ITEM 1. Business
Overview
CORT Business Services Corporation (the "Company" or "CORT") through its wholly-owned subsidiary CORT Furniture Rental Corporation ("CFR") is the leading national provider of rental furniture, accessories and related services in the growing and fragmented "rent-to-rent" segment of the furniture rental industry. The "rent-to-rent" segment serves both corporate and individual customers who desire flexibility to meet their temporary and transitional needs. The Company focuses on corporate customers by offering office and residential furniture and related accessories through a direct sales force of approximately 900 salespeople and a network of 119 showrooms in 32 states and the District of Columbia. The Company believes that approximately 80% of its rental revenue is derived from its corporate customers, while the remainder is derived principally from rentals to middle- and upper-income level individuals. The Company maintains the showroom quality condition of its merchandise available for rent by selling its previously rented merchandise through a network of 83 company-operated clearance centers, thereby enabling the Company to regularly update its inventory with new styles and new merchandise. Sales of furniture through clearance centers, at prices which for the last five years have averaged 108% of the furniture's original cost, allow the Company to maximize the residual value of its rental merchandise. Furniture sales through clearance centers and other sales accounted for approximately 17% of the Company's total 1998 revenue.
As the industry leader and the only "rent-to-rent" furniture rental company with a national presence, CORT is well-positioned to take advantage of growing demand for furniture rental services. This demand is believed to be driven by continued growth in management and professional employment, the increasing importance to American business of flexibility and outsourcing and the impact of a more mobile and transitory population. The Company is called upon to meet furniture rental needs of a corporate customer base which includes Fortune 500 companies, small businesses and professionals, and owners and operators of apartment communities.
According to industry estimates, a significant portion of the "rent-to-rent" furniture rental revenues is derived from single-location and small regional rental businesses which present attractive consolidation opportunities for the larger "rent-to-rent" furniture rental companies such as CORT. Since the beginning of 1993, the Company has acquired two larger regional competitors, General Furniture Leasing and Evans Rents, and has completed and successfully integrated 19 lease portfolio acquisitions. Management believes that CORT is well-positioned to continue capitalizing on the industry's consolidation trend due to its national presence, leading market share and financial capacity.
Business Strategy
Management believes that CORT's size, national presence, consistently high-level customer service, product quality and broad product selection, depth of management and efficient clearance centers have been key contributors to the Company's success. The Company's objective is to build on these fundamentals and increase further its revenue and operating earnings and expand its margins by continuing to pursue its growth strategy. The key components of this strategy are (i) making selective acquisitions; (ii) initiating operations in new markets and adding showrooms and clearance centers in existing markets; (iii) expanding its corporate customer base and (iv) continuing to invest in the development of various products and services.
Acquisitions
The primary focus of the Company's growth strategy has been and will continue to be the selective acquisition of small lease portfolios and regional companies in new and existing markets. Since the beginning of 1993, the Company has completed 18 small lease portfolio acquisitions which include entrance into the New York City, Salt Lake City, Pittsburgh and Cleveland markets. In addition, the Company completed the purchase of the rental furniture business of Instant Interiors Corporation. This acquisition expands CORT's reach into the Midwest, particularly in Michigan, Illinois, Indiana, and Ohio, and provides a centralized distribution format that is cost effective in serving large geographic areas containing many smaller cities. In a typical lease portfolio acquisition, the Company acquires existing leases and rental furniture. Additionally, the Company retains sales personnel with strong local customer relationships. The Company generally does not acquire showrooms, distribution facilities or
clearance centers in existing markets. However, in new markets, the Company may choose to retain such real estate. The Company also believes that there are a select number of opportunities to acquire larger regional companies in order to enter new markets and increase its market share in existing markets. For example, the Company has acquired two larger regional companies: General Furniture Leasing in September 1993, which had total revenues of approximately $41.5 million for fiscal year 1992, and Evans Rents in April 1996, which had total revenues of approximately $30.5 million for fiscal year 1995. The acquisition of General Furniture Leasing provided CORT with immediate access to new market areas and additional critical mass in CORT's existing markets. Evans Rents provided CORT with additional critical mass in the greater Los Angeles and San Francisco areas, increased the percentage of rental revenue derived from the rental of higher-margin office furniture products and contributed additional expertise in the supply of furniture for trade shows and conventions.
The Company entered the trade show furnishings business through acquisition of three businesses in 1997. These businesses have been integrated to create CORT's trade show furnishings segment and will establish CORT as one of the major players in this segment of the furniture rental industry. To further expand this segment, the Company purchased certain assets of the trade show furnishings business of Aaron Rents, Inc. in October 1998. The trade show furnishings business serves the major trade show contractors and corporate exhibitors nationwide and provides specialty rental furniture for use at conventions and trade shows. Major locations served include: Atlanta, Chicago, Dallas, Las Vegas, Los Angeles, New Orleans, Orlando, New York City, San Francisco, and Washington, D.C.
New Markets and Additional Facilities
The Company continues to expand the number of showrooms and clearance centers within its existing markets as well as initiate new operations, including showrooms, distribution facilities and clearance centers, in strategically identified geographic locations where it currently does not conduct business and where attractive acquisition opportunities do not exist. By increasing the number of showrooms and clearance centers associated with existing distribution facilities, the Company is able to distribute its real estate, personnel and other fixed costs over a larger revenue base. Since the beginning of 1995, CORT has begun operations in seven new metropolitan markets: Birmingham, AL; Huntsville, AL; Little Rock, AR; Portland, OR; St. Louis, MO; Las Vegas, NV and El Paso, TX.
Expanded Corporate Customer Base
The Company seeks to increase its corporate customer base in order to capitalize on the longer lease terms, higher average lease amounts and multiple lease transactions associated with corporate customers. In addition, corporate customers more frequently enter into higher-margin office furniture leases. The Company intends to grow revenue by increasing its corporate customer base through expanded emphasis on national accounts, further development of sales personnel with business-to-business sales experience and continued advertising. In addition, the Company has introduced the high quality brand of office systems furniture by Herman Miller. The Company continues to increase awareness among its sales force of the benefits and breadth of its office product offerings through expanded training programs and to focus the efforts of its sales force on these products by increased incentive compensation for office product rentals.
Development of Products and Services
The Company continues to invest in the development of other products and services. Products and services in various stages of development include the rental of housewares amenity packages, the supply of furniture for trade shows and conventions, and a website that provides information for relocating customers. Management believes that the gradual introduction of new products and services allows the Company to experiment with such products and services at a relatively low initial cost.
The "Rent-to-Rent" Industry
The "rent-to-rent" segment of the furniture rental industry serves both corporate and individual customers who generally have immediate, temporary needs for office or residential merchandise but who typically do not seek to own such merchandise. Office product customers range from large corporations who desire flexibility to meet their temporary and transitional needs, to small businesses and professionals who require office furnishings but seek to conserve capital. Residential product customers include corporations seeking to provide furnishings for corporate employees who have been relocated or who are on temporary assignment, apartment community managers seeking to
provide furnished apartments and individual residents seeking to rent furnishings for their own homes and apartments.
Management believes the demand for rental products is driven by continued growth in management and professional employment levels, the changing trends in American business towards flexibility and outsourcing and the impact of a more mobile and transitory population.
The "rent-to-rent" business is differentiated from the "rent-to-own" business primarily by the terms of the rental arrangements and the type of customer served. "Rent-to-rent" customers generally desire high quality furniture to meet temporary needs, have established credit, and pay on a monthly basis. Typically, these customers do not seek to acquire the property rented. In the typical "rent-to-rent" transaction, the customer agrees to rent merchandise for three to six months, subject to extension by the customer on a month-to-month basis. By contrast, "rent-to-own" arrangements are generally made by customers without established credit whose objective is to acquire ownership of the property. "Rent-to-own" arrangements are typically entered into on a month-to-month basis and require weekly rental payments.
Operating Segments
The Company has identified the following operating segments based on the distinct products/services from which each derives revenue:
Furniture Rental - rental of residential and office furniture and accessories to individual and corporate customers.
Furniture Sales - sale of new or previously rented residential and office furniture to the general public.
Trade Show - short term rental of display and workplace furnishings for Operations trade shows, conventions, and special events to corporate customers and trade show associations.
Housewares - rental of kitchen, bedroom and bathroom accessories to the Operations Furniture Rental segment.
Furniture rental and furniture sales segments represent the aggregation of individual districts, all of which have similar economic characteristics and distribution methods. Trade Show Operations and Housewares Operations are aggregated with furniture rental and furniture sales for reporting purposes.
The Company reports separately, in its Consolidated Statements of Operations, the revenue and associated cost of revenue of its reportable segments. Operating segments are measured on the basis of gross margin; operating expenses, goodwill amortization, interest expense, tax expense, and extraordinary items are not allocated to the individual segments.
Assets and liabilities are not specifically allocated between Furniture Rental and Furniture Sales. All rental furniture is available for rental or sale.
Products
The Company rents a full line of furniture and accessories throughout the United States for office and residential purposes. The Company classifies its furniture leases based on the type of furniture leased and the expected use of the furniture.
Office Products
In order to capitalize on the significant profit potential available from the longer average rental periods and the higher average monthly rent for office products, the Company's strategy is to emphasize office furniture rentals. The Company offers a full range of office, conference room and reception area furniture, including desks, chairs, tables, credenzas, panel systems and accessories. In order to promote longer office lease terms, the Company leases furniture to its corporate customers at rates that reflect a premium on leases that are less than six months and a discount on leases of more than six months.
The Company's office furniture customers consist primarily of large companies that desire flexibility to satisfy
temporary and transitional needs and small or start-up businesses that have immediate and changing furniture requirements but seek to minimize capital outlay. The Company emphasizes its ability to outfit an entire office with high quality furniture in two business days, as well as its ability to provide consistent customer service and product quality nationwide.
Residential Products
The Company leases residential products to corporate customers who are temporarily or permanently relocating employees, to apartment managers and owners who are providing furnished apartments and to individual end users of the furniture. The Company offers a broad range of household furniture, including dining room, living room and bedroom pieces, as well as certain electronic products.
A significant portion of the Company's residential furniture rentals are derived from corporate relocations and temporary assignments, as new and transferred employees of the Company's corporate customers enter into leases for residential furniture. The Company's sales personnel maintain contact with corporate relocation departments and present the possibility of obtaining fully-furnished rental apartments as a lower cost alternative to hotel accommodations. Thus, the Company offers its corporate rental customers a way to reduce the costs of corporate relocations while developing residential business with new and transferred employees. The Company's ability to service both corporate and individual needs creates a broad corporate customer base accompanied by an increasing pool of employees utilizing the Company's residential services.
Other Products and Services
CORT offers several other products and services in selected markets. The Company offers houseware amenity packages (such as linens, towels, dishes, cookware and other kitchen, bedroom and bath accessories) for rent to its furniture rental customers. The Company had generally distributed houseware amenity packages through third-party contractors either under subcontract arrangements or direct referrals. The Company continues to expand the distribution of its own houseware amenity packages to capture profits currently realized by third-party contractors.
The Company provides rental specialty furniture for short term use at trade shows and conventions through its trade show furnishings operation. The Company had operations in New Orleans and California. The trade show services business expanded through the acquisition of three trade show businesses in March 1997 and one trade show business in October 1998. The combination of CORT's national network with the experience of these organizations should provide the Company with a competitive advantage in the trade show and convention services business.
The Company established Relocation Central, a website that provides information about major cities such as apartment finders, school systems, movers and local recreation for relocating individuals. Relocation Central provides the Company with an additional marketing tool while also providing valuable information to potential customers.
Operations
Lease Terms
The Company typically leases furniture to individuals and corporate accounts for three-, six- and twelve-month terms, which may be and often are extended by its customers on a month-to-month basis. Management believes that, on average, furniture remains on lease for approximately nine months at a time. Although rental contracts may give the customer the option to purchase the merchandise rented, only a small percentage of the Company's rental leases lead to customer ownership.
The Company's strategy is to price rentals to recover the original cost of the furniture over a ten-month rental "payout period." However, pricing and payout periods often vary with the length of the leases. The Company frequently charges a delivery fee and, in the absence of proof of insurance, a waiver fee. Within general company guidelines, each district has discretion to set prices based upon local market factors.
The Company may also require a customer security deposit which will be returned at the end of the lease upon satisfactory compliance with the terms of the lease. The Company requires applications from prospective rental
customers and performs credit investigations before approving such applications. In each of the last five years, the Company's bad debt losses have been limited to 0.7% of revenue or less.
Customer Services
CORT is dedicated to providing consistently high quality customer service nationwide to its corporate and individual customers. Through its national network, the Company more efficiently services its corporate clients by providing a single point of contact for customers who have furniture needs in multiple locations, offering consistent quality of products and services at all CORT locations, and offering a broad spectrum of products to customers. Under its Personal Service Guaranty, the Company ensures customers of CORT Furniture Rental that they will be satisfied with the furniture they rent or the Company will exchange it for similar furniture within two business days, free of charge. Additionally, the Company's employees assist customers with space planning, interior design and apartment location services.
Furniture Sales
For the last five years, the Company has derived 71% of its furniture sales revenue from clearance centers sales. The remaining furniture sales revenue is derived primarily from lease conversions and sales of new furniture. Sales of rental furniture allow the Company to control inventory levels and maintain showroom quality of rental inventory. On average, furniture is typically sold through the clearance centers three years after its initial purchase by the Company. For the last five years, sales of rental furniture through the clearance centers have had an average recovery margin on the original cost of furniture of approximately 108%, at a price which is usually considerably lower than the price of comparable new merchandise. Management believes that its ability to recover the original cost of its furniture through its clearance centers is a key contributor to the Company's profitability.
Sales, Marketing and Advertising
The Company employs a sales force of approximately 900 people, including managers and supervisors, rental consultants, commercial account executives, residential account executives, and clearance center personnel. In general, rental consultants service walk-in showroom customers, clearance center sales personnel are responsible for walk-in clearance center customers and commercial and residential account executives work to develop office and residential customers in their markets. Utilizing the Company's national distribution network to emphasize its ability to serve customers throughout the country, the Company employs fourteen national account representatives who are responsible for customers with business in more than one district.
CORT's sales representatives receive professional, business-to-business sales training through the Company's CORT University program, which was developed as part of the Company's continuing effort to increase rental revenue and improve customer service. Management believes that the program's emphasis on a problem solving, value-added approach to clients' needs enhances its relationships with customers and provides CORT with a competitive advantage in marketing to corporate customers.
The Company markets its services through brochures, newspapers, periodicals, yellow pages, radio, television and direct response media and over the internet (http://www.cort1.com and http://www.relocationcentral.com). The Company designs its marketing program both to promote the business and to increase awareness of the advantages of renting in the residential and office furniture markets.
Purchasing and Distribution
The Company has a national product line chosen by its merchandising group. Each district manager, in consultation with his or her regional merchandising manager, selects from the national product line based on an analysis of customer demand within such manager's specific market. Each district then places purchase orders directly with the Company's vendors and shipment is arranged through the Company's freight analyst directly to the district warehouse.
The Company acquires furniture from a large number of manufacturers and is not dependent on any particular manufacturer as a source of supply. In 1998, no furniture manufacturer accounted for more than 10% of the Company's furniture purchases. Management believes that the Company is able to purchase furniture at lower prices
than its competitors due to the centralized selection of its product line and large volume of purchases. The Company is generally able to obtain prompt delivery of furniture from its suppliers and has not experienced significant interruptions in its business resulting from delays in acquiring furniture.
Merchandise is delivered to rental customers by Company employees via owned or leased trucks after a rental agreement has been signed. At the end of the lease term, rental furniture is returned to the Company's warehouses where it is inspected, cleaned and/or repaired in preparation for future rental or sale. If it is determined that the furniture is appropriate for sale rather than future rental, the furniture is then transferred to a clearance center. Company warehouses are typically located next to a clearance center, thereby allowing the Company to reduce shipping expenses and realize efficiency gains.
Competition
The "rent-to-rent" segment of the furniture rental industry is highly competitive. Management believes that Aaron Rents, Globe Business Resources and Brook Furniture Rental are the Company's most significant competitors. In addition, there are numerous smaller regional and local "rent-to-rent" furniture companies as well as retailers offering residential and office furniture. Management believes that the principal competitive factors in the furniture rental industry are product value, furniture condition, extent of furniture selection, terms of rental agreement, speed of delivery, exchange privilege, option to purchase, deposit requirements and customer service level.
With respect to sales of furniture through its clearance centers, the Company competes with numerous used and new furniture retailers, some of which are larger than the Company and have greater financial resources. Management believes that price and value are the principal competitive factors in its furniture sales.
Employees
On December 31, 1998, the Company employed approximately 2,700 people, of whom approximately 106 were employed at corporate headquarters. Approximately 900 people were employed as salespersons, 1,500 people were employed in the warehouse and distribution portion of the business and the remainder in district and regional administrative positions.
The Company's warehouse and delivery employees in Maryland (approximately 49 persons) are represented by an independent union under a contract which expires in December 1999. Additionally, 16 of the Company's warehouse and delivery employees in New York City are represented by the Local 840 of the International Brotherhood of Teamsters under a contract which expires in June 1999.
The Company believes that its relationships with its employees are good.
Trademarks and Name Recognition
The Company engages in business primarily under the CORT Furniture Rental tradename, which has been used in the furniture rental business for over 20 years. The Company has established its reputation as a provider of quality furniture and customer service using this name. The Company feels that reputation and name recognition are important to customers. Therefore, following an acquisition in a new market, the Company may use a combination of the CORT and acquired business name to maintain customer recognition for a period of time.
Regulatory Matters
Compliance with Federal, state and local laws and regulations governing pollution and protection of the environ-ment is not expected to have any material effect upon the financial condition or results of operations of the Company.
Subsequent Event
On March 25, 1999 the Company entered into an Agreement and Plan of Merger among the Company, CBF Holding LLC, a Delaware limited liability company, and CBF Mergerco Inc., a Delaware corporation. Pursuant to the Merger
Agreement, an investor group that includes Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS") and members of the Company's management team will acquire the Company for consideration of $24.00 per share in cash and $2.50 per share in liquidation value of a new series of preferred stock. Citicorp Venture Capital, Ltd. ("CVC") will retain a portion of its investment and thereby provide equity financing to the resulting corporation.
The merger agreement requires approval by the holders of a majority of the Company's voting stock and, in addition, approval by the holders of a majority of the outstanding voting stock who are not affiliated with BRS, CVC or other members of the investor group. The merger is also subject to other conditions, including receipt of necessary financing, a limitation on the number of dissenting shareholders and certain regulatory approvals. The merger agreement will terminate if the investor group has not obtained customary commitment and highly confident letters to provide the required debt financing within thirty days after the date of the merger agreement. There can be no assurance that the merger will be completed, or that the merger will be completed as contemplated.
ITEM 2.
ITEM 2. Properties
As of December 31, 1998, the Company carried out its rental, sales and warehouse operations through 277 facilities, of which 20 were owned and 257 were leased. The leased facilities have lease terms with expiration dates ranging from 1999 to 2014. Upon the expiration of its leases, the Company generally has been able to either extend its leases or obtain suitable alternative facilities on satisfactory terms. Management seeks to locate properties in new markets where rental, clearance and warehouse operations can be combined in one facility. As the Company expands in a particular district, the Company seeks to open free-standing showrooms and clearance centers that can be serviced from pre-existing warehouses. The Company's showrooms generally have 4,500 square feet of floor space. The Company regularly reviews the presentation and appearance of its furniture showrooms and clearance centers and periodically improves or refurbishes them to enhance their attractiveness to customers.
The Company's decision to enter a new market is based upon its review of current demographic information, short-and long-term population and business growth projections and the level of existing competition. Once the decision is made to enter a new market, management selects individual showroom locations by reviewing demographic information, accessibility, visibility, customer traffic, location of competitors and cost.
The metropolitan areas in which the Company operates, together with the number of showrooms in each metropolitan area, are set forth in the table below:
- ------------ (1) Includes locations in Washington, D.C., Maryland and Virginia. (2) Includes locations in Pennsylvania, New Jersey and Delaware.
The Company distributes its furniture using a fleet of approximately 352 leased and 47 company-owned delivery trucks. The trucks are usually rented for a period of five to six years under operating leases and typically display CORT's tradenames.
ITEM 3.
ITEM 3. Legal Proceedings
At December 31, 1998, the Company was involved in certain legal proceedings arising in the normal course of its business. The Company believes the outcome of these matters will not have a material adverse effect on the Company.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 4a. Directors and Executive Officers of the Registrant
The names of the executive officers and directors of CORT and their respective ages and positions with CORT are set forth in the following table. Directors are elected at the annual meeting of stockholders to serve until the next annual meeting and until their successors are elected and qualify.
- ------------
(1) Member of Compensation Committee (2) Member of Audit Committee (3) Member of Directors Stock Option Committee
PAUL N. ARNOLD, President, Chief Executive Officer and Director. Mr. Arnold has been with CORT and Mohasco Corporation, its former parent, for 30 years and has held group management positions within CORT since 1976. He has held his current position since July 1992. He is also a Director of Town Sports International, Inc.
ANTHONY J. BELLERDINE, Senior Group Vice President. Mr. Bellerdine has been with CORT since July 1991. He was appointed to Group Vice President in December 1994, having served as Area Vice President and Senior District Manager. Prior to joining CORT, Mr. Bellerdine was Senior Vice President of Sales and Marketing of Stern Office Furniture for eight years.
MICHAEL G. CONNORS, Vice President--Real Estate. Mr. Connors joined CORT in February 1986, after nearly eight years in Real Estate and Marketing with Mobil Oil Corporation and has served in his current position since March 1991.
CHARLES M. EGAN, Chairman and Director. Mr. Egan has been with CORT since the acquisition of General Furniture Leasing Company in September 1993. Mr. Egan joined General Furniture Leasing Company in 1989 and became its President and Chief Executive Officer in 1992. From 1985 to 1989, Mr. Egan was Executive Vice President of Mohasco Corporation. Mr. Egan was President of CORT from 1980 to 1985.
KENNETH W. HEMM, Executive Vice President & Chief Operating Officer--Division II. Mr. Hemm has been with CORT for 17 years. He was appointed Group Vice President in June 1992, having served as Group Manager since January 1991.
STEVEN D. JOBES, Executive Vice President & Chief Marketing Officer. Mr. Jobes has been with CORT for 26 years and served as Group Vice President prior to assuming his current position in May 1993.
LLOYD LENSON, Executive Vice President & Chief Operating Officer--Division II. Mr. Lenson has been with CORT for 19 years serving in his current position since May 1993. He previously served as Group Vice President and as Vice President--Marketing, Sales and Acquisitions.
ROBERT BAKER, Group Vice President--CORT/Instant. Mr. Baker joined the Company in August 1998 with the acquisition of certain assets of Instant Interiors Corporation. Mr. Baker was the Chairman of Instant Interiors Corporation from 1978 until the acquisition.
VICTORIA L. STILES, Vice President--Human Resources and Corporate Risk Management. Ms. Stiles joined CORT in November 1987, after nearly eight years in Personnel for the Hecht Company, a division of the May Company. She was appointed to Vice President in July 1996, having served as Director of Human Resources and Regional Manager of Human Resources.
WILLIAM SWETS, Vice President--Business Development. Mr. Swets joined the Company in August 1998 with the acquisition of certain assets of Instant Interiors Corporation. Mr. Swets was the founder and president of Instant Interiors Corporation from 1978 until the acquisition.
MAUREEN C. THUNE, Vice President--Corporate Controller and Assistant Secretary. Ms. Thune joined CORT in August 1992 after five years with KPMG Peat Marwick LLP, having most recently served as a Manager.
FRANCES ANN ZIEMNIAK, Executive Vice President, Chief Financial Officer and Secretary. Ms. Ziemniak joined the Company in March 1995 after three years as an independent consultant focusing on risk-management and retail acquisition analysis. Ms. Ziemniak was previously Vice President, Finance and Chief Financial Officer for Federated Merchandising, a division of Federated Department Stores, Inc. from 1987 to 1992 and Corporate Vice President, Financial Services for The GAP, Inc. from 1982 to 1987. Before Ms. Ziemniak joined The GAP, Inc. in 1979, she was employed by Ernst & Young LLP.
KEITH E. ALESSI, Director. Mr. Alessi is currently President, Chief Executive Officer and Chairman of the Board of Directors of Telespectrum Worldwide, Inc. Mr. Alessi was President and Chief Executive Officer of Jackson Hewitt Inc. from June 1996 through March 1998. He was Vice Chairman and Chief Financial Officer of Farm Fresh, Inc. (which filed voluntary bankruptcy as part of a sale of the company in January 1998 and emerged from bankruptcy in February 1998) from June 1994 through June 1996. He had previously served in various executive capacities, including President, with Farm Fresh from 1988 to 1992. Mr. Alessi was Chairman and Chief Executive Officer of Virginia Supermarkets, Inc., from 1992 to 1994. He is also a Director of Town Sports International, Inc.
BRUCE C. BRUCKMANN, Director. Mr. Bruckmann is currently Managing Director of Bruckmann, Rosser, Sherrill & Co., Inc. Mr. Bruckmann was a Vice President of Citicorp Venture Capital Ltd., which is an affiliate of the Company, through 1993 and a Managing Director from 1993 through 1994. He is also a Director of AmeriSource Health Corporation, Anvil Knitwear, Inc., Chromcraft-Revington, Inc., Jitney-Jungle Stores of America, Inc., MEDIQ, Incorporated, Mohawk Industries, Inc., Penhall International, Inc. and Town Sports International, Inc.
MICHAEL A. DELANEY, Director. Mr. Delaney is currently a Managing Director of Citicorp Venture Capital Ltd., which is an affiliate of the Company. From 1989 through 1997, he was a Vice President of Citicorp Venture Capital Ltd. and from 1986 through 1989 he was Vice President of Citicorp Mergers and Acquisitions. Mr. Delaney is also a Director of Allied Digital Technologies Corporation, Aetna Industries, Inc., AmeriSource Health Corporation, CLARK Material Handling Corporation, Delco Remy International, Inc., Enterprise Media Inc., FabriSteel, Inc., Great Lakes Dredge & Dock Corporation, GVC Holdings, IKS Corporation, JAC Holdings, MSX International, Inc., Palomar Technologies, Inc., SC Processing, Inc., and Triumph Group, Inc.
GREGORY B. MAFFEI, Director. Mr. Maffei is the Chief Financial Officer of Microsoft Corporation. He joined Microsoft in April 1993, served as Treasurer from 1994 to 1996 and Vice President, Corporate Development from 1996 to 1997, and was promoted to Chief Financial Officer in July 1997. Mr. Maffei is also a Director of Ragen MacKenzie Group Inc., Skytel Communications, Inc. and Starbucks Corporation.
JAMES A. URRY, Director. Mr. Urry has been with Citibank, N.A. since 1981 serving as a Vice President since 1986. He has been a Vice President of Citicorp Venture Capital Ltd., which is an affiliate of the Company, since 1989. He is also a Director of Airxcel, Inc., AmeriSource Health Corporation, Brunner Mond Holdings, CLARK Material Handling Corporation, Hancor Holding Corporation, IKS Corporation, Palomar Products Inc., and York International Corporation.
PART II
ITEM 5.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required for this item is incorporated by reference to page 28 of the Company's 1998 Annual Report to Stockholders.
ITEM 6.
ITEM 6. Selected Financial Data
The information required for this item is incorporated by reference to page 10 of the Company's 1998 Annual Report to Stockholders.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required for this item is incorporated by reference to pages 11 through 14 of the Company's 1998 Annual Report to Stockholders.
In addition to historic information, this Annual Report on Form 10-K 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 limited to acquisitions, additional financing requirements, development of new products and services, 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.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data
The consolidated balance sheets of CORT Business Services Corporation and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1998 are incorporated by reference to pages 15 through 27 of the Company's 1998 Annual Report to Stockholders.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
No response to this Item is required.
PART III
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 401 of Regulation S-K is included in Part I, Item 4a. Directors and Executive Officers of the Registrant.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Information appearing under "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Company's Notice of Annual Meeting of Shareholders and Proxy Statement for the 1999 annual meeting of stockholders (the "1998 Proxy Statement") is incorporated herein by reference. The Company will file the 1998 Proxy Statement with the Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year.
ITEM 11.
ITEM 11. Executive Compensation
The information required for this item is incorporated by reference to the Company's 1998 Proxy Statement.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required for this item is incorporated by reference to the Company's 1998 Proxy Statement.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions
The information required for this item is incorporated by reference to the Company's 1998 Proxy Statement.
PART IV
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) and (d) Financial Statements and Schedules (see Index on Page)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the period covered by this report.
(c) Exhibits (see Index on Page E-1)
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Frances Ann Ziemniak ---------------------------------- Frances Ann Ziemniak (Principal financial officer)
By: /s/ Maureen C. Thune ----------------------------------- Maureen C. Thune (Principal accounting officer)
Date: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
E-1
E-2
E-3
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in thousands)
Condensed Balance Sheets:
Condensed Statements of Operations:
S-1
CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) (in thousands)
Condensed Statements of Cash Flows:
Note to Condensed Financial Statements of Registrant:
Basis of Presentation
The accompanying condensed financial statements represent the accounts of CORT Business Services Corporation on a stand-alone basis. Substantially all footnote disclosures are omitted. Reference is made to the audited consolidated financial statements and footnotes of CORT Business Services Corporation and subsidiary as of December 31, 1998 and 1997, and for each of the years in the three-year period ended December 31, 1998, which appear in the Company's 1998 Annual Report to stockholders.
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CORT BUSINESS SERVICES CORPORATION AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)
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(1) Other additions represent the balance of Evans Rents' allowance for doubtful accounts, which was recorded April 24, 1996 in conjunction with the acquisition.
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