☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
CALIFORNIA | 95-2412961 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock without par value | The NASDAQ Stock Market LLC |
Large Accelerated Filer | ☐ | Accelerated Filer | ☒ | |||
Non-Accelerated Filer | ☐ | (Do not check if a smaller reporting company) | Smaller Reporting Company | ☐ |
• | Customer Service. Our customer service responsiveness and expert technical staff provide us with a key competitive advantage. Our resale channel for T&M equipment in the United States and Canada has enabled us to substantially expand the number and technical expertise of our T&M sales force which, at approximately 100 persons worldwide, is already the largest among our principal competitors. |
• | Trusted Brand. We believe our management team is the most experienced and stable in the industry, with our executive officers averaging 30 years at Electro Rent. In 2008, 2009 and 2014, Forbes magazine named us as one of the “100 Most Trustworthy Companies” out of more than 8,000 publicly traded companies for “transparent and conservative accounting practices and solid corporate governance and management.” We were also honored as a Frost & Sullivan 2012 Company of the Year. |
• | Global Platform. We have locations in North America, Asia and Europe. Our size and reach may appeal to multinational customers and assists us in maximizing our equipment utilization and equipment pool management across different geographic markets. The majority of our rental equipment not out on rent is located at our Van Nuys, California warehouse and service center that is compliant with ISO9001:2008 (DEKRA certification), ISO17025:2005 (A2LA accreditation) and ANSI/NCSLI Z540.3-2006 (A2LA accreditation). We also service our customers through sales offices and calibration and service centers in the United States, Canada, China and Belgium, which are linked by a proprietary computer system. These centers also function as depots for the sale of used equipment. |
• | Multichannel Offerings. Our business offers customers a single source for their equipment needs, whether they want to rent, lease or buy new or used equipment. We believe that we offer the greatest breadth of acquisition options in the industry, allowing our customers to match the appropriate option to their usage and capital needs, budget and other factors, such as accounting rules and regulatory requirements. In addition, spreading costs over multiple channels allows us to maintain the largest sales force among our principal competitors, which in turn broadens and deepens our customer contacts and provides them more technical strength and assistance. |
• | Equipment Management. To maximize our overall profit, we manage our equipment pool on an on-going basis by controlling the timing, pricing and mix of our purchases and sales of equipment. We acquire new and used equipment to meet current and anticipated customer demand and stay abreast of current technical standards. We sell our used equipment when we believe that is the most lucrative option. We employ a complex equipment management strategy and our proprietary PERFECT software to adjust our equipment pool and pricing in order to maximize equipment availability, utilization and profitability. Our PERFECT software is designed to provide real time pricing and availability on our global equipment pool, ensure rapid order fulfillment and improve overall customer service. |
Fiscal Year ended May 31, (in thousands) | 2016 | 2015 | 2014 | ||||||||
Revenues: 1 | |||||||||||
U.S. | $ | 141,535 | $ | 200,323 | $ | 203,806 | |||||
Other 2 | 33,798 | 38,006 | 37,331 | ||||||||
Total | $ | 175,333 | $ | 238,329 | $ | 241,137 |
As of May 31, (in thousands) | 2016 | 2015 | 2014 | ||||||||
Net Long Lived Assets: 3 | |||||||||||
U.S. | $ | 168,331 | $ | 197,514 | $ | 188,343 | |||||
Other 2 | 43,583 | 47,277 | 46,667 | ||||||||
Total | $ | 211,914 | $ | 244,791 | $ | 235,010 |
1 | Revenues by country are based on the shipping destination. |
2 | Other consists of countries other than the U.S. Each foreign country individually accounts for less than 10% of the total consolidated revenues and net long-lived assets. |
3 | Net long-lived assets include rental and lease equipment and other property, net of accumulated depreciation and amortization. |
Fiscal Year ended May 31, (in thousands) | T&M | DP | Total | ||||||||
2016 | |||||||||||
Rentals and leases | $ | 105,850 | $ | 17,935 | $ | 123,785 | |||||
Sales of equipment and other revenues | 49,518 | 2,030 | 51,548 | ||||||||
Segment and consolidated total | $ | 155,368 | $ | 19,965 | $ | 175,333 | |||||
2015 | |||||||||||
Rentals and leases | $ | 111,327 | $ | 17,928 | $ | 129,255 | |||||
Sales of equipment and other revenues | 107,270 | 1,804 | 109,074 | ||||||||
Segment and consolidated total | $ | 218,597 | $ | 19,732 | $ | 238,329 | |||||
2014 | |||||||||||
Rentals and leases | $ | 120,629 | $ | 16,788 | $ | 137,417 | |||||
Sales of equipment and other revenues | 101,898 | 1,822 | 103,720 | ||||||||
Segment and consolidated total | $ | 222,527 | $ | 18,610 | $ | 241,137 |
2016 | 2015 | 2014 | |||||||||
T&M | $ | 51,669 | $ | 52,278 | $ | 52,652 | |||||
DP | 4,262 | 4,167 | 4,382 | ||||||||
Segment and consolidated total | $ | 55,931 | $ | 56,445 | $ | 57,034 |
2016 | 2015 | 2014 | |||||||||
T&M | $ | 38,527 | $ | 50,410 | $ | 58,924 | |||||
DP | 6,695 | 6,914 | 5,962 | ||||||||
Total marginal contribution of operating segments | 45,222 | 57,324 | 64,886 | ||||||||
Deduct: | |||||||||||
Unallocated SG&A expenses | 37,139 | 34,396 | 32,747 | ||||||||
Add: | |||||||||||
Interest income, net | (329 | ) | 332 | 387 | |||||||
Other income | 33 | 1,390 | — | ||||||||
Consolidated income before income taxes | $ | 7,787 | $ | 24,650 | $ | 32,526 |
• | announcements of developments related to our business; |
• | announcements concerning new products or enhancements in the equipment that we rent, or developments in our relationships with our customers; |
• | announcements regarding the expiration of the Keysight reseller agreement and the establishment of new reseller or sales agent arrangements; |
• | variations in our revenues, gross margins, earnings or other financial results from investors’ expectations; and |
• | fluctuations in results of our operations and general conditions in the economy, our market, and the markets served by our customers. |
• | our acquisition cost; |
• | our estimates of current and future market demand for rentals; |
• | our estimates of current and future supply of equipment; |
• | the book value of the equipment after depreciation and other impairment; |
• | our estimates of the effect of interest rates on rental and leasing fees as well as capital financing; and |
• | our estimates of the potential current and future sale prices of equipment. |
• | changes in customer demands and/or requirements; |
• | changes in pricing or maintenance policies of equipment manufacturers; |
• | price competition from other rental, leasing and finance companies; |
• | the timing of new product announcements and launches; |
• | mix of rental versus resale revenues; |
• | changes in interest rates; |
• | changes in product delivery dates; |
• | currency fluctuations and other risks of international operations; and |
• | changes and reductions to government spending that could negatively impact our customers in the aerospace and defense industry. |
• | proper identification of customer needs; |
• | appropriate control of costs; |
• | timely completion and introduction of products and services as compared to our competitors; |
• | our ability to differentiate our equipment and services from our competitors; and |
• | appropriate pricing and market acceptance of our solutions. |
• | international political and economic conditions; |
• | changes in government regulation in various countries; |
• | trade barriers; |
• | difficulty in staffing our foreign sales and service centers, and in training and retaining foreign employees; |
• | issues relating to the repatriation of any profits; |
• | adverse tax consequences; and |
• | costs associated with expansion into new territories. |
• | the difficulty of integrating acquired operations and personnel with our existing operations; |
• | the difficulty of developing and marketing new products and services; |
• | the diversion of our management’s attention as a result of evaluating, negotiating and integrating acquisitions or new business ventures; |
• | our exposure to unforeseen liabilities of acquired companies; and |
• | the loss of key employees of an acquired operation. |
• | charges to our income to reflect the impairment of acquired intangible assets, including goodwill; |
• | interest costs and debt service requirements for any debt incurred in connection with an acquisition or new business venture; and |
• | any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current shareholders. |
• | the right of our board of directors to issue preferred stock with rights and privileges that are senior to the Common Stock, without prior shareholder approval; and |
• | certain limitations of the rights of shareholders to call a special meeting of shareholders. |
Fiscal Year 2016 | Fiscal Year 2015 | ||||||||||||||
High | Low | High | Low | ||||||||||||
First Quarter | $ | 11.71 | $ | 9.72 | $ | 17.37 | $ | 14.85 | |||||||
Second Quarter | 11.67 | 9.78 | 15.53 | 13.27 | |||||||||||
Third Quarter | 10.80 | 7.30 | 14.97 | 12.52 | |||||||||||
Fourth Quarter | 13.13 | 8.26 | 13.11 | 9.97 |
Number of shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of shares of Common Stock remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) (c) | ||
— | — | 238,720 |
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||
Electro Rent Corporation | 100 | 95 | 131 | 130 | 87 | 117 | |||||||||||
NASDAQ Composite | 100 | 101 | 125 | 155 | 188 | 186 | |||||||||||
Russell 2000 | 100 | 91 | 119 | 139 | 155 | 146 | |||||||||||
Value Line Industrial Services | 100 | 93 | 116 | 150 | 185 | 193 |
Fiscal year ended May 31, | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 (1) | |||||||||||||||
Operations data: | |||||||||||||||||||
Revenues | $ | 175,333 | $ | 238,329 | $ | 241,137 | $ | 248,731 | $ | 248,554 | |||||||||
Costs of revenues and depreciation | 107,096 | 156,088 | 150,078 | 155,477 | 159,218 | ||||||||||||||
Selling, general and administrative expenses | 60,154 | 59,313 | 58,920 | 56,543 | 53,250 | ||||||||||||||
Operating profit | 8,083 | 22,928 | 32,139 | 36,711 | 36,086 | ||||||||||||||
Bargain purchase gain, net (2) | — | — | — | — | 3,435 | ||||||||||||||
Interest income/(expense), net | (329 | ) | 332 | 387 | 402 | 484 | |||||||||||||
Other income | 33 | 1,390 | — | — | — | ||||||||||||||
Income before income taxes | 7,787 | 24,650 | 32,526 | 37,113 | 40,005 | ||||||||||||||
Income tax provision | 3,003 | 9,218 | 12,118 | 14,359 | 14,233 | ||||||||||||||
Net income | $ | 4,784 | $ | 15,432 | $ | 20,408 | $ | 22,754 | $ | 25,772 | |||||||||
Earnings per share: | |||||||||||||||||||
Basic | $ | 0.20 | $ | 0.63 | $ | 0.84 | $ | 0.94 | $ | 1.07 | |||||||||
Diluted | $ | 0.20 | $ | 0.63 | $ | 0.84 | $ | 0.94 | $ | 1.07 | |||||||||
Shares used in per share calculation: | |||||||||||||||||||
Basic | 24,414 | 24,360 | 24,325 | 24,226 | 23,983 | ||||||||||||||
Diluted | 24,429 | 24,378 | 24,357 | 24,269 | 24,152 | ||||||||||||||
Balance sheet data (at end of year): | |||||||||||||||||||
Total assets | $ | 284,577 | $ | 300,314 | $ | 302,058 | $ | 318,926 | $ | 329,831 | |||||||||
Bank borrowings | $ | — | $ | 2,387 | $ | — | $ | 10,000 | $ | — | |||||||||
Shareholders’ equity | $ | 221,499 | $ | 227,978 | $ | 230,958 | $ | 228,549 | $ | 248,131 | |||||||||
Shareholders’ equity per common share | $ | 9.15 | $ | 9.46 | $ | 9.62 | $ | 9.52 | $ | 10.34 | |||||||||
Cash dividends declared per common share | $ | 0.50 | $ | 0.80 | $ | 0.80 | $ | 1.80 | $ | 0.80 |
(1) | Includes the post-acquisition operating results and year-end balance sheet information for the assets acquired from Equipment Management Technology, Inc. ("EMT") on August 24, 2011. |
(2) | The estimated fair value of the net assets acquired from EMT in fiscal 2012 exceeded the acquisition cost, resulting in bargain purchase gains with respect to that transaction. |
• | Rental and Lease Business. We rent and lease state-of-the-art electronic equipment. We maintain an equipment portfolio comprising T&M and DP equipment purchased from leading manufacturers, which we warehouse in various locations around the world to enable us to serve rental and lease customers. |
• | Used Equipment Sales. We sell used T&M and DP equipment that we previously held for rent and lease. Used equipment is sold at substantial discounts compared to new equipment, and provides an economic advantage for customers seeking ownership of used equipment. All of our used equipment has been maintained and serviced by our professional maintenance team, and our customers have confidence in the quality of the used equipment purchased from us. |
• | New Equipment Sales. We sell new T&M equipment. We were, through May 31, 2015, an authorized reseller of certain new Keysight (formerly Agilent) T&M products and services to small and medium size customers in the United States and Canada. Substantially all of our new equipment sales were through our Keysight reseller agreement. |
• | our rental and lease revenues decreased by 4.2% to $123.8 million from $129.3 million primarily due to decreases in rental/lease rates as a result of a negative effect of a decline in foreign exchange rates and competition and, to a lesser degree, lower demand in certain industries we serve; |
• | our sales of equipment and other revenues decreased by 52.7% to $51.5 million from $109.1 million primarily due to a decrease in new equipment sales as a result of the expiration of the Keysight reseller agreement on May 31, 2015; |
• | our operating profit decreased 64.7% to $8.1 million from $22.9 million primarily due to the decrease in sales of new equipment revenues without a commensurate decrease in SG&A expenses; |
• | our net income decreased by 69% to $4.8 million from $15.4 million; |
• | our net income per diluted common share (EPS) decreased 68.3% to $0.20 from $0.63; |
• | our net income as a percentage of average assets declined to 1.6% from 5.1%; and |
• | our net income as a percentage of average equity declined to 2.1% from 6.7%. |
• | our rental and lease revenues decreased by 5.9% to $129.3 million from $137.4 million primarily due to decreases in average T&M equipment on rent and lease and decreases in rates due to competition, changes in product mix and the negative effect of fluctuations in foreign exchange rates; |
• | our sales of equipment and other revenues increased by 5.2% to $109.1 million from $103.7 million primarily due to an increase in new equipment sales as a result of increased demand; |
• | our operating profit decreased 28.7% to $22.9 million from $32.1 million primarily due to the decrease in rental and lease revenues and changes in product mix; |
• | our net income decreased by 24.4% to $15.4 million from $20.4 million; |
• | our net income per diluted common share (EPS) decreased 25.0% to $0.63 from $0.84; |
• | our net income as a percentage of average assets declined to 5.1% from 6.5%; and |
• | our net income as a percentage of average equity declined to 6.7% from 8.8%. |
Fiscal Year | |||||||
2016 | 2015 | ||||||
T&M rental and lease revenue | $ | 105,850 | $ | 111,327 | |||
DP rental and lease revenue | 17,935 | 17,928 | |||||
$ | 123,785 | $ | 129,255 |
Fiscal Year | |||||||
2016 | 2015 | ||||||
Sales of new equipment | $ | 17,385 | $ | 72,846 | |||
Sales of used equipment and other revenues | 34,163 | 36,228 | |||||
$ | 51,548 | $ | 109,074 |
Fiscal Year | ||||||||||
Average acquisition cost of equipment on rent and lease (in millions) | 2016 | 2015 | Change | |||||||
T&M | $ | 257.7 | $ | 257.6 | — | % | ||||
DP | $ | 12.7 | $ | 13.0 | (2.3 | )% |
Fiscal Year | |||||||
2015 | 2014 | ||||||
T&M rental and lease revenue | $ | 111,327 | $ | 120,629 | |||
DP rental and lease revenue | 17,928 | 16,788 | |||||
$ | 129,255 | $ | 137,417 |
Fiscal Year | |||||||
2015 | 2014 | ||||||
Sales of new equipment | $ | 72,846 | $ | 65,813 | |||
Sales of used equipment and other revenues | 36,228 | 37,907 | |||||
$ | 109,074 | $ | 103,720 |
Fiscal Year | ||||||||||
Average acquisition cost of equipment on rent and lease (in millions) | 2015 | 2014 | Change | |||||||
T&M | $ | 257.6 | $ | 264.1 | (2.5 | )% | ||||
DP | $ | 13.0 | $ | 11.7 | 11.1 | % |
(in thousands) | Fiscal Three Years Ended May 31, 2016 | 2016 | 2015 | 2014 | |||||||||||
Cash flows from operating activities1 | $ | 154,160 | $ | 52,355 | $ | 52,619 | $ | 49,186 | |||||||
Proceeds from sale of used equipment | 102,551 | 33,066 | 34,261 | 35,224 | |||||||||||
Total cash flows | 256,711 | 85,421 | 86,880 | 84,410 | |||||||||||
Payments for equipment purchases | (173,703 | ) | (44,071 | ) | (70,954 | ) | (58,678 | ) | |||||||
Total cash flows as percentage of payments for equipment purchases | 148 | % | 194 | % | 122 | % | 144 | % |
Payments due by period | |||||||||||||||||||
Contractual Obligations (in thousands) | Total | 1 year | 2-3 years | 3-5 years | More than 5 years | ||||||||||||||
Facility lease payments, not including property taxes and insurance | $ | 1,524 | $ | 706 | $ | 707 | $ | 111 | $ | — | |||||||||
Severance payments | 2,476 | 2,454 | 22 | — | — | ||||||||||||||
Total | $ | 4,000 | $ | 3,160 | $ | 729 | $ | 111 | $ | — |
Name | Age | |
Nancy Y. Bekavac | 69 | |
Karen J. Curtin | 61 | |
Daniel Greenberg | 75 | |
Joseph J. Kearns | 74 | |
James S. Pignatelli | 72 | |
Theodore E. Guth | 61 |
Named Executive Officer | Age | Office or Offices | |||
Daniel Greenberg 1 | 75 | Chairman of the Board and Chief Executive Officer | |||
Steven Markheim 1 | 63 | President and Chief Executive Officer | |||
Craig Jones 2 | 70 | Vice President and Chief Financial Officer | |||
Allen Sciarillo 2 | 51 | Vice President and Chief Financial Officer | |||
Herb F. Ostenberg | 66 | Senior Vice President, North American Sales |
• | Selecting, retaining and overseeing our independent auditors and approving their fees and engagement terms; |
• | Resolving any disagreement between our independent auditors and our management; and |
• | Pre-approving all audit and non-audit services performed by our independent auditors, subject to a de minimis exception. |
• | reviews the definition of independent director; |
• | investigates potential conflicts of interest and related party transactions; |
• | recommends committee assignments; and |
• | reviews our Code of Business Conduct and Ethics, corporate governance guidelines and committee charters. |
• | review and approve the corporate goals and objectives for our Chief Executive Officer and set our Chief Executive Officer’s compensation; |
• | review and approve the evaluation process and compensation structure for our other executive officers and approve their compensation; |
• | review the performance of our executive officers, including our Chief Executive Officer; |
• | review and approve employment, severance or termination agreements with our executive officers; |
• | oversee our policies relating to compensation of our employees; and |
• | as appropriate, approve grants of equity incentives, including stock options and restricted stock units, to our employees, and make recommendations to our Board with respect to incentive compensation plans and equity-based plans and administer those plans that include our officers. |
Title | Share Equivalents | Multiple of Base Salary/Retainer | ||
Chief Executive Officer | 120,000 | 4x | ||
Other executive officers | 50,000 | 3x | ||
Directors | 12,500 | 3x |
• | Compensation should be meaningfully related to the value created for our shareholders. |
• | Compensation programs should support our short-term and long-term strategic goals and objectives. |
• | Compensation programs should reflect and promote our values. |
Agilysys, Inc. | Measurement Specialties, Inc. | |
Aircastle Ltd | Mobile Mini Inc. | |
CAI International Inc. | PC Connection, Inc. | |
Extreme Networks, Inc. | PCM, Inc. | |
Globecomm Systems, Inc. | Richardson Electronics, Ltd. | |
GSI Group Inc. | ScanSource, Inc. | |
H&E Equipment Services, Inc. | Symmetricom, Inc. | |
Maxwell Technologies Inc. | TAL International Group, Inc. | |
McGrath RentCorp | Willis Lease Finance Corporation |
Named Executive Officer | Fiscal 2015 Base Salary | Fiscal 2016 Base Salary | Percentage Change from Fiscal 2015 | Fiscal 2017 Base Salary | Percentage Change from Fiscal 2016 | |||||
Daniel Greenberg | $509,028 | $407,222 | (20.0)% | $— | (100.0)% | |||||
Steven Markheim | $348,282 | $348,282 | —% | $400,000 | 14.8% | |||||
Craig R. Jones | $251,835 | $251,835 | —% | $— | (100.0)% | |||||
Allen Sciarillo | $225,000 | $225,000 | —% | $260,000 | 15.6% | |||||
Herb F. Ostenberg | $223,946 | $223,946 | —% | $223,946 | —% |
• | May adjust the Target Percentage where appropriate to reflect changes in responsibilities and similar issues; |
• | Evaluates the performance of each officer against the performance goals for that officer and other factors in its discretion. For Messrs. Greenberg, Markheim and Sciarillo, their principal performance goals for fiscal 2016 were based on the Company’s planned revenue and earnings before taxes. In fiscal 2016, the Company’s revenue was approximately 14% below plan and the Company’s earnings before taxes were approximately 58% below plan; |
• | Based on that evaluation, assigns each officer a “Participation Percentage” that is generally not less than 85% of his or her Target Percentage nor more than 115% of his or her Target Percentage; and |
• | Each participating officer’s actual Annual Incentive Bonus is then determined by multiplying his or her Participation Percentage times his or her Target Percentage, and then multiplying that percentage by the aggregate bonus pool. The Compensation Committee retains the power to adjust the calculated Annual Incentive Bonus for any participating officer in its discretion. |
Named Executive Officer | Fiscal 2016 Target Percentage | Fiscal 2016 Participation Percentage | Fiscal 2016 Target Bonus 1 | Fiscal 2016 Actual Bonus | ||||||
Daniel Greenberg | 22.8% | 19.3% | $90,000 | $77,000 | ||||||
Steven Markheim | 25.0% | 24.9% | $99,000 | $99,400 | ||||||
Allen Sciarillo | 6.8% | 14.3% | $27,000 | $57,200 | ||||||
Herb F. Ostenberg | 8.2% | 7.0% | $32,000 | $27,800 |
1 | The “Target” amount for each named executive officer was calculated by multiplying (i) the total of the incentive bonus pool, at 3% of our actual fiscal 2016 earnings before taxes (adjusted for acquisition related charges and Mr. Greenberg's severance), by (ii) that named executive officer’s fiscal 2016 Target Percentage assigned at the beginning of the fiscal year (rounded to the nearest thousand). |
• | Mr. Greenberg received a Participation Percentage of 85%, based on the Company’s disappointing financial performance compared to its planned revenue and earnings before taxes. As a result of this Participation Percentage and the overall decline in the aggregate bonus pool, Mr. Greenberg’s Annual Incentive Bonus for fiscal 2016 declined by 36.4% from his Annual Incentive Bonus for fiscal 2015. |
• | Mr. Markheim received a Participation Percentage of 100%, based on the Company’s disappointing financial performance compared to its planned revenue and earnings before taxes, offset by his increased responsibilities with respect to his succession as Chief Executive Officer of the Company. As a result of this Participation Percentage and the overall decline in the aggregate bonus pool, Mr. Markheim’s Annual Incentive Bonus for fiscal 2016 declined by 31.0% from his Annual Incentive Bonus for fiscal 2015. |
• | Mr. Sciarillo received a Participation Percentage of 117% based on Mr. Sciarillo’s increased responsibilities first as Acting Chief Financial Officer and then later as Chief Financial Officer. As a result, Mr. Sciarillo’s Annual Incentive Bonus for fiscal 2016 increased by 14.4% from his Annual Incentive Bonus for fiscal 2015. |
• | Mr. Ostenberg received a Participation Percentage of 86%, based on his achievement of 85% of quantitative performance goals related to North America test and measurement equipment lease and rental revenues, while he did not achieve his qualitative goals. As a result of this Participation Percentage and the overall decline in the aggregate bonus pool, Mr. Ostenberg’s Annual Incentive Bonus for fiscal 2016 declined by 55.9% from his Annual Incentive Bonus for fiscal 2015. |
Named Executive Officer | Fiscal 2017 Target Percentage | Fiscal 2016 Target Percentage | |||
Daniel Greenberg | —% | 22.8% | |||
Steven Markheim | 34.7% | 25.0% | |||
Allen Sciarillo | 25.0% | 6.8% | |||
Herb F. Ostenberg | 8.1% | 8.2% |
• | In light of Mr. Greenberg’s announced retirement, the Compensation Committee did not set a Target Percentage for Mr. Greenberg for fiscal 2017. |
• | The Target Percentage for Mr. Markheim for fiscal 2017 was increased compared to fiscal 2016 as a result of his promotion to Chief Executive Officer effective July 11, 2016. |
• | The Target Percentage for Mr. Sciarillo for fiscal 2017 was increased compared to fiscal 2016 as a result of his promotion to Chief Executive Officer effective July 11, 2016. |
• | The Target Percentage for Mr. Ostenberg for fiscal 2017 remained comparable to fiscal 2016. |
Named Executive Officer | July 2015 RSU Grants (Units) | Grant Date Value | July 2016 RSU Grants (Units) | Grant Date Value | ||||||||||
Steven Markheim | 22,686 | $ | 250,000 | — | $ | — | ||||||||
Craig R. Jones | — | $ | — | — | $ | — | ||||||||
Allen Sciarillo 1 | 13,000 | $ | 150,000 | — | $ | — | ||||||||
Herb F. Ostenberg | 6,352 | $ | 70,000 | — | $ | — |
• | Term. Mr. Greenberg’s employment agreement continues for a rolling three year term such that each month that passes results in the employment term being extended by one month. Upon notice by either party, Mr. Greenberg’s employment term shall no longer be extended by one month increments and shall expire at the end of the three year employment term then in effect. |
• | Base Salary. Mr. Greenberg’s annual base salary shall not be less than $300,000. The Board or the Compensation Committee may increase the salary payable to Mr. Greenberg during the term of the employment agreement. Mr. Greenberg’s salary was also subject to annual increase or decrease in accordance with the Consumer Price Index for the Los Angeles-Long Beach-Anaheim Metropolitan Area. Mr. Greenberg’s base salary for fiscal 2016 was $407,222. |
• | Bonuses. Mr. Greenberg was entitled to receive a bonus and incentive compensation each year in addition to his base salary. In determining the amount of such bonus and incentive compensation, Mr. Greenberg’s employment agreement provides that consideration shall be given to all pertinent factors including, but not limited to, historic policies and practices, business revenues, business profits, the quality of Mr. Greenberg’s performance and the value of his contributions, and the prevailing compensation levels for comparable executive officers in businesses of size, complexity and character similar to us. |
• | Benefits. Mr. Greenberg was entitled to employee benefits comparable to those provided to our senior executives. In October 2001, we further amended Mr. Greenberg’s employment agreement to require that we maintain medical coverage, consistent with the standard of coverage then available to him, for Mr. Greenberg and his spouse for as long as they each shall live, regardless of any termination of the employment relationship. |
• | Severance. For purposes of Mr. Greenberg’s employment, a “change in control,” as defined in his agreement, occurred in 2000. Accordingly, following Mr. Greenberg's resignation, we are obligated (i) to pay an amount equal to three times his highest “annual base amount” (which includes Mr. Greenberg’s base salary, bonus, incentive compensation and deferred compensation) during the term of his employment, payable in one lump sum on the 60th day after Mr. Greenberg’s termination of employment (provided that any portion of the lump sum payment that constitutes an excess parachute payment as defined in Code Section 280G shall not be paid), (ii) to continue each employee health plan and welfare benefit plan and other fringe benefits for a period of 36 months following the date of termination (with medical coverage continuing for his and his spouse’s lifetime) and (iii) to pay Mr. Greenberg’s vested account balance under the Electro Rent Employee Stock Ownership and Savings Plan, as well as an amount equal to the retirement contributions that would have been made on his behalf during the three years following termination. However, the cash payments to Mr. Greenberg are subject to reduction in order to avoid being characterized as excess parachute payments within the meaning of Section 280G of the Code and Mr. Greenberg shall receive a gross up to compensate for any excise taxes payable on any payments made to Mr. Greenberg under this agreement as a result of Section 4999 of the Code. |
• | At Will Employment. Mr. Markheim, Mr. Jones and Mr. Sciarillo are “at will” employees, and may be terminated by us at any time for any reason or resign at any time for any reason. |
• | Salary and Bonus. Mr. Markheim, Mr. Jones and Mr. Sciarillo are paid a base salary and a discretionary bonus each year in an amount to be determined in accordance with our practices for our senior executive officers. Mr. Markheim’s base salary for fiscal 2016 and 2017 is $348,282 and $400,000, respectively. Mr. Jones’s base salary for fiscal 2016 was |
• | Employee Benefits. Mr. Markheim, Mr. Jones and Mr. Sciarillo receive employment benefits generally available to our senior executive officers. |
• | Severance. Messrs. Markheim, Jones and Sciarillo employment agreements provide for severance if, within 18 months after a “material change,” either Mr. Markheim, Mr. Jones or Mr. Sciarillo is terminated by us other than for cause or terminates his employment relationship for good reason (which generally includes diminution in work responsibilities, forced relocation or material reduction in compensation). In such event, Mr. Markheim, Mr. Jones or Mr. Sciarillo, respectively, shall be entitled to (i) a severance payment equal to two times his base salary as in effect on the date of termination, (ii) immediate vesting of all then-outstanding unvested equity compensation awards previously granted to him, (iii) a pro rata share of the bonus pool for the year of termination based on the percentage of the year worked prior to termination and his share of the prior year’s bonus pool and (iv) reimbursement for any COBRA payments made by him for the 12 months following the termination date. If, at any time other than within 18 months following a “material change,” either Mr. Markheim, Mr. Jones or Mr. Sciarillo is terminated by us other than for cause or if either of them terminates his employment relationship with us for good reason, then he shall be entitled to (i) a severance payment equal to one times his base salary, (ii) a pro rata share of the bonus pool for the year of termination equal to his share of the prior year’s bonus pool multiplied by the percentage of the year worked prior to termination and (iii) reimbursement for any COBRA payments made by him for the 12 months following the termination date. The severance payments described in clause (i) of each of the two preceding sentences shall be payable as one lump sum on the 60th day after the termination date of Mr. Markheim or Mr. Jones, respectively. Severance payments to Messrs. Markheim, Jones and Sciarillo will be reduced to avoid being characterized as a parachute payment within the meaning of Section 280G of the Code and to thereby avoid the imposition of excise taxes pursuant to Section 4999 of the Code. Messrs. Markheim, Jones and Sciarillo will be required to sign a release of claims on or within 45 days after his respective termination of employment, to not revoke the release and to remain in full compliance with the terms of the release as a condition of receiving any severance payment. |
• | Material change. A “material change” is defined in the employment agreements to have occurred (i) upon a merger, consolidation or sale of substantially all of our assets other than in a transaction in which the holders of our Common Stock immediately prior to the merger, consolidation or asset sale have at least 75% ownership of the voting capital stock of the surviving corporation, (ii) upon any person becoming the beneficial owner of 25% or more of our Common Stock (excluding persons and affiliates of persons who have been 5% holders of our Common Stock for at least one year), or (iii) if during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board cease for any reason (except death) to constitute a majority thereof unless the election, or the nomination for election by our shareholders, of each new director was approved by a vote of the directors then still in office who were directors at the beginning of such period. As discussed below, the proposed Merger with Platinum Equity, which is expected to close in August 2016 would constitute a “material change” under the employment agreements. |
• | Good Reason. A “good reason” event is defined in the employment agreements as the occurrence of any of the following: (i) a material breach by us of this agreement, (ii) we require Messrs. Markheim, Jones or Sciarillo, respectively, to relocate his principal place of work more than 20 miles from the location at which he performed his duties prior to the relocation, (iii) we fail to provide Messrs. Markheim, Jones or Sciarillo, respectively, with compensation and benefits in the aggregate on terms not materially less favorable in the aggregate than those enjoyed by the executive under this agreement prior to the “material change”, or the subsequent material reduction of his compensation and benefits in effect at the time of the “material change” unless such compensation and benefits are substantially equally reduced for our executive officers as a group and there is less than a 10% reduction in compensation or benefits, or (iv) we assign duties to Messrs. Markheim, Jones or Sciarillo, respectively, materially and adversely inconsistent with his positions prior to the “material change”, provided however that a lateral transfer within our company or to an affiliate will not constitute a “good reason.” Termination by Messrs. Markheim, Jones or Sciarillo for “good reason” also requires that Messrs. Markheim, Jones and Sciarillo provide written notice to us describing the existence of the “good reason” event within 90 days of the date of the initial existence of the event. Upon our receipt of such timely written notice, we then have 30 days during which we may cure or remedy the event. Messrs. Markheim’s, Jones’ or Sciarillo's resignation for “good reason” can only be effective if we have not cured or remedied the “good reason” event during the 30 day period and if Messrs. Markheim, Jones or Sciarillo, respectively, actually resigns his employment for “good reason” within 60 days after the expiration of the 30 day cure/remedy period. |
• | Any unpaid base salary from the date of the last payroll to the date of termination; |
• | Reimbursement for any properly incurred unreimbursed business expenses; and |
• | Any existing rights to indemnification for prior acts through the date of termination. |
Involuntary Termination4 | ||||||||||||||||||
Named Executive Officer | Voluntary Termination 1 | Not for Cause | Change of Control | Death or Permanent Disability | ||||||||||||||
Daniel Greenberg | ||||||||||||||||||
Base salary | $ | 1,221,666 | $ | 1,221,666 | $ | 1,221,666 | $ | 1,221,666 | ||||||||||
Non-equity incentive plan compensation | 231,000 | 231,000 | 231,000 | 231,000 | ||||||||||||||
Employee health and other fringe benefits | 477,246 | 477,246 | 477,246 | 477,246 | ||||||||||||||
Accumulated vacation pay 3 | 4,699 | 4,699 | 4,699 | 4,699 | ||||||||||||||
Total | $ | 1,934,611 | $ | 1,934,611 | $ | 1,934,611 | $ | 1,934,611 | ||||||||||
Steven Markheim | ||||||||||||||||||
Base salary | $ | 348,282 | $ | 348,282 | $ | 696,564 | $ | — | ||||||||||
Non-equity incentive plan compensation | 99,000 | 99,000 | 99,000 | 99,000 | ||||||||||||||
Employee health benefits | 16,434 | 16,434 | 16,434 | — | ||||||||||||||
Unvested and accelerated awards under equity incentive plans 2 | — | — | 454,418 | 454,418 | ||||||||||||||
Accumulated vacation pay 3 | 96,352 | 96,352 | 96,352 | 96,352 | ||||||||||||||
Total | $ | 560,068 | $ | 560,068 | $ | 1,362,768 | $ | 649,770 | ||||||||||
Allen Sciarillo | ||||||||||||||||||
Base salary | $ | 260,000 | $ | 260,000 | $ | 520,000 | $ | — | ||||||||||
Non-equity incentive plan compensation | 57,200 | 57,200 | 57,200 | 57,200 | ||||||||||||||
Employee health benefits | 7,800 | 7,800 | 7,800 | — | ||||||||||||||
Unvested and accelerated awards under equity incentive plans 2 | — | — | 282,940 | 282,940 | ||||||||||||||
Accumulated vacation pay 3 | 89,116 | 89,116 | 89,116 | 89,116 | ||||||||||||||
Total | $ | 414,116 | $ | 414,116 | $ | 957,056 | $ | 429,256 | ||||||||||
Herb F. Ostenberg | ||||||||||||||||||
Base salary | $ | — | $ | — | $ | — | $ | — | ||||||||||
Non-equity incentive plan compensation | 27,800 | 27,800 | 27,800 | 27,800 | ||||||||||||||
Employee health benefits | — | — | — | — | ||||||||||||||
Unvested and accelerated awards under equity incentive plans 2 | — | — | 157,458 | 157,458 | ||||||||||||||
Accumulated vacation pay 3 | 18,074 | 18,074 | 18,074 | 18,074 | ||||||||||||||
Total | $ | 45,874 | $ | 45,874 | $ | 203,332 | $ | 203,332 |
1 | In the case of Messrs. Markheim and Sciarillo, only if they have good reason and the voluntary termination does not follow a "material change" as described above under "Principal Compensation Agreements and Plans - Employment Agreements." |
2 | Reflects the value of unvested restricted stock units as of May 31, 2016 valued using the closing NASDAQ Stock Market price of $13.10 per share. Includes the following dividend equivalent amounts that had accrued on unvested restricted stock units and which would be paid out to the executive if and when the underlying stock units’ vesting is accelerated upon a change of control, death or disability: Steven Markheim - $22,354; Allen Sciarillo - $7,172; Herb F. Ostenberg - $9,166. Does not include the amounts for restricted stock units which were vested as of May 31, 2016 for each executive which would be issued in the following amounts upon a hypothetical termination occurring on May 31, 2016: 37,825 restricted stock units for Steven Markheim valued at $495,508; 2,373 restricted stock units for Allen Sciarillo valued at $31,086; and 16,263 restricted stock units for Herb F. Ostenberg valued at $213,045. |
3 | Represents accrued standard paid vacation amounts as of May 31, 2016. |
4 | For Mr. Greenberg, an “involuntary termination” includes his resignation for any reason as described above under “Principal Compensation Agreements and Plans-Employment Agreements.” In the case of Messrs. Markheim and Sciarillo, only if the termination follows within 18 months of a "material change" and is terminated by us without cause or by Messrs. Markheim or Jones for "good reason", as described above under "Principal Compensation Agreements and Plans - Employment Agreements." |
Named Executive Officer | Year | Salary | Stock Awards 1 | Non-equity Incentive Plan Compensation 2 | All Other Compensation 3 | Total | |||||||||||||||||
Daniel Greenberg | 2016 | $ | 407,222 | $ | — | $ | 77,000 | $ | 102,333 | $ | 586,555 | ||||||||||||
Chairman of the Board | 2015 | $ | 509,028 | $ | — | $ | 121,000 | $ | 88,134 | $ | 718,162 | ||||||||||||
and Chief Executive Officer | 2014 | $ | 499,047 | $ | — | $ | 273,000 | $ | 86,273 | $ | 858,320 | ||||||||||||
Steven Markheim | 2016 | $ | 348,282 | $ | — | $ | 99,400 | $ | 35,696 | $ | 483,378 | ||||||||||||
President and Chief | 2015 | $ | 348,282 | $ | 172,100 | $ | 144,000 | $ | 44,646 | $ | 709,028 | ||||||||||||
Operating Officer | 2014 | $ | 341,453 | $ | 172,100 | $ | 240,000 | $ | 48,811 | $ | 802,364 | ||||||||||||
Craig R. Jones 4 | 2016 | $ | 251,835 | $ | — | $ | 5,393 | $ | 17,047 | $ | 274,275 | ||||||||||||
Vice President and | 2015 | $ | 251,835 | $ | 110,700 | $ | 40,000 | $ | 32,853 | $ | 435,388 | ||||||||||||
Chief Financial Officer | 2014 | $ | 246,897 | $ | 110,700 | $ | 126,000 | $ | 40,680 | $ | 524,277 | ||||||||||||
Allen Sciarillo | 2016 | $ | 225,000 | $ | — | $ | 57,200 | $ | 20,942 | $ | 303,142 | ||||||||||||
Vice President and | 2015 | $ | 187,500 | $ | 75,000 | $ | 50,000 | $ | 6,908 | $ | 319,408 | ||||||||||||
Chief Financial Officer | 2014 | $ | 170,000 | $ | 30,000 | $ | — | $ | — | $ | 200,000 | ||||||||||||
Herb F. Ostenberg | 2016 | $ | 223,946 | $ | — | $ | 26,700 | $ | 21,452 | $ | 272,098 | ||||||||||||
Senior Vice President, North | 2015 | $ | 223,946 | $ | 80,000 | $ | 63,000 | $ | 17,760 | $ | 384,706 | ||||||||||||
American Sales | 2014 | $ | 219,555 | $ | 90,000 | $ | 75,000 | $ | 21,439 | $ | 405,994 |
1 | Represents the aggregate grant date fair value of restricted stock units recognized in accordance with ASC 718. Assumptions used in the calculation of this amount are included in Note 11 to our audited financial statements for fiscal 2016. See “Executive Compensation-Compensation Discussion and Analysis-Executive Compensation Components” above, the "Grants of Plan-Based Awards" below, and the "Outstanding Equity Awards at Fiscal Year-End" table for more details regarding the terms of the restricted stock units. |
2 | Consists of amounts paid under our annual incentive compensation program. See “Executive Compensation-Compensation Discussion and Analysis-Executive Compensation Components-Annual Incentive Bonuses” above and "Grants of Plan-Based Awards" table below. |
3 | The components of the column entitled “All Other Compensation” for fiscal 2016 are set forth in the following table: |
Named Executive Officer | 401(k) Savings Plan | Supplemental Executive Retirement Plan | Life Insurance Premiums | Professional Services (a) | Personal Use of Company Owned Vehicle | Other (b) | Total | ||||||||||||||||||||||
Daniel Greenberg | $ | 6,496 | $ | 7,253 | $ | 34,597 | $ | 15,000 | $ | 24,247 | $ | 14,740 | $ | 102,333 | |||||||||||||||
Steven Markheim | $ | 5,782 | $ | 4,898 | $ | 12,895 | $ | 2,750 | $ | 5,231 | $ | 4,140 | $ | 35,696 | |||||||||||||||
Craig R. Jones | $ | 3,961 | $ | — | $ | 6,161 | $ | 5,000 | $ | 1,925 | $ | — | $ | 17,047 | |||||||||||||||
Allen Sciarillo | $ | 6,624 | $ | — | $ | 276 | $ | — | $ | 14,042 | $ | — | $ | 20,942 | |||||||||||||||
Herb F. Ostenberg | $ | 6,260 | $ | 960 | $ | 5,305 | $ | 4,500 | $ | 4,427 | $ | — | $ | 21,452 |
(a) | Professional services include legal, accounting, financial planning, investment counseling and other services. |
(b) | Other includes reimbursement to Mr. Greenberg and Mr. Markheim for dues at clubs where each is a member. |
4 | Mr. Jones voluntarily resigned his employment effective August 31, 2015. |
Named Executive Officer | Grant Date | Estimated Future Payouts under Non-Equity Incentive Plan Awards 1 | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards 2 | ||||||||||
Minimum | Target | Maximum | ||||||||||||
Daniel Greenberg | — | $76,500 | $90,000 | $103,500 | — | — | ||||||||
— | — | — | — | — | — | |||||||||
Steven Markheim | — | $84,150 | $99,000 | $113,850 | — | — | ||||||||
7/16/2015 | — | — | — | 22,686 | $250,000 | |||||||||
Craig R. Jones | — | $— | $— | $— | — | — | ||||||||
7/16/2015 | — | — | — | — | — | |||||||||
Allen Sciarillo | — | $22,950 | $27,000 | $31,050 | — | — | ||||||||
7/16/2015 | — | — | — | 6,806 | $75,000 | |||||||||
10/15/2015 | — | — | — | 13,000 | $150,000 | |||||||||
Herb F. Ostenberg | — | $27,200 | $32,000 | $36,800 | — | — | ||||||||
7/16/15 | — | — | — | 6,352 | 70,000 |
1 | Represents amounts expected to be received under our annual incentive compensation program. The “Target” amount for each named executive officer was calculated by multiplying (i) the total of the incentive bonus pool, estimated at 3% of our actual fiscal 2016 earnings before taxes (adjusted for acquisition related charges and Mr. Greenberg's severance), by (ii) that named executive officer’s fiscal 2016 Target Percentage assigned at the beginning of the fiscal year. We then calculated the “Threshold” amount as 85% of that “Target” (based on the expected minimum Participation Percentage) and the “Maximum” as 115% of that “Target” (based on the expected maximum Participation Percentage), although because the Compensation Committee retained discretion to adjust the size of the pool, the Target Percentage and the Participation Percentage, the actual bonuses paid could be less than or more than the values in the table above. For additional discussion, see “Executive Compensation-Compensation Discussion and Analysis-Executive Compensation Components-Annual Incentive Bonuses.” For actual amounts paid for fiscal 2016, see “Summary Compensation Table-Non-equity Incentive Plan Compensation.” |
2 | Represents the aggregate grant date fair value of restricted stock units recognized in accordance with ASC 718. Assumptions used in the calculation of this amount are included in Note 11 to our audited financial statements for fiscal 2016 included in our Annual Report on Form 10-K. The closing price of our Common Stock on July 16, 2015 was $11.02 per share. These awards vest evenly in annual increments over three years, with full vesting on July 16, 2018. See “Executive Compensation-Compensation Discussion and Analysis-Executive Compensation Components” for a description of the terms of the restricted stock units. |
Stock Awards | ||||||||
Named Executive Officer | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested 1 | ||||||
Daniel Greenberg | — | — | ||||||
Steven Markheim | 32,982 | 2 | 432,064 | |||||
Craig R. Jones | — | — | ||||||
Allen Sciarillo | 21,051 | 3 | 275,768 | |||||
Herb F. Ostenberg | 11,320 | 4 | 148,292 |
1 | The market values of the unvested restricted stock units are presented based on the closing price of our Common Stock on May 31, 2016 of $13.10 per share. See “Executive Compensation-Compensation Discussion and Analysis-Executive Compensation Components” for a description of the terms of the restricted stock units. |
2 | Consists of the following restricted stock unit awards: (a) 9,456 restricted stock units granted on July 11, 2013, vesting one-third on July 11, 2014, 2015 and 2016; and (b) 10,716 restricted stock units granted July 10, 2014, vesting one-third on July 10, 2015, 2016 and 2017; and (c) 22,686 restricted stock units granted July 16, 2015, vesting one-third on July 16, 2016, 2017 and 2018. |
3 | Consists of the following restricted stock unit awards: (a) 1,868 restricted stock units granted on July 10, 2014, vesting one-third on July 10, 2014, 2015 and 2016; and (b) 6,806 restricted stock units granted July 16, 2015, vesting one-third on July 16, 2016, 2017 and 2018; and (c) 13,000 restricted stock units granted October 15, 2015, vesting one-third on October 15, 2016, 2017 and 2018. |
4 | Consists of the following restricted stock unit awards: (a) 4,945 restricted stock units granted on July 11, 2013, vesting one-third on July 11, 2014, 2015 and 2016; and (b) 4,981 restricted stock units granted July 10, 2014, vesting one-third on July 10, 2015, 2016 and 2017; and (c) 6,352 restricted stock units granted July 16, 2015, vesting one-third on July 16, 2016, 2017 and 2018. |
Named Executive Officer | Stock Awards | |||||||
Number of Shares Vesting 1 | Value Realized on Vesting 2 | |||||||
Daniel Greenberg | — | $ | — | |||||
Steven Markheim | 11,045 | $ | 119,617 | |||||
Craig R. Jones | 6,478 | $ | 70,157 | |||||
Allen Sciarillo | 1,206 | $ | 13,061 | |||||
Herb F. Ostenberg | 5,176 | $ | 56,056 |
1 | Shares for the vested restricted stock units will be issued to the named executive officer on the earliest of: (i) the first |
Named Executive Officer | January 1, 2018 | January 1, 2019 | January 1, 2020 | Total | |||||||
Steven Markheim | 4,321 | 3,152 | 3,572 | 11,045 | |||||||
Craig R. Jones | 2,153 | 2,027 | 2,298 | 6,478 | |||||||
Allen Sciarillo | 583 | — | 623 | 1,206 | |||||||
Herb F. Ostenberg | 1,867 | 1,648 | 1,661 | 5,176 |
Named Executive Officer | Executive Contributions in Last FY 1 | Registrant Contributions in Last FY 2 | Aggregate Earnings / (Losses) in Last FY 3 | Aggregate Withdrawals/ Distributions 4 | Aggregate Balance at Last FYE 5 | |||||||||||||||
Daniel Greenberg | ||||||||||||||||||||
SERP | $ | 43,519 | $ | 7,253 | $ | (285,654 | ) | $ | — | $ | 2,322,436 | |||||||||
Steven Markheim | ||||||||||||||||||||
SERP | $ | 9,795 | $ | 4,898 | $ | 12,188 | $ | — | $ | 555,191 | ||||||||||
Vested Stock Units | $ | — | $ | 144,690 | $ | 75,787 | $ | (220,800 | ) | $ | 495,508 | |||||||||
Craig R. Jones | ||||||||||||||||||||
SERP | $ | — | $ | — | $ | — | $ | (170,033 | ) | $ | — | |||||||||
Vested Stock Units | $ | — | $ | 69,055 | $ | — | $ | (302,637 | ) | $ | — | |||||||||
Allen Sciarillo | ||||||||||||||||||||
SERP | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Vested Stock Units | $ | — | $ | 15,799 | $ | 9,300 | $ | (18,400 | ) | $ | 31,086 | |||||||||
Herb F. Ostenberg | ||||||||||||||||||||
SERP | $ | 5,762 | $ | 960 | $ | 74 | $ | — | $ | 36,337 | ||||||||||
Vested Stock Units | $ | — | $ | 67,806 | $ | 31,376 | $ | (73,600 | ) | $ | 213,045 |
1 | Represents cash contributions to the SERP through salary deferrals. The amounts are also included in the “Salary” column totals for fiscal 2016 reported in the “Summary Compensation Table.” |
2 | For SERP contributions, represents matching contributions for each named executive officer due to limitations imposed by the Internal Revenue Service on our matching contributions to the 401(k) plan. The amounts are also included in the “All Other Compensation” column totals for fiscal 2016 reported above in the “Summary Compensation Table.” |
3 | Each participant in the SERP directs the investment of his account balance in the same manner as participants in our 401(k) plan, and his account receives the benefits of any resulting gains or income and is charged with any resulting losses. The |
4. | Reflects the value of the 24,000, 2,000 and 8,000 vested restricted stock units held by Mr. Markheim, Mr. Sciarillo and Mr. Ostenberg, respectively, that were settled into common stock on January 4, 2016. The value was calculated using the closing NASDAQ Stock Market price of $9.20 per share on December 31, 2015. |
5. | For vested stock units, reflects the aggregate value of the shares underlying the vested stock units as of May 31, 2016 based on the closing NASDAQ Stock Market price of $13.10 per share as of such date: Mr. Markheim - 37,825 shares, Mr. Sciarillo - 2,373 shares and Mr. Ostenberg - 16,263 shares. The following grant date values for these stock units were previously reported in the “Stock Awards” column of the Summary Compensation Table in previous years: For Mr. Markheim, $646,499; for Mr. Ostenberg, $278,680. Mr. Jones retired effective August 31, 2015 and Mr. Sciarillo became an executive officer upon Mr. Jones' retirement. |
COMPENSATION COMMITTEE | |
James S. Pignatelli, Chairperson | |
Karen J. Curtin | |
Nancy Y. Bekavac | |
Theodore E. Guth | |
Joseph J. Kearns |
• | Annual retainer of $50,000; |
• | Annual grants of restricted stock units to each continuing non-employee director valued at $50,0001; |
• | An additional retainer of $5,000 for the Compensation Committee chairperson and $4,000 for our Nominating Committee chairperson; |
• | An additional $15,000 annual retainer for the Audit Committee chairperson; |
• | An additional $15,000 one-time retainer for the Strategic Alternatives Committee chairperson; |
• | An additional $10,000 annual retainer for the lead director. |
1 | The restricted stock units are granted each year in October, on the date of our annual shareholders’ meeting, and vest in four equal quarterly installments (25% upon grant) with full vesting on July 1 of the following year (subject to acceleration on any change of control, death or disability) but are otherwise the same as those issued to our officers. The shares of Common Stock underlying the units are issued with respect to the vested units on the earliest of (i) the first January 1 after the fifth anniversary of the grant, (ii) a change of control, or (iii) the grantee ceasing to be a director for any reason. |
Name | Fees Earned or Paid in Cash | Stock Awards 1 & 2 | Total | |||||||||
Nancy Y. Bekavac | $ | 54,000 | $ | 50,000 | $ | 104,000 | ||||||
Karen J. Curtin | $ | 60,000 | $ | 50,000 | $ | 110,000 | ||||||
Joseph J. Kearns | $ | 65,000 | $ | 50,000 | $ | 115,000 | ||||||
James S. Pignatelli | $ | 50,000 | $ | 50,000 | $ | 100,000 | ||||||
Theodore E. Guth | $ | 55,000 | $ | 50,000 | $ | 105,000 |
1 | Represents the aggregate grant date fair value of restricted stock units recognized in accordance with ASC 718. The assumptions used in the calculation of this amount are included in Note 11 to our audited financial statements the year ended May 31, 2016. |
2 | Each director was granted 4,329 restricted stock units in fiscal 2016 on October 15, 2015 in connection with their annual director compensation. The closing price of our Common Stock on October 15, 2015 was $11.55. The restricted stock units vested 25% upon grant, and another 25% vested on each of January 1, April 1 and July 1, 2016. As of May 31, 2016, 1,082 restricted stock units remained unvested for each non-employee director. |
• | each person ELRC knows to be the beneficial owner of 5% or more of the outstanding shares of ELRC’s common stock; |
• | each of ELRC’s named executive officers; |
• | each of ELRC’s directors; and |
• | all of ELRC’s current executive officers and directors as a group. |
Name and Address of Owner 1 | Number of Shares of Common Stock Beneficially Owned 2 | Percentage of Common Stock Beneficially Owned 2 | ||||
5% Shareholders | ||||||
T. Rowe Price and Associates, Inc. 3 | 3,337,400 | 13.8 | % | |||
Dimensional Fund Advisors LP 4 | 1,847,042 | 7.6 | % | |||
Phillip Greenberg 5 | 1,735,573 | 7.2 | % | |||
Current Directors and Named Executive Officers | ||||||
Nancy Y. Bekavac | 46,070 | * | ||||
Karen J. Curtin | 40,040 | * | ||||
Daniel Greenberg 6 | 4,600,434 | 19.0 | % | |||
Theodore E. Guth | 18,748 | * | ||||
Joseph J. Kearns | 30,072 | * | ||||
Steven Markheim | 259,101 | 1.1 | % | |||
Herb F. Ostenberg | 29,689 | * | ||||
James S. Pignatelli | 36,700 | * | ||||
Allen Sciarillo | 6,389 | * | ||||
Total current directors and executive officers as a group | 5,067,243 | 20.1 | % | |||
* Indicates less than 1% |
1 | The address of each shareholder is 6060 Sepulveda Boulevard, Van Nuys, California 91411-2512 unless otherwise set forth in the table or in the footnote. |
2 | For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares that such person or group has the right to acquire within 60 days after August 1, 2016. These shares are deemed outstanding for purposes of computing the percentage of outstanding shares held by each person or group on that date, but are not deemed outstanding for computing the percentage ownership of any other person. The number of shares in this table includes restricted stock units that are currently vested or that will become vested within 60 days after August 1, 2016: Mr. Markheim, 52,111; Mr. Sciarillo, 5,264; Mr. Ostenberg, 21,689; 15,182 for each of Ms. Bekavac, Ms. Curtin, Mr. Kearns, Mr. Pignatelli and 16,248 for Mr. Guth. |
3 | Based on information filed in their joint Schedule 13G/A on February 11, 2016, on behalf of each of T. Rowe Price Associates, Inc., a Maryland corporation, and an investment adviser registered under the Investment Advisers Act of 1940, and T. Rowe Price Small-Cap Value Fund, Inc., a Maryland corporation, T. Rowe Price Associates, Inc. has sole voting |
4 | Based on information contained in its Schedule 13G/A filed on February 9, 2016, Dimensional Fund Advisors LP, an investment adviser registered under the Investment Advisers Act of 1940, has sole voting power with respect to 1,790,030 shares and sole dispositive power with respect to 1,847,042 shares. The address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. |
5 | In his Schedule 13G/A filed on January 25, 2010, Phillip A. Greenberg reported sole voting and dispositive power with respect to 2,335,573 shares. Mr. Greenberg transferred 600,000 shares to a charity subsequent to May 27, 2016; however, the charity agreed to an agreement obligating it to vote in favor of the merger with respect to the 600,000 shares. |
6 | The number of shares reflected in the table includes 1,001,672 shares held by the Greenberg Foundation, which Daniel Greenberg has the right to vote, but as to which he disclaims beneficial ownership. |
Number of shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of shares of Common Stock remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) (c) | ||
— | $— | 238,720 |
• | the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year; |
• | we are a participant; and |
• | any related party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity). |
• | an executive officer, director or nominee for election as a director; |
• | a beneficial owner of more than five percent of any class of our voting securities; |
• | an immediate family member of any of the persons named above, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than five percent beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than five percent beneficial owner; and |
• | a firm, corporation or other entity in which any of the persons named above is employed or is a general partner or principal or in a similar position. |
Fiscal 2016 | Fiscal 2015 | |||||||
Audit fees 1 | $ | 866,273 | $ | 1,244,917 | ||||
Audit-related fees 2 | — | — | ||||||
Tax fees 3 | 23,700 | 22,575 | ||||||
All other fees | — | — | ||||||
Total | $ | 889,973 | $ | 1,267,492 |
1 | Consists of fees for professional services rendered for the audit of our annual financial statements and review of our annual report on Form 10-K and for reviews of the financial statements included in our quarterly reports on Form 10-Q for the first three quarters of fiscal 2016 and 2015. |
2 | Consists of fees for assurance services that are reasonably related to performance of audit or review of our financial statements. |
3 | Consists of professional services rendered by D&T for tax compliance, tax advice and tax planning, which are aggregate fees billed by D&T for tax services rendered to us, other than those described above under “Audit Fees.” |
Exhibit No. | Description of Document | Incorporation by Reference | ||
2.1 | Agreement and Plan of Merger dated May 27, 2016 among Elecor Intermediate Holding II Corporation, Elecor Merger Corporation and the Company | Incorporated by reference from the Registrant's Current Report on Form 8-K filed May 31, 2016. | ||
2.2 | Amended and Restated Agreement and Plan of Merger dated June 23, 2016 among Elecor Intermediate Holding II Corporation, Elecor Merger Corporation and the Company | Incorporated by reference from the Registrant's Current Report on Form 8-K filed June 23, 2016. | ||
3.1 | Restated Articles of Incorporation, filed October 3, 1984 | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
3.2 | Certificate of Amendment of Restated Articles of Incorporation, filed October 24, 1988 | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
3.3 | Certificate of Amendment of Restated Articles of Incorporation, filed October 15, 1997 | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 1998. | ||
3.4 | Amended and Restated By-laws of Registrant, adopted July 10, 2014 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed July 16, 2014. | ||
4.1 | Form of Common Stock Certificate | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
10.1* | Electro Rent Corporation Supplemental Executive Retirement Plan | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
10.2* | Executive Employment Agreement (Amended and Restated as of July 15, 1992) between Registrant and Daniel Greenberg | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
10.3* | Amendment No. 1 to Executive Employment Agreement (Amended and Restated as of July 15, 1992) between Registrant and Daniel Greenberg, dated October 12, 2001 | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2003. | ||
10.4* | Amendment No. 2 to the Executive Employment Agreement between Electro Rent Corporation and Daniel Greenberg dated August 13, 2012 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2012. | ||
Exhibit No. | Description of Document | Incorporation by Reference | ||
10.5* | Employment Agreement between Registrant and Steven Markheim, dated as of October 31, 2005 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed November 1, 2005. | ||
10.6* | Amendment No. 1 to the Executive Employment Agreement between Electro Rent Corporation and Steven Markheim dated August 13, 2012 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2012. | ||
10.7* | Employment Agreement between Registrant and Craig R. Jones, dated as of October 31, 2005 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed November 1, 2005. | ||
10.8* | Amendment No. 1 to the Executive Employment Agreement between Electro Rent Corporation and Craig Jones dated August 13, 2012 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2012. | ||
10.9* | Separation Agreement and Release, dated August 31, 2015, by and between Electro Rent Corporation and Craig Jones. | Incorporated by reference from the Registrant's Current Report on Form 8-K filed December 3, 2015. | ||
10.10* | Consulting Agreement, dated August 31, 2015, by and between Electro Rent Corporation and Craig Jones. | Incorporated by reference from the Registrant's Current Report on Form 8-K filed December 3, 2015. | ||
10.11* | Retention Agreement, dated February 1, 2015, by and between Electro Rent Corporation and Allen Sciarillo | Filed herewith. | ||
10.12* | 2005 Equity Incentive Plan | Incorporated by reference from Registrant’s Registration Statement on Form S-8 filed December 20, 2005 (File No. 333-130487). | ||
10.13* | Amendment No. 1 to 2005 Equity Incentive Plan | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2012. | ||
10.14* | Form of Stock Option Agreement (2005 Plan) | Incorporated by reference from Registrant’s Registration Statement on Form S-8 filed December 20, 2005 (File No. 333-130487). | ||
10.15* | Form of Stock Unit Award Agreement (Employee) (2005 Plan) | Incorporated by reference from Registrant’s Current Report on Form 8-K filed July 21, 2009. | ||
10.16* | Form of Stock Unit Award Agreement (Employee) (2005 Plan) (new form of agreement adopted October 11, 2014) | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
10.17* | Amendment No. 1 to Form of Stock Unit Award Agreement (Employee) (2005 Plan) | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
10.18* | Form of Stock Unit Award Agreement (Director) (2005 Plan) | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
10.19* | Form of Stock Unit Award Agreement (Director) (2005 Plan) (new form of agreement adopted October 11, 2014) | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
10.20* | Amendment No. 1 to Form of Stock Unit Award Agreement (Director) (2005 Plan) | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
Exhibit No. | Description of Document | Incorporation by Reference | ||
10.21* | Form of Indemnification Agreement | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009. | ||
10.22 | Credit Agreement between Electro Rent Corporation (the “Company”) and J.P. Morgan Chase Bank, National Association, as administrative agent, J.P. Morgan Securities LLC, as sole bookrunner and sole lead arranger, and the lenders party thereto, dated as of November 19, 2013. | Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on November 25, 2013. | ||
10.23 | Amendment Number One dated as of November 27, 2015 to Credit Agreement by and among Electro Rent Corporation, JPMorgan Chase Bank, National Association, as administrative agent, J.P. Morgan Securities LLC, as sole bookrunner and sole lead arranger, and the lenders party thereto, dated as of November 19, 2013. | Incorporated by reference from the Registrant's Current Report on Form 8-K filed December 12, 2015. | ||
10.24# | EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 dated as of May 29, 2014 by and between Electro Rent Corporation and Keysight Technologies, Inc. | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
10.25 | Amendment No. 1 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 dated as of May 29, 2014 | Incorporated by reference from Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. | ||
10.26# | Amendment No. 2 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 dated as of August 18, 2014 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2014. | ||
10.27# | Amendment No. 3 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 dated as of September 17, 2014 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2014. | ||
10.28# | Amendment No. 4 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of January 10, 2015 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2014. | ||
10.29# | Amendment No. 5 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of November 1, 2014 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2014. | ||
10.30# | Amendment No. 6 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of November 1, 2014 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2014. | ||
10.31# | Amendment No. 7 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of November 1, 2014 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015. | ||
10.32# | Amendment No. 8 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of March 30, 2015 | Incorporated by reference from Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015. | ||
10.33# | Amendment No. 9 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of April 10, 2015 | Filed herewith. | ||
Exhibit No. | Description of Document | Incorporation by Reference | ||
10.34# | Amendment No. 10 to EMG Authorized Technology Partner Program Agreement / Agreement No. ANT76 effective as of June 2, 2015 | Filed herewith. | ||
14 | Code of Business Ethics and Conduct | Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on July 16, 2014. | ||
21 | Subsidiaries of the Registrant. • ER International, Inc., a Delaware corporation • Electro Rent Asia, Inc., a California corporation • Electro Rent (Beijing) Test and Measurement Equipment Rental Co., Ltd., a Chinese wholly foreign-owned enterprise • Electro Rent Europe NV, a Belgium corporation • Electro Rent, LLC, a Delaware limited liability company | Filed herewith. | ||
23 | Consent of Deloitte & Touche LLP, the Company’s independent registered public accounting firm | Filed herewith. | ||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | Filed herewith. | ||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | Filed herewith. | ||
32.1** | Section 1350 Certification by Principal Executive Officer | Filed herewith. | ||
32.2** | Section 1350 Certification by Principal Financial Officer | Filed herewith. | ||
101.INS*** | XBRL Instance Document. | |||
101.SCH*** | XBRL Taxonomy Extension Schema Document. | |||
101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document. | |||
101.DEF*** | XBRL Taxonomy Extension Definition Linkbase Document. | |||
101.LAB*** | XBRL Taxonomy Label Linkbase Document. | |||
101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document. |
# | The Company has requested confidential treatment for portions of this agreement. Accordingly, certain portions of this agreement have been omitted in the version filed with this report and such confidential portions have been filed with the Securities and Exchange Commission. |
* | Management contract or compensatory plan or arrangement. |
** | This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
*** | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
Electro Rent Corporation | |||||||
Dated: | August 9, 2016 | By | /s/ Steve Markheim | ||||
Steve Markheim | |||||||
President and Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||
/s/ Allen Sciarillo | Vice President and Chief Financial Officer | August 9, 2016 | ||
Allen Sciarillo | (Principal Financial and Accounting Officer) | |||
/s/ Nancy Y. Bekavac | Director | August 9, 2016 | ||
Nancy Y. Bekavac | ||||
/s/ Karen J. Curtin | Chairman of the Board | August 9, 2016 | ||
Karen J. Curtin | ||||
/s/ Daniel Greenberg | Director | August 9, 2016 | ||
Daniel Greenberg | ||||
/s/ Theodore E. Guth | Director | August 9, 2016 | ||
Theodore E. Guth | ||||
/s/ Joseph J. Kearns | Director | August 9, 2016 | ||
Joseph J. Kearns | ||||
/s/ James S. Pignatelli | Director | August 9, 2016 | ||
James S. Pignatelli |
Page Number | ||||
1. | Financial Statements | |||
Year Ended May 31, (in thousands, except per share information) | 2016 | 2015 | 2014 | ||||||||
Revenues: | |||||||||||
Rentals and leases | $ | 123,785 | $ | 129,255 | $ | 137,417 | |||||
Sales of equipment and other revenues | 51,548 | 109,074 | 103,720 | ||||||||
Total revenues | 175,333 | 238,329 | 241,137 | ||||||||
Operating expenses: | |||||||||||
Depreciation of rental and lease equipment | 55,931 | 56,445 | 57,034 | ||||||||
Costs of rentals and leases, excluding depreciation | 17,466 | 18,086 | 18,292 | ||||||||
Costs of sales of equipment and other revenues | 33,699 | 81,557 | 74,752 | ||||||||
Selling, general and administrative expenses | 60,154 | 59,313 | 58,920 | ||||||||
Total operating expenses | 167,250 | 215,401 | 208,998 | ||||||||
Operating profit | 8,083 | 22,928 | 32,139 | ||||||||
Interest income/(expense), net | (329 | ) | 332 | 387 | |||||||
Other income | 33 | 1,390 | — | ||||||||
Income before income taxes | 7,787 | 24,650 | 32,526 | ||||||||
Income tax provision | 3,003 | 9,218 | 12,118 | ||||||||
Net income | $ | 4,784 | $ | 15,432 | $ | 20,408 | |||||
Earnings per share: | |||||||||||
Basic | $ | 0.20 | $ | 0.63 | $ | 0.84 | |||||
Diluted | $ | 0.20 | $ | 0.63 | $ | 0.84 | |||||
Shares used in per share calculation: | |||||||||||
Basic | 24,414 | 24,360 | 24,325 | ||||||||
Diluted | 24,429 | 24,378 | 24,357 | ||||||||
Cash dividend declared per share | $ | 0.50 | $ | 0.80 | $ | 0.80 |
As of May 31, (in thousands, except share information) | 2016 | 2015 | |||||
Assets | |||||||
Cash | $ | 30,065 | $ | 4,064 | |||
Accounts receivable, net of allowance for doubtful accounts of $464 and $604 | 22,266 | 33,863 | |||||
Rental and lease equipment, net of accumulated depreciation of $235,387 and $241,116 | 199,525 | 231,671 | |||||
Other property, net of accumulated depreciation and amortization of $17,653 and $16,749 | 12,389 | 13,120 | |||||
Goodwill | 3,109 | 3,109 | |||||
Intangibles, net of amortization of $1,879 and $1,761 | 626 | 744 | |||||
Other assets | 16,597 | 13,743 | |||||
$ | 284,577 | $ | 300,314 | ||||
Liabilities and Shareholders’ Equity | |||||||
Liabilities: | |||||||
Bank borrowings | $ | — | $ | 2,387 | |||
Accounts payable | 5,195 | 8,234 | |||||
Accrued expenses | 16,954 | 18,487 | |||||
Deferred revenue | 5,153 | 5,576 | |||||
Deferred tax liability | 35,776 | 37,652 | |||||
Total liabilities | 63,078 | 72,336 | |||||
Commitments and contingencies (Note 10) | |||||||
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 2016—24,196,634; 2015—24,108,176 | 41,483 | 40,440 | |||||
Retained earnings | 180,016 | 187,538 | |||||
Total shareholders’ equity | 221,499 | 227,978 | |||||
$ | 284,577 | $ | 300,314 |
Common Stock | Total | |||||||||||||
Three years ended May 31, (in thousands) | Number of Shares | Amount | Retained Earnings | Shareholders’ Equity | ||||||||||
Balance, June 1, 2013 | 23,996 | $ | 37,724 | $ | 190,825 | $ | 228,549 | |||||||
Issuance of shares under equity plan, net of shares withheld for employee taxes | 12 | — | — | — | ||||||||||
Excess tax benefit for share-based compensation | — | 183 | — | 183 | ||||||||||
Non-cash stock compensation expense | — | 1,356 | — | 1,356 | ||||||||||
Dividends declared | — | — | (19,527 | ) | (19,527 | ) | ||||||||
Minimum tax withholdings on share-based compensation | — | (11 | ) | — | (11 | ) | ||||||||
Net income for the year ended May 31, 2014 | — | — | 20,408 | 20,408 | ||||||||||
Balance, May 31, 2014 | 24,008 | 39,252 | 191,706 | 230,958 | ||||||||||
Issuance of shares under equity plan, net of shares withheld for employee taxes | 100 | — | — | — | ||||||||||
Excess tax benefit for share-based compensation | — | 358 | — | 358 | ||||||||||
Non-cash stock compensation expense | — | 1,292 | — | 1,292 | ||||||||||
Dividends declared | — | — | (19,600 | ) | (19,600 | ) | ||||||||
Minimum tax withholdings on share-based compensation | — | (462 | ) | — | (462 | ) | ||||||||
Net income for the year ended May 31, 2015 | — | — | 15,432 | 15,432 | ||||||||||
Balance, May 31, 2015 | 24,108 | 40,440 | 187,538 | 227,978 | ||||||||||
Issuance of shares under equity plan, net of shares withheld for employee taxes | 88 | — | — | — | ||||||||||
Excess tax shortfall for share-based compensation | — | (30 | ) | — | (30 | ) | ||||||||
Non-cash stock compensation expense | — | 1,371 | — | 1,371 | ||||||||||
Dividends declared | — | — | (12,306 | ) | (12,306 | ) | ||||||||
Minimum tax withholdings on share-based compensation | — | (298 | ) | — | (298 | ) | ||||||||
Net income for the year ended May 31, 2016 | — | — | 4,784 | 4,784 | ||||||||||
Balance, May 31, 2016 | 24,196 | $ | 41,483 | $ | 180,016 | $ | 221,499 |
Year Ended May 31, (in thousands) | 2016 | 2015 | 2014 | ||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 4,784 | $ | 15,432 | $ | 20,408 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 57,164 | 57,562 | 58,286 | ||||||||
Rental and lease equipment impairment | 443 | — | — | ||||||||
Remeasurement loss on foreign currency | 343 | 5 | 152 | ||||||||
Provision for losses on accounts receivable | 679 | 591 | 860 | ||||||||
Gain on sale of rental and lease equipment | (11,973 | ) | (13,622 | ) | (14,195 | ) | |||||
Stock compensation expense | 1,372 | 1,292 | 1,356 | ||||||||
Excess tax benefit for share-based compensation | (100 | ) | (358 | ) | (183 | ) | |||||
Deferred income taxes | (1,876 | ) | (4,160 | ) | (7,928 | ) | |||||
Change in operating assets and liabilities: | |||||||||||
Accounts receivable | 9,137 | (503 | ) | (2,366 | ) | ||||||
Other assets | (4,250 | ) | (7,532 | ) | (6,568 | ) | |||||
Accounts payable | (1,463 | ) | 1,195 | 260 | |||||||
Accrued expenses | (1,491 | ) | 4,586 | (1,125 | ) | ||||||
Deferred revenue | (414 | ) | (1,869 | ) | 229 | ||||||
Net cash provided by operating activities | 52,355 | 52,619 | 49,186 | ||||||||
Cash flows from investing activities: | |||||||||||
Proceeds from sales of rental and lease equipment | 33,066 | 34,261 | 35,224 | ||||||||
Payments for purchase of rental and lease equipment | (44,071 | ) | (70,954 | ) | (58,678 | ) | |||||
Payments for purchase of other property | (384 | ) | (986 | ) | (384 | ) | |||||
Net cash used in investing activities | (11,389 | ) | (37,679 | ) | (23,838 | ) | |||||
Cash flows from financing activities: | |||||||||||
Borrowings under bank lines of credit | 11,211 | 45,702 | 56,018 | ||||||||
Payments under bank lines of credit | (13,598 | ) | (43,315 | ) | (66,018 | ) | |||||
Minimum tax withholdings on share-based compensation | (298 | ) | (462 | ) | (11 | ) | |||||
Excess tax benefit for share-based compensation | 100 | 358 | 183 | ||||||||
Payment of dividends | (12,328 | ) | (19,656 | ) | (19,657 | ) | |||||
Net cash used in financing activities | (14,913 | ) | (17,373 | ) | (29,485 | ) | |||||
Effect of exchange rate changes on cash | (52 | ) | 551 | (319 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 26,001 | (1,882 | ) | (4,456 | ) | ||||||
Cash and cash equivalents at beginning of year | 4,064 | 5,946 | 10,402 | ||||||||
Cash and cash equivalents at end of year | $ | 30,065 | $ | 4,064 | $ | 5,946 | |||||
Interest paid, during the period | $ | 69 | $ | 31 | $ | 106 | |||||
Income taxes paid, during the period | $ | 7,883 | $ | 8,063 | $ | 23,778 | |||||
Dividends accrued during the period, not yet paid | $ | 133 | $ | 155 | $ | 211 | |||||
Rental equipment acquisitions, not yet paid | $ | 2,854 | $ | 4,430 | $ | 4,479 | |||||
Used equipment sales in accounts receivable and other assets, not yet collected | $ | 4,961 | $ | 7,426 | $ | 9,050 | |||||
Transfers from other assets to rental and lease equipment | $ | 466 | $ | 14,338 | $ | 4,535 |
2016 | 2015 | 2014 | |||||||||
Beginning of year | $ | 604 | $ | 555 | $ | 457 | |||||
Provision for doubtful accounts | 679 | 591 | 860 | ||||||||
Write-offs | (819 | ) | (542 | ) | (762 | ) | |||||
End of year | $ | 464 | $ | 604 | $ | 555 |
2016 | 2015 | ||||||
Net investment in sales-type leases | $ | 3,581 | $ | 5,876 | |||
Supplemental executive retirement plan assets | 3,089 | 3,521 | |||||
Demonstration equipment | 4,851 | 81 | |||||
Income taxes receivable | 1,342 | — | |||||
Prepaid and other assets | 3,734 | 4,265 | |||||
$ | 16,597 | $ | 13,743 |
Derivatives Not Designated as Hedging Instruments | Consolidated Balance Sheet Location | May 31, 2016 | May 31, 2015 | |||||||
Foreign exchange forward contracts | Accrued Expenses | $ | (6 | ) | $ | (16 | ) |
Derivatives Not Designated as Hedging Instruments | Location of Gain/(Loss) Recognized in Income on Derivatives Not Designated as Hedging Instruments | Year ended May 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||||
Foreign exchange forward contracts | Selling, general and administrative expenses | $ | 38 | $ | 1,210 | $ | (269 | ) |
May 31, 2016 | |||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Balance | ||||||||||||
Assets | |||||||||||||||
SERP: | |||||||||||||||
Money market fund | $ | 182 | $ | — | $ | — | $ | 182 | |||||||
Mutual funds | 2,907 | — | — | 2,907 | |||||||||||
Total assets measured at fair value | $ | 3,089 | $ | — | $ | — | $ | 3,089 | |||||||
Liabilities | |||||||||||||||
SERP | $ | 3,089 | $ | — | $ | — | $ | 3,089 | |||||||
Foreign exchange forward contracts | — | 6 | — | 6 | |||||||||||
Total liabilities measured at fair value | $ | 3,089 | $ | 6 | $ | — | $ | 3,095 |
May 31, 2015 | |||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Balance | ||||||||||||
Assets | |||||||||||||||
SERP: | |||||||||||||||
Money market fund | $ | 166 | $ | — | $ | — | $ | 166 | |||||||
Mutual funds | 3,355 | — | — | 3,355 | |||||||||||
Total assets measured at fair value | $ | 3,521 | $ | — | $ | — | $ | 3,521 | |||||||
Liabilities | |||||||||||||||
SERP | $ | 3,521 | $ | — | $ | — | $ | 3,521 | |||||||
Foreign exchange forward contracts | — | 16 | — | 16 | |||||||||||
Total liabilities measured at fair value | $ | 3,521 | $ | 16 | $ | — | $ | 3,537 |
Balance as of June 1, 2015 (net of amortization) | Additions | Amortization | Balance as of May 31, 2016 | ||||||||||||
Goodwill | $ | 3,109 | $ | — | $ | — | $ | 3,109 | |||||||
Trade name | 411 | — | — | 411 | |||||||||||
Customer relationships | 333 | — | (118 | ) | 215 | ||||||||||
$ | 3,853 | $ | — | $ | (118 | ) | $ | 3,735 | |||||||
Balance as of June 1, 2014 (net of amortization) | Additions | Amortization | Balance as of May 31, 2015 | ||||||||||||
Goodwill | $ | 3,109 | $ | — | $ | — | $ | 3,109 | |||||||
Trade name | 411 | — | — | 411 | |||||||||||
Customer relationships | 462 | — | (129 | ) | 333 | ||||||||||
$ | 3,982 | $ | — | $ | (129 | ) | $ | 3,853 |
May 31, 2016 | ||||||||||||||
Estimated Useful Life | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||
Trade name | — | $ | 411 | $ | — | $ | 411 | |||||||
Customer relationships | 3-8 years | 2,094 | (1,879 | ) | 215 | |||||||||
$ | 2,505 | $ | (1,879 | ) | $ | 626 | ||||||||
May 31, 2015 | ||||||||||||||
Estimated Useful Life | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||
Trade name | — | $ | 411 | $ | — | $ | 411 | |||||||
Customer relationships | 3-8 years | 2,094 | (1,761 | ) | 333 | |||||||||
$ | 2,505 | $ | (1,761 | ) | $ | 744 |
Year ending May 31, | Future Amortization | ||
2017 | $ | 118 | |
2018 | 97 | ||
2019 | — | ||
2020 | — | ||
2021 | — | ||
$ | 215 |
2016 | 2015 | 2014 | |||||||||
Domestic | $ | 8,991 | $ | 24,203 | $ | 30,907 | |||||
Foreign | (1,204 | ) | 447 | 1,619 | |||||||
$ | 7,787 | $ | 24,650 | $ | 32,526 |
2016 | 2015 | 2014 | |||||||||
Current | |||||||||||
Federal | $ | 4,228 | $ | 11,636 | $ | 18,007 | |||||
State | 556 | 1,355 | 1,720 | ||||||||
Foreign | 95 | 387 | 319 | ||||||||
Deferred | |||||||||||
Federal | (1,285 | ) | (3,626 | ) | (7,553 | ) | |||||
State | (277 | ) | (248 | ) | (500 | ) | |||||
Foreign | (314 | ) | (286 | ) | 125 | ||||||
$ | 3,003 | $ | 9,218 | $ | 12,118 |
2016 | 2015 | 2014 | ||||||
Statutory federal rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
State taxes, net of federal benefit | 2.3 | 2.9 | 2.5 | |||||
Foreign tax credit/refund | (3.0 | ) | (0.8 | ) | (0.6 | ) | ||
Permanent differences resulting from valuation allowances | 3.6 | 0.6 | 0.3 | |||||
Other | 0.7 | (0.3 | ) | 0.1 | ||||
Effective tax rate | 38.6 | % | 37.4 | % | 37.3 | % |
2016 | 2015 | ||||||
Deferred tax assets: | |||||||
Allowance for doubtful accounts | $ | 130 | $ | 113 | |||
Deferred compensation and benefits | 5,193 | 4,588 | |||||
Net operating losses | 681 | 398 | |||||
Valuation allowance | (681 | ) | (398 | ) | |||
Other | 1,640 | 1,890 | |||||
6,963 | 6,591 | ||||||
Deferred tax liabilities: | |||||||
Accumulated depreciation | (41,392 | ) | (42,505 | ) | |||
Deferred taxes on bargain purchase | (1,189 | ) | (1,583 | ) | |||
Intangible asset | (158 | ) | (155 | ) | |||
Net deferred tax liabilities | $ | (35,776 | ) | $ | (37,652 | ) |
2016 | 2015 | ||||||
Gross minimum lease payments receivable | $ | 3,701 | $ | 6,109 | |||
Less—unearned interest | (120 | ) | (233 | ) | |||
Net investment in sales-type lease receivables | $ | 3,581 | $ | 5,876 |
Year ending May 31, | Future Amortization | ||
2017 | $ | 2,949 | |
2018 | 679 | ||
2019 | 73 | ||
2020 | — | ||
2021 | — | ||
$ | 3,701 |
2016 | 2015 | 2014 | |||||||||
Denominator: | |||||||||||
Denominator for basic earnings per share—weighted average common shares outstanding (including shares issuable for vested restricted stock units) | 24,414 | 24,360 | 24,325 | ||||||||
Effect of unvested restricted stock units | 15 | 18 | 32 | ||||||||
Diluted shares used in per share calculation | 24,429 | 24,378 | 24,357 | ||||||||
Net income | $ | 4,784 | $ | 15,432 | $ | 20,408 | |||||
Earnings per share: | |||||||||||
Basic | $ | 0.20 | $ | 0.63 | $ | 0.84 | |||||
Diluted | $ | 0.20 | $ | 0.63 | $ | 0.84 |
Year ending May 31, | Future Minimum Rental Payments | ||
2017 | $ | 4,639 | |
2018 | 2,802 | ||
2019 | 531 | ||
2020 | — | ||
2021 | — | ||
$ | 7,972 |
2016 | 2015 | ||||||
Land | $ | 6,985 | $ | 6,985 | |||
Buildings | 15,906 | 15,895 | |||||
Furniture and other equipment | 6,907 | 6,733 | |||||
Leasehold improvements | 244 | 256 | |||||
30,042 | 29,869 | ||||||
Less—accumulated depreciation and amortization | (17,653 | ) | (16,749 | ) | |||
$ | 12,389 | $ | 13,120 |
Year ending May 31, | Minimum Payments | ||
2017 | $ | 706 | |
2018 | 449 | ||
2019 | 258 | ||
2020 | 111 | ||
2021 | — | ||
$ | 1,524 |
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||
Nonvested at June 1, 2015 | 129 | $ | 16.75 | |||
Granted | 182 | 11.24 | ||||
Vested | (81 | ) | 15.78 | |||
Forfeited/canceled | (9 | ) | 15.40 | |||
Nonvested at May 31, 2016 | 221 | $ | 12.62 |
T&M | DP | Total | |||||||||
2016 | |||||||||||
Rentals and leases | $ | 105,850 | $ | 17,935 | $ | 123,785 | |||||
Sales of equipment and other revenues | 49,518 | 2,030 | 51,548 | ||||||||
Segment and consolidated total | $ | 155,368 | $ | 19,965 | $ | 175,333 | |||||
2015 | |||||||||||
Rentals and leases | $ | 111,327 | $ | 17,928 | $ | 129,255 | |||||
Sales of equipment and other revenues | 107,270 | 1,804 | 109,074 | ||||||||
Segment and consolidated total | $ | 218,597 | $ | 19,732 | $ | 238,329 | |||||
2014 | |||||||||||
Rentals and leases | $ | 120,629 | $ | 16,788 | $ | 137,417 | |||||
Sales of equipment and other revenues | 101,898 | 1,822 | 103,720 | ||||||||
Segment and consolidated total | $ | 222,527 | $ | 18,610 | $ | 241,137 |
2016 | 2015 | 2014 | |||||||||
T&M | $ | 51,669 | $ | 52,278 | $ | 52,652 | |||||
DP | 4,262 | 4,167 | 4,382 | ||||||||
Segment and consolidated total | $ | 55,931 | $ | 56,445 | $ | 57,034 |
2016 | 2015 | 2014 | |||||||||
T&M | $ | 38,527 | $ | 50,410 | $ | 58,924 | |||||
DP | 6,695 | 6,914 | 5,962 | ||||||||
Total marginal contribution of operating segments | 45,222 | 57,324 | 64,886 | ||||||||
Deduct: | |||||||||||
Unallocated SG&A expenses | 37,139 | 34,396 | 32,747 | ||||||||
Add: | |||||||||||
Interest income, net | (329 | ) | 332 | 387 | |||||||
Other income | 33 | 1,390 | — | ||||||||
Consolidated income before income taxes | $ | 7,787 | $ | 24,650 | $ | 32,526 |
Year ended May 31, | 2016 | 2015 | 2014 | ||||||||
Revenues: 1 | |||||||||||
U.S. | $ | 141,535 | $ | 200,323 | $ | 203,806 | |||||
Other 2 | 33,798 | 38,006 | 37,331 | ||||||||
Total | $ | 175,333 | $ | 238,329 | $ | 241,137 |
As of May 31, | 2016 | 2015 | 2014 | ||||||||
Net Long Lived Assets: 3 | |||||||||||
U.S. | $ | 168,331 | $ | 197,514 | $ | 188,343 | |||||
Other 2 | 43,583 | 47,277 | 46,667 | ||||||||
Total | $ | 211,914 | $ | 244,791 | $ | 235,010 |
1 | Revenues by country are based on the shipping destination. |
2 | Other consists of countries other than the U.S. Each foreign country individually accounts for less than 10% of the total consolidated revenues and net long-lived assets. |
3 | Net long-lived assets include rental and lease equipment and other property, net of accumulated depreciation and amortization. |
Total Revenues | Gross Profit 1 | Income Before Taxes | Net Income | Earnings per share | |||||||||||||||||||
Basic | Diluted | ||||||||||||||||||||||
Fiscal Year 2016 | |||||||||||||||||||||||
First Quarter | $ | 53,343 | $ | 18,964 | $ | 3,951 | $ | 2,470 | $ | 0.10 | $ | 0.10 | |||||||||||
Second Quarter | 43,310 | 17,881 | 3,541 | 2,190 | 0.09 | 0.09 | |||||||||||||||||
Third Quarter | 39,498 | 15,172 | 1,492 | 1,009 | 0.04 | 0.04 | |||||||||||||||||
Fourth Quarter | 39,182 | 16,220 | (1,197 | ) | (885 | ) | (0.04 | ) | (0.04 | ) | |||||||||||||
Annual totals | $ | 175,333 | $ | 68,237 | $ | 7,787 | $ | 4,784 | $ | 0.20 | $ | 0.20 | |||||||||||
Fiscal Year 2015 | |||||||||||||||||||||||
First Quarter | $ | 61,871 | $ | 22,480 | $ | 7,562 | $ | 4,771 | $ | 0.20 | $ | 0.20 | |||||||||||
Second Quarter | 59,703 | 20,825 | 7,696 | 4,795 | 0.20 | 0.20 | |||||||||||||||||
Third Quarter | 56,342 | 18,356 | 3,746 | 2,425 | 0.10 | 0.10 | |||||||||||||||||
Fourth Quarter | 60,413 | 20,580 | 5,646 | 3,441 | 0.14 | 0.14 | |||||||||||||||||
Annual totals | $ | 238,329 | $ | 82,241 | $ | 24,650 | $ | 15,432 | $ | 0.63 | $ | 0.63 |
1 | Gross profit is calculated as total revenues less depreciation of rental and lease equipment, costs of rentals and leases and costs of sales of equipment and other revenues. |
• | each outstanding share of our common stock (other than shares held by any person who properly asserts dissenters’ rights under California law) will be converted into the right to receive an amount in cash equal to $15.50 per share (the “Merger Consideration”); and |
• | each restricted stock unit (whether vested or unvested) that is outstanding at the effective time of the Merger will vest in full and will convert into the right to receive an amount in cash equal to the per share Merger Consideration. |
-1- |
-2- |
-3- |
-4- |
-5- |
“Executive” | |
/s/ Allen Sciarillo | |
Allen Sciarillo | |
“Electro Rent” Electro Rent Corporation | |
By: /s/ Daniel Greenberg | |
Daniel Greenberg, Its CEO |
-6- |
-7- |
-8- |
/s/ Steve Markheim | |
Steve Markheim Chief Executive Officer |
/s/ Allen Sciarillo | |
Allen Sciarillo Chief Financial Officer |
/s/ Steve Markheim | |
Steve Markheim Chief Executive Officer |
/s/ Allen Sciarillo | |
Allen Sciarillo Chief Financial Officer |
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end
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
Aug. 08, 2016 |
Nov. 30, 2015 |
|
Document Information [Line Items] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | May 31, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | ELRC | ||
Entity Registrant Name | ELECTRO RENT CORP | ||
Entity Central Index Key | 0000032166 | ||
Current Fiscal Year End Date | --05-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 24,200,660 | ||
Entity Public Float | $ 159,711,978 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
May 31, 2016 |
May 31, 2015 |
---|---|---|
Allowance for doubtful accounts | $ 464 | $ 604 |
Accumulated depreciation on rental and lease equipment | 235,387 | 241,116 |
Accumulated depreciation and amortization for other property | 17,653 | 16,749 |
Amortization of intangibles | $ 1,879 | $ 1,761 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Common stock, par value | ||
Commons stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 24,196,634 | 24,108,176 |
Common stock, shares outstanding | 24,196,634 | 24,108,176 |
Summary of Significant Accounting Policies |
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May 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation: The consolidated financial statements include Electro Rent Corporation and its wholly owned subsidiaries, Electro Rent, LLC, ER International, Inc., Electro Rent Europe NV, Electro Rent Asia, Inc. and Electro Rent (Beijing) Test and Measurement Equipment Rental Co., Ltd. (collectively “we”, “us”, or “our” hereafter). All intercompany balances and transactions have been eliminated in consolidation. Business and Organization: We are a global organization devoted to the rental, lease and sale of new and used electronic test and measurement (“T&M”) equipment. We purchase T&M equipment from leading manufacturers such as Keysight Technologies, Inc. (formerly Agilent Technologies, Inc., “Keysight”), Anritsu, Inc. ("Anritsu"), Rohde & Schwarz Gmbh & Co. KG ("Rohde & Schwarz") and Tektronix Inc. Our customers rent, lease and buy our T&M equipment, and use that equipment primarily in the aerospace and defense, telecommunications, electronics, industrial and semiconductor markets. In addition, we purchase personal computers from manufacturers including Dell, HP, IBM, Toshiba and Apple for our Data Products ("DP") division. Our reseller agreement with Keysight was not renewed after its May 31, 2015 expiration date. The expiration of the Keysight reseller agreement materially affected our revenues and net profits. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosures of contingent assets and liabilities as of the date of these financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, we review these estimates including those related to asset lives and depreciation methods, impairment of long-lived assets, including rental and lease equipment, goodwill and intangibles, allowance for doubtful accounts, income taxes, contingencies and litigation. These estimates are based on our evaluation of current business and economic conditions, historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe, however, that our estimates, including those for the above-listed items, are reasonable. Revenue Recognition: We generate revenues primarily through the rental and leasing of T&M and DP equipment and through the sale of new and used equipment. Rental revenues comprise short term agreements that can be daily, weekly or monthly. Rental revenues are recognized in the month they are due on the accrual basis of accounting. Our operating lease agreements have varying terms, typically one to three years. Upon lease termination, customers have the option to renew the lease term, purchase the equipment at fair market value, or continue to rent on a month-to-month basis. Our operating leases do not provide for contingent rentals. Revenues related to operating leases are recognized on a straight-line basis over the term of the lease. Negotiated lease early-termination charges are recognized upon receipt. Rentals and leases are primarily billed to customers in advance, and unearned billings are recorded as deferred revenue. We enter into finance leases as lessor for some of our equipment. Our finance lease agreements contain bargain purchase options and are accounted for as sale-type leases. Revenues from finance leases, which are recorded at the present value of the aggregate future lease payments, net of unearned interest, are included in sales of equipment and other revenues in our consolidated statements of operations. Unearned interest is recognized over the life of the finance lease term using the effective interest method. Our finance lease terms vary, and are typically one to three years. The net investment in finance leases, which represents the receivables due from lessees, net of unearned interest, is included in other assets in our consolidated balance sheets. Historically, we have not required security deposits based on our assessed credit risk within our customer bases. Initial direct costs for operating and finance leases are insignificant. Sales of new equipment through our resale channel are recognized in the period in which the equipment is delivered and risk of loss passes to the customer, while sales of used equipment from our rental and lease equipment pool are recognized in the period in which the equipment is shipped and risk of loss passes to the customer. In the case of equipment sold to customers that is already on rent or lease to the same party, revenue is recognized at the agreed-upon date when the rent or lease term ends and risk of loss passes to the customer. The amount of revenue recognized for sales of new equipment depends on whether we sell as principal or as agent for the original equipment manufacturer. Prior to May 31, 2015, our sales of new equipment were derived primarily from the reseller agreement with Keysight Technologies, Inc. In fiscal 2016, we entered into reseller agreements with other T&M equipment manufacturers, including Anritsu and Rohde & Schwarz. Under the terms of these agreements we act as the principal with respect to sales of new equipment, based on several factors, including: (1) We act as the primary obligor by working directly with our customers to define their needs, providing them with options to satisfy such needs, contracting directly with the customer, and, to the extent required, providing customers with instruction on the use of the product and additional technical support once the product is received by the customer. The original equipment manufacturer is not a party to our customer sales agreements, nor is it referenced in the agreements, and therefore has no obligation to our customers with the exception of the manufacturer’s standard warranty on the product; (2) We bear back-end risk of inventory loss with respect to any product return from the customer as the original equipment manufacturer is not required to accept returns of equipment from us. Under the reseller agreement with Keysight, we also bore front-end risk of inventory loss in those cases where we acquired products for resale into our equipment pool prior to shipment to customers; (3) We have full discretion in setting pricing terms with our customers and negotiate all such terms ourselves; and (4) We assume all credit risk. In situations where we act as principal, the gross sales of new equipment are recorded in sales of equipment and other revenues, while the related equipment costs, including the purchase price from the original equipment manufacturer, are recorded in costs of sales of equipment and other revenues in our consolidated statements of operations. In situations where we act as an agent for the original equipment manufacturer, we recognize revenue only on the commissions that we receive, which are recorded in other revenue within the sales of equipment and other revenues in our consolidated statement of operations. Other revenues, consisting primarily of billings to customers for delivery and repairs, are recognized in the period in which the respective services are performed. Operating Expenses: Costs of rentals and leases, excluding depreciation, primarily include labor related costs of our operations personnel, supplies, repairs, insurance and warehousing costs associated with our rental and lease equipment, relating to our rental and lease revenues. Costs of sales of equipment and other revenues primarily include the cost of new equipment and the carrying value of used equipment sold. Selling, general and administrative expenses include sales and advertising costs, payroll and related benefit costs, insurance expenses, property taxes on our property and rental and lease equipment, legal and professional fees, and administrative overhead. Advertising costs are expensed as incurred. Total advertising expenses were $1,133, $982 and $982 for fiscal 2016, 2015 and 2014, respectively. Selling, general and administrative expenses also include shipping and handling costs of $3,634, $3,953 and $3,977 for fiscal 2016, 2015 and 2014, respectively. Rental and Lease Equipment and Other Property: Assets are generally stated at cost, less accumulated depreciation. Upon retirement or disposal of assets, the cost and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized. We depreciate our buildings over 31.5 years, building improvements over useful life, furniture and other equipment over three to ten years, and leasehold improvements over the shorter of the lease term, typically three to five years, or useful life. Each is depreciated on a straight-line basis. Depreciation of rental and lease equipment is provided over the estimated useful lives of the respective assets. We depreciated $407,807 and $440,495 of equipment, at acquisition cost, at May 31, 2016 and 2015, respectively, using straight-line methods ranging from two to ten years, and $27,106 and $32,292 of equipment, at acquisition cost, at May 31, 2016 and 2015, respectively, using accelerated methods ranging from two to four years. We generally use straight-line methods for our T&M equipment, which we believe maintains its value consistently throughout the equipment’s useful life, and accelerated methods primarily for our DP equipment, which tends to depreciate faster due to frequent technological advancements. Depreciation methods and useful lives are periodically reviewed and revised, as deemed appropriate, including revisions to reflect shorter useful lives to more closely match depreciation expense with rental revenue for rental arrangements where the customer can acquire title through payment of all required rentals. Normal maintenance and repairs are expensed as incurred. Depreciation expense for rental and lease equipment was $55,931, $56,445 and $57,034 for fiscal 2016, 2015 and 2014, respectively. Rental and lease equipment at net book value was comprised of $194,618 of T&M equipment and $4,908 of DP equipment at May 31, 2016, and $225,222 of T&M equipment and $6,449 of DP equipment at May 31, 2015. Income Taxes: We recognize a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when reported amounts of the assets or liabilities are recovered or settled. Deferred tax assets are periodically reviewed for recoverability. We recognize the tax impact from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax impact recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We recognize interest, penalties and foreign currency gains and losses with respect to uncertain tax positions as components of our income tax provision. Accrued interest and penalties are included within accrued expenses in the consolidated balance sheet. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions (see Note 5 for further discussion.) Impairment of Long-Lived Assets: The carrying value of equipment held for rental and lease is assessed when circumstances indicate that the carrying amount of equipment may not be recoverable. Recoverability of equipment to be rented and leased is measured by a comparison of the carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the current carrying value exceeds the estimated undiscounted cash flows, an impairment loss is recorded equal to the difference between the asset’s current carrying value and its fair value as described in FASB ASC Topics No. 360, Impairment and Disposal of Long-Lived Assets and No. 820, Fair Value Measurements and Disclosures. We determine the fair value based upon the projected net cash flows from model's rental and sale considering current market conditions. Based upon such periodic assessments, costs of rentals and leases included impairment charges of $443 related to our T&M rental and lease equipment during the year ended May 31, 2016. No impairments occurred during fiscal 2015 and 2014. Goodwill: Goodwill, which represents the excess of purchase price over the fair value of net assets acquired is discussed further in Note 3. Pursuant to FASB ASC Topic No. 350, Intangibles – Goodwill and Other, goodwill is not amortized but tested annually for impairment, or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. In connection with the annual impairment test for goodwill, we have elected the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we determine that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test. The impairment test involves a two-step process. The first step involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using the market approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the test to determine the amount of impairment loss. The second step involves measuring the impairment by comparing the implied fair value of the affected reporting unit’s goodwill with its carrying value. We completed the required impairment review at the end of fiscal 2016, 2015 and 2014 and concluded that there were no impairments. Cash and Cash Equivalents: We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. We held no cash equivalents at May 31, 2016 and 2015 except for the money market funds that are part of our supplemental executive retirement plan (SERP) assets included in other assets. Allowance for Doubtful Accounts: We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make rental and lease payments. The estimated losses are based on historical collection experience in conjunction with an evaluation of the current status of the existing accounts. If the financial condition of our customers were to deteriorate, then additional allowances could be required that would reduce income. Conversely, if the financial condition of our customers were to improve or if legal remedies to collect past due amounts were more successful than expected, then the allowance for doubtful accounts may need to be reduced and income would be increased. A roll forward of the allowance for doubtful accounts is as follows at May 31:
Other Assets: We include demonstration equipment used in connection with our resale activity, totaling $4,851 and $81 as of May 31, 2016 and 2015, respectively, in other assets for a period up to two years. Demonstration equipment is recorded at the lower of cost or estimated market value until the units are transferred to our rental and lease equipment pool. Once transferred to our rental and lease equipment pool, the equipment is depreciated over its remaining estimated useful life. Other assets consisted of the following at May 31:
Concentration of Credit Risk: Financial instruments that potentially expose us to concentration of credit risk primarily consist of trade accounts receivable. To mitigate the risk, we sell primarily on 30-day terms, perform credit evaluation procedures on each customer’s individual transactions and require security deposits or personal guarantees from our customers when significant credit risks are identified. Typically, most customers are large, established firms. We purchase rental and lease equipment from numerous vendors. During fiscal 2016, 2015 and 2014, Keysight accounted for approximately 56.0%, 70.7% and 65.6%, respectively, of all new equipment purchases, including rental equipment and equipment purchased for resale. Anritsu equipment purchases during fiscal 2016 accounted for 12.3% of our new equipment purchases while Anritsu equipment purchases during fiscal 2015 and fiscal 2014 were below 10.0%. No other vendor accounted for more than 10.0% of such purchases. Foreign Currency: The U.S. dollar has been determined to be the functional currency of all foreign subsidiaries. The assets and liabilities of our foreign subsidiaries are remeasured from their local currency to U.S. dollars at current or historic exchange rates, as appropriate. Revenues and expenses are remeasured from foreign currencies to U.S. dollars using historic or average monthly exchange rates, as appropriate, for the month in which the transaction occurred. Remeasurement gains and losses are included in selling, general and administrative expenses or income taxes, as appropriate. The assets, liabilities, revenues and expenses of our foreign subsidiaries are individually less than 10.0% of our respective consolidated amounts. The euro, British pound sterling, Canadian dollar and Chinese yuan are our primary foreign currencies. Net remeasurement gains and losses have not been significant. We enter into forward contracts to hedge against unfavorable currency fluctuations in our monetary assets and liabilities in our European and Canadian operations. These contracts are designed to minimize the effect of fluctuations in foreign currencies. To qualify for hedge accounting, contracts must reduce the foreign currency exchange rate and interest rate risk otherwise inherent in the amount and duration of the hedged exposures and comply with established risk management policies. Our derivative instruments are not designated as hedging instruments and, therefore, are recorded at fair value as an asset or liability, and any changes in fair value are recorded in our consolidated statements of operations. We do not use derivative financial instruments for speculative trading purposes. The fair value of our foreign exchange forward contracts in the consolidated balance sheets is shown in the table below:
The table below provides data about the amount of fiscal 2016, 2015 and 2014 gains and losses recognized in income for derivative instruments not designated as hedging instruments:
Net Income Per Common and Common Equivalent Share: Basic earnings per share (“EPS”) is computed as net income divided by the weighted average number of shares of common stock outstanding and shares issuable for vested restricted stock units for the reported year, excluding the dilutive effects of any potentially anti-dilutive securities. Diluted EPS is computed as net income divided by the weighted average number of shares outstanding of common stock and common stock equivalents for the reported year. The dilutive effect of restricted stock units is computed using the treasury stock method. Share-Based Compensation: Share-based payments to employees are recognized in the consolidated financial statements as compensation expense over the period that an employee provides service in exchange for the award based on its fair value on the date of grant. Compensation expense resulting from restricted stock units is measured at fair value on the date of grant and is recognized in selling, general and administrative expenses over the vesting period (see Note 11 for further discussion). Recent Accounting Pronouncements: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718). Under the new guidance, all excess tax benefits and tax deficiencies will be recognized in the income statement as they occur. This will replace the current guidance, which requires tax benefits that exceed compensation cost (windfalls) to be recognized in equity. It will also eliminate the need to maintain a “windfall pool,” and will remove the requirement to delay recognizing a windfall until it reduces current taxes payable. The new guidance will also change the cash flow presentation of excess tax benefits, classifying them as operating inflows, consistent with other cash flows related to income taxes. The amendments in this guidance are effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The Company is evaluating the impact of this new guidance on its consolidated financial statements. In February 2016, the FASB issued guidance that will require lessees to put most leases on their balance sheets but recognize expenses in the income statement. For lessors, the standard will be similar to the current model but will be updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The impact this guidance will have on the consolidated financial statements cannot be determined at this time. In May 2014, the FASB and the International Accounting Standards Board ("IASB") issued guidance to establish a new, more robust framework for the recognition of revenue related to the transfer of goods and services to customers. This guidance is effective for reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The impact this guidance will have on the consolidated financial statements cannot be determined at this time. Other Comprehensive Income: Comprehensive income is equivalent to net income for all periods presented. Other Income: In fiscal 2015, we recognized other income from a $1,390 settlement received as one of the plaintiffs in a class action lawsuit involving the purchase of certain computer products. Out-of-period Adjustment: In fiscal 2015, we identified $1,344 of previously recognized revenue which the Company was not entitled to recognize. We determined this adjustment to be immaterial to our current and previously filed financial statements. We have recorded this out-of-period adjustment as a reduction to sales of equipment and other revenues and an increase to accrued expenses. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements We measure certain financial assets and liabilities at fair value on a recurring basis, including supplemental executive retirement plan ("SERP") assets and liabilities, and foreign currency derivatives. The fair value of financial assets and liabilities can be determined based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, as follows: Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or through corroboration with observable market data; and Level 3 – Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-developed valuation models. Our assets and liabilities measured at fair value on a recurring basis were determined as follows:
The fair value measures for our SERP money market funds and mutual funds, which we classify as trading securities, were derived from quoted market prices in active markets and are included in Level 1 inputs (see Note 12 for further discussion of our SERP assets and liabilities). Foreign currency forward contracts were valued based on observable market spot and forward rates as of our reporting date and are included in Level 2 inputs. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets consist of purchased customer relationships and trade names. Our goodwill and intangibles at May 31, 2016 are the result of our acquisition of Equipment Management Technology, Inc. ("EMT") on August 24, 2011, Telogy LLC on March 31, 2010, and Rush Computer Rentals, Inc. on January 31, 2006. The changes in carrying amount of goodwill and other intangible assets for fiscal 2016 and 2015 were as follows:
Goodwill is not deductible for tax purposes. We evaluate the recoverability of goodwill and indefinite-lived intangible assets annually as of May 31, and whenever events or changes in circumstances indicate to us that the carrying amount may not be recoverable. We completed the required impairment review at the end of fiscal 2016, 2015 and 2014 and concluded that there were no impairments. Intangible assets with finite useful lives are amortized over their respective estimated useful lives. The following tables provide a summary of our intangible assets:
Amortization expense was $118, $129 and $164 for fiscal 2016, 2015 and 2014, respectively. Amortization expense for customer relationships is included in selling, general and administrative expenses. The following table provides estimated future amortization expense related to intangible assets:
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Borrowings |
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Debt Disclosure [Abstract] | |
Borrowings | Borrowings On November 19, 2013, we entered into a credit agreement (the “Credit Agreement”) with J.P. Morgan Chase Bank, National Association (“JPM”), as administrative agent, J.P. Morgan Securities LLC, as sole bookrunner and sole lead arranger, and a syndicate of lenders. The Credit Agreement provides for a $25,000 revolving credit facility, including swingline loans and letters of credit. The Credit Agreement expires on November 30, 2017. We have an option to increase the commitments under the Credit Agreement by up to an additional $25,000, upon our request and subject to the lenders electing to increase their commitments or by means of the addition of new lenders. Borrowings under the Credit Agreement bear interest at a rate equal to, at our election, the applicable rate for a “Eurodollar Loan” or a “CB Floating Rate Loan.” Eurodollar Loan advances accrue interest at a per annum interest rate equal to (i) the quotient (rounded upwards to the next 1/16th of 1%) of (a) the applicable LIBO Rate, divided by (b) one minus the maximum aggregate reserve requirement (expressed as a decimal) imposed under Federal Reserve Board Regulation D (the “Adjusted LIBO Rate”), plus (ii) 0.75%. CB Floating Rate Loan advances accrue interest at a per annum interest rate equal to (i) the higher of (a) JPM’s Prime Rate or (b) the Adjusted LIBO Rate for a one month interest period plus 2.5%, minus (ii) 2.0%. In addition, we pay a commitment fee of 0.10% of the unused amount if the average borrowing under the Credit Agreement is less than or equal to $8,000 on a quarterly basis. The Credit Agreement contains customary affirmative and negative covenants (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on the ability to incur additional indebtedness, create liens, make certain investments, make restricted payments, enter into or undertake certain liquidations, mergers, consolidations or acquisitions and dispose of assets or subsidiaries. In addition, the Credit Agreement requires us to maintain minimum earnings and tangible net worth. We were in compliance with all financial covenants at May 31, 2016. At May 31, 2016, we had no borrowings outstanding under the Credit Agreement. We had $2,387 borrowings outstanding at May 31, 2015. The weighted average interest rate under the line of credit was approximately 1.25% at May 31, 2015. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes We recognize a liability or an asset for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets are periodically reviewed for recoverability. There were no uncertain tax positions in fiscal 2016, 2015 and 2014. At May 31, 2016 and 2015, we did not have any accrual for interest and penalties. We are subject to taxation in the U.S., as well as various states and foreign jurisdictions. We have substantially settled all income tax matters for the United States federal jurisdiction for years through fiscal 2011. Major state jurisdictions have been examined through fiscal 2004 and 2005, and foreign jurisdictions have not been examined for their respective initial statutory periods of approximately 3 years. For financial reporting purposes, income before income taxes comprised the following as of May 31:
The income tax provision consisted of the following for the fiscal years ended May 31:
The following reconciles the statutory federal income tax rate to the effective tax rate for the fiscal years ended May 31:
The higher tax rate in fiscal 2016 is primarily due to higher losses in our China operations for which we receive no tax benefit and lower consolidated pretax income. Our effective tax rate remained consistent between fiscal 2015 and fiscal 2014. The tax effects of temporary differences that gave rise to significant portions of the net deferred tax liabilities consisted of the following at May 31:
We determined that a valuation allowance was required in fiscal 2016, 2015 and 2014 of $681, $398 and $254, respectively, for our deferred tax assets related to certain foreign net operating loss carry forwards, which, if unused, will expire between fiscal 2017 and 2021. The change in the valuation allowance for fiscal 2016 as compared to fiscal 2015 was due to higher loss in China and lower consolidated pretax income. The change in the valuation allowance for fiscal 2015 and 2014 was not significant. As of May 31, 2016, 2015 and 2014, U.S. income taxes had not been assessed on approximately $7,322, $7,574 and $6,303, respectively, of undistributed earnings of foreign subsidiaries because we consider these earnings to be invested indefinitely. We consider the undistributed earnings of our foreign subsidiaries as of May 31, 2016, to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. As of May 31, 2016, the amount of cash associated with indefinitely reinvested foreign earnings was approximately $5,702. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements. |
Sales-type Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales-type Leases | Sales-Type Leases We have certain customer leases providing bargain purchase options, which are accounted for as sales-type leases. Interest income is recognized over the life of the lease using the effective interest method. The initial acceptance of customer finance arrangements is based on a review of each customer’s credit profile, which may include the review of third party credit reports, customer financial statements and/or bank verifications. We monitor the credit quality of our sales-type lease portfolio based on payment activity and the related finance lease receivable aging. This credit quality is assessed on a monthly basis. Our historical losses on finance lease receivables are insignificant, and therefore we do not have a specific allowance for credit losses. The minimum lease payments receivable and the net investment included in other assets were as follows at May 31:
The following table provides estimated future minimum lease payments by year related to sales-type leases:
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Computation of Earnings Per Share |
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Computation of Earnings Per Share | Computation of Earnings per Share The following is a reconciliation of the denominator used in the computation of basic and diluted EPS for the fiscal years ended May 31:
We did not include 47, 5, and 3 shares in the calculation of diluted earnings per share for the years ended May 31, 2016, 2015 and 2014, respectively, as to do so would have been antidilutive. |
Rentals Under Noncancellable Operating Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Rentals Under Noncancellable Operating Leases | Rentals under Noncancellable Operating Leases Our operating lease agreements have varying terms, typically one to three years. Upon lease termination, the lessee has the option to renew the lease term, purchase the equipment at fair market value, or continue to rent on a month-to-month basis. Our operating leases do not provide for contingent rentals. Our cost of equipment under operating leases at May 31, 2016 and May 31, 2015, with remaining noncancellable lease terms of more than one year, was $15,104 and $12,512, before accumulated depreciation of $4,201 and $3,335, and the net book value was $10,904 and $9,177, respectively. The following sets forth a schedule of future minimum rental payments to be received on noncancellable operating leases with remaining lease terms of more than one year as of May 31, 2016:
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Other Property |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Property | Other Property Other property, at cost, consisted of the following at May 31:
Depreciation expense for other property was $1,113, $987 and $1,089 for fiscal 2016, 2015 and 2014, respectively. Depreciation expense is included in selling, general and administrative expenses. |
Commitments and Contingencies |
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May 31, 2016 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies We lease certain facilities under various operating leases. Most of the lease agreements provide us with the option of renewing our leases at the end of the initial lease term, at fair market rates, for periods of up to five years. In most cases, we expect that in the normal course of business, facility leases will be renewed or replaced by other leases. Minimum payments over the next five years under these leases as of May 31, 2016, exclusive of property taxes and insurance, are as follows:
Rent expense was $907, $1,197 and $1,169 for fiscal 2016, 2015 and 2014, respectively. We are subject to legal proceedings and business disputes involving ordinary routine legal matters and claims incidental to our business. The ultimate legal and financial liability with respect to such matters generally cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements or awards against us. Estimates for losses from litigation are made after consultation with outside counsel. If estimates of potential losses increase or the related facts and circumstances change in the future, we may be required to record either more or less litigation expense. We are not involved in any pending or threatened legal proceedings that we believe could reasonably be expected to have a material adverse effect on our financial condition, results of operations or cash flows. Agreement with Keysight Technologies, Inc. In fiscal 2010, we became a reseller of Agilent's new T&M equipment in the U.S. and Canada. In 2014, Agilent spun off Keysight Technologies, Inc., its wholly-owned subsidiary that manufactures T&M equipment, into a separate publicly traded company. Sales of new T&M equipment represented approximately 33.7%, 66.8% and 63.5% of our sales of equipment and other revenues for fiscal 2016, 2015 and 2014, respectively. Prior to fiscal 2016, nearly all of our sales of new T&M equipment were in connection with our reseller agreement with Keysight which expired May 31, 2015. |
Equity Incentive Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan | Equity Incentive Plan Our 2005 Equity Incentive Plan (the “Equity Incentive Plan”), as amended and restated, authorizes our Board of Directors to grant incentive and non-statutory stock option grants, stock appreciation rights, restricted stock awards, restricted stock units, performance unit awards and performance share awards covering a maximum of 1,000 shares of our common stock. Pursuant to the Equity Incentive Plan, we have granted restricted stock units to directors, officers and key employees. Restricted Stock Units Each vested restricted stock unit entitles the holder to be issued one share of common stock. The vested restricted stock units settle into common stock on the earliest of (i) the first January 1st after the fifth anniversary of the grant, (ii) a change of control, or (iii) termination of the holder’s employment or membership on our Board of Directors. Restricted stock units vest according to a vesting schedule determined by the Compensation Committee of our Board of Directors, generally over a one to three year period. The following table represents restricted stock unit activity for fiscal 2016:
We granted 182, 87 and 65 restricted stock units during fiscal 2016, 2015 and 2014, respectively. As of May 31, 2016, we have unrecognized share-based compensation cost of approximately $1,730 associated with restricted stock units. This cost is expected to be recognized over a weighted-average period of approximately 1.9 years. We had 231, 274 and 329 of vested restricted stock units as of May 31, 2016, 2015 and 2014, respectively, which received dividends upon vesting and are convertible to common shares five years after grant date. The total fair value of shares that vested during fiscal 2016, 2015 and 2014 was $1,067, $807 and $1,414, respectively, which was calculated based on the closing price of our common stock on the Nasdaq Stock Market on the applicable date of vesting. Accounting for Share-Based Payments Accounting guidance requires all share-based payments to employees, including grants of restricted stock units, to be recognized as compensation expense in the consolidated financial statements based on their fair values. Compensation expense is recognized over the period that an employee provides service in exchange for the award, which is approximately three years. Forfeitures are estimated at the date of grant based on historical experience. We use the market price of our common stock on the date of grant to calculate the fair value of each grant of restricted stock units. We recorded $1,372, $1,292 and $1,356 of share-based compensation as part of selling, general and administrative expenses for fiscal 2016, 2015 and 2014, respectively. We receive a tax deduction for certain restricted stock units on the date the related shares are issued, generally for (1) the fair value of our common stock at the date of issuance and (2) for dividends paid on vested restricted stock units where the underlying shares have not been issued. Excess tax benefits are realized when restricted stock units are issued and the tax deductions (fair value at issuance) are greater than the compensation expense for financial reporting purposes (fair value at the date of grant). Shortfalls are realized when the fair value at issuance is less than the fair value at grant. The total excess tax shortfall realized for fiscal 2016 was $30. The total excess tax benefit realized for fiscal 2015 and 2014 was $358 and $183, respectively. |
Savings Plan, Employee Stock Ownership Plan and Retirement Plan |
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May 31, 2016 | |
Text Block [Abstract] | |
Savings Plan, Employee Stock Ownership Plan and Retirement Plan | Savings Plan, Employee Stock Ownership Plan and Retirement Plan We maintain a Savings Plan (“401(k)”). Employees become eligible to participate in the 401(k) after 90 days of employment. We have the option to match contributions of participants at a rate we determine each year. For participants with three or more years of service, we also may elect to make additional discretionary matching contributions in excess of the rate elected for participants with less than three years of service. The Board of Directors determines the amount to be contributed annually to the 401(k) in cash, provided that such contributions shall not exceed the amount deductible for federal income tax purposes. Cash contributions to the 401(k) of $554, $848 and $784 were made for fiscal 2016, 2015 and 2014, respectively. We have a Supplemental Executive Retirement Plan (“SERP”) that provides for automatic deferral of contributions in excess of the maximum amount permitted under the 401(k) for our executives who choose to participate. The SERP is a non-qualified deferred compensation program, and we have an unfunded contractual obligation under this plan. We have the option to match contributions of participants at a rate we determine each year. Cash contributions to the SERP were $14, $22 and $25 for fiscal 2016, 2015 and 2014, respectively. As of May 31, 2016 and 2015, we had $3,089 and $3,521, respectively, of obligations for this plan included in accrued expenses. We have investments in money market and mutual funds, as directed by the participants, of $3,089 and $3,521 as of May 31, 2016 and 2015, respectively, included in other assets. |
Segment Reporting and Related Disclosures |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting and Related Disclosures | Segment Reporting and Related Disclosures Accounting guidance establishes reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. In order to determine our operating segments, we considered the following: an operating segment is a component of an enterprise (i) that engages in business activities from which it may earn revenues and incur expenses, (ii) whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. In accordance with this guidance, we have identified two operating segments: our T&M and DP businesses. In the past, we concluded that although we had separate operating segments for T&M and DP equipment, these two segments could be aggregated into a single reportable segment because they had similar economic characteristics and qualitative factors. However, as a result of a change in economic characteristics in fiscal 2015 in our T&M segment, primarily attributable to the expiration of the Keysight agreement and greater competition in the marketplace, we determined that we no longer expected similar economic characteristics and qualitative factors to continue in the future. As such, management concluded that the operating segments should no longer be aggregated. Following the change in the composition of our reportable operating segments at the end of fiscal 2015, we restated the segment information for fiscal 2014. Our equipment pool, based on acquisition cost, comprised $403,154 of T&M equipment and $31,759 of DP equipment at May 31, 2016, and $434,963 of T&M equipment and $37,824 of DP equipment at May 31, 2015. Additional segment asset information is not available. Revenues for these operating segments were as follows for the fiscal year ended May 31:
Depreciation of rental and lease equipment for these operating segments was as follows for the fiscal year ended May 31:
Amortization expense is not material and is included in SG&A expenses. We consider the marginal contribution as our measure of segment profit or loss. The marginal contribution is calculated as operating revenue less operating costs and direct and allocated SG&A expenses. Marginal contribution for these operating segments was as follows for the fiscal year ended May 31:
No single customer accounted for more than 10% of total revenues during fiscal 2016, 2015 or 2014. We conduct rental, leasing and sales activity in foreign countries. Selected country information is presented below:
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Quarterly Information (Unaudited) |
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Quarterly Information (Unaudited) | Quarterly Information (Unaudited) Summarized quarterly financial data for fiscal 2016 and 2015 was as follows:
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Subsequent Events |
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May 31, 2016 | |||||||||
Subsequent Events [Abstract] | |||||||||
Subsequent Events | Subsequent Events On June 23, 2016, we entered into an Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”) with Elecor Intermediate Holding II Corporation, a Delaware corporation (“Parent”), and Elecor Merger Corporation, a California corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into us, with us surviving the merger as a wholly-owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are affiliates of Platinum Equity, a Beverly Hills-based private equity firm (“Platinum Equity”). Pursuant to the Restated Merger Agreement, at the effective time of the Merger, and as a result of the Merger:
Our board, in accordance with and upon the unanimous recommendation of a special committee of independent directors, has approved the Merger Agreement and the transactions contemplated thereby, including the Merger. The Merger was approved by our shareholders at a special meeting held on August 5, 2016. We expect the Merger and the transactions contemplated thereby to close by the end of August 2016. As a result of the Merger, we will become a wholly-owned subsidiary of Parent and our shares of common stock will no longer be publicly traded. Following closing of the Merger, we will make appropriate filings to cause our common stock to be delisted from the NASDAQ Global Select Market and to be deregistered under the Securities Exchange Act of 1934, as amended. On June 8, 2016, following the announcement of the Merger, a shareholder class action lawsuit, entitled Chaklos, et al. v. Electro Rent Corp., et al., was filed in the Superior Court of the State of California, Los Angeles County, against us, our directors, Phillip A. Greenberg, Platinum Equity, Parent and Merger Sub. The lawsuit asserts that defendants variously breached, or aided and abetted others in breaching, state law fiduciary duties in connection with their consideration and approval of the Merger. The lawsuit seeks rescission of the Merger Agreement, an injunction barring consummation of the Merger, imposition of a constructive trust of “benefits improperly received by defendants” as a result of any breaches of duty and costs and disbursements of the action. On June 20, 2016, following the announcement of the Merger, a shareholder class action lawsuit, entitled Wadsworth v. Electro Rent Corp., et al., was filed in the United States District Court for the Central District of California, against us, our directors, Platinum Equity, Parent and Merger Sub. The lawsuit asserts that defendants variously breached, or aided and abetted others in breaching, state law fiduciary duties in connection with their consideration and approval of the Merger. The lawsuit further asserts that the defendants violated securities law in connection with an assortment of alleged material omissions from the preliminary proxy statement. The lawsuit seeks rescission of the Merger Agreement, an injunction barring consummation of the Merger, imposition of a constructive trust of “benefits improperly received by defendants” as a result of any breaches of duty and costs and disbursements of the action. |
Summary of Significant Accounting Policies (Policies) |
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May 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The consolidated financial statements include Electro Rent Corporation and its wholly owned subsidiaries, Electro Rent, LLC, ER International, Inc., Electro Rent Europe NV, Electro Rent Asia, Inc. and Electro Rent (Beijing) Test and Measurement Equipment Rental Co., Ltd. (collectively “we”, “us”, or “our” hereafter). All intercompany balances and transactions have been eliminated in consolidation. |
Business and Organization | Business and Organization: We are a global organization devoted to the rental, lease and sale of new and used electronic test and measurement (“T&M”) equipment. We purchase T&M equipment from leading manufacturers such as Keysight Technologies, Inc. (formerly Agilent Technologies, Inc., “Keysight”), Anritsu, Inc. ("Anritsu"), Rohde & Schwarz Gmbh & Co. KG ("Rohde & Schwarz") and Tektronix Inc. Our customers rent, lease and buy our T&M equipment, and use that equipment primarily in the aerospace and defense, telecommunications, electronics, industrial and semiconductor markets. In addition, we purchase personal computers from manufacturers including Dell, HP, IBM, Toshiba and Apple for our Data Products ("DP") division. Our reseller agreement with Keysight was not renewed after its May 31, 2015 expiration date. The expiration of the Keysight reseller agreement materially affected our revenues and net profits. |
Use of Estimates | Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosures of contingent assets and liabilities as of the date of these financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, we review these estimates including those related to asset lives and depreciation methods, impairment of long-lived assets, including rental and lease equipment, goodwill and intangibles, allowance for doubtful accounts, income taxes, contingencies and litigation. These estimates are based on our evaluation of current business and economic conditions, historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe, however, that our estimates, including those for the above-listed items, are reasonable. |
Revenue Recognition | Revenue Recognition: We generate revenues primarily through the rental and leasing of T&M and DP equipment and through the sale of new and used equipment. Rental revenues comprise short term agreements that can be daily, weekly or monthly. Rental revenues are recognized in the month they are due on the accrual basis of accounting. Our operating lease agreements have varying terms, typically one to three years. Upon lease termination, customers have the option to renew the lease term, purchase the equipment at fair market value, or continue to rent on a month-to-month basis. Our operating leases do not provide for contingent rentals. Revenues related to operating leases are recognized on a straight-line basis over the term of the lease. Negotiated lease early-termination charges are recognized upon receipt. Rentals and leases are primarily billed to customers in advance, and unearned billings are recorded as deferred revenue. We enter into finance leases as lessor for some of our equipment. Our finance lease agreements contain bargain purchase options and are accounted for as sale-type leases. Revenues from finance leases, which are recorded at the present value of the aggregate future lease payments, net of unearned interest, are included in sales of equipment and other revenues in our consolidated statements of operations. Unearned interest is recognized over the life of the finance lease term using the effective interest method. Our finance lease terms vary, and are typically one to three years. The net investment in finance leases, which represents the receivables due from lessees, net of unearned interest, is included in other assets in our consolidated balance sheets. Historically, we have not required security deposits based on our assessed credit risk within our customer bases. Initial direct costs for operating and finance leases are insignificant. Sales of new equipment through our resale channel are recognized in the period in which the equipment is delivered and risk of loss passes to the customer, while sales of used equipment from our rental and lease equipment pool are recognized in the period in which the equipment is shipped and risk of loss passes to the customer. In the case of equipment sold to customers that is already on rent or lease to the same party, revenue is recognized at the agreed-upon date when the rent or lease term ends and risk of loss passes to the customer. The amount of revenue recognized for sales of new equipment depends on whether we sell as principal or as agent for the original equipment manufacturer. Prior to May 31, 2015, our sales of new equipment were derived primarily from the reseller agreement with Keysight Technologies, Inc. In fiscal 2016, we entered into reseller agreements with other T&M equipment manufacturers, including Anritsu and Rohde & Schwarz. Under the terms of these agreements we act as the principal with respect to sales of new equipment, based on several factors, including: (1) We act as the primary obligor by working directly with our customers to define their needs, providing them with options to satisfy such needs, contracting directly with the customer, and, to the extent required, providing customers with instruction on the use of the product and additional technical support once the product is received by the customer. The original equipment manufacturer is not a party to our customer sales agreements, nor is it referenced in the agreements, and therefore has no obligation to our customers with the exception of the manufacturer’s standard warranty on the product; (2) We bear back-end risk of inventory loss with respect to any product return from the customer as the original equipment manufacturer is not required to accept returns of equipment from us. Under the reseller agreement with Keysight, we also bore front-end risk of inventory loss in those cases where we acquired products for resale into our equipment pool prior to shipment to customers; (3) We have full discretion in setting pricing terms with our customers and negotiate all such terms ourselves; and (4) We assume all credit risk. In situations where we act as principal, the gross sales of new equipment are recorded in sales of equipment and other revenues, while the related equipment costs, including the purchase price from the original equipment manufacturer, are recorded in costs of sales of equipment and other revenues in our consolidated statements of operations. In situations where we act as an agent for the original equipment manufacturer, we recognize revenue only on the commissions that we receive, which are recorded in other revenue within the sales of equipment and other revenues in our consolidated statement of operations. Other revenues, consisting primarily of billings to customers for delivery and repairs, are recognized in the period in which the respective services are performed. |
Operating expenses | Operating Expenses: Costs of rentals and leases, excluding depreciation, primarily include labor related costs of our operations personnel, supplies, repairs, insurance and warehousing costs associated with our rental and lease equipment, relating to our rental and lease revenues. Costs of sales of equipment and other revenues primarily include the cost of new equipment and the carrying value of used equipment sold. Selling, general and administrative expenses include sales and advertising costs, payroll and related benefit costs, insurance expenses, property taxes on our property and rental and lease equipment, legal and professional fees, and administrative overhead. Advertising costs are expensed as incurred. Total advertising expenses were $1,133, $982 and $982 for fiscal 2016, 2015 and 2014, respectively. Selling, general and administrative expenses also include shipping and handling costs of $3,634, $3,953 and $3,977 for fiscal 2016, 2015 and 2014, respectively. |
Rental and Lease Equipment and Other Property | Rental and Lease Equipment and Other Property: Assets are generally stated at cost, less accumulated depreciation. Upon retirement or disposal of assets, the cost and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized. We depreciate our buildings over 31.5 years, building improvements over useful life, furniture and other equipment over three to ten years, and leasehold improvements over the shorter of the lease term, typically three to five years, or useful life. Each is depreciated on a straight-line basis. Depreciation of rental and lease equipment is provided over the estimated useful lives of the respective assets. We depreciated $407,807 and $440,495 of equipment, at acquisition cost, at May 31, 2016 and 2015, respectively, using straight-line methods ranging from two to ten years, and $27,106 and $32,292 of equipment, at acquisition cost, at May 31, 2016 and 2015, respectively, using accelerated methods ranging from two to four years. We generally use straight-line methods for our T&M equipment, which we believe maintains its value consistently throughout the equipment’s useful life, and accelerated methods primarily for our DP equipment, which tends to depreciate faster due to frequent technological advancements. Depreciation methods and useful lives are periodically reviewed and revised, as deemed appropriate, including revisions to reflect shorter useful lives to more closely match depreciation expense with rental revenue for rental arrangements where the customer can acquire title through payment of all required rentals. Normal maintenance and repairs are expensed as incurred. Depreciation expense for rental and lease equipment was $55,931, $56,445 and $57,034 for fiscal 2016, 2015 and 2014, respectively. Rental and lease equipment at net book value was comprised of $194,618 of T&M equipment and $4,908 of DP equipment at May 31, 2016, and $225,222 of T&M equipment and $6,449 of DP equipment at May 31, 2015. |
Income Taxes | Income Taxes: We recognize a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when reported amounts of the assets or liabilities are recovered or settled. Deferred tax assets are periodically reviewed for recoverability. We recognize the tax impact from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax impact recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We recognize interest, penalties and foreign currency gains and losses with respect to uncertain tax positions as components of our income tax provision. Accrued interest and penalties are included within accrued expenses in the consolidated balance sheet. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions (see Note 5 for further discussion.) |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets: The carrying value of equipment held for rental and lease is assessed when circumstances indicate that the carrying amount of equipment may not be recoverable. Recoverability of equipment to be rented and leased is measured by a comparison of the carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the current carrying value exceeds the estimated undiscounted cash flows, an impairment loss is recorded equal to the difference between the asset’s current carrying value and its fair value as described in FASB ASC Topics No. 360, Impairment and Disposal of Long-Lived Assets and No. 820, Fair Value Measurements and Disclosures. We determine the fair value based upon the projected net cash flows from model's rental and sale considering current market conditions. Based upon such periodic assessments, costs of rentals and leases included impairment charges of $443 related to our T&M rental and lease equipment during the year ended May 31, 2016. No impairments occurred during fiscal 2015 and 2014. |
Goodwill and Intangible Assets | Goodwill: Goodwill, which represents the excess of purchase price over the fair value of net assets acquired is discussed further in Note 3. Pursuant to FASB ASC Topic No. 350, Intangibles – Goodwill and Other, goodwill is not amortized but tested annually for impairment, or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. In connection with the annual impairment test for goodwill, we have elected the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we determine that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test. The impairment test involves a two-step process. The first step involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using the market approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the test to determine the amount of impairment loss. The second step involves measuring the impairment by comparing the implied fair value of the affected reporting unit’s goodwill with its carrying value. We completed the required impairment review at the end of fiscal 2016, 2015 and 2014 and concluded that there were no impairments. |
Cash and Cash Equivalents | Cash and Cash Equivalents: We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. We held no cash equivalents at May 31, 2016 and 2015 except for the money market funds that are part of our supplemental executive retirement plan (SERP) assets included in other assets. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts: We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make rental and lease payments. The estimated losses are based on historical collection experience in conjunction with an evaluation of the current status of the existing accounts. If the financial condition of our customers were to deteriorate, then additional allowances could be required that would reduce income. Conversely, if the financial condition of our customers were to improve or if legal remedies to collect past due amounts were more successful than expected, then the allowance for doubtful accounts may need to be reduced and income would be increased. |
Other Assets | Other Assets: We include demonstration equipment used in connection with our resale activity, totaling $4,851 and $81 as of May 31, 2016 and 2015, respectively, in other assets for a period up to two years. Demonstration equipment is recorded at the lower of cost or estimated market value until the units are transferred to our rental and lease equipment pool. Once transferred to our rental and lease equipment pool, the equipment is depreciated over its remaining estimated useful life. |
Concentration of Credit Risk | Concentration of Credit Risk: Financial instruments that potentially expose us to concentration of credit risk primarily consist of trade accounts receivable. To mitigate the risk, we sell primarily on 30-day terms, perform credit evaluation procedures on each customer’s individual transactions and require security deposits or personal guarantees from our customers when significant credit risks are identified. Typically, most customers are large, established firms. We purchase rental and lease equipment from numerous vendors. During fiscal 2016, 2015 and 2014, Keysight accounted for approximately 56.0%, 70.7% and 65.6%, respectively, of all new equipment purchases, including rental equipment and equipment purchased for resale. Anritsu equipment purchases during fiscal 2016 accounted for 12.3% of our new equipment purchases while Anritsu equipment purchases during fiscal 2015 and fiscal 2014 were below 10.0%. No other vendor accounted for more than 10.0% of such purchases. |
Foreign Currency | Foreign Currency: The U.S. dollar has been determined to be the functional currency of all foreign subsidiaries. The assets and liabilities of our foreign subsidiaries are remeasured from their local currency to U.S. dollars at current or historic exchange rates, as appropriate. Revenues and expenses are remeasured from foreign currencies to U.S. dollars using historic or average monthly exchange rates, as appropriate, for the month in which the transaction occurred. Remeasurement gains and losses are included in selling, general and administrative expenses or income taxes, as appropriate. The assets, liabilities, revenues and expenses of our foreign subsidiaries are individually less than 10.0% of our respective consolidated amounts. The euro, British pound sterling, Canadian dollar and Chinese yuan are our primary foreign currencies. Net remeasurement gains and losses have not been significant. We enter into forward contracts to hedge against unfavorable currency fluctuations in our monetary assets and liabilities in our European and Canadian operations. These contracts are designed to minimize the effect of fluctuations in foreign currencies. To qualify for hedge accounting, contracts must reduce the foreign currency exchange rate and interest rate risk otherwise inherent in the amount and duration of the hedged exposures and comply with established risk management policies. Our derivative instruments are not designated as hedging instruments and, therefore, are recorded at fair value as an asset or liability, and any changes in fair value are recorded in our consolidated statements of operations. We do not use derivative financial instruments for speculative trading purposes. |
Net Income Per Common and Common Equivalent Share | Net Income Per Common and Common Equivalent Share: Basic earnings per share (“EPS”) is computed as net income divided by the weighted average number of shares of common stock outstanding and shares issuable for vested restricted stock units for the reported year, excluding the dilutive effects of any potentially anti-dilutive securities. Diluted EPS is computed as net income divided by the weighted average number of shares outstanding of common stock and common stock equivalents for the reported year. The dilutive effect of restricted stock units is computed using the treasury stock method. |
Stock-Based Compensation | Share-Based Compensation: Share-based payments to employees are recognized in the consolidated financial statements as compensation expense over the period that an employee provides service in exchange for the award based on its fair value on the date of grant. Compensation expense resulting from restricted stock units is measured at fair value on the date of grant and is recognized in selling, general and administrative expenses over the vesting period (see Note 11 for further discussion). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718). Under the new guidance, all excess tax benefits and tax deficiencies will be recognized in the income statement as they occur. This will replace the current guidance, which requires tax benefits that exceed compensation cost (windfalls) to be recognized in equity. It will also eliminate the need to maintain a “windfall pool,” and will remove the requirement to delay recognizing a windfall until it reduces current taxes payable. The new guidance will also change the cash flow presentation of excess tax benefits, classifying them as operating inflows, consistent with other cash flows related to income taxes. The amendments in this guidance are effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The Company is evaluating the impact of this new guidance on its consolidated financial statements. In February 2016, the FASB issued guidance that will require lessees to put most leases on their balance sheets but recognize expenses in the income statement. For lessors, the standard will be similar to the current model but will be updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The impact this guidance will have on the consolidated financial statements cannot be determined at this time. In May 2014, the FASB and the International Accounting Standards Board ("IASB") issued guidance to establish a new, more robust framework for the recognition of revenue related to the transfer of goods and services to customers. This guidance is effective for reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The impact this guidance will have on the consolidated financial statements cannot be determined at this time. |
Other Comprehensive Income | Other Comprehensive Income: Comprehensive income is equivalent to net income for all periods presented. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Roll Forward of Allowance For Doubtful Accounts | A roll forward of the allowance for doubtful accounts is as follows at May 31:
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Summary of Other Assets | Other assets consisted of the following at May 31:
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Fair Value of Foreign Exchange Forward Contracts | The fair value of our foreign exchange forward contracts in the consolidated balance sheets is shown in the table below:
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Losses Recognized in Income for Derivative Instruments | The table below provides data about the amount of fiscal 2016, 2015 and 2014 gains and losses recognized in income for derivative instruments not designated as hedging instruments:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on Recurring Basis | Our assets and liabilities measured at fair value on a recurring basis were determined as follows:
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill and Other Intangible Assets | The changes in carrying amount of goodwill and other intangible assets for fiscal 2016 and 2015 were as follows:
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Summary of Intangible Assets | The following tables provide a summary of our intangible assets:
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Estimated Future Amortization Expense Related to Intangible Assets | The following table provides estimated future amortization expense related to intangible assets:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Income Before Income Taxes | For financial reporting purposes, income before income taxes comprised the following as of May 31:
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Components of Provision for Income Taxes | The income tax provision consisted of the following for the fiscal years ended May 31:
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Reconciliation Between Statutory Federal Income Tax Rate and Effective Income Tax Rate | The following reconciles the statutory federal income tax rate to the effective tax rate for the fiscal years ended May 31:
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Components of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that gave rise to significant portions of the net deferred tax liabilities consisted of the following at May 31:
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Sales-type Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Minimum Lease Payments Receivable and Net Investment | The minimum lease payments receivable and the net investment included in other assets were as follows at May 31:
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Estimated Future Minimum Lease Payments Receivable Related to Sales-Type Leases | The following table provides estimated future minimum lease payments by year related to sales-type leases:
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Computation of Earnings Per Share (Tables) |
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Reconciliation of Denominator Used in Computation of Basic and Diluted Earnings per Share | The following is a reconciliation of the denominator used in the computation of basic and diluted EPS for the fiscal years ended May 31:
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Rentals Under Noncancellable Operating Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Future Minimum Lease Payments to be Received Under Operating Leases | The following sets forth a schedule of future minimum rental payments to be received on noncancellable operating leases with remaining lease terms of more than one year as of May 31, 2016:
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Other Property (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Property | Other property, at cost, consisted of the following at May 31:
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Commitments and Contingencies (Tables) |
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Summary of Minimum Future Payment Due Under Lease | Minimum payments over the next five years under these leases as of May 31, 2016, exclusive of property taxes and insurance, are as follows:
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Equity Incentive Plan (Tables) |
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Summary of Restricted Stock Unit Activity | The following table represents restricted stock unit activity for fiscal 2016:
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Segment Reporting and Related Disclosures (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues from Rental, Lease and Sale Segment | Revenues for these operating segments were as follows for the fiscal year ended May 31:
|
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Revenues from External Customers and Long-Lived Assets, by Geographical Areas | Selected country information is presented below:
|
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Schedule of Depreciation | Depreciation of rental and lease equipment for these operating segments was as follows for the fiscal year ended May 31:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Marginal contribution for these operating segments was as follows for the fiscal year ended May 31:
|
Quarterly Information (Unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quarterly Financial Data | Summarized quarterly financial data for fiscal 2016 and 2015 was as follows:
|
Roll Forward of Allowance For Doubtful Accounts (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Beginning of year | $ 604 | $ 555 | $ 457 |
Provision for doubtful accounts | 679 | 591 | 860 |
Write-offs | (819) | (542) | (762) |
End of year | $ 464 | $ 604 | $ 555 |
Summary of Other Assets (Detail) - USD ($) $ in Thousands |
May 31, 2016 |
May 31, 2015 |
---|---|---|
Other Assets [Line Items] | ||
Net investment in sales-type leases | $ 3,581 | $ 5,876 |
Supplemental executive retirement plan assets | 3,089 | 3,521 |
Demonstration equipment | 4,851 | 81 |
Income taxes receivable | 1,342 | 0 |
Prepaid and other assets | 3,734 | 4,265 |
Total other assets | $ 16,597 | $ 13,743 |
Fair Value of Foreign Exchange Forward Contracts (Detail) - Derivatives Not Designated as Hedging Instruments - Foreign exchange forward contracts - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Selling, General and Administrative Expenses | |||
Derivatives, Fair Value [Line Items] | |||
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments | $ 38 | $ 1,210 | $ (269) |
Other assets | |||
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments [Abstract] | |||
Foreign exchange forward contracts other assets | $ (6) | $ (16) |
Goodwill and Intangibles - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Goodwill And Other Intangible Assets [Line Items] | |||
Amortization of Intangible Assets | $ 118 | $ 129 | $ 164 |
EMT | |||
Goodwill And Other Intangible Assets [Line Items] | |||
Date of Acquisition | Aug. 24, 2011 | ||
Telogy LLC | |||
Goodwill And Other Intangible Assets [Line Items] | |||
Date of Acquisition | Mar. 31, 2010 | ||
Rush Computer Rentals, Inc. | |||
Goodwill And Other Intangible Assets [Line Items] | |||
Date of Acquisition | Jan. 31, 2006 |
Changes in Carrying Amount of Goodwill and Other Intangible Assets (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Goodwill, Beginning Balance | $ 3,109 | $ 3,109 | |
Goodwill, Additions | 0 | 0 | |
Goodwill, Ending Balance | 3,109 | 3,109 | $ 3,109 |
Goodwill and other intangible assets, Beginning balance | 3,853 | 3,982 | |
Goodwill and other intangible assets, Additions | 0 | 0 | |
Amortization | (118) | (129) | (164) |
Goodwill and other intangible assets, Ending balance | 3,735 | 3,853 | 3,982 |
Customer relationships, Ending Balance | 215 | ||
Customer relationships | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Customer relationships, Beginning Balance | 333 | 462 | |
Customer relationships, Additions | 0 | 0 | |
Amortization | (118) | (129) | |
Customer relationships, Ending Balance | 215 | 333 | 462 |
Trade name | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Trade name, Beginning balance | 411 | 411 | |
Trade name, Additions | 0 | 0 | |
Trade name, Ending balance | $ 411 | $ 411 | $ 411 |
Estimated Future Amortization Expense Related to Intangible Assets (Detail) $ in Thousands |
May 31, 2016
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2014 | $ 118 |
2015 | 97 |
2016 | 0 |
2017 | 0 |
2018 | 0 |
Customer relationships, Net Carrying Amount | $ 215 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Income Taxes [Line Items] | |||
Interest and penalties | $ 0 | $ 0 | |
Effective tax rate | 38.60% | 37.40% | 37.30% |
Valuation allowance | $ 681 | $ 398 | $ 254 |
Undistributed Earnings of Foreign Subsidiaries | 7,322 | $ 7,574 | $ 6,303 |
Undistributed earnings of foreign subsidiaries, cash | $ 5,702 | ||
United States federal jurisdiction | |||
Income Taxes [Line Items] | |||
Jurisdiction | years through fiscal 2011 | ||
State jurisdictions | |||
Income Taxes [Line Items] | |||
Jurisdiction | through fiscal 2004 and 2005 |
Components of Income Before Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Schedule of Components of Income Before Income Tax Expense (Benefit) [Line Items] | ||||||||||||
Domestic | $ 8,991 | $ 24,203 | $ 30,907 | |||||||||
Foreign | (1,204) | 447 | 1,619 | |||||||||
Income before income taxes | $ (1,197) | $ 1,492 | $ 3,541 | $ 3,951 | $ 5,646 | $ 3,746 | $ 7,696 | $ 7,562 | $ 24,650 | $ 7,787 | $ 24,650 | $ 32,526 |
Components of Provision for Income Taxes (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Current | |||
Federal | $ 4,228 | $ 11,636 | $ 18,007 |
State | 556 | 1,355 | 1,720 |
Foreign | 95 | 387 | 319 |
Deferred | |||
Federal | (1,285) | (3,626) | (7,553) |
State | (277) | (248) | (500) |
Foreign | (314) | (286) | 125 |
Provision for income taxes | $ 3,003 | $ 9,218 | $ 12,118 |
Reconciliation Between Statutory Federal Income Tax Rate and Effective Income Tax Rate from Continuing Operations (Detail) |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Schedule of Effective Tax Rate Reconciliation [Line Items] | |||
Statutory federal rate | 35.00% | 35.00% | 35.00% |
State taxes, net of federal benefit | 2.30% | 2.90% | 2.50% |
Foreign tax refund | (3.00%) | (0.80%) | (0.60%) |
Permanent differences resulting from valuation allowances | 3.60% | 0.60% | 0.30% |
Other | 0.70% | (0.30%) | 0.10% |
Effective tax rate | 38.60% | 37.40% | 37.30% |
Components of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
---|---|---|---|
Deferred tax assets: | |||
Allowance for doubtful accounts | $ 130 | $ 113 | |
Deferred compensation and benefits | 5,193 | 4,588 | |
Net operating losses | 681 | 398 | |
Valuation allowance | (681) | (398) | $ (254) |
Other | 1,640 | 1,890 | |
Net deferred tax asset | 6,963 | 6,591 | |
Deferred tax liabilities: | |||
Accumulated depreciation | (41,392) | (42,505) | |
Deferred taxes on bargain purchase | (1,189) | (1,583) | |
Intangible asset | (158) | (155) | |
Net deferred tax liabilities | $ (35,776) | $ (37,652) |
Minimum Lease Payments Receivable and Net Investment (Detail) - USD ($) $ in Thousands |
May 31, 2016 |
May 31, 2015 |
---|---|---|
Leases [Abstract] | ||
Gross minimum lease payments receivable | $ 3,701 | $ 6,109 |
Less-unearned interest | (120) | (233) |
Net investment in sales-type lease receivables | $ 3,581 | $ 5,876 |
Estimated Future Minimum Lease Payments Receivable Related to Sales-Type Leases (Detail) $ in Thousands |
May 31, 2016
USD ($)
|
---|---|
Leases [Abstract] | |
2015 | $ 2,949 |
2016 | 679 |
2017 | 73 |
2018 | 0 |
2019 | 0 |
Total Future Minimum Leases Payments | $ 3,701 |
Reconciliation of Denominator Used in Computation of Basic and Diluted Earnings per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Earnings Per Share [Abstract] | ||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 47 | 5 | 3 | |||||||||
Denominator: | ||||||||||||
Denominator for basic earnings per share—weighted average common shares outstanding (including shares issuable for vested restricted stock units) | 24,414 | 24,360 | 24,325 | |||||||||
Effect of unvested restricted stock units | 15 | 18 | 32 | |||||||||
Diluted shares used in per share calculation | 24,429 | 24,378 | 24,357 | |||||||||
Net income | $ (885) | $ 1,009 | $ 2,190 | $ 2,470 | $ 3,441 | $ 2,425 | $ 4,795 | $ 4,771 | $ 15,432 | $ 4,784 | $ 15,432 | $ 20,408 |
Earnings per share: | ||||||||||||
Basic, in dollars per share | $ (0.04) | $ 0.04 | $ 0.09 | $ 0.10 | $ 0.14 | $ 0.10 | $ 0.20 | $ 0.20 | $ 0.63 | $ 0.20 | $ 0.63 | $ 0.84 |
Diluted, in dollars per share | $ (0.04) | $ 0.04 | $ 0.09 | $ 0.10 | $ 0.14 | $ 0.10 | $ 0.20 | $ 0.20 | $ 0.63 | $ 0.20 | $ 0.63 | $ 0.84 |
Rentals Under Noncancellable Operating Leases (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
May 31, 2016 |
May 31, 2015 |
|
Property Subject to or Available for Operating Lease [Line Items] | ||
Operating lease gross | $ 15,104 | $ 12,512 |
Accumulated depreciation | 4,201 | 3,335 |
Net book value | $ 10,904 | $ 9,177 |
Minimum | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Lease Period | 1 year | |
Maximum | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Lease Period | 3 years |
Future Minimum Lease Payments to be Received Under Operating Leases (Detail) - Non Cancelable Operating Leases $ in Thousands |
May 31, 2016
USD ($)
|
---|---|
Future Minimum Payments Receivable [Line Items] | |
2015 | $ 4,639 |
2016 | 2,802 |
2017 | 531 |
2018 | 0 |
2019 | 0 |
Total | $ 7,972 |
Other Property (Detail) - USD ($) $ in Thousands |
May 31, 2016 |
May 31, 2015 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Land | $ 6,985 | $ 6,985 |
Buildings | 15,906 | 15,895 |
Furniture and other equipment | 6,907 | 6,733 |
Leasehold improvements | 244 | 256 |
Property, Plant and Equipment, Gross, Total | 30,042 | 29,869 |
Less-accumulated depreciation and amortization | (17,653) | (16,749) |
Total | $ 12,389 | $ 13,120 |
Other Property - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Property, Plant and Equipment [Line Items] | |||
Depreciation expense | $ 55,931 | $ 56,445 | $ 57,034 |
Property, Plant and Equipment, Other Types [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation expense | $ 1,113 | $ 987 | $ 1,089 |
Commitments And Contingencies - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Operating Leased Assets [Line Items] | |||
Rental expenses | $ 907 | $ 1,197 | $ 1,169 |
Sale Revenue Percentage | 33.70% | 66.80% | 63.50% |
Maximum | |||
Operating Leased Assets [Line Items] | |||
Operating lease agreements Period | 5 years |
Summary of Minimum Future Payment Due Under Lease (Detail) $ in Thousands |
May 31, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2014 | $ 706 |
2015 | 449 |
2016 | 258 |
2017 | 111 |
2018 | 0 |
Total | $ 1,524 |
Equity Incentive Plan - Summary of Restricted Stock Unit Activity (Detail) - Restricted Stock Units - $ / shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Nonvested, Restricted Stock Units, beginning balance | 129 | ||
Granted, Restricted Stock Units | 182 | 87 | 65 |
Vested, Restricted Stock Units | (81) | ||
Forfeited/canceled, Restricted Stock Units | (9) | ||
Nonvested, Restricted Stock Units, ending balance | 221 | 129 | |
Nonvested, Weighted Average Grant Date Fair Value, beginning balance | $ 16.75 | ||
Granted, Weighted Average Grant Date Fair Value | 11.24 | ||
Vested, Weighted Average Grant Date Fair Value | 15.78 | ||
Forfeited/canceled, Weighted Average Grant Date Fair Value | $ 15.40 | ||
Nonvested, Weighted Average Grant Date Fair Value, ending balance | $ 12.62 | $ 16.75 |
Savings Plan, Employee Stock Ownership Plan and Retirement Plan - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Postemployment Benefits Disclosure [Line Items] | |||
Requisite service period to become eligible to participate in 401(k) | 90 days | ||
Minimum requisite service period for additional discretionary contributions | 3 years | ||
Contributions to Retirement Plan | $ 554 | $ 848 | $ 784 |
Other assets | 16,597 | 13,743 | |
Supplemental Executive Retirement Plan [SERP] | |||
Postemployment Benefits Disclosure [Line Items] | |||
Contributions to Retirement Plan | 14 | 22 | $ 25 |
Accrued Expense | 3,089 | 3,521 | |
Other assets | $ 3,089 | $ 3,521 |
Segment Reporting and Related Disclosures - Additional Information (Detail) $ in Thousands |
12 Months Ended | |
---|---|---|
May 31, 2016
USD ($)
Segment
Customer
|
May 31, 2015
USD ($)
Customer
|
|
Revenue from External Customer [Line Items] | ||
Number of operating segment | Segment | 2 | |
Number of major customer accounted for more than 10% of total revenues | Customer | 0 | 0 |
T&M equipment | ||
Revenue from External Customer [Line Items] | ||
Equipment pool, based on acquisition cost | $ 403,154 | $ 434,963 |
DP equipment | ||
Revenue from External Customer [Line Items] | ||
Equipment pool, based on acquisition cost | $ 31,759 | $ 37,824 |
Revenues from Rental, Lease and Sale Segment (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Revenue from External Customer [Line Items] | ||||||||||||
Rentals and leases | $ 123,785 | $ 129,255 | $ 137,417 | |||||||||
Sales of equipment and other revenues | 51,548 | 109,074 | 103,720 | |||||||||
Total revenues | $ 39,182 | $ 39,498 | $ 43,310 | $ 53,343 | $ 60,413 | $ 56,342 | $ 59,703 | $ 61,871 | $ 238,329 | 175,333 | 238,329 | 241,137 |
T&M equipment | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Rentals and leases | 105,850 | 111,327 | 120,629 | |||||||||
Sales of equipment and other revenues | 49,518 | 107,270 | 101,898 | |||||||||
Total revenues | 155,368 | 218,597 | 222,527 | |||||||||
DP equipment | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Rentals and leases | 17,935 | 17,928 | 16,788 | |||||||||
Sales of equipment and other revenues | 2,030 | 1,804 | 1,822 | |||||||||
Total revenues | $ 19,965 | $ 19,732 | $ 18,610 |
Revenues from External Customers and Long-Lived Assets, by Geographical Areas (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Revenues: | ||||||||||||
Total revenues | $ 39,182 | $ 39,498 | $ 43,310 | $ 53,343 | $ 60,413 | $ 56,342 | $ 59,703 | $ 61,871 | $ 238,329 | $ 175,333 | $ 238,329 | $ 241,137 |
Net Long Lived Assets: | ||||||||||||
Total net long-lived assets | 211,914 | 244,791 | 211,914 | 244,791 | 235,010 | |||||||
UNITED STATES | ||||||||||||
Revenues: | ||||||||||||
Total revenues | 141,535 | 200,323 | 203,806 | |||||||||
Net Long Lived Assets: | ||||||||||||
Total net long-lived assets | 168,331 | 197,514 | 168,331 | 197,514 | 188,343 | |||||||
Non-United States [Member] | ||||||||||||
Revenues: | ||||||||||||
Total revenues | 33,798 | 38,006 | 37,331 | |||||||||
Net Long Lived Assets: | ||||||||||||
Total net long-lived assets | $ 43,583 | $ 47,277 | $ 43,583 | $ 47,277 | $ 46,667 |
Revenues from External Customers and Long-Lived Assets, by Geographical Areas -Supplemental information (Detail) |
12 Months Ended |
---|---|
May 31, 2016 | |
Segment Reporting [Abstract] | |
Minimum percentage of revenue accounted for major customer | 10.00% |
Segment Reporting and Related Disclosures Depreciation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Segment Reporting Information [Line Items] | |||
Depreciation expense | $ 55,931 | $ 56,445 | $ 57,034 |
Operating Segments [Member] | T&M equipment | |||
Segment Reporting Information [Line Items] | |||
Depreciation expense | 51,669 | 52,278 | 52,652 |
Operating Segments [Member] | DP equipment | |||
Segment Reporting Information [Line Items] | |||
Depreciation expense | $ 4,262 | $ 4,167 | $ 4,382 |
Segment Reporting and Related Disclosures Income Before Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|
Segment Reporting Information [Line Items] | ||||||||||||
Marginal contribution | $ 45,222 | $ 57,324 | $ 64,886 | |||||||||
Unallocated SG&A expenses | 37,139 | 34,396 | 32,747 | |||||||||
Interest income/(expense), net | (329) | 332 | 387 | |||||||||
Other income | 33 | 1,390 | 0 | |||||||||
Income before income taxes | $ (1,197) | $ 1,492 | $ 3,541 | $ 3,951 | $ 5,646 | $ 3,746 | $ 7,696 | $ 7,562 | $ 24,650 | 7,787 | 24,650 | 32,526 |
Operating Segments [Member] | T&M equipment | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Marginal contribution | 38,527 | 50,410 | 58,924 | |||||||||
Operating Segments [Member] | DP equipment | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Marginal contribution | $ 6,695 | $ 6,914 | $ 5,962 |
Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2016 |
Feb. 29, 2016 |
Nov. 30, 2015 |
Aug. 31, 2015 |
May 31, 2015 |
Feb. 28, 2015 |
Nov. 30, 2014 |
Aug. 31, 2014 |
Nov. 30, 2014 |
May 31, 2016 |
May 31, 2015 |
May 31, 2014 |
|||
Schedule Of Quarterly Financial Information [Line Items] | ||||||||||||||
Total revenues | $ 39,182 | $ 39,498 | $ 43,310 | $ 53,343 | $ 60,413 | $ 56,342 | $ 59,703 | $ 61,871 | $ 238,329 | $ 175,333 | $ 238,329 | $ 241,137 | ||
Gross Profit | [1] | 16,220 | 15,172 | 17,881 | 18,964 | 20,580 | 18,356 | 20,825 | 22,480 | 82,241 | 68,237 | |||
Income Before Taxes | (1,197) | 1,492 | 3,541 | 3,951 | 5,646 | 3,746 | 7,696 | 7,562 | 24,650 | 7,787 | 24,650 | 32,526 | ||
Net income | $ (885) | $ 1,009 | $ 2,190 | $ 2,470 | $ 3,441 | $ 2,425 | $ 4,795 | $ 4,771 | $ 15,432 | $ 4,784 | $ 15,432 | $ 20,408 | ||
Basic, in dollars per share | $ (0.04) | $ 0.04 | $ 0.09 | $ 0.10 | $ 0.14 | $ 0.10 | $ 0.20 | $ 0.20 | $ 0.63 | $ 0.20 | $ 0.63 | $ 0.84 | ||
Diluted, in dollars per share | $ (0.04) | $ 0.04 | $ 0.09 | $ 0.10 | $ 0.14 | $ 0.10 | $ 0.20 | $ 0.20 | $ 0.63 | $ 0.20 | $ 0.63 | $ 0.84 | ||
|
Subsequent Events - Additional Information (Detail) |
Jun. 23, 2016
$ / shares
|
---|---|
Restated Merger Agreement | Subsequent Event | |
Subsequent Event [Line Items] | |
Common stock convertible to cash (usd per share) | $ 15.50 |
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