FINANCIAL PERFORMANCE
Fiscal 2009 revenues declined to $130.5 million
from $144.5 million for fiscal 2008. Rental and lease
revenues decreased 10% to $98.4 million for
fiscal 2009 from $108.8 million for fiscal 2008,
while equipment sales and other revenues also
declined 10% to $32.1 million from $35.8 million
in the prior year.
Rental and lease revenues in our test and measurement
equipment business decreased 9% to
$77.4 million in fiscal 2009 from $85.2 million in
the prior year.
On the positive side, distribution sales
rose 14% for fiscal 2009. In Europe,
revenue increased 15% for fiscal 2009,
primarily reflecting improved strategic
positioning and deeper marketing
penetration for Electro Rent in that
market.
Operating profit for fiscal 2009 decreased to
$17.4 million from $30.7 million, mostly as a
result of decreased rental rates, equipment utilization,
leasing and sales for both the test and
measurement and data products segments.
Net income for fiscal 2009 was $11.8 million, or
$0.47 per diluted share, compared with $21.1
million, or $0.81 per diluted share, last year.
Selling, general and administrative expenses for the
entire year increased modestly to $44.5 million for
fiscal 2009, from $43.9 million for fiscal 2008.
However, these results reflected only a partial year
of the savings we introduced in the
latter part of fiscal 2009. We had
significantly reduced our expenditure
rate by the end of the fiscal year.
EXCELLENT FINANCIAL CONDITION
During fiscal 2009, we paid $52.0 million
for equipment purchases
from internally-generated cash flows
and ended the year with no debt and
a large and strong cash position as liquidity
and financial strength remained
a fundamental indicator of our company’s
health. Cash, cash equivalents and
investments totaled $72.0 million at the
end of fiscal 2009, compared with $74.6 million
at the end of fiscal 2008.
We achieved this even while taking advantage of the
opportunity to purchase 2.1 million shares of Electro
Rent stock for $22.8 million, thereby reducing the
number of our shares outstanding by almost 10%.
At the same time, we increased our regular quarterly
dividend by 50% to $0.15 per share, resulting in
$15.0 million in dividend payments during fiscal
2009. Even after returning a total of $37.8 million
to our shareholders, our shareholders’ equity only
decreased to $228.8 million at May 31, 2009, from
$256.1 million at the end of the prior year.
During the past several years, we resisted
the siren call to make acquisitions when
price earnings multiples were very high.
Because we did not succumb to temptation
and chose to wait, our financial
condition now constitutes one of our great strengths. In the end, being cash
rich may give us real opportunities in
this depressed economic environment,
and allows all of us to sleep a bit more
soundly at night.
REDUCING EXPENSES
Proactive measures to lower expenses
also helped reduce our economic exposure in fiscal
2009 as we sought the right balance to operate effectively
in a depressed economy. We purchased less
equipment, which helped moderate our depreciation
expense. We reduced our workforce to fit the
new economic reality while keeping our core competencies
intact, and we implemented changes to
our compensation structures where needed.
MAINTAINING OUR GLOBAL FOOTPRINT
We began growing our international business
nearly four years ago when the upside potential of
our activities clearly outweighed any fear about
possible future economic weakness. As it turned
out, Europe and Asia have not been
immune to the economic downturn
this time around. Manufacturing
activity, the focus of our Asian operations,
is down substantially, and our
operations in China are suffering as a
result. Our European business did relatively
well, as our equipment enjoyed
fairly strong utilization at a number of
major European projects where telecom
infrastructure and satellite construction
were key components. We continue to
explore growth opportunities in each
region, evaluating opportunities as
they present themselves. We hope to be in a strong
position to capitalize on our worldwide presence
when the economy improves.
NEW INITIATIVES
Among our initiatives to help our customers was
an alliance we formed about a year ago with GE
Capital. The relationship has expanded our leasing
program and enhanced our ability to meet the
needs of our customers by offering competitive
finance and operating leases. Additionally, we
continue to cooperate closely with our suppliers,
the world’s preeminent measurement equipment
companies, to find ways to work together through
troubled times. We also have made a
commitment to expand our telecommunications
test business by building
a new organization specifically dedicated
to this market.
ADDING TO OUR BOARD
In fiscal 2009, we appointed Suzan K.
DelBene to the board of directors,
bringing extensive business development
and strategic planning expertise
to our company. Her background in
marketing and technology will serve
Electro Rent well, as we forge ahead and
continue to fine tune our strategic initiatives.
MOVING FORWARD WITH FOCUS AND DETERMINATION
While external conditions remain difficult and
uncertain, there is growing evidence that our current
efforts and new initiatives may give us the
opportunity to improve our competitive position
as our present fiscal year progresses. Our confidence
in the future stems first from the company’s long
term management and sales teams, our ability to
successfully function in adverse conditions, our
ability to commit resources to new
initiatives and the power and flexibility
of our financial position.
We thank our shareholders for their
continued support and extend our deepest
gratitude to the entire Electro Rent
team for remaining upbeat, working
hard through a difficult time, and ignoring, whenever
possible, the gloom of the economic weather
outside our windows.
Intensity, determination and focus day by day will
guide us as the year progresses. Focusing on strategic
objectives will help define our future. Building
on our strengths is vitally important, and gaining
advantage when others falter is paramount. These
two attributes hold the keys to our success in what
we hope will be better times ahead.