and development company. The company is a biomedical acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences…