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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended May 31, 1995 Commission File No. 0-9061
ELECTRO RENT CORPORATION
A California corporation I.R.S. Employer
Identification No. 95-2412961
6060 Sepulveda Boulevard
Van Nuys, California 91411-2512
(Address of principal executive offices)
Registrant's telephone number, including area code: (818) 786-2525
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock without par value.
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
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ].
The aggregate market value of the voting stock of the registrant held
by non-affiliates of the registrant as of August 11, 1995 was $204,488,717.
Number of shares of Common Stock outstanding as of August 11, 1995
11,797,426 shares (after giving effect to the three-for-two stock split
declared July 13, 1995 payable August 18, 1995 to shareholders of record July
31, 1995).
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ELECTRO RENT CORPORATION
FORM 10-K ANNUAL REPORT
DOCUMENTS INCORPORATED BY REFERENCE
1. Pages 1 and 16 to 27 of the Annual Report to Security Holders for the
fiscal year ended May 31, 1995 (the "1995 Annual Report") are incorporated by
reference in this Form 10-K Annual Report.
2. Proxy Statement for the Annual Meeting of Shareholders to be held on
October 5, 1995 (the "1995 Proxy Statement").
CROSS REFERENCE SHEET
Showing Location in 1995 Annual Report
and 1995 Proxy Statement of Information
Required by Items of Form 10-K
Caption and Reference
Form 10-K Item in 1995 Annual Report ("AR")
Number and Caption or 1995 Proxy Statement ("PS")
------------------ ------------------------------
PART II
5. Market for the Registrant's
Common Equity and Related
Shareholders Matters AR page 25
6. Selected Financial Data AR page 1
7. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations AR pages 14 and 15
8. Financial Statements and
Supplementary Data AR pages 16 to 24
PART III
10. Directors and Executive
Officers of the Registrant PS pages 2 to 4
11. Executive Compensation PS pages 5 to 8
12. Security Ownership of
Certain Beneficial Owners
and Management PS pages 2 and 3
13. Certain Relationships and
Related Transactions PS page 5
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PART I
Item 1. Business.
Electro Rent Corporation (the "Company" or "Electro Rent") was
incorporated in California in 1965. The Company became a publicly held
corporation on March 31, 1980.
The Company primarily engages in the short-term rental of state-of-the-art
electronic equipment. Approximately 55% of the Company's equipment portfolio
is composed of general purpose test and measurement instruments and
microprocessor development systems purchased from leading manufacturers such
as Hewlett Packard, Sun Microsystems, Tektronix, Intel and Texas Instruments.
The remainder, and a growing portion of the equipment portfolio, comprises
personal computers and workstations. Personal computer lines include those
from IBM, Compaq, Apple and AST; while workstations are purchased primarily
from Sun Microsystems, Hewlett Packard and Digital Equipment. A large part of
its equipment portfolio is rented or leased to Fortune 500 companies in the
aerospace, electronics and defense industries. Management believes that the
Company's equipment is primarily used in research and development activities
and that a significant amount of its equipment is used in connection with
government-generated projects. The Company also rents equipment to companies
of various sizes representing a cross-section of American industry. No
customer accounted for more than 10% of the Company's revenues for the fiscal
year ended May 31, 1995. No significant portion of the Company's revenues are
currently derived from direct United States Government contracts.
An important aspect of the Company's equipment portfolio management is
the resale of equipment from the portfolio, generally three to five years after
purchase, which, on the average, have been at prices above book value. Such
sales have historically provided a substantial portion of revenues and
operating cash flow.
The Company services its customers through a network of equipment,
calibration and service centers in the United States and Canada which are
linked by an on-line computer system. These centers also function as depots
for the sale of used equipment.
Data Rentals/Sales, Inc., formerly a wholly owned subsidiary of the
Company, has been merged into the Company and is operated as a division of the
Company.
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On December 12, 1985 the Company entered into a joint venture agreement
with Nas-Fritzke International Corp. to form Nippon Electro Rent Co., Ltd. for
the purpose of renting and selling test and measurement equipment and
microcomputers in Japan. The Company's original joint venture interest of
25% was reduced to 15% in March 1991.
Electro Rent is one of the larger companies in the highly competitive
electronic equipment rental and lease business. Independent industry
publications have identified a number of major competitors, including United
States Instrument Rental, Inc., a division of A T & T; G.E. Rents, a division
of General Electric Corporation; Telogy; Ameridata; and Continental Resources.
Since the larger of these firms are divisions of large corporations, these
firms have access to greater financial and other resources than does the
Company.
Electro Rent's business is relatively non-seasonal except for the third
quarter months of December, January and February, when rental activity declines
because a number of customers close for extended Christmas-New Year vacation.
In addition, the shortness of February results in a reduced level of rental
billing.
Electro Rent purchases the majority of its equipment from leading
suppliers of electronic equipment. The research and development, manufacturing
and marketing trends and activities of the Company's major suppliers tend to
shape the nature of the rental and lease demand of the Company's customers
and the availability of equipment. As a result, Electro Rent's business is
significantly affected by the continued research and development, manufacturing
and financial condition of its major suppliers, particularly Hewlett-
Packard.
Electro Rent believes that its relationships with its major suppliers are
good. Because of the volume of its purchases and its long-term purchase
commitments, the Company obtains favorable price discounts.
At May 31, 1995, Electro Rent employed approximately 443 individuals.
None of the employees is a member of a labor union. Electro Rent considers its
employee relations to be satisfactory and provides standard employee benefits
and pays certain of the costs of employee education.
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Item 2. Properties.
Electro Rent's corporate headquarters are located at 6060 Sepulveda
Boulevard, Van Nuys, California. The building contains approximately 84,500
square feet of office space. Approximately 16,000 square feet are currently
being leased, and another 24,000 square feet will be leased in the near future,
all of which will be available for future needs of the Company.
Electro Rent owns a facility in Wood Dale, Illinois containing
approximately 30,750 square feet. It houses the Company's Chicago operations.
In March 1994 Electro Rent purchased a building at 15385 Oxnard Street,
Van Nuys, California. The building contains approximately 68,200 square feet.
A portion of the building is being utilized to house the Company's California
warehouse and laboratory operations. Approximately 34,000 square feet of the
building are leased to others until needed by the Company.
As of May 31, 1995 Electro Rent had both sales offices and equipment,
calibration and service centers in the metropolitan areas of Boston, Chicago
and Los Angeles. Electro Rent also has sales offices in Atlanta, Dallas,
Denver, Detroit, Hartford, Houston, Minneapolis, New York/Newark, Phoenix,
Portland (OR), Rochester, San Diego, San Francisco, Seattle and
Washington/Baltimore.
Electro Rent's facilities aggregate approximately 271,084 square feet.
Except for the corporate headquarters, the Chicago area facilities, and the
newly acquired Oxnard Street building, all of the facilities are rented
pursuant to leases for up to five years for aggregate annual rentals of
approximately $852,000 in fiscal 1995. No rented facility is considered
essential to the Company. The Company considers its facilities to be in good
condition, well maintained and adequate for its needs.
Item 3. Legal Proceedings.
Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the security holders of the Company.
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PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock is listed by the National Association of
Securities Dealers and is quoted on the NATIONAL MARKET SYSTEM OF NASDAQ. The
symbol is ELRC. The quarterly market price ranges for the common stock for the
two fiscal years ended May 31, 1995 as quoted on NASDAQ, shareholder
information and dividend information are set forth on page 25 of the 1995
Annual Report and are incorporated herein by reference.
None of the Company's preferred shares are issued and outstanding.
Item 6. Selected Financial Data.
The summary of the selected financial data referred to as Financial
Highlights, appearing on page 1 of the 1995 Annual Report, is hereby
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Information appearing under the above caption on pages 14 and 15 of the
1995 Annual Report is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
The Company's consolidated financial statements together with the report
thereon of Arthur Andersen LLP appearing on pages 16 to 25 of the 1995 Annual
Report are hereby incorporated by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
Nothing to report.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
Information appearing in the 1995 Proxy Statement under the captions
Election of Directors (pages 2 and 3), Executive Officers (page 4), Compliance
With Section 16 of the Securities Exchange Act of 1934 (page 4), and
Transactions With Management (page 5), is hereby incorporated by reference.
Item 11. Executive Compensation.
Information appearing in the 1995 Proxy Statement under the captions
Executive Compensation (pages 5 to 8) is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Information concerning the ownership of the Company's securities by the
principal holders and by management is set forth in the 1995 Proxy Statement
(pages 2 and 3), and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information appearing in the 1995 Proxy Statement under the caption
Transactions With Management (page 5) is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) The following financial statements and financial statement schedule
covered by the Report of Independent Public Accountants are filed as a part of
this report and are included or incorporated herein by reference to the
following page or pages of the 1995 Annual Report.
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Page Number
-----------
1995 Annual
Item Report Form 10-K
---- ----------- ---------
Consolidated Balance Sheets at
May 31, 1995 and 1994 17
Consolidated Statements of Income
for each of the three years in
the period ended May 31, 1995 16
Consolidated Statements of Shareholders'
Equity for each of the three years in
the period ended May 31, 1995 18
Consolidated Statements of Cash Flows
for each of the three years in the
period ended May 31, 1995 19
Notes to Consolidated Financial Statements 20 to 24
Report of Independent Public Accountants 25
Schedule for each of the three years in the
period ended May 31, 1995:
II - Valuation and qualifying accounts 12
Consent and Report of Independent Public
Accountants 14
All other schedules have been omitted since the required information is
not present or is not present in amounts sufficient to require submission of a
schedule, or because the information required is included in the financial
statements or related notes.
(b) Reports on Form 8-K.
During the last quarter of the period covered by this Annual Report, Form
10-K, the Registrant did not file and was not required to file any Current
Reports on Form 8-K.
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(c) Exhibits listed by numbers corresponding to Exhibit Table
of Item 601 of Regulation S-K.
(3) Articles of Incorporation (Restated) and bylaws are incorporated by
reference to Exhibits 1.2 and 6.1, respectively, of Registration Statement
(Form S-14), File No. 2-63532. A copy of the Restated Articles of
Incorporation and the Certificate of Amendment of Restated Articles of
Incorporation filed October 24, 1988 are incorporated by reference to Exhibit
(3) to the Annual Report (Form 10-K) for the fiscal year ended May 31, 1989. A
copy of the amendment to the bylaws adopted October 6, 1994 is filed as Exhibit
(3) to this Annual Report.
(10)(A) The ELECTRO RENT CORPORATION EMPLOYEE STOCK OWNERSHIP AND SAVINGS
PLAN, JUNE 1, 1985 RESTATEMENT, and the ELECTRO RENT CORPORATION EMPLOYEE STOCK
OWNERSHIP AND SAVINGS PLAN TRUST AGREEMENT, are incorporated by reference to
Exhibits 10(A)-(1) and 10(A)-(2) of the Registrant's Annual Report (Form 10-K)
for the fiscal year ended May 31, 1985. A copy of AMENDMENT NO. ONE to the
RESTATED ESOSP is incorporated by reference to Exhibit (10)(A) of Registrant's
Annual Report (Form 10-K) for the fiscal year ended May 31, 1987.
A copy of the ELECTRO RENT CORPORATION EMPLOYEE STOCK OWNERSHIP AND
SAVINGS PLAN, RESTATED AS OF JUNE 1, 1989 is incorporated by reference to
Exhibit (10)(A) of the Annual Report (Form 10-K) for the fiscal year ended May
31, 1989.
Copies of the following documents amending and supplementing the ESOSP and
ESOP as heretofore amended are filed as exhibits to this Annual Report:
ADOPTION AGREEMENT FOR THE VANGUARD PROTOTYPE 401(k) SAVINGS PLAN dated
August 1, 1994, Exhibit (10)(A)-(1).
ELECTRO RENT CORPORATION SAVINGS PLAN TRUST AGREEMENT dated September 1,
1994, Exhibit (10)(A)-(2).
ELECTRO RENT SAVINGS PLAN SUPPLEMENT TO THE VANGUARD PROTOTYPE 401(k)
SAVINGS PLAN ADOPTION AGREEMENT dated September 24, 1994, Exhibit
(10)(A)-(3).
SECOND AMENDMENT TO ELECTRO RENT CORPORATION EMPLOYEE STOCK OWNERSHIP &
SAVINGS PLAN (RESTATED AS OF JUNE 1, 1989) dated as of June 1, 1991, Exhibit
(10)(A)-(4).
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THIRD AMENDMENT TO ELECTRO RENT CORPORATION EMPLOYEE STOCK OWNERSHIP AND
SAVINGS PLAN (RESTATED AS OF JUNE 1, 1989) dated June 15, 1994, Exhibit
(10)(A)-(5).
FOURTH AMENDMENT TO ELECTRO RENT CORPORATION SAVINGS PLAN (RESTATED AS OF
JUNE 1, 1989) dated September 1, 1994, Exhibit (10)(A)-(6).
ELECTRO RENT CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST AGREEMENT
dated September 1, 1994, Exhibit (10)(A)-(7).
(10)(B) The 1980 Stock Option Plan and form of Stock Option Agreement are
incorporated by reference to Exhibits 1.1 and 2, respectively, of Registration
Statement (Form S-8), File No. 2-70763.
The Incentive Stock Option Plan (as Amended and Restated to July 8, 1982)
and Amendment No. One to Stock Option Agreement are incorporated by reference to
Exhibit (10)(B) of the Annual Report (Form 10-K) for the fiscal year ended May
31, 1982. Amendment No. One to the Plan as Amended and Restated and the Stock
Option Agreement, Non-Qualified Stock Options are incorporated by reference to
Exhibit 10(B) of the Annual Report (Form 10-K) for the fiscal year ended May 31,
1984.
(10)(C) A copy of the ELECTRO RENT CORPORATION SUPPLEMENTAL RETIREMENT
PLAN is incorporated by reference to Exhibit (10)(C) of Registrant's Annual
Report (Form 10-K) for the fiscal year ended May 31, 1987.
(10)(D) The EXECUTIVE EMPLOYMENT AGREEMENT between the Company and Daniel
Greenberg, Chairman of the Board of Directors and Chief Executive Officer, and
between the Company and William Weitzman, President and Chief Operating Officer,
each originally entered into December 15, 1986 and amended November 22, 1988 by
AMENDMENT NO. ONE TO EXECUTIVE EMPLOYMENT AGREEMENT was each further amended and
restated as of July 15, 1992. A copy of each EXECUTIVE EMPLOYMENT AGREEMENT
(AMENDED AND RESTATED AS OF JULY 15, 1992) is incorporated by reference to
Exhibits (10)(D)-(1) and (10)(D)-(2) of Registrant's Annual Report (Form 10-K)
for the fiscal year ended May 31, 1993.
(10)(E) A copy of the Electro Rent Corporation 1990 Stock Option Plan, the
Electro Rent Corporation Stock Option Agreement (Incentive Stock Option) and the
Electro Rent Corporation Stock Option
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Agreement (Nonstatutory Option) are incorporated by reference to Exhibits
(10)(E)-(1), (10)(E)-(2) and (10)(E)-(3), respectively to the Annual Report
(Form 10-K) for the fiscal year ended May 31, 1990. A copy of AMENDMENT NUMBER
ONE TO ELECTRO RENT CORPORATION 1990 STOCK OPTION PLAN adopted October 3, 1991
is incorporated by reference to Exhibit (10)(E) of the Annual Report (Form
10-K) for the fiscal year ended May 31, 1992. A copy of AMENDMENT NUMBER TWO
TO ELECTRO RENT CORPORATION 1990 STOCK OPTION PLAN adopted April 11, 1995 is
filed as Exhibit (10)(E) to this Annual Report.
(11) Statement re computation of per share earnings is incorporated by
reference to the 1995 Annual Report, pages 16 and 20.
(13) 1995 Annual Report. Only those portions of the 1995 Annual Report to
security holders expressly incorporated hereby by reference are deemed "filed."
(21) Subsidiaries of the Registrant.
Genstar Rental Electronics, Inc., a Delaware corporation.
Electro Rent de Mexico S.A. de C.V., a Mexican corporation.
Data Rentals/Sales, Inc., the Registrant's formerly wholly owned
subsidiary, has been merged into the Registrant, its parent, by statutory
merger. Its functions are conducted by a division of Electro Rent.
Electro Rent Europe B.V., a Netherlands corporation, has been
terminated.
(22) Pages 1 and 14 to 25 of the Annual Report to Security Holders for the
fiscal year ended May 31, 1995 are appended hereto as Exhibit 22 hereof and are
being electronically filed with this Form 10-K Annual Report.
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(d) Schedule of Financial Statements Required by Regulation S-X
which is excluded from the 1995 Annual Report by Rule 14 a 3(b) (1):
ELECTRO RENT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended May 31, 1995, 1994 and 1993
(in thousands)
Balance
at Additions Balance
Beginning Charged to at End
Description of Year Income Deductions* of Year
----------- --------- ---------- ---------- -------
Allowance for doubtful
receivables
1995 $1,140 $244 $144 $1,240
1994 $1,027 $363 $250 $1,140
1993 $1,249 $338 $560 $1,027
*Represents accounts written off against the allowance, net of recoveries.
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SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Electro Rent Corporation
Dated: August 24, 1995. By /s/ DANIEL GREENBERG
----------------------------------
Daniel Greenberg, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ DANIEL GREENBERG Chairman of the Board
- ------------------------- and Chief Executive Officer August 24, 1995
Daniel Greenberg
/s/ WILLIAM WEITZMAN President, Chief Operating
- ------------------------- Officer and Director August 24, 1995
William Weitzman
/s/ CRAIG R. JONES Chief Financial Officer August 24, 1995
- -------------------------
Craig R. Jones
/s/ GERALD D. BARRONE Director August 24, 1995
- -------------------------
Gerald D. Barrone
/s/ NANCY Y. BEKAVAC Director August 24, 1995
- -------------------------
Nancy Y. Bekavac
/s/ JOSEPH J. KEARNS Director August 24, 1995
- -------------------------
Joseph J. Kearns
/s/ MICHAEL R. PEEVEY Director August 24, 1995
- -------------------------
Michael R. Peevey
/s/ WILL RICHESON, JR. Director August 24, 1995
- -------------------------
Will Richeson, Jr.
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement No. 3-37692.
Arthur Andersen LLP
Los Angeles, California
August 28, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Electro Rent Corporation's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated August 4, 1995. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index above is the responsibility of the Company's
management, and is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Los Angeles, California
August 4, 1995
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