-- Company Generates 12 Percent Increase in Net
Income --
Electro Rent Corporation (Nasdaq: ELRC) today reported
improved financial results for the first quarter of fiscal 2014
ended August 31, 2013.
“We are very comfortable with the solid results achieved during
the first quarter, considering the uncertain environment in which
we are operating,” said Daniel Greenberg, Chairman and CEO of
Electro Rent. “The quarter was characterized by several positive
trends, including strong equipment rentals, an expanding telecom
business and data products growth. Our European operations held
steady, while China continues to show promise for this fiscal year.
Both new and used equipment sales declined modestly.”
Total revenues for the first quarter of fiscal 2014 rose to
$60.2 million from $58.5 million one year ago. Rental and lease
revenues increased approximately 6.0% to $35.7 million for the
first quarter of fiscal 2014, up from $33.7 million last year.
Sales of equipment and other revenues totaled $24.5 million for the
most recent quarter of fiscal 2013, compared with $24.8 million
last year.
Selling, general and administrative expenses equaled $14.7
million, or 24.4% of total revenues, for the first quarter of
fiscal 2014, compared with $13.8 million, or 23.6% of total
revenues, for the similar quarter last year. The increase
principally related to the ongoing enhancement of Electro Rent’s
sales and sales support organizations, as well as its
administrative infrastructure, to support the company’s growth
plans.
Total operating expenses amounted to $51.4 million for the
fiscal 2014 first quarter, versus $50.3 million a year ago.
Operating profit for the first quarter of fiscal 2014 was $8.8
million, or 14.6% of total revenues, compared with $8.2 million, or
14.1% of total revenues, for the first quarter of fiscal 2013.
Net income grew to $5.7 million, or $0.23 per diluted share, for
fiscal 2014 first quarter, versus $5.1 million, or $0.21 per
diluted share, for the same quarter last year.
The company’s effective tax rate was 35.8% for the first quarter
of fiscal 2014, compared with 39.4% for the same quarter last year.
The decrease was principally related to changes in state tax
apportionment.
Rental equipment additions for the fiscal 2014 first quarter
were $15.0 million, compared with $17.9 million for the fiscal 2013
first quarter. The net book value of Electro Rent's equipment was
$233.7 million at August 31, 2013, compared with $234.9 million at
the end of the last fiscal year.
Electro Rent had a sales order backlog for test and measurement
equipment relating to its Agilent resale agreement of $6.9 million
at August 31, 2013, versus $7.8 million last year, primarily
reflecting a decrease in new sales orders due to lower demand. The
majority of the backlog is expected to be delivered to customers
within the next six months.
Electro Rent paid dividends of $5.0 million for the first
quarter of fiscal 2014. On an annualized basis, Electro Rent’s
current quarterly dividend of $0.20 per common share represents a
4.6% yield on the October 2, 2013 closing share price of
$17.43.
Total shareholders' equity at August 31, 2013 was $225.0
million, or $9.38 per share, compared with $228.5 million, or $9.52
per share, at May 31, 2013.
Electro Rent’s cash and cash equivalents balance was $5.5
million at August 31, 2013, compared with $10.4 million at May 31,
2013. The decline related primarily to the repayment of debt. Bank
borrowings at August 31, 2013 were reduced to $5.0 million, from
$10.0 million at May 31, 2013 and a high of $23.0 million in
December 2012, when the company paid its special dividend.
“We remain cautiously positive about the remainder of the fiscal
year, despite the complicated issues surrounding the current
government ‘shutdown,’ sequestration, the national budget, and the
impact that is having on our core customer sectors. In this
environment, customers are continuing to respond very positively to
the alternatives we offer, which allow them to deploy their capital
in much more effective ways,” said Greenberg. “We believe Electro
Rent’s longer-term prospects remain very promising. Regardless of
external challenges, we are confident that the range of choices we
offer to customers, including sale of new and used equipment,
leases, and most importantly, rentals, will become a much more
important factor in our customers’ business decisions this coming
fiscal year.”
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,
2013 2012 Revenues: Rentals and leases $
35,657 $ 33,665 Sales of equipment and other revenues 24,511
24,836 Total revenues 60,168 58,501
Operating expenses: Depreciation of rental and lease
equipment 14,373 14,058 Costs of rentals and leases, excluding
depreciation 4,812 4,372 Cost of sales equipment and other revenues
17,518 18,049 Selling, general and administrative expenses
14,679 13,777 Total operating expenses 51,382
50,256 Operating profit 8,786 8,245 Interest
income, net 82 146 Income before income taxes
8,868 8,391 Income tax provision 3,171 3,305
Net income $ 5,697 $ 5,086 Earnings per share:
Basic
$ 0.23 $ 0.21 Diluted $ 0.23 $ 0.21 Shares used in per share
calculation: Basic 24,291 23,993 Diluted
24,328 24,216 Cash dividends declared per share $
0.40 $ 0.20
ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) (in thousands, except share numbers)
August 31, May 31, 2013
2013 ASSETS Cash and cash equivalents $ 5,489 $
10,402 Accounts receivable, net of allowance for doubtful accounts
of $410 and $457 34,390 34,350 Rental and lease equipment, net of
accumulated depreciation of $231,274 and $224,397 233,746 234,856
Other property, net of accumulated depreciation and amortization of
$19,125 and $18,873 13,700 13,826 Goodwill 3,109 3,109 Intangibles,
net of amortization of $1,509 and $1,468 996 1,037 Other assets
21,361 21,346 $ 312,791 $ 318,926 LIABILITIES
AND SHAREHOLDERS' EQUITY Liabilities: Bank Borrowings $
5,000 $ 10,000 Accounts payable 5,671 7,479 Accrued expenses 21,594
15,866 Deferred revenue 7,218 7,292 Deferred tax liability
48,305 49,740 Total liabilities 87,788 90,377
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, 2013 -
23,996,292; May 31, 2013 - 23,995,626 38,164 37,724 Accumulated
other comprehensive income, net of tax - Retained earnings
186,839 190,825 Total shareholders' equity 225,003
228,549 $ 312,791 $ 318,926
Electro Rent CorporationDaniel Greenberg, Chairman and
CEO818-786-2525orPondelWilkinson Inc.Roger Pondel/Laurie
Berman310-279-5980pwinvestor@pondel.com
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