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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 September 30, 1997
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.
Class Outstanding as of
November 10, 1997
Class A, $.01 par value
Class B, $.01 par value 12,854,938
- 0 -
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<PAGE>
CORT BUSINESS SERVICES CORPORATION
INDEX TO FORM 10-Q
Page
No.
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1
Unaudited Condensed Consolidated Statements of Operations 2
Unaudited Condensed Consolidated Statements of Cash Flows 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 5
Part II. OTHER INFORMATION
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, September 30,
1996 1997
---- ----
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents................................................... $ 123 $ 452
Accounts receivable, net.................................................... 11,011 14,302
Prepaid expenses............................................................ 4,224 4,105
Rental furniture, net....................................................... 147,161 165,109
Property, plant and equipment, net.......................................... 35,667 37,709
Other receivables and assets, net........................................... 3,815 2,904
Goodwill, net............................................................... 45,198 52,128
------ -------
Total assets............................................................. $247,199 $276,709
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable............................................................ $ 4,157 $ 5,097
Accrued expenses............................................................ 27,491 29,708
Deferred revenue and security deposits...................................... 14,358 16,650
Revolving credit facility, secured ......................................... 15,600 21,800
Senior notes, 12%........................................................... 50,000 49,932
Deferred income taxes....................................................... 10,441 10,441
------ ------
122,047 133,628
Stockholders' equity........................................................ 125,152 143,081
------- -------
Total liabilities and stockholders' equity............................... $247,199 $276,709
======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1996 1997 1996 1997
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Furniture rental...................... $ 53,707 $ 61,135 $139,144 $ 176,367
Furniture sales....................... 10,900 12,253 32,340 38,803
------ ------ ------ ------
Total revenue....................... 64,607 73,388 171,484 215,170
Operating costs and expenses:
Cost of furniture rental.............. 10,175 11,582 26,803 33,597
Cost of furniture sales............... 6,537 7,377 19,115 23,474
Selling, general and
administrative expenses........... 37,865 42,326 100,159 123,842
------ ------ ------- -------
Total costs and expenses............ 54,577 61,285 146,077 180,913
------ ------ ------- -------
Operating earnings.................. 10,030 12,103 25,407 34,257
Interest expense......................... 2,192 2,125 6,237 6,363
----- ----- ----- -----
Income before income taxes............ 7,838 9,978 19,170 27,894
Income taxes............................. 3,247 4,102 7,936 11,481
----- ----- ----- ------
Net income............................ $ 4,591 $ 5,876 $ 11,234 $ 16,413
====== ====== ====== ======
Earnings per share....................... $0.35 $0.43 $0.93 $1.20
Weighted average number of
shares used in computation............ 12,976 13,758 12,075 13,674
</TABLE>
See accompanying notes to unaudited 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>
Nine Months Ended
September 30,
-------------
1996 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................... $ 11,234 $ 16,413
Proceeds of disposals of rental furniture in
excess of gross profit................................................. 18,280 21,241
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization:
Rental furniture depreciation ......................................... 19,290 25,186
Other depreciation and amortization.................................... 2,698 3,559
Goodwill amortization.................................................. 668 1,137
Amortization of debt issuance costs.................................... 518 540
Rental furniture inventory shrinkage.................................. 1,728 2,366
Changes in operating accounts, net.................................... 5,533 4,468
----- -----
Net cash provided by operating activities.............................. 59,949 74,910
------ ------
Cash flows from investing activities:
Purchases of rental furniture............................................ (65,245) (62,710)
Purchases of portfolio acquisitions...................................... (467) (13,041)
Purchases of property, plant and equipment............................... (5,272) (6,361)
Sales of property, plant and equipment................................... 461 900
Purchase of Evans Rents.................................................. (27,737) -
Purchase of assets of Apartment Furniture Rental..................................... (9,269) -
------ -------
Net cash used by investing activities.................................. (107,529) (81,212)
-------- ------
Cash flows from financing activities:
Issuance of common stock................................................. 32,748 499
Borrowings on the line of credit......................................... 75,853 56,512
Repayments on the line of credit......................................... (59,353) (50,312)
Repayments of long term debt............................................. (573) (68)
--- --
Net cash provided by financing activities.............................. 48,675 6,631
------ ------
Net increase in cash and cash equivalents.............................. 1,095 329
Cash and cash equivalents at beginning of period............................ 379 123
------ ------
Cash and cash equivalents at end of period.................................. $ 1,474 $ 452
======== ======
Supplemental disclosures of cash flow information:
Tax benefit from exercise of stock options............................... $ -- $ 1,017
Interest paid............................................................ 7,084 7,231
Income taxes paid........................................................ 5,643 8,471
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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 September 30, 1997, and
the results of their operations for the three and nine months ended
September 30, 1997, and the cash flows for the nine months ended September
30, 1997 and 1996. The results of operations for the nine months ended
September 30, 1997 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 1996 Annual Report on Form 10-K.
(2) Acquisitions
On March 6, 1997, the Company acquired the stock of each of Levitt
Investment Company and McGregor Enterprises, Inc. and certain assets of
Alco Trade Show Services, Inc. These companies provide rental specialty
furniture for short term use at conventions and trade shows. In addition,
McGregor Enterprises, Inc. provides rental furniture in the "rent-to-rent"
segment of the furniture industry in Orlando, Florida. The cost of the
acquisitions, including expenses, was approximately $12.7 million, subject
to certain adjustments, in transactions accounted for as purchase business
combinations. The preliminary allocation of the purchase price over the net
assets acquired resulted in goodwill of approximately $7.6 million.
(3) Income Taxes
The Internal Revenue Service ("IRS") has proposed the disallowance of
certain deductions taken by Fairwood Corporation for a consolidated tax
group of which CORT Furniture Rental Corporation ("CFR") was previously a
member (the "Former Group") through the year ended December 31, 1988. 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")), CFR'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 CFR was a member of the Former Group, which could be
as much as approximately $31 million for such periods (including interest
through December 31, 1996). Under the agreement of sale for CFR,
Consolidated agreed to indemnify the Company in full for any consolidated
tax liability of the Former Group for the years during which CFR 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. Fairwood Corporation has indicated to the Company that it has
tentatively reached an agreement in principle with the IRS Appeals Officer
handling the case regarding a settlement of the principal issues in the
case. A final settlement on that basis would be substantially less than the
liability that would result from the proposed adjustments. The terms of
such a tentative settlement are subject to further review by the IRS and by
the Joint Committee on Taxation, and no assurance can be given that any
settlement will be reached with the IRS. The Company is not in a position
to determine the probable outcome and its impact on the Company's
consolidated financial statements, if any.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollar figures in thousands)
Certain information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contains foward-looking statements
as such term is defined in Section 27A of the Securities Act and Sections 21E of
the Exchange Act. Certain factors such as competition and general economic
conditions could cause actual results to differ materially from those in
forward-looking statements.
Results of Operations
Three months ended September 30, 1997 as compared to three months ended
September 30, 1996
Revenue
Total revenue increased 13.6% to $73,388 for the three months ended September
30, 1997 from $64,607 for the three months ended September 30, 1996. Furniture
rental revenue for the quarter ended September 30, 1997 was $61,135, a 13.8%
increase from $53,707 for the corresponding period in 1996. Rental revenue
growth, adjusted for the impact of the 1996 Summer Olympics and the Company's
Salt Lake City, New York City, and Trade Show acquisitions, was approximately
10%, which reflects growth in the number of leases as well as revenue per lease.
Furniture sales increased 12.4% to $12,253.
Operating Costs and Expenses
Cost of furniture rental has remained constant at 18.9% of furniture rental
revenue in 1996 and 1997. Cost of furniture sales increased from 60.0% of
furniture sales revenue in 1996 to 60.2% of furniture sales revenue in 1997.
Selling, general and administrative expenses totaled $42,326 or 57.7% of total
revenue for the quarter ended September 30, 1997 as compared to $37,865 or 58.6%
of total revenue for the quarter ended September 30, 1996. In 1996, the
percentage of selling, general and administrative expenses to revenue was higher
due to the impact of start up districts.
Operating Earnings
As a result of the changes in revenue, operating costs and expenses discussed
above, operating earnings were $12,103 or 16.5% of total revenue in the third
quarter of 1997 compared to $10,030 or 15.5% of total revenue in the third
quarter of 1996.
Nine months ended September 30, 1997 as compared to nine months ended September
30, 1996
Revenue
Total revenue increased 25.5% to $215,170 for the nine months ended September
30, 1997 from $171,484 for the nine months ended September 30, 1996. Furniture
rental revenue for the nine months ended September 30, 1997 was $176,367 a 26.8%
increase from $139,144 for the nine months ended September 30, 1996. Rental
revenue growth, adjusted for the impact of the 1996 Summer Olympics and before
the impact of acquisitions, estimated by excluding the Company's California
operations for the first six months and New York City, Salt Lake City and
- 5 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Trade Show operations was approximately 13%, which reflects growth in the number
of leases as well as revenue per lease. Furniture sales increased 20.0% to
$38,803 in the nine months ended September 30, 1997 from $32,340 in the nine
months ended September 30, 1996. Approximately 5% of this increase is due to an
unusually large corporate sale in the second quarter of 1997.
Operating Costs and Expenses
Cost of furniture rental has decreased from 19.3% of furniture rental revenue in
1996 to 19.0% in 1997. Cost of furniture sales increased from 59.1% of furniture
sales revenue in 1996 to 60.5% of furniture sales revenue in 1997. Without the
unusually large corporate sale, cost of furniture sales for 1997 would be 59.6%.
Selling, general and administrative expenses totaled $123,842 or 57.6% of total
revenue for the nine months ended September 30, 1997 as compared to $100,159 or
58.4% of total revenue for the nine months ended September 30, 1996. Excluding
$425 of certain charges associated with duplicate showrooms related to the Evans
Rents acquisition, selling, general and administrative expenses for 1996 would
have been 58.2% of total revenue. In 1996, the percentage of selling, general
and administrative expenses to revenue was higher due to the impact of start up
districts.
Operating Earnings
As a result of the changes in revenue, operating costs and expenses discussed
above, operating earnings were $34,257 or 15.9% of total revenue for the nine
months ended September 30, 1997 compared to $25,407 or 14.8% of total revenue
for the nine months ended September 30, 1996. Excluding the charges related to
the Evans Rents acquisition, operating earnings would have been 15.1% of total
revenue for the nine months ended September 30, 1996.
Furniture Purchases
Furniture purchases totaled $62,710 in the nine months ended September 30, 1997,
a decrease of 3.9% from the $65,245 purchased in the nine months ended September
30, 1996. In 1996, there were additional purchases for the Summer Olympics.
- 6 -
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 CFR. The Company
is dependent on the receipt of dividends or distributions from CFR to fund any
obligations. The Revolving Credit Facility (as defined below) and indenture
governing the Senior Notes restrict the ability of CFR 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 primarily of purchases of
property, plant and equipment, including warehouse and showroom leasehold
improvements, warehouse and office equipment, and computer hardware. Net
purchases of property, plant and equipment were $4,811 and $5,461 for the nine
months ended September 30, 1996 and 1997, respectively.
During the nine months ended September 30, 1996 and 1997, net cash provided by
operations was $59,949 and $74,910, respectively. During the nine months ended
September 30, 1996 and 1997, net cash used in investing activities was $107,529
and $81,212, respectively. In 1996, approximately $27,737 was used for the
acquisition of Evans Rents and in 1997, approximately $13,041 was used for
portfolio acquisitions. The remaining cash used in investing activities consists
primarily of purchases of rental furniture. During the nine months ended
September 30, 1996 and 1997, net cash provided in financing activities was
$48,675 and $6,631, respectively. In 1996, approximately $27,725 was borrowed to
acquire Evans Rents.
The Company is required to make semi-annual interest payments, in arrears on
March 1 and September 1, of approximately $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.
CFR has available a revolving line of credit of $70,000, subject to certain
borrowing base restrictions, to meet acquisition and expansion needs as well as
seasonal working capital and general corporate requirements (the "Revolving
Credit Facility"). CFR had borrowings of $21,800 under the Revolving Credit
Facility at September 30, 1997.
The IRS has proposed the disallowance of certain deductions taken by Fairwood
Corporation for a consolidated tax group of which CFR was previously a member
(the "Former Group") through the year ended December 31, 1988. 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 Consolidated,
CFR'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
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the Former Group while CFR was a member of the Former Group, which could be as
much as approximately $31 million for such periods (including interest through
December 31, 1996). Under the agreement of sale for CFR, Consolidated agreed to
indemnify the Company in full for any consolidated tax liability of the Former
Group for the years during which CFR 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. Fairwood Corporation has indicated to
the Company that it has tentatively reached an agreement in principle with the
IRS Appeals Officer handling the case regarding a settlement of the principal
issues in the case. A final settlement on that basis would be substantially less
than the liability that would result from the proposed adjustments. The terms of
such a tentative settlement are subject to further review by the IRS and by the
Joint Committee on Taxation, and no assurance can be given that any settlement
will be reached with the IRS. The Company is not in a position to determine the
probable outcome and its impact on the Company's consolidated financial
statements, if any.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("Statement 128"). Statement 128 supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share" ("APB 15") and its related
interpretations, and promulgates new accounting standards for the computation
and manner of presentation of the Company's earnings per share. The Company is
required to adopt the provisions of Statement 128 for the year ending December
31, 1997. Earlier application is not permitted; however, upon adoption the
Company will be required to restate previously reported annual and interim
earnings per share in accordance with the provisions of Statement 128. The
Company does not believe that the adoption of Statement 128 will have a material
impact on the computation or manner of presentation of its earnings per share as
currently or previously presented under APB 15.
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the financial statements. The Company is required to adopt the
provisions of Statement 130 for the year ending December 31, 1998. Earlier
application is permitted; however, upon adoption of Statement 130, CORT will be
required to reclassify previously reported annual and interim financial
statements. CORT believes that the disclosure of comprehensive income in
accordance with the provisions of Statement 130 will impact the manner of
presentation of its financial statements as currently and previously reported.
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see Index on page E-1)
(b) Reports on Form 8-K:
None.
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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: November 14, 1997 By: /s/ Frances Ann Ziemniak
----------------- ------------------------
Frances Ann Ziemniak
Vice President, Finance,
CFO & Secretary
(Principal financial and
principal accounting officer)
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<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
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 CFR'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
CFR'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
CFR and the Company; incorporated by reference to Exhibit 2.3 to CFR'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 Amendment to Restated Certificate of Incorporation; incorporated by
reference to Appendix A to the Company's Definitive Proxy Statement on
Schedule 14A, filed as of March 31, 1997
3.3 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 CFR and United States Trust Company of New York,
as Trustee, with respect to CFR'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 CFR 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 CFR 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
</TABLE>
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 CFR, 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 First Amendment to Credit Agreement dated as of May 24, 1996 by and among
CFR, the Company, the lenders identified therein, and NationsBank, N.A., as
agent, incorporated by reference to Exhibit 10.18 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996
10.3 Stock Option, Securities Purchase and Stockholders Agreement, dated as of
January 18, 1994, by and among the Company, CFR, 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
10.4 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 CFR's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993
10.5 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 CFR's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1995
10.6 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
10.7 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
10.8 CFR's Supplemental Executive Retirement Plan, dated October 28, 1992, as
revised effective January 1, 1993, restated through the Second Amendment;
E-2
<PAGE>
incorporated by reference to Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996
10.9 Agreement for Irrevocable Trust Under CORT Furniture Rental Supplemental
Executive Retirement Plan, dated June 1, 1996, between CFR and Mentor Trust
Company; incorporated by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996
10.10Letter Agreement, dated July 24, 1992, between CFR and Paul N. Arnold;
incorporated by reference to Exhibit 10.16 to CFR's Registration Statement
on Form S-1, No. 33-65094, filed on June 25, 1993
10.11Letter Agreement, dated August 18, 1993, between CFR 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
10.12Employment Agreement, dated September 1, 1994, between CFR and Charles M.
Egan; incorporated by reference to Exhibit 10.10 to CFR's Annual Report on
Form 10-K for the year ended December 31, 1994
10.13Amended and Restated CORT Business Services Corporation 1995 Directors
Stock Option Plan adopted by the Board of Directors October 18, 1995 and
amended and restated on May 14, 1997; incorporated by reference to Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997
10.14Equity Share Agreement, between CFR 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
10.15Form of Senior Notes Purchase Agreement between CFR and certain holders of
CFR'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
10.16Private 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
10.17Amended and Restated CORT Business Services Corporation 1995 Stock-Based
Incentive Compensation Plan as adopted by the Board of Directors on July
25, 1995 and amended and restated on May 14, 1997; incorporated by
reference to Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1997
10.18CORT Business Services Corporation 1997 Directors Stock Option Plan, as
adopted by the stockholders of the Company at the Annual Meeting of
Stockholders on May 14, 1997; incorporated by reference to Appendix C to
the Company's Definitive Proxy Statement on Schedule 14A, filed as of March
31, 1997
11.1 Statement re computation of per share earnings
27 Financial Data Schedules
E-3
Exhibit 11.1
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
---------- ---------- ----------- -----------
Net income applicable to common shares:
<S> <C> <C> <C> <C>
Net income applicable to common shares $4,591,000 $5,876,000 $11,234,000 $16,413,000
========= ========= ========== ==========
Weighted average common shares outstanding
for primary earnings per share:
Average shares outstanding during the period 12,038,038 12,833,985 11,001,928 12,784,987
Unexercised stock options and warrants using
the treasury stock method 938,444 923,734 1,072,805 889,274
------- ------- --------- -------
Total weighted average common shares for
primary earnings per share 12,976,482 13,757,719 12,074,733 13,674,261
========== ========== ========== ==========
Weighted average common shares outstanding for
fully diluted earnings per common share:
Average shares outstanding during the period 12,038,038 12,833,985 11,001,928 12,784,987
Unexercised stock options and warrants using
the treasury stock method 955,883 956,778 1,107,260 985,767
------- ------- ---------- -------
Total weighted average common shares for
fully diluted earnings per share 12,993,921 13,790,763 12,109,188 13,770,754
========== ========== ========== ==========
Earnings per common share:
Primary $ 0.35 $ 0.43 $ 0.93 $ 1.20
========= ========= ========= =========
Fully diluted $ 0.35 $ 0.43 $ 0.93 $ 1.19
========== ========= ========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 452
<SECURITIES> 0
<RECEIVABLES> 17,056
<ALLOWANCES> 2,754
<INVENTORY> 165,109
<CURRENT-ASSETS> 0
<PP&E> 51,251
<DEPRECIATION> 13,542
<TOTAL-ASSETS> 276,709
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 129
<OTHER-SE> 142,952
<TOTAL-LIABILITY-AND-EQUITY> 276,709
<SALES> 38,803
<TOTAL-REVENUES> 215,170
<CGS> 23,474
<TOTAL-COSTS> 57,071
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,426
<INTEREST-EXPENSE> 6,363
<INCOME-PRETAX> 27,894
<INCOME-TAX> 11,481
<INCOME-CONTINUING> 16,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,413
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.19
</TABLE>
