-- Generates Growth in Several Key Business
Areas --
Electro Rent Corporation (Nasdaq: ELRC) today reported
financial results for the second quarter of fiscal 2014 ended
November 30, 2013.
“To a large degree, our second quarter mirrored the first, with
gains in several key areas of our business that resulted in
year-over-year rental and lease revenue improvement. Our China
operations benefited from increased demand, and we saw ongoing
rental strength in the telecommunications sector, while our
European and data products businesses remained stable,” said Daniel
Greenberg, Chairman and CEO. “New equipment sales declined,
continuing a trend resulting from the Government’s inability to
deal with ongoing budget and sequestration issues. That trend
should change in 2014, however, with a new budget agreement put in
place at the end of last year. Delayed shipments by manufacturers
shifted equipment deliveries to some of our customers into the
third quarter, increasing our backlog by $4 million over last
year’s second quarter.
“Additionally, we faced a difficult comparison with last year’s
second quarter, during which time several of our aerospace and
defense customers made one-time, last minute purchases to utilize
their remaining budgets prior to the government shutdown,”
Greenberg said.
Total revenues for the second quarter of fiscal 2014 were $57.9
million, compared with $65.2 million last year. Rental and lease
revenues grew to $35.2 million for the 2014 second fiscal quarter,
up from $34.6 million one year ago. Sales of equipment and other
revenues were $22.7 million for the second quarter of fiscal 2014,
compared with $30.6 million for the corresponding prior-year
period.
Selling, general and administrative expenses equaled $14.2
million, or 24.6% of total revenues, for the fiscal 2014 second
quarter, compared with $14.1 million, or 21.6% of total revenues,
for the same quarter last year. Although SG&A expenses were
constant, they increased as a percentage of revenue because of the
decline in new equipment sales.
Total operating expenses amounted to $49.0 million for the
fiscal 2014 second quarter, versus $54.9 million a year ago.
Operating profit for the second quarter of fiscal 2014 was $8.9
million, or 15.4% of total revenues, compared with $10.3 million,
or 15.8% of total revenues, for the second quarter of fiscal
2013.
Net income was $5.6 million, or $0.23 per diluted share, for the
fiscal 2014 second quarter, versus $6.2 million, or $0.26 per
diluted share, for the same quarter last year.
Total revenues for the first half of fiscal 2014 were $118.0
million, compared with $123.7 million for the comparable period
last year. Rental and lease revenues for the fiscal 2014
year-to-date period increased to $70.9 million from $68.2 million
for the fiscal 2013 year-to-date period. Equipment sales and other
revenues were $47.2 million for the six months ended November 30,
2013, compared with $55.5 million for the six months ended November
30, 2012.
SG&A expenses were $28.9 million, or 24.5% of total
revenues, for the first six months of fiscal 2014, versus $27.8
million, or 22.5% of total revenues, for the same period last year.
Total operating expenses for the fiscal 2014 six-month period were
$100.3 million, compared with $105.1 million for the fiscal 2013
six-month period.
Operating profit for the first six months of fiscal 2014 totaled
$17.7 million, or 15.0% of total revenue, compared with $18.6
million, or 15.0% of total revenue, in the prior-year period.
Net income for the first half of fiscal 2014 amounted to $11.3
million, or $0.46 per diluted share, versus $11.3 million, or $0.47
per diluted share, for the fiscal 2013 period.
The company’s effective tax rate was 38.0% for the second
quarter of fiscal 2014, compared with 40.3% for the same quarter
last year. The decrease was principally related to a decline in
foreign losses where the company has a valuation allowance and
therefore does not recognize a tax benefit.
Rental equipment additions for the fiscal 2014 second quarter
totaled $15.1 million, compared with $16.4 million for the fiscal
2013 second quarter. Rental equipment purchases for the first six
months of fiscal 2014 were $30.1 million, versus $34.3 million for
the first six months of fiscal 2013. The net book value of Electro
Rent's equipment was $231.8 million at November 30, 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 $11.2 million
at November 30, 2013, versus $7.2 million last year. 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 second
quarter of fiscal 2014. On an annualized basis, Electro Rent’s
current quarterly dividend of $0.20 per common share represents a
4.4% yield on the January 7, 2014 closing share price of
$18.33.
Total shareholders' equity at November 30, 2013 grew to $230.9
million, or $9.62 per share, from $228.5 million, or $9.52 per
share, at May 31, 2013.
Electro Rent’s cash and cash equivalents balance was $8.2
million at November 30, 2013, compared with $10.4 million at May
31, 2013. The decline related primarily to the repayment of debt.
Bank borrowings at November 30, 2013 were $8.5 million, compared
with $10.0 million at May 31, 2013 and a high of $23.0 million in
December 2012, when the company paid its special dividend.
“The business climate remains somewhat complicated. However, we
hope to see some improvement later in the calendar year as a result
of a new defense budget and important changes regarding
sequestration. These changes could begin to provide additional
decision-making flexibility for many of our customers, as they
start to feel more comfortable taking risks they were previously
unwilling to without clear signals from our government," said
Greenberg. "We remain highly focused on providing customers with
the widest range and breadth of test and measurement equipment
available, irrespective of the external environment.”
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 Six
Months Ended November 30, November 30,
2013 2012 2013 2012 Revenues:
Rentals and leases $ 35,205 $ 34,575 $ 70,862 $ 68,240 Sales of
equipment and other revenues 22,671 30,617
47,182 55,453 Total revenues 57,876
65,192 118,044 123,693 Operating expenses:
Depreciation of rental and lease equipment 14,241 14,082 28,614
28,140 Costs of rentals and leases, excluding depreciation 4,798
4,558 9,610 8,930 Costs of sales of equipment and other revenues
15,699 22,164 33,217 40,213 Selling, general and administrative
expenses 14,226 14,068 28,905 27,845
Total operating expenses 48,964 54,872
100,346 105,128 Operating profit 8,912 10,320 17,698
18,565 Interest income, net 87 137 169
283 Income before income taxes 8,999 10,457 17,867
18,848 Income tax provision 3,418 4,218
6,589 7,523 Net income $ 5,581 $ 6,239 $ 11,278 $
11,325 Earnings per share: Basic $ 0.23 $ 0.26 $ 0.46 $ 0.47
Diluted $ 0.23 $ 0.26 $ 0.46 $ 0.47 Shares used in per share
calculation: Basic 24,331 23,988 24,313
23,994 Diluted 24,350 24,225 24,340
24,221 Cash dividend declared per share $ - $ 1.40 $ 0.40 $
1.60
ELECTRO RENT CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands,
except share numbers)
November 30, May 31, 2013 2013
ASSETS Cash and cash equivalents $ 8,191 $ 10,402 Accounts
receivable, net of allowance for doubtful accounts of $454 and $457
33,103 34,350 Rental and lease equipment, net of accumulated
depreciation of $237,533 and $224,397
231,787
234,856 Other property, net of accumulated depreciation and
amortization of $19,337 and $18,873 13,617 13,826 Goodwill 3,109
3,109 Intangibles, net of accumulated amortization of $1,550 and
$1,468 955 1,037 Other assets 21,320 21,346 $
312,082
$ 318,926 LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: Bank Borrowings $ 8,508 $ 10,000 Accounts payable
5,797 7,479 Accrued expenses
13,538
15,866 Deferred revenue 7,720 7,292 Deferred tax liability
45,583 49,740 Total liabilities
81,146
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 November 30,
2013 - 24,006,698; May 31, 2013 - 23,995,626 38,579 37,724 Retained
earnings
192,357
190,825 Total shareholders' equity
230,936
228,549 $
312,082
$ 318,926
Electro Rent CorporationDaniel Greenberg, Chairman and
CEO818-786-2525orPondelWilkinson Inc.Roger Pondel/Laurie
Berman310-279-5980pwinvestor@pondel.com
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