-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, San4rV/MDC5+fetvPabc/7jdk81bs3L7Xge47GcGLVHkQFxpFZbHLKS8rDXRlFuB qx13EZnyy3SDgb4G7h71aA== 0000032166-97-000005.txt : 19971015 0000032166-97-000005.hdr.sgml : 19971015 ACCESSION NUMBER: 0000032166-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRO RENT CORP CENTRAL INDEX KEY: 0000032166 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 952412961 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09061 FILM NUMBER: 97694960 BUSINESS ADDRESS: STREET 1: 6060 SEPULVEDA BLVD CITY: VAN NUYS STATE: CA ZIP: 91411-2512 BUSINESS PHONE: 8187872100 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED AUGUST 31, 1997 COMMISSION FILE NUMBER 0-9061 ELECTRO RENT CORPORATION Exact name of registrant as specified in its charter CALIFORNIA 95-2412961 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6060 SEPULVEDA BOULEVARD VAN NUYS, CALIFORNIA 91411-2501 (Address of principal executive offices) (Zip code) (818) 786-2525 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X NO At October 9, 1997 registrant had 12,050,571 shares of common stock outstanding. ELECTRO RENT CORPORATION FORM 10-Q AUGUST 31, 1997 TABLE OF CONTENTS Page Part I: FINANCIAL INFORMATION Condensed Consolidated Statements of Income for the Three Months Ended August 31, 1997 and 1996 3 Condensed Consolidated Balance Sheets at August 31, 1997 and May 31, 1997 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 31, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II: OTHER INFORMATION 9 SIGNATURES 10 Page 2 ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (000 omitted except per share data)
Three Months Ended August 31 1997 1996 --------- --------- Revenues: Rentals and leases $ 34,392 $ 32,380 Sales of equipment and other revenues 4,525 5,764 --------- --------- Total revenues 38,917 38,144 --------- --------- Costs and expenses: Depreciation of equipment 11,615 11,007 Costs of revenues other than depreciation 4,157 5,563 Selling, general and administrative expenses 11,208 10,179 Interest 113 300 --------- --------- Total costs and expenses 27,093 27,049 --------- --------- Income before income taxes 11,824 11,095 Income taxes 4,847 4,548 --------- --------- Net income $ 6,977 $ 6,547 ========= ========= Net income per common and common equivalent share $ 0.56 $ 0.53 ========= ========= Average common and common equivalent shares outstanding 12,480 12,426 ========= ========= See accompanying notes to condensed consolidated financial statements.
Page 3 ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (000 omitted) ASSETS
August 31 May 31 1997 1997 --------- --------- Cash $ 1,002 $ 2,207 Accounts receivable, net 22,517 19,968 Rental and lease equipment, net of accumulated depreciation 144,729 139,377 Other property, net of accumulated depreciation and amortization 19,344 19,438 Other 7,332 7,223 --------- --------- $ 194,924 $ 188,213 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank borrowings $ 9,700 $ 4,200 Accounts payable 10,338 20,096 Accrued expenses 15,077 11,001 Deferred income taxes 13,551 13,696 --------- --------- Total liabilities 48,666 48,993 --------- --------- Shareholders' equity Common stock 10,026 9,965 Retained earnings 136,232 129,255 --------- --------- Total shareholders' equity 146,258 139,220 --------- --------- $ 194,924 $ 188,213 ========= ========= See accompanying notes to condensed consolidated financial statements.
Page 4 ELECTRO RENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (000 omitted) [CAPTION] Three Months Ended August 31 1997 1996 --------- --------- [S] [C] [C] Cash flows from operating activities: Net income $ 6,977 $ 6,547 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,992 11,440 Provision for losses on accounts receivable 181 188 Gain on sale of equipment (1,476) (1,573) Change in operating assets and liabilities: Increase in accounts receivable (2,730) (654) Increase in other assets (188) (90) Decrease in accounts payable (840) (932) Increase in accrued expenses 4,076 3,430 Decrease in deferred income taxes (145) (134) --------- --------- Net cash provided by operating activities 17,847 18,222 --------- --------- Cash flows from investing activities: Proceeds from sale of equipment 3,736 5,183 Payments for purchase of rental and lease equipment (28,145) (19,194) Payments for purchase of other property (204) (174) --------- --------- Net cash used in investing activities (24,613) (14,185) --------- --------- Cash flows from financing activities: Increase (decrease) in short-term bank borrowings 5,500 (4,600) Proceeds from issuance of common stock 61 95 --------- --------- Net cash provided by financing activities 5,561 (4,505) --------- --------- Net decrease in cash (1,205) (468) Cash at beginning of period 2,207 1,394 --------- --------- Cash at end of period $ 1,002 $ 926 ========= ========= [FN] See accompanying notes to condensed consolidated financial statements. Page 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 -- Basis of Presentation - ----------------------------------- The unaudited consolidated financial statements are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. The condensed consolidated financial statements include Electro Rent Corporation and the accounts of its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The information furnished reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the financial position and the results of operations of the Company. All such adjustments are of a normal recurring nature. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 -- Net Income Per Common and Common Equivalent Share - ----------------------------------- Earnings per share were computed based on the weighted average number of common and common equivalent shares outstanding of 12,480,000 and 12,426,000 for the three month periods ended August 31, 1997 and 1996. Note 3 -- Interest and Income Taxes Paid - ------------------------------------------- Total interest paid during the three month periods ended August 31, 1997 and 1996 was $127,000 and $296,000, respectively. Total income taxes paid during the three month period ended August 31, 1997 was $2,741,000 compared to $583,000 during the same period in the prior year. Note 4 -- Noncash Investing and Financing Activities - ------------------------------------------------------- The Company acquired equipment totaling $10,486,000 and $19,405,000 as of August 31, 1997 and May 31, 1997, respectively, and $12,399,000 and $15,832,000 as of August 31, 1996 and May 31, 1996, respectively, which was paid for during subsequent quarters. Note 5 -- Capital Leases - ---------------------------- The Company has certain customer leases providing bargain purchase options with a portion of lease revenue deferred until option exercise. At August 31, 1997 investment in sales-type leases of $626,000 net of deferred interest of $37,000 is included in other assets. Interest income is recognized over the life of the lease using the interest method. Page 6 Note 6 -- Acquisition - ---------------------------- On September 22, 1997, Electro Rent Corporation entered into a definitive agreement to acquire the computer and test and measurement equipment rental business of GE Capital Technology Management Services (TMS), a division of GE Capital Services, for $320 million in cash. The acquisition, which is expected to close by October 31, 1997, is subject to certain closing conditions. On October 6, 1997, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1966 expired. Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------- Results of Operations Total revenues increased 2.0% to $38,917,000 for the three month period ended August 31, 1997, over the same period last year, due to a 6.2% increase in rental and lease revenues, partially offset by a 21.5% decline in sales and other revenues. The increase in rental and lease revenues for the three month period is due primarily to increases in personal computer rental and lease contracts. Sales of used equipment which decreased in the three month period is due to a significant buyout of test equipment by one customer in the previous fiscal year first quarter. For the three month period ended August 31, 1997, depreciation expense increased 5.5% as compared to the same prior year period, due to increases in the pool of equipment for rental and lease. Costs of revenues other than depreciation decreased 25.3% for the first quarter primarily as a result of a reduction in cost of sales related to the decline in sales of used equipment. For the three month period ended August 31, 1997, selling, general and administrative expenses increased 10.1%, as compared with the same period in fiscal 1997, primarily due to an increase in the number of employees and increased facility and communications costs. Interest expense decreased 62.3% for the three month period ended August 31, 1997, respectively, as a result of lower borrowings due to strong cash flows. Financial Condition and Liquidity - ----------------------------------- During the first three months of fiscal 1998, net cash provided by operating activities was $17,847,000, compared to $18,222,000 for the same period last year. This decrease can be substantially attributed to an increase in accounts receivable. Net cash used in investing activities for the three month period increased from $14,185,000 in fiscal 1997 to $24,613,000 in fiscal 1998 primarily due to substiantially increased purchases of rental and lease equipment. Short-term bank borrowings increased $5,500,000 during the first three months of fiscal 1998 as a result of payments for equipment purchases, which compared with a $4,600,000 decrease in the prior year period. On September 22, 1997, Electro Rent Corporation entered into a definitive agreement to acquire the computer and test and measurement equipment rental business of GE Capital Technology Management Services (TMS), a division of GE Capital Services, for $320 million in cash. The acquisition, which is expected to close by October 31, 1997, is subject to certain closing conditions. On October 1, 1997, the Company received a commitment for bank financing for the TMS acquisition in the form of a $360 million reducing revolving credit facility. Page 8 Part II. OTHER INFORMATION - ---------------------------- Items 1. through 3. - ---------------------------- Nothing to report. Item 4. Submission of Matters to a Vote of Security Holders (a) On October 9, 1997, the 1997 Annual Meeting of Shareholders of the Registrant was held. Proxies pursuant to Regulation 14A were solicited in connection with the meeting. 10,780,500 shares were present in person or by proxy out of a total of 12,050,571 shares issued and outstanding and eligible to vote on the record date. (b) The meeting involved the election of directors. The following directors were elected by the number of affirmative votes set opposite their respective names: Name Number of Votes Gerald D. Barrone 10,739,285 Nancy Y. Bekavac 10,685,873 Daniel Greenberg 10,741,000 Joseph J. Kearns 10,739,285 S. Lee Kling 10,736,248 Michael R. Peevey 10,681,986 Will Richeson, Jr. 10,682,628 William Weitzman 10,744,037 (c) Other matters submitted to a vote of security holders: The shareholders ratified the appointment of Arthur Andersen LLP as the registrant's independent public accountants for the current year. 10,641,414 shares were voted for, 32,024 were voted against, and 107,062 shares abstained from voting. The shareholders also approved an Amendment to the Articles of Incorporation to increase the authorized number of common shares from 20,000,000 to 40,000,000. 10,516,604 shares were voted for, 163,298 were voted against, and 55,797 shares abstained from voting. Item 5. - ---------------------------- Nothing to report. Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------- (b) Reports of Form 8-K On October 1, 1997 a Report of Form 8-K was filed, relating to the acquisition of the computer and test and measurement equipment rental business of GE Capital Technology Management Services, a division of GE Capital Services. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. ELECTRO RENT CORPORATION DATED: October 13, 1997 /s/ Daniel Greenberg Daniel Greenberg Chairman and Chief Executive Officer DATED: October 13, 1997 /s/ William Weitzman William Weitzman President and Chief Operating Officer DATED: October 13, 1997 /s/ Craig R. Jones Craig R. Jones Vice President and Chief Financial Officer Page 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 MAY-31-1998 JUN-1-1997 AUG-31-1997 3-MOS 1,002 0 24,369 1,852 0 0 302,805 138,732 194,924 0 0 0 0 10,026 0 194,924 4,525 38,917 4,157 26,980 0 0 113 11,824 4,847 6,977 0 0 0 6,977 0.56 0.56
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