U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

OR

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

For the transition period from                                          to                                          .

(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 þ No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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 o		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No þ

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 17,826,052 shares issued and outstanding as of April 30, 2009.

 

 

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			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. Submission of Matters to a Vote of Security Holders			38
Item 5. Other Information			38
Item 6. Exhibits			38
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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)

		Successor (Note 1)
		June 30,				March 31,
		2008				2009
						(Unaudited)
Assets
Cash and cash equivalents		$	2,772			$	—
Trade and other receivables, net of allowance for doubtful accounts of $485 and $2,204 at June 30, 2008 and March 31, 2009, respectively			18,327				25,218
Inventories			21,084				19,779
Prepaid expenses			2,094				1,897
Total current assets			44,277				46,894
Lease receivables			1,589				1,108
Property, plant and equipment, net			7,503				9,782
Lease fleet, net			87,748				183,454
Intangible assets, net (including goodwill and indefinitely-lived intangible assets of $32,461 and $70,938 at June 30, 2008 and March 31, 2009, respectively)			66,419				96,636
Other assets			325				12
Total non-current assets			163,584				290,992
Total assets		$	207,861			$	337,886
Current liabilities
Trade payables and accrued liabilities		$	18,504			$	23,977
Current portion of long-term debt and obligations			3,223				7,542
Unearned revenue and advance payments			2,930				8,809
Income taxes payable			705				283
Total current liabilities			25,362				40,611
Non-current liabilities
Long-term debt and obligations, net of current portion			78,029				183,735
Deferred tax liabilities			1,462				12,400
Employee benefits and other non-current liabilities			227				146
Total non-current liabilities			79,718				196,281
Commitments and contingencies (Note 8)			—				—
Minority interest			9,050				4,538
Stockholders’ equity
Cumulative preferred stock, $.0001 par value: 1,000,000 shares authorized; 24,000 shares issued and outstanding (in series) at March 31, 2009 and stated at liquidation value			—				1,295
Common stock, $.0001 par value: 100,000,000 shares authorized; 13,826,052 and 17,826,052 shares outstanding at June 30, 2008 and March 31, 2009, respectively			1				2
Additional paid-in capital			81,688				108,064
Cumulative dividends paid			—				(21	)
Accumulated other comprehensive income (loss)			6,787				(12,377	)
Retained earnings (accumulated deficit)			5,255				(507	)
Total stockholders’ equity			93,731				96,456
Total liabilities and stockholders’ equity		$	207,861			$	337,886

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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)

		Successor (Note 1)
		Quarter Ended March 31,
		2008				2009
Revenues
Sales		$	19,801			$	14,769
Leasing			8,849				19,686
			28,650				34,455
Costs and expenses
Cost of sales			16,356				12,354
Leasing, selling and general expenses			6,473				12,966
Depreciation and amortization			2,251				3,882
Operating income			3,570				5,253
Interest income			91				58
Interest expense			(2,426	)			(3,308	)
Foreign currency exchange gain (loss) and other			115				(1,860	)
			(2,220	)			(5,110	)
Income before provision for income taxes and minority interest			1,350				143
Provision for income taxes			376				50
Minority interest			140				(177	)
Net income		$	834			$	270
Net income per common share:
Basic		$	0.09			$	0.01
Diluted			0.08				0.01
Weighted average shares outstanding:
Basic			9,690,099				17,826,052
Diluted			11,083,722				17,826,052

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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)

		Predecessor				Successor (Note 1)
		Period from				Nine Months
		July 1 to				Ended
		September 13,				March 31,
		2007				2008				2009
Revenues
Sales		$	10,944			$	45,277			$	57,093
Leasing			4,915				17,624				51,616
			15,859				62,901				108,709
Costs and expenses
Cost of sales			9,466				37,757				48,655
Leasing, selling and general expenses			4,210				13,595				36,638
Depreciation and amortization			653				4,834				11,161
Operating income			1,530				6,715				12,255
Interest income			14				1,194				244
Interest expense			(947	)			(4,385	)			(13,388	)
Foreign currency exchange gain (loss) and other			(129	)			2,220				(12,575	)
			(1,062	)			(971	)			(25,719	)
Income (loss) before provision for income taxes and minority interest			468				5,744				(13,464	)
Provision (benefit) for income taxes			180				1,837				(4,685	)
Minority interest			—				354				(3,017	)
Net income (loss)		$	288			$	3,553			$	(5,762	)
Net income (loss) per common share:
Basic						$	0.36			$	(0.35	)
Diluted							0.31				(0.35	)
Weighted average shares outstanding:
Basic							9,910,981				16,482,986
Diluted							11,304,604				16,482,986

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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss)
(In thousands, except share data)
(Unaudited)

Successor (Note 1)

																														Retained
		Cumulative Preferred																Additional				Cumulative				Other				Earnings				Total
		Stock								Common Stock								Paid-In				Dividends				Comprehensive				(Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Paid				Income (Loss)				Deficit)				Equity
Balance at June 30, 2008			—			$	—				13,826,052			$	1			$	81,688			$	—			$	6,787			$	5,255			$	93,731
Issuance of common stock			—				—				4,000,000				1				25,599				—				—				—				25,600
Issuance of preferred stock			24,000				1,295				—				—				(9	)			—				—				—				1,286
Share-based compensation			—				—				—				—				656				—				—				—				656
Contributed services			—				—				—				—				130				—				—				—				130
Cumulative dividends paid			—				—				—				—				—				(21	)			—				—				(21	)
Net loss			—				—				—				—				—				—				—				(5,762	)			(5,762	)
Cumulative translation adjustment			—				—				—				—				—				—				(19,164	)			—				(19,164	)
Total comprehensive loss			—				—				—				—				—				—				—				—				(24,926	)
Balance at March 31, 2009			24,000			$	1,295				17,826,052			$	2			$	108,064			$	(21	)		$	(12,377	)		$	(507	)		$	96,456

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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

		Predecessor				Successor (Note 1)
		Period from				Nine Months
		July 1 to				Ended
		September 13,				March 31,
		2007				2008				2009
Net cash provided (used) by operating activities (Note 9)		$	4,294			$	(6,889	)		$	9,636
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment			28				16				109
Business acquisitions, net of cash acquired			—				(90,954	)			(48,189	)
Purchases of property, plant and equipment			—				(310	)			(2,483	)
Purchases of lease fleet			(3,106	)			(5,764	)			(14,086	)
Purchases of intangible assets			—				(285	)			(33	)
Net cash used by investing activities			(3,078	)			(97,297	)			(64,682	)
Cash flows from financing activities:
Proceeds (repayments) on capital leasing activities			(7,921	)			(282	)			579
Proceeds from long-term borrowings			1,124				36,601				25,403
Proceeds from issuances of equity capital			4,990				—				26,886
Cumulative dividends paid			—				—				(21	)
Payments to converting stockholders, net			—				(6,426	)			—
Minority interest capital contributions			—				8,278				—
Repayment of borrowings from related party			—				(2,350	)			—
Net cash provided (used) by financing activities			(1,807	)			35,821				52,847
Net decrease in cash			(591	)			(68,365	)			(2,199	)
Cash and equivalents at beginning of period			886				68,277				2,772
Impact of foreign currency translation on cash			(5	)			1,257				(573	)
Cash and equivalents at end of period		$	290			$	1,169			$	—

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

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Organization and Business Operations

Organization

General Finance Corporation (“GFN”) was incorporated in Delaware in October 2005 to effect a business combination with one or more operating businesses in the rental services and specialty finance sectors. From inception through September 13, 2007, GFN had no business or operations. 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 North America Corp., a Delaware corporation (“GFNNA”); GFN Mobile Storage Inc., a Delaware corporation (“GFNMS”); GFN Australasia Holdings Pty Ltd., an Australian corporation (“GFN Holdings”); GFN Australasia Finance Pty Ltd, an Australian corporation (“GFN Finance”); RWA Holdings Pty Limited (“RWA”), an Australian corporation, and its subsidiaries (collectively, “Royal Wolf”); and Pac-Van, Inc., an Indiana corporation (“Pac-Van”). In September 2007, the Company changed its fiscal year to June 30 from December 31.

Acquisition of Royal Wolf

On September 13, 2007 (September 14 in Australia), the Company completed the acquisition of Royal Wolf through the acquisition of all of the outstanding shares of RWA. Based upon the actual exchange rate of one Australian dollar to $0.8407 U.S. dollar realized in connection with payments made upon completion of the acquisition, the purchase price paid to the sellers for the RWA shares was $64.3 million, including deposits of $1,005,000 previously paid in connection with the acquisition. The Company paid the purchase price, less the deposits, by a combination of cash in the amount of $44.7 million plus the issuance to Bison Capital Australia, L.P., (“Bison Capital”), one of the sellers, of shares of common stock of GFN U.S., constituting 13.8% of the outstanding capital stock of GFN U.S. following the issuance; and the issuance of a note to Bison Capital. As a result of this structure, the Company owns 86.2% of the outstanding capital stock of GFN U.S. and Bison Capital owns 13.8% of the outstanding capital stock of GFN U.S. GFN Finance, an indirect subsidiary of GFN U.S., owns all of the outstanding capital stock of Royal Wolf.

Royal Wolf leases and sells storage containers, portable container buildings and freight containers in Australia and New Zealand; which is considered geographically by the Company to be the Asia-Pacific area. All references to events or activities (other than equity-related) which occurred prior to the completion of the acquisition on September 13, 2007 (September 14 in Australia) relate to Royal Wolf, as the predecessor company (the “Predecessor”). All references to events or activities (other than equity-related) which occurred after the completion of the acquisition on September 13, 2007 (September 14 in Australia) relate to the Company, as the successor company (the “Successor”).

Acquisition of Pac-Van

On October 1, 2008, the Company completed its acquisition of Pac-Van through a merger with Mobile Office Acquisition Corp. (“MOAC”), the parent of Pac-Van, and the Company’s wholly-owned subsidiary formed in July 2008, GFNNA. Pac-Van leases and sells modular buildings, mobile offices and storage containers in the United States.

The Company, in addition to assuming Pac-Van’s long-term debt, paid the purchase price to the stockholders of MOAC by a combination of $19.4 million in cash, 4,000,000 shares of GFN restricted common stock and a 20-month subordinated promissory note in the aggregate principal amount of $1.5 million bearing interest at 8% per annum. The note and 1,133,333 shares of the restricted common stock will secure the indemnification obligations for 20 months and 36 months, respectively. Among other things, the Company and the stockholders of MOAC entered into a stockholders agreement which provided registration rights which may be exercised after June 30, 2009. In addition, in connection with the acquisition, the Company granted options to certain key employees of Pac-Van and to a former stockholder of MOAC, who became a non-employee member of Company’s Board of Directors effective on that date, to purchase 347,000 and 9,000 shares of common stock, respectively, at an exercise price equal to the closing market price of the Company’s common stock as of October 1, 2008, or $6.40.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The total purchase consideration, including the Company’s transaction costs of approximately $0.9 million has been allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair market values as of October 1, 2008, as follows (in thousands):

		October 1, 2008
Fair value of the net tangible assets acquired and liabilities assumed:
Cash and cash equivalents		$	1,517
Trade and other receivables			15,118
Inventories			5,370
Prepaid expenses			231
Property, plant and equipment			3,458
Lease fleet			112,909
Other assets			177
Trade payables and accrued liabilities			(12,939	)
Unearned revenue and advance payments			(7,414	)
Long-term debt			(107,600	)
Deferred income taxes			(18,324	)
Total net tangible assets acquired and liabilities assumed			(7,497	)
Fair value of intangible assets acquired:
Customer base			4,850
Trade name			2,200
Deferred financing costs			166
Goodwill			47,719
Total intangible assets acquired			54,935
Total purchase consideration		$	47,438

The accompanying consolidated statements of operations of “Successor” reflect the operating results of the Company following the dates of acquisitions of Royal Wolf and Pac-Van and do not reflect the operating results of Royal Wolf and Pac-Van prior to the acquisition dates. The following unaudited pro forma information for the quarter ended March 31, 2008 and the nine months ended March 31, 2008 and 2009 assume the acquisitions of Royal Wolf and Pac-Van occurred at the beginning of the periods presented (in thousands, except per share data):

		Quarter ended				Nine months ended
		March 31,				March 31,
		2008				2008				2009
Revenues		$	44,770			$	130,826			$	131.351
Net income (loss)			1,267				5,352				(4,438	)
Pro forma net income (loss) per share:
Basic		$	0.07			$	0.30			$	(0.25	)
Diluted			0.07				0.28				(0.25	)

The pro forma results are not necessarily indicative of the results that may have actually occurred had the acquisition taken place on the date noted, or the future financial position or operating results of the Company. The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable. The pro forma adjustments include adjustments for reduced interest income and increased interest expense, as well as increased depreciation and amortization expense as a result of the application of the purchase method of accounting.

Other Acquisitions

On July 11, 2008, the Company, through Royal Wolf, purchased the business of NT Container Services for $1,028,000. The total purchase price has been allocated to tangible and intangible assets acquired based on their estimated fair market values as of July 11, 2008.

On October 31, 2008, the Company, through Royal Wolf, purchased the business of Ace Container Services Pty Ltd for $741,000. The total purchase price has been allocated to tangible and intangible assets acquired based on their estimated fair market values as of October 31, 2008.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On December 8, 2008, the Company, through Pac-Van, purchased the business of Container Wholesalers for $499,000; including the issuance of 100 shares of Series B 8% Cumulative Preferred Stock (see Note 6). The total purchase price has been allocated to tangible and intangible assets acquired based on their estimated fair market values as of December 8, 2008.

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 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 accounting principles generally accepted in the United States for complete financial statements. 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 year ending June 30, 2009. 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 year ended June 30, 2008 filed with the Securities and Exchange Commission.

Certain reclassifications have been made to conform to the current period presentation.

Unless otherwise indicated, references to “FY 2009” and “Predecessor Period 2008” are to the nine months ended March 31, 2009 and for the period from July 1 to September 13, 2007, respectively.

Principles of Consolidation

The 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.

Foreign Currency Translation

The Company’s functional currency for its operations in Australia is the Australian (“AUS”) dollar. All adjustments resulting from the translation of the accompanying consolidated financial statements from the functional currency into the United States (“U.S.”) dollar reporting currency are recorded as a component of stockholders’ equity in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52, Foreign Currency Translation. All assets and liabilities are translated at the rates in effect at the balance sheet dates; and revenues, expenses, gains and losses are translated using the average exchange rates during the periods. Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate prevailing at that date. Foreign exchange differences arising on translation are recognized in the statement of operations. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates prevailing at the dates the fair value was determined.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Segment Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way companies report information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Based on the provisions of SFAS No. 131 and the manner in which the chief operating decision maker analyzes the business, the Company has determined it has two separately reportable geographic segments and one reportable operating segment.

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.

Inventories

Inventories are stated at the lower of cost or market (net realizable value). Net realizable value is the estimated selling price in the ordinary course of business. Expenses of marketing, selling and distribution to customers, as well as costs of completion are estimated and are deducted from the estimated selling price to establish net realizable value. Costs are assigned to individual items of inventory on the basis of specific identification and include expenditures incurred in acquiring the inventories and bringing them to their existing condition and location. Inventories consist primarily of containers held for sale or lease and are comprised of the following (in thousands):

		June 30, 2008				March 31, 2009
						(Unaudited)
Finished goods		$	18,795			$	18,543
Work in progress			2,289				1,236
		$	21,084			$	19,779

Derivative Financial Instruments

Derivative financial instruments include warrants issued as part of the Initial Public Offering (“IPO”), a purchase option that was sold to the representative of the underwriters and warrants issued in connection with a senior subordinated promissory note with Bison Capital (Note 3). Based on Emerging Issues Task Force Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, the issuance of the warrants and the sale of the purchase option were reported in stockholders’ equity and, accordingly, there is no impact on the Company’s financial position or results of operations; except for the $100 in proceeds from the sale of the purchase option and the discounting of the senior subordinated promissory note for the fair market value of the warrants issued to Bison Capital. Subsequent changes in the fair value will not be recognized as long as the warrants and purchase option continue to be classified as equity instruments. At the date of issuance, the Company determined the purchase option and the warrants issued to Bison Capital had a fair market value of approximately $641,000 and $1,309,000, respectively, using the Black-Scholes pricing model.

The Company may use derivative financial instruments to hedge its exposure to foreign currency and interest rate risks arising from operating, financing and investing activities. The Company does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognized initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognized immediately in the statement of operations.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Accounting for Stock Options

For the issuances of stock options, the Company follows the fair value provisions of SFAS No. 123R, Share-Based Payment. SFAS No. 123R requires recognition of employee share-based compensation expense in the statements of income over the vesting period based on the fair value of the stock option at the grant date.

Property, Plant and Equipment

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

		Estimated				June 30,				March 31,
		Useful Life				2008				2009
										(Unaudited)
Land			—			$	1,749			$	1,295
Building		40 years					271				200
Transportation and plant equipment (including capital lease assets)		3 — 10 years					5,489				7,400
Furniture, fixtures and office equipment		3 — 10 years					893				2,647
							8,402				11,542
Less accumulated depreciation and amortization							(899	)			(1,760	)
						$	7,503			$	9,782

Lease Fleet

The Company has a fleet of storage containers, mobile offices, modular buildings and steps that it primarily leases to customers under operating lease agreements with varying terms. The lease fleet (or lease or rental equipment) is recorded at cost and depreciated on the straight-line basis over the estimated useful life (5 — 20 years), after the date the units are put in service, and are depreciated down to their estimated residual values (0% — 70% of cost). In the opinion of management, estimated residual values are at or below net realizable values. The Company continues to evaluate these depreciation policies as more information becomes available from other comparable sources and its own historical experience.

Costs incurred on lease fleet containers subsequent to initial acquisition are capitalized when it is probable that future economic benefits in excess of the originally assessed performance will result; otherwise, they are expensed as incurred.

Containers in the lease fleet are available for sale and are transferred to inventory prior to sale. Cost of sales of a container in the lease fleet is recognized at the carrying amount at the date of sale.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes. Accordingly, the Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for temporary differences between the financial reporting basis and income tax basis of assets and liabilities at the balance sheet date multiplied by the applicable tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company files U.S. Federal tax returns, California franchise tax returns and Australian tax returns, and beginning in 2009 will also file in multiple other U.S. states. The Company has identified its U.S. Federal tax return as its “major” tax jurisdiction. For U.S. Federal tax purposes, all periods subsequent to June 30, 2007 are subject to examination by the U.S. Internal Revenue Service (“IRS”). The Company believes that its income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”). In addition, the Company did not record a cumulative effect adjustment related to the adoption of FIN 48 and does not anticipate that the total amount of unrecognized tax benefit related to any particular tax position will change significantly within the next 12 months.

The Company’s policy for recording interest and penalties, if any, associated with audits will be to record such items as a component of income taxes.

Net Income per Common Share

Basic net income per common share is computed by dividing net income, less dividends declared (or accumulated) on cumulative preferred stock (Note 6), by the weighted-average number of shares of common stock outstanding during the periods. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential dilutive securities the Company has outstanding are warrants and stock options. The following is a reconciliation of weighted average shares outstanding used in calculating net income per common share:

		Quarter Ended March 31,								Nine Months Ended March 31,
		2008				2009				2008				2009
Basic			9,690,099				17,826,052				9,910,981				16,482,986
Assumed exercise of warrants			1,393,623				—				1,393,623				—
Assumed exercise of stock options			—				—				—				—
Diluted			11,083,722				17,826,052				11,304,604				16,482,986

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R also requires that acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. SFAS No. 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as equity in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The two statements will be effective for the Company as of July 1, 2009. Management is currently evaluating the impact that the adoption of these statements may have on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows and (d) encourages, but does not require, comparative disclosures for earlier periods at initial adoption. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of SFAS No. 161 did not have a significant impact on the Company’s consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In April 2008, the FASB issued FASB Staff Position FAS 142-3, Determining the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets accounted for pursuant to SFAS No. 142. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. Management does not believe that the adoption of FSP 142-3 will have a material effect on the Company’s consolidated financial statements.

Note 3. Long-term Debt and Obligations

Royal Wolf Senior Credit Facility and Subordinated Notes

Royal Wolf has a credit facility, as amended, with Australia and New Zealand Banking Group Limited (“ANZ”). The facility is subject to annual reviews by ANZ and is guaranteed and secured by assets of the Company’s Australian and New Zealand subsidiaries. Based upon the exchange rate of one Australian dollar to $0.68350 U.S. dollar and one New Zealand dollar to $0.82570 Australian dollar at March 31, 2009, the total credit facility limit is $77.8 million (AUS$101.0 million and NZ$15.5 million). The aggregate ANZ facility is comprised of various sub-facilities. The largest of these sub-facilities include eight interchangeable loan facilities under which Royal Wolf may borrow up to the lesser of $50.5 million (AUS$74.0 million) or 80% of the orderly liquidation value, as defined, of its container fleet; a receivables financing facility of up to $8.2 million (AUS$12.0 million); a special finance line for acquisitions of $0.7 million (AUS$1.0 million); a multi-option facility for the lease financing of accommodation units of $3.8 million (AUS$5.6 million); and a separate bank guarantee facility for New Zealand of $8.7 million (NZ$15.5 million), which would effectively terminate in May 2010. The receivables financing facility bears interest at a variable rate equal to the bank bill swap reference rate, plus 1.65% per annum, and may not be terminated, except on default, prior to ANZ’s next review date of the facility. Five of the interchangeable loan facilities, totaling $42.2 million (AUS$61.8 million), mature in September 2012; two of the interchangeable loan facilities, totaling $4.9 million (AUS$7.2 million) and $0.7 million (AU$1.0 million), mature in April 2010 and November 2010, respectively; and the remaining interchangeable loan facility of $2.7 million (AUS$4.0 million) may not be terminated, except on default, prior to ANZ’s next review date. The multi-option facility matures two years from the date of drawdown. Loans on the interchangeable facilities and multi-option facility bear interest at ANZ’s prime rate plus 2.50% per annum, with interest payable quarterly. As of March 31, 2009, the weighted-average effective interest rate was 8.3%.

The ANZ senior credit facility is subject to certain covenants, including compliance with specified consolidated senior and total interest coverage and senior and total debt ratios, as defined, for each financial quarter based on earnings before interest, income taxes, depreciation and amortization and other non-operating costs (“EBITDA”), as defined, on a year-to-date or trailing twelve-month (“TTM”) basis; and restrictions on the payment of dividends, loans and payments to affiliates and granting of new security interests on the assets of any of the secured entities. A change of control in any of GFN Holdings or its direct and indirect subsidiaries without the prior written consent of ANZ constitutes an event of default under the facility.

On September 13, 2007, in conjunction with the closing of the acquisition of Royal Wolf, the Company entered into a securities purchase agreement with Bison Capital, pursuant to which the Company issued and sold to Bison Capital, at par, a secured senior subordinated promissory note in the principal amount of $16,816,000 (the “Bison Note”). Pursuant to the securities purchase agreement, the Company paid Bison Capital a closing fee of $336,000 and issued to Bison Capital warrants to purchase 500,000 shares of common stock of GFN.

The Bison Note bears interest at the annual rate of 13.5%, payable quarterly in arrears, commencing October 1, 2007, and matures on March 13, 2013. The Company may extend the maturity date by one year, provided that it is not then in default. The Company may prepay the Bison Note at a declining price of 103% of par prior to September 13, 2009; 102% of par prior to September 13, 2010; 101% of par prior to September 13, 2011 and 100% of par thereafter. The maturity of the Bison Note may be accelerated upon an event of default or upon a change of control of GFN Finance or any of its subsidiaries. Payment under the Bison Note is secured by a lien on all or substantially all of the assets of GFN Finance and its subsidiaries, subordinated and subject to the inter-creditor agreement with ANZ. If, during the 66-month period ending on the scheduled maturity date, GFN’s common stock has not traded above $10 per share for any 20 consecutive trading days on which the average daily trading volume was at least 30,000 shares (ignoring any daily trading volume above 100,000 shares), upon demand by Bison Capital, the Company will pay Bison Capital on the scheduled maturity date a premium of $1.0 million in cash, less any gains realized by Bison Capital from any prior sale of the warrants and warrant shares. This premium is also payable upon any acceleration of the Bison Note due to an event of default or change of control of GFN Finance or any of its subsidiaries. As a condition to receiving this premium, Bison Capital must surrender for cancellation any remaining warrants and warrant shares.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The warrants issued to Bison Capital represent the right to purchase 500,000 shares of GFN’s common stock at an initial exercise price of $8.00 per share, subject to adjustment for stock splits and stock dividends. Unexercised warrants will expire September 13, 2014.

On May 1, 2008, the Company issued and sold to Bison Capital a second secured senior subordinated promissory note in the principal amount of $5,500,000 on terms comparable to the original Bison Note, except that the maturity of this second note is July 1, 2010. Collectively, these two notes are referred to as the “Bison Notes”. At March 31, 2009, the principal balance of the Bison Notes was $21,375,000.

The Bison Notes require the maintenance of minimum EBITDA levels, as defined, and a total debt ratio based on a TTM EBITDA basis; as well as restrictions on capital expenditures.

Pac-Van Senior Credit Facility and Subordinated Note

Pac-Van has a revolving line of credit and letter of credit facility, as amended, with a syndication of four financial institutions led by LaSalle Bank National Association (“LaSalle”), as administrative and collateral agent. The LaSalle credit facility is secured by substantially all the business assets of Pac-Van and GFNNA, including the assignment of its rights under leasing contracts with customers, and is available for purchases of rental equipment and general operating purposes. The maximum aggregate amount available under the LaSalle credit facility is $120,000,000; with borrowings limited to 85% of eligible accounts receivable, net of reserves and allowances, plus 85% of the net book value of all eligible rental equipment, net of reserves and allowances, plus the lesser of (i) 75% of property and equipment, as defined, and (ii) $1,000,000. Letters of credit commitments under the credit facility are not to exceed $10,000,000 and approval is required by LaSalle, as the administrative agent, for borrowings over $95,400,000 and letters of credit commitments over $2,000,000.

Borrowings under the LaSalle credit facility are due on August 23, 2012 and accrue interest at the lead lender’s prime lending rate or its prime lending rate plus 0.25%, or the LIBOR plus a stated margin ranging from 1.5% to 2.25% based on Pac-Van’s leverage. At March 31, 2009, the weighted-average interest rate was 2.5%. In addition, the Company is required to pay an unused commitment fee equal to 0.25% of the average unused line calculated on a quarterly basis. The LaSalle senior credit facility is subject to certain covenants, including compliance with minimum EBITDA levels, as defined, specified interest coverage, senior and total debt ratios based on a TTM EBITDA basis, a minimum utilization rate, as defined; and, among other things, restrictions on the payment of dividends, loans and payments to affiliates.

Pac-Van also has a senior subordinated secured note payable to SPV Capital Funding, L.L.C. (“SPV”) with a principal balance of $25,000,000. This subordinated note matures on February 2, 2013, requires quarterly interest only payments computed at 13.0% per annum and is also subject to the maintenance of certain financial covenants.

Loan Covenant Compliance

The Company was in compliance with the financial covenants under its senior credit facilities and senior subordinated notes discussed above as of March 31, 2009. However, as widely reported, the financial markets and economy in the U.S. and Australia, as well as the global economy in general, have been in a downturn for a period of time. If the current economic environment continues to be weak or worsens, the Company’s ability to continue meeting covenant requirements may be impaired and may result in the seeking of amendments or waivers of covenant compliance. While management of the Company believes its relationships with its senior lenders are good, there is no assurance that they would consent to such an amendment or waiver in the event of noncompliance; or that such consent would not be conditioned upon the receipt of a cash payment, revised principal payout terms, increased interest rates, or restrictions in the expansion of the credit facilities; or that our senior lenders would not exercise rights that would be available to them, including, among other things, demanding payment of outstanding borrowings.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

UBOC Credit Facility

The Company has a credit agreement, as amended, with Union Bank of California, N.A. (“UBOC”) for a $1.0 million credit facility. Borrowings or advances under the facility will bear interest at UBOC’s “Reference Rate” (which approximates the prime rate) and are due and payable by March 31, 2011. The facility is guaranteed by GFN U.S. and requires the maintenance of certain quarterly and year-end financial reporting covenants. There were no outstanding borrowings under the UBOC credit facility at March 31, 2009.

Capital Leases

Capital lease liabilities of the Company are payable as follows as of March 31, 2009 (in thousands):

		Minimum
		lease payments				Interest				Principal
Less than one year		$	81			$	7			$	74
Between one and five years			23				5				18
More than five years			—				—				—
		$	104			$	12			$	92

Note 4. Financial Instruments

The Company adopted SFAS No. 157, Fair Value Measurements, effective July 1, 2008. SFAS No. 157 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, SFAS No. 157 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.

Interest Rate Swap Contracts

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

To manage this mix in a cost-efficient manner, the Company enters into interest rate swaps and interest rate options, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps and options are designated to hedge changes in the interest rate of its commercial bill liability. The secured ANZ loan and interest rate swaps and options have the same critical terms, including expiration dates. The Company believes that financial instruments designated as interest rate hedges are highly effective. However, documentation of such as required by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities 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.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company’s interest rate swap and option (cap) contracts are not traded on a market exchange; therefore, the fair values are determined using valuation models which include assumptions about the interest rate yield curve at the reporting dates (Level 2 fair value measurement). As of March 31, 2009, there were four open interest rate swap contracts and three open interest rate option (cap) contracts, as follows (dollars in thousands):

						Fair Value as of
		Notional Amount				March 31, 2009
Swap		$	11,278			$	(1,185	)
Swap			1,367				(189	)
Swap			3,447				(452	)
Swap			2,504				(223	)
Option (Cap)			8,202				26
Option (Cap)			1,477				3
Option (Cap)			1,073				1
Total		$	29,348			$	(2,019	)

The total fair value of $680,000 and ($2,019,000) at June 30, 2008 and March 31, 2009 is included in “trade and other receivables” and in “trade payables and accrued liabilities,” respectively, in the consolidated balance sheet. In FY2009, unrealized loss on interest rate swap and option (cap) contracts totaled $2,826,000.

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. The Company 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. The Company uses forward currency contracts and options 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 contracts and options 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 SFAS No. 133 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. The fair value of forward currency exchange contracts (Level 2 fair value measurement), which is included in “trade and other receivables” in the consolidated balance sheet, was $673,000 at March 31, 2009. In FY2009, unrealized gains on forward currency exchange contracts totaled $1,486,000.

The Company also has certain U.S. dollar-denominated debt at Royal Wolf, including intercompany borrowings, which are remeasured at each financial reporting date with the impact of the remeasurement being recorded in our consolidated statements of operations. Unrealized gains and losses resulting from such remeasurement due to changes in the Australian exchange rate to the U.S. dollar could have significant impact in the Company’s reported results of operations, as well as any realized gains and losses from the payments on such U.S. dollar-denominated debt and intercompany borrowings.

In FY2009, unrealized and realized foreign exchange losses totaled $10,657,000 and $3,401,000, respectively.

Note 5. Related Party Transactions

The Company previously had an unsecured limited recourse revolving line of credit from Ronald F. Valenta, a director and the chief executive officer of the Company, pursuant to which the Company could borrow up to $3,000,000 outstanding at one time. The line of credit terminated upon the completion of the acquisition of Royal Wolf and the outstanding principal and interest totaling $2,587,000 was repaid on September 14, 2007.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company has utilized certain accounting, administrative and secretarial services from affiliates of officers; as well as office space provided by an affiliate of Mr. Valenta. Until the consummation of a business combination by the Company, the affiliates had agreed to make such services available to the Company free of charge, as may be required by the Company from time to time; with the exception of the reimbursement of certain out-of-pocket costs incurred on behalf of the Company. Effective September 14, 2007, the Company entered into a month-to-month arrangement that lasted until January 31, 2008 with an affiliate of Mr. Valenta for the rental of the office space at $1,148 per month. In addition, effective September 14, 2007, the Company commenced recording a charge to operating results (with an offsetting contribution to additional paid-in capital) for the estimated cost of contributed services rendered to the Company by non-employee officers and administrative personnel of affiliates.

Effective January 31, 2008, the Company entered into a lease with an affiliate of Mr. Valenta for its new 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. Rental payments were $86,000 in FY2009.

Effective October 1, 2008, the Company entered into a services agreement through June 30, 2009 (the “Termination Date”) with an affiliate of Mr. Valenta for certain accounting, administrative and secretarial services to be provided at the corporate offices and for certain operational, technical, sales and marketing services to be provided directly to the Company’s operating subsidiaries. Charges for services rendered at the corporate offices will be, until further notice, at $7,000 per month and charges for services rendered to the Company’s subsidiaries will vary depending on the scope of services provided. The services agreement provides for, among other things, mutual modifications to the scope of services and rates charged and automatically renews for successive one-year terms, unless terminated in writing by either party not less than 30 days prior to the Termination Date. Total charges to the Company for services rendered under this agreement totaled $178,000, plus out-of-pocket expenses, in FY 2009.

Note 6. Cumulative Preferred Stock

The Company is offering private placements of Series A 12.5% Cumulative Preferred Stock, par value $0.0001 per share and liquidation preference of $50 per share (“Series A Preferred Stock”); and Series B 8% 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 (see Note 1).

The Series A Preferred stock and the Series B Preferred stock are referred to collectively as the “Cumulative Preferred Stock.”

Upon issuance of the Cumulative Preferred Stock, the Company records the liquidation value as the preferred equity in the consolidated balance sheet, with any issuance or offering costs as a reduction in additional paid-in capital. As of March 31, 2009, the Company had issued 23,900 shares and 100 shares of Series A Preferred Stock and Series B Preferred Stock for total proceeds of $1,195,000 and $100,000, respectively.

The Cumulative Preferred Stock is not convertible into GFN common stock, has no voting rights, except as required by Delaware law, and is not redeemable prior to 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 Cumulative 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 of each year and 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 Cumulative Preferred Stock will have preference to holders of common stock; with the holders of the Series A Preferred Stock having preference over holders of the Series B Preferred Stock. The Company has agreed to register for public trading the Cumulative Preferred Stock no later than one year from issuance.

As of March 31, 2009, dividends paid or payable totaled $19,000 and $2,000 for the Series A Preferred Stock and Series B Preferred Stock, respectively. The characterization of dividends as ordinary income, capital or qualified for Federal income tax purposes is made based upon the earnings and profits of the Company, as defined by the Internal Revenue Code. No such characterization has been made by the Company as of March 31, 2009.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 7. Stock Option Plans

On August 29, 2006, the Board of Directors of the Company adopted the General Finance Corporation 2006 Stock Option Plan (“2006 Plan”), which was approved and amended by stockholders on June 14, 2007 and December 11, 2008, respectively. Under the 2006 Plan, the Company may issue to directors, employees, consultants and advisers up to 2,500,000 shares of its common stock. The options may be incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, or so-called non-qualified options that are not intended to meet incentive stock option requirements. The options may not have a term in excess of ten years, and the exercise price of any option may not be less than the fair market value of the Company’s common stock on the date of grant of the option. Unless terminated earlier, the 2006 Plan will automatically terminate June 30, 2016.

On each of September 11, 2006 (“2006 Grant”) and December 14, 2007 (“2007 Grant”), the Company granted options to an officer of GFN to purchase 225,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $7.30 per share and $9.05 per share, respectively, with a vesting period of five years. Stock-based compensation expense of $570,000 related to these options has been recognized in the statements of operations through March 31, 2009, with a corresponding benefit to additional paid-in capital. As of March 31, 2009, there remains $961,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 3.08 years. There have been no options exercised, cancelled or forfeited under these two grants and 450,000 options were outstanding at March 31, 2009. Also, as of March 31, 2009, 90,000 and 45,000 of the 2006 Grant and 2007 Grant options, respectively, were exercisable.

On January 22, 2008 (“2008 Grant”), the Company granted options to certain key employees of Royal Wolf to purchase 489,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $8.80 per share. The 2008 Grant consisted of 243,000 options with a vesting period of five years and 246,000 options that vest subject to a performance condition based on Royal Wolf achieving a certain EBITDA target for 2008. The Company initially commenced recognizing compensation expense over the vesting period of 20 months.

In June 2008, the Compensation Committee of the Company’s Board of Directors determined that the full EBITDA target for the 2008 Grant would not be achieved. As a result, the 2008 Grant was modified whereby one-half of the outstanding options subject to the EBITDA performance criteria were deemed to have achieved the performance condition. The remaining one-half of these performance-based options (“PB 2008 Grant”) were modified on July 23, 2008 (see below) for EBITDA targets at Royal Wolf pertaining to the years ending June 30, 2009 (“2009”) and 2010 (“2010”). At that time, the Company reassessed and revalued these options and commenced recognizing the changes in stock-based compensation on a prospective basis. Total stock-based compensation expense of $561,000 related to the 2008 Grant has been recognized in the statement of operations through March 31, 2009, with a corresponding benefit to additional paid-in capital. As March 31, 2009, there remains $539,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 2.66 years. There have been 41,500 options cancelled or forfeited under the 2008 Grant and 329,000 options were outstanding at March 31, 2009. No options have been exercised and 43,000 options were exercisable under the 2008 Grant as of March 31, 2009.

On July 23, 2008 (“July 2008 Grant”), the Company granted options to certain key employees of Royal Wolf to purchase 198,500 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 $5.35 per share. The July 2008 Grant consisted of the PB 2008 Grant (see above) totaling 118,500 options, 40,000 options with a vesting period of five years and 40,000 options that vest subject to a performance condition based on Royal Wolf achieving certain EBITDA targets for 2009 and 2010. The Company initially commenced recognizing compensation expense over the vesting periods of 2.17 years and 3.17 years for EBITDA targets in 2009 and 2010, respectively, pertaining to 79,250 options in each of those vesting periods. However, the Company has determined that it is not probable that the EBITDA target for 2009 will be achieved and has ceased recognizing stock-based compensation expense for those performance-based options. In addition, the Company has recorded a cumulative effect adjustment of $37,000 in the quarter ended March 31, 2009 to reverse compensation expense recognized prior to January 1, 2009 on those performance-based options. Total stock-based compensation expense of $62,000 related to the July 2008 Grant has been recognized in the statement of operations through March 31, 2009, with a corresponding benefit to additional paid-in capital. As of March 31, 2009, there remains $195,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 3.06 years. There have been 12,250 options cancelled or forfeited under the July 2008 Grant and 107,000 options were outstanding at March 31, 2009. No options have been exercised and no options were exercisable under the July 2008 Grant as of March 31, 2009.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On September 18, 2008 (“September 2008 Grant”), the Company granted options to the non-employee members of its Board of Directors to purchase 36,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $6.50 per share, with a vesting period of three years. Stock-based compensation expense of $21,000 related to these options has been recognized in the statements of operations through March 31, 2009, with a corresponding benefit to additional paid-in capital. As of March 31, 2009, there remains $99,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 2.47 years. There have been no options exercised, cancelled or forfeited under the September 2008 Grant, all 36,000 options were outstanding at March 31, 2009, and none were exercisable.

On October 1, 2008 (“October 2008 Grant”), the Company granted options to certain key employees of Pac-Van and to a former stockholder of MOAC, who became a non-employee member of Company’s Board of Directors effective on that date, to purchase 356,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date; or $6.40 per share. The October 2008 Grant consisted of 154,550 options with a vesting period of five years, 9,000 options with a vesting period of three years and 192,450 options that vest subject to performance conditions based on Pac-Van achieving a certain EBITDA target for 2009 and to-be-determined EBITDA targets for the subsequent four fiscal years . The Company commenced recognizing compensation expense over the vesting periods ranging from 1.92 years to 5.92 years pertaining to 38,490 options in each of those vesting periods. However, the Company has determined that it is not probable that the EBITDA target for 2009 will be achieved and has ceased recognizing stock-based compensation expense for those performance-based options. In addition, the Company has recorded a cumulative effect adjustment of $13,000 in the quarter ended March 31, 2009 to reverse compensation expense recognized prior to January 1, 2009 on those performance-based options. Total stock-based compensation expense of $74,000 related to the October 2008 Grant has been recognized in the statement of operations through March 31, 2009, with a corresponding benefit to additional paid-in capital. As of March 31, 2009, there remains $562,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 4.11 years. There have been no options exercised, cancelled or forfeited under the October 2008 Grant, 317,500 options were outstanding at March 31, 2009, and none were exercisable.

On December 11, 2008 (“December 2008 Grant”), the Company granted options to a non-employee member of its Board of Directors to purchase 9,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $1.78 per share, with a vesting period of three years. Stock-based compensation expense of $1,000 related to these options has been recognized in the statements of operations through March 31, 2009 and, as of that date, there remains $9,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 2.75 years. There have been no options exercised, cancelled or forfeited under the December 2008 Grant, all 9,000 options were outstanding at March 31, 2009, and none were exercisable.

On January 27, 2009 (“January 2009 Grant”), the Company granted options to certain key employees of Royal Wolf and Pac-Van to purchase 4,000 shares of common stock at an exercise price equal to the closing market price of the Company’s common stock as of that date, or $1.94 per share, with a vesting period of five years. Stock-based compensation expense of under $1,000 related to these options has been recognized in the statements of operations through March 31, 2009 and, as of that date, there remained $5,000 of unrecognized compensation expense that will be recorded in the statement of operations on the straight-line basis over the remaining weighted-average vesting period of 4.75 years. There have been no options exercised, cancelled or forfeited under the January 2009 Grant, all 4,000 options were outstanding at March 31, 2009, and none were exercisable.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

At March 31, 2009, the Company’s market price for its common stock was at $1.00 per share, which is below the exercise prices of all of the outstanding stock options.

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 an increase to additional paid-in capital.

The weighted-average fair value of the stock options granted was $3.06, $3.75, $3.94, $2.74, $3.31, $3.22, $1.06 and $1.20 per option for the 2006 Grant, 2007 Grant, 2008 Grant, July 2008 Grant, September 2008 Grant, October 2008 Grant, December 2008 Grant and January 2009 Grant, respectively, determined by using the Black-Scholes option-pricing model using the following assumptions: A risk-free interest rate of 4.8%, 3.27%, 3.01%, 3.77%, 3.08%, 3.29%, 1.99% and 1.99% (corresponding treasury bill rates) for the 2006 Grant, 2007 Grant, 2008 Grant, July 2008 Grant, September 2008 Grant, October 2008 Grant, December 2008 Grant and January 2009 Grant, respectively; an expected life of 7.5 years for all grants; an expected volatility of 26.5%, 31.1%, 35.83%, 41.78%, 43.12%, 41.78%, 57.13% and 59.85% for the 2006 Grant, 2007 Grant, 2008 Grant, July 2008 Grant, September 2008 Grant, October 2008 Grant, December 2008 Grant and January 2009 Grant, respectively; and no expected dividend.

Royal Wolf had an employee share option plan (“ESOP”) for the granting of non-transferable options to certain key management personnel and senior employees with more than twelve months service at the grant date. The ESOP was terminated in the Predecessor Period 2008.

Note 8. Commitments and Contingencies

Operating Leases

The Company leases office equipment and other facilities under operating leases. The leases have terms of between one and nine years, some with an option to renew the lease after that period. None of the leases includes contingent rentals. There are no restrictions placed upon the lessee by entering into these leases.

Non-cancellable operating lease rentals at March 31, 2009 are payable as follows (in thousands):

Less than one year		$	3,486
Between one and two years			2,546
Between two and three years			1,372
Between three and four years			990
Between four and five years			501
Thereafter			1,933
		$	10,828

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Put and Call Options

In conjunction with the closing of the acquisition of Royal Wolf, the Company entered into a shareholders agreement with Bison Capital which provides that, at any time after September 13, 2009, Bison Capital may require the Company to purchase from Bison Capital all of its 13.8% outstanding capital stock of GFN U.S. The purchase price for the capital stock is, in essence, the greater of the following:

(i) the amount equal to Bison Capital’s ownership percentage in GFN U.S., or 13.8%, multiplied by the result of 8.25 multiplied by the sum of Royal Wolf’s EBITDA for a twelve-month determination period, as defined, plus all administrative expense payments or reimbursements made by Royal Wolf to the Company during such period; minus the net debt of Royal Wolf, as defined; or

(ii) the amount equal to the Bison Capital’s ownership percentage in GFN U.S. multiplied by the result of the GFN trading multiple, as defined, multiplied by Royal’s Wolf’s EBITDA for the determination period; minus the net debt of Royal Wolf; or

(iii) Bison Capital’s cost, as defined, in the GFN U.S. capital stock.

Also under the shareholders agreement, the Company has the option, at anytime prior to September 13, 2010, to cause Bison Capital to sell and transfer its 13.8% outstanding capital stock of GFN U.S. to the Company for a purchase price equal to the product of 2.75 multiplied by Bison Capital’s cost in the GFN U.S. capital stock. Subsequent to September 13, 2010, the Company’s call option purchase price is similar to (i) and (ii) of the Bison Capital put option, except the EBITDA multiple is 8.75.

Preferred Supply Agreement

In connection with a Business Sale Agreement dated November 14, 2007 with GE SeaCo Australia Pty Ltd. and GE SeaCo SRL (collectively “GE SeaCo”), Royal Wolf entered in a preferred supply agreement with GE SeaCo. Under the preferred supply agreement, GE SeaCo has agreed to sell to Royal Wolf, and Royal Wolf has agreed to purchase, all of GE SeaCo’s containers that GE SeaCo determines to sell, up to a maximum of 5,000 containers each year. The purchase price for the containers will be based on their condition and is specified in the agreement, subject to annual adjustment. In addition, Royal Wolf received a right of first refusal to purchase any additional containers that GE SeaCo desires to sell in Australia, New Zealand and Papua New Guinea. Either party may terminate the agreement upon no less than 90 days’ prior notice at any time after November 15, 2012.

Other Matters

In January 2008, Royal Wolf was notified by a Department of the Australian government of an odor that might be caused by high levels of formaldehyde or volatile organic compounds that exceed national guidelines in some of its containers. Royal Wolf engaged the services of independent consultants in cooperation with the Australian government in testing ventilation improvements. In the fourth quarter of the year ended June 30, 2008 and in FY2009, the Company expensed $259,000 and $291,000, respectively, for containers that were affected by this matter. Management of the Company believes that the remediation of this matter has been resolved.

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.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 9. Cash Flows From Operating Activities and Supplemental Cash Flow Information

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

		Predecessor				Successor
		Period from				Nine Months
		July 1 to				Ended
		September 13,				March 31,
		2007				2008				2009
						(Unaudited)
Cash flows from operating activities
Net income (loss)		$	288			$	3,553			$	(5,762	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Loss (gain) on sales and disposals of property, plant and equipment			11				3				6
Unrealized foreign exchange loss (gain)			58				(376	)			10,657
Unrealized loss (gain) on forward exchange contracts			72				393				(1,486	)
Unrealized loss (gain) on interest rate swaps and options			90				(13	)			2,826
Depreciation and amortization			653				4,834				11,161
Amortization of deferred financing costs			—				125				175
Accretion of interest			32				129				180
Share-based compensation expense			—				282				656
Contributed services			—				160				130
Interest deferred for common stock subject to possible conversion, net of income tax effect			—				(226	)			—
Deferred income taxes			180				2,281				(4,739	)
Minority interest			—				354				(3,017	)
Changes in operating assets and liabilities:
Trade and other receivables, net			1,090				(7,814	)			3,549
Inventories			(3,822	)			(10,016	)			(855	)
Prepaid expenses and other			—				(993	)			549
Trade payables and accrued liabilities			5,642				827				(4,142	)
Income taxes payable			—				(392	)			(252	)
Net cash provided (used) by operating activities		$	4,294			$	(6,889	)		$	9,636

Supplemental Cash Flow Information — Non-Cash Investing and Financing Activities

On October 1, 2008, the Company issued a subordinated promissory note of $1.5 million as part of the consideration for the Pac-Van acquisition (see Note 1).

GENERAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 10. Segment Reporting

The tables below represent the Company’s revenues from external customers, long-lived assets (consisting of lease fleet and property, plant and equipment) and operating income as attributed to its two geographic locations (in thousands):

Revenues from external customers:

		Quarter Ended March 31,								Nine Months Ended March 31,
		2008				2009				2008				2009
						(Unaudited)
North America:
Sales		$	—			$	4,442			$	—			$	13,427
Leasing			—				11,415				—				23,843
			—				15,857				—				37,270
Asia-Pacific:
Sales			19,801				10,327				56,221	(a)			43,666
Leasing			8,849				8,271				22,539	(a)			27,773
			28,650				18,598				78,760	(a)			71,439
Total revenues		$	28,650			$	34,455			$	78,760			$	108,709

Long-lived assets:

		June 30, 2008				March 31, 2009
						(Unaudited)
North America		$	74			$	116,921
Asia-Pacific			95,177				76,315
Total long-lived assets		$	95,251			$	193,236

Operating income (loss):

		Quarter Ended March 31,								Nine Months Ended March 31,
		2008				2009				2008				2009
						(Unaudited)
North America		$	(576	)		$	2,164			$	(1,629	)		$	5,158
Asia Pacific			4,146				3,089				9,874	(a)			7,097
Total operating income		$	3,570			$	5,253			$	8,245	(a)		$	12,255

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, 2008 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 and the definitive proxy materials filed with the SEC for the Special Meeting of Stockholders held on September 30, 2008. 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. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

References in this Quarterly Report to “we”, “us”, or the “Company” are to General Finance Corporation (“GFN”) and its consolidated subsidiaries. These subsidiaries include GFN U.S. Australasia Holdings, Inc., a Delaware corporation (“GFN U.S.”); GFN North America Corp., a Delaware corporation (“GFNNA”); GFN Mobile Storage Inc., a Delaware corporation (“GFNMS”); GFN Australasia Holdings Pty Ltd., an Australian corporation (“GFN Holdings”); GFN Australasia Finance Pty Ltd, an Australian corporation (“GFN Finance”); RWA Holdings Pty Limited (“RWA”), an Australian corporation, and its subsidiaries (collectively, “Royal Wolf”); and Pac-Van, Inc., an Indiana corporation (“Pac-Van”).

Background and Significant Acquisitions

We were incorporated in Delaware on October 14, 2005 in order to serve as a vehicle to effect a business combination with one or more operating businesses in the rental services and specialty finance sectors. From inception through September 13, 2007, we did not have any business or operations and our activities were limited to raising capital in our initial public offering (the “IPO”) in April 2006, identifying an operating business to acquire, and negotiating and entering into an agreement to acquire Royal Wolf.

On September 13, 2007 (September 14 in Australia), we completed the acquisition of Royal Wolf through the acquisition of all of the outstanding shares of RWA. Royal Wolf is the leading provider in Australia and New Zealand of storage containers, portable container buildings and freight containers, which we refer to collectively as “storage container products.” Based upon the actual exchange rate of one Australian dollar to $0.8407 U.S. dollar realized in connection with payments made upon completion of the acquisition, the purchase price paid to the sellers for the RWA shares was $64.3 million, including deposits of $1,005,000 previously paid by us in connection with the acquisition. We paid the purchase price, less the deposits, by a combination of cash in the amount of $44.7 million plus the issuance to Bison Capital Australia, L.P. (“Bison Capital”), one of the sellers, of shares of common stock of GFN U.S., constituting 13.8% of the outstanding capital stock of GFN U.S. following the issuance; and the issuance of a note to Bison Capital. As a result of this structure, we own 86.2% of the outstanding capital stock of GFN U.S. and Bison Capital owns 13.8% of the outstanding capital stock of GFN U.S, which through its indirect subsidiary GFN Finance owns all of the outstanding capital stock of Royal Wolf.

All references to events or activities (other than equity-related) which occurred prior to the completion of the acquisition on September 13, 2007 (September 14 in Australia) relate to Royal Wolf, as the predecessor company (the “Predecessor”). All references to events or activities (other than equity-related) which occurred after the completion of the acquisition on September 13, 2007 (September 14 in Australia) relate to us, as the successor company (the “Successor”).

On October 1, 2008, we completed our acquisition of Pac-Van through a merger with Mobile Office Acquisition Corp. (“MOAC”), the parent of Pac-Van, and our wholly-owned subsidiary formed in July 2008, GFNNA. Pac-Van leases and sells modular buildings, mobile offices and storage container products in the United States. In addition to assuming Pac-Van’s long-term debt, we paid the purchase price to the stockholders of MOAC by a combination of $19.4 million in cash, 4,000,000 shares of GFN restricted common stock and a 20-month subordinated promissory note in the aggregate principal amount of $1.5 million bearing interest at 8% per annum. The note and 1,133,333 shares of our restricted common stock will secure the indemnification obligations for 20 months and 36 months, respectively. Among other things, we and the stockholders of MOAC entered into a stockholders agreement which provided registration rights which may be exercised after June 30, 2009.

Business Overview

Our strategy and business plan is to acquire and operate rental services and specialty finance businesses in North America, Europe and the Asia-Pacific area. We currently have two operating subsidiaries, Royal Wolf and Pac-Van, that lease and sell storage container products, modular buildings and mobile offices through 18 customer service centers (“CSCs”) in Australia, six CSCs in New Zealand and 25 branch locations across 18 states in the United States. As of March 31, 2009, we had 228 and 202 employees and 29,717 and 11,726 lease fleet units in the Asia-Pacific area and United States, respectively. We do business in two distinct, but related industries; modular space and mobile storage, which we collectively refer to as the “portable services industry.” Currently, only Pac-Van leases and sells modular space products. Prior to our acquisition of Pac-Van, our revenue mix was approximately 70% sales and 30% leasing. However, during the nine months ended March 31, 2009 the mix was 53% sales and 47% leasing.

Our products include the following:

Modular Space

Modular Buildings. Also known as manufactured buildings, modular buildings provide customers with additional space and are often tailored specifically to satisfy the unique needs of the customer. Depending on the customer’s desired application, modular buildings can range in size from 1,000 to more than 30,000 square feet and may be highly customized.

Mobile Offices and Portable Container Buildings. Also known as trailers or construction trailers, mobile offices are re-locatable units with aluminum or wood exteriors on wood (or steel) frames on a steel carriage fitted with axles, allowing for an assortment of “add-ons” to provide comfortable and convenient temporary space solutions. We also offer portable container buildings, ground level offices (“GLO”), or office containers, which are either modified or specifically-manufactured shipping containers that are used as mobile offices; and in-plant units, which are manufactured structures that provide self-contained office space with maximum design flexibility.

Mobile Storage

Storage Containers. Storage containers generally consist of used shipping containers that have been purchased and refurbished and provide a flexible, low cost alternative to warehousing, while offering greater security, convenience, and immediate accessibility. Our storage products include general purpose dry storage containers, refrigerated containers and specialty containers in a range of standard and modified sizes, designs and storage capacities. Specialty containers include blast-resistant units, hoarding units and hazardous-waste units. We also offer storage vans, also known as storage trailers or dock-height trailers.

Freight Containers. Freight containers are specifically designed for transport of products by road and rail. Our freight container products include curtain-side, refrigerated and bulk cargo containers, together with a range of standard and industry-specific dry freight containers.

Results of Operations

Quarter Ended March 31, 2009 (“QE FY 2009”) Compared to Quarter Ended March 31, 2008 (“QE FY 2008”)

The following compares our QE FY 2009 results of operations with our QE FY 2008 results of operations.

Revenues. Revenues totaled $34.5 million in QE FY 2009, representing an increase of $5.8 million, or 20.2%, from $28.7 million in QE FY 2008. The increase was primarily due to $15.8 million of revenues at Pac-Van, which we acquired on October 1, 2008, offset somewhat by a $10.0 million reduction, or 35%, in revenues in QE FY 2009 from QE FY 2008 at Royal Wolf.

Sales during QE FY 2009 amounted to $14.7 million compared to $19.8 million during QE FY 2008; representing a decrease of $5.1 million, or 25.8%. This decrease was primarily due to a decline at Royal Wolf of $9.5 million attributable to reduced sales from our retail operations at the CSCs of $0.4 million, a reduction in sales of $3.9 million in our national accounts group, or non-retail operations, and a $5.2 million reduction as a result of unfavorable foreign exchange rates. The $0.4 million decrease in our retail operations consisted of a decrease of $1.1 million due to lower unit sales, substantially offset by a $0.7 million increase due to higher prices. The $3.9 million decrease in our national accounts group operations consisted of $4.7 million due to lower unit sales, offset somewhat by an increase of $0.8 million due to higher pricing. The decrease in total sales was offset by $4.4 million in sales recognized at Pac-Van during QE FY 2009.

Leasing revenues during QE FY 2009 amounted to $19.7 million compared to $8.8 million during QE FY 2008, representing an increase of $10.9 million, or 123.9%. The increase was primarily due to leasing revenues recognized at Pac-Van of $11.4 million, which had an average utilization rate of 72.6% during QE FY 2009. However, leasing revenues at Royal Wolf decreased slightly by $0.5 million, or 5.7%, in QE FY 2009 from QE FY 2008. This was driven by unfavorable foreign exchange rates of $1.8 million; offset somewhat by an increase of $0.1 million due to growth in the average total number of units on lease per month in our portable container building business and an increase of $1.2 million due to growth in the average total number of units on lease per month in our storage container business, primarily as a result of five acquisitions in the Asia-Pacific area since March 2008. At Royal Wolf, average utilization in the retail operations was 73.5% during QE FY 2009, as compared to 80.3% during QE FY 2008; and average utilization in the national accounts group operations was 76.6% during QE FY 2009, as compared to 87.7% during QE FY 2008. Overall average utilization at Royal Wolf was 75.3% in QE FY 2009, as compared to 83.3% in QE FY 2008.

The average value of the U.S. dollar against the Australian dollar strengthened during QE FY 2009 as compared to QE FY 2008. The average currency exchange rate of one Australian dollar during QE FY 2008 was $0.90493 U.S. dollar compared to $0.66566 U.S. dollar during QE FY 2009. This fluctuation in foreign currency exchange rates resulted in a decrease to our sales and leasing revenues at Royal Wolf of $5.2 million and $1.8 million, respectively, during QE FY 2009 compared to QE FY 2008; representing 24.4% of total revenues in QE FY 2008.

Sales and leasing revenues represented 43% and 57%, respectively, of total revenues in QE FY 2009 and 69% and 31% of total revenues in QE FY 2008, respectively; the more favorable leasing revenue mix in QE FY 2009 resulting primarily from our acquisition of Pac-Van.

Cost of Sales. Cost of sales decreased by $4.0 million to $12.4 million during QE FY 2009 compared to $16.4 million during QE FY 2008. The decrease was primarily due to foreign exchange translation effect of $7.9 million; substantially offset by cost of sales incurred at Pac-Van of $3.2 million, as well as cost increases of $0.2 million in our national account group operations and $0.5 million in our retail operations in the Asia-Pacific area. Our gross profit percentage from sales revenues deteriorated during QE FY 2009 to approximately 16%, as compared to approximately 17% during QE FY 2008, as a result of price decreases and unfavorable product mix that resulted in a gross profit percentage of 11.8% in the Asia-Pacific area. This was substantially offset by the more favorable gross profit percentage of 27.0% at Pac-Van during QE FY 2009.

Leasing, Selling and General Expenses. Leasing, selling and general expenses increased by $6.5 million during QE FY 2009 to $13.0 million from $6.5 million during QE FY 2008. This increase in QE FY 2009 from QE FY 2008 was comprised of $8.5 million incurred at Pac-Van, offset somewhat by a $2.0 million decrease at Royal Wolf. The following table provides more detailed information about the Royal Wolf operating expenses of $3.9 million in QE FY 2009 as compared to $5.9 million in QE FY 2008:

		Quarter Ended March 31,
		2008				2009
		(in millions)
Salaries, wages and related		$	3.3			$	1.9
Share-based payments			—				0.1
Rent			0.1				0.1
CSC operating costs			1.1				0.8
Business promotion			0.2				0.2
Travel and meals			0.2				0.1
IT and telecommunications			0.2				0.2
Professional costs			0.4				0.2
Other			0.4				0.3
		$	5.9			$	3.9

Operating expenses at Royal Wolf decreased in QE FY 2009 from QE FY 2008 in absolute dollars and increased slightly as a percentage of revenues to 21.0% in QE FY 2009 from 20.6% in QE FY 2008; reflecting the effect of the lower revenues in QE FY 2009 versus QE FY 2008 and the effectively proportionate offset of decreased payroll-related expenses (as well as decreases in other operating expenses) as a result of personnel reductions at Royal Wolf. As a percentage of revenues, operating expenses at Pac-Van were approximately 53% during QE FY 2009. Overall, total operating expenses as a percentage of revenues were 37.7% in QE FY 2009, as compared to 22.6% in QE FY 2008.

Depreciation and Amortization. Depreciation and amortization increased by $1.6 million to $3.9 million during QE FY 2009 from $2.3 million during QE FY 2008. The increase was primarily due to adjustments to fair values of fixed assets and identifiable intangible assets as a result of the Pac-Van acquisition, as well as five other smaller acquisitions since March 2008. Depreciation and amortization at Pac-Van totaled $1.4 million during QE FY 2009.

Interest Expense. The increase in interest expense of $0.9 million in QE FY 2009 to $3.3 million, as compared to $2.4 million in QE FY 2008, was due primarily to the increase in total long-term debt, which was $80.0 million at March 31, 2008, and $191.3 million at March 31, 2009. The increase in total debt since QE FY 2008 was due primarily to our acquisition of Pac-Van and five other smaller acquisitions since March 2008, funded principally with borrowings under the senior credit facility with Australia and New Zealand Banking Group Limited (“ANZ”) and the secured senior subordinated notes issued to Bison Capital; as well as the assumption of the senior credit facility with a syndication of four financial institutions led by LaSalle National Association (“LaSalle”) and the senior subordinated secured note payable to SPV Capital funding, L.L.C. (“SPV”) in connection with our acquisition of Pac-Van.

Foreign Currency Exchange. We have certain U.S. dollar-denominated debt at Royal Wolf, including intercompany borrowings, which are remeasured at each financial reporting date with the impact of the remeasurement being recorded in our consolidated statements of operations. Unrealized gains and losses resulting from such remeasurement due to changes in the Australian exchange rate to the U.S. dollar could have a significant impact in our reported results of operations, as well as any realized gains and losses from the payments on such U.S. dollar-denominated debt and intercompany borrowings. As noted above, the average value of the U.S. dollar against the Australian dollar strengthened during QE FY 2009 as compared to QE FY 2008 and, in addition, the U.S. dollar strengthened against the Australian dollar from December 31, 2008 to March 31, 2009. The currency exchange rate of one Australian dollar at December 31, 2008 was $0.6907 U.S. dollar compared to $0.6835 U.S. dollar at March 31, 2009. In QE FY 2009, unrealized foreign exchange losses and unrealized losses on forward currency exchange contracts totaled $1.9 million.

Income Taxes. Our effective income tax rate (which resulted in an income tax benefit) increased to 35.0% during QE FY 2009 from the QE FY 2008 effective rate of 27.9%, primarily as a result of the favorable income tax impact of the amortization of goodwill acquired in acquisitions made in the Asia-Pacific area, which is deductible for U.S. income tax reporting purposes.

Net Income. We had net income of $0.3 million during QE FY 2009, as compared to net income of $0.8 million during QE FY 2008, primarily as a result of the unfavorable impact of the foreign currency exchange losses and increased interest expense in QE FY 2009 versus QE FY 2008; offset somewhat by the operating profit from Pac-Van, which we acquired on October 1, 2008.

Nine Months Ended March 31, 2009 (“YTD FY 2009”) Compared to Nine Months Ended March 31, 2008 (“YTD FY 2008”)

We had no business or operations prior to our acquisition of Royal Wolf on September 13, 2007. Comparisons of our results of operations for YTD FY 2009 with YTD FY 2008 therefore are not particularly meaningful. We believe a more meaningful comparison is the results of our operations for YTD FY 2009 with the combined results of our operations and Royal Wolf during YTD FY 2008. To assist in this comparison, the following table sets forth condensed statements of operations for the following: (i) Royal Wolf, as Predecessor, for the period July 1, 2007 to September 13, 2007; (ii) the Company, as Successor, for YTD FY 2008, which reflects the results of operations of Royal Wolf for the period September 14, 2007 through September 30, 2007; (iii) the combined results of operations of the Predecessor and the Successor for YTD FY 2008; and (iii) the Company, as Successor, for YTD FY 2009. The combined YTD FY 2008 results do not reflect any adjustments for the purchase method of accounting in the Predecessor period and is presented for comparison purposes only.

		Predecessor				Successor				Combined				Successor
		Period from
		July 1 to
		September 13,				Nine Months Ended March 31,
		2007				2008				2008				2009
		(in thousands)
Revenues
Sales		$	10,944			$	45,277			$	56,221			$	57,093
Leasing			4,915				17,624				22,539				51,616
			15,859				62,901				78,760				108,709
Costs and expenses
Cost of sales			9,466				37,757				47,223				48,655
Leasing, selling and general expenses			4,210				13,595				17,805				36,638
Depreciation and amortization			653				4,834				5,487				11,161
Operating income			1,530				6,715				8,245				12,255
Interest income			14				1,194				1,208				244
Interest expense			(947	)			(4,385	)			(5,332	)			(13,388	)
Foreign currency exchange gain (loss) and other			(129	)			2,220				2,091				(12,575	)
			(1,062	)			(971	)			(2,033	)			(25,719	)
Income (loss) before provision for income taxes and minority interest			468				5,744				6,212				(13,464	)
Provision (benefit) for income taxes			180				1,837				2,017				(4,685	)
Minority interest			—				354				354				(3,017	)
Net income (loss)		$	288			$	3,553				3,841			$	(5,762	)

Revenues. Revenues totaled $108.7 million in YTD FY 2009, an increase of $29.9 million, or 37.9%, from $78.8 million in YTD FY 2008. The increase was primarily due to $37.2 million of revenues at Pac-Van, which we acquired on October 1, 2008, offset somewhat by a $7.4 million decrease, or 9.4%, in revenues in YTD FY 2009 from YTD FY 2008 at Royal Wolf.

Sales during YTD FY 2009 amounted to $57.0 million compared to $56.2 million during YTD FY 2008; representing a slight increase of $0.8 million. The increase in total sales was primarily due to $13.4 million in sales recognized at Pac-Van during YTD FY 2009, which benefited by a single sale of $4.5 million in December 2008. This increase was substantially offset by a reduction in sales at Royal Wolf primarily due to $10.5 million as a result of unfavorable foreign exchange rates and decreased sales of $3.9 million in our national accounts group, or non-retail operations; offset somewhat by increased sales from our retail operations at the CSCs of $1.8 million. The $1.8 million increase in our retail operations consisted of $3.3 million from higher unit sales, offset somewhat by a $1.5 million reduction due to lower prices.

Leasing revenues during YTD FY 2009 amounted to $51.6 million compared to $22.5 million during YTD FY 2008, representing an increase of $29.1 million, or 129.3%. The increase was primarily due to leasing revenues recognized at Pac-Van of $23.8 million, which had a utilization rate of 72.8% at March 31, 2009. In addition, leasing revenues at Royal Wolf increased by $5.2 million, or 23.1%, in YTD FY 2009 from YTD FY 2008. This was driven by an increase of $1.2 million due to growth in the average total number of units on lease per month in our portable container building business and an increase of $7.5 million due to growth in the average total number of units on lease per month in our storage container business, primarily as a result of five acquisitions in the Asia-Pacific area since March 2008; offset somewhat by unfavorable foreign exchange rates of $3.5 million. At Royal Wolf, average utilization in the retail operations was 78.5% during YTD FY 2009, as compared to 82.8% during YTD FY 2008; and average utilization in the national accounts group operations was 76.3% during YTD FY 2009, as compared to 81.4% during YTD FY 2008. Overall average utilization at Royal Wolf was 77.4% in YTD FY 2009, as compared to 82.6% in YTD FY 2008.

The average value of the U.S. dollar against the Australian dollar strengthened during YTD FY 2009 as compared to YTD FY 2008. The average currency exchange rate of one Australian dollar during YTD FY 2008 was $0.88084 U.S. dollar compared to $0.74406 U.S. dollar during YTD FY 2009. This fluctuation in foreign currency exchange rates resulted in a decrease to our sales and leasing revenues at Royal Wolf of $10.5 million and $3.5 million, respectively, during YTD FY 2009 compared to YTD FY 2008; representing 17.8% of total revenues in YTD FY 2008.

Sales and leasing revenues represented 53% and 47% of total revenues in YTD FY 2009 and 71% and 29% of total revenues in YTD FY 2008, respectively; the more favorable leasing revenue mix in YTD FY 2009 resulting primarily from our acquisition of Pac-Van.

Cost of Sales. Cost of sales increased by $1.5 million to $48.7 million during YTD FY 2009 from $47.2 million during YTD FY 2008. The increase was primarily due to cost of sales incurred at Pac-Van of $10.0 million and cost increases of $2.9 million in our retail operations and $0.4 million in the national account group operations in the Asia-Pacific area; offset somewhat by foreign exchange translation effect of $11.8 million. Our gross profit percentage from sales revenues deteriorated during YTD FY 2009 to approximately 15% compared to approximately 16% during YTD FY 2008 as a result of price decreases and unfavorable product mix that resulted in a gross profit percentage of 11.4% in the Asia-Pacific area. This was offset by the more favorable gross profit percentage of 25.8% at Pac-Van during YTD FY 2009.

Leasing, Selling and General Expenses. Leasing, selling and general expenses increased by $18.8 million during YTD FY 2009 to $36.6 million from $17.8 million during YTD FY 2008. This increase included $17.5 million incurred at Pac-Van and an approximately $0.2 increase at GFN, which incurred $1.9 million during YTD FY 2009 as compared to $1.7 million in YTD FY 2008. The following table provides more detailed information about the Royal Wolf operating expenses of $17.3 million in YTD FY 2009 as compared to $16.2 million in YTD FY 2008:

		Nine Months Ended March 31,
		2008				2009
		(in millions)
Salaries, wages and related		$	9.2			$	9.0
Share-based payments			—				0.3
Rent			0.3				0.3
CSC operating costs			2.8				3.4
Business promotion			0.7				0.9
Travel and meals			0.7				0.7
IT and telecommunications			0.6				0.6
Professional costs			1.2				1.2
Other			0.7				0.9
		$	16.2			$	17.3

Operating expenses at Royal Wolf increased by $1.1 million, or 6.8%, in YTD FY 2009 from YTD FY 2008. As a percentage of revenues, it increased to 24.2% in YTD FY 2009 from 20.6% in YTD FY 2008; reflecting primarily the effect of the lower revenues at Royal Wolf in YTD FY 2009 from YTD 2008. As a percentage of revenues, operating expenses at Pac-Van were approximately 47% during YTD FY 2009. Overall, total operating expenses as a percentage of revenues were 33.7% in YTD FY 2009, as compared to 22.6% in YTD FY 2008.

Depreciation and Amortization. Depreciation and amortization increased by $5.7 million to $11.2 million during YTD FY 2009 from $5.5 million during YTD FY 2008. The increase was primarily due to adjustments to fair values of fixed assets and identifiable intangible assets as a result of the Pac-Van acquisition, as well as five other smaller acquisitions since March 2008. Depreciation and amortization at Pac-Van totaled $1.4 million during YTD FY 2009.

Interest Expense. The increase in interest expense of $8.1 million in YTD FY 2009 to $13.4 million, as compared to $5.3 million in YTD FY 2008, was due primarily to the increase in total long-term debt; which was $80.0 million at March 31, 2008 and $191.3 million at March 31, 2009, and an unrealized loss on interest rate swap and option contracts totaling $2.8 million. The increase in total debt since YTD FY 2008 was due primarily to our acquisition of Pac-Van and five other smaller acquisitions since March 2008, funded principally with borrowings under the senior credit facility with ANZ and the secured senior subordinated notes issued to Bison Capital; as well as the assumption of the senior credit facility with a syndication of four financial institutions led by LaSalle and the senior subordinated secured note payable to SPV in connection with our acquisition of Pac-Van.

Foreign Currency Exchange. We have certain U.S. dollar-denominated debt at Royal Wolf, including intercompany borrowings, which are remeasured at each financial reporting date with the impact of the remeasurement being recorded in our consolidated statements of operations. Unrealized gains and losses resulting from such remeasurement due to changes in the Australian exchange rate to the U.S. dollar could have a significant impact in our reported results of operations, as well as any realized gains and losses from the payments on such U.S. dollar-denominated debt and intercompany borrowings. As noted above, the average value of the U.S. dollar against the Australian dollar strengthened during YTD FY 2009 as compared to YTD FY 2008 and, in addition, the U.S. dollar strengthened against the Australian dollar from June 30, 2008 to March 31, 2009. The currency exchange rate of one Australian dollar at June 30, 2008 was $0.9615 U.S. dollar compared to $0.6835 U.S. dollar at March 31, 2009. In addition, we incurred a significant realized exchange loss of $2.8 million as a result of Royal Wolf’s repayment of intercompany advances totaling $21.5 million in September 2008. We advanced $20.0 million of the proceeds received from our warrant exercise program in May 2008 to Royal Wolf for the temporary reduction of long-term borrowings prior to the ultimate use of these proceeds in the acquisition of Pac-Van on October 1, 2008. In YTD FY 2009, unrealized and realized foreign exchange losses totaled $10.7 million and $3.4 million, respectively. These foreign exchange losses were somewhat offset in YTD FY 2009 by unrealized gains on forward currency exchange contracts, which totaled $1.5 million.

Income Taxes. Our effective income tax rate (which resulted in an income tax benefit) increased to 34.8% during YTD FY 2009 from the YTD FY 2008 effective rate of 32.5%, primarily as a result of the favorable income tax impact of the amortization of goodwill acquired in acquisitions made in the Asia-Pacific area, which is deductible for U.S. income tax reporting purposes.

Net Income. We had a net loss of $5.8 million during YTD FY 2009, as compared to net income of $3.8 million during YTD FY 2008, primarily as a result of the unfavorable impact of the foreign currency exchange losses and increased interest expense YTD FY 2009 versus YTD FY 2008; offset somewhat by the operating profit from Pac-Van, which we acquired on October 1, 2008.

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

Earnings before interest, income taxes, depreciation and amortization and other non-operating costs (“EBITDA”) and adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating, investing or financing activities as a measure of liquidity.

EBITDA is a non-GAAP measure. We calculate adjusted EBITDA by adjusting 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 EBITDA and adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of EBITDA and adjusted EBITDA. Our presentation of EBITDA and adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We present EBITDA and adjusted EBITDA because we consider them to be important supplemental measures of our performance and because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, many of which present EBITDA and adjusted EBITDA when reporting their results.

EBITDA and adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, EBITDA and adjusted EBITDA should not be considered as measures 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 GAAP results and using EBITDA and adjusted EBITDA only supplementally. The following table shows our EBITDA and adjusted EBITDA, and the reconciliation from operating income (loss):

		Successor
		Quarter Ended March 31,
		2008				2009
		(in thousands)
Operating income		$	3,570			$	5,253
Add — depreciation and amortization			2,251				3,882
EBITDA			5,821				9,135
Add —
Share-based compensation expense			206				180
Adjusted EBITDA		$	6,027			$	9,315

		Predecessor				Successor				Combined				Successor
		Period from
		July 1 to
		September 13,				Nine Months Ended March 31,
		2007				2008				2008				2009
		(in thousands)
Operating income		$	1,530			$	6,715			$	8,245			$	12,255
Add — depreciation and amortization			653				4,834				5,487				11,161
EBITDA			2,183				11,549				13,732				23,416
Add —
Share-based compensation expense			—				282				282				656
Adjusted EBITDA		$	2,183			$	11,831			$	14,014			$	24,072