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, 1996
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 2, 1996 registrant had 11,953,363 shares of common stock
outstanding.
<PAGE>
ELECTRO RENT CORPORATION
FORM 10-Q
AUGUST 31, 1996
TABLE OF CONTENTS
Page
Part I: FINANCIAL INFORMATION
Condensed Consolidated Statements of Income for the Three Months
ended August 31, 1996 and August 31, 1995 3
Condensed Consolidated Balance Sheets at
August 31, 1996 and May 31, 1996 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended August 31, 1996 and August 31, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II: OTHER INFORMATION 8
SIGNATURES 9
Page 2
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<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (000 omitted except per share data)
<CAPTION>
Three Months Ended
August 31
1996 1995
--------- ---------
<S> <C> <C>
Revenues:
Rentals and leases $ 32,380 $ 28,613
Sales of equipment
and other revenues 5,764 5,748
--------- ---------
Total revenues 38,144 34,361
--------- ---------
Costs and expenses:
Depreciation of equipment 11,007 9,696
Costs of revenues other
than depreciation 5,563 5,760
Selling, general and
administrative expenses 10,179 9,388
Interest 300 612
--------- ---------
Total costs and expenses 27,049 25,456
--------- ---------
Income before income taxes 11,095 8,905
Income taxes 4,548 3,651
--------- ---------
Net income $ 6,547 $ 5,254
========= =========
Net income per common and common
equivalent share $ 0.53 $ 0.43
========= =========
Average common and common
equivalent shares outstanding 12,426 12,224
========= =========
<FN>
See accompanying notes to
condensed consolidated financial statements.
</TABLE>
Page 3
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<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (000 omitted)
ASSETS
<CAPTION>
August 31 May 31
1996 1996
--------- ---------
<S> <C> <C>
Cash $ 926 $ 1,394
Accounts receivable, net 21,064 20,598
Rental and lease equipment, net
of accumulated depreciation 123,350 122,206
Other property, net of accumulated
depreciation and amortization 19,214 19,323
Other 7,847 7,907
--------- ---------
$ 172,401 $ 171,428
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank borrowings $ 12,200 $ 16,800
Accounts payable 12,068 16,433
Accrued expenses 15,306 11,876
Deferred income taxes 11,562 11,696
--------- ---------
Total liabilities 51,136 56,805
--------- ---------
Shareholders' equity
Common stock 9,536 9,441
Retained earnings 111,729 105,182
--------- ---------
Total shareholders' equity 121,265 114,623
--------- ---------
$ 172,401 $ 171,428
========= =========
<FN>
See accompanying notes to
condensed consolidated financial statements.
</TABLE>
Page 4
<PAGE>
<TABLE>
ELECTRO RENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (000 omitted)
<CAPTION>
Three Months Ended
August 31
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,547 $ 5,254
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,440 10,098
Provision for losses on accounts receivable 188 173
Gain on sale of equipment (1,573) (1,675)
Change in operating assets and liabilities:
Increase in accounts receivable (654) (1,734)
Increase (decrease) in other assets (90) 109
Decrease in accounts payable (932) (1,318)
Increase in accrued expenses 3,430 3,370
Decrease in deferred income taxes (134) (548)
--------- ---------
Net cash provided by operating activities 18,222 13,729
--------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 5,183 5,247
Payments for purchase of rental and lease equipment (19,194) (13,789)
Payments for purchase of other property (174) (150)
--------- ---------
Net cash used in investing activities (14,185) (8,692)
--------- ---------
Cash flows from financing activities:
Decrease in short-term bank borrowings (4,600) (4,900)
Proceeds from issuance of common stock 95 119
Payments for repurchase of common stock - (6)
--------- ---------
Net cash used in financing activities (4,505) (4,787)
--------- ---------
Net increase (decrease) in cash (468) 250
Cash at beginning of period 1,394 432
--------- ---------
Cash at end of period $ 926 $ 682
========= =========
<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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 12,426,000 and 12,224,000
for the three month periods ended August 31, 1996 and 1995, respectively.
Note 3 -- Interest and Income Taxes Paid
- -------------------------------------------
Total interest paid during the three month period ended August 31, 1996
and 1995 was $296,000 and $612,000, respectively. Total income taxes paid
during the three month period ended August 31, 1996 was $583,000 compared to
$3,946,000 during the same period in the prior year.
Note 4 -- Noncash Investing and Financing Activities
- -------------------------------------------------------
The Company had acquired equipment totaling $12,399,000 and $15,832,000
as of August 31, 1996 and May 31, 1996, 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, 1996 investment in sales-type leases of $1,044,000 net of deferred
interest of $59,000 is included in other assets. Interest income is
recognized over the life of the lease using the interest method.
Page 6
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------
Results of Operations
- ----------------------------
Total revenues increased 11% to $38,144,000 for the three month period
ended August 31, 1996, over the same period last year, due to a 13% increase
in rental and lease revenues, while sales and other revenues were essentially
unchanged.
The increase in rental and lease revenues for the first three months is
primarily due to increases in rental equipment utilization, personal computer
leasing and lease yields. Sales of equipment remained unchanged due to a
reduction in equipment available for sale resulting from higher rental
equipment utilization.
For the three month period ended August 31, 1996 depreciation expense
increased 14%, as compared to the prior year, due to increases in the pool of
equipment for rental and lease.
Costs of revenues other than depreciation decreased 3% for the first
quarter mostly due to lower parts and accessories expense.
Selling, general and administrative expenses increased 8% in the first
quarter compared to last year, due in part to a rise in the total number of
employees. The increase in staffing can be attributed to opening of new
offices, the purchase of LDI in March 1996, and the general staff expansion
associated with greater business volume.
Interest expense decreased 51% in the first quarter reflecting lower
borrowings due to strong cash flows.
Financial Condition and Liquidity
- -----------------------------------
During the first three months of fiscal 1997, net cash provided by
operating activities was $18,222,000, compared to $13,729,000 for the same
period last year. This increase can be substantially attributed to increased
net income, depreciation, and receivables collections, as well as lower
payments of accounts payable. Net cash used in investing activities for the
three month period increased from $8,692,000 in fiscal 1996 to $14,185,000 in
fiscal 1997, primarily due to substiantially greater payments for purchase of
rental and lease equipment. Short-term bank borrowings decreased $4,600,000
during the first three months of fiscal 1997 as a result of continued positive
cash flows, which compared with a $4,900,000 decrease in the prior year
period.
The Company expects cash flows as recorded in the first three months to
continue at approximately the same levels for the rest of the fiscal year, if
the Company's average equipment utilization and rental yield continue to
remain at the comparatively high levels experienced during the the first
quarter.
While this is a positive indicator for future periods, the Company must
continue to purchase substantial amounts of new product to meet customers'
demands for technologically up-to-date equipment.
<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 3, 1996, the 1996 Annual Meeting of Shareholders of
the Registrant was held. Proxies pursuant to Regulation 14A were solicited in
connection with the meeting. 10,982,943 shares were present in person or by
proxy out of a total of 11,927,846 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 10,944,019
Nancy Y. Bekavac 10,940,145
Daniel Greenberg 10,944,551
Joseph J. Kearns 10,944,154
Michael R. Peevey 10,939,464
Will Richeson, Jr. 10,944,019
William Weitzman 10,944,551
(c) Other matters submitted to a vote of security holders:
The shareholders voted to approve the Electro Rent Corporation 1996 Stock
Option Plan. 10,199,344 shares were voted for, 560,288 were voted against,
and 47,909 shares abstained.
The shareholders voted to approve the Electro Rent Corporation 1996 Director
Option Plan. 10,324,493 shares were voted for, 431,805 were voted against,
and 51,243 shares abstained.
The shareholders ratified the appointment of Arthur Andersen LLP as the
registrant's independent public accountants for the current year. 10,937,722
shares were voted for, 9,728 were voted against, and 35,493 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 3, 1996 /s/ Daniel Greenberg
Daniel Greenberg
Chairman and Chief Executive Officer
DATED: October 3, 1996 /s/ William Weitzman
William Weitzman
President and Chief Operating
Officer
DATED: October 3, 1996 /s/ Craig R. Jones
Craig R. Jones
Vice President and
Chief Financial Officer
Page 10
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-1-1996
<PERIOD-END> AUG-31-1996
<PERIOD-TYPE> 3-MOS
<CASH> 926
<SECURITIES> 0
<RECEIVABLES> 22,692
<ALLOWANCES> 1,628
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 270,657
<DEPRECIATION> 128,093
<TOTAL-ASSETS> 172,401
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 9,536
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 172,401
<SALES> 5,764
<TOTAL-REVENUES> 38,144
<CGS> 5,563
<TOTAL-COSTS> 26,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 11,095
<INCOME-TAX> 4,548
<INCOME-CONTINUING> 6,547
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,547
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
