<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-KA
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OCTOBER 7, 1996 (JULY 25, 1996)
-------------------------------
Date of Report (Date of earliest event reported)
RENT-WAY, INC.
--------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 000-22026 25-1407782
------------ --------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of corporation) Identification No.)
3230 WEST LAKE ROAD, ERIE, PENNSYLVANIA 16505
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814) 836-0618
<PAGE> 2
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 25, 1996, Rent-Way, Inc. (the "Company") acquired all of the
outstanding shares of Diamond Leasing Corporation ("Diamond") for consideration
consisting of 20,538 shares of the Company's Common Stock and $4,375,741 in
cash. Prior to the acquisition, Diamond was wholly owned by Kenneth H. Moye and
Lee Brady. The amount and form of consideration paid to such persons for the
stock of Diamond was determined through arms length negotiations. Pursuant to
the terms of the acquisition, $325,000 of the purchase price was placed in
escrow and held subject to the terms on the escrow agreement. The escrow
agreement provides for $175,000 to be held pending completion of an audit of
Diamond's financial statements and $150,000 to be held for a period of three
years after the closing date. The cash paid in the acquisition was drawn
against the Company's existing line of credit with First Source Financial LLP.
Diamond operates a chain of 11 rental-purchase stores located in Delaware,
Maryland and Pennsylvania. Annual revenues for Diamond are approximately $7.0
million
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
a. Financial statements of business acquired.
Audited Financial Statements of Diamond Leasing Corporation
Report of Independent Accountants 5
Balance Sheets - June 30, 1996 and 1995 6
Statements of Income - Years Ended
June 30, 1996 and 1995 7
Statement of Stockholders' Equity - Years
Ended June 30, 1996 and 1995 8
Statements of Cash Flows - Years Ended
June 30, 1996 and 1995 9
Notes to Financial Statements 10
b. Pro Forma Financial Information.
Rent-Way, Inc. and Diamond Leasing Corporation
Pro Forma Information
Unaudited Pro Forma Consolidated Balance Sheet - June 30, 1996 15
Notes to Unaudited Pro Forma Consolidated Balance Sheet 16
Unaudited Pro Forma Consolidated Statements of Income -
For the Year Ended September 30, 1995 17
Unaudited Pro Forma Consolidated Statements of Income -
For the Nine Months Ended June 30, 1996 18
Notes to Unaudited Pro Forma Consolidated Statements of Income 19
</TABLE>
2
<PAGE> 3
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
c. Exhibits in Accordance with the Provisions of Item 601 of
Regulation S-B:
Exhibit
(2)-5 Stock Purchase Agreement between Rent-Way, Inc., Diamond Leasing
Corporation, Kenneth H. Moye and Lee Brady dated July 20, 1996*
(2)-6 Closing Letter Agreement. Amendment to the Stock Purchase
Agreement between Rent-Way, Inc. Diamond Leasing Corporation,
Kenneth H. Moye and Lee Brady dated July 20, 1996*
*Previously filed
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.
RENT-WAY, INC.
----------------------------------
(Registrant)
Date October 7, 1996 /s/ JEFFREY A. CONWAY
----------------------------- ----------------------------------
(Signature)
JEFFREY A. CONWAY
CHIEF FINANCIAL OFFICER
3
<PAGE> 4
DIAMOND LEASING CORPORATION
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
4
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants .......................................... 1
Financial Statements:
Balance Sheets ........................................................ 2
Statements of Operations .............................................. 3
Statements of Shareholders' Equity .................................... 4
Statements of Cash Flows .............................................. 5
Notes to Financial Statements ......................................... 6-10
</TABLE>
DIAMOND LEASING CORPORATION
5
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Diamond Leasing Corporation
We have audited the accompanying balance sheets of Diamond Leasing Corporation
as of June 30, 1996 and 1995, and the related statements of operations,
shareholders' 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 financial position of Diamond Leasing Corporation as
of June 30, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
September 6, 1996
6
<PAGE> 7
BALANCE SHEETS
June 30, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
---------- ----------
<S> <C> <C>
Cash $ 81,292 $ 70,641
Prepaid expenses 29,457 40,479
Income taxes receivable -- 9,055
Rental merchandise, net of accumulated depreciation
totaling $1,938,504 and $1,717,542, respectively 1,726,162 1,805,406
Equipment and leasehold improvements, net 627,273 681,751
Deferred tax asset 131,434 3,534
Other assets 55,145 49,503
---------- ----------
Total assets $2,650,763 $2,660,369
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Book overdraft $ 40,872 $ 62,498
Accounts payable 433,244 243,722
Accrued payroll 228,991 289,542
Income taxes payable 77,300 --
Debt 1,468,026 1,530,379
Other liabilities 43,973 38,897
---------- ----------
Total liabilities 2,292,406 2,165,038
Shareholders' equity:
Common stock, $1 par value, 1,000,000
shares authorized, 1,000 issued and outstanding 1,000 1,000
Retained earnings 357,357 494,331
---------- ----------
Total shareholders' equity 358,357 495,331
---------- ----------
Total liabilities and shareholders' equity $2,650,763 $2,660,369
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
DIAMOND LEASING CORPORATION 7
<PAGE> 8
STATEMENTS OF OPERATIONS
for the years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Rental revenue $6,154,659 $5,690,121
Other revenue 1,069,885 950,299
---------- ----------
Total revenues 7,224,544 6,640,420
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise 2,042,073 1,847,883
Property and equipment 198,498 217,856
Salaries and wages 2,806,111 2,657,996
Advertising 222,536 200,290
Occupancy 475,535 394,725
Other operating expenses 1,478,510 1,153,187
---------- ----------
Total costs and operating expenses 7,223,263 6,471,937
Operating income 1,281 168,483
Other income (expense):
Interest expense (220,884) (183,930)
Interest income 775 --
Other income, net 17,050 26,824
---------- ----------
(Loss) income before income taxes (201,778) 11,377
Income tax (benefits) expense:
Current 63,096 1,241
Deferred (127,900) 6,066
---------- ----------
(64,804) 7,307
---------- ----------
Net (loss) income $ (136,974) $ 4,070
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
DIAMOND LEASING CORPORATION 8
<PAGE> 9
STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Total
------------------- Retained Shareholders'
Shares Amount Earnings Equity
------ ------ --------- -------------
<S> <C> <C> <C> <C>
Balance at July 1, 1994 1,000 $1,000 $ 490,261 $ 491,261
Net income -- -- 4,070 4,070
------ ------ --------- ---------
Balance at June 30, 1995 1,000 1,000 494,331 495,331
Net (loss) -- -- (136,974) (136,974)
------ ------ --------- ---------
Balance at June 30, 1996 1,000 $1,000 $ 357,357 $ 358,357
====== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
DIAMOND LEASING CORPORATION 9
<PAGE> 10
STATEMENTS OF CASH FLOWS
for the years ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net (loss) income $ (136,974) $ 4,070
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 2,655,863 2,387,274
Deferred income taxes (127,900) 6,066
Changes in assets and liabilities:
Rental merchandise (2,375,021) (2,380,885)
Prepaid expenses 11,022 11,663
Income taxes receivable 9,055 (9,055)
Other assets (5,642) (20,288)
Accounts payable 189,522 (204,881)
Accrued payroll (60,551) 140,747
Income taxes payable 77,300 (59,255)
Other liabilities 5,075 34,713
----------- -----------
Net cash provided by (used in) operating activities 241,749 (89,831)
----------- -----------
Investing activities:
Purchases of equipment (147,120) (463,364)
----------- -----------
Net cash used in investing activities (147,120) (463,364)
----------- -----------
Financing activities:
(Payment on) proceeds from book overdraft (21,626) 62,498
Proceeds from borrowings 359,695 789,764
Payments on borrowings (438,201) (274,843)
Proceeds from loan from related party 124,000 90,000
Payments on loan from related party (107,846) (85,174)
----------- -----------
Net cash (used in) provided by financing activities (83,978) 582,245
----------- -----------
Increase in cash 10,651 29,050
Cash at beginning of year 70,641 41,591
----------- -----------
Cash at end of year $ 81,292 $ 70,641
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 227,300 $ 168,800
Income taxes (received) paid , net $ (61,845) $ 69,579
</TABLE>
The accompanying notes are an integral part of these financial statements.
DIAMOND LEASING CORPORATION 10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies and practices followed by the Diamond
Leasing Corporation (the "Company") are as follows:
DESCRIPTION OF BUSINESS: The Company operates a chain of 11 rental-purchase
stores in Pennsylvania, Delaware and Maryland that rent durable household
products such as home entertainment, furniture, major appliances, and
jewelry to consumers on a weekly, bi-weekly, semi-monthly, or monthly
basis.
CASH: The Company maintains at various financial institutions cash accounts
which periodically may exceed federally insured amounts.
RENTAL MERCHANDISE, RELATED RENTAL AND OTHER REVENUE AND DEPRECIATION:
Rental merchandise is rented to customers pursuant to rental agreements
with maximum terms from fifteen to eighteen months which provide for either
weekly, bi-weekly, semi-monthly, or monthly payments collected in advance.
The rental arrangement may be terminated at any time by the customers and
if terminated, the rental merchandise is returned to the Company. Rental
revenue is recognized when collected, since at the time of collection of
the rental, merchandise has been placed in service and costs of
installation and delivery have been incurred. This method of revenue
recognition does not produce materially different results than if rental
revenue was recognized over the agreed upon rental period. At the end of
each rental period, the customers can renew the rental agreement, return
the merchandise with no obligation or purchase the merchandise through a
variety of purchase options, except in Pennsylvania (where customers may
purchase the product at any time at a price negotiated between the customer
and the Company). Amounts from such sales are included in other revenue.
Merchandise rented to customers or available for rent is depreciated on a
straight-line basis over fifteen or eighteen months.
Merchandise rented to customers or available for rent is classified in the
balance sheet as rental merchandise and is valued at cost and depreciated
commencing with the initial rental date by the straight-line method.
Write-offs of rental merchandise arising from customers' failure to return
merchandise and losses due to excessive wear and tear of merchandise are
recognized using the direct write-off method, which is materially
consistent with the results that would be recognized under the allowance
method.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Equipment and leasehold improvements
are stated at cost. Expenditures for repairs and maintenance are charged to
expense as incurred and additions and improvements that significantly
extend the lives of depreciable assets are capitalized. Upon sale or other
retirement of depreciable property, the cost and accumulated depreciation
are removed from the related accounts and any gain or loss is reflected in
operations.
Depreciation is provided on the straight-line and accelerated methods based
on the estimated useful lives of the depreciable assets.
DIAMOND LEASING CORPORATION 11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES: Income taxes are computed under the liability method
whereby deferred income taxes, if significant, are recognized to reflect
the tax consequences on future years attributed to temporary differences
between the financial statement and tax basis of assets and liabilities
and for carryforward items. At June 30, 1996 and 1995, primary
components of deferred taxes were related to rental merchandise and
equipment. The measurement of current and deferred tax assets and
liabilities is based on enacted tax laws. Deferred tax assets are
reduced, if necessary, by a valuation allowance for the amount of tax
benefits that may not be realized.
BALANCE SHEET PRESENTATION: The Company presents an unclassified balance
sheet since its operating cycle exceeds a one year period which is
consistent with industry practice.
CASH EQUIVALENTS: For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months of less to be cash equivalents.
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 amounts reported in the
financial statements and accompanying notes. Actual results may differ
from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Management has determined that the
carrying amount of financial instruments (Note 3), as reported on the
balance sheet, approximates fair value.
2. EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Leasehold improvements $ 447,921 $ 376,288
Vehicles 744,897 729,624
Store and office equipment 258,475 237,081
---------- ----------
1,451,293 1,342,993
Less accumulated depreciation and amortization 824,020 661,242
---------- ----------
$ 627,273 $ 681,751
========== ==========
</TABLE>
Depreciation and amortization expense totaled $201,598 and $222,942 for
the years ended June 30, 1996 and 1995.
DIAMOND LEASING CORPORATION 12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Note payable -related party is a demand note from the principal
shareholder, collateralized by the Company's stock.
Principle payments are made based on excess cash flows
of the Company and are not reflective of an established
payment schedule. Interest accrues at 15% per annum at
June 30, 1996 and 1995 $ 273,445 $ 257,291
Note payable to financial institution-demand note for
$165,000 collateralized by various vehicles. The principal
and interest is payable in monthly installments of $6,302
and matures in October 1996. Interest is payable monthly
at a fixed rate of 8% per annum at June 30, 1996 15,212 84,011
Note payable to financial institution-term note for $750,000
collateralized by a first lien on real estate, rental
equipment, equipment, accounts receivable, assignment
of life insurance and the guarantee of the shareholder.
The principal is payable in 60 consecutive equal monthly
installments of $12,500 and matures February 19, 1998.
Interest is payable monthly at the low New York prime rate
(base rate 10.25% and 11% at June 30, 1996 and 1995, respectively) 250,000 400,000
Note payable to financial institution-term note for $750,000
collateralized by rental equipment, accounts receivable,
furniture and fixtures and the guarantee of the shareholder.
The principal and interest are payable in 60 consecutive
equal monthly installments of $15,894 and matures October 1,
2000. Interest is payable monthly at the financial institution's
published base rate plus 1.75 %, (base rate 10% at June 30, 1996).
This note replaced a $250,000 and a $200,000 note with the same
financial institution that were outstanding at June 30, 1995.
For the $250,000 term note interest was payable monthly at the
financial institution's interest rate plus 2% (base rate 11% at
June 30, 1995). For the $200,000 term note, interest was payable
monthly at the financial institution's interest rate plus 1.75%
(base rate 10.75% at June 30, 1995) 658,101 450,000
Various vehicle notes-payable in monthly installments
ranging from $563 to $763, including interest ranging from
8.59% to 11.32% payable through 1999 271,268 338,365
Other - 712
---------- ----------
$1,468,026 $1,530,379
========== ==========
</TABLE>
DIAMOND LEASING CORPORATION 13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. DEBT, CONTINUED:
At June 30, 1996 aggregate annual maturities of debt for the
next five fiscal years and thereafter are as follows:
1997 $ 828,024
1998 240,389
1999 187,018
2000 176,341
2001 and thereafter 36,254
----------
Total $1,468,026
==========
Interest expense totaled $220,884 and $183,930 for the years ended June
30, 1996 and 1995. Subsequent to June 30, 1996, certain portions of the
financing obligations were refinanced (see Note 8).
4. LEASES:
The Company leases certain real estate and vehicles under noncancelable
operating leases. Most of the store leases require the payment of taxes,
insurance, and maintenance costs by the Company.
Future minimum lease payments under leases with initial or remaining
noncancelable lease terms in excess of one year as of June 30, 1996 are
as follows:
1997 $ 335,391
1998 305,070
1999 205,505
2000 89,924
2001 and thereafter 8,491
---------
Total minimum lease payments $ 944,381
=========
Rental expense for operating leases totaled $354,144 and $293,796 for
the years ended June 30, 1996 and 1995.
5. RELATED PARTY TRANSACTIONS:
The Company maintains a related party loan from the principal
shareholder of $273,445 and $257,291 at June 30, 1996 and 1995,
respectively. Interest accrues at 15% per annum and is paid periodically
throughout the year. Interest incurred during the years ended June 30,
1996 and 1995 amounted to $48,443 and $47,167, respectively.
DIAMOND LEASING CORPORATION 14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. RELATED PARTY TRANSACTIONS, CONTINUED:
The principal shareholder has an agreement with the Company whereby the
shareholder is paid a fee equal to 4% per annum of the outstanding loans
personally guaranteed for the benefit of the Company. During the years
ended June 30, 1996 and 1995, $40,588 and $33,120 were paid for loan
guarantee fees.
A related party note receivable of $3,673 was written-off by the Company
in June 1996. This balance was originally recorded as a receivable under
employee advances and subsequently written-off as an employee bonus.
6. COMMITMENTS AND CONTINGENCIES:
The Company is subject to commitments, legal proceedings and claims,
which arise in the ordinary course of business. In management's opinion,
the amount of ultimate liability from such matters will not materially
affect the financial position or operating results of the Company.
7. SUBSEQUENT EVENTS:
Effective July 25, 1996, the Company was merged with Rent-Way, Inc.
under the provisions of an Agreement and Plan of Merger dated July 25,
1996. Concurrent with the merger, several portions of the financing
disclosed in Note 3 were paid in full. Included in this transaction were
the notes payable to a financial institution including the term note for
$658,101, term note for $250,000 and demand note for $7,576 plus accrued
interest.
Subsequent to June 30, 1996, and pursuant to a stock option agreement
between the principle shareholder and senior management dated July 25,
1996, management purchased 25% of the outstanding shares of the Company
at a price of $.01 per share.
DIAMOND LEASING CORPORATION 15
<PAGE> 16
RENT-WAY, INC. FORM 8-KA
- -------------------------------------------------------------------------------
OCTOBER 7, 1996
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1996
(UNAUDITED)
-----------------------------------------------------------------------
AS REPORTED DIAMOND PRO FORMA PRO FORMA
RENT-WAY, INC. LEASING, INC. ADJUSTMENTS CONSOLIDATED
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 1,288,224 $ 81,292 $ 1,369,516
Prepaid expenses 881,680 29,457 911,137
Rental merchandise, net 15,845,884 1,726,162 $ (200,000) (a) 17,372,046
Deferred income taxes 1,430,204 131,434 1,561,638
Proprety and equipment, net 3,918,403 627,273 (50,000) (a) 4,495,676
Goodwill, net 16,294,461 4,629,884 (b) 20,924,345
Deferred financing costs, net 411,445 411,445
Prepaid consulting fee 1,086,309 1,086,309
Other assets 728,558 55,145 200,000 (b) 983,703
----------- ---------- ---------- -----------
$41,885,168 $2,650,763 $4,579,884 $49,115,815
=========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 1,989,941 $ 433,244 $ 2,423,185
Other liabilities 1,186,170 313,836 (7,576) (c) 1,492,430
Income taxes payable 1,377,287 77,300 1,454,587
Debt 7,145,603 1,468,026 5,666,418 (c) 13,371,946
(908,101) (c)
----------- ---------- ---------- -----------
11,699,001 2,292,406 4,750,741 18,742,148
Redeemable preferred stock 1,120,700 1,120,700
Common stock 27,150,043 1,000 187,500 (a) 27,337,543
(1,000) (a)
Retained earnings 1,915,424 357,357 (357,357) (a) 1,915,424
----------- ---------- ---------- -----------
Total shareholders' equity 29,065,467 358,357 (170,857) 29,252,967
----------- ---------- ---------- -----------
$41,885,168 $2,650,763 $4,579,884 $49,115,815
=========== ========== ========== ===========
</TABLE>
*See the Notes to the Unaudited Pro Forma Consolidated Balance Sheet
16
<PAGE> 17
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated balance sheet has been prepared
assuming the acquisition of Diamond Leasing Corporation ("DLC") was
consummated on June 30, 1996. The acquisition has been accounted for as a
purchase in accordance with the provisions of the Accounting Principles
Board Opinion No. 16, and accordingly, the purchase price has been allocated
to the net assets acquired based on historical information available to
management and preliminary estimates of fair market value.
2. PRO FORMA ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The excess purchase price over the fair value of the net assets
of DLC was calculated as follows:
Purchase price:
Common Stock ($9.21) $ 187,500
Cash 4,375,741
Other acquisition and closing costs 375,000
----------
Total purchase price 4,938,241
DLC net assets as reported (358,357)
Plus fair value adjustments:
Adjustment to record rental
merchandise at fair value 200,000
Adjustment to record property
and equipment at fair value 50,000
----------
Excess purchase price over fair value
of the net assets of DLC $4,829,884
==========
(b) The excess purchase price over the fair market value of the net
assets of DLC was allocated to assets and liabilities based on
historical information and preliminary estimates of fair value. The
final purchase price allocation is subject to refinement upon
completion of a review of rental merchandise, property and equipment,
intangibles and certain accrued liabilities. The excess of purchase
price over the fair value of DLC's net assets of $4,829,884 was
allocated to consulting/non-compete agreements and goodwill as
follows:
Consulting/Non-compete $ 200,000
Goodwill 4,629,884
Excess purchase price over the fair ----------
value of net assets of DLC $4,829,884
==========
(c) The pro forma consolidated balance sheet has been prepared assuming
$5,666,418 in borrowings under Rent-Way's financing agreement.
Such borrowings were used to pay off certain DLC debt, pay for the
acquisition and other related acquisition costs. The borrowings from
Rent-Way's financing agreement were used as follows:
Cash payment $4,375,741
Payment of DLC acquisition and
closing costs 375,000
----------
Borrowings under Rent-Way's
financing agreement 4,750,741
----------
Total refinancing of certain DLC debt 915,677
----------
Total borrowings under Rent-Way's
financing agreement $5,666,418
==========
17
<PAGE> 18
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL 1995
(unaudited)
------------------------------------------------------------------------------
AS REPORTED DIAMOND
SEPT. 30, 1995 LEASING, INC. PRO FORMA PRO FORMA
RENT-WAY, INC. JUNE 30, 1995 ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenue $24,080,270 $5,690,121 $ $ 29,770,391
Other revenue 4,114,153 950,299 5,064,452
----------- ---------- ---------- ------------
Total revenue 28,194,423 6,640,420 34,834,843
COSTS AND OPERATING EXPENSES:
Depreciation and amortization
Rental merchandise 8,312,014 1,847,883 10,159,897
Property and equipment 525,060 217,856 742,916
Amortization of goodwill 334,003 231,494 (a) 565,497
Salaries and wages 6,908,648 2,657,996 (207,800) (b) 9,358,844
Advertising 1,259,514 200,290 1,459,804
Occupancy 1,887,870 394,725 2,282,595
Other operating expenses 6,387,333 1,153,187 66,880 (c) 7,607,400
----------- ---------- ---------- ------------
Total costs and operating expenses 25,614,442 6,471,937 90,574 32,176,953
----------- ---------- ---------- ------------
Operating income 2,579,981 168,483 (90,574) 2,657,890
OTHER INCOME (EXPENSE):
Interest expense (1,178,613) (183,930) (267,390) (d) (1,629,933)
Interest income 66,277 66,277
Other income (expense), net (13,435) 26,824 13,389
----------- ---------- ---------- ------------
Income before income taxes 1,454,210 11,377 (357,964) 1,107,623
Income tax expense 445,440 7,307 (21,882) (e) 430,865
----------- ---------- ---------- ------------
Net income $ 1,008,770 $ 4,070 $ (336,082) $ 676,758
=========== ========== ========== ============
Preferred stock dividend 37,973 37,973
----------- ------------
Earnings applicable to
common shares $ 970,797 $ 638,785
=========== ============
EARNINGS PER COMMON SHARE:
Primary $ 0.22 $ 0.15
=========== ============
Fully diluted $ 0.22 $ 0.14
=========== ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Primary 4,400,066 4,420,424
=========== ============
Fully diluted 4,500,287 4,520,645
=========== ============
</TABLE>
See the accompanying Notes to the Unaudited Pro Forma
Consolidated Statements of Income.
18
<PAGE> 19
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
FISCAL 1996
(unaudited)
------------------------------------------------------------------------------
AS REPORTED DIAMOND
JUNE 30, 1996 LEASING, INC. PRO FORMA PRO FORMA
RENT-WAY, INC. MARCH 31, 1996 ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenue $31,602,369 $4,654,416 $ $36,256,785
Other revenue 5,134,150 818,578 5,952,728
----------- ---------- ---------- -----------
Total revenue 36,736,519 5,472,994 42,209,513
COSTS AND OPERATING EXPENSES:
Depreciation and amortization
Rental merchandise 9,763,900 1,971,917 11,735,817
Property and equipment 557,456 557,456
Amortization of goodwill 632,808 173,621 (a) 806,429
Salaries and wages 9,160,570 1,611,588 (156,000) (b) 10,616,158
Advertising 1,481,652 169,202 1,650,854
Occupancy 2,385,564 273,478 2,659,042
Other operating expenses 8,031,365 1,264,969 44,559 (c) 9,340,893
----------- ---------- --------- -----------
Total costs and operating expenses 32,013,315 5,291,154 62,180 37,366,649
----------- ---------- --------- -----------
Operating income 4,723,204 181,840 (62,180) 4,842,864
OTHER INCOME (EXPENSE):
Interest expense (1,279,914) (90,161) (228,388) (d) (1,598,463)
Interest income 60,267 60,267
Other income (expense) net 73,677 10,442 84,119
----------- ---------- --------- -----------
Income before income taxes 3,577,234 102,121 (290,568) 3,388,787
Income tax expense 1,645,562 34,715 (121,435) (e) 1,558,842
----------- ---------- --------- -----------
Net income $1,931,672 $ 67,406 $(169,133) $ 1,829,945
========== ========== ========= ===========
Preferred stock dividend requirements 109,357 109,357
---------- -----------
Earnings applicable to
common shares $1,822,315 $ 1,720,588
========== ===========
EARNINGS PER COMMON SHARE:
Primary $ 0.33 $ 0.31
========== ===========
Fully diluted $ 0.32 $ 0.30
========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Primary 5,531,767 5,552,305
========== ===========
Fully diluted 5,743,960 5,764,498
========== ===========
</TABLE>
See the accompanying Notes to the Unaudited Pro Forma
Consolidated Statements of Income
19
<PAGE> 20
RENT-WAY, INC. FORM 8-KA
- ------------------------------------------------------------------------------
OCTOBER 7, 1996
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Consolidated Statements of Income have been prepared
assuming the acquisition of DLC was consummated on October 1, 1994 using the
historical financial statements of Rent-Way, Inc. for the year and nine
month periods ending September 30, 1995 and June 30, 1996 and the historical
financial statements of DLC for the year and nine month periods ending
June 30, 1995 and March 31, 1996.
2. PRO FORMA ADJUSTMENTS TO THE CONSOLIDATED STATEMENTS OF INCOME
(a) Adjustment to recognize amortization of Goodwill on a straight line
basis over twenty years:
Nine months ended June 30, 1996 $173,621
Year ended September 30, 1995 $231,494
(b) Salaries and wages have been adjusted for the elimination of
Ken Moye, the prior owner of DLC who is no longer employed by
Rent-Way, Inc. and adjusted for the difference in compensation now
paid to Lee Brady by Rent-Way, Inc. as compared to his compensation
from DLC.
Nine months ended June 30, 1996 $156,000
Year ended September 30, 1995 $207,800
(c) Adjustment for various expenses including:
1. Elimination of fees paid to K. Moye for personal guarantee of
DLC debt
Nine months ended June 30, 1996 $30,441
Year ended September 30, 1995 $33,120
2. Amortization of non-compete agreements using straight line for
2 years.
Nine months ended June 30, 1996 $75,000
Year ended September 30, 1995 $100,000
(d) Adjustment to record interest expense on net borrowings
for acquisition offset by elimination of DLC debt.
Nine months ended June 30, 1996 $228,388
Year ended September 30, 1995 $267,390
(e) Adjustment to record income tax expense based on effective tax rates
of 38.9% and 46.0% respectively
Nine months ended June 30, 1996 $(121,435)
Year ended September 30, 1995 $(21,882)
20
