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As filed with the Securities and Exchange Commission on June 13, 1997
Registration No. 333-26835
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
RENT-WAY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1407782
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
3230 West Lake Road
Erie, Pennsylvania 16505
(814) 836-0618
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
William E. Morgenstern, President
3230 West Lake Road
Erie, Pennsylvania 16505
(814) 836-0618
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
John J. Zak, Esq.
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
1800 One M & T Plaza
Buffalo, New York 14203
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Approximate date of commencement of proposed sale to the public: from time
to time after this Registration Statement becomes effective.
If the only securities on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [x]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
______________________.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
This Registration Statement contains two prospectuses. The first
prospectus forming a part of this Registration Statement is to be used in
connection with the offer and sale from time to time by certain security
holders of the Registrant's 7.0% Convertible Subordinated Debentures due 2007
and the shares of Common Stock issuable upon conversion thereof. Such first
prospectus immediately follows this explanatory note. The second prospectus
forming a part of this Registration Statement is to be used in connection with
the offer and sale from time to time by certain security holders of 1,534,458
shares of the Registrant's Common Stock, including 322,500 shares issuable upon
exercise of outstanding warrants to purchase Common Stock of the Registrant and
704,225 shares issuable upon conversion of the Registrant's 10.0% Convertible
Subordinated Notes due 2002. Such second prospectus immediately follows the
first prospectus.
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PROSPECTUS
RENT-WAY, INC.
$20,000,000 7.0% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
(INTEREST PAYABLE FEBRUARY 1 AND AUGUST 1)
1,495,886 SHARES OF COMMON STOCK
This Prospectus relates to the public offering by the holders thereof (the
"Selling Security Holders") of $20,000,000 aggregate principal amount of 7.0%
Convertible Subordinated Debentures due 2007 (the "Debentures") of Rent-Way,
Inc., a Pennsylvania corporation (the "Company") and the 1,495,886 shares of
common stock, without par value, of the Company issuable upon conversion of the
Debentures, subject to adjustment under certain circumstances (the "Common
Stock" and, together with the Debentures, the "Securities"). The Securities are
being offered for the account of the Selling Security Holders and the Company
will not receive any proceeds from this offering.
The Debentures are convertible into shares of Common Stock at any time
after the effectiveness of the registration statement of which this Prospectus
is a part and at or prior to maturity, unless previously redeemed, at a
conversion price of $13.37 per share, subject to adjustment under certain
circumstances. Prior to this offering, there has been no public market for the
Debentures, although the Debentures have been eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market. The Common Stock is traded on the Nasdaq National Market ("Nasdaq")
under the symbol "RWAY." On June 12, 1997, the last sale price of the Common
Stock, as reported by Nasdaq, was $14.625 per share.
Interest on the Debentures is payable semiannually on February 1 and
August 1, commencing on August 1, 1997. The Debentures mature on February 1,
2007 and are redeemable, in whole or in part, at the option of the Company, for
cash, at any time on or after February 5, 2000 on at least 30 days' notice at
the redemption prices set forth herein plus accrued interest. See "Description
of Debentures."
The Debentures are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company. The Indenture (as defined herein) does not
restrict the incurrence of Senior Indebtedness by the Company. At March 31,
1997, the Company had approximately $26.0 million of Senior Indebtedness.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
The Selling Security Holders, acting as principals for their own account,
directly, through agents designated from time to time, or through dealers or
underwriters also to be designated, may sell all or a portion of the Securities
offered hereby from time to time on terms to be determined at the time of sale.
The aggregate proceeds to the Selling Security Holders from the sale of the
Securities offered hereby will be the purchase price of such Securities less
commissions, if any. For information concerning indemnification arrangements
between the Company and the Selling Security Holders, see "Plan of
Distribution."
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The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Securities offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 13, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the United States Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company may
be inspected at the public reference facilities of the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New
York Regional Office of the Commission, Seven World Trade Center, Suite 1300,
New York, New York 10048, and at the Chicago Regional Office of the Commission,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Place, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a World Wide Web site on the
Internet at http:www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, the Company's Common Stock is traded on
Nasdaq and the Company's reports, proxy statements and information statements
and other information filed with Nasdaq can be inspected at the Offices of
Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to
the registration of the Securities offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained in this
Prospectus or in any document incorporated by reference herein as to the
contents of any contract or other documents referred to herein or therein are
not necessarily complete and, in each instance, reference is made to the copy
of such documents filed as an exhibit to the Registration Statement or such
other documents, which may be obtained from the Commission as indicated above
upon payment of the fees prescribed by the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1996; (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1996;
(iii) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; (iv) the Company's Current Report on Form 8-K dated January 7, 1997;
(v) the Company's Current Report on Form 8-K dated February 21, 1997 and
Amendment No. 1 thereto on Form 8-K/A dated April 21, 1997; (vi) the Company's
Proxy Statement dated February 10, 1997 related to the Annual Meeting of
Shareholders held on March 12, 1997; and (vii) the description of the Company's
capital stock contained in the Company's Registration Statement on Form 8-A
dated August 19, 1993, including any amendment or reports filed for the purpose
of updating such description. In addition, each document filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to termination of this offering shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date such document is filed with the Commission.
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Any statement contained herein, or any document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of the Registration Statement or this
Prospectus. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference. This Prospectus
incorporates documents by reference which are not presented herein or delivered
herewith. These documents (other than exhibits thereto) are available without
charge, upon written or oral request by any person to whom this Prospectus has
been delivered, from Jeffrey A. Conway, Chief Financial Officer, Rent-Way,
Inc., 3230 West Lake Road, Erie, Pennsylvania 16505, telephone number (814)
836-0618.
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RISK FACTORS
Prospective investors should carefully review the following factors,
together with the information set forth elsewhere in this Prospectus, prior to
purchasing any Securities offered hereby.
ACQUISITION RISKS
The continued growth of the Company will depend, in part, on the Company's
ability to acquire additional rental-purchase stores on favorable terms, to
enhance their performance and to integrate the acquired stores into the
Company's operations. The Company will compete for acquisition opportunities
with companies that have significantly greater financial and other resources.
There can be no assurance that the Company will be able to locate or acquire
suitable acquisition candidates, that acquisition candidates, once located,
will be acquired by the Company on terms comparable with terms available to its
acquisition competitors, or that any operations that are acquired can be
effectively and profitably integrated into the Company's existing operations.
Furthermore, future acquisitions may negatively impact the Company's operating
results, particularly during the periods immediately following an acquisition.
The Company may acquire operations that are unprofitable or have inconsistent
profitability. The inability to improve the profitability of such acquired
stores could have a material adverse effect on the Company's results of
operations and financial condition. The Company's acquisition strategy is also
likely to place significant demands on the Company's management and its
financial resources.
SUBORDINATION OF DEBENTURES TO SENIOR INDEBTEDNESS OF THE COMPANY
The Debentures will be expressly subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, which at March 31, 1997
aggregated approximately $26.0 million. Senior Indebtedness includes the
Company's $7.0 million unsecured convertible subordinated notes held by
Massachusetts Mutual Life Insurance Company and its affiliates (the
"Convertible Subordinated Notes"). Neither the Debentures nor the Indenture
under which the Debentures were issued will limit the ability of the Company to
incur additional Senior Indebtedness or other indebtedness. Such Indenture and
the Debentures will not contain any financial covenants or similar restrictions
with respect to the Company and, therefore, the holders of the Debentures will
have no protection (other than rights upon Events of Default as described in
"Description of Debentures") from adverse changes in the Company's financial
condition. By reason of such subordination of the Debentures, in the event of
insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up
of the business of the Company or upon a default in payment with respect to any
indebtedness of the Company or an event of default with respect to such
indebtedness resulting in the acceleration thereof, the assets of the Company
will be available to pay the amounts due on the Debentures only after all
Senior Indebtedness has been paid in full.
SIGNIFICANT CONTINUING CASH REQUIREMENTS ASSOCIATED WITH COMPANY'S
ACQUISITION STRATEGY
The Company's cash requirements have been and will continue to be
significant. In fiscal years 1994, 1995 and 1996, the Company used $0.5
million, $1.7 million and $8.6 million for acquisitions, respectively. In the
first quarter of 1997, the Company completed the acquisition of Bill Coleman
TV, Inc. and Perry Electronics, Inc. d/b/a Rental King using $6.5
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million and $17.9 million in cash, respectively. The continued pursuit of the
Company's acquisition strategy will require significant additional capital
resources. Capital is needed not only for acquisitions, but also to service
acquisition-related debt and for the effective integration, operation and
expansion of acquired rental-purchase stores. There can be no assurances that
capital will be available to the Company in the future or, if available, on
terms acceptable to it.
RISKS ASSOCIATED WITH SUBSTANTIAL LEVERAGE; INABILITY TO REFINANCE INDEBTEDNESS
The Company has incurred substantial indebtedness to finance the
acquisition of rental-purchase stores. The Company had debt of approximately
$46.3 million at March 31, 1997 and its ratio of debt to total shareholders'
equity was approximately 140%. At March 31, 1996 and March 31, 1995, the
Company's ratio of debt to total shareholders' equity was 27% and 177%,
respectively. There can be no assurances that the Company will have the ability
to service its debt. Nor can there by any assurances that the Company will be
able to refinance its debt at maturity on terms acceptable to it.
RISKS ASSOCIATED WITH INTANGIBLE ASSETS
A substantial portion of the Company's assets consist of intangible assets,
including goodwill and covenants not to compete relating to the acquisition of
rental-purchase stores. At March 31, 1997, the Company had $42.2 million of
intangible assets of these types, a substantial portion of the Company's
$89.3 million in total assets at such date. The Company expects goodwill on its
balance sheet to increase in the future in connection with additional
acquisitions. These additions to goodwill will have an adverse impact on
earnings as goodwill will be amortized against earnings. In the event of any
sale or liquidation of the Company, there can be no assurance that the value of
the Company's intangible assets will be realized. In addition, the Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining balance of intangible assets are recoverable. If and when
factors indicate that these intangible assets should be evaluated for possible
impairment, the Company may be required to reduce the carrying value of its
intangible assets. Such a reduction could have a material adverse effect on the
results of operations of the Company during the periods in which such reduction
is recognized.
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the offering, there has been no public market for the Debentures
although the Debentures have been eligible for trading in the PORTAL market.
The Company does not intend to apply for listing of the Debentures on any
national securities exchanges or Nasdaq. It is unlikely that an active or
liquid trading market will develop or be sustained for the Debentures. After
completion of this offering, the market price of the Common Stock into which
the Debentures are convertible could be subject to significant fluctuations in
response to various factors and events, including the liquidity of the market
for the Common Stock, variations in the Company's operating results, and new
statutes or regulations or changes in the interpretation of existing statutes
or regulations affecting the rental-purchase industry generally. In addition,
the stock market in recent years has experienced broad price and volume
fluctuations that often have been unrelated to the operating performance of
particular companies.
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These market fluctuations also may adversely affect the market price of the
Common Stock. See "Description of Debentures" and "Plan of Distribution."
RISKS ASSOCIATED WITH SIGNIFICANT GOVERNMENT REGULATION OF THE
RENTAL - PURCHASE INDUSTRY
Forty-five states have enacted laws regulating or otherwise impacting the
rental-purchase transaction, including all the states in which the Company's
stores are located, other than New Jersey. These laws generally require certain
contractual and advertising disclosures concerning the nature of the
transaction and also provide varying levels of substantive consumer protection,
such as requiring a grace period for late payments and contract reinstatement
rights in the event the agreement is terminated for non-payment. The
rental-purchase laws of some states, including Michigan, New York, Ohio,
Pennsylvania and West Virginia, limit the total dollar amount of rentals that
may be charged over the life of the rental-purchase agreement. Michigan law
effectively limits the amount that may be charged under the rental-purchase
agreement to 2.22 times the price that would have been charged had the
merchandise been purchased rather than leased. New York, Ohio and Pennsylvania
law effectively limit the amount that may be charged under the rental-purchase
agreement to twice the price that would have been charged had the merchandise
been purchased rather than leased. West Virginia law effectively limits the
amount that may be charged under the rental-purchase agreement to 2.4 times the
price that would have been charged had the merchandise been purchased rather
than leased. To the extent that in connection with the implementation of its
business strategies the Company acquires or opens new stores in states in which
it does not currently operate, the Company will become subject to rental-
purchase laws of such states. See "Business--Government Regulation."
RISKS ASSOCIATED WITH PARTICIPATION IN HIGHLY COMPETITIVE
RENTAL - PURCHASE INDUSTRY
The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses as well as with rental stores that do not
offer their customers a purchase option. Competition is based primarily on
rental prices and terms, product selection and availability, and customer
service. With respect to consumers who are able to purchase a product for cash
or on credit, the Company also competes with department stores, discount stores
and retail outlets. These competitors may offer an installment sales program or
may compete with the Company simply on the basis of product and price. Several
competitors of the Company in the rental-purchase business are national in
scope and have significantly greater financial and operating resources and name
recognition than does the Company. There can be no assurances that the Company
will be able to compete successfully against these competitors. Furthermore,
additional competitors may emerge, especially since the cost of entry into the
rental-purchase business is relatively low. Increased competition may have a
material adverse effect on the Company's revenues and profits. See
"Business--Competition."
CONTROL BY PRINCIPAL SHAREHOLDERS
Gerald A. Ryan and William E. Morgenstern, the Chairman of the Board and
the President and Chief Executive Officer, respectively, of the Company, own
or, have the right to acquire, approximately 9.6% and 7.6%, respectively, of the
Company's outstanding Common Stock. As a result, Messars. Ryan and Morgenstern,
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should they act in concert, may be in a position to exercise practical control
over the outcome of actions requiring shareholder approval, including potential
acquisitions, sales and changes in control of the Company.
DEPENDENCE UPON KEY PERSONNEL
The Company's operations and future success are largely dependent upon its
management, and in particular, Mr. Morgenstern, the Company's Chief Executive
Officer. The loss of Mr. Morgenstern's services could have a material adverse
effect on the Company. The Company maintains a $7.0 million policy of life
insurance on Mr. Morgenstern. Such policy secures payment of the Convertible
Subordinated Notes and names Massachusetts Mutual Life Insurance Company and
certain of its affiliates as beneficiary. The Company maintains no other
policies of life insurance on Mr. Morgenstern nor on other members of
management.
LACK OF CASH DIVIDENDS ON COMMON STOCK
The Company has paid no cash dividends on its Common Stock and does not
contemplate doing so in the foreseeable future.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and By-Laws contain provisions
that could delay, deter or prevent a merger, tender offer or other business
combination or change in control involving the Company that some or a majority
of the shareholders might consider to be in their best interests, including
offers or attempted takeovers that might otherwise result in such shareholders
receiving a premium over the market price of the Common Stock.
EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE OF COMMON STOCK
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of such shares for future sale,
will have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of the Common Stock (including shares issued upon
the exercise of employee stock options or outstanding warrants or upon
conversion of the Convertible Subordinated Notes or the Debentures), or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. The Company has 6,623,620 shares of Common
Stock outstanding, of which 4,882,583 shares are freely tradeable without
limitation.
As of March 31, 1997, approximately 3,704,722 shares of Common Stock were
reserved for issuance pursuant to the exercise of outstanding stock options and
warrants and the conversion of the Convertible Subordinated Notes and the
Debentures. Of these shares, approximately 3,563,910 shares are covered under
Registration Statements, including the Registration Statement of which this
Prospectus forms a part. As a result, these shares when issued generally will
be freely tradeable. An additional 792,266 outstanding shares of Common Stock
issued in connection with acquisitions by the Company are covered under such
Registration Statement. The existence of this substantial overhang of shares of
Common Stock covered under Registration Statements could adversely affect
prevailing market prices for the Common Stock.
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BUSINESS
GENERAL
The Company has been engaged in the rental-purchase business since 1981
and currently operates 191 stores that provide brand name merchandise in 14
states and the District of Columbia. The Company offers home entertainment
equipment, furniture, major appliances and jewelry to customers under
full-service rental-purchase agreements that generally allow the customer to
obtain ownership of the merchandise at the conclusion of an agreed upon rental
period. Management believes that these rental-purchase arrangements appeal to a
wide variety of customers by allowing them to obtain merchandise that they
might otherwise be unable or unwilling to obtain due to insufficient cash
resources or lack of access to credit or because they have a temporary,
short-term need for the merchandise or a desire to rent rather than purchase
the merchandise.
The Company was formed in 1981 to operate a rental-purchase store in Erie,
Pennsylvania. By 1993, as a result of acquisitions and new store openings, the
Company was operating 19 stores in three states and had completed its initial
public offering. As of December 31, 1996, principally as a result of
acquisitions, the Company was operating 108 stores in 11 states and the
District of Columbia.
The Company's principal executive offices are located at 3230 West Lake
Road, Erie, Pennsylvania 16505, and its telephone number is (814) 836-0618.
RECENT ACQUISITIONS
On January 2, 1997, the Company acquired all of the outstanding stock
of Bill Coleman TV, Inc. ("Bill Coleman TV") for a purchase price consisting of
approximately $6.7 million in cash and an option to purchase 25,000 shares of
the Company's Common Stock at an exercise price of $8.875 per share. Bill
Coleman TV operated 15 rental-purchase stores in Michigan and had revenues of
approximately $8.6 million for the twelve months ended December 31, 1996. On
February 6, 1997, the Company acquired all of the outstanding stock of Perry
Electronics, Inc. d/b/a Rental King ("Rental King"). Rental King operated 70
rental-purchase stores in Ohio, Michigan, Florida, Colorado, Indiana, West
Virginia and Kentucky and had revenues of approximately $24.0 million for the
twelve months ended December 31, 1996. The purchase price was $23.0 million
consisting of cash and the assumption of liabilities, subject to downward
adjustment following a post-closing audit.
Management believes that the acquisitions of Bill Coleman TV and Rental
King provide the Company with certain strategic benefits including increased
market share and operating efficiencies in certain regions and improved
economies of scale for certain corporate expenses, including purchasing and
advertising. Management believes that improved merchandising, marketing and
operational methods should improve performance of the acquired stores. There
can be no assurance, however, that the acquired stores will perform in
accordance with expectations or that the Company will not encounter
unanticipated problems or liabilities in connection with these stores. See
"Risk Factors--Acquisition Risks."
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THE RENTAL-PURCHASE INDUSTRY
Begun in the mid-to-late 1960s, the rental-purchase business is a
relatively new segment of the retail industry offering an alternative to
traditional retail installment sales. The rental-purchase industry provides
brand name merchandise to customers generally on a week-to-week or
month-to-month basis under a full service rental agreement, which in most cases
includes a purchase option. The customer may cancel the rental agreement at any
time without further obligation by returning the product to the rental-purchase
operator.
APRO, the industry's trade association, estimated that at the end of 1995
the rental-purchase industry comprised approximately 7,500 stores providing 5.4
million products to 2.8 million households in the United States. Management
believes that its customers generally have annual household incomes ranging
from $20,000 to $40,000. Based on APRO estimates, the rental-purchase industry
had gross revenues of $3.9 billion in 1995. The rental-purchase industry is
highly fragmented. Based on information from APRO and management estimates, the
ten largest industry participants account for approximately 37.5% of total
industry stores, with the largest industry participant, Rent-A-Center,
accounting for approximately 50.0% of such stores, and management estimates
that the majority of the industry consists of operations with fewer than 20
stores. See "--Strategy", "--Competition."
Rental-purchase operators historically have been financed by a few
commercial lenders who specialize in the industry. In recent years, however, a
number of these lenders have reduced the amount of debt their customers can
carry, limited their business with new operators in the rental-purchase
industry or withdrawn from the market altogether. Consequently, many
rental-purchase dealers have either attempted to reduce debt by investing more
equity in their businesses or attempted to sell their stores and rental
contracts to other dealers having greater financial resources. Management
believes that this trend toward consolidation of operations in the industry
presents an opportunity for well-capitalized rental-purchase operators to
acquire additional stores on favorable terms. In addition, management believes
that many smaller industry operators lack the management information systems
necessary to manage a large, multi-state rental-purchase operation efficiently
and profitably.
STRATEGY
Management believes that the Company's continued success depends on
successful implementation of the following business strategies:
Acquiring and Opening New Stores
The Company currently intends to expand its operations by acquiring
existing stores and opening new stores, both within its present market area and
in geographic regions not currently served by the Company. The majority of that
expansion is expected to be accomplished through acquisitions. The Company
believes that acquisitions can effectively increase the Company's market share
and operating efficiencies while simultaneously expanding its customer base. In
addition, in pursuing its growth strategies, the Company expects to benefit
from both enhanced purchasing power and the ability to exploit economies of
scale for certain fixed operational expenses. The Company continually reviews
acquisition opportunities, and management believes that a number of acquisition
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opportunities currently exist. At present, the Company has no plans, proposals,
arrangements or understandings with respect to significant acquisitions. In
identifying targets for acquisition, the Company intends to focus on operations
that complement the Company's existing markets, while remaining open to the
possibility of making acquisitions in other areas. The Company has not
established formal criteria for potential acquisitions. Generally, however, the
Company seeks to acquire rental - purchase businesses that operate profitably
and are located in geographic markets that complement the Company's existing
stores. The Company seeks to acquire such businesses at purchase prices that
will permit the Company a prompt return on its investment in the form of
increased earnings. The Company has no formal policy with respect to
acquisitions with related entities. To date, no such acquisitions have been
considered nor does the Company anticipate considering such acquisitions in the
future. Management believes that its senior management has a level of ability
and experience that provides the Company with a competitive advantage in the
evaluation and consummation of acquisition opportunities. Although the present
state of the rental-purchase industry makes acquisition opportunities more
economically attractive than the opening of new stores, management anticipates
that the consolidation of the industry will cause this attractiveness to
diminish over time.
Customer-Focused Philosophy
Management believes that through the continued adherence to its "Welcome,
Wanted and Important" business philosophy it should be able to increase its new
and repeat customer base, and thus the number of units it has on rent, thereby
increasing revenues and profits. The "Welcome, Wanted and Important" philosophy
is a method by which the Company seeks to create a store atmosphere conducive
to customer loyalty. The Company attempts to create this atmosphere through the
effective use of advertising and merchandising strategies, by maintaining the
clean and well-stocked appearance of its stores, and by providing a high level
of customer service (such as the institution of a 1-800-RENTWAY complaint and
comment line). The Company's advertising emphasizes brand name merchandise from
leading manufacturers. In addition, merchandise selection within each product
category is periodically updated to incorporate the latest offerings from
suppliers. All acquired stores are promptly evaluated and, if necessary,
remodeled. Services provided by the Company to the customer include home
delivery and ordinary maintenance and repair services during the term of the
contract at no additional charge. Store managers also work closely with each
customer in choosing merchandise, setting delivery dates and arranging a
suitable payment schedule. As part of the "Welcome, Wanted and Important"
philosophy, store managers are empowered, encouraged and trained to make
decisions regarding store operations subject only to certain Company-wide
operating guidelines and general policies.
Expanding the Company's Product Lines
One of the Company's principal strategies is to provide the rental-
purchase customer with the opportunity to obtain merchandise of higher quality
than the merchandise available from its competitors on competitive terms. To
this end, the Company attempts to maintain a broad selection of products while
emphasizing higher priced merchandise. The Company intends to continue
expanding its offerings of higher priced products in all product areas.
Management believes that previous offerings of higher priced products have
succeeded in both increasing the Company's profitability and attracting new
customers to the Company's existing stores. In addition, the Company
selectively tests new merchandise such as personal computers and cellular
phones. Management believes that opportunities exist to provide additional or
non-traditional merchandise to its customers.
Monitoring Store Performance
Each store is provided with a management information system that allows
management to track rental and collection activity on a daily basis. The system
generates detailed reports that track inventory movement within each
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<PAGE> 15
product category and the number and frequency of past due accounts and other
collection activity. In addition, physical inventories are regularly conducted
at each store to ensure the accuracy of the management information system data.
Senior management monitors this information to ensure adherence to established
operating guidelines. Management believes the Company's management information
systems enhance its ability to monitors and affect the operating performance of
existing stores and to integrate and improve the performance of newly acquired
stores.
Results-Oriented Compensation
Management believes that an important reason for its positive financial
performance and growth has been the structure of its management compensation
system, which provides incentives for both regional and store managers to
increase store revenues and profits. As a result, a significant portion of the
Company's regional and store managers' total compensation is dependent upon
store performance. As further incentive, the Company grants many of its
managers stock options in the Company. Management believes that the Company's
emphasis on incentive-based compensation has been instrumental in the Company's
ability to attract, retain and motivate its regional and store managers.
Manager Training
Management believes that well-trained store managers are important to the
Company's efforts to maximize individual store performance. The Company employs
two full-time trainers who conduct classroom programs in the areas of sales,
store operations and personnel management. These training programs often
continue for several months and culminate in an exam. The Company also offers
its managers the opportunity to attend, at Company expense, leadership and
management programs offered by leading management and organization experts.
OPERATIONS
Company Stores
The Company currently operates 191 stores in 14 states and the District of
Columbia, as follows:
<TABLE>
<CAPTION>
Location Number of Stores
<S> <C>
Ohio 57
Michigan 32
Pennsylvania 21
New York 20
Indiana 18
Maryland 9
Illinois 8
Virginia 7
Florida 7
Delaware 4
Colorado 3
West Virginia 2
Kentucky 1
New Jersey 1
Washington, D.C. 1
</TABLE>
16
<PAGE> 16
The Company's stores average 3,000 square feet in floor space and are
generally located in strip shopping centers in or near low to middle income
neighborhoods. Often, such shopping centers offer convenient free parking to
the Company's customers. The Company's stores are generally uniform in interior
appearance and design and display of available merchandise. The stores have
separate storage areas but generally do not use warehouse facilities. In
selecting store locations, the Company uses a variety of market information
sources to locate areas of a town or city that are readily accessible to low
and middle income consumers. The Company believes that within these areas the
best locations are in neighborhood shopping centers that include a supermarket.
The Company believes this type of location makes frequent rental payments at
its stores more convenient for its customers.
Product Selection
The Company offers brand name home entertainment equipment (such as
television sets, video recorders, video cameras and stereos), furniture, major
appliances and jewelry. Major appliances offered by the Company include
refrigerators, ranges, washers and dryers. The Company's product line currently
includes the Zenith, RCA, Pioneer and JVC brands in home entertainment
equipment and the Crosley and Kenmore brands in major appliances. The Company
closely monitors customer rental requests and adjusts its product mix to offer
rental merchandise desired by customers.
For the year ended September 30, 1996, payments under rental-purchase
contracts for home entertainment products accounted for approximately 44.0%
furniture for 27.0%, appliances for 28.0%, and jewelry for 1.0% of the
Company's revenues. Customers may request either new merchandise or previously
rented merchandise. Previously rented merchandise is typically offered at the
same weekly or monthly rental rate as is offered for new merchandise, but with
an opportunity to obtain ownership of the merchandise after fewer rental
payments. Weekly rentals currently range from $4.59 to $44.95 for home
entertainment equipment, from $1.99 to $49.99 for furniture, from $4.59 to
$38.99 for major appliances and $3.99 to $30.99 for jewelry.
Rental-Purchase Agreements
Merchandise is provided to customers under written rental-purchase
agreements that set forth the terms and conditions of the transaction. The
Company uses standard form rental-purchase agreements which are reviewed by
legal counsel and customized to meet the legal requirements of the various
states in which they are intended to be used. Generally, the rental-purchase
agreement is signed at the store, but may be signed at the customer's residence
if the customer orders the product by telephone and requests home delivery.
Customers may elect to rent merchandise on a week- to-week or month-to-month
basis. The rental for the first week or month and each succeeding week or month
during the term of the agreement is payable in advance. At the end of the
initial and each subsequent rental period, the customer retains the merchandise
for an additional week or month by paying the required rental or may terminate
the agreement without further obligation. If the customer decides to terminate
the agreement, the merchandise is returned to the store and is then available
for rent to another customer. The Company retains title to the merchandise
during the term of the rental-purchase agreement. If a customer rents
merchandise for a sufficient period of time, usually 12 to 24 months, ownership
is transferred to the customer without further payments being required.
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<PAGE> 17
Rental payments are made in cash or by check, money order or credit card. The
Company does not extend credit. See "--Government Regulation."
Product Turnover
Generally, a minimum rental term of between 12 and 24 months is required
to obtain ownership of new merchandise. Based upon merchandise returns for the
year ended September 30, 1996, the Company believes that the average period of
time during which customers rent merchandise is 16 to 17 weeks. However,
turnover varies significantly based on the type of merchandise being rented,
with certain consumer electronic products, such as camcorders and VCRs,
generally being rented for shorter periods, while appliances and furniture are
generally rented for longer periods. At September 30, 1996, the Company's
stores contained an average of 1121 items of merchandise per store, of which
approximately 829 items were subject to rental-purchase agreements and
approximately 292 items were available in inventory, which management believes
is representative of the average inventory on rent and idle inventory at any
given time. Each rental-purchase transaction requires delivery and pickup of
the product, weekly or monthly payment processing and, in some cases, repair
and refurbishment of the product. In order to cover the relatively high
operating expenses generated by greater product turnover, rental-purchase
agreements require larger aggregate payments than are generally charged under
installment purchase or credit plans.
Customer Service
The Company offers same day delivery and installation of its merchandise
at no additional cost to the customer. The Company also provides any required
service or repair without charge, except for damage in excess of normal wear
and tear. If the product cannot be repaired at the customer's residence, the
Company provides a temporary replacement while the product is being repaired.
The customer is fully liable for damage, loss or destruction of the
merchandise, unless the customer purchases an optional loss/damage waiver. Most
of the products offered by the Company are covered by a manufacturer's warranty
for varying periods, which, subject to the terms of the warranty, is
transferred to the customer in the event that the customer obtains ownership.
Repair services are provided through in-house service technicians, independent
contractors or under factory warranties. The Company recently introduced
Rent-Way Plus, a fee-based membership program that provides special loss and
damage protection and an additional two years of service protection on rental
merchandise, preferred treatment in the event of involuntary job loss,
accidental death and dismemberment insurance and discounted emergency roadside
assistance, as well as other discounts on merchandise and services.
Collections
Management believes that effective collection procedures are important to
the Company's success in the rental-purchase business. The Company's collection
procedures increase the revenue per product with minimal associated costs,
decrease the likelihood of default and reduce charge-offs. Senior management,
as well as store managers use the Company's computerized management information
system to monitor cash collections on a daily basis. In the event a customer
fails to make a rental payment when due, store management will attempt to
contact the customer to obtain payment and reinstate the contract or will
terminate the account and arrange to regain possession of the merchandise.
However, store managers
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<PAGE> 18
are given latitude to determine the appropriate collection action to be pursued
based on individual circumstances. Depending on state regulatory requirements,
the Company charges for the reinstatement of terminated accounts or collects a
delinquent account fee. Such fees are standard in the industry and may be
subject to state law limitations. See "-- Government Regulation." Despite the
fact that the Company is not subject to the federal Fair Debt Collection
Practices Act, it is the Company's policy to abide by the restrictions of such
law in its collection procedures. Charge-offs due to lost or stolen merchandise
were approximately 2.7% and 3.6% of the Company's revenues for the years ended
September 30, 1996 and 1995, respectively. The three-year average charge-off
rate for the largest chains in the industry reporting to APRO in 1996 was 2.3%.
Management
The Company's stores are organized geographically with several levels of
management. At the individual store level, each store manager is responsible
for customer and credit relations, deliveries and pickups, inventory
management, staffing and certain marketing efforts. A Company store normally
employs one store manager, one assistant manager, two account managers, one
full-time office manager, one full-time delivery and installation technician.
The staffing of a store depends on the number of rental-purchase contracts
serviced by the store. Each store manager reports to one of 25 regional
managers each of whom typically oversees six to eight stores. Regional managers
are primarily responsible for monitoring individual store performance and
inventory levels within their respective regions. The Company's regional
managers, in turn, report to three Directors of Operations, located at the
Company's headquarters, who monitor the operations of their respective regions
and, through the regional managers, individual store performance. The Directors
of Operations report to the Vice President and Chief Operating Officer of the
Company who is responsible for overall Company-wide store operations.
Senior management at the Company's headquarters directs and coordinates
purchasing, financial planning and controls, management information systems,
employee training, personnel matters and acquisitions. Headquarters personnel
also evaluate the performance of each store and conduct on-site reviews.
MANAGEMENT INFORMATION SYSTEM
The Company believes that its management information system provides it
with a competitive advantage over many small rental-purchase operations. The
Company uses an integrated computerized management information and control
system to track each unit of merchandise and each rental-purchase agreement.
The Company's system also includes extensive management software and report
generating capabilities. The reports for all stores are reviewed daily by
senior management and any irregularities are addressed the following business
day. Each store is equipped with a computer system that tracks individual
components of revenue, each item in idle and rented inventory, total items on
rent, delinquent accounts and other account information. The Company
electronically gathers each day's activity report through the computer located
at the headquarters office. This system provides the Company's management with
access to operating and financial information about any store location or
region in which the Company operates and generates management reports on a
daily, weekly, month-to-date and year-to-date basis for each store and every
rental-
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<PAGE> 19
purchase transaction. Utilizing the management information system, senior
management, regional managers and store managers can closely monitor the
productivity of stores under their supervision compared to Company- prescribed
guidelines. This system has enabled the Company to expand its operations while
maintaining a high degree of control over cash receipts, inventory, merchandise
units in repair and customer transactions. To date, the Company has
successfully integrated all of its acquired stores into its management
information system.
PURCHASING AND DISTRIBUTION
The Company's general product mix is determined by senior management,
based on an analysis of customer rental patterns and introduction of new
products on a test basis. Individual store managers are responsible for
determining the particular product selection for their store from a list of
products approved by senior management. All purchase orders are executed
through regional managers and the Company's purchasing department to insure
that inventory levels and mix throughout the store regions are appropriate. The
Company maintains only minimal warehouse space for storage of merchandise, and
merchandise is generally shipped by vendors directly to each store, where it is
held for rental.
The Company purchases its merchandise directly from manufacturers or
distributors. The Company generally does not enter into written contracts with
its suppliers. Although the Company currently expects to continue its existing
relationships, management believes there are numerous sources of products
available to the Company, and does not believe that the success of the
Company's operations is dependent on any one or more of its present suppliers.
MARKETING
The Company promotes its products and services primarily through direct
mail advertising and, to a lesser extent, through television, radio and
secondary print media advertisement. The Company also solicits business by
telephoning former and prospective customers. Company advertisements emphasize
such features as product and brand name selection, prompt delivery and repair,
and the absence of any downpayment, credit investigation or long-term
obligation. Advertising expense as a percentage of revenue for the year ended
September 30, 1996 was approximately 4.1%. As the Company obtains new stores in
its existing markets, the advertising expenses of each store in the market can
be reduced by listing all stores in the same market-wide advertisement.
COMPETITION
The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses as well as rental stores that do not
offer their customers a purchase option. Competition is based primarily on
rental rates and terms, product selection and availability, and customer
service. With respect to consumers who are able to purchase a product for cash
or on credit, the Company also competes with department stores, discount stores
and retail outlets. These competitors may offer an installment sales program or
may compete with the Company simply on the basis of product and price. Several
competitors in the rental-purchase business are national in scope and have
significantly greater financial and operating resources and name recognition
than does the Company. Based upon APRO's most recent information and management
estimates, the Company's
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<PAGE> 20
share of the rental-purchase market, based on number of stores, is
approximately 2.5%.
PROPERTIES
The Company leases all of its stores under operating leases that generally
have terms of three to five years and require the Company to pay real estate
taxes, utilities and maintenance. The Company has optional renewal privileges
on most of its leases for additional periods ranging from three to five years
at rental rates generally adjusted for increases in the cost of living. There
is no assurance that the Company can renew the leases that do not contain
renewal options, or that if it can renew them, that the terms will be favorable
to the Company. Management believes that suitable store space is generally
available for lease and that the Company would be able to relocate any of its
stores without significant difficulty should it be unable to renew a particular
lease. Management also expects that additional space will be readily available
at competitive rates in the event the Company desires to open new stores. The
Company's corporate office in Erie, Pennsylvania, which consists of
approximately 14,000 square feet, was acquired by the Company in 1995. The
Company also leases certain warehouse space in New Castle, Delaware, Buffalo,
New York and Pittsburgh, Pennsylvania, and an office building in Erie,
Pennsylvania, which is used for storage.
PERSONNEL
As of March 31, 1997, the Company had approximately 944 employees, of
whom 58 are located at the corporate office in Erie, Pennsylvania. None of the
Company's employees is represented by a labor union. Management believes its
relations with its employees are good.
GOVERNMENT REGULATION
Forty-five states have enacted laws regulating or otherwise impacting the
rental-purchase transaction, including all of the states in which the Company's
stores are located, other than New Jersey. These laws generally require certain
contractual and advertising disclosures concerning the nature of the
transaction and also provide varying levels of substantive consumer protection,
such as requiring a grace period for late payments and contract reinstatement
rights in the event the agreement is terminated for nonpayment of rentals. No
federal legislation has been enacted regulating rental-purchase transactions.
See "Risk Factors--Government Regulation."
The Company instructs its managers in its required procedures through
training seminars and policy manuals and believes that it has operated in
compliance with the requirements of applicable law in all material respects. In
addition, the Company provides its customers with a toll-free number,
1-800-RENTWAY, to telephone corporate headquarters to report any irregularities
in service or misconduct by its employees. Any such calls are reviewed daily
and are the subject of immediate follow-up investigation by senior management.
SERVICE MARKS
The Company has registered the "Rent-Way" service mark under the Lanham
Act. The Company believes that this mark has acquired significant market
recognition and goodwill in the communities in which its stores are
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<PAGE> 21
located. The service mark "Rent-Way Because There's Really Only One Way" and
the related design have also been registered by the Company.
LEGAL PROCEEDINGS
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of its business. The Company is not currently a
party to any material litigation, except litigation to which it succeeded to as
a result of its acquisition of McKenzie Leasing Corporation in 1995, for which
it is being indemnified and held harmless. The Company has been sued in an
action brought in New York Supreme Court requesting damages in the amount of
$50.0 million arising out of an accident whereby a Company truck struck and
injured a child riding a bike. Such action is being defended by the Company's
insurance carriers and management believes it has sufficient available
insurance coverage such that this action will not have a material adverse
effect on the Company's financial condition or results of operations.
RELATED PARTY TRANSACTIONS
Although the Company has in the past and may in the future enter into
transactions with related parties, the Company has adopted no formal policies,
procedures or controls with respect to such transactions. Generally, however,
the Company requires that any transactions with related entities be on terms no
less favorable to the Company than would be available from an unrelated third
party.
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<PAGE> 22
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for its last five fiscal
years and for the six month period ended March 31, 1997 is as follows:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended September 30, March 31, 1997
------------------------ -----------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
3.29 1.23 0.40 0.24 (0.35) 3.37
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of pretax income from continuing operations and fixed charges
consist of interest on indebtedness and amortization of deferred financing
costs.
23
<PAGE> 23
USE OF PROCEEDS
The Securities offered hereby are being offered for the account of the
Selling Security Holders. Accordingly, the Company will receive no proceeds
from sales of such Securities.
SELLING SECURITY HOLDERS
The Debentures were issued by the Company on February 6, 1997 in a private
offering made pursuant to Section 4(2) of the Securities Act. The following
table sets forth certain information regarding the holders of the Debentures
based upon information furnished to the Company:
<TABLE>
<CAPTION>
Principal Percentage
Amount of Principal Amount of
Debentures of Debentures Outstanding
Name Owned That May be Sold Debentures
<S> <C> <C> <C>
Paloma Securities L.L.C. $2,500,000 $2,500,000 12.50%
Glen Eagles Fund, L.P. 125,000 125,000 *
Ramius Fund, L.P. 250,000 250,000 1.25%
Palladin Partners, L.P. 125,000 125,000 *
Offshore Strategies Ltd. 1,050,000 1,050,000 5.25%
Laterman Strategies 90's LLC 200,000 200,000 1.00%
Franklin Investors Securities
Trust Convertible Securities
Fund 2,200,000 2,200,000 11.00%
Franklin Strategic Income
Fund 300,000 300,000 1.50%
Franklin MultiIncome Trust 300,000 300,000 1.50%
Franklin Universal Trust 1,400,000 1,400,000 7.00%
Buffalo High Yield Fund, Inc. 700,000 700,000 3.50%
Buffalo Balanced Fund, Inc. 1,300,000 1,300,000 6.50%
Great Plains Trust Company
Fixed Income Fund 1,250,000 1,250,000 6.25%
NatWest Securities Corp. 1,100,000 1,100,000 5.50%
Mass Mutual High Yield
Partners LLC 1,000,000 1,000,000 5.00%
C.S.L. Associates L.P. 500,000 500,000 2.50%
Highlander Capital 200,000 200,000 1.00%
Swiss Bank Corporation,
London Branch 500,000 500,000 2.50%
Eaton Vance Total
Return Portfolio 5,000,000 5,000,000 25.00%
</TABLE>
24
<PAGE> 24
- -------------------
* Less than one percent.
Information concerning the Selling Security Holders may change from time
to time and may be set forth in supplements to this Prospectus.
Other than as a result of the ownership of the Securities offered hereby,
none of the Selling Security Holders has had any material relationship with the
Company within the past three years, except as noted herein.
Because the Selling Security Holders may offer all or some of the
Debentures and shares of Common Stock issued upon conversion thereof pursuant
to the offering contemplated by this Prospectus, and because there are
currently no agreements, arrangements or understandings with respect to the
sale of any of such Debentures or shares of Common Stock, no estimate can be
given as to the principal amount of the Debentures or the number of shares of
Common Stock that will be held by the Selling Security Holders after completion
of this offering. See "Plan of Distribution."
25
<PAGE> 25
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Company has been advised by the Selling Security Holders that the Selling
Security Holders may sell all or a portion of the Securities offered hereby
from time to time on terms to be determined at the times of such sales. The
Selling Security Holders may also make private sales directly or through a
broker or brokers. Alternatively, any of the Selling Security Holders may from
time to time offer the Securities through underwriters, dealers or agents, who
may receive compensation in the form of underwriting discounts, commissions or
concessions from the Selling Security Holders and the purchasers of the
Securities for whom they may act as agent. To the extent required, the
aggregate principal amount of Debentures and number of shares of Common Stock
to be sold, the names of the Selling Security Holders, the purchase price, the
name of any such agent, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Security Holders
from the sale of the Securities offered by the Selling Security Holders hereby
will be the purchase price of such Securities less any commissions. There is no
assurance that the Selling Security Holders will sell any or all of the
Securities offered hereby.
The Securities may be sold from time to time in one or more transactions
at fixed offering prices, which may be changed, or at varying prices determined
at the time of sale or at negotiated prices. Such prices will be determined by
the holders of the Securities or by agreement between such holders and
underwriters or dealers who may receive fees or commissions in connection
therewith.
The Company does not intend to apply for listing of the Debentures on any
national securities exchange or on Nasdaq. The Company does not anticipate that
an active market for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states the Securities offered hereby may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Securities offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of such Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Debentures were originally sold to the purchasers thereof on February
6, 1997 in a private offering at a purchase price of 100% of their principal
amount. Under certain circumstances, the Company has agreed to indemnify and
hold such purchasers and certain subsequent holders of the Debentures harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale of the Debentures by the purchasers or such subsequent
holders.
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<PAGE> 26
The Company will pay all expenses incident to this offering of the
Securities to the public other than underwriting discounts and selling
commissions and fees.
27
<PAGE> 27
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture, dated as of February 4,
1997 (the "Indenture"), between the Company and Manufacturers and Traders Trust
Company, as the trustee under the Indenture (the "Trustee"). The terms of the
Debentures include those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended.
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain
terms therein to which reference is hereby made, for a complete statement of
such provisions. Wherever particular provisions or sections of the Indenture or
terms defined therein are referred to herein, such provisions or definitions
are incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company, subject
to the rights of holders of Senior Indebtedness of the Company, and mature on
February 1, 2007. The Debentures are in the aggregate principal amount of $23.0
million and bear interest semiannually on February 1 and August 1 of each year,
commencing August 1, 1997, at the rate per annum of 7.0%. The first payment
will be for the period from the date of issuance to August 1, 1997. The Company
will pay interest on the Debentures to the persons who are registered holders
of Debentures at the close of business on January 15 or July 15 preceding the
interest payment date. Principal (and premium, if any) and interest will be
payable, the Debentures will be convertible and exchangeable, and transfers
thereof will be registerable, at the office or agency of the Company maintained
for such purposes, initially at the offices of the Trustee. The Company may pay
principal and interest by check and may mail an interest check to a holder's
registered address. Holders must surrender Debentures to a Paying Agent to
collect principal payments.
The Trustee currently acts as Paying Agent, Registrar and Conversion
Agent. The Company may change any Paying Agent, Registrar, Conversion Agent or
co-registrar upon prior written notice to the Trustee and may act in any such
capacity itself.
DELIVERY AND FORM OF DEBENTURES
Those Debentures initially sold to qualified institutional buyers (as
defined in Rule 144A under the Securities Act) are represented by a single
global Debenture (the "Rule 144A Global Security"), which was deposited on
February 6, 1997 with, or on behalf of, the Depository and registered in the
name of Cede & Co., as nominee of the Depository (such nominee being referred
to herein as the "Rule 144A Global Security Holder"). Debentures initially sold
to accredited investors (the "Accredited Investor Securities") are in fully
registered form.
So long as the Rule 144A Global Security Holder is the registered owner of
any Debentures, the Rule 144A Global Security Holder will be considered the
sole holder under the Indenture of any Debentures evidenced by the Rule 144A
Global Security. Beneficial owners of Debentures evidenced by the Rule 144A
Global Security will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the
28
<PAGE> 28
giving of any directions, instructions or approvals to the Trustee thereunder.
Neither the Company nor the Trustee have any responsibility or liability for
any aspect of the records of the Depository or for maintaining, supervising or
reviewing any records of the Depository relating to the Debentures.
Payments in respect of the principal or premium, if any, and interest on
any Debentures registered in the name of the Rule 144A Global Security Holder
on the applicable record date will be payable to the Trustee to or at the
direction of the Rule 144A Global Security Holder in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the persons in whose names the Debentures,
including the Rule 144A Global Security, are registered as the owner thereof
for the purpose of receiving such payments. Consequently, neither the Company
nor the Trustee has any responsibility or liability for the payment of such
amounts to beneficial owners of Debentures (including principal or premium, if
any, and interest).
A holder may transfer or exchange Debentures in accordance with the
Indenture. No service charge will be made for any registration or transfer,
exchange or conversion of Debentures, except for any tax or other governmental
charges that may be imposed in connection therewith. The Registrar need not
transfer or exchange any Debentures selected for redemption. Also, in the event
of a partial redemption, it need not transfer or exchange any Debentures for a
period of 15 days before selecting Debentures to be redeemed. The Indenture
does not contain any provision requiring the Company to repurchase the
Debentures at the option of the holders thereof in the event of a leveraged
buyout, recapitalization or similar restructuring of the Company, even though
the Company's creditworthiness and the market value of the Debentures may
decline significantly as a result of such transaction. The Indenture does not
protect holders of the Debentures against any decline in credit quality,
whether resulting from any such transaction or from any other cause. The
registered holder of a Debenture may be treated as its owner for all purposes.
CONVERSION RIGHTS
The holders of the Debentures are entitled at any time after the
Registration Date and prior to maturity, subject to prior redemption, to
convert the Debentures or portions thereof (which are in denominations of
$1,000 or multiples thereof) into shares of Common Stock at the conversion
price set forth in the Debentures (subject to adjustments as described below).
No payment or adjustment will be made for accrued interest on a converted
Debenture. If any Debenture not called for redemption is converted between a
record date for the payment of interest and the next succeeding interest
payment date, such Debenture must be accompanied by funds equal to the interest
payable to the registered holder on such interest payment date on the principal
amount so converted. The Company will not issue fractional interests in shares
of Common Stock upon conversion of the Debentures and instead will deliver a
check for the fractional share based upon the market value of the Common Stock
on the last trading date prior to the conversion date. If the Debentures are
called for redemption, conversion rights will expire at the close of business
on the redemption date, unless the Company defaults in payment due upon such
redemption.
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The conversion price is subject to adjustments, as set forth in the
Indenture, in certain events, including the payment of dividends or
distributions on the Company's Common Stock in shares of capital stock;
subdivisions or combinations of the Common Stock into a greater or smaller
number of shares; reclassification of the shares of Common Stock resulting in
an issuance of any shares of the Company's capital stock; distribution of
rights or warrants to all holders of Common Stock entitling them to purchase
Common Stock at less than the then current price at that time; and the
distribution to all holders of Common Stock of assets, excluding certain cash
dividends and distributions, or debt securities or any rights or warrants to
purchase securities of the Company; provided, however, that no adjustment will
be required if holders of the Debentures receive notice of and are allowed to
participate in such transactions. No adjustment will be required for rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest, or for a change in the par value of the Common Stock. To the
extent that Debentures become convertible into cash, no adjustment will be
required thereafter as to cash. No adjustment in the conversion price need be
made unless such adjustment would require a change of at least one percent
(1.0%) in the conversion price; however, any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. The Company may voluntarily reduce the conversion price
for a period of time.
If the Company pays dividends on the Common Stock in shares of capital
stock or subdivides or combines the Common Stock or issues by reclassification
of its Common Stock any shares of its capital stock or merges with, or transfer
or leases substantially all of its assets to, another corporation or trust, the
holders of the Debentures then outstanding will be entitled thereafter to
convert such Debentures into the kind and amount of shares of capital stock,
other securities, cash or other assets which they would have owned immediately
after such event had such Debentures been converted before the effective date
of the transaction.
Any Debentures called for redemption, unless surrendered for conversion on
or before the close of business on the redemption date, are subject to being
purchased from the holder of such Debentures at the redemption price by one or
more investment banks or other purchasers who may agree with the Company to
purchase such Debentures and convert them into Common Stock of the Company.
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures will be subordinated and
junior in right of payment to the extent set forth in the Indenture to the
prior payment in full of amounts then due on all Senior Indebtedness. No
payment shall be made by the Company on account of principal of (or premium, if
any) or interest on the Debentures or on account of the purchase or other
acquisition of Debentures, if there shall have occurred and be continuing a
default with respect to any Senior Indebtedness permitting the holders to
accelerate the maturity thereof, or with respect to any Senior Indebtedness and
such default shall be the subject of a judicial proceeding, unless and until
such default or event of default shall have been cured or waived or shall have
ceased to exist. By reason of these provisions, in the event of default on any
Senior Indebtedness, whether now outstanding or hereafter issued, payments of
principal of (and premium, if any) and interest on the Debentures may not be
permitted to be made until such Senior Indebtedness is paid in full, or the
event of default on such Senior Indebtedness is cured or waived.
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<PAGE> 30
Upon any acceleration of the principal of the Debentures or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization or similar proceedings of the Company,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the holders of the Debentures or the Trustee are entitled to receive or retain
any assets so distributed in respect of the Debentures. By reason of this
provision, in the event of insolvency, holders of the Debentures may recover
less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
interest on and all other amounts payable under or in respect of Indebtedness
(as defined in the Indenture) of the Company. There is no limit on the amount
of Senior Indebtedness that the Company may incur.
OPTIONAL REDEMPTION
The Debentures will be subject to redemption, as a whole or in part, at
any time or from time to time commencing after February 5, 2000 at the option
of the Company on at least 30 days' and not more than 60 days' prior notice by
mail. The redemption prices (expressed as a percentage of principal amount)
are as follows for the 12-month period beginning after February 5 of the
following years:
<TABLE>
<CAPTION>
Redemption
Year Price
- ---- -----
<S> <C>
2000 103%
2001 102%
2002 101%
2003 and
thereafter 100%
</TABLE>
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and obligations
of the Company with respect to the Debentures and the rights of holders of the
Debentures may only be modified by the Company and the Trustee with the written
consent of the holders of not less than 66-2/3% in principal amount of the
outstanding Debentures. However, without the consent of each Holder of any
Debenture affected, an amendment, waiver or supplement may not (a) reduce the
amount of Debentures whose holders may consent to an amendment; (b) reduce the
rate or change the time of payment of interest on any Debenture; (c) reduce the
principal of or change the fixed maturity of any Debenture; (d) make any
Debenture payable in money other than that stated in the Debenture; (e) change
the provisions of the Indenture regarding the right of the holders of a
majority of the Debenture to waive defaults under the Indenture or impair the
right of any holder of Debentures to institute suit for the enforcement of any
payment of principal and interest on the Debentures on and after their
respective due dates; or (f) make any change that adversely affects the right
to convert any Debenture.
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<PAGE> 31
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following is a summary of certain provisions of the Indenture relating
to events of default, notice and waiver.
The following are Events of Default under the Indenture with respect to
the Debentures: (i) default in the payment of interest on the Debentures when
due and payable which continues for 30 days; (ii) default in the payment of
principal of (and premium, if any) on the Debentures when due and payable, at
maturity, upon redemption or otherwise, which continues for five business days;
(iii) failure to perform any other covenant of the Company contained in the
Indenture or the Debentures which continues for 60 days after notice as
provided in the Indenture; (iv) acceleration of any indebtedness for money
borrowed (including obligations under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles but
not including any indebtedness or obligation for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $1.0 million,
whether existing on the date of the execution of the Indenture or thereafter
created, if such acceleration is not annulled within ten days after notice to
the Company of such acceleration; and (v) certain events of bankruptcy,
insolvency or reorganization relating to the Company.
If an Event of Default occurs and is continuing with respect to the
Debentures, either the Trustee or the Holders of at least a majority in
principal amount of the Debentures may declare all of the Debentures to be due
and payable immediately.
The Company will not (i) declare or pay any dividends or make any
distribution to holders of its capital stock or (ii) purchase, redeem or
otherwise acquire or retire for value any of its Common Stock, or any warrants,
rights or options, to purchase or acquire any shares of its Common Stock (other
than the Debentures or any other convertible indebtedness of the Company that
is neither secured nor subordinated to the Debentures), if at the time any of
the aforementioned Events of Default has occurred and is continuing or would
exist immediately after giving effect to such action.
Pursuant to the Indenture, the Trustee may require indemnity satisfactory
to it before it enforces the Indenture or the Debentures. Subject to certain
limitations, holders of a majority in principal amount of the Debentures may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Debentures notice of any default (except a default
in payment of principal or interest) if it determines that withholding notice
is in their interests. The Company is required to file with the Trustee
annually an officer's statement as to the absence of defaults in fulfilling any
of its obligations under the Indenture.
No consent of the holders of the Debentures is required for the Company to
consolidate with or merge into or transfer or lease substantially all of its
assets to another corporation or trust which assumes the obligations of the
Company under the Indenture and Debentures or for any reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code; nor is any such
consent of holders of the Debentures required for any amendment of the
Indenture or the Debentures by the Company or the Trustee to cure any
ambiguity, defect or inconsistency, or to provide for uncertificated Debentures
in addition to certified Debentures, or to make
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<PAGE> 32
any change that does not adversely affect the right of a holder of a
Debenture.
Subject to certain conditions, any person having a beneficial interest in
the Rule 144A Global Security may, upon request to the Trustee, exchange such
beneficial interest for Debentures in the form of certificate Debentures. Upon
any such issuance, the Trustee is required to register such certificated
Debentures in the name of, and cause the same to be delivered to, such person
or persons (nominee of any thereof). All such certificated Debentures will be
subject to the legend requirements set forth in the Indenture. In addition, if
(i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Debentures in the form of certificated Debentures under the Indenture, then,
upon surrender by the Rule 144A Global Security Holder of its Rule 144A Global
Security, Debentures in certificated form will be issued to each person that
the Rule 144A Global Security Holder and the Depositor identify as being the
beneficial owner of the related Debentures.
Neither the Company nor the Trustee will be liable for any delay by the
Rule 144A Global Security Holder or the Depository in identifying the
beneficial owners of Debentures, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from
the Rule 144A Global Security Holder or the Depository for all purposes.
The Debentures may not be sold or otherwise transferred except in
accordance with the provisions set forth in the Indenture.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not merge or consolidate with,
or sell or convey all, or substantially all, of its assets to another person
unless such person is a company or a trust; such person assumes by supplemental
indenture all the obligations of the Company under the Debentures and the
Indenture; and immediately after the transaction no default or Event of Default
shall exist.
MARKETABILITY
At present there is no established trading market for the Debentures. The
Company does not intend to list the Debentures on Nasdaq or on any national
securities exchange. No assurance can be given as to the liquidity of the
trading market for the Debentures. See "Risk Factors."
GOVERNING LAW
The Indenture and the Debentures are governed by and construed in
accordance with the laws of the State of New York.
REGISTRATION RIGHTS AGREEMENT
The Company agreed to use its best efforts, subject to the receipt of
necessary information from the holders thereof, to prepare and file with the
Commission a Registration Statement with respect to the resale of the
Debentures and the Common Stock issuable on conversion thereof from time to
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<PAGE> 33
time in the over-the-counter market, in privately negotiated transactions or,
with respect to the Common Stock only, on Nasdaq, as the case may be. The
Company has also agreed to prepare and file such amendments and supplements to
the Registration Statement as may be necessary to keep the Registration
Statement effective until all the Debentures and the Common Stock issuable on
conversion thereof have been sold thereby or until the Debentures and the
Common Stock issuable on conversion thereof are no longer, by reason of Rule
144(k) promulgated under the Securities Act or any other rule of similar
effect, required to be registered for the sale thereof by the holders thereof.
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<PAGE> 34
LEGAL MATTERS
Certain legal matters relating to the validity of the Securities offered
hereby will be passed upon for the Company by Hodgson, Russ, Andrews, Woods &
Goodyear LLP, Buffalo, New York.
EXPERTS
The balance sheet as of September 30, 1996 and the related statements of
income, shareholders' equity, and cash flows for the years ended September 30,
1996 and 1995 of Rent-Way, Inc., and the balance sheets as of December 31, 1996
and 1995 and the related statements of operations, shareholders' equity and cash
flows for the years then ended of Perry Electronics, Inc. (dba Rental King), all
incorporated by reference in this Registration Statement and Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING SECURITY
HOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES
OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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<PAGE> 35
PROSPECTUS
RENT-WAY, INC.
1,534,458 SHARES OF COMMON STOCK
This Prospectus relates to the public offering by the holders thereof (the
"Selling Security Holders") of 1,534,458 shares of Common Stock, without par
value (the "Common Stock") of Rent-Way, Inc., a Pennsylvania corporation (the
"Company"). The Common Stock is being offered for the account of the Selling
Security Holders and the Company will not receive any proceeds from this
offering.
The Common Stock offered by the Selling Security Holders consists of
322,500 shares underlying outstanding warrants to purchase Common Stock of the
Company, 704,225 shares issuable upon conversion of the Company's 10.0%
Convertible Subordinated Notes due 2002, and 507,733 shares issued as full or
partial consideration in connection with certain acquisitions by the Company.
See "Selling Security Holders" and "Plan of Distribution". The Common Stock is
traded on the Nasdaq National Market ("Nasdaq") under the symbol "RWAY." On
June 12, 1997, the last sale price of the Common Stock, as reported by Nasdaq,
was $14.625 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
The Selling Security Holders, acting as principals for their own account,
directly, through agents designated from time to time, or through dealers or
underwriters also to be designated, may sell all or a portion of the Common
Stock offered hereby from time to time on terms to be determined at the time of
sale, including, without limitation, in routine brokerage transactions in the
over-the-counter market at prices and terms prevailing at the time of sale. The
aggregate proceeds to the Selling Security Holders from the sale of the Common
Stock offered hereby will be the purchase price of such Common Stock less
commissions, if any. For information concerning indemnification arrangements
between the Company and the Selling Security Holders, see "Plan of
Distribution."
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 13, 1997
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<PAGE> 36
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the United States Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company may
be inspected at the public reference facilities of the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New
York Regional Office of the Commission, Seven World Trade Center, Suite 1300,
New York, New York 10048, and at the Chicago Regional Office of the Commission,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Place, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a World Wide Web site on the
Internet at http:www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, the Company's Common Stock is traded on
Nasdaq and the Company's reports, proxy statements and information statements
and other information filed with Nasdaq can be inspected at the Offices of
Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to
the registration of the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained in this
Prospectus or in any document incorporated by reference herein as to the
contents of any contract or other documents referred to herein or therein are
not necessarily complete and, in each instance, reference is made to the copy
of such documents filed as an exhibit to the Registration Statement or such
other documents, which may be obtained from the Commission as indicated above
upon payment of the fees prescribed by the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1996; (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1996;
(iii) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; (iv) the Company's Current Report on Form 8-K dated January 7, 1997;
(v) the Company's Current Report on Form 8-K dated February 21, 1997 and
Amendment No. 1 thereto on Form 8-K/A dated April 21, 1997; (vi) the Company's
Proxy Statement dated February 10, 1997 related to the Annual Meeting of
Shareholders held on March 12, 1997; and (vii) the description of the Company's
capital stock contained in the Company's Registration Statement on Form 8-A
dated August 19, 1993, including any amendment or reports filed for the purpose
of updating such description. In addition, each document filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to termination of this offering shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date such document is filed with the Commission.
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<PAGE> 37
Any statement contained herein, or any document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of the Registration Statement or this
Prospectus. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference. This Prospectus
incorporates documents by reference which are not presented herein or delivered
herewith. These documents (other than exhibits thereto) are available without
charge, upon written or oral request by any person to whom this Prospectus has
been delivered, from Jeffrey A. Conway, Chief Financial Officer, Rent-Way,
Inc., 3230 West Lake Road, Erie, Pennsylvania 16505, telephone number (814)
836-0618.
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<PAGE> 38
RISK FACTORS
Prospective investors should carefully review the following factors,
together with the information set forth elsewhere in this Prospectus, prior to
purchasing any Common Stock offered hereby.
ACQUISITION RISKS
The continued growth of the Company will depend, in part, on the Company's
ability to acquire additional rental-purchase stores on favorable terms, to
enhance their performance and to integrate the acquired stores into the
Company's operations. The Company will compete for acquisition opportunities
with companies that have significantly greater financial and other resources.
There can be no assurance that the Company will be able to locate or acquire
suitable acquisition candidates, that acquisition candidates, once located,
will be acquired by the Company on terms comparable with terms available to its
acquisition competitors, or that any operations that are acquired can be
effectively and profitably integrated into the Company's existing operations.
Furthermore, future acquisitions may negatively impact the Company's operating
results, particularly during the periods immediately following an acquisition.
The Company may acquire operations that are unprofitable or have inconsistent
profitability. The inability to improve the profitability of such acquired
stores could have a material adverse effect on the Company's results of
operations and financial condition. The Company's acquisition strategy is also
likely to place significant demands on the Company's management and its
financial resources.
SIGNIFICANT CONTINUING CASH REQUIREMENTS ASSOCIATED WITH COMPANY'S
ACQUISITION STRATEGY
The Company's cash requirements have been and will continue to be
significant. In fiscal years 1994, 1995 and 1996, the Company used $0.5
million, $1.7 million and $8.6 million for acquisitions, respectively. In the
first quarter of 1997, the Company completed the acquisition of Bill Coleman
TV, Inc. and Perry Electronics, Inc. d/b/a Rental King using $6.5 million and
$17.9 million in cash, respectively. The continued pursuit of the Company's
acquisition strategy will require significant additional capital resources.
Capital is needed not only for acquisitions, but also to service
acquisition-related debt and for the effective integration, operation and
expansion of acquired rental-purchase stores. There can be no assurances that
capital will be available to the Company in the future or, if available, on
terms acceptable to it.
RISKS ASSOCIATED WITH SUBSTANTIAL LEVERAGE; INABILITY TO REFINANCE
INDEBTEDNESS
The Company has incurred substantial indebtedness to finance the
acquisition of rental-purchase stores. The Company had debt of approximately
$46.3 million at March 31, 1997 and its ratio of debt to total shareholders'
equity was approximately 140%. At March 31, 1996 and March 31, 1995, the
Company's ratio of debt to total shareholders' equity was 27% and 177%,
respectively. There can be no assurances that the Company will have the ability
to service its debt. Nor can there by any assurances that the Company will be
able to refinance its debt at maturity on terms acceptable to it.
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<PAGE> 39
RISKS ASSOCIATED WITH INTANGIBLE ASSETS
A substantial portion of the Company's assets consist of intangible
assets, including goodwill and covenants not to compete relating to the
acquisition of rental-purchase stores. At March 31, 1997, the Company had
$42.2 million of intangible assets of these types, a substantial portion of the
Company's $89.3 million in total assets at such date. The Company expects
goodwill on its balance sheet to increase in the future in connection with
additional acquisitions. These additions to goodwill will have an adverse
impact on earnings as goodwill will be amortized against earnings. In the event
of any sale or liquidation of the Company, there can be no assurance that the
value of the Company's intangible assets will be realized. In addition, the
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining balance of intangible assets are recoverable. If
and when factors indicate that these intangible assets should be evaluated for
possible impairment, the Company may be required to reduce the carrying value
of its intangible assets. Such a reduction could have a material adverse effect
on the results of operations of the Company during the periods in which such
reduction is recognized.
RISKS ASSOCIATED WITH SIGNIFICANT GOVERNMENT REGULATION OF THE RENTAL-
PURCHASE INDUSTRY
Forty-five states have enacted laws regulating or otherwise impacting the
rental-purchase transaction, including all the states in which the Company's
stores are located, other than New Jersey. These laws generally require certain
contractual and advertising disclosures concerning the nature of the
transaction and also provide varying levels of substantive consumer protection,
such as requiring a grace period for late payments and contract reinstatement
rights in the event the agreement is terminated for non-payment. The
rental-purchase laws of some states, including Michigan, New York, Ohio,
Pennsylvania and West Virginia limit the total dollar amount of rentals that
may be charged over the life of the rental-purchase agreement. Michigan law
effectively limits the amount that may be charged under the rental-purchase
agreement to 2.22 times the price that would have been charged had the
merchandise been purchased rather than leased. New York law effectively limit
the amount that may be charged under the rental-purchase agreement to twice the
price that would have been charged had the merchandise been purchased rather
than leased. West Virginia law effectively limits the amount that may be
charged under the rental-purchase agreement to 2.4 times the price that would
have been charged had the merchandise been purchased rather than leased. To the
extent that in connection with the implementation of its business strategies,
the Company acquires or opens new stores in states in which it does not
currently operate, the Company will become subject to rental-purchase laws of
such states. See "Business--Government Regulation."
RISKS ASSOCIATED WITH PARTICIPATION IN HIGHLY COMPETITIVE
RENTAL - PURCHASE INDUSTRY
The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses as well as with rental stores that do not
offer their customers a purchase option. Competition is based primarily on
rental prices and terms, product selection and availability, and customer
service. With respect to consumers who are able to purchase a product for cash
or on credit, the Company also competes with department stores, discount stores
and retail outlets. These competitors may offer an installment sales program or
may compete with the Company simply on the basis of product and price. Several
competitors of the
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<PAGE> 40
Company in the rental-purchase business are national in scope and have
significantly greater financial and operating resources and name recognition
than does the Company. There can be no assurances that the Company will be able
to compete successfully against these competitors. Furthermore, additional
competitors may emerge, especially since the cost of entry into the
rental-purchase business is relatively low. Increased competition may have a
material adverse effect on the Company's revenues and profits. See
"Business--Competition."
CONTROL BY PRINCIPAL SHAREHOLDERS
Gerald A. Ryan and William E. Morgenstern, the Chairman of the Board and
the President and Chief Executive Officer, respectively, of the Company, own or,
have the right to acquire approximately 9.6% and 7.6%, respectively, of the
Company's outstanding Common Stock. As a result, Messrs. Ryan and Morgenstern,
should they act in concert, may be in a position to exercise practical control
over the outcome of actions requiring shareholder approval, including potential
acquisitions, sales and changes in control of the Company.
DEPENDENCE UPON KEY PERSONNEL
The Company's operations and future success are largely dependent upon its
management, and in particular, Mr. Morgenstern, the Company's Chief Executive
Officer. The loss of Mr. Morgenstern's services could have a material adverse
effect on the Company. The Company maintains a $7.0 million policy of life
insurance on Mr. Morgenstern. Such policy secures payment of the Company's
10.0% Convertible Subordinated Notes due 2002 and names Massachusetts Mutual
Life Insurance Company and certain of its affiliates as beneficiary. The
Company maintains no other policies of life insurance on Mr. Morgenstern nor on
other members of management.
LACK OF CASH DIVIDENDS ON COMMON STOCK
The Company has paid no cash dividends on its Common Stock and does not
contemplate doing so in the foreseeable future.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and By-Laws contain provisions
that could delay, deter or prevent a merger, tender offer or other business
combination or change in control involving the Company that some or a majority
of the shareholders might consider to be in their best interests, including
offers or attempted takeovers that might otherwise result in such shareholders
receiving a premium over the market price of the Common Stock.
EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE OF COMMON STOCK
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of such shares for future sale,
will have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of the Common Stock (including shares issued upon
the exercise of employee stock options or outstanding warrants or upon
conversion of the Company's outstanding Convertible Subordinated Debentures or
Convertible Subordinated Notes), or the perception that such sales could occur,
could adversely affect prevailing market prices for the Common Stock. The
Company has 6,623,620 shares of Common Stock outstanding, of which 4,882,583
shares are freely tradeable without limitation.
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<PAGE> 41
As of March 31, 1997, approximately 3,704,722 shares of Common Stock were
reserved for issuance pursuant to the exercise of outstanding stock options and
warrants and the conversion of the Convertible Subordinated Notes and the
Debentures. Of these shares, approximately 3,563,910 shares are covered under
Registration Statements, including the Registration Statement of which this
Prospectus forms a part. As a result, these shares when issued generally will
be freely tradeable. An additional 792,266 outstanding shares of Common Stock
issued in connection with acquisitions by the Company are covered under such
Registration Statement. The existence of this substantial overhang of shares of
Common Stock covered under Registration Statements could adversely affect
prevailing market prices for the Common Stock.
42
<PAGE> 42
BUSINESS
GENERAL
The Company has been engaged in the rental-purchase business since 1981
and currently operates 191 stores that provide brand name merchandise in 14
states and the District of Columbia. The Company offers home entertainment
equipment, furniture, major appliances and jewelry to customers under
full-service rental-purchase agreements that generally allow the customer to
obtain ownership of the merchandise at the conclusion of an agreed upon rental
period. Management believes that these rental-purchase arrangements appeal to a
wide variety of customers by allowing them to obtain merchandise that they
might otherwise be unable or unwilling to obtain due to insufficient cash
resources or lack of access to credit or because they have a temporary,
short-term need for the merchandise or a desire to rent rather than purchase
the merchandise.
The Company was formed in 1981 to operate a rental-purchase store in Erie,
Pennsylvania. By 1993, as a result of acquisitions and new store openings, the
Company was operating 19 stores in three states and had completed its initial
public offering. As of December 31, 1996, principally as a result of
acquisitions, the Company was operating 108 stores in 11 states and the
District of Columbia.
The Company's principal executive offices are located at 3230 West Lake
Road, Erie, Pennsylvania 16505, and its telephone number is (814) 836-0618.
RECENT ACQUISITIONS
On January 2, 1997, the Company acquired all of the outstanding stock
of Bill Coleman TV, Inc. ("Bill Coleman TV") for a purchase price consisting of
approximately $6.7 million in cash and an option to purchase 25,000 shares of
the Company's Common Stock at an exercise price of $8.875 per share. Bill
Coleman TV operated 15 rental-purchase stores in Michigan and had revenues of
approximately $8.6 million for the twelve months ended December 31, 1996. On
February 6, 1997, the Company acquired all of the outstanding stock of Perry
Electronics, Inc. d/b/a Rental King ("Rental King"). Rental King operated 70
rental-purchase stores in Ohio, Michigan, Florida, Colorado, Indiana, West
Virginia and Kentucky and had revenues of approximately $24.0 million for the
twelve months ended December 31, 1996. The purchase price was $23.0 million
consisting of cash and the assumption of liabilities, subject to downward
adjustment following a post-closing audit.
Management believes that the acquisitions of Bill Coleman TV and Rental
King provide the Company with certain strategic benefits including increased
market share and operating efficiencies in certain regions and improved
economies of scale for certain corporate expenses, including purchasing and
advertising. Management believes that improved merchandising, marketing and
operational methods should improve performance of the acquired stores. There
can be no assurance, however, that the acquired stores will perform in
accordance with expectations or that the Company will not encounter
unanticipated problems or liabilities in connection with these stores. See
"Risk Factors--Acquisition Risks."
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<PAGE> 43
THE RENTAL-PURCHASE INDUSTRY
Begun in the mid-to-late 1960s, the rental-purchase business is a
relatively new segment of the retail industry offering an alternative to
traditional retail installment sales. The rental-purchase industry provides
brand name merchandise to customers generally on a week-to-week or
month-to-month basis under a full service rental agreement, which in most cases
includes a purchase option. The customer may cancel the rental agreement at any
time without further obligation by returning the product to the rental-purchase
operator.
APRO, the industry's trade association, estimated that at the end of 1995
the rental-purchase industry comprised approximately 7,500 stores providing 5.4
million products to 2.8 million households in the United States. Management
believes that its customers generally have annual household incomes ranging
from $20,000 to $40,000. Based on APRO estimates, the rental-purchase industry
had gross revenues of $3.9 billion in 1995. The rental-purchase industry is
highly fragmented. Based on information from APRO and management estimates, the
ten largest industry participants account for approximately 37.5% of total
industry stores, with the largest industry participant, Rent-A-Center,
accounting for approximately 50.0% of such stores, and management estimates
that the majority of the industry consists of operations with fewer than 20
stores. See "--Strategy", "--Competition."
Rental-purchase operators historically have been financed by a few
commercial lenders who specialize in the industry. In recent years, however, a
number of these lenders have reduced the amount of debt their customers can
carry, limited their business with new operators in the rental-purchase
industry or withdrawn from the market altogether. Consequently, many
rental-purchase dealers have either attempted to reduce debt by investing more
equity in their businesses or attempted to sell their stores and rental
contracts to other dealers having greater financial resources. Management
believes that this trend toward consolidation of operations in the industry
presents an opportunity for well-capitalized rental-purchase operators to
acquire additional stores on favorable terms. In addition, management believes
that many smaller industry operators lack the management information systems
necessary to manage a large, multi-state rental-purchase operation efficiently
and profitably.
STRATEGY
Management believes that the Company's continued success depends on
successful implementation of the following business strategies:
Acquiring and Opening New Stores
The Company currently intends to expand its operations by acquiring
existing stores and opening new stores, both within its present market area and
in geographic regions not currently served by the Company. The majority of that
expansion is expected to be accomplished through acquisitions. The Company
believes that acquisitions can effectively increase the Company's market share
and operating efficiencies while simultaneously expanding its customer base. In
addition, in pursuing its growth strategies, the Company expects to benefit
from both enhanced purchasing power and the ability to exploit economies of
scale for certain fixed operational expenses. The Company continually reviews
acquisition opportunities, and management believes that a number of acquisition
44
<PAGE> 44
opportunities currently exist. At present, the Company has no plans, proposals,
arrangements or understandings with respect to significant acquisitions. In
identifying targets for acquisition, the Company intends to focus on operations
that complement the Company's existing markets, while remaining open to the
possibility of making acquisitions in other areas. The Company has not
established formal criteria for potential acquisitions. Generally, however, the
Company seeks to acquire rental - purchase businesses that operate profitably
and are located in geographic markets that complement the Company's existing
stores. The Company seeks to acquire such businesses at purchase prices that
will permit the Company a prompt return on its investment in the form of
increased earnings. The Company has no formal policy with respect to
acquisitions with related entities. To date, no such acquisitions have been
considered nor does the Company anticipate considering such acquisitions in the
future. Management believes that its senior management has a level of ability
and experience that provides the Company with a competitive advantage in the
evaluation and consummation of acquisition opportunities. Although the present
state of the rental-purchase industry makes acquisition opportunities more
economically attractive than the opening of new stores, management anticipates
that the consolidation of the industry will cause this attractiveness to
diminish over time.
Customer-Focused Philosophy
Management believes that through the continued adherence to its "Welcome,
Wanted and Important" business philosophy it should be able to increase its new
and repeat customer base, and thus the number of units it has on rent, thereby
increasing revenues and profits. The "Welcome, Wanted and Important" philosophy
is a method by which the Company seeks to create a store atmosphere conducive
to customer loyalty. The Company attempts to create this atmosphere through the
effective use of advertising and merchandising strategies, by maintaining the
clean and well-stocked appearance of its stores, and by providing a high level
of customer service (such as the institution of a 1-800-RENTWAY complaint and
comment line). The Company's advertising emphasizes brand name merchandise from
leading manufacturers. In addition, merchandise selection within each product
category is periodically updated to incorporate the latest offerings from
suppliers. All acquired stores are promptly evaluated and, if necessary,
remodeled. Services provided by the Company to the customer include home
delivery and ordinary maintenance and repair services during the term of the
contract at no additional charge. Store managers also work closely with each
customer in choosing merchandise, setting delivery dates and arranging a
suitable payment schedule. As part of the "Welcome, Wanted and Important"
philosophy, store managers are empowered, encouraged and trained to make
decisions regarding store operations subject only to certain Company-wide
operating guidelines and general policies.
Expanding the Company's Product Lines
One of the Company's principal strategies is to provide the rental-
purchase customer with the opportunity to obtain merchandise of higher quality
than the merchandise available from its competitors on competitive terms. To
this end, the Company attempts to maintain a broad selection of products while
emphasizing higher priced merchandise. The Company intends to continue
expanding its offerings of higher priced products in all product areas.
Management believes that previous offerings of higher priced products have
succeeded in both increasing the Company's profitability and attracting new
customers to the Company's existing stores. In addition, the Company
selectively tests new merchandise such as personal computers and cellular
phones. Management believes that opportunities exist to provide additional or
non-traditional merchandise to its customers.
Monitoring Store Performance
Each store is provided with a management information system that allows
management to track rental and collection activity on a daily basis. The system
generates detailed reports that track inventory movement within each
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<PAGE> 45
product category and the number and frequency of past due accounts and other
collection activity. In addition, physical inventories are regularly conducted
at each store to ensure the accuracy of the management information system data.
Senior management monitors this information to ensure adherence to established
operating guidelines. Management believes the Company's management information
systems enhance its ability to monitors and affect the operating performance of
existing stores and to integrate and improve the performance of newly acquired
stores.
Results-Oriented Compensation
Management believes that an important reason for its positive financial
performance and growth has been the structure of its management compensation
system, which provides incentives for both regional and store managers to
increase store revenues and profits. As a result, a significant portion of the
Company's regional and store managers' total compensation is dependent upon
store performance. As further incentive, the Company grants many of its
managers stock options in the Company. Management believes that the Company's
emphasis on incentive-based compensation has been instrumental in the Company's
ability to attract, retain and motivate its regional and store managers.
Manager Training
Management believes that well-trained store managers are important to the
Company's efforts to maximize individual store performance. The Company employs
two full-time trainers who conduct classroom programs in the areas of sales,
store operations and personnel management. These training programs often
continue for several months and culminate in an exam. The Company also offers
its managers the opportunity to attend, at Company expense, leadership and
management programs offered by leading management and organization experts.
OPERATIONS
Company Stores
The Company currently operates 191 stores in 14 states and the District of
Columbia, as follows:
<TABLE>
<CAPTION>
Location Number of Stores
<S> <C>
Ohio 57
Michigan 32
Pennsylvania 21
New York 20
Indiana 18
Maryland 9
Illinois 8
Virginia 7
Florida 7
Delaware 4
Colorado 3
West Virginia 2
Kentucky 1
New Jersey 1
Washington, D.C. 1
</TABLE>
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<PAGE> 46
The Company's stores average 3,000 square feet in floor space and are
generally located in strip shopping centers in or near low to middle income
neighborhoods. Often, such shopping centers offer convenient free parking to
the Company's customers. The Company's stores are generally uniform in interior
appearance and design and display of available merchandise. The stores have
separate storage areas but generally do not use warehouse facilities. In
selecting store locations, the Company uses a variety of market information
sources to locate areas of a town or city that are readily accessible to low
and middle income consumers. The Company believes that within these areas the
best locations are in neighborhood shopping centers that include a supermarket.
The Company believes this type of location makes frequent rental payments at
its stores more convenient for its customers.
Product Selection
The Company offers brand name home entertainment equipment (such as
television sets, video recorders, video cameras and stereos), furniture, major
appliances and jewelry. Major appliances offered by the Company include
refrigerators, ranges, washers and dryers. The Company's product line currently
includes the Zenith, RCA, Pioneer and JVC brands in home entertainment
equipment and the Crosley and Kenmore brands in major appliances. The Company
closely monitors customer rental requests and adjusts its product mix to offer
rental merchandise desired by customers.
For the year ended September 30, 1996, payments under rental-purchase
contracts for home entertainment products accounted for approximately 44.0%
furniture for 27.0%, appliances for 28.0%, and jewelry for 1.0% of the
Company's revenues. Customers may request either new merchandise or previously
rented merchandise. Previously rented merchandise is typically offered at the
same weekly or monthly rental rate as is offered for new merchandise, but with
an opportunity to obtain ownership of the merchandise after fewer rental
payments. Weekly rentals currently range from $4.59 to $44.95 for home
entertainment equipment, from $1.99 to $49.99 for furniture, from $4.59 to
$38.99 for major appliances and $3.99 to $30.99 for jewelry.
Rental-Purchase Agreements
Merchandise is provided to customers under written rental-purchase
agreements that set forth the terms and conditions of the transaction. The
Company uses standard form rental-purchase agreements which are reviewed by
legal counsel and customized to meet the legal requirements of the various
states in which they are intended to be used. Generally, the rental- purchase
agreement is signed at the store, but may be signed at the customer's residence
if the customer orders the product by telephone and requests home delivery.
Customers may elect to rent merchandise on a week- to-week or month-to-month
basis. The rental for the first week or month and each succeeding week or month
during the term of the agreement is payable in advance. At the end of the
initial and each subsequent rental period, the customer retains the merchandise
for an additional week or month by paying the required rental or may terminate
the agreement without further obligation. If the customer decides to terminate
the agreement, the merchandise is returned to the store and is then available
for rent to another customer. The Company retains title to the merchandise
during the term of the rental-purchase agreement. If a customer rents
merchandise for a sufficient period of time, usually 12 to 24 months, ownership
is transferred to the customer without further payments being required.
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<PAGE> 47
Rental payments are made in cash or by check, money order or credit card. The
Company does not extend credit. See "--Government Regulation."
Product Turnover
Generally, a minimum rental term of between 12 and 24 months is required
to obtain ownership of new merchandise. Based upon merchandise returns for the
year ended September 30, 1996, the Company believes that the average period of
time during which customers rent merchandise is 16 to 17 weeks. However,
turnover varies significantly based on the type of merchandise being rented,
with certain consumer electronic products, such as camcorders and VCRs,
generally being rented for shorter periods, while appliances and furniture are
generally rented for longer periods. At September 30, 1996, the Company's
stores contained an average of 1121 items of merchandise per store, of which
approximately 829 items were subject to rental-purchase agreements and
approximately 292 items were available in inventory, which management believes
is representative of the average inventory on rent and idle inventory at any
given time. Each rental-purchase transaction requires delivery and pickup of
the product, weekly or monthly payment processing and, in some cases, repair
and refurbishment of the product. In order to cover the relatively high
operating expenses generated by greater product turnover, rental-purchase
agreements require larger aggregate payments than are generally charged under
installment purchase or credit plans.
Customer Service
The Company offers same day delivery and installation of its merchandise
at no additional cost to the customer. The Company also provides any required
service or repair without charge, except for damage in excess of normal wear
and tear. If the product cannot be repaired at the customer's residence, the
Company provides a temporary replacement while the product is being repaired.
The customer is fully liable for damage, loss or destruction of the
merchandise, unless the customer purchases an optional loss/damage waiver. Most
of the products offered by the Company are covered by a manufacturer's warranty
for varying periods, which, subject to the terms of the warranty, is
transferred to the customer in the event that the customer obtains ownership.
Repair services are provided through in-house service technicians, independent
contractors or under factory warranties. The Company recently introduced
Rent-Way Plus, a fee-based membership program that provides special loss and
damage protection and an additional two years of service protection on rental
merchandise, preferred treatment in the event of involuntary job loss,
accidental death and dismemberment insurance and discounted emergency roadside
assistance, as well as other discounts on merchandise and services.
Collections
Management believes that effective collection procedures are important to
the Company's success in the rental-purchase business. The Company's collection
procedures increase the revenue per product with minimal associated costs,
decrease the likelihood of default and reduce charge-offs. Senior management,
as well as store managers use the Company's computerized management information
system to monitor cash collections on a daily basis. In the event a customer
fails to make a rental payment when due, store management will attempt to
contact the customer to obtain payment and reinstate the contract or will
terminate the account and arrange to regain possession of the merchandise.
However, store managers
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<PAGE> 48
are given latitude to determine the appropriate collection action to be pursued
based on individual circumstances. Depending on state regulatory requirements,
the Company charges for the reinstatement of terminated accounts or collects a
delinquent account fee. Such fees are standard in the industry and may be
subject to state law limitations. See "-- Government Regulation." Despite the
fact that the Company is not subject to the federal Fair Debt Collection
Practices Act, it is the Company's policy to abide by the restrictions of such
law in its collection procedures. Charge-offs due to lost or stolen merchandise
were approximately 2.7% and 3.6% of the Company's revenues for the years ended
September 30, 1996 and 1995, respectively. The three-year average charge-off
rate for the largest chains in the industry reporting to APRO in 1996 was 2.3%.
Management
The Company's stores are organized geographically with several levels of
management. At the individual store level, each store manager is responsible
for customer and credit relations, deliveries and pickups, inventory
management, staffing and certain marketing efforts. A Company store normally
employs one store manager, one assistant manager, two account managers, one
full-time office manager, one full-time delivery and installation technician.
The staffing of a store depends on the number of rental-purchase contracts
serviced by the store. Each store manager reports to one of 25 regional
managers each of whom typically oversees six to eight stores. Regional managers
are primarily responsible for monitoring individual store performance and
inventory levels within their respective regions. The Company's regional
managers, in turn, report to three Directors of Operations, located at the
Company's headquarters, who monitor the operations of their respective regions
and, through the regional managers, individual store performance. The Directors
of Operations report to the Vice President and Chief Operating Officer of the
Company who is responsible for overall Company-wide store operations.
Senior management at the Company's headquarters directs and coordinates
purchasing, financial planning and controls, management information systems,
employee training, personnel matters and acquisitions. Headquarters personnel
also evaluate the performance of each store and conduct on-site reviews.
MANAGEMENT INFORMATION SYSTEM
The Company believes that its management information system provides it
with a competitive advantage over many small rental-purchase operations. The
Company uses an integrated computerized management information and control
system to track each unit of merchandise and each rental-purchase agreement.
The Company's system also includes extensive management software and report
generating capabilities. The reports for all stores are reviewed daily by
senior management and any irregularities are addressed the following business
day. Each store is equipped with a computer system that tracks individual
components of revenue, each item in idle and rented inventory, total items on
rent, delinquent accounts and other account information. The Company
electronically gathers each day's activity report through the computer located
at the headquarters office. This system provides the Company's management with
access to operating and financial information about any store location or
region in which the Company operates and generates management reports on a
daily, weekly, month-to-date and year-to-date basis for each store and every
rental-
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<PAGE> 49
purchase transaction. Utilizing the management information system, senior
management, regional managers and store managers can closely monitor the
productivity of stores under their supervision compared to Company- prescribed
guidelines. This system has enabled the Company to expand its operations while
maintaining a high degree of control over cash receipts, inventory, merchandise
units in repair and customer transactions. To date, the Company has
successfully integrated all of its acquired stores into its management
information system.
PURCHASING AND DISTRIBUTION
The Company's general product mix is determined by senior management,
based on an analysis of customer rental patterns and introduction of new
products on a test basis. Individual store managers are responsible for
determining the particular product selection for their store from a list of
products approved by senior management. All purchase orders are executed
through regional managers and the Company's purchasing department to insure
that inventory levels and mix throughout the store regions are appropriate. The
Company maintains only minimal warehouse space for storage of merchandise, and
merchandise is generally shipped by vendors directly to each store, where it is
held for rental.
The Company purchases its merchandise directly from manufacturers or
distributors. The Company generally does not enter into written contracts with
its suppliers. Although the Company currently expects to continue its existing
relationships, management believes there are numerous sources of products
available to the Company, and does not believe that the success of the
Company's operations is dependent on any one or more of its present suppliers.
MARKETING
The Company promotes its products and services primarily through direct
mail advertising and, to a lesser extent, through television, radio and
secondary print media advertisement. The Company also solicits business by
telephoning former and prospective customers. Company advertisements emphasize
such features as product and brand name selection, prompt delivery and repair,
and the absence of any downpayment, credit investigation or long-term
obligation. Advertising expense as a percentage of revenue for the year ended
September 30, 1996 was approximately 4.1%. As the Company obtains new stores in
its existing markets, the advertising expenses of each store in the market can
be reduced by listing all stores in the same market-wide advertisement.
COMPETITION
The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses as well as rental stores that do not
offer their customers a purchase option. Competition is based primarily on
rental rates and terms, product selection and availability, and customer
service. With respect to consumers who are able to purchase a product for cash
or on credit, the Company also competes with department stores, discount stores
and retail outlets. These competitors may offer an installment sales program or
may compete with the Company simply on the basis of product and price. Several
competitors in the rental-purchase business are national in scope and have
significantly greater financial and operating resources and name recognition
than does the Company. Based upon APRO's most recent information and management
estimates, the Company's
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<PAGE> 50
share of the rental-purchase market, based on number of stores, is
approximately 2.5%.
PROPERTIES
The Company leases all of its stores under operating leases that generally
have terms of three to five years and require the Company to pay real estate
taxes, utilities and maintenance. The Company has optional renewal privileges
on most of its leases for additional periods ranging from three to five years
at rental rates generally adjusted for increases in the cost of living. There
is no assurance that the Company can renew the leases that do not contain
renewal options, or that if it can renew them, that the terms will be favorable
to the Company. Management believes that suitable store space is generally
available for lease and that the Company would be able to relocate any of its
stores without significant difficulty should it be unable to renew a particular
lease. Management also expects that additional space will be readily available
at competitive rates in the event the Company desires to open new stores. The
Company's corporate office in Erie, Pennsylvania, which consists of
approximately 14,000 square feet, was acquired by the Company in 1995. The
Company also leases certain warehouse space in New Castle, Delaware, Buffalo,
New York and Pittsburgh, Pennsylvania, and an office building in Erie,
Pennsylvania, which is used for storage.
PERSONNEL
As of March 31, 1997, the Company had approximately 944 employees, of
whom 58 are located at the corporate office in Erie, Pennsylvania. None of the
Company's employees is represented by a labor union. Management believes its
relations with its employees are good.
GOVERNMENT REGULATION
Forty-five states have enacted laws regulating or otherwise impacting the
rental-purchase transaction, including all of the states in which the Company's
stores are located, other than New Jersey. These laws generally require certain
contractual and advertising disclosures concerning the nature of the
transaction and also provide varying levels of substantive consumer protection,
such as requiring a grace period for late payments and contract reinstatement
rights in the event the agreement is terminated for nonpayment of rentals. No
federal legislation has been enacted regulating rental-purchase transactions.
See "Risk Factors--Government Regulation."
The Company instructs its managers in its required procedures through
training seminars and policy manuals and believes that it has operated in
compliance with the requirements of applicable law in all material respects. In
addition, the Company provides its customers with a toll-free number,
1-800-RENTWAY, to telephone corporate headquarters to report any irregularities
in service or misconduct by its employees. Any such calls are reviewed daily
and are the subject of immediate follow-up investigation by senior management.
SERVICE MARKS
The Company has registered the "Rent-Way" service mark under the Lanham
Act. The Company believes that this mark has acquired significant market
recognition and goodwill in the communities in which its stores are
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<PAGE> 51
located. The service mark "Rent-Way Because There's Really Only One Way" and
the related design have also been registered by the Company.
LEGAL PROCEEDINGS
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of its business. The Company is not currently a
party to any material litigation, except litigation to which it succeeded to as
a result of its acquisition of McKenzie Leasing Corporation in 1995, for which
it is being indemnified and held harmless. The Company has been sued in an
action brought in New York Supreme Court requesting damages in the amount of
$50.0 million arising out of an accident whereby a Company truck struck and
injured a child riding a bike. Such action is being defended by the Company's
insurance carriers and management believes it has sufficient available
insurance coverage such that this action will not have a material adverse
effect on the Company's financial condition or results of operations.
RELATED PARTY TRANSACTIONS
Although the Company has in the past and may in the future enter into
transactions with related parties, the Company has adopted no formal policies,
procedures or controls with respect to such transactions. Generally, however,
the Company requires that any transactions with related entities be on terms no
less favorable to the Company than would be available from an unrelated third
party.
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<PAGE> 52
USE OF PROCEEDS
The Common Stock offered hereby is being offered for the account of the
Selling Security Holders. Accordingly, the Company will receive no proceeds
from sales of such Common Stock.
SELLING SECURITY HOLDERS
The following table sets forth and certain information regarding the
holders of the Common Stock offered hereby based upon information furnished to
the Company:
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of Number of Percentage of
Common Stock Common Stock Shares of Outstanding
Owned Prior Offered for Common Stock Common Stock
to the Sale in the Owned After Owned After
Name Offering Offering the Offering the Offering
---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Stephens Group, Inc. 216,353(1) 216,353 0 --
Linda K. Goble 2,457(1) 2,457 0 --
Larry A. Kugler 12,686(1) 12,686 0 --
David A. Jones 120,295(2) 120,295 0 --
Marc W. Joseffer(3) 155,500(2) 155,500 0 --
Alice A. Joseffer 442(2) 442 0 --
Benjamin J. Jesselson 12/18/80
Trust 10,000(4) 10,000 0 --
Michael G. Jesselson 4/8/71
Trust 10,000(4) 10,000 0 --
Joel E. Marks 10,500(4) 10,500 0 --
J W Charles Financial
Services, Inc. 13,500(4) 13,500 0 --
Steven C. Jacobs 21,000(4) 21,000 0 --
</TABLE>
53
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C>
Bertram Fagenson 10,000(4) 10,000 0 --
Starr Securities Target
Benefit Plan 20,000(4) 20,000 0 --
Richard Kandel 47,500(4)(5) 47,500 0 --
Bernie Fine 15,000(5) 15,000 0 --
Milan Glumidge 7,500(5) 7,500 0 --
Bernard Goldberg 15,000(5) 15,000 0 --
Benjamin Zucker Trust 37,500(5) 37,500 0 --
Massachusetts Mutual Life
Insurance Company 346,810(6) 346,810 0 --
MassMutual Corporate Investors 231,207(6) 231,207 0 --
MassMutual Participation
Investors 115,603(6) 115,603 0 --
MassMutual Corporate Value
Partners Limited 115,603(6) 115,603 0 --
</TABLE>
- --------------------------------------------------
(1) Represents shares acquired in connection with the Company's
acquisition of McKenzie Leasing Corporation in July 1995.
(2) Represents shares acquired in connection with the Company's
acquisition of D.A.M.S.L. Corp. in May 1994.
(3) Mr. Joseffer is a director of the Company and was employed by the
Company from May 1994 through May 1996. Since May 1996, Mr. Joseffer
has acted as a consultant to the Company.
(4) Represents shares issuable on exercise of outstanding warrants to
purchase Common Stock of the Company dated October 30, 1992.
(5) Represents shares issuable on exercise of outstanding warrants to
purchase Common Stock of the Company dated August 12, 1993.
(6) Represents shares issuable on conversion of the Company's 10.0%
Convertible Subordinated Notes due 2002 and issuable on exercise of
outstanding warrants to purchase Common Stock of the Company dated
July 15, 1995.
Except as noted above, none of the Selling Security Holders has had any
position, office or material relationship with the Company within the past
three years, other than as a result of the ownership of the Common Stock, or
the ownership of the securities convertible into or exercisable for the Common
Stock, offered hereby.
54
<PAGE> 54
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Company has been advised by the Selling Security Holders that the Selling
Security Holders may sell all or a portion of the Common Stock offered hereby
from time to time on terms to be determined at the times of such sales,
including without limitation, in brokerage transactions in the over-the-counter
market at prices and terms prevailing at the time of sale. The Selling Security
Holders may also make private sales directly or through a broker or brokers.
Alternatively, any of the Selling Security Holders may from time to time offer
the Common Stock through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the Selling Security Holders and the purchasers of the Common Stock for
whom they may act as agent. The aggregate proceeds to the Selling Security
Holders from the sale of the Common Stock will be the purchase price of such
Common Stock less commissions, if any. There is no assurance that the Selling
Security Holders will sell any or all of the Common Stock offered hereby.
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of such Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under certain circumstances, the Company has agreed to indemnify and hold
the Selling Security Holders harmless against certain liabilities under the
Securities Act that could arise in connection with the sale of the Common Stock
offered hereby.
The Company will pay all expenses incident to this offering of the Common
Stock to the public other than underwriting discounts and selling commissions
and fees.
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Stock offered
hereby will be passed upon for the Company by Hodgson, Russ, Andrews, Woods &
Goodyear LLP, Buffalo, New York.
EXPERTS
The balance sheet as of September 30, 1996 and the related statements of
income, shareholders' equity, and cash flows for the years ended September 30,
1996 and 1995 of Rent-Way, Inc., and the balance sheets as of December 31, 1996
and 1995 and the related statements of operations, shareholders' equity and cash
flows for the years then ended of Perry Electronics, Inc. (dba Rental King), all
incorporated by reference in this Registration Statement and Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING SECURITY
HOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES
OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
55
<PAGE> 55
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
56
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be incurred in connection with the offering are set forth
below. The Selling Security Holders will not pay any expenses of the offering.
<TABLE>
<S> <C>
SEC registration fee..................................................... $12,119.40
Accounting fees and expenses............................................. 1,000.00*
Legal fees and expenses.................................................. 25,000.00*
Nasdaq National Market listing fee....................................... 45,364.74
Miscellaneous............................................................ 5,000.00*
Total................................................................ $88,484.14
==========
</TABLE>
- -----------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The provisions of Sections 1741 through 1750 of the Pennsylvania Business
Corporation Law provide that a corporation shall have the power to indemnify
any person who was or is a party or is threatened to be made a party to any
action or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he or she is or was a representative of the
corporation, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with the action or proceeding if they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation. To the extent that a representative of the corporation has
been successful on the merits or otherwise in defense of any action or
proceeding or in defense of any claim, issue or matter therein, the corporation
is required by the Pennsylvania Business Corporation Law to indemnify them
against expenses actually and reasonably incurred by them in connection with
such defense.
The Company's By-Laws provide that it shall indemnity its officers and
directors against claims arising from actions taken in their official capacity
except where the conduct giving rise to the claim is finally determined by a
court or in arbitration to have constituted willful misconduct or recklessness
or to have involved the receipt from the Company of a personal benefit to which
the officer or director was not entitled, or where such indemnification has
been determined in a final adjudication to be unlawful. The Company may create
a fund, trust or other arrangement to secure the indemnification. In addition,
the Company is required to pay the expenses of defending the claim in advance
of final adjudication upon the receipt of an undertaking by the officer or
director to repay such advanced amounts if it is ultimately determined that the
officer or director is not entitled to be indemnified. These provisions of the
By-Laws are expressly permitted pursuant to the Pennsylvania Business
Corporation Law.
The Selling Security Holders have agreed to indemnify the Company and its
directors, officers and controlling persons as to any losses, claims, damages,
expenses or liabilities arising out of any untrue statement or
II-1
<PAGE> 57
omission in the Registration Statement based on information relating to the
Selling Security Holders furnished in writing by such Selling Security Holders
for use in the Registration Statement.
ITEM 16. EXHIBITS
Exhibit
No. Description
- ------- -----------
4.1(1) Indenture, dated as of February 4, 1997, between the Company and
Manufacturers and Traders Trust Company, as Trustee, in respect of the
Company's 7.0% Convertible Subordinated Debentures Due 2007
4.2(1) Form of 7.0% Convertible Subordinated Debenture Due 2007 of the Company
5.1(1) Opinion of Hodgson, Russ, Andrews, Woods &
Goodyear, LLP
12.1(2) Statement Regarding Computation of Earnings to
Fixed Charges
23.1(1) Consent of Hodgson, Russ, Andrews, Woods &
Goodyear, LLP (included in Exhibit 5.1)
23.2(2) Consent of Coopers & Lybrand L.L.P.
24.1(1) Power of Attorney (included on signature page to
this Registration Statement)
25.1(1) Statement of Eligibility of Trustee on Form T-1
- -------------
(1) Previously filed, as of May 9, 1997, as an exhibit to the Company's
Registration Statement on Form S-3 (No. 333-26835)
(2) Filed herewith.
II-2
<PAGE> 58
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(b) The Company also hereby undertakes that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
Provided, however, that paragraphs (b)(1)(i) and (b)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Company pursuant to Section 13 or 15(d) of the Exchange
Act that are incorporated by reference in the Registration Statement.
(2) That for the purposes of determining any liability under the
Securities Act, each such post-effective shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offer thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(c) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
II-3
<PAGE> 59
pursuant to Section 15(d) of the Company Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company certifies
that it has reasonable grounds to believe that it meets all of the requirements
of filing on Form S-3 and has duly caused this Amendment to Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of Erie, State of Pennsylvania, on June 13, 1997.
RENT-WAY, INC.
By: /s/ Jeffrey A. Conway
--------------------------------
Jeffrey A. Conway, Vice President
In accordance with the requirements of the Securities Act, this
Registration Statement was signed by the following persons in the capacities
and on the date stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gerald A. Ryan* Chairman of the Board June 13, 1997
- -------------------------- and Director
Gerald A. Ryan
/s/ William E. Morgenstern* President, Chief Executive June 13, 1997
- --------------------------- Officer and Director
William E. Morgenstern (Principal Executive
Officer)
/s/ Jeffrey A. Conway Vice President and Chief June 13, 1997
- -------------------------- Financial Officer
Jeffrey A. Conway (Principal Financial and
Accounting Officer)
</TABLE>
II-5
<PAGE> 61
<TABLE>
<S> <C> <C>
/s/ Marc W. Joseffer* Director June 13, 1997
- --------------------------
Marc W. Joseffer
/s/ William Lerner* Director June 13, 1997
- --------------------------
William Lerner
/s/ Vincent A. Carrino* Director June 13, 1997
- --------------------------
Vincent A. Carrino
/s/ Robert B. Fagenson* Director June 13, 1997
- --------------------------
Robert B. Fagenson
*By: /s/ Jeffrey A. Conway
---------------------
Jeffrey A. Conway,
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 62
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
4.1(1) Indenture, dated as of February 4, 1997, between the Company and
Manufacturers and Traders Trust Company, as Trustee, in respect of the
Company's 7.0% Convertible Subordinated Debentures Due 2007
4.2(1) Form of 7.0% Convertible Subordinated Debenture
Due 2007 of the Company
5.1(1) Opinion of Hodgson, Russ, Andrews, Woods &
Goodyear, LLP
12.1(2) Statement Regarding Computation of Earnings to
Fixed Charges
23.1(1) Consent of Hodgson, Russ, Andrews, Woods &
Goodyear, LLP (included in Exhibit 5.1)
23.2(2) Consent of Coopers & Lybrand L.L.P.
24.1(1) Power of Attorney (included on signature page to
this Registration Statement)
25.1(1) Statement of Eligibility of Trustee on Form T-1
- -------------
(1) Previously filed, as of May 9, 1997, as an exhibit to the Company's
Registration Statement on Form S-3 (No. 333-26835)
(2) Filed herewith.
II-7
<PAGE> 1
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION
OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six months
For the Year Ended September 30, ended
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 3/31/97
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income
from continuing
operations $5,228,374 $1,454,210 $217,090 $141,407 $(191,991) $4,200,722
Interest expense 1,493,143 1,162,384 541,531 580,432 552,300 1,164,966
Amortization of
deferred
financing costs 93,649 16,229 -- -- -- 82,714
-----------------------------------------------------------------------------------------------------
Total fixed
charges $1,586,792 $1,178,613 $541,531 $580,432 $ 552,300 $1,247,680
Ratio of earnings
to fixed charges 3.29 1.23 0.40 0.24 (0.35) 3.37
</TABLE>
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Accountants
We consent to the inclusion in this registration statement
on Form S-3 (File No.333-26835) of our report dated December 23, 1996,
on our audits of the financial statements of Rent-Way, Inc., and of our report
dated March 28, 1997, on our audits of the financial statements of Perry
Electronics, Inc. (dba Rental King). We also consent to the reference to our
firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Cleveland, Ohio
June 13, 1997
