- -------------------------------------------------------------------------------
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 DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22026
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.)
One Rentway Place, Erie, Pennsylvania 16505
(Address of principal executive offices)
(814) 455-5378
(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
- -------------------------------------------------------------------------------
Common Stock
Outstanding as of January 19, 2000
- -------------------------------------------------------------------------------
22,011,564
- -------------------------------------------------------------------------------
<PAGE>
RENT-WAY, INC.
<TABLE>
<CAPTION>
Page
PART I--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
<S> <C> <C> <C> <C> <C>
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30, 1999.... 3
Condensed Consolidated Statements of Operations, Three Months Ended December 31, 1999
and 1998................................................................................ 4
Condensed Consolidated Statements of Cash Flows, Three Months Ended December 31, 1999
and 1998................................................................................ 5
Notes to Condensed Consolidated Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................ 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 14
PART II-OTHER INFORMATION
Item 1. Material Developments in Connection with Legal Proceedings........................... 15
Item 5. Other Information.................................................................... 15
Item 6. Exhibits and Reports on Form 8-K..................................................... 15
Signatures................................................................................... 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(all dollars in thousands, except share data)
December 31, September 30,
1999 1999
------------- --------------
(unaudited)
Assets
<S> <C> <C>
Cash.................................................... $ 3,752 $ 8,646
Prepaid expenses........................................ 12,878 9,610
Rental merchandise, net................................. 232,133 202,145
Property and equipment, net............................. 52,432 50,578
Goodwill, net........................................... 307,710 305,900
Deferred financing costs, net........................... 3,579 3,688
Non-compete and prepaid consulting fees, net............ 4,784 5,494
Other assets............................................ 9,799 11,333
------------- -------------
Total assets....................................... $ 627,067 $ 597,394
============= =============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable........................................ $ 13,668 $ 8,417
Other liabilities....................................... 16,612 15,861
Income taxes payable.................................... 7,723 2,316
Deferred income taxes................................... 4,269 5,218
Debt.................................................... 297,128 288,130
------------- -------------
Total liabilities.................................. 339,400 319,942
Contingencies (see Note 6).............................. -- --
Shareholders' equity:
Preferred stock, without par value; 1,000,000 shares
authorized;
no shares issued and outstanding...................... -- --
Common stock, without par value; 50,000,000 shares
authorized; and 21,989,579 and 21,976,401 shares
issued and outstanding, respectively.................. 256,842 256,755
Retained earnings....................................... 30,825 20,697
------------- -------------
Total shareholders' equity......................... 287,667 277,452
------------- -------------
Total liabilities and shareholders' equity......... $ 627,067 $ 597,394
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(all dollars in thousands, except per share data)
For the three months ended
December 31,
---------------------------------------
1999 1998
---- ----
(unaudited) (unaudited)
Revenues:
<S> <C> <C>
Rental revenue...................................... $ 119,982 $ 109,634
Other revenue....................................... 20,929 14,325
------------- -------------
Total revenues................................. 140,911 123,959
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise................................ 31,158 31,324
Property and equipment............................ 3,711 2,185
Amortization of goodwill.......................... 3,259 2,495
Salaries and wages.................................. 36,157 33,328
Advertising......................................... 5,609 7,787
Occupancy........................................... 10,310 8,147
Name change expense................................. -- 86
Business combination costs.......................... -- 16,368
Other operating expenses............................ 28,143 29,327
------------- -------------
Total costs and operating expenses............. 118,347 131,047
------------- -------------
Operating income (loss)........................ 22,564 (7,088)
Other income (expense):
Interest expense.................................... (5,828) (3,613)
Interest income..................................... 14 26
Other income (expense), net......................... (146) (191)
------------- -------------
Income (loss) before income taxes and
extraordinary item......................... 16,604 (10,866)
Income tax expense (benefit)........................ 6,476 (1,335)
------------- -------------
Income (loss) before extraordinary item...... 10,128 (9,531)
Extraordinary item, net of tax benefit.............. -- (519)
------------- -------------
Net income (loss)................................... $ 10,128 $ (10,050)
============= =============
Earnings (loss) per common share (see note 2):
Basic earnings(loss) per common share:
Income (loss) before extraordinary item...... $ 0.46 $ (0.45)
============= =============
Net income (loss)............................ $ 0.46 $ (0.48)
============= =============
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item...... $ 0.44 $ (0.45)
============= =============
Net income (loss)............................ $ 0.44 $ (0.48)
============= =============
Weighted average common shares outstanding:
Basic........................................ 21,982 21,088
============= =============
Diluted...................................... 23,762 21,088
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(all dollars in thousands)
For the three months ended
December 31,
--------------------------------
1999 1998
--------------- ---------------
(unaudited) (unaudited)
Operating activities:
<S> <C> <C>
Net income (loss)..................................... $ 10,128 $ (10,050)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization....................... 38,319 36,111
Deferred income taxes............................... (950) 588
Extraordinary item.................................. -- 519
Changes in assets and liabilities:
Prepaid expenses.................................... (3,268) (587)
Rental merchandise.................................. (61,146) (52,345)
Prepaid consulting fees............................. 710 717
Income taxes receivable............................. -- (654)
Other assets........................................ 1,534 2,021
Accounts payable.................................... (4,444) (10,265)
Income taxes payable................................ 5,407 --
Other liabilities................................... 417 2,699
-------------- --------------
Net cash used in operating activities............ (13,293) (31,246)
-------------- --------------
Investing activities:
Purchase of businesses, net of cash acquired........ (4,736) (727)
Purchases of property and equipment................. (5,565) (3,275)
--------------- ---------------
Net cash used in investing activities............ (10,301) (4,002)
-------------- --------------
Financing activities:
Proceeds from borrowings............................ 16,000 208,475
Payments on borrowings including early
extinguishment...................................... (7,002) (179,916)
Book overdraft...................................... 9,695 5,190
Deferred finance costs.............................. (80) (1,187)
Proceeds from common stock issuance................. 87 571
-------------- --------------
Net cash provided by financing activities........ 18,700 33,133
-------------- --------------
Decrease in cash................................. (4,894) (2,115)
Cash at beginning of period......................... 8,646 5,326
-------------- --------------
Cash at end of period............................... $ 3,752 $ 3,211
============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
RENT-WAY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(all dollars in thousands, except per share data)
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
consolidated 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 (which, except as
discussed herein consist 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.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
The Company has no items of other comprehensive income.
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-K for the fiscal year ended September 30, 1999.
2. Earnings (Loss) per Common Share:
Basic earnings (loss) per common share is computed using income (loss)
available to common shareholders divided by the weighted average number of
common shares outstanding. Diluted earnings (loss) per common share is computed
using income (loss) available to common shareholders adjusted for anticipated
interest savings, net of related taxes, on conversion of the Company's
convertible subordinated debentures and the weighted average number of shares
outstanding is adjusted for the potential impact of options, warrants and
convertible subordinated debentures where the effects are dilutive. Because
operating results were a loss in the quarter ended December 31, 1998, basic and
diluted loss per common share were the same.
The following table discloses the reconciliation of numerators and
denominators of the basic and diluted earnings (loss) per common share
computation:
<TABLE>
<CAPTION>
For the three months ended
December 31,
(unaudited)
-----------------------------------
COMPUTATION OF EARNINGS (LOSS) PER SHARE: 1999 1998
----------------------------------------- ---- ----
BASIC
Earnings (loss) applicable to common shares for
<S> <C> <C>
basic earnings per share......................... $ 10,128 $ (10,050)
============ ============
Weighted average common shares outstanding....... 21,982 21,088
============ ============
Earnings (loss) per common share:
Income (loss) before extraordinary item........ $ 0.46 $ (0.45)
============ ============
Earnings (loss) applicable to common shares.... $ 0.46 $ (0.48)
============ ============
DILUTED
Earnings (loss) applicable to common shares for
basic earnings per share....................... $ 10,128 $ (10,050)
Interest on 7% convertible debentures (net of
tax)........................................... 210 --
------------ ------------
Earnings (loss) applicable to common shares for
diluted earnings per share....................... $ 10,338 $ (10,050)
============ ============
Weighted average common shares used in
calculating basic earnings per share........... 21,982 21,088
Add incremental shares representing:
Shares issuable upon exercise of stock options,
stock warrants, and escrowed shares.............. 284 --
Shares issued on conversion of 7% convertible
debentures....................................... 1,496 --
------------- ------------
Weighted average number of shares used in
calculation of diluted earnings (loss) per share. 23,762 21,088
============= ============
Earnings (loss) per common share:
Income (loss) before extraordinary item........ $ 0.44 $ (0.45)
============ ============
Earnings (loss) applicable to common shares.... $ 0.44 $ (0.48)
============ ============
</TABLE>
<PAGE>
RENT-WAY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements - continued
(all dollars in thousands, except per share data)
3. Mergers and Acquisitions:
On September 23, 1999, the Company acquired all of the outstanding shares
of RentaVision, Inc. ("RentaVision"), a rental-purchase chain located in 16
states with annual revenues of approximately $75,000. The consideration paid in
exchange for all the outstanding shares of RentaVision was $73,874 consisting of
$68,774 in cash and 278,801 shares of the Company's common stock (restricted
shares). Pursuant to the terms of the purchase agreement, 181,201 shares of
common stock equivalent to $4,000 of the purchase price was placed in escrow
subject to the terms and conditions of the escrow agreement to secure seller's
representations and warranties and any purchase price adjustments. The
acquisition was accounted for using the purchase method of accounting.
RentaVision's assets and liabilities were recorded at their fair values as of
the date of the acquisition. The excess of the acquisition cost over the
estimated fair value of the net assets acquired ("goodwill") of $88,917 is being
amortized on a straight-line basis over 30 years. The total cost of the net
assets acquired was $73,874 and consisted of assets of $104,465 less liabilities
assumed of $25,721 and acquisition costs of $4,870. Assets acquired (at fair
value) other than goodwill consisted primarily of rental merchandise of $13,500,
non-compete agreement of $1,000, customer contracts of $1,200, cash of $725, and
other assets of $356. Liabilities assumed (at fair value) consisted primarily of
debt of $21,527, accrued liabilities of $2,684, and trade accounts payable of
$1,510. The Consolidated Statement of Operations for the three months ended
December 31, 1999 includes the results of operations of RentaVision for the
entire period.
On June 30, 1999, the Company acquired all the outstanding shares of
America's Rent-To-Own Center, Inc., ("America's Rent-To-Own"). At the time of
the acquisition, America's Rent-To-Own operated a chain of 21 rental-purchase
stores located in Arkansas, Kansas, Missouri, and Oklahoma with annual revenues
of approximately $8,000. The consideration paid in exchange for all the
outstanding shares of America's Rent-To-Own consisted of 231,140 shares of the
Company's common stock (restricted shares). Pursuant to the terms of the
purchase agreement approximately $800 or 32,454 shares of the Company's common
stock were placed in escrow subject to the terms and conditions of the escrow
agreement to secure seller's representations and warranties and any purchase
price adjustments. As of December 31, 1999, the Company had not released any
funds from the escrow account due to final settlement of the purchase price. The
acquisition was accounted for using the purchase method of accounting. America's
Rent-To-Own assets and liabilities were recorded at their fair value at the date
of the acquisition. The excess of the acquisition cost over the fair value of
net assets acquired, ("goodwill") of $4,835 is being amortized on a straight
line basis over 30 years. The total cost of the net assets acquired was $4,838
and consisted of assets of $7,261 less liabilities assumed of $2,149 and
acquisition costs of $274. Assets acquired, other than goodwill (at fair value)
consisted of rental merchandise of $1,269, receivables of $632, prepaid and
other assets of $65, a deferred tax asset of $400, and a non-compete agreement
of $60. Liabilities assumed (at fair value) consisted of debt of $1,295, accrued
liabilities of $474 and trade accounts payables of $380. The Company is in the
process of finalizing the purchase price allocation. The Consolidated Statement
of Operations for the three months ended December 31, 1999 includes the results
of operations of America's Rent-To-Own for the entire period.
4. Debt:
On November 17, 1999, the Company amended its existing collaterized term
loan and revolving credit facility with a syndicate of banks led by National
City Bank of Pennsylvania (the "Facility"). The amendment permits the Company to
repurchase outstanding capital stock and to make an investment in and a loan to
DPI Teleconnect, L.L.C., a Delaware limited liability company (see Note 8).
On December 31, 1999, the Company made the required $3,750 principal
payment on its Term Notes A and the required $250 principal payment on its Term
Notes B.
As of December 31, 1999, the Company's debt under both the euro-rate option
and base-rate option plans were as follows:
<TABLE>
<CAPTION>
Borrowing option plan Amount Rate Expiration Date
--------------------- ------ ---- ---------------
<S> <C> <C> <C> <C>
Euro-rate tranche.............................. $ 121,250 8.68375% 03/29/00
Euro-rate tranche.............................. 99,750 9.68375% 03/29/00
Euro-rate tranche.............................. 40,000 8.68375% 03/29/00
Base-rate...................................... 16,000 9.50000% 09/30/04
---------
$ 277,000
=========
</TABLE>
At December 31, 1999, the Company had $56,000 principal amount of the
revolving credit facility outstanding under the Facility and $1,700 in letters
of credit outstanding. At December 31, 1999 there was $42,300 of unused
revolving notes and letters of credit available under the Facility.
<PAGE>
RENT-WAY, INC.
Notes to Unaudited Condensed Consolidated Financial Statements - continued
(all dollars in thousands, except per share data)
4. Debt (continued):
By notice to the holders thereof dated December 10, 1999, the Company called
for a mandatory redemption of its $20 million 7% Convertible Subordinated
Debentures due 2007. The redemption date is February 5, 2000 and the redemption
price is 103% of the outstanding principal amount thereof. The Debentures are
convertible into shares of Common Stock at a price of $13.37 per share until
redeemed.
5. Derivative Financial Instruments:
During the three month period ended December 31, 1999, the Company entered
into a new derivative financial instrument with PNC Bank. The notional amount
outstanding, maturity date, and the fixed pay and variable receive rate of this
interest rate swap agreement are as follows:
<TABLE>
<CAPTION>
Fixed Variable
Notional Maturity Pay Receive
Amount Date Rate Rate
----------- -------- ------ --------
<S> <C> <C> <C> <C>
Interest rate swap, PNC Bank.......................... $ 5,000 Sept 2004 6.740% 5.514%
</TABLE>
The fair value of the interest rate swap agreements based on settlement
cost as estimated by independent dealers as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Notional Fair
Amount Value
---------- -----------
<S> <C> <C>
Interest rate swap, National City Bank....................... $ 30,000 $ 755
Interest rate swap, Bank of America.......................... $ 20,000 $ 165
Interest rate swap, Manufacturers' and Traders Trust Company. $ 10,000 $ 232
Interest rate swap, Harris Bank.............................. $ 20,000 $ 1,225
Interest rate swap, SunTrust Bank............................ $ 10,000 $ 594
Interest rate swap, LaSalle Bank............................. $ 10,000 $ 609
Interest rate swap, Bank of America.......................... $ 10,000 $ 602
Interest rate swap, Harris Bank.............................. $ 10,000 $ 602
Interest rate swap, PNC Bank................................. $ 5,000 $ 5
</TABLE>
6. 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 $1,400 to $3,100. 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 financial
position, results of operations or cash flows of the Company. In addition, on
December 20, 1999, an action was brought against the Company in the Circuit
Court of Jefferson County, Mississippi, asserting claims in the amount of
$100,000 for wrongful deaths and punitive damages arising out of a collision on
November 20, 1999, between a Company delivery truck and a passenger vehicle. The
Company intends to vigorously defend itself against the claims. The Company
believes that it has sufficient insurance coverage for any damages that might be
awarded and that the final disposition of the action will not have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.
Additional claims exist in the range of $300 to $450 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 previous shareholders of prior
acquisitions or covered by insurance policies and therefore will not have a
material effect on the financial position, results of operations or cash flows
of the Company.
7. Income Taxes:
The fiscal 1999 effective tax rate has been adjusted for certain
non-deductible business combination costs which have been expensed in the
quarter ended December 31, 1998. As a result, the impact in the effective rate
for the year has been entirely reflected in the quarter ended December 31, 1998
and without these charges would have been approximately 41.5%.
8. Subsequent Event:
On January 10, 2000, the Company acquired a 49% interest in DPI
Teleconnect, L.L.C. ("DPI"), a privately-held provider of prepaid local phone
service, for $5,500 in cash. The Company has the option to acquire an additional
21% interest upon receipt of regulatory approvals. DPI is currently licensed to
offer prepaid local phone service in 21 states and is working to expand to over
40 states by the end of 2000.
<PAGE>
RENT-WAY, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Rent-Way is the second largest operator in the rental purchase industry with
1,088 stores located in 41 states. The Company offers quality brand name home
entertainment equipment, furniture, appliances, and jewelry to customers under
full-service rental-purchase agreements that generally allow the customer to
obtain ownership of the merchandise at the conclusion of an agreed upon rental
period.
On June 30, 1999, the Company acquired America's Rent-To-Own Center, Inc.
("America's Rent-To-Own"). The transaction value was approximately $7 million
and was paid for with a combination of 231,140 shares of Rent-Way's common stock
and the assumption of certain liabilities. America's Rent-To-Own operated 21
rental-purchase stores in Arkansas, Kansas, Missouri, and Oklahoma and had
annual revenues of approximately $8 million.
On September 23, 1999, the Company acquired all the stock of RentaVision,
Inc. ("RentaVision") for a purchase price of approximately $74 million.
RentaVision operated a chain of 250 rental-purchase stores in 16 states, 50 of
which have been opened during the past year. RentaVision had annual revenues of
approximately $75 million.
The Company completed the management information integration of all stores
acquired in the America's Rent-To-Own acquisition by July 31, 1999 and all
stores acquired in the RentaVision acquisition by November 11, 1999. In
addition, the Company consolidated all back office functions such as accounting,
payroll, and human resources. The Company closed and merged 33 stores located in
overlapping markets. The Company also closed RentaVision's five warehouse
locations. The Company uses a direct-ship policy from their vendors to the
stores. This policy has minimized the amount of rental merchandise not on rent.
On January 10, 2000, the Company acquired a 49% interest in DPI Teleconnect,
L.L.C. ("DPI"), a privately-held provider of prepaid local phone service. The
Company has the option to acquire an additional 21% interest upon receipt of
regulatory approvals. In fiscal 1999, the Company began to act as an agent for
DPI. The Company successfully tested this service in 70 of its stores. The
Company received the benefit of additional traffic in these stores, as well as,
a 10% commission from the sale of the service. DPI is currently licensed to
offer prepaid local phone service in 21 states and is working to expand to over
40 states by the end of 2000.
Management continues to actively seek acquisition candidates with financial
and geographic profiles consistent with the Company's growth objectives.
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain items
from the Company's unaudited Condensed Consolidated Statements of Operations,
expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Three Months
Ended
December 31
-----------------------------------------
1999 1998
-----------------------------------------
Revenues:
<S> <C> <C>
Rental revenue............................. 85.1% 86.5%
Other revenue.............................. 14.9 13.5
-------------- --------------
Total revenues.......................... 100.0 100.0
Costs and operating expenses:
Depreciation and amortization:
Rental merchandise......................... 22.1 25.3
Property and equipment..................... 2.6 1.7
Amortization of goodwill................... 2.3 2.0
-------------- -------------
Total depreciation and amortization..... 27.0 29.0
Salaries and wages........................... 25.7 26.9
Advertising.................................. 4.0 6.3
Occupancy.................................... 7.3 6.5
Name change expense.......................... -- 0.1
Business combination costs................... -- 13.2
Other operating expenses..................... 20.0 23.7
-------------- -------------
Total costs and operating expenses...... 84.0 105.7
-------------- -------------
Operating income (loss)................. 16.0 (5.7)
Interest expense............................ (4.1) (2.9)
Other income................................ (0.1) (0.2)
-------------- -------------
Income (loss) before income taxes and
extraordinary item...................... 11.8 (8.8)
Income tax expense (benefit)................ 4.6 (1.1)
-------------- -------------
Income (loss) before extraordinary item. 7.2% (7.7)%
============== =============
</TABLE>
Comparison of Three Months Ended December 31, 1999 and 1998
Total revenues. Total revenues increased $17.0 million, or 13.7% to
$140.9 million from $123.9 million. The increase is attributable to the addition
of the stores acquired and opened in fiscal 1999 and 2000 and increased same
store revenues. The stores acquired in the RentaVision and America's Rent-To-Own
acquisitions accounted for $20.1 million and $1.9 million of the increase,
respectively. Stores opened in fiscal 1999 and 2000 accounted for $1.3 million
of the increase. The Company experienced a 1.9% increase in same store revenues
compared to the same period last year. Increase (decrease) in same store
revenues for the Rent-Way stores and Home Choice stores were 5.1% and (0.9)%,
respectively. The increase in same store revenues was primarily due to a 1.4%
increase as a percentage of total revenues in appliance rentals, a 1.6% increase
as a percentage of total revenues in electronics revenues, 0.9% increase as a
percentage of total revenues in jewelry rentals, and a 1.1% increase as a
percentage of total revenues in merchandise sales offset by a 1.1% decrease as a
percentage of total revenues in furniture rentals and a 0.2% decrease as a
percentage of total revenues in pager rentals. The Company expects increased
same store revenues for the rest of the fiscal 2000 due to, among many other
factors, the addition of new products and services. During the last quarter of
fiscal 1999, the Company added Compaq personal computers to its product line. In
addition, the Company has begun to act as an agent to provide prepaid phone
service through DPI Teleconnect, L.L.C. This program is currently being rolled
out to 70 stores. Management believes that opportunities exist to provide
additional non-traditional merchandise to its customers.
Depreciation and amortization. Depreciation expense related to rental
merchandise decreased $0.1 million, 3.2% as a percentage of total revenues to
22.1% from 25.3%. This decrease is primarily due to increases in weekly rental
rates, lower purchase costs of rental merchandise due to increased volume, and
improved realization of potential collectible rent. In addition, depreciation
expense as a percentage of total revenues has shown solid improvement in the
stores acquired in the Home Choice merger. Acquired merchandise with high
remaining values has worked its way out of the Company's system and the stores
are replacing poorly priced and termed agreements with new agreements priced and
termed in accordance with Rent-Way operating procedures.
Depreciation expense related to property and equipment increased to
2.6% as a percentage of total revenues from 1.7%. This increase is principally
due to the depreciation expense related to new store signage and remodels
associated with the Home Choice stores, new computers and equipment installed in
the RentaVision stores, and the computer and software costs associated with the
Company's implementation of the PeopleSoft software package in January 1999.
Amortization of goodwill increased to 2.3% as a percentage of total
revenues from 2.0%. This increase is due to the addition of the goodwill
associated with the RentaVision and America's Rent-To-Own acquisitions.
Salaries and wages. Salaries and wages increased by $2.9 million to
$36.2 million from $33.3 million, but decreased 1.2% as a percentage of total
revenues to 25.7% from 26.9%. This 1.2% decrease as a percentage of total
revenues is due to the Company's ability to spread corporate and regional
managers' payroll over an increased store revenue base. The decrease is also
attributable to the Company bringing Home Choice payroll and store personnel
levels within the Company's standards. As a result of these factors, the Company
expects a further decline in salaries and wages as a percentage of total
revenues during the remainder of fiscal 2000.
Advertising. Advertising expense decreased to $5.6 million from $7.8
million and decreased to 4.0% as a percentage of total revenues from 6.3%. This
decrease is due to the Company's ability to focus advertising efforts in cluster
markets. It is also due to the Company's participation in co-operative
advertising programs with its vendors. As part of these co-operative programs,
the Company is able to recoup a portion of its advertising costs from its
vendors in the form of rebates for advertising their products in Rent-Way ads.
Occupancy. Occupancy expense increased to $10.3 million from $8.1
million, or 0.8% as a percentage of total revenues to 7.3% from 6.5%. This
increase is primarily due to the addition of the RentaVision stores. The
RentaVision stores have lower revenue averages to charge fixed rental costs
against. The Company expects occupancy expense as a percentage of total revenues
to decrease as the RentaVision per store revenue averages increase. Fifty of the
250 stores acquired were opened in the past twelve months.
Name change expense. Name change expense decreased to zero from $0.1
million. In 1997, Home Choice launched a program to change the name of all of
its stores from the various trade names acquired to "HomeChoice Lease or Own".
In connection with this program, Home Choice incurred nonrecurring costs which
included the write-off of the net carrying values of old signs and branded
supplies and the expensing of new vehicle decals. The Company currently operates
under both the RentWay and HomeChoice trade names.
Business combination costs. In conjunction with the Company's merger
with Home Choice Holdings, Inc. (the "Merger") on December 10, 1998, the Company
incurred $16.4 million in costs in the quarter ended December 31, 1998. These
costs included investment banker fees of $6.5 million, proxy preparation,
printing, and other professional fees of $1.3 million, employee severance and
stay-put arrangements of $4.1 million, due diligence and other costs of $0.9
million, costs related to closing or disposing of duplicate corporate
headquarters, equipment and stores in overlapping markets of $2.1 million, and
the write-off of prepaid assets which could not be used of $1.5 million.
Other operating expenses. Other operating expenses decreased to $28.1
million from $29.3 million and decreased to 20.0% as a percentage of total
revenues from 23.7%. This decrease is due in part to a decrease in inventory
write-offs. In connection with the Merger, the Company identified a large number
of rental merchandise items, which failed to meet the accepted quality standards
of the Company's operating procedures. Accordingly, the Company experienced an
excessive amount of inventory deletions during the three month period ended
December 31, 1998. The amount of these excessive inventory write-offs was
approximately $1.1 million. The decrease in other operating expenses is also the
result of the efficiencies gained by the Company from its ability to spread
certain fixed costs over an increased store revenue base. These decreased fixed
costs include liability insurance, legal and professional fees, state and local
taxes, and office supplies.
Operating income. Operating income increased to 16.0% of total revenues
from an operating loss of 5.7% of total revenues due to the factors discussed
above. Excluding the $1.1 million in excessive inventory write-offs and the
$16.4 million in business combination costs described above, operating income
increased to 16.0% from 8.4%. The Company anticipates its operating income to
remain at or increase above 16.0% in fiscal 2000 as a result of its continued
ability to leverage costs over an increased store revenue base.
Interest expense. Interest expense increased to 4.1% from 2.9% as a
percentage of total revenues. This increase is mainly due to the $68.8 million
in funds drawn on the Company's senior credit facility to consummate the
RentaVision acquisition. In addition, the Company has purchased rental
merchandise at a higher rate in an effort to supplement the merchandise in the
RentaVision stores with newer merchandise and a broader product selection.
Income tax expense. Income tax expense increased to 4.6% as a
percentage of total revenues from an income tax benefit of 1.1% of total
revenues. The increase was due to a significant increase in pretax book income
and operating income.
Extraordinary item. In the three month period ended December 31, 1998,
the Company entered into a new syndicated loan facility in connection with its
merger with Home Choice. As a result of this refinancing, the Company wrote-off
the remainder of deferred financing costs associated with its and Home Choice's
previous credit facilities. The amount of the remaining deferred financing costs
was $0.9 million, $0.5 million net of tax benefit.
Net income. Net income increased to 7.2% of total revenues from a net loss
of 8.1% of total revenues due to the factors discussed above.
Liquidity and Capital Resources
The Company's capital requirements relate primarily to acquisitions, new
store openings, and purchasing additional rental merchandise and replacing
rental merchandise that has been sold or is no longer suitable for rent. The
Company intends to increase the number of stores it operates through
acquisitions and new store openings. Such acquisitions will vary in size and the
Company will consider large acquisitions that could be material to the Company.
To provide any additional funds necessary for the continued pursuit of its
growth strategies, the Company may incur, from time-to-time, additional short
and long-term bank or other institutional indebtedness and may issue, in public
or private transactions, its equity and debt securities, depending upon market
and other conditions. There can be no assurance that such additional financing
will be available on terms acceptable to the Company.
Net cash used in operating activities decreased to $13.3 million for the
three month period ended December 31, 1999, from $31.2 million for the three
month period ended December 31, 1998. This decrease is principally due to a
$20.2 million increase in net income, a $5.9 million increase in accounts
payable, and a $5.4 million increase in income taxes payable offset by a $8.8
million increase in rental merchandise purchases, a $2.7 million increase in
prepaid expenses, and a $2.3 million decrease in other liabilities.
Net cash used in investing activities increased $6.3 million to $10.3
million in the three month period ended December 31, 1999, compared to $4.0
million in the three month period ended December 31, 1998. Capital expenditures
in the three month period ended December 31, 1999 included acquisition costs
related to the RentaVision acquisition. It also included the purchase of new
store signage and store remodeling costs associated with the stores obtained in
the Home Choice merger and the purchase of computers and equipment for the
stores acquired from RentaVision. Capital expenditures in the three month period
ended December 31, 1998 included the computer equipment and software costs
related to the implementation of a PeopleSoft software package for all
accounting, payroll, human resources, and benefits administration requirements
and a J. Driscoll package for cash management.
The Company has begun to construct a 30,000 square foot addition to its
current corporate headquarters facility. The Company estimates the cost at
approximately $3.5 million. The Company plans to fund this project with
borrowings on its senior credit facility. As of December 31, 1999, the Company
incurred $0.4 million in costs related to this project.
Net cash provided by financing activities increased to $18.7 million in the
three month period ended December 31, 1999 from $33.1 million in the three month
period ended December 31, 1998. Cash flows from financing activities have
historically represented the Company's financing of its long term growth.
On September 23, 1999, the Company amended its existing collaterized term
loan and revolving credit facility with a syndicate of banks led by Bank of
Montreal and National City Bank (the "Amended Facility"). The Amended Facility
provides for loans and letters of credit up to $325.0 million. Borrowings under
the Amended Facility bear interest at the Company's option either at a base rate
or a LIBOR based rate. The Amended Facility requires the Company to meet certain
financial covenants and ratios including maximum leverage, minimum interest
coverage, minimum tangible net worth, fixed charge coverage, and rental
merchandise usage ratios. As of December 31, 1999, the Company was in compliance
with all covenants contained in the Amended Facility. As of December 31, 1999,
$277.0 million in borrowings is outstanding under the Amended Facility. Of the
$277.0 million outstanding, $56.0 million is related to a revolving credit
facility, which is payable September 30, 2004 and $221.0 million is in the form
of term notes designated as Term Notes A (up to $125.0 million) and Term Notes B
(up to $100 million).
On December 31, 1999, the Company made the required principal repayments of
$3.8 million on the Term Notes A and $250,000 on the Term Notes B. These
repayments were funded with cash generated from operations. The Company believes
that it will generate sufficient amounts of cash from operations to make the
required quarterly principal repayments in the remainder of fiscal 2000.
On January 10, 2000, the Company acquired a 49% interest in DPI Teleconnect,
L.L.C., a privately-held provider of prepaid local phone service, for $5.5
million in cash. The Company has agreed to acquire an additional 21% interest
upon receipt of regulatory approvals. The Company has also committed to provide
DPI $3.0 million in funds to meet working capital requirements as needed.
Management believes that sufficient resources will be available to meet the
Company's cash requirements through at least the next twelve months. The Company
believes that it can adequately fund its cash needs for the foreseeable future
through borrowings under the Amended Facility and cash generated from
operations. Cash requirements for periods beyond the next twelve months depend
on the Company's profitability, its ability to manage working capital
requirements, and its rate of growth.
Seasonality and Inflation
Management believes that operating results may be subject to seasonality.
The first quarter typically has a greater percentage of rentals because of
traditional holiday shopping patterns. Management plans for these seasonal
variances and takes particular advantage of the first quarter with product
promotions, marketing campaigns, and employee incentives. Because many of the
Company's expenses do not fluctuate with seasonal revenue changes, such revenue
changes may cause fluctuations in the Company's quarterly earnings.
During the three months ended December 31, 1999, the cost of rental
merchandise, store lease rental expense and salaries and wages have increased
modestly. These increases have not had a significant effect on the Company's
results of operations because the Company has been able to charge commensurately
higher rental for its merchandise. This trend is expected to continue in the
foreseeable future.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging-Activities-Deferral of the Effective Date of SFAS No. 133-an Amendment
of FASB Statement 133." This Statement delays the effective date for this
standard until fiscal years beginning after June 15, 2000. The Company is
currently evaluating the provisions of this Statement.
The Accounting Standards Executive Committee Statement of Position 98-5,
"Accounting for the Costs of Start-up Activities" ("SOP 98-5"), issued in April
1998 and effective for fiscal years beginning after December 15, 1998 with
earlier application permitted, provides guidance on financial reporting of start
up costs and organization costs. The Company is currently evaluating the
provisions of this Statement.
Year 2000 Issues
As of the date hereof, the Company has not experienced any significant
business disruptions as a result of Year 2000 issues. However, Year 2000 issues
may yet arise that are not apparent currently. The Company utilizes management
information systems and software technology that may be affected by Year 2000
issues throughout its operations. During fiscal 1998, the Company began to
implement plans to ensure those systems continue to meet its internal and
external requirements. All the Company's remote locations operate on an
internally developed point of sale system. This system utilizes a peer to peer,
Windows 95 local area network. Communications between remote locations and the
corporate office are handled via e-mail through the internet. After completion
of testing, the Company has determined that its point of sale system is Year
2000 compliant. As a result of the Company's growth, a decision was made to
upgrade information systems at the corporate office. The installation and
implementation of a Year 2000 compliant PeopleSoft software package was
completed in January 1999. This package encompasses all accounting functions,
payroll, human resources and benefit administration requirements. The system
operates in an n-tier environment on a Windows NT platform. The cost of all
hardware, software, training and implementation costs were approximately $1.5
million, the majority of which was incurred in fiscal 1998. In addition to the
PeopleSoft package, the Company has implemented a Year 2000 compliant J.
Driscoll Package for cash management. This package operates on the same platform
as the PeopleSoft package.
The Company developed questionnaires and contacted key suppliers regarding
their Year 2000 compliance to determine any impact on its operations. The
Company will continue to monitor its suppliers on this matter. The Company has
reviewed and continues to review its non-information technology systems to
determine the extent of any changes that may be necessary and believes that
there will be minimal changes required for compliance.
The Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan was and remains to address its
significant Year 2000 issues prior to being affected by them, it has not
developed a comprehensive contingency plan. However, if the Company identifies
significant risks related to Year 2000 issues, the Company will develop
contingency plans as deemed necessary at that time.
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 of 1933, as amended, 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,
(iii) the ability of the Company to improve the performance of the Home Choice
stores and other stores acquired in fiscal 1999, (iv) the Company's ability to
open new stores in favorable locations and on favorite terms and to cause such
stores to become profitable in a timely manner or at all, and (v) the impact of
state and federal laws regulating or otherwise affecting the rental-purchase
transaction.
Undue 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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's major market risk exposure is primarily due to possible
fluctuations in interest rates. The Company's policy is to manage interest rate
risk by utilizing interest rate swap agreements to convert a portion of the
floating interest rate debt to fixed interest rates. The Company does not enter
into derivative financial instruments for trading or speculative purposes. The
interest rate swap agreements are entered into with major financial institutions
thereby minimizing the risk of credit loss.
The following table presents information about the Company's market
sensitive financial instruments. The table illustrates the principle and
notional amounts, as well as the date of maturity, actual and weighted average
pay and receive rates for all significant financial and derivative financial
instruments in effect as of December 31, 1999:
<TABLE>
<CAPTION>
Expected Maturity Dates
(dollars in millions): 1999 2000 2001 2002 2003 2004 Thereafter
-------------------------------------- ---- ---- ---- ---- ---- ---- ----------
Debt:
Revolving credit facility, Base
<S> <C>
rate option......................... $16.0
--Actual floating rate............... 9.500%
Revolving credit facility,
Euro-rate option.................... $40.0
--Actual floating rate............... 8.684%
Term Loan A Euro-rate option........ $11.2 $20.0 $25.0 $30.0 $35.0
--Actual floating rate............... 8.684% 8.684% 8.684% 8.684% 8.684%
Term Loan B Euro-rate option........ $0.8 $1.0 $1.0 $1.0 $1.0 $95.0
--Actual floating rate............... 9.684% 9.684% 9.684% 9.684% 9.684% 9.684%
Convertible Subordinated Debentures. $20.0
--Actual fixed interest rate......... 7.0%
Interest rate swap agreements:
National City Bank, notional amount. $30.0
--Actual fixed interest rate pay
rate............................... 5.965%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Bank of America, notional amount.... $20.0
--Actual fixed interest rate pay
rate............................... 5.760%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Manufacturers and Traders Trust,
notional amount..................... $10.0
--Actual fixed interest rate pay
rate............................... 5.925%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Harris Bank, notional amount........ $20.0
--Actual fixed interest rate pay
rate............................... 5.090%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
SunTrust Bank, notional amount...... $10.0
--Actual fixed interest rate pay
rate............................... 5.105%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
LaSalle Bank, notional amount....... $10.0
--Actual fixed interest rate pay
rate................................ 5.095%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Bank of America, notional amount.... $10.0
--Actual fixed interest rate pay
rate............................... 5.120%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
Harris Bank, notional amount........ $10.0
--Actual fixed interest rate pay
rate............................... 5.120%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................. 5.514%
PNC Bank, notional amount........... $5.0
--Actual fixed interest rate pay
rate............................... 6.740%
--Actual variable interest rate
receive rate, (based on 3 month
LIBOR)............................ 5.514%
Letters of credit:
Letter of credit, Base rate option.. $650
--Actual floating rate............... N/A
Letter of credit, Base rate option.. $300
--Actual floating rate............... N/A
Letter of credit, Base rate option.. $450
--Actual floating rate............... N/A
Letter of credit, Base rate option.. $300
--Actual floating rate............... N/A
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Material Developments in Connection With Legal Proceedings
On December 20, 1999, an action was brought against Rent-Way, Inc. (among
other parties) in the Circuit Court of Jefferson County, Mississippi, asserting
claims in the amount of $100 million for wrongful deaths and punitive damages
arising out of a collision on November 20, 1999, between a Rent-Way, Inc.
delivery truck and a passenger vehicle. Rent-Way, Inc. intends to vigorously
defend itself against the claims. Rent-Way, Inc. believes that it has sufficient
insurance coverage for any damages that might be awarded and that the final
disposition of the action will not have a material adverse effect on the
financial position, results of operations or cash flows of Rent-Way, Inc.
ITEM 5. Other Information
By notice to the holders thereof dated December 10, 1999, the Company called
for a mandatory redemption of its $20 million 7% Convertible Subordinated
Debentures due 2007. The redemption date is February 5, 2000 and the redemption
price is 103% of the outstanding principal amount thereof. The Debentures are
convertible into shares of Common Stock at a price of $13.37 per share until
redeemed.
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
----------- ------------------------------
10.22 Notification to the holders of
Rent-Way, Inc.'s 7% Convertible
Debentures, due 2007, of the
Company's intent to redeem the
debentures in February 2000.
27 Financial data schedule
b. Reports on Form 8-K
(1) On October 12, 1999, the Company filed a Current Report on Form 8-K
disclosing the completion of the RentaVision acquisition and attaching the
exhibits under Item 7.
(2) On October 21, 1999, the Company filed a Current Report on Form 8-K in
response to numerous inquiries regarding the decline in the price of its common
stock.
(3) On December 3, 1999, the Company filed a Current Report on Form 8-K/A
amending the Current Report on Form 8-K filed on October 12, 1999 to file the
financial statements and pro forma financial information required under Item 7.
(4) On January 19, 2000, the Company filed a Current Report on Form 8-K
announcing the promotion of Jeffrey A. Conway to the office of President and
Chief Operating Officer and announcing the appointment of William A. McDonnell
as Chief Financial Officer.
(5) On January 19, 2000, the Company filed a Current Report on Form 8-K
announcing its investment in DPI Teleconnect, LLC, a privately-held provider of
prepaid local phone service.
<PAGE>
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.
January 21, 2000
- -------------------------------------
Date
/s/ Jeffrey A. Conway
- -------------------------------------
Jeffrey A. Conway
President and Chief Operating Officer
January 21, 2000
- ------------------------------------
Date
/s/ Matthew J. Marini
- -------------------------------------
Matthew J. Marini
Controller and Chief Accounting Officer
<PAGE>
Exhibit 10.22
RENT-WAY, INC.
One RentWay Place
Erie, Pennsylvania 16505
December 10, 1999
Via First-Class Mail
- --------------------
TO THE HOLDERS OF RENT-WAY, INC. $20,000,000
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007 (CUSIP Numbers
76009UAA2 and 76009UAB0):
Ladies and Gentlemen:
Reference is made to that certain Indenture, dated as of February 4,
1997, from Rent-Way, Inc. ("Rent-Way") to Manufacturers and Traders Trust
Company, as Trustee (the "Trustee") (the "Indenture"). All specially-capitalized
terms not otherwise defined in this letter have the same meanings as in the
Indenture.
Rent-Way hereby redeems the following Securities: 100% of the principal
amount of Rent-Way's $20,000,000 7% Convertible Subordinated Debentures due
2007. The Redemption Date is February 7, 2000. The Redemption Price is 103% of
the principal amount plus accrued and unpaid interest to the Redemption Date.
The Conversion Price is $13.369. The name and address of the Paying Agent and
the Conversion Agent is Manufacturers and Traders Trust Company, One M&T Plaza,
7th Floor, Buffalo, New York 14203, Attention:
Russell Whitley.
Securities called for redemption may be converted at any time before
the close of business on the Redemption Date and, if not converted prior to the
close of business on the Redemption Date, the right of conversion will be lost.
Holders who wish to convert Securities must satisfy the requirements of
Paragraph 7 thereof.
Securities called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price. Interest on Securities called for
redemption ceases to accrue on and after the Redemption Date.
No representation is made as to the correctness or accuracy of the
CUSIP numbers set forth above.
If you have any questions concerning this redemption notice, please
contact Russell Whitley at the Trustee, (716) 842-5602, John Zak, legal counsel
to Rent-Way, at (716) 848-1253 or Jeffrey A. Conway, Chief Financial Officer of
Rent-Way, at (814) 461-5223.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000893046
<NAME> Rent-Way, Inc.
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,752
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 232,133
<CURRENT-ASSETS> 0
<PP&E> 76,409
<DEPRECIATION> 23,976
<TOTAL-ASSETS> 627,067
<CURRENT-LIABILITIES> 0
<BONDS> 297,128
0
0
<COMMON> 256,842
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 627,067
<SALES> 119,982
<TOTAL-REVENUES> 140,911
<CGS> 31,158
<TOTAL-COSTS> 118,347
<OTHER-EXPENSES> 146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,828
<INCOME-PRETAX> 16,604
<INCOME-TAX> 6,476
<INCOME-CONTINUING> 10,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,128
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.44
</TABLE>
