<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
_______________
Date of Report (Date of earliest event reported):
February 29, 1996
ALRENCO, INC.
(Exact name of registrant as specified in its charter)
Indiana 0-27490 35-1480655
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1736 E. Main Street, New Albany, Indiana 47150
(Address of principal executive offices) (Zip Code)
(812) 949-3370
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
On February 29, 1996 (the "Closing Date"), pursuant to an Asset Purchase
Agreement of the same date (the "Agreement"), Alrenco, Inc. ("Alrenco"), in a
transaction that was effective on March 1, 1996 (the "Effective Date"), acquired
substantially all of the assets of Easy T.V. & Appliance Rental of Florida,
Inc., a Georgia corporation, Easy T.V. & Appliance Rental of Louisiana, Inc., a
Louisiana corporation, Easy T.V. & Appliance Rental of Alabama, Inc., an Alabama
corporation, and Easy Rental of Dallas, Inc., a Georgia corporation
(collectively "Easy Rental"). The following financial statements of Easy Rental
are filed as a part of this report:
Report of Independent Certified Public Accountants
Combined Balance Sheets as of December 31, 1995 and 1994
Combined Statements of Operations for the two years ended December 31, 1995
Combined Statement of Stockholder's Equity for the two years ended December 31,
1995
Combined Statements of Cash Flows for the two years ended December 31, 1995
Notes to Combined Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma financial statements relating to
the acquisition of Easy Rental are filed as a part of this report:
Pro Forma Condensed Balance Sheet as of December 31, 1995
Pro Forma Condensed Statement of Earnings for the year ended December 31, 1995
Notes to Pro Forma Condensed Financial Statements
2
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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 hereunto duly authorized.
Dated: May 14, 1996
ALRENCO, INC.
By: /s/ Theodore H. Wilson
-----------------------------------------
Theodore H. Wilson
Executive Vice President and
Chief Financial Officer
3
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Alrenco, Inc.
We have audited the accompanying combined balance sheets of Easy TV &
Appliance Rental Stores, Inc. as of December 31, 1995 and 1994, and the
related combined statements of operations, stockholder's equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Easy TV &
Appliance Rental Stores, Inc. as of December 31, 1995 and 1994 and the combined
results of their operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
April 29, 1996
4
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Easy TV & Appliance Rental Stores, Inc.
COMBINED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1995 1994
---------- ----------
<S> <C> <C>
Cash and cash equivalents $1,044,712 $ 951,185
Rental merchandise
On rent 1,797,895 1,646,304
Held for rent 421,729 386,170
---------- ----------
2,219,624 2,032,474
Property assets, net 600,218 466,372
Other assets 102,736 81,546
---------- ----------
$3,967,290 $3,531,577
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
LIABILITIES
Accounts payable - trade $ 324,603 $ 277,640
Accrued expenses and other liabilities 252,077 180,214
Debt to related parties 2,755,833 2,425,203
---------- ----------
3,332,513 2,883,057
EQUITY
Common stock
Easy TV & Appliance Rental of New Orleans, Inc., $1 par value
500 shares authorized, issued and outstanding 500 500
Easy TV & Appliance Rental of Mobile, Inc., $1 par value
1,000 shares authorized, issued and outstanding 1,000 1,000
Easy TV & Appliance Rental of Tampa, Inc., $1 par value
500 shares authorized, issued and outstanding 500 500
Easy TV & Appliance Rental of Miami, Inc., $1 par value
500 shares authorized, issued and outstanding 500 500
Easy Rental of Dallas, Inc., $1 par value
1,000 shares authorized, issued and outstanding 1,000 -
---------- ----------
3,500 2,500
Retained earnings 631,277 646,020
---------- ----------
634,777 648,520
---------- ----------
$3,967,290 $3,531,577
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
5
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Easy TV & Appliance Rental Stores, Inc.
COMBINED STATEMENTS OF OPERATIONS
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenues
Rental income and fees $9,865,336 $9,101,453
Costs and operating expenses
Direct store expenses
Depreciation of rental merchandise 2,658,989 2,379,161
Other 793,740 335,237
General and administrative expenses, including fees of
$982,163 and $898,009 to affiliated company in
1995 and 1994, respectively 6,337,383 5,817,576
---------- ----------
9,790,112 8,531,974
---------- ----------
Operating income 75,224 569,479
Other (income) expense
Interest expense 288,593 264,431
Other, net 50,874 (3,240)
---------- ----------
339,467 261,191
---------- ----------
NET EARNINGS (LOSS) $ (264,243) $ 308,288
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
6
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Easy TV & Appliance Rental Stores, Inc.
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common stock
------------------- Retained
Shares Amount earnings Total
------ ------ ---------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 2,500 $2,500 $ 118,232 $ 120,732
Accrued interest to stockholder forgiven - - 219,500 219,500
Net earnings - - 308,288 308,288
----- ----- ---------- ----------
Balance at December 31, 1994 2,500 2,500 646,020 648,520
Accrued interest to stockholder forgiven - - 249,500 249,500
Initial capitalization of Easy Rental of
Dallas, Inc. 1,000 1,000 - 1,000
Net loss - - (264,243) (264,243)
----- ----- ---------- ----------
Balance at December 31, 1995 3,500 $3,500 $ 631,277 $ 634,777
----- ----- ---------- ----------
----- ----- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
7
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Easy TV & Appliance Rental Stores, Inc.
COMBINED STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (264,243) $ 308,288
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation of rental merchandise 2,658,989 2,379,161
Depreciation of property assets 201,221 195,403
Amortization of intangible assets 326 -
Interest expense imputed on stockholder debt 249,500 219,500
Loss from disposal of property assets 50,874 -
Changes in operating assets and liabilities
Rental merchandise (2,846,140) (2,812,436)
Other assets (12,290) 47,139
Accounts payable, trade 46,963 (749,873)
Accrued expenses and other liabilities 71,863 113,279
------------ ------------
Net cash provided by (used in) operating activities 157,063 (299,539)
Cash flows from investing activities
Purchase of property assets (404,869) (145,219)
Proceeds from sale of property assets 9,703 10,960
------------ ------------
Net cash used in investing activities (395,166) (134,259)
Cash flows from financing activities
Proceeds from issuance of debt 583,159 106,124
Retirement of debt (252,529) (233,554)
Issuance of common stock 1,000 -
------------ ------------
Net cash provided by (used in) financing activities 331,630 (127,430)
------------ ------------
Increase (decrease) in cash and cash equivalents 93,527 (561,228)
Cash and cash equivalents, beginning of year 951,185 1,512,413
------------ ------------
Cash and cash equivalents, end of year $ 1,044,712 $ 951,185
------------ ------------
------------ ------------
Supplemental cash flow information
Cash paid during the year for
Interest $ 27,235 $ 33,544
Income taxes - -
Noncash investing and financing activities
Accrued interest due to stockholder forgiven $ 249,500 $ 219,500
</TABLE>
The accompanying notes are an integral part of these statements.
8
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Easy TV & Appliance Rental Stores, Inc.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying combined financial statements follows.
1. BASIS OF PRESENTATION
The accompanying combined financial statements include Easy TV & Appliance
Rental of New Orleans, Inc., Easy TV & Appliance Rental of Mobile, Inc., Easy
TV & Appliance Rental of Tampa, Inc., Easy TV & Appliance Rental of Miami,
Inc. and Easy Rental of Dallas, Inc., all of which are under common ownership
(collectively, the "Company").
All significant intercompany accounts and transactions have been eliminated.
2. NATURE OF OPERATIONS
The Company leases household durable merchandise to customers under rental-
purchase agreements. At December 31, 1995, the Company operated 14 stores in
4 states.
3. RENTAL MERCHANDISE
Rental merchandise is recorded at cost. Depreciation is provided using the
straight-line method over the Company's estimate of the useful life of its
rental merchandise, generally 18 months.
4. RENTAL REVENUE
Merchandise is rented to customers pursuant to rental purchase agreement which
provide for weekly or monthly rental terms with nonrefundable rental payments.
Generally, the customer has the right to acquire title either through a
purchase option or through payment of all required rentals. Rental revenue is
recognized over the rental term. No revenue is accrued because the customer
can cancel the rental contract at any time and the Company cannot enforce
collection for nonpayment of rents.
5. PROPERTY ASSETS AND RELATED DEPRECIATION
Furniture, fixtures, equipment and vehicles are recorded at cost. Depreciation
is computed on the straight-line method for financial statement purposes based
on the estimated useful lives as listed below. Leasehold improvements are
amortized over the lesser of the property life or lease term.
<TABLE>
<S> <C>
Vehicles 3 to 5 years
Furniture, fixtures and equipment 5 to 7 years
Leasehold improvements 5 to 31 years
</TABLE>
9
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Easy TV & Appliance Rental Stores, Inc.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
6. INCOME TAXES
Income taxes on net earnings are payable personally by the stockholder
pursuant to an election under Subchapter S of the Internal Revenue Code not to
have the company taxed as a corporation. As a result of the election, no
provision has been made for income taxes.
7. CASH EQUIVALENTS
For purposes of reporting cash flows, cash equivalents include all highly
liquid investments with an original maturity of three months or less.
8. USE OF ESTIMATES
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.
9. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of (1) cash and cash equivalents
and accounts payable whose carrying value approximates fair value at December
31, 1995 and (2) debt. The carrying value of the Company's debt exceeds its
fair value at December 31, 1995 by approximately $280,000 based upon an
assumed maturity date of December 31, 1996.
NOTE B - RENTAL MERCHANDISE
Cost and accumulated depreciation of rental merchandise are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
On rent
Cost $ 3,549,507 $ 3,457,021
Less accumulated depreciation (1,751,612) (1,810,717)
----------- -----------
$ 1,797,895 $ 1,646,304
----------- -----------
----------- -----------
Held for rent
Cost $ 832,600 $ 810,906
Less accumulated depreciation (410,871) (424,736)
----------- -----------
$ 421,729 $ 386,170
----------- -----------
----------- -----------
</TABLE>
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Easy TV & Appliance Rental Stores, Inc.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE C - PROPERTY ASSETS
Property assets consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Vehicles $ 869,834 $ 696,813
Furniture, fixture and equipment 433,437 357,322
Leasehold improvements 131,121 237,082
----------- -----------
1,434,392 1,291,217
Less accumulated depreciation (834,174) (824,845)
----------- -----------
$ 600,218 $ 466,372
----------- -----------
----------- -----------
</TABLE>
NOTE D - RELATED PARTY MATTERS
Debt with related parties was comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Notes payable with the Company's stockholder due on demand
and noninterest-bearing; interest has been imputed at 10% $2,595,000 $2,195,000
Notes payable with affiliated company due in monthly installments
of principal ranging from $591 to $2,949 plus interest through
December 1997, bearing interest at 12% 160,833 230,203
---------- ----------
$2,755,833 $2,425,203
---------- ----------
---------- ----------
</TABLE>
Administrative fees totaling $982,163 and $898,009 for the years ended
December 31, 1995 and 1994, respectively, were paid to an affiliated
company. In addition, the Company paid rent of $95,316 for 1995 and 1994
to its stockholder under month-to-month operating leases.
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Easy TV & Appliance Rental Stores, Inc.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE E - LEASE COMMITMENTS
The Company leases its store facilities. Future minimum rental payments under
operating leases with remaining noncancelable lease terms in excess of one
year at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $285,914
1997 228,926
1998 218,747
1999 161,071
2000 91,356
Thereafter 4,688
--------
$990,702
--------
--------
</TABLE>
Rental expense was $382,825 and $328,428 for years ended December 31, 1995 and
1994, respectively.
NOTE F - RETIREMENT PLAN
The Company maintains a 401(k) plan (the "Plan") for all eligible employees.
The Company, at its discretion, may match up to 6% of employee contributions
to the Plan up to designated limits. Company contributions for the years ended
December 31, 1995 and 1994 totaled $35,303 and $14,242, respectively.
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<PAGE>
Alrenco, Inc.
Pro Forma Condensed Financial Statements
The accompanying unaudited pro forma condensed balance sheet and pro forma
statement of earnings have been derived from the Company's balance sheet at
December 31, 1995 and the statement of earnings for the year ended December 31,
1995, and the combined balance sheet of Easy TV & Appliance Rental Stores, Inc.
(Easy) and combined statement of operations for the year ended December 31,
1995. These statements give effect to the acquisition of Easy as though it had
occurred on January 1, 1995.
The unaudited pro forma condensed statement of earnings is presented for
informational purposes only and do not purport to be indicative of the operating
results that actually would have occurred if the acquisition had been
consummated as of January 1, 1995, nor which may result from future operations.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The acquisition has been
accounted for using the purchase method of accounting. These pro forma
financial statements should be read in conjunction with the historical financial
statements and related notes of the Company included in the Form 10-K for the
year ended December 31, 1995.
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Alrenco, Inc.
Pro Forma Condensed Balance Sheet
December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Company Easy Adjustments Pro forma
----------- ---------- ----------- -----------
(1)
<S> <C> <C> <C> <C>
ASSETS
Cash $ 27,041 $1,044,712 $(1,044,712) $ 27,041
Rental merchandise 13,115,368 2,219,624 (74,034) 15,260,958
Property assets 1,402,409 600,218 78,582 2,081,209
Intangible assets 4,868,590 - 3,675,610 8,544,200
Other assets 1,563,842 102,736 (102,736) 1,563,842
----------- ---------- ----------- -----------
$20,977,250 $3,967,290 $ 2,532,710 $27,477,250
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable - trade $ 1,763,272 $ 324,603 $ (324,603) $ 1,763,272
Accrued liabilities 1,542,621 252,077 (252,077) 1,542,621
Taxes other than income 330,530 - - 330,530
Debt 12,865,239 2,755,833 3,744,167 19,365,239
----------- ---------- ----------- -----------
16,501,662 3,332,513 3,167,487 23,001,662
Stockholders' equity 4,475,588 634,777 (634,777) 4,475,588
----------- ---------- ----------- -----------
$20,977,250 $3,967,290 $ 2,532,710 $27,477,250
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
See Notes to pro forma financial statements.
14
<PAGE>
Alrenco, Inc.
Pro Forma Condensed Statement of Earnings
Year ended December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Company Easy Adjustments Pro forma
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $37,575,639 $9,865,336 $ - $47,440,975
Operating expenses
Direct store expenses 30,023,179 3,452,729 - 33,475,908
General and administrative expenses 4,338,583 6,337,383 - 10,675,966
Amortization of intangibles 284,901 - 333,781 (2) 618,682
----------- ---------- --------- -----------
Total operating expenses 34,646,663 9,790,112 333,781 44,770,556
----------- ---------- --------- -----------
Operating profit 2,928,976 75,224 (333,781) 2,670,419
Interest expense 894,003 288,593 296,407 (3) 1,479,003
Other, net (99,930) 50,874 - (49,056)
----------- ---------- --------- -----------
Earnings (loss) before
income taxes 2,134,903 (264,243) (630,188) 1,240,472
Income tax (expense) benefit (868,311) - 363,811 (4) (504,500)
----------- ---------- --------- -----------
NET EARNINGS (LOSS) $ 1,266,592 $ (264,243) $ (266,377) $ 735,972
----------- ---------- --------- -----------
----------- ---------- --------- -----------
Earnings per share $.41 $.24
---- ----
---- ----
</TABLE>
15
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Alrenco, Inc.
Notes to Pro Forma Condensed Financial Statements
(unaudited)
(1) Gives effect to the consummation of the Easy acquisition by the Company.
The consideration for Easy consists of $6.5 million cash which was financed
by debt. These adjustments allocate the purchase price to assets acquired
which consists of rental merchandise and certain property assets.
(2) Amortization of amounts assigned to customer rental agreements over 15
months, noncompete agreements over 5 years and goodwill over 20 years.
(3) Adjustment to interest expense for debt of the Company incurred in
connection with the acquisition.
(4) Tax effects of the loss of Easy and the pro forma adjustments.
16
