SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED AUGUST 31, 1995
COMMISSION FILE NUMBER 0-9061
ELECTRO RENT CORPORATION
Exact name of registrant as specified in its charter
CALIFORNIA 95-2412961
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6060 SEPULVEDA BOULEVARD
VAN NUYS, CALIFORNIA 91411-2501
(Address of principal executive offices) (Zip code)
(818) 786-2525
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X NO
At October 12, 1995 registrant had 11,800,175 shares of common stock
outstanding.
<PAGE>
ELECTRO RENT CORPORATION
FORM 10-Q
AUGUST 31, 1995
TABLE OF CONTENTS
Page
Part I: FINANCIAL INFORMATION
Condensed Consolidated Statements of Income for the Three Months
Ended August 31, 1995 3
Condensed Consolidated Balance Sheets at
August 31, 1995 and May 31, 1995 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended August 31, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II: OTHER INFORMATION 9
SIGNATURES 10
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<PAGE>
<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (000 omitted except per share data)
<CAPTION>
Three Months Ended
August 31
1995 1994
-------- --------
<S> <C> <C>
Revenues:
Rentals and leases $ 28,613 $ 22,224
Sales of equipment
and other revenues 5,748 5,564
-------- --------
Total revenues 34,361 27,788
-------- --------
Costs and expenses:
Depreciation of equipment 9,696 8,067
Costs of revenues other
than depreciation 5,760 4,878
Selling, general and
administrative expenses 9,388 8,490
Interest 612 336
-------- --------
Total costs and expenses 25,456 21,771
-------- --------
Income before income taxes 8,905 6,017
Income taxes 3,651 2,467
-------- --------
Net income $ 5,254 $ 3,550
======== ========
Net income per common and common equivalent share $ 0.43 $ 0.29
======== ========
Average common and common equivalent shares outstanding 12,224 12,093
======== ========
<FN>
See accompanying notes to
condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (000 omitted)
ASSETS
<CAPTION>
August 31 May 31
1995 1995
-------- --------
<S> <C> <C>
Cash $ 682 $ 432
Accounts receivable, net 19,161 17,600
Rental and lease equipment, net
of accumulated depreciation 118,151 118,192
Other property, net of accumulated
depreciation and amortization 18,583 18,703
Other 7,741 7,982
-------- --------
$ 164,318 $ 162,909
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank borrowings $ 31,200 $ 36,100
Accounts payable 10,422 12,302
Accrued expenses 13,712 10,342
Deferred income taxes 11,429 11,977
-------- --------
Total liabilities 66,763 70,721
-------- --------
Shareholders' equity
Common stock 8,716 8,597
Retained earnings 88,791 83,543
Cumulative translation adjustment 48 48
-------- --------
Total shareholders' equity 97,555 92,188
-------- --------
$ 164,318 $ 162,909
======== ========
<FN>
See accompanying notes to
condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (000 omitted)
<CAPTION>
Three Months Ended
August 31
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,254 $ 3,550
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,098 8,394
Provision for losses on accounts receivable 173 83
Gain on sale of equipment (1,675) (1,447)
Change in operating assets and liabilities:
Increase in accounts receivable (1,734) (229)
(Increase) decrease in other assets 109 (39)
Decrease in accounts payable (1,318) (789)
Increase in accrued expenses 3,370 2,957
Decrease in deferred income taxes (548) (913)
-------- --------
Net cash provided by operating activities 13,729 11,567
-------- --------
Cash flows from investing activities:
Proceeds from sale of equipment 5,247 4,983
Payments for purchase of rental and lease equipment (13,789) (13,275)
Payments for purchase of other property (150) (502)
-------- --------
Net cash used in investing activities (8,692) (8,794)
-------- --------
Cash flows from financing activities:
Decrease in short-term bank borrowings (4,900) (4,000)
Proceeds from issuance of common stock 119 14
Payments for repurchase of common stock (6) -
-------- --------
Net cash used in financing activities (4,787) (3,986)
-------- --------
Net increase (decrease) in cash 250 (1,213)
Cash at beginning of period 432 1,613
-------- --------
Cash at end of period $ 682 $ 400
======== ========
<FN>
See accompanying notes to
condensed consolidated financial statements.
-- Page 5 --
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 -- Basis of Presentation
- -----------------------------------
The unaudited consolidated financial statements are condensed and do not
contain all information required by generally accepted accounting principles to
be included in a full set of financial statements. The condensed consolidated
financial statements include Electro Rent Corporation and the accounts of its
wholly owned subsidiaries.
All intercompany balances and transactions have been eliminated. The
information furnished reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the financial position and the
results of operations of the Company. All such adjustments are of a normal
recurring nature.
Note 2 -- Net Income Per Common and Common Equivalent Share
- -----------------------------------
Earnings per share were computed based on the weighted average number of
common and common equivalent shares outstanding of 12,224,000 and 12,093,000 for
the three month periods ended August 31, 1995 and August 31, 1994. On July 13,
1995 the Board of Directors declared a three-for-two stock split to be
distributed August 18, 1995 to shareholders of record on July 31,1995. Earnings
per share and shares outstanding have been restated to give retroactive effect
to the stock split.
Note 3 -- Interest and Income Taxes Paid
- -------------------------------------------
Total interest paid during the three month periods ended August 31, 1995
and August 31, 1994 was $612,000 and $336,000, respectively. Total income taxes
paid during the three month period ended August 31, 1995 was $3,946,000 compared
with $2,467,000 during the comparable prior year period.
Note 4 -- Noncash Investing and Financing Activities
- -------------------------------------------------------
The Company had acquired equipment totaling $9,581,000 and $10,143,000 as
of August 31, 1995 and May 31, 1995, respectively, which was paid for during
subsequent quarters.
Note 5 -- Capital Leases
- ----------------------------
The Company has certain customer leases providing bargain purchase options
with a portion of lease revenue deferred until option exercise. At August 31,
1995 investment in sales-type leases of $2,265,000 net of deferred interest of
$66,000 is included in other assets. Interest income is recognized over the
life of the lease using the interest method.
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<PAGE>
Note 6 -- Acquisition
- ----------------------------
On September 30, 1994, the Company purchased all of the outstanding stock
of Genstar Rental Electronics, Inc. (Genstar), a privately-held company engaged
in the business of renting, leasing and selling computers, workstations and
general purpose test and measurement equipment. The purchase price, based on
Genstar's audited Net Worth at September 30, 1995, was $23.2 million, and
consisted of cash and assumed debt.
The acquisition has been accounted for by the purchase method and,
accordingly, the results of operations of Genstar have been included with those
of the Company since the date of acquisition.
-- Page 7 --
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------
Results of Operations
- ----------------------------
Total revenues increased 24% to $34,361,000 for the three month period
ended August 31, 1995, over the same period last year, due to a 29% increase in
rental and lease revenues and a 3% increase in sales and other revenues. The
increase in rental and lease revenues is due primarily to inclusion of Genstar's
operations since its acquisition on September 30, 1994, and increases in average
equipment utilization and rental yield. The increase in sales of equipment
related to Genstar was partially offset by a reduction in equipment available
for sale resulting from the higher utilization.
Depreciation expense increased 20% primarily as a result of the Genstar
acquisition, but improved utilization kept the growth rate lower than that of
rental and lease revenues. Costs of revenues other than depreciation increased
18% primarily due to the Genstar acquisition and higher parts expense. Selling,
general and administrative expenses increased 11% to $9,388,000, again as a
result of the Genstar acquisition, although the rate of increase was less than
that for revenues because of efficiencies gained by the integration of Genstar's
operations. For example, numerous duplicate facilities and functions were
eliminated shortly after the acquisition.
Interest expense increased 82% to $612,000 for the quarter, reflecting
borrowings to finance the Genstar acquisition and higher interest rates. As a
result of the foregoing, net income increased 48% to $5,254,000 for the three
months ended August 31, 1995, over the same period last year.
Financial Condition and Liquidity
- -----------------------------------
During the first three months of fiscal 1996, net cash provided by
operating activities was $13,729,000, compared to $11,567,000 for the same
period last year. This increase can be substantially attributed to increased
net income plus depreciation. Net cash used in investing activities remained
about the same in the current fiscal quarter, as compared to same quarter last
year. Net cash used in financing activities increased 20% to $4,787,000, as a
result of paying down bank borrowings to a greater extent this year compared to
last.
The Company expects cash flows as recorded in the first quarter to continue
at approximately the same levels for the rest of the fiscal year, if the
Company's average equipment utilization and rental yield remain at the record
levels reached near the end of the first quarter. While this portends well for
succeeding periods, the Company must continue to purchase substantial amounts of
new product to meet customers' demands for technologically current equipment.
-- Page 8 --
<PAGE>
Part II. OTHER INFORMATION
- ----------------------------
Items 1. through 3.
- ----------------------------
Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
(a) On October 5, 1995, the 1995 Annual Meeting of Shareholders of the
Registrant was held. Proxies pursuant to Regulation 14A were solicited in
connection with the meeting. 9,069,550 shares were present in person or by
proxy out of a total of 11,797,426 shares issued and outstanding and eligible to
vote on the record date.
(b) The meeting involved the election of directors. The following
directors were elected by the number of affirmative votes set opposite their
respective names:
Name Number of Votes
Gerald D. Barrone 8,879,698
Nancy Y. Bekavac 8,875,422
Daniel Greenberg 8,878,065
Joseph J. Kearns 8,877,673
Michael R. Peevey 8,878,297
Will Richeson, Jr. 8,880,198
William Weitzman 8,880,090
(c) Other matters submitted to a vote of security holders:
The shareholders ratified the appointment of Arthur Andersen LLP as the
registrant's independent public accountants for the current year. 8,868,043
shares were voted for, 4,082 were voted against, and 14,249 shares abstained
from voting.
Item 5.
- ----------------------------
Nothing to report.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------
Nothing to report.
-- Page 9 --
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
ELECTRO RENT CORPORATION
DATED: October 16, 1995 /s/ Daniel Greenberg
Daniel Greenberg
Chairman and Chief Executive Officer
DATED: October 16, 1995 /s/ William Weitzman
William Weitzman
President and Chief Operating Officer
DATED: October 16, 1995 /s/ Craig R. Jones
Craig R. Jones
Vice President and
Chief Financial Officer
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<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUN-1-1995
<PERIOD-END> AUG-31-1995
<PERIOD-TYPE> 3-MOS
<CASH> 682
<SECURITIES> 0
<RECEIVABLES> 20,421
<ALLOWANCES> 1,260
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 265,791
<DEPRECIATION> 129,057
<TOTAL-ASSETS> 164,318
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 8,716
<OTHER-SE> 48
<TOTAL-LIABILITY-AND-EQUITY> 164,318
<SALES> 5,748
<TOTAL-REVENUES> 34,361
<CGS> 5,760
<TOTAL-COSTS> 24,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 612
<INCOME-PRETAX> 8,905
<INCOME-TAX> 3,651
<INCOME-CONTINUING> 5,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,254
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
