Electro Rent Corporation (Nasdaq: ELRC) today reported
financial results for the fourth quarter and full year ended May
31, 2013.
“We finished fiscal 2013 with all of our rental businesses
showing gains, and our used sales equipment business growing
meaningfully,” said Daniel Greenberg, Chairman and CEO of Electro
Rent. “Globally, we continued to make good progress. Domestically,
our telecom unit generated healthy growth. As sequestration became
an ongoing reality, demand for RF microwave test and measurement
equipment, a key component of our inventory, was impacted. Events
this fall in Washington should hopefully provide a clearer idea of
the role research and development will play both in defense
spending and in other sectors of the economy.”
Total revenues for the fourth quarter of fiscal 2013 were $60.4
million, compared with $68.2 million last year. Rental and lease
revenues increased 5.0% to $35.5 million for the fourth quarter of
fiscal 2013, up from $33.8 million a year ago. Sales of equipment
and other revenues amounted to $24.9 million for the most recent
fourth fiscal quarter, compared with $34.4 million last year.
Selling, general and administrative expenses equaled $14.9
million, or 24.7% of total revenues, for the fourth quarter of
fiscal 2013, compared with $13.9 million, or 20.5% of total
revenues, for the corresponding quarter last year. The increase
principally related to the continuing enhancement of Electro Rent’s
sales and sales support organizations, and its administrative
infrastructure, to allow the company to better capitalize on future
growth opportunities. Total operating expenses were $50.6 million
for the fiscal 2013 fourth quarter, versus $58.0 million last
year.
Operating profit for fourth quarter of fiscal 2013 totaled $9.8
million, or 16.2% of total revenues, compared with $10.2 million,
or 14.9% of total revenues, a year ago.
Net income was $6.4 million, or $0.26 per diluted share, for
fourth quarter of fiscal 2013, versus $6.3 million, or $0.26 per
diluted share, for the same quarter last year.
Fiscal 2013 total revenues were $248.7 million, versus $248.6
million for the prior fiscal year. Rental and lease revenues for
fiscal 2013 increased 5.3% to $136.6 million from $129.7 million
last year. Equipment sales and other revenues equaled $112.1
million for fiscal 2013, compared with $118.8 million for fiscal
2012.
Selling, general and administrative expenses totaled $56.5
million, or 22.7% of total revenues, for fiscal 2013, compared with
$53.3 million, or 21.4% of total revenues, last year. Total
operating expenses for fiscal 2013 were $212.0 million, versus
$212.5 million for fiscal 2012.
Fiscal 2013 operating profit was $36.7 million, or 14.8% of
total revenue, up from $36.1 million, or 14.5% of total revenue,
for the prior-year period.
Net income for the fiscal 2013 full year amounted to $22.8
million, or $0.94 per diluted share, versus $25.8 million, or $1.07
per diluted share, for fiscal 2012, which included a one-time
bargain purchase gain of $3.4 million, or $0.14 per diluted share,
associated with the acquisition of Equipment Management Technology
(EMT).
The company’s effective tax rate was 35.0% for the fourth
quarter of fiscal 2013, compared with 39.5% for the fourth quarter
of fiscal 2012. The change primarily related to a reduction in
foreign losses, for which there is a 100% valuation allowance, and
lower state taxes resulting from income apportionment revisions.
For fiscal 2013, the company’s effective tax rate was 38.7%,
compared with 35.6% for fiscal 2012. The increase resulted from the
bargain purchase gain recorded for fiscal 2012. 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 additions for the fiscal 2013 fourth quarter
were $16.2 million, compared with $19.1 million last year. Rental
equipment additions for the full fiscal 2013 year were $63.5
million, versus $113.2 million for the full fiscal 2012 year,
including $15.8 million of rental equipment acquired in connection
with the company’s EMT acquisition. The book value of Electro
Rent's equipment was $234.9 million at May 31, 2013, compared with
$243.2 million at May 31, 2012.
Electro Rent had a sales order backlog for test and measurement
equipment relating to its Agilent resale agreement of $7.6 million
at May 31, 2013, versus $8.4 million last year, primarily resulting
from shorter manufacturing lead times and a decrease in new sales
orders reflecting lower demand. The majority of the backlog is
expected to be delivered to customers within the next six
months.
Electro Rent paid dividends of $4.8 million for the fourth
quarter of fiscal 2013 and $43.8 million for the full fiscal year,
which included a special dividend of $1.00 per common share. On an
annualized basis, Electro Rent’s current quarterly dividend of
$0.20 per common share represents a 4.5% yield on the August 13,
2013 closing share price of $17.62.
Total shareholders' equity at May 31, 2013 was $228.5 million,
or $9.52 per share, compared with $248.1 million, or $10.34 per
share, at May 31, 2012.
Electro Rent’s cash and cash equivalents balance grew to $10.4
million at May 31, 2013, compared with $9.3 million at May 31,
2012. Bank borrowings at May 31, 2013 were $10.0 million, down from
the fiscal 2013 high of $23.0 million in December 2012, when the
company paid its special dividend. There were no bank borrowings at
May 31, 2012.
“Over the last several years, Electro Rent has built
considerable intellectual capital, an industry-leading equipment
pool, and a strong and flexible balance sheet, giving us confidence
in our ability to operate soundly, regardless of external
challenges,” Greenberg said. “We will continue to adapt to
marketplace changes and build our business for the long-term, while
keeping customers’ needs our strongest priority. In a more positive
climate, opportunities should emerge that will allow Electro Rent’s
customers to utilize our many resources as part of their forward
planning.”
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 Twelve
Months Ended May 31, May 31, 2013
2012 2013 2012 Revenues: Rentals and
leases $ 35,514 $ 33,812 $ 136,591 $ 129,737 Sales of equipment and
other revenues 24,852 34,370 112,140
118,817 Total revenues 60,366 68,182
248,731 248,554 Operating expenses: Depreciation of
rental and lease equipment 14,335 14,073 56,795 53,651 Costs of
rentals and leases, excluding depreciation 4,137 4,119 17,788
17,320 Cost of sales of equipment and other revenues 17,210 25,865
80,894 88,247 Selling, general and administrative expenses
14,914 13,948 56,543 53,250 Total
operating expenses 50,596 58,005 212,020
212,468 Operating profit 9,770 10,177 36,711 36,086
Gain on bargain purchase, net of deferred taxes - - - 3,435
Interest income, net 58 157 402
484 Income before income taxes 9,828 10,334 37,113 40,005
Income tax provision 3,436 4,081 14,359
14,233 Net income $ 6,392 $ 6,253 $ 22,754 $ 25,772
Earnings per share: Basic $ 0.26 $ 0.26 $ 0.94 $ 1.07
Diluted $ 0.26 $ 0.26 $ 0.94 $ 1.07 Shares used in per share
calculation: Basic 24,240 23,988 24,226
23,983 Diluted 24,306 24,197 24,269
24,152
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in
thousands, except share numbers)
May 31, 2013 2012 ASSETS Cash
and cash equivalents $ 10,402 $ 9,290 Accounts receivable, net of
allowance for doubtful accounts of $457 and $522 34,350 35,915
Rental and lease equipment, net of accumulated depreciation of
$224,397 and $204,108 234,856 243,173 Other property, net of
accumulated depreciation and amortization of $18,873 and $17,832
13,826 13,871 Goodwill 3,109 3,109 Intangibles, net of amortization
of $1,468 and $1,304 1,037 1,201 Other 21,346 23,272
$ 318,926 $ 329,831 LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: Bank borrowings $ 10,000 $ - Accounts payable
7,479 8,555 Accrued expenses 15,866 11,870 Deferred revenue 7,292
6,904 Deferred tax liability 49,740 54,371 Total
liabilities 90,377 81,700 Commitments and
contingencies Shareholders' equity: Preferred stock, $1 par
- shares authorized 1,000,000, none issued or outstanding - -
Common stock, no par - shares authorized 40,000,000;
issued and outstanding 2013 - 23,995,626;
2012 - 23,987,826
37,724 36,179 Retained earnings 190,825 211,952 Total
shareholders' equity 228,549 248,131 $ 318,926 $
329,831
Electro Rent CorporationDaniel Greenberg, Chairman and
CEO818-786-2525orPondelWilkinson Inc.Roger Pondel/Laurie
Berman310-279-5980pwinvestor@pondel.com
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