Electro Rent Reports Fiscal 2013 First Quarter Financial Results

VAN NUYS, Calif.--()--Electro Rent Corporation (NASDAQ:ELRC) today reported financial results for the first quarter ended August 31, 2012.

“Our business held steady during the quarter, as Electro Rent’s proven ability to provide increasing value to our rental customers weighed in against declines in our new sales equipment business,” said Daniel Greenberg, Chairman and CEO of Electro Rent. “Business in all our rental markets continued to grow and strengthen during the first quarter. In addition, our used equipment business moved upwards. On the other hand, capital constraints and general economic uncertainty negatively affected our new equipment sales business. We believe that the short-term trends we experienced in the quarter will likely prove to be long-term trends as customer preferences and needs continue to change.”

Total revenues were $58.5 million for the first quarter of fiscal 2013 compared with $58.7 million for the first quarter of fiscal 2012. Rental and lease revenues advanced to $33.7 million for the first quarter of fiscal 2013, up from $31.3 million for the first quarter of fiscal 2012, primarily related to acquisition of Equipment Management Technology (EMT) in fiscal 2012, improved customer demand and the integration of Electro Rent’s resale organization with its test and measurement sales force. Sales of equipment and other revenues were $24.8 million for the most recent fiscal quarter compared with $27.3 million a year ago, as changes in national budgetary policy and continuing economic uncertainty caused delays in customers’ procurement decisions.

Selling, general and administrative expenses totaled $16.6 million, or 28.4% of total revenues, for the fiscal 2013 first quarter compared with $15.9 million, or 27.1% of total revenues, for last year’s first quarter. The additional spending reflected enhancements to Electro Rent’s sales and sales support organizations and its administrative infrastructure, in order to allow Electro Rent to better capitalize on future growth opportunities. Total operating expenses amounted to $50.3 million for the fiscal 2013 first quarter versus $50.0 million last year.

Operating profit for the fiscal 2013 first quarter was $8.2 million, or 14.1% of total revenues compared with $8.6 million, or 14.7% of total revenues, a year ago.

Net income for the fiscal 2013 first quarter totaled $5.1 million, or $0.21 per diluted share, versus $8.5 million, or $0.35 per diluted share, for the fiscal 2012 first quarter. Net income for the fiscal 2012 period included a one-time gain of $3.2 million, or $0.13 per diluted share, associated with the EMT acquisition.

Electro Rent’s effective tax rate for the first quarter of fiscal 2013 was 39.4% compared with 28.6% last year. The increase resulted from the bargain purchase gain, net of deferred taxes, of $3.2 million for the three months ended August 31, 2011, related to an acquisition. Bargain purchase gains are recorded net of deferred taxes and are treated as permanent differences, resulting in a lower effective tax rate in the period recorded.

Rental equipment purchases for the fiscal 2013 first quarter were $17.9 million compared with $24.6 million for the same period last year. The book value of Electro Rent's equipment was $243.4 million at August 31, 2012 compared with $243.2 million at May 31, 2012.

As of August 31, 2012, Electro Rent had a sales order backlog for test and measurement equipment relating to its Agilent resale agreement of $7.8 million, versus $14.6 million last year, primarily reflecting shorter manufacturing lead time and a reduction in new sales orders as the result of lower demand. The majority of the backlog is expected to be delivered to customers within the next six months.

Electro Rent paid dividends of $4.9 million for the fiscal 2013 first quarter. On an annualized basis, Electro Rent’s current quarterly dividend of $0.20 per common share represents a 4.5% yield on the September 28, 2012 closing share price of $17.69.

Total shareholders' equity at August 31, 2012 grew to $248.7 million, or $10.36 per share, from $248.1 million, or $10.34 per share, at May 31, 2012.

Electro Rent had $11.7 million in cash and cash equivalents at August 31, 2012, up from $9.3 million at May 31, 2012. Electro Rent’s balance sheet remains debt free.

About Electro Rent

Electro Rent Corporation (www.ElectroRent.com) is one of the largest global organizations devoted to the rental, leasing and sales of general purpose electronic test equipment, personal computers and servers.

“Safe Harbor" Statement:

Except for the historical statements and discussions in this press release, the company’s statements above constitute forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect Electro Rent’s management's current views with respect to future events and financial performance; however, you should not put undue reliance on these statements. When used, the words "expect" and "will" and other similar expressions identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties. The company believes its assumptions are reasonable; nonetheless, it is likely that at least some of these assumptions will not come true. Accordingly, Electro Rent’s actual results will probably differ from the outcomes contained in any forward-looking statement, and those differences could be material. Factors that could cause or contribute to these differences include, among others, those risks and uncertainties discussed in the company’s periodic reports on Form 10-K and 10-Q and in its other filings with the Securities and Exchange Commission. Should one or more of the risks discussed, or any other risks, materialize, or should one or more of our underlying assumptions prove incorrect, the company’s actual results may vary materially from those anticipated, estimated, expected or projected. In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct. Electro Rent undertakes no obligation to update or revise any forward-looking statements.

ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (in thousands, except per share data)
                         
 
Three Months Ended
August 31,
  2012   2011
 
Revenues:
Rentals and leases $ 33,665 $ 31,309
Sales of equipment and other revenues   24,836   27,341
 
Total revenues   58,501   58,650
 
Operating expenses:
Depreciation of rental and lease equipment 14,058 12,527
Costs of revenues other than depreciation of rental
and lease equipment 19,576 21,610
Selling, general and administrative expenses   16,622   15,893
 
Total operating expenses   50,256   50,030
 
Operating profit 8,245 8,620
 
Gain on bargain purchase, net of deferred taxes - 3,194
 
Interest income, net   146   99
 
Income before income taxes 8,391 11,913
 
Income tax provision   3,305   3,408
 
Net income $ 5,086 $ 8,505
 
Earnings per share:
Basic $ 0.21 $ 0.35
Diluted $ 0.21 $ 0.35
 
Shares used in per share calculation:
Basic   23,993   23,981
Diluted   24,216   24,132
 
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands, except share numbers)
                     
 
 
August 31, May 31,
  2012   2012
ASSETS
 
Cash and cash equivalents $ 11,679 $ 9,290
Accounts receivable, net of allowance for doubtful accounts of $428 and $522 34,211 35,915
Rental and lease equipment, net of accumulated depreciation of $209,867 and $204,108 243,388 243,173
Other property, net of accumulated depreciation and amortization of $18,121 and $17,832 13,721 13,871
Goodwill 3,109 3,109
Intangibles, net of amortization of $1,345 and $1,304 1,160 1,201
Other assets   21,655   23,272
$ 328,923 $ 329,831
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Liabilities:
Accounts payable $ 6,529 $ 8,555
Accrued expenses 13,123 11,870
Deferred revenue 6,759 6,904
Deferred tax liability   53,817   54,371
Total liabilities   80,228   81,700
 
 
Shareholders' equity:
Preferred stock, $1 par - shares authorized 1,000,000, none issued
Common stock, no par - shares authorized 40,000,000;
issued and outstanding August 31, 2012 - 23,995,626;
May 31, 2012 - 23,987,826 36,522 36,179
Retained earnings   212,173   211,952
Total shareholders' equity   248,695   248,131
$ 328,923 $ 329,831

Contacts

Electro Rent Corporation
Daniel Greenberg, Chairman and CEO
818-786-2525
or
PondelWilkinson Inc.
Roger Pondel/Laurie Berman
310-279-5980
pwinvestor@pondel.com

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Contacts

Electro Rent Corporation
Daniel Greenberg, Chairman and CEO
818-786-2525
or
PondelWilkinson Inc.
Roger Pondel/Laurie Berman
310-279-5980
pwinvestor@pondel.com