<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: June 30, 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
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RENT-WAY, INC.
--------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1407782
- -------------- ----------
(State or other jurisdiction of incorporation) (I.R.S. Employer
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 June 30, 1997
------------ -------------------------------
Common Stock 6,788,947
<PAGE> 2
RENT-WAY, INC.
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements:
Balance Sheets as of June 30, 1997 and 3
September 30, 1996
Statements of Income, Three and Nine Months 4
Ended June 30, 1997 and 1996
Statements of Cash Flows, Nine Months Ended 5
June 30, 1997 and 1996
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 6. Exhibits and Reports on Form 8-K 17
Signatures 17
</TABLE>
<PAGE> 3
RENT-WAY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
June 30, September 30,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 1,482,476 $ 179,425
Prepaid expenses 1,545,355 1,266,087
Rental merchandise, net 32,390,910 17,862,420
Deferred income taxes 1,825,323 1,473,522
Property and equipment, net 8,460,637 4,616,362
Goodwill, net 42,345,760 21,866,806
Deferred financing costs, net 1,493,915 377,232
Prepaid consulting fee 907,738 1,041,667
Other assets 1,947,862 1,290,217
----------- -----------
$92,399,376 $49,973,738
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 2,014,422 $ 1,746,797
Other liabilities 5,270,267 2,181,899
Income taxes payable 3,136,562 1,226,590
Debt 46,658,180 12,979,075
----------- -----------
57,079,431 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; 6,788,947 and 6,659,180 shares issued and
outstanding, respectively 28,927,632 27,907,225
Preferred stock, without par value; 1,000,000 shares authorized - -
Retained earnings 6,392,913 2,811,452
---------- ----------
Total shareholders' equity 35,320,545 30,718,677
---------- ----------
$92,399,976 $49,973,738
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
RENT-WAY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 30, June 30,
1997 1996 1997 1996
(unaudited) (unaudited)
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue $ 21,814,622 $ 10,785,619 $55,340,679 $ 31,602,369
Other revenue 3,017,811 1,790,087 7,701,033 5,134,150
---------- ----------- ---------- -----------
Total revenue 24,832,433 12,575,706 63,041,712 36,736,519
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise 5,735,820 3,303,285 14,633,800 9,763,900
Property and equipment 432,403 202,471 1,025,920 557,456
Amortization of goodwill 564,374 213,403 1,338,416 632,808
Salaries and wages 6,177,887 3,189,620 16,213,914 9,160,570
Advertising 925,963 380,255 2,879,561 1,481,652
Occupancy 1,702,910 827,167 4,327,603 2,385,564
Other operating expenses 5,162,161 2,828,736 13,020,306 8,031,365
---------- ---------- ---------- ----------
Total costs and operating expenses 20,701,518 10,944,937 53,439,520 32,013,315
---------- ---------- ---------- ----------
Operating income 4,130,915 1,630,769 9,602,192 4,723,204
Other income (expense):
Interest expense (1,064,062) (212,805) (2,311,742) (1,279,914)
Interest income 26,618 920 60,267
Other income (expense), net (38,903) 39,624 (62,698) 73,677
---------- ---------- ---------- ----------
Income before income taxes
and extraordinary item 3,027,950 1,484,206 7,228,672 3,577,234
Income tax expense 1,422,144 681,606 3,378,194 1,645,562
---------- ---------- ---------- ----------
Income before extraordinary item 1,605,806 802,600 3,850,478 1,931,672
Extraordinary item - - (269,017) -
---------- ---------- ---------- ----------
Net income 1,605,806 802,600 3,581,461 1,931,672
Preferred stock (dividend)/gain on redemption - (19,250) 280,175 (109,357)
---------- ---------- ---------- ----------
Earnings applicable to common shares $1,605,806 $ 783,350 $3,861,636 $ 1,822,315
========== ========== =========== ==========
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 $ 0.22 $ 0.11 $ 0.58 $ 0.33
========== ========== ========== ==========
Net income $ 0.22 $ 0.11 $ 0.54 $ 0.33
========== ========== ========== ==========
Fully diluted earnings per share (adjusted to give effect to any preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.20 $ 0.11 $ 0.54 $ 0.32
========== ========== ========== ==========
Net income $ 0.20 $ 0.11 $ 0.51 $ 0.32
========== ========== ========== ==========
Weighted average common shares outstanding:
Primary 7,249,186 7,121,717 7,108,541 5,531,767
========== ========== ========== ==========
Fully diluted 9,683,321 7,153,534 8,903,947 5,743,960
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
RENT-WAY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended
June 30,
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Operating activities:
Net income $ 3,312,444 $ 1,931,672
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 16,839,902 10,954,164
Deferred income taxes (351,801) (20,000)
Extraordinary item 269,017 -
Changes in assets and liabilities:
Prepaid expenses (279,268) (329,577)
Rental merchandise (20,716,342) (12,838,822)
Prepaid consulting fees 133,929 133,929
Other assets (514,908) (209,584)
Accounts payable (1,532,094) 374,152
Income taxes payable 1,909,972 1,282,984
Other liabilities 1,410,576 (318,303)
----------- -----------
Net cash provided by operating activities 750,444 960,615
----------- -----------
Investing activities:
Purchase of businesses, net of cash acquired of $827,912 in 1997 (24,082,407) (2,159,207)
Purchases of property and equipment (3,603,093) (1,656,182)
----------- -----------
Net cash used in investing activities (27,685,500) (3,815,389)
----------- -----------
Financing activities:
Principal payments on capital lease obligation - (6,638)
Proceeds from borrowings 39,628,121 12,131,388
Payments on borrowings including early extinguishment (11,447,956) (24,220,269)
Redeemable preferred stock dividend (32,252) (127,538)
Redeemable preferred stock redemption (840,525) (1,629,300)
Deferred finance costs 158,234 -
Common stock 772,485 16,899,039
Loan to related party - 136,595
----------- -----------
Net cash provided by financing activities 28,238,107 3,183,277
----------- -----------
Increase in cash 1,303,051 328,503
Cash at beginning of period 179,425 959,721
----------- -----------
Cash at end of period $ 1,482,476 $ 1,288,224
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,800,756 $ 871,266
Income taxes $ 1,640,529 $ 281,412
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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, 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 Exchange
Act of 1934 (the "Exchange Act"), where it had previously been reporting
under Regulation S-B.
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 other potentially dilutive securities.
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.
<PAGE> 7
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
2. Earnings Per Common Share, Continued:
The following table discloses the impact of the SFAS No. 128 on the Company's
earnings per common share for the three and nine month periods ended June 30,
1997 and 1996 respectively.
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 6,640,603 6,356,624 6,621,224 4,947,191
Plus: shares applicable to:
Options and warrants 842,603 796,910 773,019 796,769
10% convertible notes 704,225 - 704,225 -
7% convertible debentures 1,495,890 - 805,479 -
----------- ----------- ----------- -----------
Adjusted weighted average common shares outstanding 9,683,321 7,153,534 8,903,947 5,743,960
=========== =========== =========== ===========
Earnings applicable to common shareholders
for Basic EPS $ 1,605,806 $783,350 $3,861,636 $1,822,315
Plus: Impact of assumed conversions:
Interest on 10% convertible notes (net of tax) 105,000 - 315,000 -
Interest on 7% convertible debentures (net of tax) 210,000 - 350,000 -
----------- ----------- ----------- -----------
Earnings applicable to common shareholders
plus assumed conversions for Diluted EPS $ 1,920,806 $783,350 $4,526,636 $ 1,822,315
----------- -----------
Basic earnings per common share (adjusted to give effect to any preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.24 $ 0.12 $ 0.62 $ 0.37
=========== =========== =========== ===========
Net income $ 0.24 $ 0.12 $ 0.58 $ 0.37
=========== =========== =========== ===========
Diluted earnings per common share (adjusted to give effect to any preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.20 $ 0.11 $ 0.54 $ 0.32
=========== =========== =========== ===========
Net Income $ 0.20 $ 0.11 $ 0.51 $ 0.32
=========== =========== =========== ===========
</TABLE>
<PAGE> 8
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS, (Continued)
(unaudited)
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 $17.9 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. In June 1997, the full
amount of the escrow account was released. 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 finalized based on
the completion of certain additional procedures. The estimated excess of
the acquisition cost over net assets acquired, ("goodwill") of $17.1 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 $25.2 million less liabilities assumed of $5.5 million and acquisition costs
of $1.8 million. The acquisition of Rental King was primarily funded by 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 credit. The
statements of income for the three and nine month periods ended June 30,
1997 include 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 TV, 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 $2.8 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 seller's 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 purchase price will be finalized based on the
completion of certain additional procedures. The estimated excess of the
acquisition cost over net assets acquired, ("goodwill") of $4.4 million is
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 $7.8 million less liabilities assumed of $4.7 million and acquisition
costs of $0.3 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 purchase
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 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 $4,519,147 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 $7,332,052 less liabilities
assumed of $2,363,136 and acquisition costs of $679,120. 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 consisted
principally of trade accounts payable of $582,693 and bank debt of $1,446,238.
Following are pro forma results of operations for the nine months ended
June 30, 1997 and 1996 assuming the acquisitions of Diamond Leasing, Coleman
and Rental King (as defined in Note 3) had occurred on October 1, 1995. The
results are not necessarily indicative of future operations or what would
have occurred had the acquisitions been consummated as of October 1, 1995.
<PAGE> 9
RENT-WAY, INC.
NOTES TO FINANCIAL STATEMENTS, (Continued)
(unaudited)
3. Acquisitions, Continued:
<TABLE>
<CAPTION>
Unaudited Pro Forma Operations
Nine months ended June 30,
------------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $76,868,714 $74,629,820
Income before extraordinary item $ 3,612,821 $ 3,524,201
----------- -----------
Net income $ 3,343,804 $ 3,524,201
=========== ===========
Earnings per common share (adjusted to give effect to any preferred stock (dividends)/gain on redemption):
Income before extraordinary item $ 0.53 $ 0.51
=========== ===========
Net income $ 0.52 $ 0.51
=========== ===========
</TABLE>
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 estimated at $2,045,000.
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 amount of $1,344,500 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 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.
<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
tranches 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 facility are equal to 0.25% per annum on each bank's 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 in part, without premium or penalty, except with respect
to restrictions identified above in connection with the selection of the
euro-rate interest option. As of June 30, 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
McKenzie Leasing Corporation in July 1995. 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 preferred 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. Following
full review by the Securities and Exchange Commission, the Company filed
an amended registration statement on June 13, 1997, which registration
statement was declared effective on June 19, 1997. 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 of incorporation was approved to increase the number of
authorized shares of Common Stock from 10,000,000 to 20,000,000.
9. Subsequent Event:
On July 14, 1997, the Company acquired the assets of R. A. Wolford Inc.,
a privately owned rental-purchase chain in southeast Pennsylvania with
annual revenues of approximately $3.3 million. Consideration consisted of
$2.8 million in cash drawn on the Company's existing line of credit.
<PAGE> 11
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
For the three and nine months ended June 30, 1997 the Company's total
revenues increased by 97.5% and 71.6%, operating income increased by 153.3%
and 103.3% and income before the effect of an extraordinary item increased
by 100.1% and 99.3%, respectively, compared to the three and nine 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 7.7% for the three months ended June 30,
1997 as compared to the same three month period 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 111.9% to $3.9 million for the nine month period ended June 30,
1997 from $1.8 million in the same period last year.
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 $17.9 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 an escrow agreement, to satisfy sellers' representations
and warranties and any purchase price adjustments. In June 1997, the full
amount of the escrow account was released. The Company believes 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 June 30,
1997, all 70 stores have been fully integrated into the Rent-Way system.
On January 2, 1997, the Company acquired all the outstanding common shares
of Bill Coleman TV, 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 $2.8 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
June 30, 1997 all fifteen stores have been fully integrated into the
Rent-Way system, with any necessary remodeling under way.
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.
<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>
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues:
Rental revenue 87.8% 85.8% 87.8% 86.0%
Other revenue 12.2 14.2 12.2 14.0
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise 23.1 26.3 23.2 26.6
Property and equipment 1.7 1.6 1.6 1.5
Amortization of goodwill 2.3 1.7 2.1 1.7
----- ----- ----- -----
Total depreciation and amortization 27.1 29.6 26.9 29.8
Salaries and wages 24.9 25.3 25.7 24.9
Advertising 3.7 3.0 4.6 4.0
Occupancy 6.9 6.6 6.9 6.5
Other operating expenses 20.8 22.5 20.7 21.9
----- ----- ----- -----
Total costs and operating expenses 83.4 87.0 84.8 87.1
----- ----- ----- -----
Operating income 16.6 13.0 15.2 12.9
Interest expense (4.3) (1.7) (3.7) (3.5)
Other income (0.1) 0.5 (0.1) 0.4
----- ----- ----- -----
Income before income taxes and
extraordinary item 12.2 11.8 11.5 9.8
Income tax expense 5.7 5.4 5.4 4.5
----- ----- ----- -----
Income before extraordinary item 6.5 6.4 6.1 5.3
Extraordinary item - - (0.4) -
----- ----- ----- -----
Net income 6.5 % 6.4% 5.7 % 5.3%
===== ===== ===== =====
Redeemable preferred stock, (dividends)/gain
on redemption - (0.2) 0.4 (0.3)
----- ----- ----- -----
Earnings applicable to common shares 6.5 % 6.2 % 6.1 % 5.0 %
===== ===== ===== =====
</TABLE>
<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 June 30, 1997 and 1996
For the three months ended June 30, 1997 compared to the three months ended
June 30, 1996, total revenues increased by $12.2 million (97.5%) to $24.8
million from $12.6 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 Rental King
acquisition. Stores acquired in fiscal 1996 accounted for $3.3 million
(27.0%) of the increase, the Coleman acquisition accounted for $1.9 million
(15.5%) of the increase, the Rental King acquisition accounted for $6.1
million (49.8%) of the increase and the Company's same stores accounted for
$0.9 million (7.7%) of the increase. Other revenue increased by $1.2 million
(68.6%) to $3.0 million from $1.8 million principally due to the sotres
acquired in fiscal 1996 and 1997.
For the three months ended June 30, 1997 compared to the three months ended
June 30, 1996, total costs and operating expenses increased to $20.7 million
from $10.9 million primarily as a result of the costs and operating expenses
associated with stores acquired in fiscal 1996 and 1997, but decreased to
83.4% from 87.0% of total revenues. This decrease of 3.6% resulted primarily
from a 2.5% decrease in depreciation and amortization as a percentage of
total revenues, a 0.4% decrease in salaries and wages as a percentage of total
revenues, and a 1.7% decrease in other operating expenses as a percentage of
total revenues. Depreciation expense related to rental merchandise increased
by $2.4 million to $5.7 million from $3.3 million, but decreased 3.2% as a
percentage of total revenues due to increases in weekly rental rates, lower
purchase costs of rental merchandise due to increased volume, and improve-
ments in the realization of potential collectible rental revenue. Amortiza-
tion of goodwill increased by $0.4 million primarily because of the increase in
goodwill related to the stores acquired in fiscal 1996 and 1997. Amortization
of goodwill was 2.3% and 1.7% of total revenues for the three months ended
June 30, 1997 and 1996, respectively. For the three months ended June 30, 1997
compared to the three months ended June 30, 1996, salaries and wages
increased by $3.0 million to $6.2 million from $3.2 million principally due to
the addition of 111 new locations, an increase in same store payroll, upgrades
in the regional manager position and the addition of 13 new managers from
recent acquisitions, and an overall strengthening of corporate personnel. The
111 stores from recent acquisitions produced additional payroll cost of
approxmately $2.3 million for the three months ended June 30, 1997. Same store
payroll increased $0.2 million. The upgrade and additions in regional
managers and the strengthening of corporate personnel resulted in an
increase in salaries and wages of approximately $0.3 million and $0.2 million,
respectively. Salaries and wages decreased to 24.9% from 25.3% of total
revenue for the three months ended June 30, 1997 and 1996, respectively,
primarily due to growth in same store revenue and more efficient use of
corporate personnel. The Company, in anticipation of future growth, has
strengthened store and regional personnel by upgrading with managers who have
extensive multi-unit experience. Advertising expense increased $0.5 million or
0.7% as a percentage of total revenues to $0.9 million from $0.4 million
principally due to the addition of the stores acquired in fiscal 1996 and
1997. Occupancy expense increased $0.9 million or 0.3% as a percentage of
total revenues to $1.7 million from $0.8 million primarily due to the
addition of the stores acquired in fiscal 1996 and 1997. Other
operating expenses increased by $2.4 million to $5.2 million from $2.8 million,
but decreased 1.7% as a percentage of total revenues. This 1.7% decrease
occurred becauses 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 June 30, 1997 compared to the three months ended
June 30, 1996, operating income increased by $2.5 million (153.3%) to $4.1
million from $1.6 million, and increased to 16.6% from 13.0% 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 June 30, 1997 compared to the three months ended
June 30, 1996, interest expense increased $0.9 million to $1.1 million from
$0.2 million due to an increase in debt of $39.6 million from $7.1 million
to $46.7 million. This increase is principally the result of the issuance
of $20 million of 7% convertible subordinated debentures in the Rental King
acquisition on February 6, 1997, the purchase of DLC on July 25, 1996 and
Coleman on January 2, 1997.
<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 June 30, 1997 and 1996, Continued
For the three months ended June 30, 1997 compared to the three months ended
June 30, 1996, income tax expense increased to $1.4 million from $0.7 million
because the Company generated greater taxable income. The Company's income
tax rate of 47.0% 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 June 30, 1997 compared to the three months ended
June 30, 1996, net income increased by $0.8 million (100.1%) to $1.6 million
from $0.8 million. The increase was due to the factors discussed above.
Comparison of Nine Months Ended June 30, 1997 and 1996
For the nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, total revenues increased by $26.3 million (71.6%) to $63.0
million from $36.7 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 $10.0 million (38.0%) of the
increase, stores acquired in the Coleman acquisition accounted for $3.9
million (14.8%) of the increase, stores acquired in the Rental King
acquisition accounted for $10.6 million (40.3%) of the increase,
and the Company's same stores accounted for $1.8 million (6.9%) of the
increase. Other revenue increased $2.6 million (50.0%) to $7.7 million
from $5.1 million principally due to stores acquired in 1996 and 1997.
For the nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, total costs and operating expenses increased to $53.4 million
from $32.0 million primarily as a result of the costs and operating expenses
associated with stores acquired in 1996 and 1997, but decreased to 84.8%
from 87.1% of total revenues. This decrease of 2.3% resulted primarily from
a 2.9% decrease in depreciation and amortization as a percentage of total
revenues and a 1.2% decrease in other operating expenses as a percentage of
total revenues. Depreciation expense related to rental merchandise increased
by $4.8 million to $14.6 million from $9.8 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 $0.7 million primarily
because of the increase in goodwill related to stores acquired in 1996 and
1997. For the nine months ended June 30, 1997 compared to the nine months
ended June 30, 1996 salaries and wages increased by $7.0 million to $16.2
million from $9.2 million. This increase is principally due to the
addition of 111 new stores including 13 new regional managers, upgrades
in store and regional personnel, and an overall strengthening of corporate
personnel. Salaries and wages were 25.7% and 24.9% of total revenues for the
nine months ended June 30, 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 $1.4 million or 0.6% as a percentage of total revenues to
$2.9 million from $1.5 million principally due to the addition of the stores
acquired in 1996 and 1997. Occupancy expense increased $1.9 million to $4.3
million from $2.4 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 $5.0 million to $13.0 million from $8.0 million
principally due to the addition of the stores acquired in 1996 and 1997,
but decreased to 20.7% from 21.9% of total revenues. This 1.2% 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 nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, operating income increased by $4.9 million (103.3%) to $9.6
million from $4.7 million, and increased to 15.2% from 12.9% of total
revenues. The improvement in operating income was principally due to the
stores acquired in 1996 and 1997 and the factors discussed above.
<PAGE> 15
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (Continued)
Comparison of Nine Months Ended June 30, 1997 and 1996, Continued
For the nine months ended June 30, 1997 compared to the nine months ended
June 30,1996, interest expense increased by $1.0 million to $2.3 million
from $1.3 million due to an increase in debt of $39.6 million from $7.1
million to $46.7 million. This increase is the result of the issuance of
$20 million of 7% convertible subordinated debentures in connection with the
Rental King acquisition on February 6, 1997, the purchase of DLC on July 25,
1996 and Coleman on January 2, 1997.
For the nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, income tax expense increased to $3.4 million from $1.6
million because the Company generated greater taxable income. The Company
is accruing income tax expense based on an effective tax rate of 46.7%,
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 nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, net income increased by $1.7 million (85.4%) to $3.6
million from $1.9 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 consists 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. The new facility
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. As of June 30, 1997, the Company had approximately
$20.5 million of availability under the working capital loan portion of the
new facility.
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. and affiliates. 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 and the registration
statement became effective on June 19, 1997. The funds generated by this
private placement were used in conjunction with Rental King acquisition
(see Note 3).
For the nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, the Company's net cash provided by operating activities
decreased to $0.8 million from $1.0 million. This decrease was principally
due to a $7.9 million increase in rental merchandise purchases and a $1.9
million decrease in accounts payable offset by a $1.9 million increase in
net income, a $5.9 million increase in non-cash depreciation and
amortization, a $0.4 million increase in income taxes payable, and a $1.7
million increase in other liabilities. The increase in depreciation,
amortization, and rental merchandise purchases resulted primarily from the
stores acquired in 1996 and 1997.
For the nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, the Company's net cash used in investing activities increased
$23.9 million to $27.7 million from $3.8 million. This increase is primarily
due to the purchase of Coleman and Rental King.
<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 nine months ended June 30, 1997 compared to the nine months ended
June 30, 1996, the Company's net cash provided by financing activities
increased to $28.2 million from $3.2 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 it's existing corporate headquarters, to accommodate the
growth from recent acquisitions. The building was purchased for $0.8
million with funds drawn on the Company's new facility.
Inflation
During the nine months ended June 30, 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" ("SFAS 123")
effective for transactions entered into after December 15, 1995. The
Company intends on adopting disclosure-only provisions of SFAS 123 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"
(SFAS 128"), effective for periods ending after December 31, 1997.
The Company has disclosed the estimated impact of SFAS 128 for the three
and nine month periods ended June 30, 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 may contain
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 the 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.
<PAGE> 17
RENT-WAY, INC.
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
The Exhibits filed as part of this report are listed below.
Exhibit No. Description
---------- -----------
11 Computation of Net Income per Common Share
27 Financial data schedule
b. Reports on Form 8-K
On April 21, 1997, the Company filed Form 8-K/A amending its previous
Form 8-K filed February 21, 1997 which reported the company's acquisition
of Perry Electronics, Inc. d/b/a Rental King. The Form 8-K/A included (i)
audited financial statements of Rental King consisting of balance sheets,
statements of operations, statements of shareholders' equity and statement
of cash flows for and as of the years ended December 31, 1996 and 1995, and
notes thereto, and (ii) unaudited proforma financial information consisting
of a balance sheet and statements of income, and notes thereto.
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.
______________ _________________________________________
Date Jeffrey A. Conway
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer and Duly
Authorized Officer)
<PAGE> 1
RENT-WAY, INC.
EXHIBIT 11
Computation of Net Income Per Common Share
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PRIMARY
Net income $ 1,605,806 $ 802,600 $ 3,581,461 $ 1,931,672
Preferred stock (dividend)/gain on redemption - (19,250) 280,175 (109,357)
----------- --------- ----------- -----------
Net income for primary earnings per common share $ 1,605,806 $ 783,350 $ 3,861,636 $ 1,822,315
=========== ========= =========== ===========
Weighted average number of common shares
outstanding during the period 6,640,603 6,356,624 6,621,224 4,947,191
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of stock options
stock warrants and escrowed shares 608,583 765,094 487,317 584,576
----------- --------- ----------- -----------
Weighted average number of shares used in
calculation of primary income per share 7,249,186 7,121,717 7,108,541 5,531,767
----------- --------- ----------- -----------
Earnings per common share (adjusted to give effect to any preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.22 $ 0.11 $ 0.54 $ 0.33
=========== ========== =========== ==========
Net income $ 0.22 $ 0.11 $ 0.51 $ 0.33
=========== ========== =========== ==========
FULLY DILUTED
Net income $ 1,605,806 $ 783,350 $3,861,636 $1,822,315
Add - Impact of assumed conversion:
Interest on 10% convertible notes (net of tax) 105,000 - 315,000 -
Interest on 7% convertible debentures (net of tax) 210,000 - 350,000 -
----------- ---------- ----------- ----------
Adjusted net income for fully diluted earnings per share $ 1,920,806 $ 783,350 $4,526,636 $1,822,315
=========== ========== =========== ==========
Weighted average number of common shares
outstanding during the period 6,640,603 6,356,624 6,621,224 4,947,191
Add - incremental shares representing:
Shares issuable upon exercise of stock options, stock warrants
and escrowed shares included in primary calculation above 608,583 765,094 487,317 584,576
Shares issuable upon exercise of stock options, stock warrants
and escrowed shares based on year end market prices 234,020 31,816 285,702 212,193
Shares issued on conversion of 10% notes 704,225 - 704,225 -
Shares issued on conversion of 7% debentures 1,495,890 - 805,479 -
----------- ---------- ----------- ----------
Weighted average number of shares used in
calculation of fully diluted income per share 9,683,321 7,153,534 8,903,947 5,743,960
=========== ========== =========== ==========
Earnings per common share (adjusted to give effect to any preferred stock (dividend)/gain on redemption):
Income before extraordinary item $ 0.20 $ 0.11 $ 0.54 $ 0.32
=========== ========== =========== ===========
Net income $ 0.20 $ 0.11 $ 0.51 $ 0.32
=========== ========== =========== ==========
</TABLE>
<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> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,482,476
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 32,390,910
<CURRENT-ASSETS> 0
<PP&E> 11,386,041
<DEPRECIATION> 2,925,404
<TOTAL-ASSETS> 92,399,376
<CURRENT-LIABILITIES> 0
<BONDS> 46,658,180
0
0
<COMMON> 28,927,632
<OTHER-SE> 6,392,913
<TOTAL-LIABILITY-AND-EQUITY> 92,399,376
<SALES> 21,814,622
<TOTAL-REVENUES> 24,832,433
<CGS> 5,735,820
<TOTAL-COSTS> 20,701,518
<OTHER-EXPENSES> 38,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,064,062
<INCOME-PRETAX> 3,027,950
<INCOME-TAX> 1,422,144
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,605,806
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.20
</TABLE>
