UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number 0-25370
RENTERS CHOICE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 48-1024367
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13800 Montfort, Suite 300
Dallas, Texas 75240
(972) 701-0489
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
NONE
(Former name, former address and former
fiscal year, if changed since last report)
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 November 7, 1996:
CLASS OUTSTANDING
Common stock, $.01 par value per share 24,823,835
RENTERS CHOICE, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. Consolidated Financial Statements
Balance Sheets as of September 30, 1996 and December 31, 1995 1
Statements of Earnings for the nine months ended
September 30, 1996 and 1995 2
Statements of Earnings for the three months ended
September 30, 1996 and 1995 3
Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 4
Notes to Financial Statements 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 17
Exhibit 3.2 21
Exhibit 10.1 23
Exhibit 11.1 29
Exhibit 27 30
RENTERS CHOICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, 1995
------------- -------------
Unaudited
ASSETS
Cash and cash equivalents ....................................................... $ 9,679,027 $ 35,321,338
Rental merchandise, net
On rent ....................................................................... 59,997,718 49,700,354
Held for rent ................................................................. 16,819,203 14,539,645
Accounts receivable, net ........................................................ 2,105,304 --
Income taxes receivable ......................................................... 216,346 1,440,223
Prepaid expenses and other assets ............................................... 1,742,244 2,391,220
Property assets, net ............................................................ 11,175,872 7,375,667
Deferred income taxes ........................................................... 10,626,581 6,976,576
Intangible assets, net .......................................................... 33,088,143 29,549,275
------------- -------------
$ 145,450,438 $ 147,294,298
LIABILITIES
Accounts payable - trade ........................................................ $ 6,546,706 $ 3,288,069
Accrued liabilities ............................................................. 6,027,019 4,213,624
Income taxes payable ............................................................ 3,390,225 --
Taxes other than income ......................................................... 2,296,896 2,458,984
Deferred income taxes ........................................................... 350,000 --
Other debt ...................................................................... 6,273,822 40,849,605
Reserve for loans sold with recourse ............................................ 1,016,605 --
------------- -------------
25,901,273 50,810,282
COMMITMENTS AND CONTINGENCIES ...................................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued ................................................................... -- --
Common stock, $.01 par value; 50,000,000 shares authorized;
24,819,395 and 24,378,108 shares issued and
outstanding in 1996 and 1995, respectively .................................... 248,193 243,781
Additional paid-in capital ...................................................... 98,039,912 87,919,305
Unamortized value of stock award ................................................ (672,890) (897,890)
Retained earnings ............................................................... 21,933,950 9,218,820
------------- -------------
119,549,165 96,484,016
$ 145,450,438 $ 147,294,298
The accompanying notes are an integral part of these statements.
1
RENTERS CHOICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
------------- -----------
Unaudited
STORE REVENUE
Rentals and fees ......................... $ 142,357,856 $82,529,529
Merchandise sales ........................ 8,030,325 3,651,453
Other
533,924 450,459
FRANCHISE REVENUE
Franchise merchandise sales .............. 14,027,289 --
Royalty income and fees .................. 1,833,148 --
------------- -----------
TOTAL REVENUE ...................... 166,782,542 86,631,441
OPERATING EXPENSES
Direct store expenses
Depreciation of rental merchandise ..... 31,024,771 19,099,556
Cost of merchandise sold ............... 6,266,708 2,572,274
Salaries and other expenses ............ 83,753,192 44,389,993
Franchise operation expenses
Cost of franchise merchandise sales .... 13,376,058 --
----------- -----------
134,420,729 66,061,823
General and administrative expenses ...... 6,957,136 4,243,874
Amortization of intangibles .............. 3,546,037 2,109,382
------------- -----------
TOTAL OPERATING EXPENSES ........... 144,923,902 72,415,079
------------- -----------
OPERATING PROFIT ................... 21,858,640 14,216,362
INTEREST EXPENSE(INCOME), NET ............... (82,717) 944,490
------------- -----------
EARNINGS BEFORE INCOME TAXES ....... 21,941,357 13,271,872
INCOME TAX EXPENSE .......................... 9,226,227 5,736,268
------------- -----------
NET EARNINGS ....................... $ 12,715,130 $ 7,535,604
============= ===========
Weighted average shares outstanding ......... 25,048,765 19,907,787
============= ===========
EARNINGS PER SHARE ................. $ 0.51 $ 0.38
============= ===========
The accompanying notes are an integral part of these statements.
2
RENTERS CHOICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
------------ -----------
Unaudited
STORE REVENUE
Rentals and fees ........................ $ 48,929,122 $35,096,938
Merchandise sales ....................... 2,266,387 1,380,293
Other ................................... 172,317
182,067
FRANCHISE REVENUE
Franchise merchandise sales ............. 7,528,885 --
Royalty income and fees ................. 1,127,869 --
------------ -----------
TOTAL REVENUE ..................... 60,024,580 36,659,298
OPERATING EXPENSES
Direct store expenses
Depreciation of rental merchandise .... 10,462,160 8,100,795
Cost of merchandise sold .............. 1,882,824 1,101,321
Salaries and other expenses ........... 29,057,753 19,648,195
Franchise operation expenses
Cost of franchise merchandise sales ... 7,174,113 --
---------- ----------
48,576,850 28,850,311
General and administrative expenses ..... 2,232,054 1,594,759
Amortization of intangibles ............. 1,258,937 785,357
------------ -----------
TOTAL OPERATING EXPENSES .......... 52,067,841 31,230,427
------------ -----------
OPERATING PROFIT .................. 7,956,739 5,428,871
INTEREST (INCOME) EXPENSE, NET ............. (105,531) 497,069
------------ -----------
EARNINGS BEFORE INCOME TAXES ...... 8,062,270 4,931,802
INCOME TAX EXPENSE ......................... 3,333,025 2,010,348
------------ -----------
NET EARNINGS ...................... $ 4,729,245 $ 2,921,454
============ ===========
Weighted average shares outstanding ........ 25,203,721 21,039,187
============ ===========
EARNINGS PER SHARE ................ $ 0.19 $ 0.14
============ ===========
The accompanying notes are an integral part of these statements.
3
RENTERS CHOICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
1996 1995
------------ ------------
Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings .................................................................... $ 12,715,130 $ 7,535,604
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation of rental merchandise .......................................... 31,024,771 19,099,556
Depreciation of property assets ............................................. 2,548,495 1,178,323
Amortization of intangibles ................................................. 3,546,037 2,109,382
Other ....................................................................... 225,000 (123,052)
Changes in operating assets and liabilities
Rental merchandise .......................................................... (41,157,165) (22,996,982)
Accounts receivable ......................................................... 312,810
Income taxes receivable ..................................................... 2,194,487 --
Prepaid expenses and other assets ........................................... 1,056,243 (422,607)
Accounts payable - trade .................................................... 243,539 169,371
Accrued liabilities ......................................................... (1,344,196) 151,777
Income taxes payable ........................................................ 2,465,701 (122,057)
Taxes other than income ..................................................... (162,088) 617,781
Reserve for loans held with recourse ........................................ (123,614) --
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................. 13,545,150 7,197,096
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property assets ..................................................... (5,897,975) (2,466,463)
Proceeds from sale of property assets ........................................... 216,058 377,155
Acquisitions of businesses, net of cash acquired
of $2,132,930 in 1996 ......................................................... (7,935,643) (21,351,873)
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES ..................................... (13,617,560) (23,441,181)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public offerings .................................................. -- 23,396,209
Proceeds from exercise of options ............................................... 590,937 10,000
Distributions to stockholders ................................................... -- (1,493,340)
Proceeds from debt .............................................................. 531,844 20,259,780
Repayments of debt .............................................................. (48,030,976) (21,024,743)
Repayments of note to stockholder ............................................... -- (6,250,000)
Repayment of notes receivable ................................................... 21,338,294 --
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ....................... (25,569,901) 14,897,906
------------ ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ......................................................... (25,642,311) (1,346,179)
Cash and cash equivalents at beginning of period ................................... 35,321,338 1,441,001
------------ ------------
Cash and cash equivalents at end of period ......................................... $ 9,679,027 $ 94,822
============ ============
The accompanying notes are an integral part of these statements.
4
RENTERS CHOICE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim financial statements of Renters Choice, Inc. and Subsidiary (the
"Company") included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. In the opinion of management, the accompanying unaudited
interim financial statements contain all adjustments, consisting only of
those of a normal recurring nature, necessary to present fairly the Company's
results of operations and cash flows for the periods presented. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
2. On May 15, 1996 the Company acquired all the outstanding common stock of
ColorTyme, Inc. ("ColorTyme") pursuant to a merger (the "Merger") of a wholly
owned subsidiary of the Company with ColorTyme. The total Merger
consideration consisted of cash of $4,665,751 paid to shareholders and
343,175 shares of the Company's common stock, valued at $19.04 per share. The
acquisition was accounted for as a purchase, and accordingly, the operating
results of ColorTyme have been included in the operating results of the
Company since May 1, 1996. Goodwill is amortized over twenty years, and
identifiable intangible assets are amortized over periods from eighteen
months to ten years. The assets purchased, liabilities assumed and equity
consideration were recorded by the Company as follows:
ASSETS ACQUIRED
Rental merchandise $ 748,717
Accounts receivable 23,756,408
Income taxes receivable 970,610
Deferred income taxes 3,650,000
Prepaid expenses and other assets 375,128
Intangible assets 3,654,341
Property assets 446,784
----------------
$ 33,601,988
================
LIABILITIES ASSUMED
Accounts payable - trade $ 3,015,098
Accrued liabilities 3,157,591
Income taxes payable 924,524
Deferred income taxes 350,000
Other debt 12,688,583
Reserve for loans sold with recourse 1,140,219
----------------
21,276,015
EQUITY CONSIDERATION
Common stock 3,462
Additional paid-in capital 9,530,620
9,534,082
------------
$ 30,810,097
================
5
RENTERS CHOICE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
2. Continued.
CASH PURCHASE PRICE $ 2,791,891
================
Immediately following the purchase of ColorTyme by the Company, ColorTyme
sold its franchise loan portfolio (with certain recourse provisions) to a
third party for an aggregate purchase price of approximately $21.7 million .
At September 30, 1996, ColorTyme's provision for future possible losses
related to the sale of the loan portfolio is $1,016,605. ColorTyme
simultaneously paid off related notes payable owed to Chrysler First
Commercial Corporation for $13.2 million. No gain or loss was recognized on
the sale.
The following summary, prepared on a pro forma basis, combines the results
of operations as if ColorTyme, Crown Leasing Corporation and certain of its
affiliates, and Pro Rental, Inc. had been acquired as of the beginning of
each of the nine month and three month periods ending September 30, 1996 and
1995, after including the impact of purchase accounting adjustments and the
additional shares issued as consideration.
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
Revenue .............. $180,976,695 $163,790,900 $60,024,580 $55,571,704
Net earnings ......... $ 13,074,725 $ 6,279,032 $ 4,729,245 $ 2,126,458
Earnings per common
share .............. $ 0.52 $ 0.31 $ 0.19 $ 0.10
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of operating results that would have
occurred had the acquisition been consummated as of the above dates, nor are
they necessarily indicative of future operating results.
The Company acquired the assets of an additional seventeen stores in eight
transactions during the nine months ended September 30, 1996 for
approximately $5.1 million. The transactions were accounted for using the
purchase method of accounting.
The assets acquired were recorded by the Company as follows:
ASSETS ACQUIRED
Rental merchandise $ 1,695,811
Prepaid expenses and other assets 9,277
Intangible assets 3,453,429
Property assets 220,000
-----------------
5,378,517
Other Debt 234,765
CASH PURCHASE PRICE $ 5,143,752
================
6
RENTERS CHOICE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
3. The Company has a credit agreement with its current lender for $40 million.
This agreement consists of a $10 million revolving credit facility and a $30
million term loan facility. Borrowings under the term loan facility bear
interest at a rate equal to the National prime rate as published in the WALL
STREET JOURNAL (8-1/4% per annum at September 30, 1996) and borrowings under
the revolving credit facility bear interest at such designated prime rate, in
each case as adjusted monthly. All borrowings are secured by a lien on
substantially all of the Company's assets. Borrowings under the revolving
credit facility are due on April 30, 1997. Any term loan borrowings will be
funded in individual notes amortized over five-year periods payable in equal
monthly installments (including interest). The commitment on the term
facility expires April 30, 1997, and bears no commitment fee. The credit
agreement includes certain cash flow and net worth requirements, as well as
covenants which limit the ability of the Company to incur additional
indebtedness, grant liens, transfer assets out of the ordinary course of
business or engage in merger transactions. At September 30, 1996, there were
no outstanding borrowings under either of these facilities.
On September 30, 1996, the Company executed a commitment letter with a
syndicate of banks led by Comerica Bank to provide financing in the aggregate
principal amount of $90 million. The commitment is subject to certain terms
and conditions set forth in the letter. The terms and conditions of the
financing are being negotiated, and the agreement is expected to be executed
before year-end.
7
RENTERS CHOICE, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. The actual future results of the Company could differ materially
from those statements. Factors that could cause or contribute to such
differences include, but are not limited to, uncertainties regarding the ability
to acquire additional rent-to-own stores on favorable terms, to enhance their
performance and to integrate the acquired stores into the Company's operations.
In April 1995, the Company acquired 72 stores located in 18 states from
Crown Leasing Corporation and certain of its affiliates (the "Crown
Acquisition") and two other stores in a separate transaction. In August 1995,
the Company acquired 135 stores located in 10 states by purchasing the issued
and outstanding stock of Pro Rental, Inc., the parent company of a chain of
rent-to-own stores doing business as Magic Rent-to-Own and Kelway Rent-to-Own
(the "Magic Acquisition" and, together with the Crown Acquisition, the "1995
Acquisitions"). In May 1996, the Company acquired all the issued and outstanding
stock of ColorTyme, Inc. ("ColorTyme"), a franchisor of 313 rent-to-own stores,
pursuant to the Merger. Prior to the Merger, ColorTyme operated six company
owned stores, all of which were purchased by the Company subsequent to the
Merger. The Company acquired an additional seventeen stores in seven separate
transactions in the first half of 1996 (together with the ColorTyme Acquisition,
the "1996 Acquisitions") and fifty stores in seven separate transactions through
November 7, 1996. The 1995 and 1996 Acquisitions were accounted for as purchases
and, accordingly, the operating results of the acquired stores and franchisor
have been included in the operating results of the Company since the respective
dates of acquisition. Primarily as a result of the impact of the 1995 and 1996
Acquisitions on the results of operations, comparisons of the operating results
for the three month and nine month periods ended September 30, 1996 and 1995 may
not be meaningful or indicative of future results.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Total revenue increased by $80.2 million, or 92.6%, to $166.8 million for
1996 from $86.6 million for 1995. The increase in total revenue was primarily
attributable to the inclusion of the 209 stores purchased in 1995, and the 1996
Acquisitions. Total revenue exclusive of the 1995 and the 1996 Acquisitions
increased by $5.2 million, or 7.9% to $71.4 million for 1996 from $66.2 million
in 1995. This improvement was primarily attributable to an increase in revenue
earned per item on rent.
Depreciation of rental merchandise increased by $11.9 million, or 62.3%,
to $31.0 million for 1996 from $19.1 million for 1995. Depreciation of rental
merchandise expressed as a percent of rental revenue decreased from 23.1% in
1995 to 21.8% in 1996. The decrease was primarily attributable to higher rental
rates on rental merchandise.
Salaries and other expenses expressed as a percentage of total store
revenue increased to 55.5% for 1996 from 51.2% for 1995. This increase is
attributable to increase in salaries for employees of acquired stores
immediately following the acquisitions while store revenues have increased
gradually. Additionally, the Company increased its advertising efforts during
the first nine months of 1996 in the markets related to the 1995 and 1996
Acquisitions. Occupancy costs also increased as a percent of total revenue
primarily because of the relocation of certain stores acquired in the 1995
acquisitions to stores that are larger in square footage. Revenues from these
larger stores increase gradually while the additional occupancy costs are
incurred immediately. The average relocated store is approximately 4,000 square
feet. General and administrative expenses expressed as a percent of total
revenue decreased to 4.2% for 1996 from 4.9% for 1995. The decrease is primarily
attributable to increased economies of scale resulting from the 1995 and 1996
Acquisitions.
8
RENTERS CHOICE, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
Operating profit increased by $7.7 million, or 54.2%, to $21.9 million for
1996 from $14.2 million for 1995. This improvement was primarily attributable to
an increase in revenue earned per item on rent, in stores acquired in the 1995
and 1996 Acquisitions. Net earnings increased by $5.2 million, or 69.3%, to
$12.7 million in 1996 from $7.5 million in 1995. The improvement was a result of
the increase in operating profit described above.
COMPARISON OF THREE MONTHS SEPTEMBER 30, 1996 AND 1995
Total revenue increased by $23.3 million, or 63.5%, to $60.0 million for
1996 from $36.7 million for 1995. The increase in total revenue was primarily
attributable to the inclusion of the 209 stores purchased in 1995, and the 1996
Acquisitions. Total revenue exclusive of the Magic Acquisition, and the 1996
Acquisitions increased by $2.3 million or 7.4% to $33.5 million for 1996 from
$31.2 million in 1995. Same store revenue for the quarter ended September 30,
1996 increased $1,763,000 or 5.7%, over the comparable quarter. Notwithstanding
same store revenue growth for the quarter ended September 30, 1996, the
Company's existing operations were adversely affected by inclement weather due
to tropical storms in September on both the East Coast and in Puerto Rico.
Additionally, during 1996 the Company relocated managers and regional managers
from stores acquired prior to 1995 to stores acquired in 1995. As a result, same
store revenue during the quarter ended September 30, 1996 for stores acquired
prior to 1995 increased 1%, while same store revenue for the April 1995 (72
store) acquisition increased 18%.
Depreciation of rental merchandise increased by $2.4 million, or 29.6%, to
$10.5 million for 1996 from $8.1 million for 1995. Depreciation of rental
merchandise expressed as a percent of rental revenue decreased to 21.4% in 1996
from 23.1% in 1995. The decrease was primarily attributable to higher rental
rates on rental merchandise.
Salaries and other expenses expressed as a percentage of total store
revenue increased to 56.6% for 1996 from 53.6% for the comparative 1995 quarter.
This increase is attributable to increase in salaries for employees of acquired
stores immediately following the acquisitions while store revenues have
increased gradually. Additionally, the Company increased its advertising efforts
during the quarter ended September 30, 1996 in the markets related to the 1995
and 1996 Acquisitions. Occupancy costs also increased as a percent of total
revenue primarily because of the relocation of certain stores acquired in the
1995 acquisitions to stores that are larger in square footage. Revenues from
these larger stores increase gradually while the additional costs are incurred
immediately. The average relocated store is approximately 4,000 square feet.
General and administrative expenses expressed as a percent of total revenue
decreased to 3.7% for 1996 from 4.4% for 1995. The decrease is primarily
attributable to increased economies of scale resulting from the 1995 and 1996
Acquisitions.
Operating profit increased by $2.6 million, or 48.1%, to $8.0 million for
1996 from $5.4 million for 1995. This improvement was primarily attributable to
an increase in both the number of items on rent and in revenue earned per item
on rent, both in stores acquired before 1995 and in stores acquired in the 1995
Acquisitions.
Net earnings increased by $1.8 million, or 62.0%, to $4.7 million in 1996
from $2.9 million in 1995. The improvement was a result of the increase in
operating profit described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary requirements for capital are the acquisition of
existing stores, the opening of new stores, the purchase of additional rental
merchandise and the replacement of rental merchandise which has been sold or
charged-off or is no longer suitable for rent. During the year ended December
31, 1995, the Company
9
RENTERS CHOICE, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
acquired 209 stores for an aggregate purchase price of $59 million, of which
$21.7 million was paid in cash. During the nine months ended September 30, 1996,
the Company acquired an additional seventeen stores and ColorTyme for a net cash
purchase price of $7.9 million. The Company purchased $50.2 million and $24.7
million of rental merchandise during the nine month periods ended September 30,
1996 and 1995, respectively.
For the nine months ended September 30, 1996, cash provided by operating
activities increased by $6.3 million to $13.5 million in 1996 from $7.2 million
in 1995, primarily due to increased earnings, timing of the payment of various
operating expenses offset by increased rental merchandise purchases. Cash used
in investing activities decreased by $9.8 million to $13.6 million in 1996 from
$23.4 in 1995, primarily relating to the 1995 Acquisitions. Cash used in
financing activities was $25.6 million for the nine months ended September 30,
1996, which relates primarily to repayment of debt to the Magic selling
shareholders which was paid in full on January 2, 1996, offset by the net
proceeds of the sale of the ColorTyme franchise loan portfolio. Cash provided by
financing activities was $14.9 million for the nine months ended September 30,
1995, which relates primarily to the proceeds from the initial public offering
in January 1995 offset by repayment of the note to a stockholder.
The Company increased its credit agreement with its current lender from
$25 million to $40 million in the first quarter of 1996. This agreement consists
of a $10 million revolving credit facility and a $30 million term loan facility.
Borrowings under the term loan facility bear interest at a rate equal to the
National prime rate as published in the WALL STREET JOURNAL (8 1/4% per annum at
September 30, 1996) and borrowings under the revolving credit facility bear
interest at such designated prime rate, in each case as adjusted monthly. All
borrowings are secured by a lien on substantially all of the Company's assets.
Borrowings under the revolving credit facility are due on April 30, 1997. Any
term loan borrowings will be funded in individual notes amortized over five-year
periods payable in equal monthly installments (including interest). The
commitment on the term facility expires April 30, 1997, and bears no commitment
fee. The credit agreement includes certain cash flow and net worth requirements,
as well as covenants which limit the ability of the Company to incur additional
indebtedness, grant liens, transfer assets out of the ordinary course of
business or engage in merger transactions. On September 30, 1996, there were no
outstanding borrowings under either of these facilities.
In connection with the stores acquired in 1993, monthly payments of
$33,333 are due under a consulting agreement through April 1, 2001, and monthly
payments of $125,000 are due under a non-competition agreement from February
1996 through January 1998. If the settlement agreement described under the
caption "Part II. Item 1. Legal Proceedings - IN RE: DEF INVESTMENTS, INC." is
executed, the Company will be released from its obligation to make payments
under such consulting and non-competition agreements, in exchange for a cash
payment of $4.75 million (the "Settlement Amount"). Although management cannot
at this time estimate when it will be required to pay the Settlement Amount, if
ever, management believes that the Company's borrowing capacity under its credit
facility and cash flow from operations will be sufficient to fund the payment.
In connection with the Crown Acquisition, monthly payments of $16,667 were
due under a consulting agreement through October 1996, and in connection with
the Magic Acquisition, monthly payments in the aggregate amount of $32,500 are
due under certain noncompetition agreements through August 2000.
The Company intends to increase the number of stores it operates through
acquisitions and new store openings. In particular, the Company's goal is to
increase the number of stores it operates by approximately 50-60 stores in each
of the next few years. The Company currently expects to open six to ten new
stores during the last quarter of 1996. The Company estimates that the average
investment with respect to new stores is approximately $350,000 per store, of
which rental merchandise comprises approximately 75% to 80% of the investment.
The
10
RENTERS CHOICE, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
remaining investment consists of leasehold improvements, delivery trucks, store
signs, computer equipment and start-up costs. There can be no assurance that the
Company will open any new stores in the future, or as to the number, location or
profitability thereof. Additionally, management believes that there are
currently a number of possible future acquisition opportunities in the
rent-to-own industry, and it is possible that any acquisition could be material
to the Company. There can be no assurance that the Company will be able to
acquire any additional stores, or that any stores that are acquired will be or
will become profitable.
Management believes that cash flow from operations and the previously
described credit facilities will be adequate to fund the operations and
expansion plans of the Company during 1996. In addition, to provide any
additional funds necessary for the continued pursuit of the Company's growth
strategies, the Company may incur, from time to time, additional short-term and
long-term bank indebtedness and may issue, in public or private transactions,
its equity and debt securities. The availability and attractiveness of any
outside sources of financing will depend on a number of factors, some of which
will relate to the financial condition and performance of the Company, and some
of which will be beyond the Company's control such as prevailing interest rates
and general economic conditions. There can be no assurance that such additional
financing will be available, or if available, will be on terms acceptable to the
Company.
11
PART II. OTHER INFORMATION
RENTERS CHOICE, INC. AND SUBSIDIARY
ITEM 1. LEGAL PROCEEDINGS.
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of its business. Except as described below, the
Company is not currently a party to any material litigation.
IN RE: DEF INVESTMENTS, INC.
On September 5, 1995, a complaint (the "Complaint") was filed in the
United States Bankruptcy Court for the District of Minnesota (the "Bankruptcy
Court") against Mr. and Mrs. Robert A. Hardesty (the "Hardestys") and the
Company, among others (collectively, the "Defendants"). The complaint was filed
by the trustee (the "Trustee") for DEF Investments, Inc. ("DEF"), in an
involuntary chapter 7 bankruptcy case against DEF (the "DEF Bankruptcy Case")
commenced on April 20, 1995 by the plaintiffs in a pending class action suit
against DEF and other companies including, at this point, the Company (the
"Miller lawsuit").
The Complaint seeks (i) to avoid the transfer of certain assets purchased
in 1993 by a predecessor of the Company from DEF and certain of its subsidiaries
and to obtain an order that such assets be turned over to the Trustee, (ii) to
nullify the Hardestys' consulting and noncompetition agreements, pursuant to the
terms of which the Company paid $2.0 million to the Hardestys on the closing
date of the 1993 acquisition, has paid them an additional $900,000 since the
closing date and is obligated to pay them approximately $5.3 million in varying
amounts through April 1, 2001, (iii) to require the Company to make all future
payments under the consulting and noncompetition agreements to the Trustee for
the benefit of the DEF bankruptcy estate, and (iv) to set aside all payments
already made by the Company to the Hardestys under the consulting and
noncompetition agreements, and to grant judgment against the Hardestys for the
amount of all such payments.
On March 8, 1996, the Company reached an agreement with the Trustee and
the Hardestys to settle the bankruptcy lawsuit (the "Bankruptcy Settlement").
The terms of the Bankruptcy Settlement provide that the Company will be released
from the fraudulent transfer claim and the future obligation to pay $5.3 million
under the consulting and noncompetition agreements with the Hardestys in
exchange for a cash payment of $4.75 million to the Trustee. The Bankruptcy
Settlement, which, as of November 7, 1996, has not yet been reduced to writing
and is subject to approval by the Bankruptcy Court after notice and hearing,
contemplates the nonrefundable payment by the Company of $50,000 upon execution
of the written settlement agreement in exchange for the Trustee's dismissal of
the Complaint against the Company without prejudice. As to the balance of the
settlement amount, $300,000 is attributable to the Trustee's claims against the
Company based upon payments already made to the Hardestys, and $4.4 million is
attributable to future obligations under the noncompetition and consulting
agreements.
As a part of the overall Bankruptcy Settlement, the Company will receive a
full release from the fraudulent transfer claim by the Trustee on behalf of DEF,
all of its subsidiaries which have filed Chapter 7 bankruptcy cases and their
respective creditors. The Bankruptcy Settlement is also conditioned on the
Bankruptcy Court issuing protective orders enjoining the Hardestys from making
any claims against the Company or J. E. Talley and certain of their affiliates
under the noncompetition and consulting agreements.
The Miller lawsuit will not be dismissed entirely under the Bankruptcy
Settlement. While the claims against the Hardestys will be dismissed, the claims
against the Company will not be. Nevertheless, the plaintiffs agreed to first
pursue collection of any judgment obtained against the Company through
enforcement of the indemnity agreement between the Company and Transamerica
Commercial Finance Corporation, Inc. ("Transamerica"). The plaintiff class
further agreed that it cannot collect or enforce any judgment obtained against
the Company in the Miller lawsuit until it has exhausted collection through the
indemnity agreement. In September 1996, Transamerica and the plaintiff class
reached an agreement to settle all claims against the Company in the Miller
lawsuit. The terms of the settlement between the plaintiff and Transamerica are
subject to approval of the Bankruptcy Court and the state court after notice and
hearing.
12
PART II. OTHER INFORMATION
RENTERS CHOICE, INC. AND SUBSIDIARY - Continued
Finally, the Bankruptcy Settlement calls for the plaintiff class to release and
covenant not to assert any claims it may have against the Company except those
contained in its current pleading in the Miller lawsuit.
Management believes that the execution of the Bankruptcy Settlement, in
the form in which it is currently proposed, will not have a material adverse
effect on the Company's results of operations. Management cannot predict when
the Bankruptcy Settlement will be executed and approved by the Bankruptcy Court,
and there can be no assurance that the Bankruptcy Settlement will be entered
into at all. If the Bankruptcy Settlement is not executed, the Trustee would be
able to proceed against the Company in the fraudulent transfer claim.
HINTON ET AL. V. COLORTYME, INC.
In May 1994, certain Wisconsin residents filed suit against ColorTyme
alleging that ColorTyme had entered into contracts with them which were
violative of the Wisconsin Consumer Act (the "Wisconsin Act"). Specifically, the
plaintiffs allege that the ColorTyme contracts were consumer credit transactions
under the Wisconsin Act, and that ColorTyme failed to provide required
disclosures and violated the Wisconsin Act's collection practice restrictions.
Plaintiffs are seeking damages in excess of $2.0 million.
In light of the Merger and the Company's later purchase of the assets of
four Milwaukee ColorTyme stores, the plaintiffs were granted leave to add the
Company as a defendant along with additional related substantive claims.
Currently, the parties have filed cross motions in an attempt to define the
class. In those motions, it has become clear that the plaintiffs have included
the Company as a defendant in this lawsuit to the extent that the Company
assumed the obligations of certain existing ColorTyme contracts through the
asset purchase regarding the Milwaukee stores. Nevertheless, there is still a
possibility that the plaintiffs may attempt to pursue the Company solely due to
its parent subsidiary relationship with ColorTyme.
The Company and ColorTyme have recently moved to dismiss the non-Wisconsin
Act claims in the lawsuit. Discovery continues and no trial date has been set.
Although management cannot predict the outcome of the case, management
does not expect the ultimate resolution of the case to have a material adverse
effect on the Company's consolidated results of operations.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
CURRENT REPORTS ON FORM 8-K
Current Report on Form 8-K dated May 15, 1996, filed May 30, 1996.
Current Report on Form 8-K/A dated May 15, 1996, filed July 26, 1996.
Current Report on Form 8-K/A dated May 15, 1996, filed October 2, 1996.
LISTING OF EXHIBITS
Exhibits followed by an (*) constitute management contracts or
compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION
2.1(1) - Asset Purchase Agreement dated April 20, 1995 among
Renters Choice, Inc., Crown Leasing Corporation,
Robert White, individually and Robert White Company, a
sole proprietorship owned by Robert White
2.2(2) - Stock Purchase Agreement dated as of August 27, 1995
among Renters Choice, Inc., Starla J. Flake, Rance D.
Richter, Bruce S. Johnson and Pro Rental, Inc.
2.3(3) - Stock Purchase Agreement dated September 29, 1995
between the Company and Terry N. Worrell
2.4(4) - Partnership Interest Purchase Agreement dated
September 29, 1995 among the Company, Worrell
Investors, Inc., The Christy Ann Worrell Trust and The
Michael Neal Worrell Trust
2.5(5) - Agreement and Plan of Merger by and among Renters
Choice, Inc., Pro Rental, Inc., MRTO Holdings, Inc.
and Pro Rental II, Inc.
2.6(6) - Agreement and Plan of Reorganization dated May 15,
1996, among Renters Choice, Inc., ColorTyme, Inc.,
and CT Acquisition Corporation.
3.1(7) - Amended and Restated Certificate of Incorporation of
the Company
3.2 - Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Company
3.3(8) - Amended and Restated Bylaws of the Company
4.1(9) - Form of Certificate evidencing Common Stock
10.1* - Amended and Restated 1994 Renters Choice, Inc.
Long-Term Incentive Plan
10.2(10) - Amended and Restated Loan Agreement dated as of April
13, 1995 between INTRUST Bank, N.A. and Renters
Choice, Inc.
10.3(11) - Consulting Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty and
Renters Choice, L.P.
10.4(12) - Non-Competition Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty and
Renters Choice, L.P.
10.5(13) - Noncompetition Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Patrick S. White
10.6(14) - Consulting Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Jeffrey W. Smith
10.7(15) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice,
14
Inc. and Starla J. Flake
10.8(16) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice, Inc. and Bruce S. Johnson
10.9(17) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice, Inc. and Rance D. Richter
10.10(18) - Option Agreement dated August 27, 1995 between the
Company and Terry N. Worrell
10.11(19) - Option Agreement dated August 27, 1995 among the
Company, Worrell Investors, Inc., The Christy Ann
Worrell Trust and The Michael Neal Worrell Trust
10.12(20) - First Amendment to Amended and Restated Loan Agreement
dated October 1995 by and between Intrust Bank, N.A.
and Renters Choice, Inc.
10.13(21) - Second Amendment to Amended and Restated Loan
Agreement dated April 30, 1996 by and between Intrust,
N.A. and Renters Choice, Inc.
10.14(22)* - Employment Agreement dated September 11, 1995 by and
between Renters Choice, Inc. and David D. Real
10.15(23) - Portfolio Acquisition Agreement dated May 15, 1996, by
and among Renters Choice, Inc., ColorTyme Financial
Services, Inc., and STI Credit Corporation.
11.1 - Computation of Earnings per share
27 - Financial Data Schedule
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated May 4, 1995
(2) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated August 27, 1995
(3) Incorporated herein by reference to Exhibit 10.19 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(4) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(5) Incorporated herein by reference to Exhibit 2.7 to the registrant's Annual
Report on Form 10K for the year ended December 31, 1995.
(6) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996.
(7) Incorporated herein by reference to Exhibit 3.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(8) Incorporated herein by reference to Exhibit 3.4 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(9) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(10) Incorporated herein by reference to Exhibit 10.2 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(11) Incorporated herein by reference to Exhibit 10.5 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(12) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(13) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
15
(14) Incorporated herein by reference to Exhibit 10.8 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(15) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(16) Incorporated herein by reference to Exhibit 10.11 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(17) Incorporated herein by reference to Exhibit 10.12 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(18) Incorporated herein by reference to Exhibit 2.2 to the registrant's
Current Report on Form 8-K dated August 27, 1995
(19) Incorporated herein by reference to Exhibit 2.3 to the registrant's
Current Report on Form 8-K dated August 27, 1995
(20) Incorporated herein by reference to Exhibit 10.25 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(21) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
(22) Incorporated herein by reference to Exhibit 10.26 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(23) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned duly authorized.
RENTERS CHOICE, INC. AND SUBSIDIARY
By: /s/ DAVID D. REAL
-------------
David D. Real
SENIOR VICE PRESIDENT-FINANCE
AND CHIEF FINANCIAL OFFICER
Date: November 8, 1996
17
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2.1(1) - Asset Purchase Agreement dated April 20, 1995 among
Renters Choice, Inc., Crown Leasing Corporation,
Robert White, individually and Robert White Company, a
sole proprietorship owned by Robert White
2.2(2) - Stock Purchase Agreement dated as of August 27, 1995
among Renters Choice, Inc., Starla J. Flake, Rance D.
Richter, Bruce S. Johnson and Pro Rental, Inc.
2.3(3) - Stock Purchase Agreement dated September 29, 1995
between the Company and Terry N. Worrell
2.4(4) - Partnership Interest Purchase Agreement dated
September 29, 1995 among the Company, Worrell
Investors, Inc., The Christy Ann Worrell Trust and The
Michael Neal Worrell Trust
2.5(5) - Agreement and Plan of Merger by and among Renters
Choice, Inc., Pro Rental, Inc., MRTO Holdings, Inc.
and Pro Rental II, Inc.
2.6(6) - Agreement and Plan of Reorganization dated May 15,
1996, among Renters Choice, Inc., ColorTyme, Inc., and
CT Acquisition Corporation.
3.1(7) - Amended and Restated Certificate of Incorporation of
the Company
3.2 - Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Company
3.3(8) - Amended and Restated Bylaws of the Company
4.1(9) - Form of Certificate evidencing Common Stock
10.1* - Amended and Restated 1994 Renters Choice, Inc.
Long-Term Incentive Plan
10.2(10) - Amended and Restated Loan Agreement dated as of April
13, 1995 between INTRUST Bank, N.A. and Renters
Choice, Inc.
10.3(11) - Consulting Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty and
Renters Choice, L.P.
10.4(12) - Non-Competition Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty and
Renters Choice, L.P.
10.5(13) - Noncompetition Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Patrick S. White
10.6(14) - Consulting Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Jeffrey W. Smith
10.7(15) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice, Inc. and Starla J. Flake
10.8(16) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice, Inc. and Bruce S. Johnson
10.9(17) - Noncompetition Agreement dated as of August 27, 1995
between Renters Choice, Inc. and Rance D. Richter
10.10(18) - Option Agreement dated August 27, 1995 between the
Company and Terry N. Worrell
10.11(19) - Option Agreement dated August 27, 1995 among the
Company, Worrell Investors,
18
Inc., The Christy Ann Worrell Trust and The Michael
Neal Worrell Trust
10.12(20) - First Amendment to Amended and Restated Loan Agreement
dated October 1995 by and between Intrust Bank, N.A.
and Renters Choice, Inc.
10.13(21) - Second Amendment to amended and Restated Loan
Agreement dated April 30, 1996 by and between Intrust,
N.A. and Renters Choice, Inc.
10.14(22)* - Employment Agreement dated September 11, 1995 by and
between Renters Choice, Inc. and David D. Real
10.15(23) - Portfolio Acquisition Agreement dated May 15, 1996, by
and among Renters Choice, Inc., ColorTyme Financial
Services, Inc., and STI Credit Corporation
11.1 - Computation of Earnings per share
27 - Financial Data Schedule
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated May 4, 1995
(2) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated August 27, 1995
(3) Incorporated herein by reference to Exhibit 10.19 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(4) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(5) Incorporated herein by reference to Exhibit 2.7 to the registrant's Annual
Report on Form 10K for the year ended December 31, 1995.
(6) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996.
(7) Incorporated herein by reference to Exhibit 3.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(8) Incorporated herein by reference to Exhibit 3.4 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(9) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(10) Incorporated herein by reference to Exhibit 10.2 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(11) Incorporated herein by reference to Exhibit 10.5 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(12) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(13) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(14) Incorporated herein by reference to Exhibit 10.8 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(15) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(16) Incorporated herein by reference to Exhibit 10.11 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(17) Incorporated herein by reference to Exhibit 10.12 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(18) Incorporated herein by reference to Exhibit 2.2 to the registrant's
Current Report on Form 8-K dated August 27, 1995
(19) Incorporated herein by reference to Exhibit 2.3 to the registrant's
Current Report on Form 8-K dated August 27, 1995
19
(20) Incorporated herein by reference to Exhibit 10.25 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(21) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
(22) Incorporated herein by reference to Exhibit 10.26 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(23) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996.
20
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RENTERS CHOICE, INC.
(the "Corporation")
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, the undersigned Corporation files the following Certificate of
Amendment to its Amended and Restated Certificate of Incorporation, which amends
Article FOURTH thereof so as to change the authorized capital stock of the
Corporation.
ARTICLE I
The name of the Corporation is Renters Choice, Inc.
ARTICLE II
The following amendment to the Amended and Restated Certificate of
Incorporation was adopted by the Board of Directors of the Corporation on March
18, 1996 and by the shareholders of the Corporation on May 20, 1996:
The first paragraph of Article Fourth of the Amended and Restated
Certificate of Incorporation is hereby amended to read in its entirety as
follows:
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 50,000,000 shares of common stock,
having a par value of $0.01 per share (the "Common Stock"), and 5,000,000 shares
of preferred stock, having a par value of $0.01 per share (the "Preferred
Stock").
ARTICLE III
The number of shares of the Corporation outstanding and entitled to vote
at the time of such adoption was 24,378,108 shares of Common Stock.
ARTICLE IV
The number of shares outstanding and entitled to vote which voted for the
amendment was 21,235,814 while the number of shares outstanding and entitled to
vote which voted against the amendment was 806,992. 2,335,302 shares abstained
from voting on the amendment.
ARTICLE V
This amendment to the Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with the provisions of Section 242 of the
Delaware General Corporation Law.
21
IN WITNESS WHEREOF, I have hereunto set my hand this the 23rd day of May,
1996.
RENTERS CHOICE, INC.
/s/ MARK E. SPEESE
--------------
Mark E. Speese, President
Exhibit 10.1
AMENDED AND RESTATED
1994 RENTERS CHOICE, INC.
LONG-TERM INCENTIVE PLAN
1. OBJECTIVES. The 1994 Renters Choice, Inc. Long-Term Incentive
Plan (the "Plan") is designed to retain selected employees and non-employee
directors of Renters Choice, Inc. (the "Company") and reward them for making
significant contributions to the success of the Company and its Subsidiaries (as
hereinafter defined). These objectives are to be accomplished by making awards
under the Plan and thereby providing Participants (as hereinafter defined) with
a proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall have
the following respective meanings:
"Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Employee Award or a Director Option.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means such committee of the Board as is designated by
the Board to administer the Plan. The Committee shall be constituted to permit
the Plan to comply with Rule 16b-3.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Director" means an individual serving as a member of the Board who
is not an employee of the Company or any Subsidiary of the Company.
"Director Option" means a nonqualified stock option granted to a
Director under the terms of this Plan.
"Employee Award" means the grant of any form of Employee Stock
Option, stock appreciation right, stock award or cash award, whether granted
singly, in combination or in tandem, to an employee of the Company or any
Subsidiary pursuant to any applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the Plan.
"Employee Stock Option" means an incentive stock option or a
nonqualified stock option granted to an employee of the Company or any of its
Subsidiaries under this Plan by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the mean
between the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was so
reported, (b) if the shares of Common Stock are not so listed but are quoted on
the Nasdaq National Market, the mean between the highest and lowest sales price
per share of Common Stock on the Nasdaq National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported or (c) if the Common Stock
is not so listed or quoted, the mean between the closing bid and asked price on
that date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by the
Nasdaq Stock Market, Inc., or, if not reported by the Nasdaq Stock Market, Inc.,
by the National Quotation Bureau, Inc.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Employee Award has been made under this Plan or a
Director who has received a Director Option.
23
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. ELIGIBILITY.
EMPLOYEE AWARDS. All employees of the Company and its Subsidiaries
are eligible for Employee Awards under this Plan. The Committee shall select the
employees who shall become Participants in the Plan from time to time by the
grant of Employee Awards under the Plan.
DIRECTOR OPTIONS. Recipients of Director Options shall include all
persons who, as of the time Director Options are awarded, are serving as
Directors of the Company.
4. COMMON STOCK AVAILABLE UNDER THE Plan. There shall be available
for Employee Awards granted wholly or partly in Common Stock (including rights
or options which may be exercised for or settled in Common Stock) and Director
Options during the term of this Plan an aggregate of 2,000,000 shares of Common
Stock, subject to adjustment as provided in Paragraph 14, 160,000 of which shall
be set aside for issuance pursuant to Director Options and 100,000 of which
shall be set aside for stock awards, as described in subparagraph 6(iii) hereof.
The Board and the appropriate officers of the Company shall from time to time
take whatever actions are necessary to file required documents with governmental
authorities and stock exchanges and transaction reporting systems to make shares
of Common Stock available for issuance pursuant to Employee Awards and Director
Options. Common Stock related to Employee Awards and Director Options that are
forfeited or terminated, expire unexercised, are settled in cash in lieu of
Common Stock or in a manner such that all or some of the shares covered by an
Employee Award or Director Option are not issued to a Participant, or are
exchanged for Employee Awards that do not involve Common Stock, shall
immediately become available for Employee Awards and Director Options hereunder.
The Committee may from time to time adopt and observe such procedures concerning
the counting of shares against the Plan maximum as it may deem appropriate under
Rule 16b-3.
5. ADMINISTRATION. This Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Employee Award, accelerate the vesting or exercisability of
an Employee Award, eliminate or make less restrictive any restrictions contained
in an Employee Award, waive any restriction or other provision of an Employee
Award or otherwise amend or modify an Employee Award in any manner that is
either (a) not adverse to the Participant holding such Employee Award or (b)
consented to by such Participant. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in this Plan or in any Employee
Award in the manner and to the extent the Committee deems necessary or desirable
to carry it into effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned. No member
of the Committee or officer of the Company to whom it has delegated authority in
accordance with the provisions of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute. The Committee may delegate to the Chief Executive Officer of the
Company and to other senior officers of the Company its duties under this Plan
pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant
Employee Awards to, or take other action with respect to, Participants who are
subject to Section 16 of the Exchange Act.
6. EMPLOYEE AWARDS. The Committee shall determine the type or types
of Awards to be made to each Participant under this Plan. Each Employee Award
made hereunder shall be embodied in an Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the Committee in its
sole discretion and shall be signed by the Participant and by the Chief
Executive Officer, the Chief Operating Officer or any Vice President of the
Company for and on behalf of the Company. Employee Awards may consist of those
listed in this Paragraph 6 and may be granted singly, in combination or in
tandem. Employee Awards may also be made in combination or in tandem with, in
replacement of, or as
24
alternatives to grants or rights (a) under this Plan or any other employee plan
of the Company or any of its Subsidiaries, including the plan of any acquired
entity, or (b) made to any Company or Subsidiary employee by the Company or any
Subsidiary. An Employee Award may provide for the granting or issuance of
additional, replacement or alternative Employee Awards upon the occurrence of
specified events, including the exercise of the original Employee Award.
Notwithstanding anything herein to the contrary, no Participant may be granted
Employee Awards consisting of stock options or stock appreciation rights
exercisable for more than 20% of the shares of Common Stock originally
authorized for Employee Awards under this Plan, subject to adjustment as
provided in Paragraph 14. In the event of an increase in the number of shares
authorized under the Plan, the 20% limitation will apply to the number of shares
authorized.
(i) EMPLOYEE STOCK OPTION. An Employee Award may consist of a
right to purchase a specified number of shares of Common Stock at a price
specified by the Committee in the Agreement or otherwise. A stock option may be
in the form of an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code. Notwithstanding the foregoing,
no ISO can be granted under the Plan more than ten years following the Effective
Date of the Plan.
(ii)STOCK APPRECIATION RIGHT. An Employee Award may consist of a
right to receive a payment, in cash or Common Stock, equal to the excess of the
Fair Market Value or other specified valuation of a specified number of shares
of Common Stock on the date the stock appreciation right ("SAR") is exercised
over a specified strike price as set forth in the applicable Agreement.
(iii) STOCK AWARD. An Employee Award may consist of Common Stock
or may be denominated in units of Common Stock. All or part of any stock
Employee Award may be subject to conditions established by the Committee and set
forth in the Agreement, which conditions may include, but are not limited to,
continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, increases in specified indices, attaining
specified growth rates and other comparable measurements of performance. Such
Employee Awards may be based on Fair Market Value or other specified valuations.
The certificates evidencing shares of Common Stock issued in connection with a
stock Employee Award shall contain appropriate legends and restrictions
describing the terms and conditions of the restrictions applicable thereto.
(iv)CASH AWARD. An Employee Award may be denominated in cash with
the amount of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee and set forth
in the Agreement, including, but not limited to, continuous service with the
Company and its Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining specified growth rates and other
comparable measurements of performance.
7. DIRECTOR STOCK OPTIONS. Director Options shall be granted to each
eligible Director as of the date of consummation of the initial public offering
of the Common Stock providing for the purchase of 9,000 shares of Common Stock.
Commencing on January 1, 1996, automatic annual awards of Director Options shall
be made to each eligible Director on the first business day of the Company's
fiscal year, providing for the purchase of 3,000 shares of Common Stock;
provided that such Director Options shall provide for the purchase of 9,000
shares of Common Stock if the recipient of such Director Option had not
previously received a grant of a Director Option pursuant to this Plan. The
purchase price of each share of Common Stock placed under a Director Option
shall be equal to the Fair Market Value of such shares on the date the Director
Option is granted; provided, that the purchase price of each share of Common
Stock placed under a Director Option on the date of consummation of the initial
public offering of the Common Stock shall be equal to the initial public
offering price of the Common Stock. Director Options shall terminate and be of
no force or effect with respect to any shares not previously purchased by the
Director Optionee upon the expiration of ten years from the date of granting of
each Director Option, notwithstanding any earlier termination of the Director
Optionee's status as a Director of the Company. All Director Options shall be
exercisable immediately on the date of grant. Notwithstanding the foregoing, no
grant of Director Options shall be made unless the number of shares available
under the Plan is sufficient to make all automatic grants of Director Options on
the grant date. All Director Options shall be evidenced by a written Agreement
conforming with the terms of this Plan.
25
8. PAYMENT OF EMPLOYEE AWARDS.
(a) GENERAL. Payment of Employee Awards may be made in the form of
cash or Common Stock or combinations thereof and may include such restrictions
as the Committee shall determine including, in the case of Common Stock,
restrictions on transfer and forfeiture provisions. As used herein, "Restricted
Stock" means Common Stock that is restricted or subject to forfeiture
provisions.
(b) DEFERRAL. The Committee may, in its discretion, (i) permit
selected Participants to elect to defer payments of some or all types of
Employee Awards in accordance with procedures established by the Committee or
(ii) provide for the deferral of an Employee Award in an Agreement or otherwise.
Any such deferral may be in the form of installment payments or a future lump
sum payment. Any deferred payment, whether elected by the Participant or
specified by the Agreement or by the Committee, may be forfeited if and to the
extent that the Agreement so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights
may be extended to and made part of any Employee Award denominated in Common
Stock or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also establish
rules and procedures for the crediting of interest on deferred cash payments and
dividend equivalents for deferred payment denominated in Common Stock or units
of Common Stock.
(d) SUBSTITUTION OF EMPLOYEE AWARDS. At the discretion of the
Committee, a Participant may be offered an election to substitute an Employee
Award for another Employee Award of the same or different type.
9. STOCK OPTION EXERCISE. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering Common
Stock or surrendering all or part of that or any other Employee Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise, or any
combination thereof. The Committee shall determine acceptable methods for
tendering Common Stock or Employee Awards to exercise a stock option as it deems
appropriate. If permitted by the Committee, payment may be made by successive
exercises by the Participant. The Committee may provide for procedures to permit
the exercise or purchase of Employee Awards by (a) loans from the Company or (b)
use of the proceeds to be received from the sale of Common Stock issuable
pursuant to an Employee Award. Unless otherwise provided in the applicable
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of a stock option, a number of the shares issued upon the
exercise of the stock option, equal to the number of shares of Restricted Stock
used as consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that may be
imposed by the Committee.
10. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Employee Award payment and withhold, at the time of
delivery or vesting of cash or shares of Common Stock under this Plan, an
appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of taxes required by law or to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Employee Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax withholding, such
shares shall be valued based on the Fair Market Value when the tax withholding
is required to be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (a) no amendment or alteration that would impair the rights
of any Participant under any Employee Award previously granted to such
Participant shall be made without such Participant's consent, (b) no amendment
or alteration shall be effective prior to approval by the Company's stockholders
to the extent such approval is then required pursuant to Rule 16b-3 in order to
preserve the applicability of any exemption provided by such rule to any
Employee Award then outstanding (unless the holder of such Employee Award
consents) or to the extent stockholder approval is otherwise required by
applicable legal requirements, and (c) the Plan shall not be amended more than
once every six months to the extent such limitation is required by Rule
l6b-3(c)(2)(ii) (or any successor provision) under the Exchange Act as then in
effect.
26
12. TERMINATION OF EMPLOYMENT. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Employee Awards shall be
treated as provided in the specific Agreement evidencing the Employee Award. In
the event of such a termination, the Committee may, in its discretion, provide
for the extension of the exercisability of an Employee Award, accelerate the
vesting or exercisability of an Employee Award, eliminate or make less
restrictive any restrictions contained in an Employee Award, waive any
restriction or other provision of this Plan or an Employee Award or otherwise
amend or modify the Employee Award in any manner that is either (a) not adverse
to such Participant or (b) consented to by such Participant.
13. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Agreement, no Employee Award, Director Option or any other
benefit under this Plan constituting a derivative security within the meaning of
Rule 16a-l(c) under the Exchange Act shall be assignable or otherwise
transferable except by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The Committee
may prescribe and include in applicable Agreements other restrictions on
transfer. Any attempted assignment of an Employee Award, Director Option or any
other benefit under this Plan in violation of this Paragraph 13 shall be null
and void.
14. ADJUSTMENTS.
(a) The existence of outstanding Employee Awards shall not affect in
any manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock (whether or not such issue is prior to, on a parity with
or junior to the Common Stock) or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Committee may adjust proportionally (i) the number of shares of
Common Stock reserved under this Plan and covered by outstanding Employee Awards
and Director Options denominated in Common Stock or units of Common Stock; (ii)
the exercise or other price in respect of such Employee Awards and Director
Options; and (iii) the appropriate Fair Market Value and other price
determinations for such Employee Awards and Director Options. In the event of
any consolidation or merger of the Company with another corporation or entity or
the adoption by the Company of a plan of exchange affecting the Common Stock or
any distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the Committee
shall make such adjustments or other provisions as it may deem equitable,
including adjustments to avoid fractional shares, to give proper effect to such
event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options, regardless of whether in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption of
previously issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, Employee Awards and
the termination of unexercised options in connection with such transaction.
15. RESTRICTIONS. No Common Stock or other form of payment shall be
issued with respect to any Employee Award unless the Company shall be satisfied
based on the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. It is the intent of the Company
that this Plan comply with Rule 16b-3 with respect to persons subject to Section
16 of the Exchange Act unless otherwise provided herein or in an Agreement, that
any ambiguities or inconsistencies in the construction of this Plan be
interpreted to give effect to such intention and that, if any provision of this
Plan is found not to be in compliance with Rule 16b-3, such provision shall be
null and void to the extent required to permit this Plan to comply with Rule
16b-3. Certificates evidencing shares of Common Stock delivered under this Plan
may be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any securities exchange or
transaction reporting system upon which the Common Stock is then listed and any
applicable federal and state securities law. The Committee may cause a legend or
legends to be placed upon any such certificates to make appropriate reference to
such restrictions.
27
16. UNFUNDED PLAN. Insofar as it provides for Employee Awards of
cash, and Employee Awards and Director Options covering Common Stock or rights
thereto, this Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Common Stock
or rights thereto under this Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to a
grant of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Agreement, and no such liability or obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company.
None of the Company, the Board or the Committee shall be required to give any
security or bond for the performance of any obligation that may be created by
this Plan.
17. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
18. EFFECTIVE DATE OF PLAN.
(a) This Plan was approved by the Board of Directors of the Company
as of December 5, 1994, and by the unanimous written consent dated as of
December 21, 1994, of the holders of all of the shares of Common Stock
outstanding and entitled to vote thereon.
(b) The Plan was amended effective May 20, 1996 for the purpose of
increasing the number of shares reserved for issuance under the Plan from
1,500,000 to 2,000,000. The amendments to the Plan were approved by the Board of
Directors of the Company as of March 18, 1996, and by the holders of a majority
of the issued and outstanding shares of Common Stock of the Company as of May
20, 1996. For purposes of ease of administration and clarity of reference, the
Plan was amended and restated to incorporate the 1996 amendments.
RENTERS CHOICE, INC.
Exhibit 11.1
RENTERS CHOICE, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
SEPTEMBER 30,1996
-------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
PRIMARY EARNINGS PER SHARE
Net earnings ....................................................................... $ 4,729,245 $12,715,130
Weighted average number of common shares outstanding ............................... 24,815,988 24,612,407
Net effect of dilutive stock options based on the
treasury stock method using average market price ................................... 387,733 436,358
----------- -----------
Weighted average number of common and common equivalent
shares outstanding ................................................................. 25,203,721 25,048,765
=========== ===========
PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE .............................................................................. $ 0.19 $ 0.51
----------- -----------
FULLY DILUTED EARNINGS PER SHARE
Net earnings ....................................................................... $ 4,729,245 $12,715,130
Weighted average number of common shares outstanding ............................... 24,815,988 24,612,407
Net effect of dilutive stock options based on the
treasury stock method using the greater of the
average or ending market price ..................................................... 387,733 462,920
----------- -----------
Weighted average number of common and common equivalents
shares outstanding ................................................................. 25,203,721 25,075,327
=========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
ASSUMING FULL DILUTION ............................................................. $ 0.19 $ 0.51
=========== ===========
29
5
1,000
9-MOS
DEC-31-1996
SEP-30-1996
9,679
0
0
0
16,819
0
17,881
6,705
145,450
0
0
0
0
248
119,301
145,450
22,058
166,783
19,643
134,420
10,503
0
(83)
21,941
9,226
12,715
0
0
0
12,715
0.51
0.51
RENTAL MERCHANDISE, HELD FOR RENT.
BALANCE SHEET IS UNCLASSIFIED.
ADDITIONAL PAID IN CAPITAL, UNAMORTIZED VALUE OF STOCK AWARD, AND RETAINED
EARNINGS.
STORE AND FRANCHISE MERCHANDISE SALES.
STORE AND FRANCHISE COST OF MERCHANDISE SOLD.
GENERAL AND ADMINISTRATIVE EXPENSE AND AMORTIZATION OF INTANGIBLES.
