Electro Rent Corporation (Nasdaq: ELRC) today reported
financial results for the fiscal third quarter ended February 28,
2015.
Total revenues for the fiscal 2015 third quarter were $56.3
million, compared with $62.0 million for the same quarter one year
ago. Rental and lease revenues amounted to $30.3 million, versus
$32.5 million last year. Sales of equipment and other revenues
equaled $26.1 million for the fiscal 2015 third quarter, compared
with $29.5 million for the comparable prior-year period.
“There were encouraging signs in parts of our business during
the third quarter, but they did not offset the softness we
experienced elsewhere,” said Daniel Greenberg, Chairman and CEO.
“Our business in industrial markets held steady while our data
products business grew modestly. Average equipment on rent and
utilization in our test and measurement business were slightly
better than last year, and we are starting to see signs of higher
defense spending in key areas related to our business.
“On the other hand, growth in the telecom sector slowed,
aerospace and defense companies continued to deal with
sequestration and lower budgets, and semiconductor manufacturers
struggled with declines in PC sales. Additionally, we were impacted
by lower used equipment sales, competitive pricing pressures, a
change in product mix and a stronger U.S. dollar, particularly
against the Canadian dollar and Euro, which reduced revenues
generated outside of the United States,” Greenberg said.
Selling, general and administrative expenses for the 2015 third
fiscal quarter totaled $14.7 million, or 26.1% of total revenues,
versus $14.4 million, or 23.2% of total revenues, for the same
quarter last year, reflecting increased professional fees primarily
related to the new COSO and PCAOB guidelines.
Total operating expenses were $52.7 million for the fiscal 2015
third quarter, compared with $54.8 million a year ago.
Operating profit for the third quarter of fiscal 2015 was $3.7
million, or 6.5% of total revenues, versus $7.2 million, or 11.6%
of total revenues, for the third quarter of fiscal 2014. The change
principally related to the decline in revenues.
Net income totaled $2.4 million, or $0.10 per diluted share, for
the fiscal 2015 third quarter, compared with $4.5 million, or $0.19
per diluted share, last year.
Rental equipment purchases for the fiscal 2015 third quarter
totaled $16.4 million, compared with $12.6 million for the same
quarter last year.
Electro Rent’s effective tax rate was 35.3% for the third
quarter of fiscal 2015, compared with 37.8% for the same quarter a
year ago. The decrease was due to a decline in pretax income
relative to the level of permanent differences during the third
quarter of fiscal 2015.
Total revenues for the first nine months of fiscal 2015 were
$177.9 million, compared with $180.1 million for the comparable
period last year. Rental and lease revenues equaled $97.6 million
for the fiscal 2015 year-to-date period, versus $103.3 million for
the first nine months of fiscal 2014. Equipment sales and other
revenues totaled $80.3 million for the nine months ended February
28, 2015, compared with $76.7 million for the nine months ended
February 28, 2014.
Selling, general and administrative expenses were $44.3 million,
or 24.9% of total revenues, for the first nine months of fiscal
2015, versus $43.3 million, or 24.0% of total revenues, for the
first nine months of fiscal 2014. Total operating expenses for the
fiscal 2015 year-to-date period amounted to $160.6 million,
compared with $155.2 million for the same period last year.
Operating profit for the nine months ended February 28, 2015
totaled $17.4 million, or 9.8% of total revenue, versus $24.9, or
13.8% of total revenue, for the prior-year period.
Net income for the first nine months of fiscal 2015 was $12.0
million, or $0.49 per diluted share, compared with $15.8 million,
or $0.65 per diluted share, for the corresponding period of fiscal
2014. Net income for the fiscal 2015 period included $1.4 million,
before tax, in income related to a settlement received from a class
action lawsuit involving the purchase of certain computer products,
and a $1.3 million reduction in sales of equipment and other
revenues, before tax, related to a non-recurring, out-of-period
adjustment.
Rental equipment purchases for the first nine months of fiscal
2015 were $48.8 million, versus $42.7 million for the first nine
months of fiscal 2014.
The net book value of Electro Rent's equipment was $216.8
million at February 28, 2015, 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 resale agreement of
$7.1 million at February 28, 2015, versus $9.8 million one year
ago. 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 third
quarter of fiscal 2015. On an annualized basis, Electro Rent’s
current quarterly dividend of $0.20 per common share represents a
6.9% yield on the April 8, 2015 closing share price of $11.56.
Payment of future dividends is at the discretion of the Company’s
Board of Directors and may depend on factors such as sales,
profitability and capital needs, among others.
Total shareholders' equity at February 28, 2015 was $229.1
million, or $9.51 per share, versus $231.0 million, or $9.62 per
share, at May 31, 2014.
Electro Rent’s cash balance was $8.1 million at the end of the
third quarter of fiscal 2015, compared with $5.9 million at the end
of fiscal 2014.
“The coming months will be both challenging and exciting. Now
that we are no longer limited by an exclusive arrangement with
Keysight, we are pursuing productive conversations for new
partnerships to replace the lost Keysight revenue,” Greenberg said.
“Electro Rent’s strong marketplace reputation, robust platform and
talent pool provide the foundation for a broad, new initiative with
multiple suppliers to build a more diverse and healthy business. I
remain confident in Electro Rent’s long-term success, as we
continue to offer customers a best-in-class equipment pool,
extraordinary flexibility, and dependable insight and product
knowledge.”
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. Forward-looking statements
in this press release include statements regarding whether defense
budgets will increase, whether certain industries will rebound,
whether exchange rates will moderate, whether Electro Rent will
maintain equipment on rent and utilization rates, whether Electro
Rent will pay future dividends and in what amounts, and whether
Electro Rent can implement alternatives to its Keysight reseller
agreement. 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, including: general
macroeconomic conditions may not improve or may deteriorate; U.S.
federal government spending with respect to defense and other
research and development activities may not increase or may
decline; Electro Rent may not succeed in retaining its key sales
personnel; and manufacturers of test and measurement equipment may
not be willing to enter reseller arrangements with Electro Rent.
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
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in
thousands, except per share data)
Three Months Ended February 28, Nine Months Ended
February 28, 2015 2014
2015 2014 Revenues: Rentals and leases
$ 30,252 $ 32,485 $ 97,610 $ 103,347 Sales of equipment and other
revenues 26,090 29,531 80,306 76,713
Total revenues 56,342 62,016 177,916
180,060 Operating expenses: Depreciation of rental
and lease equipment 13,844 14,361 42,429 42,975 Costs of rentals
and leases, excluding depreciation 4,544 4,493 13,665 14,103 Costs
of sales of equipment and other revenues 19,598 21,583 60,161
54,800 Selling, general and administrative expenses 14,692
14,394 44,311 43,299 Total operating
expenses 52,678 54,831 160,566 155,177
Operating profit 3,664 7,185 17,350 24,883 Interest
income, net 82 106 264 275 Other income - -
1,390 - Income before income taxes 3,746 7,291
19,004 25,158 Income tax provision 1,321 2,754
7,013 9,343 Net Income $ 2,425 $ 4,537 $
11,991 $ 15,815 Earnings per share: Basic $ 0.10 $ 0.19 $
0.49 $ 0.65 Diluted $ 0.10 $ 0.19 $ 0.49 $ 0.65 Shares used
in per share calculation: Basic 24,377 24,334
24,355 24,320 Diluted 24,377 24,367
24,355 24,349
ELECTRO RENT CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands,
except share numbers) February 28,
May 31, 2015 2014 ASSETS
Cash $ 8,133 $ 5,946 Accounts receivable, net of allowance
for doubtful accounts of $592 and $555 32,046 34,970 Rental and
lease equipment, net of accumulated depreciation of $241,431 and
$237,151 216,841 221,888 Other property, net of accumulated
depreciation and amortization of $19,496 and $18,983 13,317 13,122
Goodwill 3,109 3,109 Intangibles, net of accumulated amortization
of $1,732 and $1,632 773 873 Other assets 27,508
22,150 $ 301,727 $ 302,058 LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities: Bank borrowings $ - $ - Accounts payable 7,563
7,279 Accrued expenses 14,625 14,472 Deferred revenue 6,159 7,537
Deferred tax liability 44,259 41,812 Total
liabilities 72,606 71,100 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 February 28, 2015 - 24,104,834; May 31, 2014
- 24,007,709 40,123 39,252 Retained earnings 188,998
191,706 Total shareholders' equity 229,121 230,958 $
301,727 $ 302,058
Electro Rent CorporationDaniel Greenberg, Chairman and
CEO818-786-2525orPondelWilkinson Inc.Roger Pondel/Laurie
Berman310-279-5980pwinvestor@pondel.com
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