-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KQ1yvJPYU1VzwH0qjCD77Wclbv8F+S1LiUNPdUUyyzIEbkvDEJjvMN64tGoWmj8a ouB3hSsIKuHZ2X+h57gtag== 0000032166-95-000002.txt : 19950417 0000032166-95-000002.hdr.sgml : 19950417 ACCESSION NUMBER: 0000032166-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRO RENT CORP CENTRAL INDEX KEY: 0000032166 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 952412961 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09061 FILM NUMBER: 95528807 BUSINESS ADDRESS: STREET 1: 6060 SEPULVEDA BLVD CITY: VAN NUYS STATE: CA ZIP: 91411 BUSINESS PHONE: 8187862525 10-Q 1 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 FEBRUARY 28, 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 April 13, 1995 registrant had 7,849,201 shares of common stock outstanding. ELECTRO RENT CORPORATION FORM 10-Q FEBRUARY 28, 1995 TABLE OF CONTENTS Page Part I: FINANCIAL INFORMATION Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended February 28, 1995 and February 28, 1994 3 Condensed Consolidated Balance Sheets at February 28, 1995 and May 31, 1994 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 1995 and February 28, 1994 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 -- Page 2 -- ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (000 omitted except per share data)
Three Months Ended Nine Months Ended February 28 February 28 1995 1994 1995 1994 -------- -------- -------- -------- Revenues: Rentals and leases $ 25,596 $ 20,541 $ 72,858 $ 62,960 Sales of equipment and other revenues 4,657 7,249 15,934 19,875 -------- -------- -------- -------- Total revenues 30,253 27,790 88,792 82,835 -------- -------- -------- -------- Costs and expenses: Depreciation of equipment 9,613 8,755 27,108 26,154 Costs of revenues other than depreciation 5,111 5,765 14,819 16,019 Selling, general and administrative expenses 9,485 8,001 27,712 25,052 Interest 788 439 1,697 1,475 -------- -------- -------- -------- Total costs and expenses 24,997 22,960 71,336 68,700 -------- -------- -------- -------- Income before income taxes 5,256 4,830 17,456 14,135 Income taxes 2,156 1,946 7,158 5,715 -------- -------- -------- -------- Net income $ 3,100 $ 2,884 $ 10,298 $ 8,420 ======== ======== ======== ======== Net income per share $ 0.40 $ 0.37 $ 1.31 $ 1.08 ======== ======== ======== ======== Average shares outstanding 7,848 7,835 7,845 7,831 ======== ======== ======== ======== See accompanying notes to condensed consolidated financial statements.
-- Page 3 -- ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (000 omitted) ASSETS
February 28 May 31 1995 1994 -------- -------- Cash $ 1,128 $ 1,613 Accounts receivable, net 19,368 15,338 Rental and lease equipment, net of accumulated depreciation 120,524 95,978 Other property, net of accumulated depreciation and amortization 18,952 18,649 Other 7,413 3,470 -------- -------- $ 167,385 $ 135,048 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank borrowings $ 44,800 $ 25,900 Accounts payable 13,945 11,703 Accrued expenses 10,434 6,986 Deferred income taxes 10,339 12,927 -------- -------- Total liabilities 79,518 57,516 -------- -------- Shareholders' equity Common stock 2,559 2,522 Additional paid-in capital 6,031 6,031 Retained earnings 79,277 68,979 -------- -------- Total shareholders' equity 87,867 77,532 -------- -------- $ 167,385 $ 135,048 ======== ======== See accompanying notes to condensed consolidated financial statements.
-- Page 4 -- ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (000 omitted)
Nine Months Ended February 28 1995 1994 -------- -------- Cash flows from operating activities: Net income $ 10,298 $ 8,420 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,231 27,078 Provision for losses on accounts receivable 145 271 Gain on sale of equipment (4,068) (5,077) Change in operating assets and liabilities, net of effects from purchase of subsidiary: Increase in accounts receivable (406) (2,131) (Increase) decrease in other assets 256 (737) Increase (decrease) in accounts payable (2,088) 88 Increase (decrease) in accrued expenses (102) 787 Decrease in deferred income taxes (2,967) (2,118) -------- -------- Net cash provided by operating activities 29,299 26,581 -------- -------- Cash flows from investing activities: Proceeds from sale of equipment 14,260 18,425 Purchase of subsidiary, net of cash acquired (7,174) - Payment for purchase of rental and lease equipment (40,185) (31,325) Payment for purchase of other property (769) (155) -------- -------- Net cash used in investing activities (33,868) (13,055) -------- -------- Cash flows from financing activities: Increase (decrease) in short-term bank borrowings 4,047 (14,200) Payment for retirement of subordinated debentures - (1) Proceeds from issuance of common stock 37 117 Payment for repurchase of common stock - (7) -------- -------- Net cash provided by (used in) financing activities 4,084 (14,091) -------- -------- Net decrease in cash (485) (565) Cash at beginning of period 1,613 1,121 -------- -------- Cash at end of period $ 1,128 $ 556 ======== ======== See accompanying notes to condensed consolidated financial statements.
-- Page 5 -- 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 Share - ----------------------------------- Earnings per common share were computed based on the weighted average number of shares outstanding of 7,847,750 and 7,835,205 in the three month periods ended February 28, 1995 and February 28, 1994, and 7,845,188 and 7,830,532 in the nine month periods ended February 28, 1995 and February 28, 1994, respectively. Note 3 -- Interest and Income Taxes Paid - ------------------------------------------- Total interest paid during the nine month periods ended February 28, 1995 and February 28, 1994 was $1,944,000 and $1,369,000, respectively. Total income taxes paid during the nine month period ended February 28, 1995 was $7,619,000 compared with $7,732,000 during the comparable prior year period. Note 4 -- Noncash Investing and Financing Activities - ------------------------------------------------------- The Company had acquired equipment totaling $12,030,000 and $9,763,000 as of February 28, 1995 and May 31, 1994, respectively, which was paid for during subsequent quarters. All cash flows are net of the effects from the purchase of a subsidiary on September 30, 1994. 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 February 28, 1995 investment in sales-type leases of $1,397,000 net of deferred interest of $82,000 is included in other assets. Interest income is recognized over the life of the lease using the interest method. 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, 1994, was $8.3 million, payable in cash. Additionally, the Company made cash payments of $15.2 million at closing to retire Genstar's outstanding debt. Financing for the transaction was achieved through additional short-term borrowings under Electro Rent's existing line of credit. -- Page 6 -- The acquistion 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. The purchase price based on audited Net Worth resulted in an excess of acquisition costs over net assets acquired of approximately $100,000. Such excess and acquired intangibles of $4.3 million are being amortized on a straight-line basis over twenty years. The following unaudited pro forma summary for the nine month periods ended February 28, 1995 and 1994, combines the consolidated results of operations of the Company and Genstar as if the acquisition had occurred at the beginning of the respective fiscal years after giving effect to certain adjustments, including amortization of goodwill, depreciation charges, estimated changes in interest expense due to debt retirement and acquisition debt, and related income tax effects. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect on the dates indicated, or which may occur in the future.
For the Nine Months Ended February 28, 1995 1994 - ------------------------------------------- -------- -------- (In thousands, except per share data) Net Revenue $ 96,477 $100,195 Net income 9,939 9,146 Earnings per common share 1.27 1.17 Average shares outstanding 7,845 7,831
-- Page 7 -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------- Results of Operations - ---------------------------- Total revenues increased by 9% to $30,253,000 for the three month period ended February 28, 1995, as compared to the same period last year, due to a 25% increase in rental and lease revenue, which was partially offset by a 36% decrease in sales and other revenues. For the nine months ended February 28, 1995 total revenues increased by 7% to $88,792,000, as a result of 16% higher rental and lease revenue, which was partially offset by 20% lower sales and other revenues, as compared to the same period last year. Net income increased by 7% to $3,100,000 for the third quarter of fiscal 1995 when compared with $2,884,000 for the same period last year. The results reflect the interim effects of the acquisition of Genstar Rental Electronics, Inc. on September 30, 1994. Since its acquisition, Genstar's operations have been fully evaluated and the necesssary steps have been taken to maximize efficiencies through the consolidation of facilities and functions. The integration process has now been largely completed and it is expected that the Company will be able to achieve a cost structure for Genstar's remaining operations which will be approximately one-half of its pre-acquisition level. The benefits of these efforts have begun to be realized in the third quarter and will continue in the fourth quarter. Genstar contributed an estimated $1.5 million per month to third quarter revenues, a strong indication that its revenue and customer base have been retained. For both the three and nine months periods ended February 28, 1995, there have been significant increases in rentals of personal computers and workstations, and test and measurement equipment rentals have increased modestly. Reductions in defense spending continue to negatively impact the overall test and measurement equipment market; however, the Company's market share has expanded. Equipment sales decreased by 38% for the quarter and 23% year to date as compared to the same periods last year due primarily to the winding down of a major leasing program last year which produced unusually large used equipment sales in that period, higher rental utilization, and increasing sales of PCs and workstations, which have lower residual values than test and measurement equipment. Sales and other revenues decreased from $7,249,000 to $4,657,000 for the three months ended February 28, 1995 and from $19,875,000 to $15,934,000 for the nine months then ended. Costs of revenues other than depreciation for the three and nine month periods ended February 28, 1995 decreased by 11% and 7%, respectively, when compared to the same prior year periods. The decreases result from lower equipment sales, which were partially offset by higher parts expense. Interest expense increased by 79% for the third quarter and by 15% for the first nine months of fiscal 1995 from the comparable periods of the prior year. Interest rates were higher for the three and nine month periods of fiscal 1995, and bank borrowings were lower until the September 30, 1994 acquisition of Genstar, when $25 million of additional bank borrowings were required. -- Page 8 -- Financial Condition and Liquidity - ----------------------------------- During the first nine months of fiscal 1995, net cash provided by operating activities was $29,299,000 as compared with $26,581,000 in the same period of fiscal 1994, primarily reflecting cash flow improvements related to higher income before depreciation and gain on sale of equipment. Net cash used in investing activities increased by 159% from $13,055,000 to $33,868,000, reflecting the purchase of Genstar, increased purchases of rental and lease equipment, and lower sales proceeds. As a result, during the nine months ended February 28, 1995, the Company increased short-term bank borrowings by $4,047,000, net of the effects from the purchase of Genstar. With the expected continued growth in rentals of personal computers, workstations, and test and measurement equipment, the Company is projecting purchases of equipment to remain higher than last year. However, cash flow provided by operating activities is expected to improve during the remainder of the year, as revenues continue to increase and Genstar consolidation savings are realized, resulting in a reduction of bank borrowings. Part II. OTHER INFORMATION - ---------------------------- Items 1. through 3. - ---------------------------- Nothing to report. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ Nothing to report. Item 5. - ---------------------------- Nothing to report. Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------- Nothing to report. -- Page 9 -- 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: April 13, 1995 /s/ Daniel Greenberg Daniel Greenberg Chairman and Chief Executive Officer DATED: April 13, 1995 /s/ William Weitzman William Weitzman President and Chief Operating Officer DATED: April 13, 1995 /s/ Craig R. Jones Craig R. Jones Vice President and Chief Financial Officer -- Page 10 -- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 MAY-31-1994 JUN-1-1994 FEB-28-1995 9-MOS 1,128 0 20,628 1,260 0 0 268,533 129,057 167,385 0 0 0 0 2,559 85,308 167,385 15,934 88,792 14,819 69,639 0 0 1,697 17,456 7,158 10,298 0 0 0 10,298 1.31 1.31
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