================================================================================
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, 1998
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 Novmeber 6, 1998
----- -----------------
Class A, $.01 par value 13,077,889
Class B, $.01 par value - 0 -
================================================================================
<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
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 6. EXHIBITS AND REPORTS ON FORM 8-K...................... 10
SIGNATURE............................................................... 11
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents .......................... $ -- $ 1,159
Accounts receivable, net ........................... 13,521 15,022
Prepaid expenses ................................... 4,127 5,619
Rental furniture, net .............................. 164,323 194,301
Property, plant and equipment, net ................. 38,777 42,710
Other receivables and assets, net .................. 3,183 4,261
Goodwill, net ...................................... 53,910 70,999
-------- --------
Total assets .................................. $277,841 $334,071
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable ................................... $ 5,551 $ 4,231
Accrued expenses ................................... 27,936 26,339
Deferred revenue and security deposits ............. 17,217 20,339
Revolving credit facility .......................... 13,200 99,300
Senior notes, 12% .................................. 49,932 --
Deferred income taxes .............................. 14,673 14,673
-------- --------
128,509 164,882
Stockholders' equity ............................... 149,332 169,189
-------- --------
Total liabilities and stockholders' equity .... $277,841 $334,071
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
1
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
1997 1998 1997 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Furniture rental ........................................... $61,135 $68,477 $176,367 $196,356
Furniture sales ............................................ 12,253 14,254 38,803 39,948
------- ------- -------- --------
Total revenue .......................................... 73,388 82,731 215,170 236,304
------- ------- -------- --------
Operating costs and expenses:
Cost of furniture rental ................................... 11,582 12,358 33,597 35,226
Cost of furniture sales .................................... 7,377 8,698 23,474 24,234
Selling, general and administrative expenses ............... 42,326 47,794 123,842 137,034
------- ------- -------- --------
Total costs and expenses ............................... 61,285 68,850 180,913 196,494
------- ------- -------- --------
Operating earnings ..................................... 12,103 13,881 34,257 39,810
Interest expense ............................................. 2,125 2,126 6,363 6,164
------- ------- -------- --------
Income before income taxes ............................. 9,978 11,755 27,894 33,646
Income taxes ................................................. 4,102 4,960 11,481 14,140
------- ------- -------- --------
Income before extraordinary loss ....................... 5,876 6,795 16,413 19,506
------- ------- -------- --------
Extraordinary loss on early retirement of debt,
net of income tax benefit of $1,672 ........................ -- 2,508 -- 2,508
------- ------- -------- --------
Net Income ............................................. $ 5,876 $ 4,287 $ 16,413 $ 16,998
======= ======= ======== ========
Earnings per common share before extraordinary loss:
Basic .................................................. $ .46 $ .52 $ 1.28 $ 1.50
Diluted ................................................ $ .44 $ .50 $ 1.23 $ 1.45
Earnings per common share:
Basic .................................................. $ .46 $ .33 $ 1.28 1.31$
Diluted ................................................ $ .44 $ .32 $ 1.23 1.26$
Weighted average number of common shares used in computations:
Basic .................................................. 12,834 13,050 12,785 12,999
Diluted ................................................ 13,420 13,467 13,355 13,486
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
---------------------
1997 1998
-------- ---------
Cash flows from operating activities:
Net income .......................................... $ 16,413 $ 16,998
Proceeds of disposals of rental furniture in
excess of gross profit ............................ 21,241 22,925
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss on early retirement of debt .. -- 2,508
Depreciation and amortization:
Rental furniture depreciation ................. 25,186 27,051
Other depreciation and amortization ........... 3,559 4,535
Goodwill amortization ......................... 1,137 1,397
Amortization of debt issuance costs ........... 540 550
Rental furniture inventory shrinkage ............ 2,366 2,152
Changes in operating accounts, net .............. 4,468 152
-------- ---------
Net cash provided by operating activities .... 74,910 78,268
-------- ---------
Cash flows from investing activities:
Purchases of rental furniture ....................... (62,710) (69,962)
Purchases of acquired businesses .................... (13,041) (30,224)
Purchases of property, plant and equipment .......... (6,361) (7,430)
Sales of property, plant and equipment .............. 900 104
Purchase of investment .............................. -- (3,000)
-------- ---------
Net cash used by investing activities ........ (81,212) (110,512)
-------- ---------
Cash flows from financing activities:
Issuance of common stock ............................ 499 738
Borrowings on the line of credit .................... 56,512 120,000
Repayments on the line of credit .................... (50,312) (33,900)
Repayments of long term debt ........................ (68) (49,932)
Payments to retire debt ............................. --
-- (3,503)
-------- ---------
Net cash provided by financing activities ..... 6,631 33,403
-------- ---------
Net increase in cash and cash equivalents ..... 329 1,159
Cash and cash equivalents at beginning of period ...... 123 --
-------- ---------
Cash and cash equivalents at end of period ............ $ 452 $ 1,159
======== =========
Supplemental disclosures of cash flow information:
Tax benefit from exercise of stock options .......... $ 1,017 $ 2,103
Interest paid ....................................... 7,231 7,306
Income taxes paid ................................... 8,471 9,602
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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 Subsidiary as of September 30, 1998, and the
results of operations for the three and nine months ended September 30,
1998 and 1997, and the cash flows for the nine months ended September 30,
1998 and 1997. The results of operations for the nine months ended
September 30, 1998 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 1997 Annual Report on Form 10-K.
(2) Income Taxes
The Internal Revenue Service ("IRS") had 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 included 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. Fairwood
Corporation has indicated to the Company that it has reached an agreement
with the IRS regarding a settlement of the proposed adjustments. The
bankruptcy court handling Fairwood Corporation's bankruptcy filing approved
the terms of the settlement in October 1998. The total tax liability of the
Former Group under the terms of the settlement is approximately $6 million,
including interest through September 30, 1998.
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 $4.5 million for such periods
(including interest through September 30, 1998) under the terms of the
settlement. 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. The Company is
not in a position to determine the probable impact on the Company's
consolidated financial statements, if any.
4
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(3) Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1997 1998 1997 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding
during the period ........................ 12,833,985 13,049,954 12,784,987 12,999,000
Effect of dilutive securities
Stock options ............................ 509,987 393,741 481,505 446,794
Warrants ................................. 76,281 23,271 88,420 40,321
----------- ------------ ----------- ------------
Weighted average common shares --
assuming dilution ........................ 13,420,253 13,466,966 13,354,912 13,486,115
=========== ============ =========== ============
Income before extraordinary loss ........... $ 5,876,000 $ 6,795,000 $16,413,000 $ 19,506,000
Extraordinary loss, net .................... -- 2,508,000 -- 2,508,000
----------- ------------ ----------- ------------
Net income ................................. $ 5,876,000 $ 4,287,000 $16,413,000 $ 16,998,000
=========== ============ =========== ============
Earnings per common share:
Income before extraordinary loss ......... $ .46 $ .52 $ 1.28 $ 1.50
Extraordinary loss ....................... -- (.19) -- (.19)
----------- ------------ ----------- ------------
Net income ............................. $ .46 $ .33 $ 1.28 $ 1.31
=========== ============ =========== ============
Earnings per common share assuming dilution:
Income before extraordinary loss ......... $ .44 $ .50 $ 1.23 $ 1.45
Extraordinary loss ....................... -- (.19) -- (.19)
----------- ------------ ----------- ------------
Net income ............................. $ .44 $ .32 $ 1.23 $ 1.26
=========== ============ =========== ============
</TABLE>
(4) Acquisitions
On August 14, 1998, the Company acquired certain assets of Instant
Interiors Corporation, a provider of rental furniture in the Midwest area,
for approximately $16,000,000, in a transaction accounted for as a purchase
business combination. Based on the preliminary allocation of the purchase
price to the net assets acquired, goodwill of approximately $8,250,000 was
recorded. Such goodwill is being amortized on a straight-line basis over 40
years.
5
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollar figures in thousands)
Results of Operations
Three months ended September 30, 1998 as compared to three months ended
September 30, 1997
Revenue
Total revenue increased 12.7% to $82,731 for the three months ended September
30, 1998 from $73,388 for the three months ended September 30, 1997. Furniture
rental revenue for the quarter ended September 30, 1998 was $68,477, a 12.0%
increase from $61,135 in 1997. Rental revenue growth before the impact of
acquisitions, merged markets and trade show operations was approximately 5%
which reflects growth in the number of leases as well as revenue per lease.
Furniture sales increased 16.3% to $14,254 for the three months ended September
30, 1998. The addition of new clearance centers, a few large conversion sales,
and the impact of acquisitions contributed to this increase.
Operating Costs and Expenses
Cost of furniture rental has decreased from 18.9% of furniture rental revenue in
1997 to 18.0% of furniture rental revenue in 1998. The increase in rental
margins is primarily attributable to the expansion of CORT's housewares business
and improvements in inventory control from the continued installation of the
perpetual system. Cost of furniture sales increased from 60.2% of furniture
sales revenue in 1997 to 61.0% in 1998 primarily as a result of the large
conversion sales.
Selling, general and administrative expenses totaled $47,794 or 57.8% of total
revenue for the quarter ended September 30, 1998 as compared to $42,326 or 57.7%
of total revenue for the quarter ended September 30, 1997. Operating expenses as
a percent of total revenue remained stable.
Operating Earnings
As a result of the changes in revenue, operating costs and expenses discussed
above, operating earnings were $13,881 or 16.8% of total revenue in the third
quarter of 1998 compared to $12,103 or 16.5% of total revenue in the third
quarter of 1997.
Nine months ended September 30, 1998 as compared to nine months ended September
30, 1997
Revenue
Total revenue increased 9.8% to $236,304 for the nine months ended September 30,
1998 from $215,170 for the nine months ended September 30, 1997. Furniture
rental revenue for the nine months ended September 30, 1998 was $196,356, an
11.3% increase from $176,367 in 1997. Rental revenue growth before the impact of
acquisitions, merged markets, and trade show operations was approximately 6%
which reflects growth in the number of leases as well as revenue per lease.
Furniture sales increased 3.0% to $39,948 for the nine months ended September
30, 1998. The Company experienced an unusually large corporate sale in 1997 and
closed its model home business in Atlanta in 1998; adjusting for these events,
furniture sales revenue would have increased approximately 13%. The addition of
new clearance centers, a few large conversion sales as well as the impact of
acquisitions contributed to this increase.
6
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(dollar figures in thousands)
Operating Costs and Expenses
Cost of furniture rental has decreased from 19.0% of furniture rental revenue in
1997 to 17.9% in 1998. A reduction of depreciation as a percent of revenue as
well as the expansion of CORT's housewares contributed to this improvement. Cost
of furniture sales increased from 60.5% of furniture sales revenue in 1997 to
60.7% in 1998.
Selling, general and administrative expenses totaled $137,034 or 58.0% of total
revenue for the nine months ended September 30, 1998 as compared to $123,842 or
57.6% of total revenue for the same nine months of 1997. Selling, general and
administrative expenses remained relatively flat as a percentage of revenue
adjusted for unusually large sales.
Operating Earnings
As a result of the changes in revenue, operating costs and expenses discussed
above, operating earnings were $39,810 or 16.8% of total revenue for the nine
months ended September 30, 1998 compared to $34,257 or 15.9% of total revenue
for the nine months ended September 30, 1997.
Furniture Purchases
Furniture purchases, which totaled $69,962 in the nine months ended September
30, 1998, increased from the $62,710 purchased in the nine months ended
September 30, 1997. Purchases for acquisitions accounted for over half the
growth. The remaining increase reflects normal business requirements including a
reduction for merged markets and start up operations.
Liquidity and Capital Resources
CORT Business Services 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 restricts the ability of CFR
to make advances and pay dividends to the Company.
The Company's primary capital requirements are purchases of rental furniture.
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 leasehold improvements, warehouse and
office equipment, standard programming enhancements and computer hardware. Net
purchases of property, plant and equipment were $5,461 and $7,326 in the nine
months ended September 30, 1997 and 1998, respectively.
7
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(dollar figures in thousands)
During the nine months ended September 30, 1997 and 1998, net cash provided by
operations was $74,910 and $78,268, respectively. During the nine months ended
September 30, 1997 and 1998, net cash used by investing activities was $81,212
and $110,512, respectively, consisting primarily of purchases of rental
furniture and acquisitions. During the nine months ended September 30, 1997 and
1998, net cash provided by financing activities was $6,631 and $33,403,
respectively.
On September 10, 1998, the Company redeemed the remaining $49,932 of its 12%
Senior Notes at a price of 107% of the principal amount plus accrued and unpaid
interest to the date of redemption. The Company used borrowings under an
expanded credit line with its existing bank group to redeem the notes. As a
result of the early retirement of the Senior Notes, the Company recognized an
extraordinary loss of $2,508, net of income tax benefit of $1,672, in the third
quarter of 1998.
CFR has available a revolving line of credit of $125,000 to meet acquisition and
expansion needs as well as seasonal working capital and general corporate
requirements. CFR had borrowings of $99,300 under the line of credit at
September 30, 1998.
The Internal Revenue Service ("IRS") had 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 included 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. Fairwood Corporation has indicated to the Company that it has
reached an agreement with the IRS regarding a settlement of the proposed
adjustments. The bankruptcy court handling Fairwood Corporation's bankruptcy
filing approved the terms of the settlement in October 1998. The total tax
liability of the Former Group under the terms of the settlement is approximately
$6 million, including interest through September 30, 1998.
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 $4.5 million for such periods (including interest through
September 30, 1998) under the terms of the settlement. 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.
The Company is not in a position to determine the probable impact on the
Company's consolidated financial statements, if any.
Year 2000
As is the case with other companies using computers in their operations, the
Company is faced with the task of addressing the Year 2000 issue. The Year 2000
issue arises from the widespread use of computer programs that rely on two-digit
codes to perform computations or decision-making functions. The Company has done
a comprehensive review of its significant computer programs to identify the
systems that would be affected by the Year 2000 issue.
8
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(dollar figures in thousands)
The Company relies on computer-based technology and utilizes a variety of
third-party hardware and software. The Company's rental and retail functions,
including lease writing, inventory control, billing and accounts receivable use
the software called "RTR". This software, which is the Company's primary
operating system, has been recently developed and installed in most of the
Company's operations. The RTR software has been modified for Year 2000
compliance, but the modified version has not yet been installed in the
operations of the Company. The installation of RTR, as well as the Year 2000
modification, is expected to be completed in the second quarter of 1999. The
Company utilizes third party software for administrative functions such as
accounting, payroll and human resources. The Company expects to upgrade the
administrative function third party software to the Year 2000 version or install
new software which is Year 2000 compliant in the first half of 1999. The Company
currently estimates the cost of modifying its computer systems to be Year 2000
compliant to be approximately $250; the majority of these costs will be incurred
by March 31, 1999.
The Company is still in the process of reviewing its Year 2000 exposure to
customers and vendors. The Company is not dependent on any one supplier or
customer for more than 10% of its rental furniture or revenue, respectively. As
part of its contingency planning efforts, the Company is sending inquiries as to
the Year 2000 readiness to selected vendors in order to identify any significant
exposures that may exist and establish alternative sources or strategies where
necessary. The Company is currently unaware of any Year 2000 problems faced by
any customers or vendors that are likely to have a material adverse effect on
the Company.
There can be no guarantee that the foregoing cost estimates or deadlines will be
achieved and actual results could differ from current expectation. Specific
factors that might cause differences include, but are not limited to, the
ability of customers, suppliers, and other companies on which the Company's
operations rely to modify or convert their systems to be Year 2000 ready, the
ability of the Company to locate and correct all relevant computer code, or
similar uncertainties. The Company is in the process of developing contingency
plans for such scenarios.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (FAS No. 131), "Disclosure about Segments
of an Enterprise and Related Information." FAS No. 131 requires CORT to present
certain information about operating segments and related information, including
geographic and major customer data, in its annual financial statements and in
condensed financial statements for interim periods. The Company is required to
adopt the provisions of this statement during fiscal year 1998 and plans to
implement the provisions of this statement at December 31, 1998. Management is
currently determining the necessary additional disclosures, if any.
Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q
includes certain forward-looking statements as such term is defined in Section
27A of the Securities Act and Section 21E of the Exchange Act. These
forward-looking statements involve certain risks and uncertainties, including
but not limited to acquisitions, additional financing requirements, development
of new products and services, purchases of rental property, the effect of
competitive products and pricing and the effect of general economic conditions,
that could cause actual results to differ materially from those in such
forward-looking statements.
9
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
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.
10
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
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 16, 1998 By: /s/ Frances Ann Ziemniak
--------------------- ----------------------------
Frances Ann Ziemniak
Vice President, Finance, CFO
and Secretary
(Principal financial and
principal accounting officer)
11
<PAGE>
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
EXHIBIT INDEX
Exhibit
Number Description Page
- - ------- ----------- ----
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
10.1 Credit Agreement dated as of February 13, 1998 by and among
CFR, the Company, the lenders identified therein, and
NationsBank, N.A., as agent; incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997
10.2 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
10.3 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 CFR'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 CFR'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 CFR's Supplemental Executive Retirement Plan, dated October
28, 1992, as revised effective January 1, 1993, restated
through the Second Amendment; incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996
E-1
<PAGE>
Exhibit
Number Description Page
- - ------- ----------- ----
10.8 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
10.9 Letter 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
10.10 Letter 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
10.11 Employment 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
10.12 Amended 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
10.13 Equity 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
10.16 Amended 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
10.17 CORT 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; incorporated
by reference to page 5 of the Company's Form 10-Q for the
fiscal quarter ended September 30, 1998
27 Financial Data Schedules
E-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Art. 5 FDS for Third Quarter 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,159
<SECURITIES> 0
<RECEIVABLES> 17,813
<ALLOWANCES> 2,791
<INVENTORY> 194,301
<CURRENT-ASSETS> 0
<PP&E> 71,778
<DEPRECIATION> 29,068
<TOTAL-ASSETS> 334,071
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 131
<OTHER-SE> 169,058
<TOTAL-LIABILITY-AND-EQUITY> 334,071
<SALES> 39,948
<TOTAL-REVENUES> 236,304
<CGS> 24,234
<TOTAL-COSTS> 59,460
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 812
<INTEREST-EXPENSE> 6,164
<INCOME-PRETAX> 33,646
<INCOME-TAX> 14,140
<INCOME-CONTINUING> 19,506
<DISCONTINUED> 0
<EXTRAORDINARY> 2,508
<CHANGES> 0
<NET-INCOME> 16,998
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Art. 5 FDS for 1997 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 16,045
<ALLOWANCES> 2,524
<INVENTORY> 164,323
<CURRENT-ASSETS> 0
<PP&E> 62,996
<DEPRECIATION> 24,219
<TOTAL-ASSETS> 277,841
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 129
<OTHER-SE> 142,952
<TOTAL-LIABILITY-AND-EQUITY> 277,841
<SALES> 38,803
<TOTAL-REVENUES> 215,170
<CGS> 23,474
<TOTAL-COSTS> 57,071
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,197
<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> 1.28
<EPS-DILUTED> 1.23
</TABLE>
