Electro Rent Corporation is primarily engaged in the rental, lease and sale of electronic equipment. Approximately 70% of its equipment portfolio is composed of general-purpose test and measurement instruments purchased from manufacturers, such as Agilent Technologies and Tektronix. 

VAN NUYS, Calif.--(BUSINESS WIRE)--Electro Rent Corporation (NASDAQ:ELRC - News) today announced financial results for the third quarter and first nine months of fiscal 2007.
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"Our rental and lease revenue continued their solid growth last quarter, and we see favorable conditions for continued growth in our core markets in the United States and our operations in China and Europe," commented Chairman and CEO Daniel Greenberg.

"We intend to continue our strategy of leveraging Electro Rent's operating and logistical capabilities through domestic and international expansion. As a result, we are incurring additional costs in the short term to fund our long-term objectives. Our implementation of this policy, coupled with intensifying competition in our test and measurement business, contributed to lower profitability this quarter. We look forward to improving our profitability as we meet these challenges, successfully implement new programs, and reap the rewards of an integrated global business that can deliver profitable growth over an extended period of time," Greenberg said.

Third Quarter Results

For the three months ended February 28, 2007, total revenues increased 4.8% to $30.7 million compared to $29.3 million for the third quarter of fiscal 2006. Rental and lease revenue increased 11.9% to $24.7 million for this fiscal year's third quarter, compared to $22.1 million a year earlier, reflecting higher demand for T&M equipment in Electro Rent's domestic markets, as well as its expansion into China and Europe and the acquisition in January 2006 of Rush Computer Rentals. Revenue from equipment sales and other revenues decreased 16.8% to $6.0 million compared to $7.2 million.

Electro Rent's operating expenses for the third quarter of fiscal 2007 increased 14.1% to $24.6 million from $21.6 million a year earlier. This increase primarily reflected higher depreciation expense due to the Rush acquisition, increased purchases of new equipment and a $0.4 million equipment impairment charge, higher SG&A expenses associated with the Rush acquisition and investments to support the growth of Electro Rent's operations in China and Europe. SG&A expenses for this fiscal year's third quarter also included $0.2 million of stock compensation expense as a result of the adoption of SFAS 123R in fiscal 2007; there was no comparable expense during the third quarter of fiscal 2006.

Pretax profit was $8.6 million for the third quarter this fiscal year compared with $8.4 million a year earlier. In the third quarter of fiscal 2007, Electro Rent recognized $1.6 million of other income from the settlement of a class action lawsuit. There was no comparable income in the prior year period.

Electro Rent's net income for the third quarter of fiscal 2007 was $5.2 million, or $0.20 per diluted share, reflecting a 39.6% effective tax rate. This compares to net income for the third quarter of fiscal 2006 of $5.9 million, or $0.23 per diluted share, reflecting a 29.8% effective tax rate. The lower effective tax rate in the prior fiscal year quarter primarily reflected a $0.8 million reduction in the accrual

for income taxes due to the expiration of specific risks related to closed tax audit years. The higher rate

in the current fiscal year quarter reflected a decline in tax-advantaged investments and extraterritorial income exclusions.

Nine Months Results

Total revenues for the first nine months of fiscal 2007 increased 10.1% to $92.3 million compared to $83.8 million for the first nine months of fiscal 2006. Rental and lease revenue increased 16.3% to $75.9 million from $65.3 million a year earlier, and revenue from equipment sales decreased 12.0% to $16.3 million from $18.6 million.

Operating expenses for this year's first nine months increased 19.0% to $71.9 million compared to $60.4 million for the same period of the prior fiscal year.

Net income for the nine months ended February 28, 2007 was $14.9 million, or $0.57 per diluted share. This compares to net income for the nine months ended February 28, 2006 of $16.5 million, or $0.64 per diluted share.

Balance Sheet Items

Equipment purchases increased to $49.4 million for this fiscal year's first nine months, including $12.7 million for the third quarter. This compares with equipment purchases of $44.7 million for the first nine months of fiscal 2006 and $17.3 million for the third quarter last year. The three and nine month periods of fiscal 2006 included $5.6 million of equipment acquired with the Rush transaction. The book value of Electro Rent's equipment pool rose to $147.8 million at February 28, 2007 from $140.1 million at May 31, 2006.

Cash, cash equivalents and marketable securities were $86.8 million at February 28, 2007 compared to $81.5 million at May 31, 2006. Electro Rent has no debt. Shareholders' equity increased to $241.6 million at February 28, 2007 from $221.8 million at May 31, 2006