<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(D)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from to
------------- -------------
Commission File Number 0-22026
-------------------------------
RENT-WAY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1407782
------------ ----------
(State or other jurisdiction (I.R.S. EMPLOYER
of incorporation) Identification No.)
3230 West Lake Road, Erie, Pennsylvania 16505
----------------------------------------------
(Address of principal executive offices)
(814) 836-0618
--------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class OUTSTANDING AS OF MARCH 31, 1997
- ------------- --------------------------------
Common Stock 6,623,612
<PAGE> 2
RENT-WAY, INC.
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements:
Balance Sheets as of March 31, 1997 and
September 30, 1996 3
Statements of Income, Three and Six Months
Ended March 31, 1997 and 1996 4
Statements of Cash Flows, Six Months Ended
March 31,1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Part II Other Information
Item 2. Changes in Securities 17
Item 4. Submission of Matters to Vote of
Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
</TABLE>
2
<PAGE> 3
RENT-WAY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION> For the period ended
March 31, September 30,
1997 199
--------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 2,095,847 $ 179,425
Prepaid expenses 1,866,249 1,266,087
Rental merchandise, net 30,926,101 17,862,420
Deferred income taxes 1,572,188 1,473,522
Property and equipment, net 7,023,346 4,616,362
Goodwill, net 41,335,305 21,866,806
Deferred financing costs, net 1,409,618 377,232
Prepaid consulting fee 952,381 1,041,667
Other assets 1,588,461 1,290,217
--------------- -------------
Total assets $ 88,769,496 $ 49,973,738
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 3,087,271 $ 1,746,797
Other liabilities 4,416,793 2,181,899
Income taxes payable 1,938,294 1,226,590
Debt 46,281,791 12,979,075
--------------- -------------
Total liabilities 55,724,149 18,134,361
Commitments and Contingencies - -
Redeemable preferred stock, Series
A, without par value; 11,207 shares
issued and outstanding at September
30, 1996 (see Note 6) - 1,120,700
Shareholders' equity:
Common stock, without par value
20,000,000 shares authorized;
6,623,612 and 6,659,180 shares issued
and outstanding, respectively 28,258,240 27,907,225
Preferred stock, without par value;
1,000,000 shares authorized - -
Retained earnings 4,787,107 2,811,452
--------------- ------------
Total shareholders' equity 33,045,347 30,718,677
--------------- ------------
Total liabilities and
shareholders' equity $ 88,769,496 $ 49,973,738
=============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
RENT-WAY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION> For the three months ended For the six months ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
------------------------ ----------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenue $ 19,836,214 $ 10,631,533 $ 33,526,057 $ 20,816,750
Other revenue 2,709,167 1,715,236 4,683,222 3,344,063
------------ ------------ ------------ ------------
Total revenues 22,545,381 12,346,769 38,209,279 24,160,813
COSTS AND OPERATING EXPENSES:
Depreciation and amortization:
Rental merchandise 5,197,299 3,381,083 8,897,980 6,460,615
Property and equipment 317,392 187,795 593,517 354,985
Amortization of goodwill 467,830 225,872 774,042 419,405
Salaries and wages 5,667,057 3,038,864 10,036,027 5,970,950
Advertising 1,130,224 492,264 1,953,598 1,101,397
Occupancy 1,589,709 761,055 2,624,693 1,558,397
Other operating expenses 4,842,079 2,698,349 7,858,145 5,202,629
------------ ----------- ------------- ------------
Total costs and
operating expenses 19,211,590 10,785,282 32,738,002 21,068,378
------------ ----------- ------------- ------------
Operating income 3,333,791 1,561,487 5,471,277 3,092,435
OTHER INCOME (EXPENSE):
Interest expense (872,184) (520,997) (1,247,680) (1,067,109)
Interest income 415 16,879 920 33,649
Other income (expense), net (21,724) 35,615 (23,795) 34,053
------------ ----------- ------------- ------------
Income before income taxes
and extraordinary item 2,440,298 1,092,984 4,200,722 2,093,028
Income tax expense 1,145,017 503,935 1,956,050 963,956
------------ ----------- ------------- ------------
Income before
extraordinary item 1,295,281 589,049 2,244,672 1,129,072
Extraordinary item - - (269,017) -
------------ ----------- ------------- ------------
Net income 1,295,281 589,049 1,975,655 1,129,072
Preferred stock (dividend)/gain
on redemption - (39,426) 280,175 (90,108)
------------ ----------- ------------- ------------
Earnings applicable to common
shares $ 1,295,281 $ 549,623 $ 2,255,830 $ 1,038,964
============ =========== ============= ============
EARNINGS PER COMMON SHARE
(NOTE 2):
Primary earnings per share (adjusted to give effect to any preferred
stock (dividend)/gain on redemption):
Income before extraordinary
item $ 0.18 $ 0.11 $ 0.36 $ 0.21
============ =========== ============= ============
Net income $ 0.18 $ 0.11 $ 0.32 $ 0.21
============ =========== ============= ============
Fully diluted earnings per share (adjusted to give effect to any preferred
stock (dividend)/gain on redemption):
Income before extraordinary
item $ 0.18 $ 0.11 $ 0.35 $ 0.21
============ =========== ============= ============
Net income $ 0.18 $ 0.11 $ 0.32 $ 0.21
============ =========== ============= ============
Weighted average common
shares outstanding:
Primary 7,052,546 4,868,325 7,042,041 4,852,200
============ =========== ============= ============
Fully diluted 8,687,836 5,004,273 8,207,427 4,942,690
============ =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
4
<PAGE> 5
RENT-WAY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> For the six months ended
March 31,
1997 1996
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,975,655 $ 1,129,072
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 10,265,539 7,281,675
Deferred income taxes (98,666) (20,000)
Extraordinary item 269,017
Changes in assets and liabilities:
Prepaid expenses (405,896) (363,231)
Rental merchandise (13,661,661) (8,146,284)
Prepaid consulting fees 89,286 89,071
Other assets (155,507) (199,823)
Accounts payable 360,578 (14,757)
Income taxes payable 792,383 712,465
Other current liabilities 557,102 (301,775)
------------ ------------
Net cash provided by operating activities 733,326 166,413
INVESTING ACTIVITIES:
Purchase of businesses, net of cash acquired
of $827,912 in 1997 (21,289,455) (180,937)
Purchases of property and equipment (1,614,140) (1,015,089)
------------ ------------
Net cash used in investing activities (22,903,595) (1,196,026)
FINANCING ACTIVITIES:
Principal payments on capital lease obligation - (12,919)
Proceeds from borrowings 38,126,385 12,214,516
Payments on borrowings including
early extinguishment (10,447,199) (24,167,586)
Redeemable preferred stock dividend (32,143) (88,112)
Redeemable preferred stock redemption (840,525) (497,100)
Deferred Finance Costs (1,356,158) -
Common stock 102,983 14,440,562
Loan to related party - (11,450)
------------ ------------
Net cash provided by financing activities 25,553,343 1,877,911
------------ ------------
Increase in cash 1,916,422 848,298
Cash at beginning of period 179,425 959,721
------------ ------------
Cash at end of period $ 2,095,847 $ 1,808,019
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 989,966 $ 845,476
Income taxes $ 1,163,368 $ 270,175
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION:
Rent-Way, Inc., (the "Company" or "Rent-Way") is a corporation organized
under the laws of the Commonwealth of Pennsylvania. The Company operates
a chain of rental-purchase stores that rent durable household products
such as home entertainment equipment, furniture, and major appliances and
jewelry to consumers on a weekly or monthly basis. The accompanying
unaudited condensed financial statements have been prepared in accordance
with the instructions to Form 10-Q, and therefore, do not include all
information and notes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments),
which are necessary for a fair statement of the financial position,
results of operations and cash flows of the Company have been made. The
results of operations for the interim periods are not necessarily
indicative of the results for the full year.
Certain amounts in the 1996 financial statements have been reclassified
to conform to the 1997 presentation. As a result of meeting specified
criteria the Company is now filing under Regulation S-X under the
Securities Act of 1933 (the "Securities Act"), where it had
previously been reporting under Regulation S-B under the Scurities Act.
These financial statements and the notes thereto should be read in
conjunction with the Company's audited financial statements included in
its Annual Report on Form 10-KSB for the fiscal year ended September
30, 1996.
2. EARNINGS PER COMMON SHARE:
Primary and fully diluted earnings per common share are computed based
on net income after preferred stock dividend requirements and the
redemption of redeemable preferred stock on a discounted basis, if
applicable. The weighted average number of common shares outstanding
during each period is adjusted to give effect to stock options and
warrants considered to be dilutive common stock equivalents.
Additionally, fully diluted weighted average number of shares outstanding
are adjusted to give effect to convertible debt deemed to be another
potentially dilutive security.
The Company, in recognition of requirements under Statement of Financial
Accounting Standards ("SFAS") No. 128, has determined the impact of
basic and dilutive earnings per common share. Basic earnings per common
share is computed using income available to common shareholders divided
by the weighted average number of common shares outstanding. Dilutive
earnings per common share is computed using income available to common
shareholders and the weighted average number of shares outstanding is
adjusted to give effect to other dilutive securities.
6
<PAGE> 7
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
2. EARNINGS PER COMMON SHARE, Continued:
The following table discloses the impact of SFAS No. 128 on the
Company's earnings per common share for the three and six month periods
ended March 31, 1997.
<TABLE>
For the three months ended For the six months ended
March 31, March 31,
------------------------- -------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ---------- ----------
Weighted average common shares outstanding 6,609,853 4,307,902 6,602,048 4,246,322
Plus: shares applicable to:
Options and warrants 442,982 696,838 440,880 696,838
10% Convertible notes 704,225 - 704,225 -
7% Convertible debentures 903,776 - 460,274 -
---------- ---------- ---------- ----------
Adjusted weighted average common
shares outstanding 8,687,836 5,004,273 8,207,427 4,942,690
========== ========== ========== ==========
Net income available to common shareholders
for Basic EPS $1,295,281 $ 549,623 $2,255,830 $1,038,964
Plus: Impact of assumed conversions:
Interest on 10% convertible notes
(net of tax) 105,000 - 210,000 -
Interest on 7% covertible debentures
(net of tax) 140,000 - 140,000 -
---------- ---------- ---------- ----------
Net income available to common shareholders
plus assumed conversions for Diluted EPS $1,540,281 $ 549,623 $2,605,830 $1,038,964
========== ========== ========== ==========
Basic earnings per common share (adjusted to give effect to any preferred
stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.20 $ 0.13 $ 0.38 $ 0.24
========== ========== ========== ==========
Net income $ 0.20 $ 0.13 $ 0.34 $ 0.24
========== ========== ========== ==========
Diluted earnings per common share (adjusted to give effect to any
preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.18 $ 0.11 $ 0.35 $ 0.21
========== ========== ========== ==========
Net income $ 0.18 $ 0.11 $ 0.32 $ 0.21
========== ========== ========== ==========
</TABLE>
Following are pro forma results of operations for the six months ended
March 31, 1997 and 1996 assuming the acquisitions of Diamond Leasing,
Coleman and Rental King had occurred on Oactober 1, 1996. The results are
not necessarily indicative of future operations or what would have occurred
had the acquisitions been consummated as of October 1, 1996.
<TABLE>
<CAPTION> Unaudited Pro Forma Operations
Six months ended March 31,
----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues $47,921,402 $47,765,071
Income before extraordinary item $ 2,527,159 $ 2,242,142
Net income $ 1,087,237 $ 2,242,142
Earnings per common share (adjusted to give effect to any preferred stock
(dividends)/gain on redemption):
Income before extraordinary item $ 0.32 $ 0.31
Net income $ 0.31 $ 0.31
</TABLE>
3. ACQUISITIONS:
On January 24, 1997, the Company signed a definitive purchase agreement
to acquire all the outstanding shares of Perry Electronics, Inc. d/b/a
Rental King ("Rental King"). On February 6, 1997, the Company
consummated the transaction and acquired all the outstanding shares of
Rental King, assuming effective control of the results of operations as
of February 1, 1997. At the time of acquisition Rental King operated a
chain of rental-purchase stores in Colorado, Florida, Indiana, Kentucky,
Michigan, Ohio and West Virginia with annual revenues of approximately
$24.0 million. The consideration paid in exchange for all the outstanding
shares of Rental King was $18.3 million in cash. Pursuant to the terms of
the purchase agreement, $2.0 million of the purchase price was placed in
escrow, subject to the terms of the escrow agreement to satisfy sellers
representations and warranties and any price adjustments. The escrow
agreement provides for release of the entire amount pending the
completion of the required financial audits of Rental King. The
acquisition was accounted for using the purchase method of accounting.
Rental King's assets and liabilities were recorded at their estimated fair
market values as of the date of the acquisition. The fair values of
rental merchandise, property and equipment, intangible assets certain
liabilities and the final purchase price will be
7
<PAGE> 8
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS, (Continued)
(unaudited)
3. ACQUISITIONS, Continued:
finalized based on the completion of the financial statement audit
valuation procedures and certain additional procedures. The estimated
excess of the acquisition cost over net assets acquired, ("goodwill")
of $15.7 million is being amortized on a straight line basis over twenty
years. The total costs of the net assets acquired was $17.9 million and
consisted of assets of $23.9 million less liabilities assumed of $5.5
million and acquisition costs of $0.4 million. The acquisition of Rental
King was primarily funded by the application of the net proceeds received
on a private placement of $20.0 million in subordinated convertible
debentures (see Note 7). The balance of the cash paid on closing
was drawn upon the Company's existing line of of credit.
The statement of income for the three and six month periods ended
March 31, 1997 includes the results of operations of Rental King since
February 1, 1997.
On January 2, 1997, the Company acquired all the outstanding shares of
Bill Coleman T.V., Inc., ("Coleman") a privately owned chain of
fifteen rental-purchase stores operating in Michigan with annual
revenues of approximately $7.5 million in exchange for consideration
consisting of approximately $3.0 million in cash and an option to
purchase 25,000 shares of the Company's common stock at an exercise
price of $8.875. Pursuant to terms of the acquisition, $350,000 of
the purchase price was placed in escrow subject to terms of the escrow
agreement to satisfy sellers representations and warranties and any
purchase price adjustments. The escrow agreement provides for release
of the escrow on completion of a financial audit of Coleman. The
acquisition was accounted for using the purchase method of accounting.
Coleman's assets and liabilities were recorded at their estimated fair
values as of the acquisition date. The fair values of rental merchandise,
property and equipment, intangible assets, certain liabilities and the
final purcahse price will be finalized based on the completion of
the financial statement audit valuation procedures and certain
additional procedures. The estimated excess of the acquisition cost
over net assets acquired, ("goodwill") of $4.3 million is being amortized
on a straight line basis over twenty years. The total cost of the net
assets acquired was $2.8 million and consisted of assets of $7.7 million
less liabilities assumed of $4.7 million and acquisition costs of $0.2
million.
On July 25, 1996 the Company acquired all the outstanding shares of
Diamond Leasing Corporation ("DLC"); a chain of 11 rental-purchase
stores operating in Delaware, Maryland and Pennsylvania with annual
revenues of approximately $7.0 million in exchange for consideration
consisting of 20,358 (unregistered shares subject to the provisions
of Rule 144 of the Securities and Exchange Act) shares of the
Company's common stock and $4,102,296 in cash. Pursuant to the terms
of the acquisition, $325,000 of the purcahse price was placed in
escrow subject to the terms of the escrow agreement. Per the terms of
the escrow agreement $175,000 was released upon the completion of the
financial statement audit with the remaining $150,000 being held for a
three year period from the date of closing. The acquisition was
accounted for using the purchase method of accounting. DLC's assets and
liabilities were recorded at their fair value as of the acquisition
date. The excess of the acquisition costs
over the fair value of the assets acquired ("goodwill") of $4,494,552
is being amortized on a straight-line basis over twenty years. The
total cost of the net assets acquired was $4,289,796 ($187,500 in common
stock and $4,102,296 in cash) and consisted of assets of $7,307,456 less
liabilities assumed of $2,363,136 and acquisition costs of $654,524.
Assets acquired other than goodwill consisted principally of rental
merchandise of $1,359,808, property and equipment of $310,850,
non-compete agreements of $300,000 and deferred tax assets of $744,808.
Liabilities assumed consisted principally of trade accounts payable
of $582,693 and bank debt of $1,446,238.
8
<PAGE> 9
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS, (Continued)
(unaudited)
4. CONTINGENCIES:
The Company is subject to legal proceedings and claims in the ordinary
course of its business that have not been finally adjudicated. Certain of
these cases have resulted in contingent liabilities ranging from $527,500
to $2,557,500. The majority of such claims are, in the opinion of
management, covered by insurance policies and therefore should not have
a material effect on the results of operations or financial position of
the Company.
Additional claims exist in the range of $810,475 to $3,440,000 for
which management believes it has meritorious defenses but for which the
likelihood of an unfavorable outcome is currently not determinable. In
management's opinion, each of these claims will either be indemnified by
the former shareholders of MLC, Coleman and Rental King or covered by
insurance policies and therefore will not have a material effect on the
results of operations or financial condition of the Company.
5. DEBT:
On November 22, 1996, the Company entered into a new collateralized
revolving credit facility (the "new facility") with a syndicate of banks
led by National City Bank of Pennsylvania, providing for loans or letters of
credit up to $40.0 million. The syndicate is composed of four banks,
with National City Bank of Pennsylvania, LaSalle National Bank, and Harris
Trust and Savings Bank committed for an equal ratable share of 27.25%, of
the new facility and Heller Financial, Inc. committed for an 18.25% ratable
share. The new facility replaces the Company's prior $15.0 million
Secured Credit Agreement with First Source Financial LLP. Of the $40.0
million available under the new facility, approximately $7.0 million
was used to refinance existing senior indebtedness with the balance
available for store acquisitions. Also in connection with the
refinancing, the Company redeemed the remainder of its Series A
Redeemable Preferred Stock. The Company redeemed the preferred stock at
a 25% discount to face value resulting in a gain of $280,175. The new
facility expires on November 22, 1999.
9
<PAGE> 10
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS, (Continued)
(unaudited)
5. DEBT, Continued:
Under the new facility the Company may borrow funds at either the
prime-rate plus 0.5% or the euro-rate plus 2.75%. Borrowings under the
euro-rate option require the Company to select a fixed interest period
during which the euro-rate is applicable with the borrowed amount not to
be repaid prior to the last day of the selected interest period. In
addition, borrowing tranche's under the euro-rate option must be in
integral multiples of $250,000 and not less than $1,000,000 in total.
Commitment fees associated with the new faciltiy are equal to 0.25%
per annum on each banks' committed amount.
The new credit facility requires the Company to meet certain financial
covenants and ratios including maximum leverage, minimum interest
coverage and minimum tangible net worth ratios. In addition, the Company
must meet requirements regarding monthly, quarterly and annual financial
reporting. The new facility also contains covenants which restrict the
actions of the Company with respect to the payment of dividends,
acquisitions, mergers, disposition of assets or subsidiaries, issuance of
capital stock and capital expenditures. The Company may at any time
repay outstanding borrowings, in whole or part, without premium or
penalty, except with respect to restrictions identified above in
connection with the selection of the euro-rate interst option. As of
March 31, 1997, the Company was in compliance with the covenants
contained in the new facility.
As a result of the refinancing the Company incurred an extraordinary
charge, net of tax benefit, of $269,017. The extraordinary charge was
composed of a $124,590 ($74,754 net of tax benefit) prepayment penalty
for early retirement of debt and a $323,772 ($194,263 net of tax
benefit) write-off of deferred financing costs associated with the
refinanced debt.
6. REDEEMABLE PREFERRED STOCK:
On November 26, 1996, the Company redeemed the remaining shares of its
Series A Redeemable Preferred Stock issued in connection with the
acquisition of MLC. At the time of redemption there were 11,207
outstanding shares with a face amount of $100 per share. These shares
were redeemed at a twenty-five percent discount for an aggregate
purchase price of $840,525 and now have the status of authorized and
unissued shares undesignated as to series.
7. PRIVATE PLACEMENT:
On February 4, 1997, the Company completed the private placement of $20.0
million of its convertible subordinated debentures ("the Debentures").
The Debentures are due February 1, 2007 and are convertible, at any time
after the registration thereof into shares of common stock, without par
value, of the Company at a conversion price of $13.37 per share. The
Debentures are subject to redemption at the option of the
Company on February 5, 2000 at a price of 103%. The redemption price
will decrease at a rate of 1% per year, reaching a price of 100% in the
year 2003 and remaining fixed until the date of maturity. The
indebtedness evidenced by the Debentures is subordinated and junior
in right of payment to all senior indebtedness. Included in the senior
indebtedness is $7.0 million of convertible notes held by Massachusetts
Mutual Life Insurance Co. and its affiliates. The Debentures bear an
annual interest rate of 7% with semi-annual payments in August and
February, beginning August 1, 1997. On May 9, 1997, the Company
filed a registration statement to register the Debentures and the common
stock underlying such Debentures under the Securities Act of 1933. The
net proceeds of the private placement were used in conjunction with the
Rental King acquisition (see Note 3).
8. Shareholders Equity:
On March 12, 1997, at the Company's Annual Shareholder Meeting, an
amendment to the articles was accepted to increase the number of
authorized shares of Common Stock from 10,000,000 to 20,000,000.
10
<PAGE> 11
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
For the three and six months ended March 31, 1997 the Company's total
revenues increased by 82.6% and 58.1%, respectively. In addition, operating
income increased by 113.5% and 76.9% while income before the effect of an
extraordinary item increased by 119.9% and 98.8% compared to the three and
six month periods last year. The increase in revenue, operating income, and
net income are primarily due to acquisitions made during fiscal 1996 and
1997, improved same store operating profits, a reduction in certain
expenses resulting from economies of scale, and increased same store
revenues. Same store revenues increased by 4.7% as compared to the three
month period ended last year.
In November 1996, the Company secured a $40.0 million collateralized
revolving credit facility from a syndicate of banks led by National City
Bank of Pennsylvania. Of the total facility, approximately $7.0 million
was used to refinance existing senior debt with the remainder of such
facility available for future store acquisitions. As a result of the
refinancing, the Company incurred an extraordinary charge, net of tax
benefit, of $269,017. The extraordinary item is composed of a pre-payment
penalty resulting from the early extinguishment of debt and the write-off
of deferred finance costs associated with the refinanced debt. Also in
connection with the refinancing, the Company redeemed the remainder of its
Series A Redeemable Preferred Stock. The Company redeemed the preferred
stock at a 25% discount to face value resulting in a gain of $280,175.
As a result of these adjustments, earnings applicable to common shares
increased 117.1% to $3.0 million from $1.0 million for the six month
period ended March 31, 1997 as compared to the same period last year.
On January 2, 1997, the Company acquired all the outstanding common shares of
Bill Coleman T.V., Inc., ("Coleman") a privately owned chain of fifteen
rental-purchase stores operating in Michigan with annual revenues of
approximately $7.5 million in exchange for consideration consisting of
approximately $3.0 million in cash and an option to purchase 25,000
shares of the Company's common stock at an exercise price of $8.875.
Pursuant to terms of the acquisition, $350,000 of the purchase price was
placed in escrow subject to terms of the escrow agreement. The escrow
agreement provides for release pending completion of a financial audit
of Coleman to satisfy seller's representations and warranties and any
purchase price adjustments. The acquisition considerably strengthens
the Company's penetration in Michigan from seven to twenty-two stores,
and is in line with the Company's strategy to cluster stores in selected
markets. As of March 31, 1997 all fifteen stores have been fully
integrated into the Rent-Way system, with any necessary remodeling under way.
On January 24, 1997, the Company signed a definitive purchase agreement
to acquire all the outstanding shares of Perry Electronics, Inc. d/b/a
Rental King ("Rental King"). On February 6, 1997, the Company consummated
the transaction and acquired all the outstanding shares of Rental King,
assuming effective control for the results of operations as of February
1, 1997. At the time of acquisition Rental King operated a chain of
rental-purchase stores in Colorado, Florida, Indiana, Kentucky, Michigan,
Ohio and West Virginia with annual revenues of approximately $24.0 million.
The consideration paid in exchange for all the outstanding shares of
Rental King was $18.3 million in cash. Pursuant to the terms of the
purchase agreement, $2.0 million of the purchase price was placed in escrow,
subject to the terms of the escrow agreement to satisfy sellers
representations and warranties and any purchase price adjustments. The escrow
agreement provides for release of the escrow on completion of the required
financial audits of Rental King. The Company believes that the Rental
King acquisition substantially increases market penetration in many of the
Company's already established areas of operation, while opening the
door to new markets such as Colorado, Kentucky and West Virginia. As of
March 31, 1997, all 70 stores have been fully integrated into the
Rent-Way system.
In February 1997, the Company sold $20 million of 7% convertible subordinated
debentures due in 2007 at par value. The debentures, which are non-callable
for three years, are convertible into common stock at a rate of $13.37 per
share. Proceeds from the sale were used to consummate the purchase of Rental
King.
Management is actively seeking merger and acquisition candidates with
financial and geographic profiles consistent with the Company's growth
objectives.
11
<PAGE> 12
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Results of Operations
The following table sets forth, for the periods indicated, certain items
from the Company's unaudited Statements of Income, expressed as a
percentage of revenues.
<TABLE>
<CAPTION> <C> <C>
Three Months Ended Six Months Ended
March 31 March 31
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Rental revenue 88.0% 86.1% 87.7% 86.2%
Other revenue 12.0 13.9 12.3 13.8
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise 23.1 27.4 23.3 26.7
Property and equipment 1.4 1.5 1.5 1.5
Amortization of goodwill 2.1 1.8 2.0 1.7
----- ----- ----- -----
Total depreciation and amortization 26.6 30.7 26.8 29.9
Salaries and wages 25.1 24.6 26.3 24.7
Advertising 5.0 4.0 5.1 4.6
Occupancy 7.1 6.2 6.9 6.5
Other operating expenses 21.4 21.8 20.6 21.5
----- ----- ----- -----
Total costs and operating expenses 85.2 87.3 85.7 87.2
----- ----- ----- -----
Operating income 14.8 12.7 14.3 12.8
Interest expense (3.9) (4.2) (3.3) (4.4)
Other income (0.1) 0.4 - 0.3
----- ----- ----- -----
Income before income taxes and
extraordinary item 10.8 8.9 11.0 8.7
Income tax expense 5.1 4.1 5.1 4.0
----- ----- ----- -----
Income before extraordinary item 5.7 4.8 5.9 4.7
Extraordinary item - - (0.7) -
----- ----- ----- -----
Net income 5.7% 4.8% 5.2% 4.7%
===== ===== ===== =====
Redeemable preferred stock (dividends)/
gain on redemption - (0.3) 0.7 (0.4)
----- ----- ----- -----
Earnings applicable to common shares 5.7% 4.5% 5.9% 4.3%
===== ===== ===== =====
</TABLE>
12
<PAGE> 13
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Comparison of three months ended March 31, 1997 and 1996
For the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, total revenues increased by $10.2 million (82.6%)
to $22.5 million from $12.3 million. This increase was principally due
to increased same store revenues, the inclusion of three month results
for stores acquired in fiscal 1996 acquisitions, the Coleman acquisition,
and the inclusion of two months results for stores acquired in the Rental
King acquisition. Stores acquired in fiscal 1996 accounted for $3.4 million
(33.3%) of the increase, the Coleman acquisition accounted for $2.0 million
(19.6%) of the increase, the Rental King acquisition accounted for $4.3
million (42.2%) of the increase and the Company's same stores accounted for
$0.5 million (4.9%) of the increase. Other revenue increased by $1.0
million (57.9%) to $2.7 million from $1.7 million principally due to the
stores acquired in fiscal 1996 and 1997.
For the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, total costs and operating expenses increased to
$19.2 million from $10.8 million primarily as a result of the costs and
operating expenses associated with stores acquired in fiscal 1996 and
1997, but decreased to 85.2% from 87.3% of total revenue. This decrease
of 2.1% resulted primarily from a 4.1% decrease in depreciation and
amortization as a percentage of total revenues and a 0.4% decrease in
other operating expenses as a percentage of total revenues. Depreciation
expense related to rental merchandise increased by $1.8 million to $5.2
million from $3.4 million, but decreased 4.3% as a percentage of total
revenues due to increases in weekly rental rates, lower purchase costs of
rental merchandise due to increased volume, and improvements in the
realization of potential collectible rental revenue. Amortization of
goodwill increased by $0.2 million primarily because of the increase in
goodwill related to the stores acquired in fiscal 1996 and 1997.
Amortization of goodwill was 2.1% and 1.8% of total revenues for the
three months ended March 31, 1997 and 1996, respectively. Salaries and
wages increased by $2.7 million to $5.7 million from $3.0 million principally
due to the addition of 111 new locations, an increase in same store
payroll, upgrades in the regional manager position, and an overall
strengthening of corporate personnel. The 111 locations from recent
acquisitions produced additional payroll cost of approximately $1.9 million
for the three months. Same store payroll increased $0.3 million as
compared to the same quarter last year. The upgrade in the regional
manager position and the strengthening of corporate personnel were
responsible for an increase during the three month period of
approximately $0.1 and $0.4, respectively. Salaries and wages were
25.1% and 24.6% of total revenues for the three months ended March 31, 1997
and 1996, respectively. The Company, in anticipation of future growth, has
strengthened store and regional personnel by upgrading with managers who
have extensive multi-unit experience. In addition to this upgrade, the
increase in salaries and wages in relation to total revenues was
primarily due to the increase in staffing levels in the McKenzie stores,
the 111 stores acquired in recent acquisitions having a lower average
revenue base than existing Rent-Way stores, and a fewer number of stores per
regional manager added from recent acquisitions. Advertising expense
increased $0.6 million or 1.0% as a percentage of total revenues to
$1.1 million from $0.5 million principally due to the addition of the
stores acquired in fiscal 1996 and 1997. Occupancy expense increased $0.8
million or 0.9% as a percentage of total revenues to $1.6 million from $0.8
million primarily due to the addition of the stores acquired in fiscal 1996
and 1997. Other operating expenses increased by $2.1 million to $4.8 million
from $2.7 million, but decreased 0.4% as a percentage of total revenues. This
0.4% decrease occurred because of the Company's ability to allocate corporate
costs and certain overhead costs over a greater number of stores and
increased revenues.
For the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, operating income increased by $1.7 million (113.5%)
to $3.3 million from $1.6 million, and increased to 14.8% from 12.7% of
total revenues. The improvement in operating income was principally due
to the stores acquired in 1996 and 1997 and the factors discussed above.
For the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, interest expense increased $0.4 million to $0.9
million from $0.5 million due to an increase in debt of $39.1 million
from $7.2 million to $46.3 million. This increase is principally the
result of the issuance of $20 million of 7% convertible subordinated
debentures sold in order to consummate the Rental King acquisition effecitve
on February 1, 1997 and the purchase of Diamond Leasing Corporation on
July 25, 1996 and Bill Coleman TV on January 2, 1997 with $10.0 million in
funds drawn on the Company's senior credit facility.
13
<PAGE> 14
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Comparison of three months ended March 31, 1997 and 1996, Continued
For the three months ended March 31, 1997 compared to the three months
ended March 31, 1996, income tax expense increased to $1.1 million from
$0.5 million because the Company generated greater taxable income. The
Company's income tax rate of 46.9% is higher than the statutory tax rates
because amortization expense related to goodwill incurred in connection
with its acquisitions is not deductible for purposes of computing income tax.
For the three months ended March 31, 1997 compared to the three months ended
March 31, 1996, net income increased by $0.7 million (119.9%) to $1.3
million from $0.6 million. The increase was due to the factors discussed
above.
Comparison of Six Months Ended March 31, 1997 and 1996
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, total revenues increased by $14.0 million (58.1%) to
$38.2 million from $24.2 million. The increase was principally due to
increased same store revenues and the inclusion of the stores acquired in
fiscal 1996 acquisitions, the Coleman acquisition, and the Rental King
acquisition. Stores acquired in fiscal 1996 accounted for $6.7 million
(47.9%) of the increase, stores acquired in the Coleman acquisition accounted
for $2.0 million (14.3%) of the increase stores acquired in the Rental King
acquisition accounted for $4.3 million (30.7%) of the increase and the
Company's same stores accounted for $1.0 million (7.1%) of the increase.
Other revenue increased $1.4 million (40.0%) to $4.7 million from $3.3
million principally due to stores acquired in 1996 and 1997.
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, total costs and operating expenses increased to $32.7 million
from $21.1 million primarily as a result of the costs and operating
expenses associated with stores acquired in 1996 and 1997, but decreased to
85.7% from 87.2% of total revenues. This decrease of 1.5% resulted primarily
from a 3.1% decrease in depreciation and amortization as a percentage of
total revenues and a 0.9% decrease in other operating expenses as a
percentage of total revenues. Depreciation expense related to rental
merchandise increased by $2.4 million to $8.9 million from $6.5 million,
but decreased by 3.4% as a percentage of total revenues primarily due to
increases in weekly rental rates, lower purchase costs of rental merchandise
due to increasing volume, and improvements in the realization of potential
collectible rental revenue. Amortization of goodwill increased by $0.4
million primarily because of the increase in goodwill related to stores
acquired in 1996 and 1997. Salaries and wages increased by $4.0 million to
$10.0 million from $6.0 million principally due to the addition of 111
new locations, an increase in same store payroll, up grades in the regional
manager position, and an overall strengthening of corporate personnel. The
111 locations from recent acquisitions produced additional payroll cost
of approximately $2.7 million for the six month period. Same store payroll
increased $0.5 million as compared to the same period last year. The upgrade
in the regional manager position and the strengthening of corporate personnel
were responsible for an increase during the six month period of
approximately $0.3 million and $0.5 million, respectively. Salaries and
wages were 26.3% and 24.7% of total revenues for the six months ended March
31, 1997 and 1996, respectively. The Company, in anticipation of future
growth, has strengthened store and regional personnel by upgrading with
managers who have extensive multi-unit experience. In addition to this
upgrade, the increase in salaries and wages in relation to total revenues
was primarily due to the increase in staffing levels in the McKenzie stores,
the 111 stores acquired in recent acquisitions having a lower average revenue
base than existing Rent-Way stores, and a fewer number of stores per regional
manager added from recent acquisitions. Advertising expense increased $0.9
million or 0.5% as a percentage of total revenues to $2.0 million from $1.1
million principally due to the addition of the stores acquired in 1996
and 1997. Occupancy expense increased $1.0 million to $2.6 million from
$1.6 million or 0.4% as a percentage of total revenues mainly due to the
addition of the stores acquired in 1996 and 1997. Other operating expenses
increased $2.7 million to $7.9 million from $5.2 million principally due to
the addition of the stores acquired in 1996 and 1997, but decreased to 20.6%
from 21.5% of total revenues. This 0.9% decrease occurred because of the
Company's ability to allocate corporate costs and certain overhead costs
over a greater number of stores and increased revenues.
For the six months ended March 31, 1997 compared to the six months
ended March 31, 1996, operating income increased by $2.4 million (76.9%) to
$5.5 million from $3.1 million, and increased to 14.3% from 12.8% of total
revenues. The improvement in operating income was principally due to the
stores acquired in 1996 and 1997 and the factors discussed above.
14
<PAGE> 15
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Comparison of Six Months Ended March 31, 1997 and 1996, Continued
For the six months ended March 31, 1997 compared to the six months ended
1996, interest expense increased by $0.1 million to $1.2 million from $1.1
million due to an increase in debt of $39.1 million from $7.2 million to
$46.3 million. This increase is the result of the issuance of $20 million
of 7% convertible subordinated debentures sold in order to consummate the
Rental King acquisition on February 6, 1997 and the purchase of Diamond
Leasing Corporation on July 25, 1996 and Coleman on January 2, 1997
with $10.0 million in funds drawn on the Company's senior credit facility.
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, income tax expense increased to $2.0 million from $1.0
million because the Company generated greater taxable income. The Company
is accruing income tax expense based on an effective tax rate of 46.6%,
which is higher than the statutory tax rates, because amortization expense
related to goodwill incurred in connection with its acquisitions is not
deductible for purposes of computing income tax.
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, net income increased by $0.9 million (75.0%) to $2.0
million from $1.1 million. The increase was due to the factors discussed
above.
Liquidity and Capital Resources
On November 22, 1996, the Company entered into a new collateralized revolving
credit facility (the "new facility") with a syndicate of banks led by
National City Bank of Pennsylvania, providing for loans or letters of credit
up to $40.0 million. The syndicate is comprised of four banks, with National
City Bank of Pennsylvania, LaSalle National Bank, and Harris Trust and
Savings Bank committed for an equal ratable share of 27.25%, and Heller
Financial, Inc. committed for an 18.25% ratable share. This agreement
replaces the existing $15.0 million Secured Credit Agreement with
First Source Financial LLP. Of the $40.0 million, approximately $7.0 million
was used to refinance existing senior indebtedness with the balance available
for store acquisitions. Also in connection with the refinancing, the Company
redeemed the remainder of its Series A Redeemable Preferred Stock. The
Company redeemed the preferred stock at a 25% discount to face value
resulting in a gain of $280,175. The new facility expires on November
22, 1999.
On February 4, 1997 the Company completed the private placement of $20.0
million in convertible subordinated debentures, ("the Debentures"). The
Debentures are due February 1, 2007 and are convertible, at any time after
the registration date into shares of common stock, without par value, of
the Company at a conversion price of $13.37 per share. The Debentures will
become subject to redemption at the option of the Company on February 5, 2000
at a price of 103%. The redemption price will decrease at a rate of 1% per
year, reaching a price of 100% in the year 2003 and remaining fixed until
the date of maturity. The indebtedness evidenced by the Debentures is
subordinated and junior in rights of payment to the extent of payment in full
of all amounts due on all senior indebtedness. Included in the senior
indebtedness is $7.0 million of convertible notes held by Massachusetts
Mutual Life Insurance Co. The Debentures bear an annual interest rate of 7%
with semi-annual payments in August and February, beginning August 1, 1997.
The Company filed a registration statement to register the securities
underlying the debentures with the Securities and Exchange Commission on
May 9, 1997. The funds generated by this private placement were used in
conjunction with the Rental King acquisition (see Note 3).
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, the Company's net cash used in operating activities
increased to $0.7 million from $0.2 million. This increase was principally
due to $5.6 million increase in rental merchandise purchases and a $0.3
million decrease in accounts payable offset by a $0.8 million increase
in net income, a $3.0 million increase in non-cash depreciation and
amortization, and a $0.9 increase in other current liabilities.
The increase in depreciation, amortization, and rental
merchandise purchases resulted primarily from the stores acquired in 1996
and 1997.
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, the Company's net cash used in investing activities increased
$21.7 million to $22.9 million from $1.2 million. This increase is primarily
due to the purchase of Bill Coleman TV and Rental King.
15
<PAGE> 16
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Liquidity and Capital Resources, Continued:
For the six months ended March 31, 1997 compared to the six months ended
March 31, 1996, the Company's net cash provided by financing activities
increased to $25.5 million from $1.9 million. The increase in net cash
provided by financing activities was principally due to increased borrowings
on the Company's credit facilities and the sale of $20 million of 7%
convertible subordinated debentures.
In April, 1997 the Company purchased an additional building, located
adjacent to its existing corporate headquarters, to accomodate the growth
from recent acquisitions. The building was purchased for $0.8 million with
funds drawn on the Company's existing credit facility.
Inflation
During the six months ended March 31, 1997, the cost of rental merchandise,
lease rental expense and salaries and wages have increased modestly. These
increases have not had a significant effect on the results of operations
because the Company has been able to charge commensurably higher rental for
its merchandise. This trend is expected to continue in the foreseeable
future.
Other Matters
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 - "Accounting for Stock-based Compensation" effective for
transactions entered into after December 15, 1995. The Company intends on
adopting this Standard's disclosure-only provisions in fiscal 1997.
Management does not believe the adoption of this standard will have a
significant impact on the financial statements of the Company.
In February 1997, the FASB issued SFAS No. 128 - "Earnings Per Share", effective
for periods ending after December 15, 1997. The Company has disclosed the
estimated impact of this standad for the three and six month periods ended
March 31, 1997 (see Note 2 to the financial statements).
Cautionary Statement
This Report on Form 10-Q and the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations contains various
"forward looking statements" within the meaning of Section 27A of the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements represent the Company's expectations or
beliefs concerning future events. Any forward-looking statements made by or
on behalf of the Company are subject to uncertainties and other factors that
could cause actual results to differ materially from such statements. These
uncertainties and other factors include, but are not limited to, (i) the
ability of the Company to acquire additional rental-purchase stores on
favorable terms, (ii) the ability of the Company to improve the performance
of such acquired stores and to integrate such acquired stores into the
Company's operations, and (iii) the impact of state and federal laws
regulating or otherwise affecting the rental-purchase transaction.
Undo reliance should not be placed on any forward-looking statements made
by or on behalf of the Company as such statements speak only as of the date
made. The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, the
occurrence of future events or otherwise.
16
<PAGE> 17
RENT-WAY, INC.
PART II OTHER INFORMATION
ITEM 2. Changes in Securities
On February 6, 1997, the Company sold $20.0 million of its 7% Convertible
Subordinated Debentures due 2007 (the "Debentures") at 100% of the face amount
thereof to various accredited investors through National Westminster Bank PLC,
New York branch ("NatWest"), as placement agent, in a transaction exempt from
registration under the Securities Act pursuant to Section 4(2) thereof. The
Company paid NatWest a placement agent fee of $800,000 in connection with the
transaction. The Debentures are convertible into shares of Common Stock of
the Company at a conversion price of $13.37 per share at any time from and
after the registration of such Debentures and the underlying Common Stock
under the Securities Act.
ITEM 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on March 12, 1997
at the offices of the Bel Aire Hotel, 2800 West Eighth Street, Erie,
Pennsylvania at 10:00 a.m. All proposals as described in the Company's
Proxy Statement dated February 10, 1997 were approved. Below are details of
the matters voted on at the meeting:
Proposal 1 - Election of Directors
Elections were held for two (2) Class II directors to serve until the 2000
Annual Meeting of Shareholders. The results of the votes are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Votes
Name Class Votes For Withheld Abstain Against Non-Vote
- ---- ----- --------- -------- ------- ------- --------
Marc W. Joseffer II 4,161,176 24,075 0 0 2,427,228
William Lerner II 4,161,176 24,075 0 0 2,427,228
</TABLE>
Proposal 2 - Amendment to the Company's Articles of Incorporation
On January 24, 1997 the Board of Directors unanimously adopted a resolution
amending the Company's Articles of Incorporation (the "Articles"), subject to
the approval of the Company's shareholders at the 1997 Annual Meeting of
Shareholders. The amendment to the Articles increased the number of
authorized shares of Common Stock from 10,000,000 to 20,000,000 shares.
The purpose of the increase is to provide additional authorized shares of
Common Stock available for stock splits, dividends, possible future
financings, acquisitions and other general corporate purposes. The result
of the vote on the adoption of the amendment to the Articles was 4,141,060
for, 31,186 against, 13,005 abstentions and 2,427,228 non-votes.
17
<PAGE> 18
RENT-WAY, INC.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
The Exhibits filed as part of this report are listed below.
<TABLE>
<S> <C> <C>
Exhibit No. Description
11 Computation of Net Income per Common Share.
27 Financial data schedule
</TABLE>
b. Reports on Form 8-K
(1) January 7, 1997 Reporting letter of intent to acquire
Bill Coleman TV
(2) January 7, 1997 Reporting acquisition of Bill Coleman TV
(3) January 31, 1997 Reporting definitive agreement to acquire
Rental King
(4) February 14, 1997 Reporting sale of Debentures
(5) February 21, 1997 Reporting consummation of Rental King
acquisition
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
5/12/97 /s/ JEFFREY A. CONWAY
----------------------- ---------------------------------------
Date Jeffrey A. Conway
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
18
<PAGE> 19
RENT-WAY, INC.
EXHIBIT 11
Computation of Net Income Per Common Share
<TABLE>
<CAPTION> For the Three Months Ended For the Six Months Ended
March 31 March 31
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PRIMARY
Net income $1,295,281 $ 589,049 $1,975,655 $ 1,129,072
Preferred stock (dividend)/ gain on redemption - (39,426) 280,175 (90,108)
----------- ---------- ---------- -----------
Net income for primary earnings per
common share $ 1,295,281 $ 549,623 $2,255,830 $ 1,038,964
=========== ========== ========== ===========
Weighted average number of common shares
outstanding during the period 6,609,853 4,307,902 6,602,048 4,246,322
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of stock options
stock warrants and escrowed shares 442,693 560,729 439,993 606,227
----------- ---------- ---------- -----------
Weighted average number of shares used in
calculation of primary income per share 7,052,546 4,868,325 7,042,041 4,852,220
=========== ========== ========== ===========
Earnings per common share (adjusted to give effect to any preferred stock
(dividend)/gain on redemption):
Income before extraordinary item $ 0.18 $ 0.11 $ 0.36 $ 0.21
=========== ========== ========== ===========
Net income $ 0.18 $ 0.11 $ 0.32 $ 0.21
=========== ========== ========== ===========
FULLY DILUTED
Net income $ 1,295,281 $ 549,623 2,255,830 $ 1,038,964
Add - Impact of assumed conversion:
Interest on 10% convertible notes (net of tax) 105,000 - 210,000 -
Interest on 7% convertible debentures (net
of tax) 140,000 - 140,000 -
----------- ---------- ---------- -----------
Adjusted net income for fully diluted earnings
per share $ 1,540,281 $ 549,623 $2,605,830 $ 1,038,964
=========== ========== ========== ===========
Weighted average number of common shares
outstanding during the period 6,609,853 4,307,902 6,602,048 4,246,322
Add - incremental shares representing:
Shares issuable upon exercise of stock options,
stock warrants and escrowed shares included in
primary calculation above 442,693 560,729 439,993 606,227
Shares issuable upon exercise of stock options,
stock warrants and escrowed shares based on year
end market prices 289 136,109 887 90,611
Shares issued on conversion of 10% notes 704,225 - 704,225 -
Shares issued on conversion of 7% debentures 930,776 - 460,274 -
----------- ----------- ---------- -----------
Weighted average number of shares used in
calculation of fully diluted income
per share 8,687,836 5,004,273 8,207,427 4,942,690
=========== ========== ========== ===========
Earnings per common share (adjusted to give effect to any preferred stock
(dividend)/gain on redemption):
Income before extraordinary item $ 0.18 $ 0.11 $ 0.35 $ 0.21
=========== ========== ========== ===========
Net income $ 0.18 $ 0.11 $ 0.32 $ 0.21
=========== ========== ========== ===========
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000893046
<NAME> Rent-Way, Inc.
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 2,095,847
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 30,926,101
<CURRENT-ASSETS> 0
<PP&E> 7,023,346
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,769,496
<CURRENT-LIABILITIES> 0
<BONDS> 46,281,791
<COMMON> 28,258,240
0
0
<OTHER-SE> 4,787,107
<TOTAL-LIABILITY-AND-EQUITY> 88,769,496
<SALES> 19,836,214
<TOTAL-REVENUES> 22,545,381
<CGS> 5,197,299
<TOTAL-COSTS> 19,211,590
<OTHER-EXPENSES> 893,493
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 872,184
<INCOME-PRETAX> 2,440,298
<INCOME-TAX> 1,145,017
<INCOME-CONTINUING> 1,295,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,295,281
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
