##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended February 28, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number: 0-9061
 ELECTRO RENT CORPORATION
  California
    
    95-2412961(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)6060 Sepulveda Boulevard, Van Nuys, California
    
    91411-2501(Address of principal executive offices)
    
    (Zip Code)
 (818) 787-2100
 þ o
 o o
  Large accelerated filer o   
    Accelerated filer þ
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



Electro Rent Corporation
 Quarterly Report on Form 10-Q
 For the Quarterly Period Ended February 28, 2011
 TABLE OF CONTENTS
 PageEXPLANATORY NOTE
    
    
    3SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
    
    
    3PART IFINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended February 28, 2011 and 2010 (Unaudited)
    
    
    4Condensed Consolidated Balance Sheets at February 28, 2011 and May 31,
2010 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
February 28, 2011 and 2010 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART IIOTHER INFORMATION
    
    
    26Item 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. (Removed and Reserved)
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EX-31.1EX-31.2EX-32.1EX-32.2
  Page 2




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EXPLANATORY NOTE
  
 SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
   Page 3




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##### Table of Contents



Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ELECTRO RENT CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited) (in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedFebruary 28,
    
    
    February 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Revenues:Rentals and leases
    
    $
    28,679
    
    
    $
    22,596
    
    
    $
    87,139
    
    
    $
    67,672Sales of equipment and other revenues
    
    
    30,771
    
    
    
    10,438
    
    
    
    76,413
    
    
    
    34,140Total revenues
    
    
    59,450
    
    
    
    33,034
    
    
    
    163,552
    
    
    
    101,812Operating expenses:Depreciation of rental and lease equipment
    
    
    12,186
    
    
    
    10,218
    
    
    
    35,761
    
    
    
    31,486Costs of revenues other than depreciation of rental
and lease equipment
    
    
    24,707
    
    
    
    7,360
    
    
    
    60,016
    
    
    
    24,980Selling, general and administrative expenses
    
    
    14,259
    
    
    
    11,517
    
    
    
    41,541
    
    
    
    32,182Gain on bargain purchase, net of taxes
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    Total operating expenses
    
    
    51,152
    
    
    
    29,095
    
    
    
    137,116
    
    
    
    88,648Operating profit
    
    
    8,298
    
    
    
    3,939
    
    
    
    26,436
    
    
    
    13,164Interest income, net
    
    
    38
    
    
    
    125
    
    
    
    257
    
    
    
    1,481Income before income taxes
    
    
    8,336
    
    
    
    4,064
    
    
    
    26,693
    
    
    
    14,645Income tax provision
    
    
    3,259
    
    
    
    1,913
    
    
    
    9,276
    
    
    
    6,408Net income
    
    $
    5,077
    
    
    $
    2,151
    
    
    $
    17,417
    
    
    $
    8,237Earnings per share:Basic
    
    $
    0.21
    
    
    $
    0.09
    
    
    $
    0.73
    
    
    $
    0.34Diluted
    
    $
    0.21
    
    
    $
    0.09
    
    
    $
    0.72
    
    
    $
    0.34Shares used in per share calculation:Basic
    
    
    23,978
    
    
    
    23,930
    
    
    
    23,972
    
    
    
    23,926Diluted
    
    
    24,098
    
    
    
    23,988
    
    
    
    24,058
    
    
    
    23,981
 See accompanying notes to condensed consolidated financial statements (unaudited).
 Page 4




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ELECTRO RENT CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited) (in thousands, except share numbers)
 February 28,
    
    
    May 31,2011
    
    
    2010ASSETSCash and cash equivalents
    
    $
    29,331
    
    
    $
    32,906Investments, trading, at fair value (cost of $14,275)
    
    
    
    
    
    
    13,323Put option
    
    
    
    
    
    
    952Accounts receivable, net of allowance for doubtful accounts of $646 and $536
    
    
    33,081
    
    
    
    25,670Rental and lease equipment, net of accumulated depreciation of $189,919
and $177,380
    
    
    195,914
    
    
    
    173,647Other property, net of accumulated depreciation and amortization of $16,665
and $16,055
    
    
    13,561
    
    
    
    13,585Goodwill
    
    
    3,109
    
    
    
    3,109Intangibles, net of amortization of $2,172 and $2,017
    
    
    1,243
    
    
    
    1,398Other
    
    
    25,191
    
    
    
    11,478$
    301,430
    
    
    $
    276,068LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Accounts payable
    
    $
    8,131
    
    
    $
    8,294Accrued expenses
    
    
    12,043
    
    
    
    14,240Deferred revenue
    
    
    6,077
    
    
    
    6,022Deferred tax liability
    
    
    37,774
    
    
    
    17,550Total liabilities
    
    
    64,025
    
    
    
    46,106Commitments and contingencies (Note 12)Shareholders equity:Preferred stock, $1 par  shares authorized 1,000,000, none issued or outstandingCommon stock, no par  shares authorized 40,000,000;
issued and outstanding February 28, 2011 - 23,980,581;
May 31, 2010 - 23,960,694
    
    
    34,473
    
    
    
    33,555Retained earnings
    
    
    202,932
    
    
    
    196,407Total shareholders equity
    
    
    237,405
    
    
    
    229,962$
    301,430
    
    
    $
    276,068
 See accompanying notes to condensed consolidated financial statements (unaudited).
 Page 5




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ELECTRO RENT CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited) (in thousands)
 Nine Months EndedFebruary 28,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    17,417
    
    
    $
    8,237Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    36,663
    
    
    
    32,357Put option loss
    
    
    952
    
    
    
    170Unrealized holding gain for trading securities
    
    
    
    
    
    
    (170
    )Realized gain on redemption of trading securities
    
    
    (952
    )
    
    
    Realized gain on redemption of investments, available-for-sale
    
    
    
    
    
    
    (841
    )Remeasurement (gain) loss on foreign currency
    
    
    (21
    )
    
    
    100Provision for losses on accounts receivable
    
    
    446
    
    
    
    291Gain on sale of rental and lease equipment
    
    
    (8,016
    )
    
    
    (8,815
    )Gain on bargain purchase, net of taxes
    
    
    (202
    )
    
    
    Stock compensation expense
    
    
    692
    
    
    
    436Excess tax benefit for share based compensation
    
    
    (33
    )
    
    
    (26
    )Deferred income taxes
    
    
    20,224
    
    
    
    (3,493
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (7,408
    )
    
    
    (3,508
    )Other assets
    
    
    (13,698
    )
    
    
    (3,535
    )Accounts payable
    
    
    (1,298
    )
    
    
    (367
    )Accrued expenses
    
    
    (2,349
    )
    
    
    3,113Deferred revenue
    
    
    13
    
    
    
    302Net cash provided by operating activities
    
    
    42,430
    
    
    
    24,251Cash flows from investing activities:Proceeds from sale of rental and lease equipment
    
    
    20,847
    
    
    
    29,546Proceeds from acquisition purchase price adjustment
    
    
    202
    
    
    
    Payments for purchase of rental and lease equipment
    
    
    (69,760
    )
    
    
    (35,918
    )Redemptions of investments, available-for-sale
    
    
    
    
    
    
    28,737Redemptions of investments, trading
    
    
    14,275
    
    
    
    1,825Payments for purchase of other property
    
    
    (723
    )
    
    
    (600
    )Net cash (used in) provided by investing activities
    
    
    (35,159
    )
    
    
    23,590Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    196
    
    
    
    292Excess tax benefit for stock options exercised
    
    
    33
    
    
    
    26Payments for repurchase of common stock
    
    
    
    
    
    
    (395
    )Payment of dividends
    
    
    (10,843
    )
    
    
    (10,768
    )Net cash used in financing activities
    
    
    (10,614
    )
    
    
    (10,845
    )Net (decrease) increase in cash and cash equivalents
    
    
    (3,343
    )
    
    
    36,996Effect of exchange rate changes on cash
    
    
    (232
    )
    
    
    52Cash and cash equivalents at beginning of period
    
    
    32,906
    
    
    
    22,215Cash and cash equivalents at end of period
    
    $
    29,331
    
    
    $
    59,263Supplemental disclosure of cash flow informationCash paid for income taxes
    
    $
    4,199
    
    
    $
    7,578
 See accompanying notes to condensed consolidated financial statements (unaudited).
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ELECTRO RENT CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands, except per share amounts)
 Note 1: Basis of Presentation
    Foreign Currency
    ConsolidatedDerivatives Not Designated as
    
    Balance Sheet
    
    February 28,
    
    May 31,Hedging Instruments
    
    Location
    
    2011
    
    2010Foreign exchange forward contracts
    
    Other
    
    
    
    
    
    $
    176Foreign exchange forward contracts
    
    Accrued expenses
    
    $
    78
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
  Three Months
    
    Three MonthsLocation of (Loss) Gain
    
    Ended
    
    EndedDerivatives Not Designated as
    
    Recognized in Income on
    
    February 28,
    
    February 28,Hedging Instruments
    
    Derivatives
    
    2011
    
    2010Foreign exchange forward contracts
    
    Selling, general and administrative expenses
    
    $
    (250
    )
    
    $
    256Nine Months
    
    Nine MonthsLocation of (Loss) Gain
    
    Ended
    
    EndedDerivatives Not Designated as
    
    Recognized in Income on
    
    February 28,
    
    February 28,Hedging Instruments
    
    Derivatives
    
    2011
    
    2010Foreign exchange forward contracts
    
    Selling, general and administrative expenses
    
    $
    (420
    )
    
    
    $91
 Recent Accounting Pronouncements
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
  Note 2: Cash and Cash Equivalents and Investments
  Note 3: Fair Value Measurements
  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.
  At February 28, 2011Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableInstruments
    
    
    Inputs
    
    
    Inputs
    
    
    Total(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    BalanceAssets:Money market funds
    
    $
    20,017
    
    
    $
    
    
    
    $
    
    
    
    $
    20,017Supplemental executive retirement
plan
    
    
    2,650
    
    
    
    
    
    
    
    
    
    
    
    2,650Total assets measured at fair value
    
    $
    22,667
    
    
    $
    
    
    
    $
    
    
    
    $
    22,667Liabilities:Supplemental executive retirement
plan
    
    $
    2,650
    
    
    $
    
    
    
    $
    
    
    
    $
    2,650Foreign exchange forward contracts
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    78Total liabilities measured at fair
value
    
    $
    2,650
    
    
    $
    78
    
    
    $
    
    
    
    $
    2,728
 Page 9




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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
 At May 31, 2010Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableInstruments
    
    
    Inputs
    
    
    Inputs
    
    
    Total(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    BalanceAssets:Money market funds
    
    $
    27,802
    
    
    $
    
    
    
    $
    
    
    
    $
    27,802Auction rate securities
    
    
    
    
    
    
    
    
    
    
    13,323
    
    
    
    13,323Put option
    
    
    
    
    
    
    
    
    
    
    952
    
    
    
    952Supplemental executive retirement
plan
    
    
    2,081
    
    
    
    
    
    
    
    
    
    
    
    2,081Foreign exchange forward contracts
    
    
    
    
    
    
    176
    
    
    
    
    
    
    
    176Total assets measured at fair value
    
    $
    29,883
    
    
    $
    176
    
    
    $
    14,275
    
    
    $
    44,334Liabilities:Supplemental executive retirement
plan
    
    $
    2,081
    
    
    $
    
    
    
    $
    
    
    
    $
    2,081Total liabilities measured at fair
value
    
    $
    2,081
    
    
    $
    
    
    
    $
    
    
    
    $
    2,081
   Three Months Ended February 28,2011
    
    
    2010Auction Rate
    
    
    
    
    
    
    Auction RatePut Option
    
    
    Securities
    
    
    Put Option
    
    
    SecuritiesFair value at beginning of period
    
    $
    
    
    
    $
    
    
    
    $
    1,510
    
    
    $
    19,365Settlements (at par)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,100
    )Unrealized gains (losses) included in
interest income, net
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    57Fair value at end of period
    
    $
    
    
    
    $
    
    
    
    $
    1,453
    
    
    $
    18,322
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
 Nine Months Ended February 28,2011
    
    
    2010Auction Rate
    
    
    
    
    
    
    Auction RatePut Option
    
    
    Securities
    
    
    Put Option
    
    
    SecuritiesFair value at beginning of period
    
    $
    952
    
    
    $
    13,323
    
    
    $
    1,623
    
    
    $
    19,977Settlements (at par)
    
    
    
    
    
    
    (14,275
    )
    
    
    
    
    
    
    (1,825
    )Unrealized (losses) gains included in
interest income, net
    
    
    
    
    
    
    
    
    
    
    (170
    )
    
    
    170Realized (losses) gains included in
interest income, net
    
    
    (952
    )
    
    
    952
    
    
    
    
    
    
    
    Fair value at end of period
    
    $
    
    
    
    $
    
    
    
    $
    1,453
    
    
    $
    18,322
  Note 4: Acquisition
   Total cash consideration
    
    $
    24,653Preliminary purchase price allocation:Accounts receivable
    
    
    2,723Rental and lease equipment
    
    
    22,922Customer relationships acquired
    
    
    940Other
    
    
    34Accrued expenses
    
    
    (189
    )Deferred tax liability
    
    
    (481
    )Deferred revenue
    
    
    (617
    )Net assets acquired
    
    
    25,332Bargain purchase gain, net of estimated taxes of $481
    
    $
    (679
    )
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
       Three Months Ended
    
    
    Nine Months EndedFebruary 28, 2010
    
    
    February 28, 2010Revenues
    
    $
    37,644
    
    
    $
    116,180Net income
    
    
    1,842
    
    
    
    6,100Earnings per share:Basic
    
    $
    0.08
    
    
    $
    0.25Diluted
    
    $
    0.08
    
    
    $
    0.25
 Note 5: Equity Incentive Plan
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
 Stock Options
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    Term (inOptions
    
    
    Price
    
    
    years)Outstanding at May 31, 2010
    
    
    57
    
    
    $
    15.46Granted
    
    
    
    
    
    
    Exercised
    
    
    (17
    )
    
    
    11.92Forfeited/canceled
    
    
    (4
    )
    
    
    10.20Outstanding at February 28, 2011
    
    
    36
    
    
    $
    17.69
    
    
    
    0.62Vested and expected to vest at
February 28, 2011
    
    
    36
    
    
    $
    17.69
    
    
    
    0.62Vested and exercisable at February 28, 2011
    
    
    36
    
    
    $
    17.69
    
    
    
    0.62
  Restricted Stock Units
  Weighted AverageRestricted
    
    
    GrantStock
    
    
    DateUnits
    
    
    Fair ValueNonvested at May 31, 2010
    
    
    150
    
    
    $
    10.14Granted
    
    
    107
    
    
    
    12.58Vested
    
    
    (49
    )
    
    
    9.98Forfeited/canceled
    
    
    (2
    )
    
    
    13.73Nonvested at February 28, 2011
    
    
    206
    
    
    $
    11.40
  Accounting for Share Based Payments
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
    Note 6: Goodwill and Intangibles
    Balance as ofJune 1, 2010 (net
    
    
    
    
    
    
    Balance as ofof amortization)
    
    
    Amortization
    
    
    February 28, 2011Goodwill
    
    $
    3,109
    
    
    $
    
    
    
    $
    3,109Trade name
    
    
    411
    
    
    
    
    
    
    
    411Non-compete agreements
    
    
    66
    
    
    
    (66
    )
    
    
    Customer relationships
    
    
    921
    
    
    
    (89
    )
    
    
    832$
    4,507
    
    
    $
    (155
    )
    
    $
    4,352
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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
  February 28, 2011Estimated
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingUseful Life
    
    
    Amount
    
    
    Amortization
    
    
    AmountTrade name
    
    indefinite
    
    $
    411
    
    
    $
    
    
    
    $
    411Non-compete agreements
    
    2-5 years
    
    
    1,050
    
    
    
    (1,050
    )
    
    
    Customer relationships
    
    3-4 years
    
    
    1,954
    
    
    
    (1,122
    )
    
    
    832$
    3,415
    
    
    $
    (2,172
    )
    
    $
    1,243
 May 31, 2010Estimated
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingUseful Life
    
    
    Amount
    
    
    Amortization
    
    
    AmountTrade name
    
    indefinite
    
    $
    411
    
    
    $
    
    
    
    $
    411Non-compete agreements
    
    2-5 years
    
    
    1,050
    
    
    
    (984
    )
    
    
    66Customer relationships
    
    3-4 years
    
    
    1,954
    
    
    
    (1,033
    )
    
    
    921$
    3,415
    
    
    $
    (2,017
    )
    
    $
    1,398
   FutureYear ending May 31,
    
    Amortization2011 (remaining)
    
    $
    292012
    
    
    1182013
    
    
    1182014
    
    
    1182015
    
    
    118Thereafter
    
    
    331$
    832
 Note 7: Noncash Investing and Financing Activities
  Page 15




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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
 Note 8: Sales-Type Leases
  February 28,
    
    
    May 31,2011
    
    
    2010Gross minimum lease payments receivable
    
    $
    6,091
    
    
    $
    6,874Less  unearned interest
    
    
    (267
    )
    
    
    (355
    )Net investment in sales-type lease receivables
    
    $
    5,824
    
    
    $
    6,519
  Year ending May 31,2011 (remaining)
    
    $
    3,7512012
    
    
    2,0432013
    
    
    2882014
    
    
    9$
    6,091
 Note 9: Segment Reporting and Related Disclosures
    Page 16




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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
  T&M
    
    
    DP
    
    
    Total2011Rentals and leases
    
    $
    25,179
    
    
    $
    3,500
    
    
    $
    28,679Sales of equipment and other revenues
    
    
    30,335
    
    
    
    436
    
    
    
    30,771$
    55,514
    
    
    $
    3,936
    
    
    $
    59,4502010Rentals and leases
    
    $
    18,808
    
    
    $
    3,788
    
    
    $
    22,596Sales of equipment and other revenues
    
    
    9,857
    
    
    
    581
    
    
    
    10,438$
    28,665
    
    
    $
    4,369
    
    
    $
    33,034
  T&M
    
    
    DP
    
    
    Total2011Rentals and leases
    
    $
    74,402
    
    
    $
    12,737
    
    
    $
    87,139Sales of equipment and other revenues
    
    
    74,799
    
    
    
    1,614
    
    
    
    76,413$
    149,201
    
    
    $
    14,351
    
    
    $
    163,5522010Rentals and leases
    
    $
    55,630
    
    
    $
    12,042
    
    
    $
    67,672Sales of equipment and other revenues
    
    
    32,333
    
    
    
    1,807
    
    
    
    34,140$
    87,963
    
    
    $
    13,849
    
    
    $
    101,812
   Three Months Ended
    
    
    Nine Months EndedFebruary 28,
    
    
    February 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Revenues: (1)U.S.
    
    $
    51,952
    
    
    $
    27,812
    
    
    $
    143,951
    
    
    $
    86,318Other (2)
    
    
    7,498
    
    
    
    5,222
    
    
    
    19,601
    
    
    
    15,494Total
    
    $
    59,450
    
    
    $
    33,034
    
    
    $
    163,552
    
    
    $
    101,812
 As ofFebruary 28,
    
    
    May 31,2011
    
    
    2010Net Long-Lived Assets: (3)U.S.
    
    $
    184,356
    
    
    $
    166,533Other (2)
    
    
    29,471
    
    
    
    25,206Total
    
    $
    213,827
    
    
    $
    191,739
 
 (1)
    
    Revenues by country are based on the location of shipping destination, and not whether the
order originates in the United States parent or a foreign subsidiary.(2)
    
    Other consists of foreign countries that each individually account for less than 10% of the
total revenues or assets. Page 17




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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
 (3)
    
    Net long-lived assets include rental and lease equipment, other property, goodwill and
intangibles, net of accumulated depreciation and amortization.
 Note 10: Computation of Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedFebruary 28,
    
    
    February 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Denominator:Denominator for basic earnings per share 
weighted average common shares outstanding
    
    
    23,978
    
    
    
    23,930
    
    
    
    23,972
    
    
    
    23,926Effect of dilutive options and restricted
stock (1)
    
    
    120
    
    
    
    58
    
    
    
    86
    
    
    
    55Diluted shares used in per share calculation
    
    
    24,098
    
    
    
    23,988
    
    
    
    24,058
    
    
    
    23,981Net income
    
    $
    5,077
    
    
    $
    2,151
    
    
    $
    17,417
    
    
    $
    8,237Earnings per share:Basic
    
    $
    0.21
    
    
    $
    0.09
    
    
    $
    0.73
    
    
    $
    0.34Diluted
    
    $
    0.21
    
    
    $
    0.09
    
    
    $
    0.72
    
    
    $
    0.34
 
 (1)
    
    Excludes 36 options outstanding during both the three and nine months ended February 28,
2011, and 54 options outstanding during both the three and nine months ended February 28,
2010, for which the exercise price exceeded the average market price of our common stock
during that period. Note 11: Income Taxes
     Note 12: Commitments and Contingencies
   Page 18




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ELECTRO RENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
  Page 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
  Business
Combinations
     Page 20




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Profitability and Key Business Trends
  
    
    Net income per diluted common share (EPS);
    
    Net income as a percentage of average assets (annualized); and
    
    Net income as a percentage of average equity (annualized).
   2011
    
    2010Net income per diluted common share (EPS)
    
    $
    0.72
    
    
    $
    0.34Net income as a percentage of average assets (annualized)
    
    
    8.0
    %
    
    
    4.1
    %Net income as a percentage of average equity (annualized)
    
    
    10.1
    %
    
    
    4.9
    %
    Page 21




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##### Table of Contents



Three Months EndedFeb 28,
    
    Nov 30,
    
    Aug 31,
    
    May 31,
    
    Feb 28,2011
    
    2010
    
    2010
    
    2010
    
    2010Rentals and leases
    
    $
    28,679
    
    
    $
    29,673
    
    
    $
    28,787
    
    
    $
    26,529
    
    
    $
    22,596Sales of equipment and other revenues
    
    
    30,771
    
    
    
    23,604
    
    
    
    22,038
    
    
    
    17,526
    
    
    
    10,438Operating profit
    
    
    8,298
    
    
    
    9,606
    
    
    
    8,532
    
    
    
    5,269
    
    
    
    3,939
 Results of Operations
 Comparison of Three Months Ended February 28, 2011 and February 28, 2010
 Revenues
    Operating Expenses
    Interest Income, Net
  Page 22




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Income Tax Provision
  Comparison of Nine Months Ended February 28, 2011 and February 28, 2010
 Revenues
    Operating Expenses
    Interest Income, Net
  Page 23




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Income Tax Provision
  Liquidity and Capital Resources
 Capital Expenditures
  Share Repurchases and Dividends
   Cash and Cash Equivalents and Investments
   Cash Flows and Credit Facilities
  Page 24




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##### Table of Contents



Contractual Obligations
  Critical Accounting Policies and Estimates
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
  Page 25




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PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. (Removed and Reserved).
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibit No.
    
    Document Description
    
    Incorporation by Reference31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
    
    Filed herewith.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
    
    Filed herewith.32.1
    
    Section 1350 Certification by Chief Executive Officer
    
    Filed herewith.32.2
    
    Section 1350 Certification by Chief Financial Officer
    
    Filed herewith.
 Page 26




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SIGNATURES
  ELECTRO RENT CORPORATIONDate: April 5, 2011
    /s/ Craig R. JonesCraig R. JonesVice President and Chief Financial Officer
(Principal Financial and Accounting Officer and duly
authorized to sign this report on behalf of the
company) Page 27