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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 1-14146
CORT BUSINESS SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1662135
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4401 Fair Lakes Court, Fairfax, VA 22033
(Address of principal executive offices) (Zip Code)
(703) 968-8500
(Registrant's telephone number, including area code)
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.
Outstanding as of
Class April 30, 1996
----- -----------------
Class A, $.01 par value 10,431,504
Class B, $.01 par value - 0 -
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<PAGE>
CORT BUSINESS SERVICES CORPORATION
INDEX TO FORM 10-Q
Page No.
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets..................... 1
Condensed Consolidated Statements of Operations........... 2
Condensed Consolidated Statements of Cash Flows........... 3
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................... 6
Part II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS....... 9
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.......................... 9
SIGNATURE................................................................... 10
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ ---------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................ $ 379 $ --
Accounts receivable, net ......................... 6,019 7,027
Prepaid expenses ................................. 3,973 3,927
Rental furniture, net ............................ 103,741 110,932
Property, plant and equipment, net ............... 31,044 32,282
Other receivables and assets, net ................ 3,814 2,896
Goodwill, net .................................... 24,752 24,587
-------- --------
Total assets ................................. $173,722 $181,651
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable ............................. $ 3,597 $ 4,625
Accrued expenses ............................. 19,096 17,976
Deferred revenue and security deposits ....... 11,186 12,119
Revolving credit facility, secured ........... 3,800 8,653
Senior notes, 12% ............................ 50,000 50,000
Deferred income taxes ........................ 10,622 9,697
-------- --------
Total liabilities ........................ 98,301 103,070
Stockholders' equity .............................. 75,421 78,581
-------- --------
Total liabilities and stockholders' equity ... $173,722 $181,651
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 1 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1995 1996
--------- ---------
<S> <C> <C>
Revenue:
Furniture rental................................... $ 33,815 $ 38,555
Furniture sales.................................... 10,316 10,214
------ ------
Total revenue.................................... 44,131 48,769
------ ------
Operating costs and expenses:
Cost of furniture rental........................... 6,487 7,438
Cost of furniture sales............................ 6,203 5,938
Selling, general and administrative expenses....... 25,189 28,221
------ ------
Total costs and expenses......................... 37,879 41,597
------ ------
Operating earnings............................... 6,252 7,172
Interest expense..................................... 4,145 1,781
----- -----
Income before tax.................................. 2,107 5,391
Income taxes......................................... 912 2,231
----- -----
Net income......................................... $ 1,195 $ 3,160
===== =====
Earnings per common share............................ $ .25 $ .27
Weighted average number of common shares used in
computation.......................................... 7,239 11,631
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................ $ 1,195 $ 3,160
Proceeds of disposals of rental furniture in
excess of gross profit ........................... 6,130 5,767
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization:
Rental furniture depreciation .................. 4,476 5,351
Other depreciation ............................. 605 721
Goodwill amortization .......................... 165 165
Amortization of debt issuance costs ............ 189 165
Discount on junior subordinated debentures...... 15 --
Current period interest converted to debt ....... 621 --
Rental furniture inventory shrinkage ............ 287 338
Changes in operating accounts, net .............. (2,843) (293)
-------- --------
Net cash provided by operating activities....... 10,840 15,374
-------- --------
Cash flows from investing activities:
Purchases of rental furniture ..................... (14,968) (18,647)
Purchases of property, plant and equipment ........ (1,119) (1,982)
Sales of property, plant and equipment ............ 4 23
Purchase of short-term investments ................ (870) --
-------- --------
Net cash used by investing activities .......... (16,953) (20,606)
-------- --------
Cash flows from financing activities:
Repayments on the line of credit .................. -- (4,200)
Borrowings on the line of credit .................. -- 9,053
Issuance of common stock .......................... 8 --
-------- --------
Net cash provided by financing activities....... 8 4,853
-------- --------
Net decrease in cash and cash equivalents....... (6,105) (379)
Cash and cash equivalents at beginning of period .... 13,161 379
-------- --------
Cash and cash equivalents at end of period .......... $ 7,056 $ --
======== ========
Supplemental disclosure of cash flow information:
Debentures issued in lieu of cash interest ........ $ 1,865 $ --
Interest paid ..................................... 6,019 3,072
Income taxes paid ................................. 126 997
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of
only normal recurring accruals, necessary for a fair presentation of the
consolidated financial position of CORT Business Services Corporation
("CORT" or the "Company") and Subsidiaries as of March 31, 1996, and the
results of its operations and cash flows for the three months ended March
31, 1996 and 1995. The results of operations for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the full year. These condensed consolidated financial
statements are unaudited, and do not include all related footnote
disclosures.
The interim unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on Form 10-K.
(2) Income Taxes
The Internal Revenue Service ("IRS") has examined the Federal income tax
returns of CORT Furniture Rental Corporation ("Rental") for the years 1989
through June 30, 1992 and has proposed certain adjustments to Rental's
income, relating primarily to methods of depreciation, period of cost
recovery and certain capitalized financing fees. If successfully asserted
by the IRS, the proposed adjustments would result in approximately $21
million of additional tax liability, including accrued interest through
March 31, 1996. During September 1995, the Company agreed in principle with
the IRS appeals officer handling the administrative appeal of the
examination as to a method of settlement of the proposed adjustments. The
method agreed to in principle will not result in any additional financial
statement tax expenses, as the Company's reserves included in deferred
income taxes are adequate to cover such expenses, and will not require the
Company to alter its methods of depreciation or cost recovery period. The
Company will be required to make a payment to the IRS and certain state
jurisdictions for income and franchise tax purposes. The total amount of
the proposed settlement is approximately $3 million, including interest
through March 31, 1996. In February 1996, the Company made an initial
deposit of approximately $925,000 to the IRS. This agreement is only an
agreement in principle, however, and is subject to final IRS approval, and
thus could change. A final settlement will become effective only upon
approval by the appropriate IRS personnel and execution of definitive
settlement documentation.
The Company has received notification that the IRS is challenging certain
deductions taken by a consolidated tax group of which Rental was previously
a member (the "Former Group") in connection with the examination of the
consolidated Federal income tax returns of the Former Group for the year
ended December 31, 1988 and subsequent years. The IRS challenge includes
the assertion that certain interest deductions taken by the Former Group
should be recharacterized as non-deductible dividend distributions and that
deductions for certain expenses related to the acquisition of Rental's
former parent be disallowed. The IRS could seek to recover from the Company
(as well as from other Former Group members) the full amount of any
resulting tax liability relating to periods while Rental was a member of
the Former Group, which could be as much as approximately $29 million for
that year, including interest through March 31, 1996. Rental's former
parent, under the agreement of sale for Rental, agreed to indemnify the
Company in full for any consolidated tax liability of the Former Group for
years while Rental was a member of the Former Group. Further, the Company
may have rights of contribution against members of the Former Group if the
Company were required to pay more than its equitable share of any
consolidated tax liability. Rental's former parent has stated that it
believes the IRS's position with respect to these proposed disallowances is
unjustified and is contesting the matter vigorously. Due to the preliminary
nature of the IRS challenge, the Company is not in a position to determine
the probable outcome and its impact on the Company, if any.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 1996
(3) Subsequent Event
On April 24, 1996, the Company acquired Evans Rents ("Evans") a provider of
rental furniture in California for approximately $27,000,000 excluding
costs of acquisition. The acquisition, which was financed through
borrowings on the Company's revolving credit facility, will be accounted
for as a purchase business combination.
- 5 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollar figures in thousands)
Results of Operations
Three months ended March 31, 1996 as compared to three months ended March 31,
1995
Revenue
Total revenue increased 10.5% to $48,769 for the three months ended March 31,
1996 from $44,131 for the three months ended March 31, 1995. Furniture rental
revenue for the three months ended March 31, 1996 was $38,555, a 14.0% increase
from $33,815 for the three months ended March 31, 1995. The increase reflects
growth in the number of leases as well as revenue per lease. Furniture sales
decreased 1.0% to $10,214 for the three months ended March 31, 1996. Excluding
the impact of an unusually large corporate sale in the first quarter of 1995,
furniture sales would have shown an increase of 14.8%.
Operating Costs and Expenses
Cost of furniture rental has increased from 19.2% of furniture rental revenue in
1995 to 19.3% of furniture rental revenue in 1996. This increase is due to the
impact of start-up operations in four new markets. Cost of furniture sales
decreased from 60.1% of furniture sales revenue in 1995 to 58.1% in 1996. The
cost of furniture sales for 1995 included the large corporate sale which had a
reduced margin.
Selling, general and administrative expenses totaled $28,221 or 57.9% of total
revenue for the quarter ended March 31, 1996 as compared to $25,189 or 57.1% in
1995. The increase for this year's quarter which was expected, reflects the
costs associated with the start-up districts. Without the start-up districts,
selling, general and administrative expenses would be 57.0% of total revenue.
Operating Earnings
As a result of the changes in revenue, operating costs and expenses discussed
above, operating earnings were $7,172 or 14.7% of total revenue in the first
quarter of 1996 compared to $6,252 or 14.2% of total revenue in the first
quarter of 1995.
Interest Expense
Interest expense decreased to $1,781 in 1996 from $4,145 in 1995. The decrease
is a result of the early retirement of $50,000 in Senior Notes and the exchange
of the subordinated debentures for common stock, both of which occurred in the
fourth quarter of 1995.
Furniture Purchases
Furniture purchases totaled $18,647 in the three months ended March 31, 1996, an
increase of 24.6% from the $14,968 purchased in the three months ended March 31,
1995. The increase supports the growth in furniture rental revenue and
replenishes furniture which has been sold or disposed of, while still reducing
idle inventory.
- 6 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(dollar figures in thousands)
Liquidity and Capital Resources
The Company is a holding company with no independent operations, no material
obligations and no material assets other than its ownership of Rental. The
Company is dependent on the receipt of dividends or distributions from Rental to
fund any obligations. The Revolving Credit Facility and indenture governing the
Senior Notes restricts the ability of Rental to make advances and pay dividends
to the Company.
The Company's primary capital requirements are purchases of rental furniture
(including new furniture purchases and lease portfolio acquisitions) and debt
service. The Company purchases furniture throughout each year to replace
furniture which has been sold and to maintain adequate levels of rental
furniture to meet existing and new customer needs. As the Company's growth
strategies continue to be implemented, furniture purchases are expected to
increase.
The Company's other capital requirements consist of purchases of property, plant
and equipment, including warehouse and showroom improvements, office equipment,
trucks and computer hardware and standard programming enhancements necessary for
installation of the management information system in additional districts. Net
purchases of property, plant and equipment were $1,115 and $1,959 in the three
months ended March 31, 1995 and 1996, respectively.
During the three months ended March 31, 1995 and 1996 net cash provided by
operations was $10,840 and $15,374, respectively. During the three months ended
March 31, 1995 and 1996 net cash used by investing activities was $16,953 and
$20,606, respectively consisting primarily of purchases of rental furniture.
During the three months ended March 31, 1995 and 1996 net cash provided by
financing activities was $8 and $4,853, respectively.
The Company is required to make semi-annual interest payments, in arrears on
March 1 and September 1, of $3,000 ($6,000 annually) on the Senior Notes. The
Company will not be required to make principal repayments on the Senior Notes
until maturity.
Rental has available a revolving line of credit of $50,000, subject to certain
borrowing base restrictions, to meet acquisition and expansion needs as well as
seasonal working capital and general corporate requirements. Rental had
borrowings of approximately $8,600 under the line of credit at March 31, 1996.
As a result of the acquisition of Evans, the Company borrowed an additional
$27,000 on April 24, 1996. The Company is currently negotiating an increase in
the line of credit.
The IRS has examined the federal income tax returns of Rental for the years 1989
through June 30, 1992. In connection with that examination, the IRS has proposed
adjustments for each year related to methods of depreciation and cost recovery
used by Rental. In addition, the IRS has notified Rental of proposed changes
with regard to legal and other fees previously deducted. If successfully
asserted by the IRS, the proposed adjustments would result in approximately
$21,000 of additional tax liability, including accrued interest through March
31, 1996. The Company, however, has agreed in principle with the IRS appeals
officer handling the administrative appeal of the examination on a settlement of
the proposed adjustments. The settlement agreed to in principle will not result
in any additional financial statement tax expenses, as the Company's reserves
included in deferred income taxes are adequate to cover such expenses, and will
not require the Company to alter its methods of depreciation or cost recovery
period. The Company will be required to make a payment to the IRS and certain
state jurisdictions for income and franchise tax purposes. The total amount of
the proposed settlement is approximately $3,000 (including interest through
March 31, 1996) of which the Company made an initial deposit of approximately
$925 in February 1996. This agreement is only an agreement in principle, and
thus could change. The tentative settlement will become effective only upon
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(dollar figures in thousands)
approval by the proper IRS personnel and execution of definitive settlement
documentation. Upon final IRS approval, the Company will make the remaining
required payment from either cash on hand or borrowings under the revolving line
of credit.
The IRS has also proposed the disallowance of certain deductions taken by
Fairwood Corporation for the Former Group through the year ended December 31,
1988 and subsequent years. The IRS challenge includes the assertion that certain
interest deductions taken by the Former Group should be recharacterized as
non-deductible dividend distributions and that deductions for certain expenses
related to the acquisition of Mohasco Corporation (now Consolidated Furniture
Corporation ("Consolidated")), Rental's former shareholder, be disallowed. Under
IRS regulations, the Company and each other member of the Former Group is
severally liable for the full amount of any Federal income tax liability of the
Former Group while Rental was a member of the Former Group, which could be a
much as approximately $29,000 for such periods (including interest through March
31, 1996). Under the agreement of sale for Rental, Consolidated agreed to
indemnify the Company in full for any consolidated tax liability of the Former
Group for the years during which Rental was a member of the Former Group. In
addition, the Company may have rights of contribution against other members of
the Former Group if the Company were required to pay more than its equitable
share of any consolidated tax liability. Although Fairwood Corporation has
stated that it believes the IRS's position with respect to those proposed
disallowances is unjustified and is contesting the matter vigorously, neither
the Company nor Fairwood Corporation can predict a successful resolution to the
IRS examination. No assurance can be given that, if Consolidated becomes liable
for Federal income tax as a result of the examination, and if the IRS were to
collect any resulting tax directly from Rental, that Rental would be able to
recover all or part of the deficiency from Consolidated under its indemnity or
from other members of the Former Group under the rights of contribution. No
reserves are included in the Company's financial statements with respect to
potential tax liabilities of the Former Group. There can be no assurance,
however, that the Company's ultimate liability with respect to periods during
which Rental was a member of the Former Group will not result in a material
impact on the Company's financial condition or results of operations.
New Accounting Standards
The Company adopted Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of ("Statement 121") issued by the Financial Accounting Standards
Board. Statement 121 requires that the Company review its long-lived assets for
impairment whenever events or circumstances indicate that the carrying amount of
an asset may not be recoverable. To the extent that the future undiscounted net
cash flows expected to be generated from an asset are less than the carrying
amount of the asset, an impairment loss is recognized based on the difference
between the asset's carrying amount and its fair market value. The adoption of
Statement 121 had no material impact on the Company's financial condition or
results of operations.
The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-based Compensation ("Statement 123") that was issued by the
Financial Accounting Standards Board. Statement 123 recommends, but does not
require, the adoption of a fair-value-based method of accounting for stock-based
compensation to employees, including common stock options. Statement 123
requires a fair-value-based method of accounting for stock-based compensation to
individuals other than employees. The Company will continue to record
stock-based compensation to employees under the intrinsic value method and will
not adopt the fair value based method of accounting for stock-based compensation
to employees as permitted by Statement 123. Certain pro forma disclosures will
be made in the Company's financial statement for the year ending December 31,
1996 as if the fair value based method had been adopted.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see Index on page E-1)
(b) Reports on Form 8-K:
The Company filed one (1) report on Form 8-K dated March 20, 1996
to report that, during the quarter of the fiscal year covered by
this report on Form 10-Q, the Company entered into an agreement to
acquire all of the outstanding stock of privately held Evans Rents
for approximately $27 million in cash.
- 9 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
SIGNATURE
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.
CORT BUSINESS SERVICES CORPORATION
(Registrant)
Date: April 26, 1996 By: /s/ Frances Ann Ziemniak
-------------- ------------------------
Frances Ann Ziemniak
Vice President, Finance and CFO
Principal financial and principal
accounting officer)
- 10 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<S> <C> <C>
2.1 Stock Purchase Agreement, dated June 22, 1993, by and among the
Company, Interfinancial, Inc., General Furniture Leasing Company and
Fortis, Inc.; incorporated by reference to Exhibit 2.1 to Rental's
Registration Statement on Form S-1, No.33-65094, filed on June 25,
1993
2.2 First Amendment to Stock Purchase Agreement, dated as of August
31, 1993, by and among the Company, Fortis, Inc., Interfinancial, Inc.
and General Furniture Leasing Company; incorporated by reference to
Exhibit 2.2 to Rental's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1993
2.3 Assignment and Assumption Agreement, dated as of August 31, 1993,
between Rental and the Company; incorporated by reference to Exhibit
2.3 to Rental's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1993
2.4 Acquisition Agreement, dated March 15, 1996, by and among the Company,
CE Merger Sub Inc. and Evans Rents; incorporated by reference to
Exhibit 2.4 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995
3.1 Restated Certificate of Incorporation of the Company; incorporated by
reference to Exhibit 3.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-1, No. 33-97568 filed on November 13,
1995
3.2 By-laws of the Company; incorporated by reference to Exhibit 3.2 to
Amendment No. 3 to the Company's Registration Statement on Form S-1,
No. 33-97568 filed on November 13, 1995
4.1 Form of Indenture between Rental and United States Trust Company of
New York, as Trustee, with respect to Rental's 12% Senior Notes due
2000; incorporated by reference to Exhibit 4.1 to Amendment No. 3 to
the Company's Registration Statement on Form S-1, No. 33-65094, filed
on August 20, 1993
4.2 First Supplemental Indenture between Rental and United States Trust
Company of New York, as Trustee, dated August 25, 1995; incorporated
by reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-1, No. 33-97568 filed on September 29, 1995
4.3 Second Supplemental Indenture between Rental and United States Trust
Company of New York, as Trustee, dated September 29, 1995;
incorporated by reference to Exhibit 4.9 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, No. 33-97568 filed on
October 23, 1995
4.4 Warrant Agreement, dated September 1, 1993, between the Company and
United States Trust Company of New York, as Warrant Agent;
incorporated by reference to Exhibit 4.7 to the Company's Registration
Statement on Form S-1, No. 33-97568 filed on September 29, 1995
E - 1
<PAGE>
4.5 Amendment No. 1 to Warrant Agreement, dated February 1, 1994, between
the Company and United States Trust Company of New York, as Warrant
Agent; incorporated by reference to Exhibit 4.8 to the Company's
Registration Statement on Form S-1, No. 33-97568 filed on September
29, 1995
10.1 Credit Agreement dated as of November 21, 1995 by and among Rental,
the Company, the lenders identified therein, and NationsBank, N.A., as
agent; incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995
10.2 Stock Option, Securities Purchase and Stockholders Agreement, dated as
of January 18, 1994, by and among the Company, Rental, Citicorp
Venture Capital Ltd. and certain investors named therein; incorporated
by reference to Exhibit 4.6 to the Company's Registration Statement on
Form S-8, No. 33-72724, filed on December 9, 1993
10.3 Amendment 1 to New Cort Holdings Corporation and Subsidiaries Employee
Stock Option and Stock Purchase Plan as adopted by the Board of
Directors of the Company on December 21, 1993; incorporated by
reference to Exhibit 10.11 to Rental's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993
10.4 New Cort Holdings Corporation and Subsidiaries Employee Stock Option
and Stock Purchase Plan (1995 Plan Distribution) as adopted by the
Board of Directors of the Company on December 16, 1994; incorporated
by reference to Exhibit 10.13 to Rental's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1995
10.5 Form of First Amendment to Stockholders Agreement, dated as of
November 13, 1995, by and among the Company, Citicorp Venture Capital
Ltd., and certain investors named therein; incorporated by reference
to Exhibit 10.5 to Amendment No. 3 to the Company's Registration
Statement on Form S-1, No. 33-97568 filed on November 13, 1995
10.6 Registration Rights Agreement for Common Stock, dated as of January
18, 1994, by and among the Company, Citicorp Venture Capital Ltd. and
certain investors named therein; incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1994
10.7 Rental's Supplemental Executive Retirement Plan, dated October 28,
1992, as amended through December 21, 1993; incorporated by reference
to Exhibit 10.12 to Rental's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993
10.8 Agreement for Irrevocable Trust Under CORT Furniture Rental
Supplemental Executive Retirement Plan, dated August 20, 1990, between
Rental and Crestar Bank, N.A.; incorporated by reference to Exhibit
10.13 to Rental's Registration Statement on Form S-1, No. 33-65094,
filed on June 25, 1993
E - 2
<PAGE>
10.9 Amendment Number One to the Agreement for Irrevocable Trust Under CORT
Furniture Rental Supplemental Executive Retirement Plan, dated October
27, 1992, between Rental and Crestar Bank, N.A.; incorporated by
reference to Exhibit 10.14 to Rental's Registration Statement on Form
S-1, No. 33-65094, filed on June 25, 1993
10.10 Letter Agreement, dated July 24, 1992, between Rental and Paul N.
Arnold; incorporated by reference to Exhibit 10.16 to Rental's
Registration Statement on Form S-1, No. 33-65094, filed on June 25,
1993
10.11 Letter Agreement, dated August 18, 1993, between Rental and Paul N.
Arnold; incorporated by reference to Exhibit 10.26 to Amendment No. 5
to the Company's Registration Statement on Form S-1, No. 33-65094,
filed on August 25, 1993
10.12 Employment Agreement, dated September 1, 1994, between Rental and
Charles M. Egan; incorporated by reference to Exhibit 10.10 to
Rental's Annual Report on Form 10-K for the year ended December 31,
1994
10.13 New Cort Holdings Corporation 1995 Stock-Based Incentive Compensation
Plan, as adopted by the Board of Directors on July 25, 1995;
incorporated by reference to Exhibit 10.16 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, No. 33-97568 filed on
October 23, 1995
10.14 Equity Share Agreement, between Rental and Lloyd and Eileen S.
Lenson, dated April 20, 1994; incorporated by reference to Exhibit
10.17 to the Company's Registration Statement on Form S-1, No.
33-97568 filed on September 29, 1995
10.15 Form of Senior Notes Purchase Agreement between Rental and certain
holders of Rental's 12% Senior Notes Due 2000, dated September 28,
1995; incorporated by reference to Exhibit 10.18 to Amendment No. 2 to
the Company's Registration Statement on Form S-1, No. 33-97568 filed
on November 1, 1995
10.16 Private Exchange Commitment Letter by and among the Company, Citicorp
Venture Capital Ltd. and certain investors, dated September 28, 1995;
incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, No. 33-97568 filed on
October 23, 1995
10.17 CORT Business Services Corporation 1995 Directors Stock Option Plan,
as adopted by the Board of Directors on October 18, 1995; incorporated
by reference to Exhibit 10.20 to Amendment No. 3 to the Company's
Registration Statement on Form S-1, No. 33-97568 filed on November 13,
1995
11.1 Statement re computation of per share earnings
</TABLE>
E - 3
<PAGE>
Exhibit 11.1
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1996
------------ ------------
<S> <C> <C>
Weighted average common shares outstanding:
Average shares outstanding during the period ..... 4,166,556 10,422,638
Unexercised stock options and warrants using
the treasury stock method, other than Cheap
Stock ........................................... 763,241 1,208,231
Cheap stock options and issuances (1) ............ 218,434 --
Common shares issued in the Exchange for Common
Stock (2)........................................ 2,090,591 --
----------- -----------
Total weighted average common shares ......... 7,238,822 11,630,869
=========== ===========
Net income applicable to common shares:
Net income ....................................... $1,195,000 $3,160,000
Increase in earnings, net of taxes, resulting from
the Exchange for Common Stock (2) ............... 583,000 --
Net income applicable to common shares ........... 1,778,000 3,160,000
Earnings per common share ........................ $ 0.25 $ .27
=========== ===========
<FN>
(1) Pursuant to Staff Accounting Bulletin Topic 4:D, stock options granted and
stock issued within one year of the initial public offering have been
included in the calculation of weighted average common shares outstanding
using the treasury stock method based on an assumed initial public offering
price of $12.00 and have been treated as outstanding for all reported
periods.
(2) In connection with the Company's initial public offering of Common Stock,
the Company exchanged Rental's 14% Senior Subordinated Pay-In-Kind Notes,
the Company's 14.5% Subordinated Debentures, the Company's 15% Junior
Subordinated Debentures, including the unamortized discount, and accrued
interest on all such debentures for 2,728,167 shares of Common Stock. For
purposes of the computations of earnings per common share for 1995, the
Company has assumed that the exchange occurred as of January 1, 1994 for
2,090,591 shares of Common Stock.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Art. 5 FDS for First Quarter 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7899
<ALLOWANCES> 872
<INVENTORY> 110,932
<CURRENT-ASSETS> 0
<PP&E> 49,948
<DEPRECIATION> 17,666
<TOTAL-ASSETS> 181,651
<CURRENT-LIABILITIES> 0
<BONDS> 50,000
0
0
<COMMON> 104
<OTHER-SE> 78,477
<TOTAL-LIABILITY-AND-EQUITY> 181,651
<SALES> 10,214
<TOTAL-REVENUES> 48,769
<CGS> 5938
<TOTAL-COSTS> 13,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 1781
<INCOME-PRETAX> 5391
<INCOME-TAX> 2231
<INCOME-CONTINUING> 3160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3160
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
