Electro Rent Corporation (Nasdaq: ELRC) today reported
financial results for the fiscal first quarter ended August 31,
2014.
“Our first quarter, on the surface, was not perceptibly
different from the past several. Used equipment sales increased,
our international operations saw modest gains, and our data
products business was slightly down,” said Daniel Greenberg,
Chairman and CEO of Electro Rent. “For the first time in several
quarters, new equipment sales grew, reflecting an improving climate
as predicted by our vendors. On the other side of the coin,
equipment rentals lagged behind to some degree, as a few important
customers suffered as a result of ongoing changes in government
policy and market conditions outside of their immediate
control.
“The world is becoming a more dangerous place today, where
threats to the United States are escalating. We think this
unfortunate reality will result in expanded military operations,
which can lead to increased defense spending. However, it’s too
early to tell when, and in what capacity,” Greenberg added. “We are
just beginning to see some uptick in rental activity, and remain
positive about the long-term rental opportunity. We strongly
believe that our equipment base is highly relevant given this
increased activity and future outlook.”
Total revenues for the first quarter of fiscal 2015 increased to
$61.9 million from $60.2 million last year. Rental and lease
revenues were $33.9 million, compared with $35.7 million one year
ago. Sales of equipment and other revenues increased to $28.0
million for the first quarter of fiscal 2015, up from $24.5 million
for the prior-year first quarter.
Selling, general and administrative expenses totaled $15.0
million, or 24.3% of total revenues, for the fiscal 2015 first
quarter, compared with $14.7 million, or 24.4% of total revenues,
for the same quarter last year.
Total operating expenses were $54.4 million for the fiscal 2015
first quarter, compared with $51.4 million a year ago. The increase
was primarily associated with higher costs for sales of equipment
and other revenue, and a slight increase in selling, general and
administrative expenses.
Operating profit for the first quarter of fiscal 2015 was $7.5
million, or 12.1% of total revenues, compared with $8.8 million, or
14.6% of total revenues, for the first quarter of fiscal 2014. The
decline principally reflected an increase in lower margin sales,
which was more than offset by decreases in higher margin
rentals.
Net income was $4.8 million, or $0.20 per diluted share, for the
fiscal 2015 first quarter, versus $5.7 million, or $0.23 per
diluted share, for the same quarter last year.
The company’s effective tax rate was 36.9% for the first quarter
of fiscal 2015, compared with 35.8% for the same quarter last year.
The first quarter fiscal 2015 rate was higher because more income
was being apportioned to states with lower tax rates for the fiscal
2014 first quarter.
Rental equipment purchases for the fiscal 2015 first quarter
totaled $17.6 million, compared with $15.0 million for the same
quarter last year.
The net book value of Electro Rent's equipment was $222.1
million at August 31, 2014, compared with $221.9 million at May 31,
2014.
Electro Rent had a sales order backlog for test and measurement
equipment relating to its Keysight Technologies (formerly Agilent)
resale agreement of $6.4 million at August 31, 2014, versus $6.9
million at August 31, 2013. 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 2015. On an annualized basis, Electro Rent’s
current quarterly dividend of $0.20 per common share represents a
5.8% yield on the October 3, 2014 closing share price of
$13.85.
Total shareholders' equity at August 31, 2014 was $231.2
million, or $9.63 per share, versus $231.0 million, or $9.62 per
share, at May 31, 2014.
Electro Rent’s cash and cash equivalents balance was $4.0
million at the end of the first quarter of fiscal 2015, compared
with $5.9 million at the end of fiscal 2014. The decline related to
equipment purchases and the regular quarterly dividend payment. The
company had no bank borrowings at August 31, 2014.
“While the path forward for many of our customers will continue
to produce a number of twists and turns, our objective of working
closely with them to deliver the best and most cost-effective
solutions is crystal clear,” Greenberg said. “With manufacturers
signaling a moderate upswing in demand, we still believe that the
sectors we serve will soon undergo fundamental changes that will
help them emerge from a protracted period of uncertainty.
“We are not sitting by idly. We are doing everything that is
within our control to be well prepared for any eventuality, while
also taking care of business today, so that we can continue to
provide our customers with the most robust and flexible equipment
solutions, when they need them the most.”
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
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited) (in thousands, except per share
data)
Three Months Ended August 31, 2014
2013 Revenues: Rentals and leases $ 33,889 $
35,657 Sales of equipment and other revenues 27,982
24,511 Total revenues 61,871 60,168
Operating expenses: Depreciation of rental and lease equipment
13,915 14,373 Costs of rentals and leases, excluding depreciation
4,574 4,812 Costs of sales of equipment and other revenues 20,902
17,518 Selling, general and administrative expenses 15,021
14,679 Total operating expenses 54,412
51,382 Operating profit 7,459 8,786 Interest income,
net 103 82 Income before income taxes 7,562
8,868 Income tax provision 2,791 3,171
Net Income $ 4,771 $ 5,697 Earnings per share: Basic $ 0.20
$ 0.23 Diluted $ 0.20 $ 0.23 Shares used in per share
calculation: Basic 24,372 24,291 Diluted
24,396 24,328
ELECTRO RENT
CORPORATIONCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited) (in thousands, except share
numbers)
August 31, May 31, 2014 2014
ASSETS Cash and cash equivalents $ 3,974 $ 5,946
Accounts receivable, net of allowance for doubtful accounts of $559
and $555 33,887 34,970 Rental and lease equipment, net of
accumulated depreciation of $241,584 and $237,151 222,071 221,888
Other property, net of accumulated depreciation and amortization of
$19,168 and $18,983 12,971 13,122 Goodwill 3,109 3,109 Intangibles,
net of accumulated amortization of $1,673 and $1,632 832 873 Other
23,842 22,150 $ 300,686 $ 302,058 LIABILITIES AND
SHAREHOLDERS' EQUITY Liabilities: Bank borrowings $ - $ -
Accounts payable 7,719 7,279 Accrued expenses 13,735 14,472
Deferred revenue 7,457 7,537 Deferred tax liability 40,577
41,812 Total liabilities 69,488 71,100
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 39,612 39,252
August 31, 2014 - 24,008,489; May 31, 2014 - 24,007,709 Retained
earnings 191,586 191,706 Total shareholders' equity
231,198 230,958 $ 300,686 $ 302,058
Electro Rent CorporationDaniel Greenberg, 818-786-2525Chairman
and CEOorPondelWilkinson Inc.Roger Pondel or Laurie Berman,
310-279-5980pwinvestor@pondel.com
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