MGRC 10-K & 10-Q changes, risk factors and insider trading

In addition, in recent years the U.S. stock market has experienced significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance of particular companies. Additionally, the most recent global credit crisis adversely affected the prices of most publicly traded stocks as many stockholders became more willing to divest their stock holdings at lower values to increase their cash flow and reduce exposure to such fluctuations. These broad market fluctuations and any other negative economic trends may cause declines in the market price of our common stock and may be based upon factors that have little or nothing to do with our Company or its performance, and these fluctuations and trends could materially reduce our stock price.

The nature of our business also subjects us to property damage and product liability claims, especially in connection with our modular buildings and tankportable and boxstorage rental businesses. Although we maintain liability coverage that we believe is commercially reasonable, an unusually large property damage or product liability claim or a series of claims could exceed our insurance coverage or result in damage to our reputation.

The agreements governing our Series D, EE, F and FG Senior Notes (as defined and more fully described under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”) and our Credit Facility contain various covenants that limit our discretion in operating our business. In particular, we are limited in our ability to merge, consolidate, reorganize or transfer substantially all of our assets, make investments, pay dividends or distributions, redeem or repurchase stock, change the nature of our business, enter into transactions with affiliates, incur indebtedness and create liens on our assets to secure debt. In addition, we are required to meet certain financial covenants under these instruments. These restrictions could limit our ability to obtain future financing, make strategic acquisitions or needed capital expenditures, withstand economic downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise.

Various states where we operate enacted laws and constitutional amendments to provide funding for school districts to limit the number of students that may be grouped in a single classroom. School districts with class sizes in excess of state limits have been and continue to be a significant source of our demand for modular classrooms. In California, efforts to address aging infrastructure and deferred maintenance have resulted in modernization and reconstruction projects by public school districts including seismic retrofitting, asbestos abatement and various building repairs and upgrades, which has been another source of demand for our modular classrooms. The most recent economic recession caused state and local budget shortfalls, which reduced school districts’ funding and their ability to comply with state class size reduction requirements. If educational priorities and policies shift away from class-size reduction or modernization and reconstruction projects, demand and pricing for our products and services may decline, not grow as quickly as, or not reach the levels that we anticipate. Further, declines in public school enrollment could result in lower demand for modular classrooms. Significant equipment returns may result in lower utilization until equipment can be redeployed or sold, which may cause rental rates to decline and negatively affect our revenues and operating income. Additionally, declining public school enrollment could lead to decreased demand for our products and services.

Mobile Modular and Portable Storage derive a portion of its revenues from contracts with U.S. federal government entities, government prime contractors, state entities and local entities, including school districts.districts, and such revenues are growing. Contracts with government entities are subject to budgetary constraints, and our continued performance under our contracts with these agencies and their prime contractors, or award of additional contracts from these agencies or their prime contractors, could be jeopardized by spending reductions or budget cutbacks at these agencies. Such contracts are also subject to unique laws and regulations, and the adoption of new laws or regulations relating to government contracting or changes to existing laws or regulations. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs and risks and reduce our profitability. In addition, any failure on the part of the company to comply with applicable government contract laws and regulations might result in administrative penalties or even in the termination or suspension of these contracts and as a result, the loss of the related revenues, which would harm our business.

Furthermore,In addition, such government contracts are subject to unique laws and regulations, and the adoption of new laws or regulations relating to government contracting or changes to existing laws or regulations. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs and risks and reduce profitability. The laws governing government contracts may differ from the laws governing private contracts. For example, many government contracts contain pricing terms and conditions that are not applicable to private contracts such as clauses that allow government entities not to perform on contractual obligations in the case of a lack of fiscal funding. Also,In working with government entities, we must comply with laws, regulations, and contractual provisions relating to the administration, and performance of government contracts, which affect how we and our partners do business with government agencies. As a result of actual or perceived noncompliance with government contracting laws, regulations, or contractual provisions, we may be subject to audits and internal investigations which may prove costly to our business financially, divert management time, or limit our ability to continue to provide services to our government customers. These laws and regulations may impose other added costs on our business, and failure to comply with these or other applicable regulations and requirements could lead to claims for damages from our partners, penalties, and termination of contracts and suspension or debarment from government contracting for a period of time with government agencies. Any such damages, penalties, disruption, or limitation in our ability to do business with a government could adversely impact our business and growth prospects. Furthermore, in the educational markets we serve, we are able to utilize “piggyback” contracts in marketing our products and services and ultimately to book business. The term “piggyback” contract refers to contracts for portable classrooms or other products entered into by public school districts following a formal bid process that allows for the use of the same contract terms and conditions with the successful vendor by other public school districts. As a result, “piggyback” contracts allow us to more readily book orders from our government customers, primarily public school districts, and to reduce the administrative expense associated with booking these orders. The governmental statutes and regulations that allow for use of “piggyback” contracts are subject to change or elimination in their entirety. A change in the manner of use or the elimination of “piggyback” contracts would likely negatively impact our ability to book new business from these government customers and could cause our administrative expenses related to processing these orders to increase significantly. In addition, any failure to comply with these laws and regulations might result in administrative penalties or even in the suspension of these contracts and as a result, the loss of the related revenues which would harm our business and results from operations.

Some of our competitors in the modular building leasing industry have greater range of products and services, greater financial and marketing resources, larger customer bases, vertical integration for efficiency and greater name recognition than we have. These competitors may be better able to respond to changes in the relocatable modular building and portable storage container markets, to finance acquisitions, to fund internal growth and to compete for market share, any of which could harm our business.

We are dependent on third parties to manufacture our products even though we are able to purchase products from a variety of third-party suppliers. Mobile Modular purchases new modulars from various manufacturers who build to Mobile Modular’s design specifications. WithMobile the exception of Enviroplex, none of theModular's principal suppliers are not affiliated with the Company. During 2024,2025, Mobile Modular purchased 18%27% of its modular product from one manufacturer. The Company believes that the loss of any of its primary manufacturers of modulars could have an adverse effect on its operations since Mobile Modular could experience higher prices and longer delivery lead times for modular product until other manufacturers were able to increase their production capacity.

Furthermore, sustained uncertainty about, or worsening of, geopolitical tensions, including further escalation of war between Russia and Ukraine, further escalation of trade tensions between the U.S. and China, escalation of tensions between China and Taiwan, further escalation in the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade. Any or all of these factors could negatively affect our revenueindustry, our customers and/or suppliers and, as a result, could materially adversely affect our business, results of operations, revenue, financial condition and growth.

The Company, incorporated in 1979, is a leading rental provider of relocatable modular buildings for classroom and office space, portable storage containers, and electronic test equipment for general purpose and communications needs. The Company’s primary emphasis is on equipment rentals. At December 31, 20242025 the Company was comprised of four reportable business segments: (1) its modular building rental segment (“Mobile Modular”); (2) its portable storage container rental segment ("Portable Storage"); (3) its electronic test equipment rental segment (“TRS-RenTelco”); and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”). In 2024,2025, Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex contributed 68%,66%, 16%,12%, 12%16% and 4%,6%, respectively, of the Company’s income from continuing operations before provision for taxes (the equivalent of “pre-tax income”), compared to 62%,69%, 22%,16%, 16%12% and less than 1%,3%, respectively, for 2023.2024.

Consolidated revenues in 2024 increased 8% to $910.9 million, from $841.3 million in 2023. Consolidated net income in 2024 increased to $231.7 million, or $9.43 per diluted share in 2024, compared to $174.6 million, or $7.12 per diluted share, in 2023. The increase in consolidated net income and earnings per diluted share during the year was primarily attributed to the $180.0 million gain on merger termination, partly offset by $63.2 million in transaction costs attributed to the terminated merger with Willscot Mobile Mini, net of provision for income taxes. Consolidated net income for the year ended December 31, 2023, included the $61.5 million gain on sale of discontinued operations from the divestiture of Adler Tanks, net of tax. Excluding the gain and transaction costs attributed to the merger termination in the current year,2024, and the gain on sale of discontinued operations in 2023, the Company's net income increased by approximately $33.9 million, or 30%, to $145.7 million, and diluted earnings per share increased $1.37, or 30%, to $5.93, compared to $4.56 in 2023. The Company’s year over year total revenue increase was primarily due to higher sales, rental, and rental related services revenues, as more fully described below.

There was no revenue, income or earnings per share from discontinued operations during the year ended December 31, 2024. Revenues from discontinued operations for the year ended December 31, 2023, was $9.4 million and income from discontinued operations was $62.8 million, which included the net gain on sale of discontinued operations of $61.5 million. Earnings per diluted share from discontinued operations for the year ended December 31, 2023 was $2.56. For additionalAdditional information onregarding discontinued operations and the divestiture of Adler Tanks,Tanks referis toincluded in the Note 5 to the consolidatedConsolidated financialFinancial statements.Statements.

Average and Period end rental equipment represents the cost of rental equipment excluding new equipment inventory and accessory equipment.

Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding new equipment inventory and accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment.

Average and Period end rental equipment represents the cost of rental equipment excluding new equipment inventory and accessory equipment.

Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding new equipment inventory and accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment.

In the threesix months ended MarchJune 31,30, 2026, Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex contributed 65%,63%, 11%,10%, 25%27% and negativeless than 1% of the Company’s income before provision for taxes (the equivalent of “pretax income”), respectively, compared to 66%,63%, 15%,14%, 17%16% and 2%7% for the same period in 2025.

The Company’s rental operations include rental and rental related service revenues which comprised approximately 82%80% and 79%74% of consolidated revenues in the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Of the total rental operations revenues for the threesix months ended MarchJune 31,30, 2026, Mobile Modular, Portable Storage and TRS-RenTelco comprised 69%, 12% and 19%, respectively, compared to 70%, 13% and 17%, respectively, in the same period of 2025. The Company’s direct costs of rental operations include depreciation of rental equipment, rental related service costs, impairment of rental equipment (if applicable), and other direct costs of rental operations (which include direct labor, supplies, repairs, insurance, property taxes, license fees, cost of sub-rentals and amortization of certain lease costs).

The Company’s Mobile Modular, Portable Storage and TRS-RenTelco business segments sell modular units, storage containers and electronic test equipment, respectively, which are either new or previously rented. In addition, Enviroplex sells new modular buildings used primarily as classrooms in California. For the threesix months ended MarchJune 31,30, 2026 and 2025, sales and other revenues of modular, container and electronic test equipment comprised approximately 18%20% and 21%26% of the Company’s consolidated revenues, respectively. Of the total sales and other revenues from operations for the threesix months ended MarchJune 31,30, 2026 and 2025, Mobile Modular and Enviroplex together comprised 71%74% and 75%,82%, respectively, Portable Storage comprised 5% and 4%,3%, respectively, and TRS-RenTelco comprised 24%21% and 21%,15%, respectively. The Company’s cost of sales includes the carrying value of the equipment sold and the direct costs associated with the equipment sold, such as delivery, installation, modifications and related site work.

On FebruaryJune 25,3, 2026, the Company announced that the Board of Directors declared a quarterly cash dividend of $0.495 per common share for the quarter ended MarchJune 31,30, 2026, an increase of 2% over the prior year’s comparable quarter.

Three Months Ended MarchJune 31,30, 2026 Compared to

Three Months Ended MarchJune 31,30, 2025

Consolidated revenues for the three months ended MarchJune 31,30, 2026, increaseddecreased 2%6% to $198.5$221.1 million from $195.4$235.6 million for the same period in 2025. Consolidated net income for the three months ended MarchJune 31,30, 2026, decreased 4%6% to $27.0$33.7 million from $28.2$36.0 million for the same period in 2025. Earnings per diluted share for the three months ended MarchJune 31,30, 2026, decreased 4%5% to $1.10,$1.39, from $1.15$1.46 for the same period in 2025. The decrease in consolidated net income and earnings per diluted share during the period was primarily attributed to an increase in selling and administrative expenses and lower gross profit at Enviroplex, Mobile Modular and Portable Storage, partly offset by higher gross profit at TRS-RenTelcoTRS-RenTelco, a $1.8 million gain on sale of a corporate property, and lower interest expense incurred on outstanding debt obligations.

For the three months ended MarchJune 31,30, 2026, on a consolidated basis:

Gross profit increaseddecreased $0.5$2.8 million to $96.9$107.9 million in 2026. Mobile Modular’s gross profit decreased $0.8$2.8 million, or 1%,4%, primarily due to lower gross profit on rentalsales and salesrental revenues, partly offset by an increase in gross profit on rental related services revenues. Portable Storage's gross profit decreased $0.8$1.4 million, or 6%,9%, primarily due to lower gross profit on rental operations revenues. TRS-RenTelco’s gross profit increased $3.4$5.8 million, or 23%,35%, primarily due to higher gross profit on rental and sales revenues. Enviroplex’s gross profit decreased $1.4$4.5 million, due to lower sales revenues and gross margins in 2026.

Selling and administrative expenses increased $2.6$2.9 million, or 5%, to $53.4$56.4 million, primarily attributed to $1.8$1.9 million higher marketing and administrative expenses and $0.8 million higher employees' salaries and benefit costs and $0.8 million higher marketing and administrative expenses.costs.

Interest expense decreased $1.7$0.7 million, or 20%,9%, to $6.5$7.1 million, which was primarily attributed to $47.3 million lower average debt levels of the Company and a lower effective interest rate in 2026 of 4.96%,4.95%, compared to 5.70%5.56% for the same period in 2025.2025, partly offset by $14.0 million higher average debt levels of the Company.

Pre-tax income contribution by Mobile Modular, Portable Storage and TRS-RenTelco was 65%,61%, 11%10% and 25%,29%, respectively, compared to 66%,61%, 15%13% and 17%,16%, respectively, for the comparable 2025 period. These results are discussed on a segment basis below. Enviroplex pre-tax income contribution was negativeless than 1% andin 2%2026, compared to 10% in 20262025. andThe 2025,lower respectively.pre-tax income contribution from Enviroplex was primarily due to $15.3 million lower sales revenues in 2026.

The provision for income taxes resulted in an effective tax rate of 26.7%27.0% and 24.6%,27.3%, for the quarters ended MarchJune 31,30, 2026 and 2025, respectively.

For the three months ended MarchJune 31,30, 2026, Mobile Modular’s total revenues increaseddecreased $2.5$5.6 million, or 2%,4%, to $134.4$150.4 million compared to the same period in 2025, primarily due to higherlower rental operationssales revenues, partly offset by lowerhigher salesrental and otheroperations revenues. Higher gross profit on rental related services revenues and lower allocated interest expense, offset by lower gross profit on sales, rental, and sales and other revenues, and higher selling and administrative expenses, resulted in a $0.9$3.0 million decrease in pre-tax income to $24.1$27.0 million for the three months ended MarchJune 31,30, 2026, from $25.0$30.0 million for the same period in 2025.

Mobile Modular’s gross profit for the three months ended MarchJune 31,30, 2026, decreased $0.8$2.8 million, or 1%,4%, to $64.7$70.5 million. For the three months ended MarchJune 31,30, 2026, compared to the same period in 2025:

Gross Profit on Rental Revenues – Rental revenues increased $2.9$1.3 million, or 4%,2%, due to 1%4% higher average rental equipment on rentrent, andpartly 3%offset higherby 2% lower average monthly rental rates in 2026. As a percentage of rental revenues, depreciation was 14% and 13% in 2026 and 2025, respectively, and other direct costs were 29%31% in 2026 and 27%29% in 2025, which resulted in gross margin percentages of 56%55% in 2026, compared to 60%58% in 2025. The increased other direct costs in 2026 were primarily due to higher material and labor costs to prepare equipment for shipment. The higher rental revenues and lower rental margins resulted in gross profit on rental revenues decreasing $1.3$1.8 million, or 3%,4%, to $45.8$45.4 million in 2026.

Gross Profit on Rental Related Services – Rental related services revenues increased $1.3$2.6 million, or 4%,8%, compared to 2025. The increase in rental related services revenues was primarily attributable to higher sitedelivery, relatedreturn servicesdelivery and installation revenues. The increase in rental related services revenues and higher grosscomparable margin percentage of 36% in 2026, compared to 33% in 2025, resulted in rental related services gross profit increasing $1.3$0.9 million, or 13%,8%, to $11.0$12.7 million in 2026.

Gross Profit on Sales – Sales revenues decreased $1.6$9.3 million, or 7%,23%, compared to 2025, primarily due to lower new and used equipment sales. The lower sales revenues and lowerhigher gross margin percentage of 31%36% in 2026, compared to 32% in 2025, resulted in gross profit on sales decreasing $0.6$1.8 million, or 8%,14%, to $6.6$11.1 million. Sales occur routinely as a normal part of Mobile Modular’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter and year to year depending on customer requirements, the scope of work to be performed, equipment availability and funding.

For the three months ended MarchJune 31,30, 2026, selling and administrative expenses increased $1.2$0.7 million, or 3%,2%, to $35.2$37.4 million. The increase in selling and administrative expenses was primarily attributed to $0.4$1.1 million higher marketing and administrative expenses, partly offset by $0.3 million lower employees' salaries and benefit costs and $0.4 million higher allocated corporate services expense during the period.costs.

For the three months ended MarchJune 31,30, 2026, Portable Storage’s total revenues increased $0.7$0.2 million, or 3%,1%, to $21.9$23.5 million compared to the same period in 2025, primarily due to higher rental operationsrelated services and sales revenues, partly offset by lower rental and other revenues. Lower gross profit on rental operations revenues and higher selling and administrative expenses, partly offset by higher gross profit on sales revenues and lower allocated interest expense, resulted in a decrease in pre-tax income of $1.4$2.2 million, or 26%,34%, to $4.0$4.4 million in 2026.

Portable Storage’s gross profit for the three months ended MarchJune 31,30, 2026, decreased $0.8$1.4 million, or 6%,9%, to $13.1$13.7 million. For the three months ended MarchJune 31,30, 2026, compared to the same period in 2025:

Gross Profit on Rental Revenues – Rental revenues increaseddecreased $0.2$0.1 million, or 1%,million due to 1% higherlower average rental equipment on rent in 20262026, andpartly comparableoffset by 1% higher average monthly rental rates. As a percentage of rental revenues, depreciation was 7% and 6% in 2026 and 2025, respectively, and other direct costs were 13% and 9%11% in 2026 and 2025, respectively, which resulted in gross margin percentage of 80% and 83% in 2026 and 84%2025, in 2025.respectively. The higherlower rental revenues and lower rental margins resulted in gross profit on rental revenues decreasing $0.4$0.5 million, or 3%,4%, to $13.1$13.5 million in 2026.

Gross Profit on Rental Related Services – Rental related services revenues wasincreased $3.8 million, compared3% to $3.6$4.5 million during the same period in 2025.2026. The gross margin on rental related services revenues was negative 20%18% in 2026, compared to negative 8%2% in 2025.2025, primarily due to higher trucking related costs. The higher revenues coupled with lower gross margins in 2026 resulted in rental related services gross profit decreasing $0.4$0.9 million, when compared to 2025.

Gross Profit on Sales– Sales revenues increased $0.4 million8% to $1.6$1.9 million in 2026. The higher sales revenues and highercomparable gross marginsmargin of 36%39% in 2026, compared to 33% in 2025, resulted in ana $0.1 million increase in sales gross profit ofon $0.2sales millionrevenues in 2026. Sales occur routinely as a normal part of Portable Storage’s rental business; however, these sales can fluctuate from period to period depending on customer requirements, equipment availability and funding.

For the three months ended MarchJune 31,30, 2026, Portable Storage’s selling and administrative expenses increased $0.8$0.9 million, or 11%,12%, to $8.4$8.5 million, primarily attributed to $0.6$0.5 million higher employees' salaries and benefit costs.

For the three months ended MarchJune 31,30, 2026, TRS-RenTelco’s total revenues increased $3.7$6.1 million, or 11%,17%, to $38.7$42.6 million, compared to the same period in 2025, primarily due to higher rental operations and sales revenues. The total revenue increase, together with higher gross profit on rental operations and sales revenues and lower interest expense, partly offset by an increase in selling and administrative expenses, resulted in an increase in pre-tax income of $3.1$4.8 million, or 51%,60%, to $12.8 million for the three months ended MarchJune 31,30, 2026, when compared to 2025.

TRS-RenTelco’s gross profit for the three months ended MarchJune 31,30, 2026 increased $3.4$5.8 million, or 23%,35%, to $18.3$22.2 million. For the three months ended MarchJune 31,30, 2026 compared to the same period in 2025:

Gross Profit on Rental Revenues – Rental revenues increased $3.4$4.7 million, or 17%, depreciation expense wasincreased comparable$0.8 tomillion, 2025,or 8%, and other direct costs increased by $0.7$0.5 million, or 14%,10%, resulting in a $2.6$3.4 million, or 25%29% increase in gross profit on rental revenues to $12.9$15.3 million. As a percentage of rental revenues, depreciation was 34%33% and 39%36% in 2026 and 2025, respectively, and other direct costs were 19% and 21% in both2026 periods,and 2025, respectively, which resulted in a gross margin percentage of 45% and 40%48% in 2026 andcompared 2025,to respectively.44% in 2025.

Gross Profit on Sales – Sales revenues increased 1%$1.0 million, or 13%, to $8.0$8.7 million in 2026. Gross profit on sales increased $0.7$2.1 million, or 19%,59%, to $4.4$5.8 million, with a higher gross margin percentage of 55%66% in 2026, compared to 47% in 2025. Sales occur as a normal part of TRS-RenTelco’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter depending on customer requirements and related mix of equipment sold, equipment availability and funding.

For the three months ended MarchJune 31,30, 2026, selling and administrative expenses increased $0.6$0.9 million, or 7%,13%, to $8.0$8.3 million.million, primarily attributed to $0.6 million higher allocated corporate expenses.