<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

     X    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

          For the Quarterly period ended January 31, 2002

                                      or

     [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the transition period from _______________ to _________________

               Commission File No. 333-60247
                                   ---------

                     COYNE INTERNATIONAL ENTERPRISES CORP.
                    BLUE RIDGE TEXTILE MANUFACTURING, INC.
                           OHIO GARMENT RENTAL, INC.

________________________________________________________________________________
     (Exact name of Registrants as specified in their respective charters)

     New York                                                16-6040758
      Georgia                                                58-2018333
       Ohio                                                  34-1261376
________________________________________________     ___________________________
 (State or Other Jurisdiction of Incorporation             (IRS Employer
                or Organization)                        Identification No.)

  140 Cortland Avenue, Syracuse, New York                      13221
--------------------------------------------         ---------------------------
  (Address of Principal Executive Offices)                   (Zip Code)

     Registrant's Telephone Number, Including Area Code:          (315) 475-1626
                                                                  --------------

     Securities Registered Pursuant to Section 12(b) of the Act:  NONE
                                                                  ----

     Securities Registered Pursuant to Section 12(g) of the Act:  NONE
                                                                  ----

     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
<PAGE>

               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
PART I.        Financial Information:

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheet ...........................................................   3

           Condensed Consolidated Statement of Operations .................................................   5

           Condensed Consolidated Statement of Cash Flows..................................................   6

           Notes to Condensed Consolidated Financial Statements............................................   7

Item 2.    Management's Discussion and Analysis of the Financial
               Condition and Results of Operations.........................................................  15


PART II.       Other Information

Item 1.    Legal Proceedings...............................................................................  17

Item 2.    Changes in Securities and Use of Proceeds.......................................................  17

Item 3.    Defaults Upon Senior Securities.................................................................  17

Item 4.    Submission of Matters to a Vote of Security Holders.............................................  17

Item 5.    Other Information...............................................................................  17

Item 6.    Exhibits and Reports on Form 8-K................................................................  17

       Signatures
</TABLE>

                                       2
<PAGE>

PART I.  Financial Information

Item 1.  Financial Statements

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidated Balance Sheet
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             January 31,             October 31,
  Assets                                                                        2002                    2001
                                                                           --------------          ---------------
                                                                             (unaudited)
  <S>                                                                      <C>                     <C>
  Current Assets:
     Cash and cash equivalents                                             $      673,937          $       119,519
     Accounts receivable                                                       16,390,630               15,453,339
     Inventories                                                                6,421,400                6,697,698
     Rental merchandise in service                                             28,225,362               31,401,376
     Prepaid expenses and other assets                                          1,467,304                  547,284
                                                                           --------------          ---------------
        Total current assets                                                   53,178,633               54,219,216

  Property, plant and equipment, net                                           40,579,271               41,635,179

  Other assets:
     Purchased routes and acquisition intangibles, net                         16,400,676               16,512,266
     Other                                                                      6,838,886                6,614,091
                                                                           --------------          ---------------
        Total other assets                                                     23,239,562               23,126,357

                                                                           --------------          ---------------
        Total Assets                                                       $  116,997,466          $   118,980,752
                                                                           ==============          ===============
</TABLE>

      See notes to unaudited condensed consolidated financial statements

                                       3
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidated Balance Sheet
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               January 31,        October 31,
Liabilities and Shareholders' Equity (Deficit)                    2002                2001
                                                             ---------------    ---------------
                                                                (unaudited)
<S>                                                          <C>                <C>
Current Liabilities:
   Accounts payable                                          $     3,133,609    $     5,152,582
   Cash overdrafts                                                 1,949,266          1,488,087
   Accrued interest                                                1,386,912          3,503,660
   Other                                                          21,829,445         21,345,972
                                                             ---------------    ---------------
     Total current liabilities                                    28,299,232         31,490,301

Long-term obligations, net of current maturities                  97,391,264         96,102,469
Other liabilities                                                  3,065,043          3,173,083
                                                             ---------------    ---------------
     Total liabilities                                           128,755,539        130,765,853
                                                             ---------------    ---------------

Shareholders' equity (deficit):
   Retained earnings (deficit)                                   (14,775,589)       (14,767,786)
   Other                                                           3,017,516          2,982,685
                                                             ---------------    ---------------
     Total shareholders' equity (deficit)                        (11,758,073)       (11,785,101)
                                                             ---------------    ---------------

     Total Liabilities and Shareholders' Equity (Deficit)    $   116,997,466    $   118,980,752
                                                             ===============    ===============
</TABLE>

      See notes to unaudited condensed consolidated financial statements

                                       4
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidated Statement of Operations
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                               January 31,
                                                                                       ------------------------------
                                                                                            2002              2001
                                                                                       -------------      -----------
                                                                                                 (unaudited)
<S>                                                                                    <C>                <C>
Revenue                                                                                $  36,965,343      $38,143,504

Operating expenses:
   Cost of operations                                                                     27,507,526       29,351,382
   Selling and administrative expenses                                                     6,832,450        7,186,917
                                                                                       -------------      -----------
                                                                                          34,339,976       36,538,299
                                                                                       -------------      -----------

       Income from operations                                                              2,625,367        1,605,205

Interest expense                                                                           2,580,172        2,995,256
                                                                                       -------------      -----------

       Income (loss) before income taxes                                                      45,195       (1,390,051)

Income tax expense (benefit)                                                                  52,998         (501,000)
                                                                                       -------------      -----------
       Net loss                                                                        $      (7,803)     $  (889,051)
                                                                                       =============      ===========
</TABLE>

      See notes to unaudited condensed consolidated financial statements

                                       5
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                           January 31,
                                                                  -----------------------------
                                                                        2002           2001
                                                                  ---------------  ------------
                                                                             (unaudited)
<S>                                                               <C>              <C>
Net cash provided by (used in) operating activities                $     (259,256) $  1,099,219

Net cash used in investing activities                                    (390,902)     (541,449)

Cash flows from financing activities:
   Proceeds from long-term borrowings                                  12,391,600    11,243,933
   Payments under long-term obligations                               (11,178,126)  (11,857,059)
   Other financing activities                                              (8,898)     (160,672)
                                                                  ---------------  ------------
     Net cash provided by (used in) financing activities                1,204,576      (773,798)
                                                                  ---------------  ------------
     Net increase (decrease) in cash                                      554,418      (216,028)

Cash and cash equivalents:
   Beginning of period                                                    119,519       909,340
                                                                  ---------------  ------------
   End of period                                                   $      673,937  $    693,312
                                                                  ===============  ============

Supplemental disclosure of cash flow information:
   Interest paid                                                   $    4,607,795  $  4,975,391
   Income taxes paid                                                       55,936        27,232
</TABLE>

      See notes to unaudited condensed consolidated financial statements

                                       6
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)
--------------------------------------------------------------------------------

1. Basis of Presentation

The accompanying condensed consolidated financial statements of Coyne
International Enterprises Corp. and Subsidiaries, (the Company), have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, quarterly results include all adjustments, (consisting of normal
recurring accruals), considered necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim periods
presented. The balance sheet as of October 31, 2001 has been derived from the
audited balance sheet included in the Company's annual report filed on Form 10-
K. For further information, refer to the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended October 31, 2001.

The Company uses a fifty-two/fifty-three week fiscal year ending on the last
Saturday of October, with quarterly interim periods of thirteen weeks. For
convenience, the dating of the accompanying financial statements and notes have
been labeled as of and for the periods ending January 31, 2002, October 31, 2001
and January 31, 2001 rather than the actual period-end dates.

Operating results for the three month period ended January 31, 2002 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 2002.

2. Reclassification

Certain amounts have been reclassified to conform with the fiscal 2002
presentation.

3. Comprehensive Income

The components of comprehensive income (loss) were as follows:

<TABLE>
<CAPTION>
                                                                       Three Months ended   Three Months ended
                                                                        January 31, 2002     January 31, 2001
                                                                        ----------------     ----------------
<S>                                                                     <C>                  <C>
Net loss                                                                        ($ 7,083)         ($  889,051)
Other comprehensive income (loss):
    Change in fair value of cash flow hedge net of tax expense
     of $55,368 in 2002 and a tax benefit of $92,399 in 2001.                     83,053             (138,599)
                                                                                --------          -----------

Comprehensive income (loss)                                                     $ 75,970          ($1,027,650)
                                                                                ========          ===========
</TABLE>

                                       7
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements  (Unaudited)
--------------------------------------------------------------------------------

4.   Condensed Consolidating Financial Statements

On June 26, 1998, the Company sold $75,000,000 of 11-1/4% Senior Subordinated
Notes due 2008, (the Notes). The Notes are jointly and severally guaranteed by
the following wholly-owned subsidiaries of the Company, (the Subsidiary
Guarantors): Blue Ridge Textile Manufacturing, Inc. and Ohio Garment Rental,
Inc. The following consolidating financial statements for the Company segregate
the financial information of Coyne International Enterprises Corp. (the Parent
Company) and the Subsidiary Guarantors.

                                       8
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Balance Sheet
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                   January 31, 2002
                                                          -----------------------------------------------------------------
                                                             Parent           Subsidiary    Consolidating    Consolidated
Assets                                                       Company          Guarantors      Adjustments       Totals
                                                          --------------     ------------   -------------    --------------
<S>                                                       <C>                <C>            <C>              <C>
Current Assets:
     Cash and cash equivalents                            $      759,571     $    (85,634)                     $    673,937
     Accounts receivable                                      13,977,755        2,412,875                        16,390,630
     Inventories                                               4,634,827        1,786,573                         6,421,400
     Rental merchandise in service                            25,144,032        3,081,330                        28,225,362
     Prepaid expenses and other assets                        10,686,909          149,842     (9,369,447)         1,467,304
                                                          --------------     ------------   ------------       ------------
        Total current assets                                  55,203,094        7,344,986     (9,369,447)        53,178,633

Property, plant and equipment, net                            37,564,538        3,014,733                        40,579,271

Other assets:
   Purchased routes and acquisition intangibles, net          16,142,864          257,812                        16,400,676
   Other                                                       6,838,886                                          6,838,886
                                                          --------------     ------------   ------------       ------------
        Total other assets                                    22,981,750          257,812              0         23,239,562

                                                          --------------     ------------   ------------       ------------
                                                          $  115,749,382     $ 10,617,531   $ (9,369,447)      $116,997,466
                                                          ==============     ============   ============       ============
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------

Current Liabilities:
     Accounts payable                                          4,830,982          251,893                         5,082,875
     Accrued interest                                          1,386,912                                          1,386,912
     Other                                                    20,833,254          996,191                        21,829,445
                                                          --------------     ------------   ------------       ------------
        Total current liabilities                             27,051,148        1,248,084              0         28,299,232

Long-term obligations, net of current maturities              97,391,264                                         97,391,264
Other liabilities                                              3,065,043        4,098,120     (4,098,120)         3,065,043
                                                          --------------     ------------   ------------       ------------
        Total liabilities                                    127,507,455        5,346,204     (4,098,120)       128,755,539
                                                          --------------     ------------   ------------       ------------
Shareholders' equity (deficit):
     Retained earnings (deficit)                             (14,775,589)       3,722,327     (3,722,327)       (14,775,589)
     Other                                                     3,017,516        1,549,000     (1,549,000)         3,017,516
                                                          --------------     ------------   ------------       ------------
        Total shareholders' equity (deficit)                 (11,758,073)       5,271,327     (5,271,327)       (11,758,073)
                                                          --------------     ------------   ------------       ------------
                                                             115,749,382     $ 10,617,531   $ (9,369,447)      $116,997,466
                                                          ==============     ============   ============       ============
</TABLE>

                                       9
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Balance Sheet
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    October 31, 2001
                                                          ---------------------------------------------------------------------
                                                             Parent           Subsidiary    Consolidating        Consolidated
Assets                                                       Company          Guarantors     Adjustments            Totals
------                                                    --------------     ------------   -------------     -----------------
<S>                                                       <C>                <C>            <C>               <C>
Current Assets:
     Cash and cash equivalents                            $      335,682     $   (216,163)                    $     119,519
     Accounts receivable                                      13,470,773        1,982,566                        15,453,339
     Inventories                                               4,353,668        2,344,030                         6,697,698
     Rental merchandise in service                            27,707,131        3,694,245                        31,401,376
     Prepaid expenses and other assets                         9,766,827           70,282     (9,289,825)           547,284
                                                          --------------     ------------   ------------      -------------
        Total current assets                                  55,634,081        7,874,960     (9,289,825)        54,219,216

Property, plant and equipment, net                            38,485,663        3,149,516              0         41,635,179

Other assets:
   Purchased routes and acquisition intangibles, net          16,251,810          260,456                        16,512,266
   Other                                                       6,614,091                                          6,614,091
                                                          --------------     ------------   ------------      -------------
        Total other assets                                    22,865,901          260,456              0         23,126,357

                                                          --------------     ------------   ------------      -------------
                                                          $  116,985,645     $ 11,284,932   $ (9,289,825)     $ 118,980,752
                                                          ==============     ============   ============      =============
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------

Current Liabilities:
     Accounts payable                                          4,623,596          528,986                         5,152,582
     Accrued interest                                          3,503,660                                          3,503,660
     Other                                                    21,367,938        1,466,121                        22,834,059
                                                          --------------     ------------   ------------      -------------
        Total current liabilities                             29,495,194        1,995,107              0         31,490,301

Long-term obligations, net of current maturities              96,102,469                                         96,102,469
Other liabilities                                              3,173,083        3,984,102     (3,984,102)         3,173,083
                                                          --------------     ------------   ------------      -------------
        Total liabilities                                    128,770,746        5,979,209     (3,984,102)       130,765,853
                                                          --------------     ------------   ------------      -------------

Shareholders' equity (deficit):
     Retained earnings (deficit)                             (14,767,786)       3,756,723     (3,756,723)       (14,767,786)
     Other                                                     2,982,685        1,549,000     (1,549,000)         2,982,685
                                                          --------------     ------------   ------------      -------------
        Total shareholders' equity (deficit)                 (11,785,101)       5,305,723     (5,305,723)       (11,785,101)
                                                          --------------     ------------   ------------      -------------
                                                             116,985,645     $ 11,284,932   $ (9,289,825)     $ 118,980,752
                                                          ==============     ============   ============      =============
</TABLE>

                                       10
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Statement of Operations
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             Three Months Ended January 31, 2002
                                                               -------------------------------------------------------------
                                                                  Parent        Subsidiary    Consolidating      Consolidated
                                                                  Company       Guarantors     Adjustments          Totals
                                                               -------------------------------------------------------------
 <S>                                                           <C>              <C>           <C>                <C>
 Revenue:                                                      $ 33,052,513    $ 5,450,674    $(1,537,844)      $ 36,965,343

 Operating expenses:
    Cost of operations                                           24,433,192      4,573,047     (1,498,712)        27,507,526
    Selling, general and administrative                           5,993,955        726,785        111,710          6,832,450
                                                               ------------    -----------    -----------       ------------
                                                                 30,427,146      5,299,832     (1,387,002)        34,339,976
                                                               ------------    -----------    -----------       ------------

      Income (loss) from operations                               2,625,367        150,842       (150,842)         2,625,367

 Interest expense                                                 2,580,172        208,168       (208,168)         2,580,172
                                                               ------------    -----------    -----------       ------------

      Income (loss) before income tax                                45,195        (57,326)        57,326             45,195

 Income tax expense (benefit)                                        52,998        (22,930)        22,930             52,998
                                                               ------------    -----------    -----------       ------------

      Net income (loss)                                        $     (7,803)   $   (34,396)   $    34,396       $     (7,803)
                                                               ============    ===========    ===========       ============
</TABLE>

                                       11
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Statement of Operations
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             Three Months Ended January 31, 2001
                                                               -------------------------------------------------------------
                                                                  Parent       Subsidiary    Consolidating      Consolidated
                                                                  Company      Guarantors     Adjustments          Totals
                                                               ------------    -----------   -------------      ------------
<S>                                                            <C>             <C>           <C>                <C>
Revenue                                                        $ 34,384,991    $ 6,233,467   $ (2,474,954)      $38,143,504

Operating expenses:
   Cost of operations                                            26,505,242      5,333,094     (2,486,954)       29,351,382
   Selling, general and administrative                            6,274,544        808,836        103,537         7,186,917
                                                               ------------    -----------    -----------       -----------
                                                                 32,779,786      6,141,930     (2,383,417)       36,538,299
                                                               ------------    -----------    -----------       -----------

     Income (loss) from operations                                1,605,206         91,537        (91,537)        1,605,206

Interest expense                                                  2,995,256        195,118       (195,118)        2,995,256
                                                               ------------    -----------    -----------       -----------

     Income (loss) before income tax                             (1,390,051)      (103,581)       103,581        (1,390,051)

Income tax expense (benefit)                                       (501,000)       (41,433)        41,433          (501,000)
                                                               ------------    -----------    -----------       -----------

     Net income (loss)                                         $   (889,051)   $   (62,148)   $    62,148       $  (889,051)
                                                               ============    ===========    ===========       ===========
</TABLE>

                                       12
<PAGE>

 Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Statement of Cash Flows
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Three Months Ended January 31, 2002
                                                            ----------------------------------------------------------------
                                                                Parent         Subsidiary     Consolidating    Consolidated
                                                                Company        Guarantors      Adjustments        Totals
                                                            --------------- ---------------- ---------------  --------------
<S>                                                         <C>              <C>              <C>             <C>
Net cash provided by (used in) operating activities         $  (1,662,843)    $ 1,403,587           0         $   (259,256)

Net cash used in investing activities                            (383,854)         (7,048)          0             (390,902)

Cash flows from financing activities:
   Proceeds from long-term borrowings                          12,391,600                                       12,391,600
   Payments under long-term obligations                       (11,178,126)                                     (11,178,126)
   Other Financing Activities                                      (8,898)                                          (8,898)
                                                            -------------     -----------     -------         ------------
     Net cash provided by financing activities                  1,204,576               0           0            1,204,576
                                                            -------------     -----------     -------         ------------
     Net decrease in cash                                        (842,121)      1,396,539           0              554,418

Cash and cash equivalents:
   Beginning of period                                            335,682        (216,163)                         119,519
                                                            -------------     -----------     -------         ------------
   End of period                                            $    (506,439)    $ 1,180,376     $     0         $    673,937
                                                            =============     ===========     =======         ============
</TABLE>

                                       13
<PAGE>

Coyne International Enterprises Corp. and Subsidiaries

Condensed Consolidating Statement of Cash Flows
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Three Months Ended January 31, 2001
                                                           -----------------------------------------------------------------
                                                               Parent         Subsidiary     Consolidating     Consolidated
                                                               Company        Guarantors      Adjustments         Totals
                                                           ---------------  --------------  ---------------   --------------
<S>                                                        <C>              <C>             <C>               <C>
Net cash provided by operating activities                  $     677,030    $   422,189             0          $  1,099,219

Net cash used in investing activities                           (515,870)       (25,579)            0              (541,449)

Cash flows from financing activities:
   Proceeds from long-term borrowings                         11,243,933                                         11,243,933
   Payments under long-term obligations                      (11,857,059)                                       (11,857,059)
   Other financing activities                                   (160,672)                                          (160,672)
                                                           -------------    -----------         -----          ------------
     Net cash used in financing activities                      (773,798)             0             0              (773,798)
                                                           -------------    -----------         -----          ------------
     Net increase (decrease) in cash                            (612,638)       396,610             0              (216,028)

Cash and cash equivalents:
   Beginning of period                                           955,728        (46,388)                            909,340
                                                           -------------    -----------         -----          ------------
   End of period                                           $     343,090    $   350,222         $   0          $    693,312
                                                           =============    ===========         =====          ============
</TABLE>

                                       14
<PAGE>

ITEM 2.  Management's Discussion and Analysis of the Financial Condition and
         Results of Operations

Coyne International Enterprises Corp. and Subsidiaries

     Management's Discussion and Analysis of Financial Condition and Results of
     Operations

Certain statements included in this Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarterly Report on Form 10-Q, which are not statements of historical fact, are
intended to be, and are hereby identified as, "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, the words "believe," "anticipate," "plan,"
"expect," "estimate," "intend" and other similar expressions are intended to
identify forward-looking statements. The Company cautions readers that
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievement expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the success or failure of the
Company in implementing its current business and operational strategies;
availability, terms and access to capital and customary trade credit; general
economic and business conditions; competition; changes in the Company's business
strategy; labor relations; the outcome of pending or yet-to-be instituted legal
proceedings; labor and employee benefit costs; and availability and terms of
necessary or desirable financing or refinancing.

Results of Operations

Total revenues decreased $1.2 million, (3.1%), for the three months ended
January 31, 2002 versus the three months ended January 31, 2001. This decrease
is the result of reduced business activity, driven by customer workforce
reductions and increasing competition.

Cost of $1.8 million, operations decreased (6.3%), for the three months
ended January 31, 2002 versus the three months ended January 31, 2001. These
decreases are a result of lower energy and other production costs as well as
lower merchandise spending resulting from tighter controls implemented in 2001.

Selling, general and administrative expenses decreased $0.4 million,(4.9%), for
the three months ended January 31, 2002 versus the three months ended January
31, 2001. These decreases were primarily the result of a $0.3 million decrease
in corporate overhead costs and a $0.1 million decrease in wages for the
Company's sales force.

Interest expense decreased $0.4 million, (13.9%), for the three months ended
January 31, 2002 versus the three months ended January 31, 2001, primarily as a
result of a decline in outstanding debt, from $105.6 million at January 31, 2001
to $101.0 million at January 31, 2002.

                                      15
<PAGE>

Liquidity and Financial Resources

The Company is highly leveraged with total indebtedness of $101.0 million and a
shareholder deficit of $11.8 million at January 31, 2002. In addition, the
Company has incurred net losses for the last four fiscal years, is required to
maintain certain financial covenants as part of its existing credit facility
(the Facility), and is dependant on operations for a major portion of its
liquidity and working capital needs. These facts create an uncertainty about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

The Company's primary source of liquidity has been cash flows from borrowings
under the Facility, which was amended in fiscal 2001. For the three months ended
January 31, 2002, the Company has experienced a net increase in cash and cash
equivalents of $0.6 million. The Company used $0.3 million in cash and cash
equivalents from operating activities for the three months ended January 31,
2002, which included a $3.5 million liquidation of inventory and rental
merchandise in service and also included total interest payments of $4.6
million.

The maximum credit available under the Company's revolving credit facility, (the
Revolver), subject to collateral availability, is $30 million. At January 31,
2002, the Company had approximately $2.8 million available under the Revolver.
Management is pursuing alternative senior credit facilities from other lenders,
with the goal of providing additional liquidity. Over the next twelve months,
the Company will continue to focus on improving utilization of new inventory and
merchandise in service as well as controlling overall costs and capital
expenditures to improve liquidity and to meet its financial covenants. The
Company does not anticipate the need to increase levels of inventory or capital
expenditures in 2002.

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<PAGE>

PART II.       Other Information

     Item 1.   Legal Proceedings

The Company is involved in certain claims and litigation arising in the ordinary
course of business, which are not considered material to the financial
operations or cash flow of the Company.

     Item 2.   Changes in Securities and Use of Proceeds

Not applicable.

     Item 3.   Defaults Upon Senior Securities

Not applicable.

     Item 4.   Submission of Matters to a Vote of Security Holders

Not applicable.

      Item 5.  Other Information

Not applicable.

     Item 6.   Exhibits and Reports on Form 8-K

Not applicable.

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