<PAGE>   1

================================================================================

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

                                   ----------


                                    FORM 10-Q


                                   ----------

   (Mark One)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

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

                                   ----------

                         Commission File Number 0-22026

                                 RENT-WAY, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

<TABLE>
<S>                                                     <C>
                 PENNSYLVANIA                                      25-1407782
                 ------------                                      ----------
(State or other jurisdiction of incorporation)          (I.R.S. Employer Identification No.)
</TABLE>


                   ONE RENTWAY PLACE, ERIE, PENNSYLVANIA 16505
                  --------------------------------------------
                    (Address of principal executive offices)

                                 (814) 455-5378
                                 --------------
                         (Registrant's telephone number)


          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  _____________           No ______X______


         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

                      Class             Outstanding as of August 20, 2001
                      -----             ---------------------------------
                  Common Stock                      24,509,979



================================================================================

<PAGE>   2

                                 RENT-WAY, INC.




<TABLE>
<CAPTION>
                                                                                                           PAGE
                                                                                                           ----
<S>      <C>                                                                                               <C>
PART I   FINANCIAL INFORMATION

         Item 1.  Financial Statements:

                  Condensed Consolidated Balance Sheets as of March 31, 2001 (unaudited)
                  and September 30, 2000.....................................................................3

                  Condensed Consolidated Statements of Operations, Three and Six Months
                  Ended March 31, 2000 and 2001 (unaudited)..................................................4

                  Condensed Consolidated Statements of Cash Flows, Six Months Ended
                  March 31, 2000 and 2001 (unaudited)........................................................5

                  Notes to Condensed Consolidated Financial Statements (unaudited)...........................6

         Item 2.  Management's Discussion and Analysis
                  of Financial Condition and Results of Operations..........................................12

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk................................16

PART II  OTHER INFORMATION

         Item 1.  Legal Proceedings.........................................................................18

         Item 3.  Defaults Upon Senior Securities...........................................................19

         Item 6.  Exhibits and Reports on Form 8-K..........................................................19

         Signatures.........................................................................................20
</TABLE>





                                       2
<PAGE>   3



                                 RENT-WAY, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                           (all dollars in thousands)



<TABLE>
<CAPTION>
                                                                            MARCH 31,           SEPTEMBER 30,
                                                                              2001                   2000
                                                                            ---------             ---------
                                                                           (unaudited)

<S>                                                                        <C>                  <C>
ASSETS

Cash and cash equivalents                                                   $  18,163             $  10,654
Prepaid expenses                                                               12,745                13,997
Income tax receivable                                                           8,635                20,607
Rental merchandise, net                                                       288,353               282,052
Rental merchandise, deposit                                                     4,323                33,289
Deferred tax asset, net                                                            --                    --
Property and equipment, net                                                    86,334                78,408
Goodwill, net                                                                 300,501               307,690
Deferred financing costs, net                                                   4,510                 5,068
Non-compete and prepaid consulting fees, net                                    2,108                 3,236
Other assets                                                                    5,725                11,310
                                                                            ---------             ---------
        Total assets                                                        $ 731,397             $ 766,311
                                                                            =========             =========


LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Accounts payable                                                            $  37,912             $  42,750
Other liabilities                                                              91,987                67,887
Debt                                                                          361,144               387,852
                                                                            ---------             ---------
        Total liabilities                                                     491,043               498,489

Contingencies (See Note 7)                                                         --                    --

SHAREHOLDERS' EQUITY:

Preferred stock, without par value; 1,000,000 shares authorized;
     no shares issued and outstanding                                              --                    --
Common stock, without par value; 50,000,000 shares
     authorized; 24,509,979 and 24,459,573 shares issued and
     outstanding, respectively                                                295,610               295,185
Loans to shareholders                                                            (885)                 (690)
Accumulated other comprehensive income                                          2,078                    --
Accumulated deficit                                                           (56,449)              (26,673)
                                                                            ---------             ---------
        Total shareholders' equity                                            240,354               267,822
                                                                            ---------             ---------
        Total liabilities and shareholders' equity                          $ 731,397             $ 766,311
                                                                            =========             =========
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>   4



                                 RENT-WAY, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (all dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                           FOR THE THREE MONTHS ENDED                 FOR THE SIX MONTHS ENDED
                                                                    MARCH 31,                                MARCH 31,
                                                            2001                2000                  2001                2000
                                                            ----                ----                  ----                ----
                                                        (unaudited)          (unaudited)          (unaudited)         (unaudited)
                                                                            (As Restated)                            (As Restated)
                                                                                                                      (See Note 9)
<S>                                                     <C>                 <C>                   <C>                <C>
REVENUES:
Rental revenue                                           $141,089             $127,022             $269,337             $247,004

Prepaid phone service revenue                               9,192                   --               17,374                   --
Other revenues                                             24,687               21,867               46,994               42,796
                                                         --------             --------             --------             --------
       Total revenues                                     174,968              148,889              333,705              289,800


COSTS AND OPERATING EXPENSES:
Depreciation and amortization:
    Rental merchandise                                     52,459               39,685               98,791               73,400

    Property and equipment                                  8,148                6,408               15,648               11,646

    Amortization of goodwill and other intangibles          3,668                3,412                7,335                6,636
Cost of prepaid phone service                               5,009                   --               10,051                   --
Salaries and wages                                         39,391               36,164               80,972               71,985

Advertising, net                                            1,833                4,472               13,181                8,298

Occupancy                                                  12,451               12,241               24,733               23,334

Other operating expenses                                   40,379               38,990               82,038               73,445
                                                         --------             --------             --------             --------
        Total costs and operating expenses                163,338              141,372              332,749              268,744
                                                         --------             --------             --------             --------
        Operating income (loss)                            11,630                7,517                  956               21,056

OTHER INCOME (EXPENSE):
Interest expense                                          (11,201)              (7,453)             (21,991)             (13,779)
Equity in loss of subsidiary                                   --                 (573)                  --                 (573)
Interest income                                                66                   55                  122                   78

Other income (expense), net                                (4,520)                 (42)              (8,863)                (181)
                                                         --------             --------             --------             --------
       Income before income taxes                          (4,025)                (496)             (29,776)               6,601
Income tax expense                                             --                 (170)                  --                2,604
                                                         --------             --------             --------             --------


Net income (loss)                                        $ (4,025)            $   (326)            $(29,776)            $  3,997
                                                         ========             ========             ========             --------

EARNINGS (LOSS) PER COMMON SHARE (NOTE 3):

     Basic                                               $  (0.16)            $  (0.01)            $  (1.22)            $   0.18
                                                         ========             ========             ========             ========
     Diluted                                             $  (0.16)            $  (0.01)            $  (1.22)            $   0.18
                                                         ========             ========             ========             ========

Weighted average common shares outstanding:
     Basic                                                 24,509               22,673               24,492               22,326
                                                         ========             ========             ========             ========

     Diluted                                               24,509               22,673               24,492               22,326
                                                         ========             ========             ========             ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       4
<PAGE>   5


                                 RENT-WAY, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (all dollars in thousands)

<TABLE>
<CAPTION>
                                                                             FOR THE SIX MONTHS ENDED
                                                                                    MARCH 31,
                                                                            2001                  2000
                                                                            ----                  ----
                                                                        (unaudited)           (unaudited)
                                                                                             (As Restated)
                                                                                          (See Notes 2 and 9)

<S>                                                                     <C>              <C>
OPERATING ACTIVITIES:
Net income (loss)                                                        $ (29,776)            $   3,997
Adjustments to reconcile net income (loss)
 to net cash provided by operating activities:
    Depreciation and amortization                                          121,794                91,888
    Deferred income taxes                                                       --                 1,496
    Write-off of property and equipment                                        992                 3,570
    Gain on sale of stores                                                    (131)                   --
    Other                                                                       82                    --
Changes in assets and liabilities:
    Prepaid expenses                                                         1,252                (5,875)
    Rental merchandise                                                    (105,720)             (121,086)
    Rental merchandise deposits and credits due from vendors                28,966                    --
    Income tax receivable                                                   11,972                (3,494)
    Other assets                                                             6,752                 1,044
    Accounts payable                                                        (8,012)                2,519
    Other liabilities                                                       16,913                 2,601
                                                                         ---------             ---------
       Net cash provided by (used in) operating activities                  45,084               (23,340)
                                                                         ---------             ---------


INVESTING ACTIVITIES:
    Purchase of businesses, net of cash acquired                              (311)               (9,950)
    Purchases of property and equipment                                     (7,342)              (13,012)
    Proceeds from sale of stores                                               886
    Other                                                                       52                    --
                                                                         ---------             ---------
       Net cash used in investing activities                                (6,715)              (22,962)
                                                                         ---------             ---------

FINANCING ACTIVITIES:
    Proceeds from borrowings                                               203,265               103,000
    Payments on borrowings including early extinguishment                 (237,635)              (66,001)
    Book overdraft                                                           3,174                 6,538
    Deferred finance costs                                                     106                    --
    Proceeds from common stock issuance                                        425                   810
    Payment of loans by directors                                               --                   140
    Interest on loans to directors                                             (36)                   --
    Loan to director                                                          (159)                   --
                                                                         ---------             ---------
       Net cash provided by (used in)financing activities                  (30,860)               44,487
                                                                         ---------             ---------
         Increase (decrease) in cash                                         7,509                (1,815)
                                                                         ---------             ---------

Cash and cash equivalents at beginning of period                            10,654                 8,646
                                                                         ---------             ---------

Cash and cash equivalents at end of period                               $  18,163             $   6,831
                                                                         =========             =========

Supplemental disclosure of noncash financing activity:
    Common stock issued to extinguish debt                               $      --             $  20,000
                                                                         =========             =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       5
<PAGE>   6


                                 RENT-WAY, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (all dollars in thousands, except per share data)

1.  BASIS OF PRESENTATION:

    Rent-Way, Inc., (the "Company" or "Rent-Way") is a corporation organized
under the laws of the Commonwealth of Pennsylvania. The Company operates a chain
of rental-purchase stores that rent durable household products such as home
entertainment equipment, furniture, computers, major appliances and jewelry to
consumers on a weekly or monthly basis. Commencing January 1, 2000, the Company
also provides prepaid local phone service to consumers on a monthly basis
through its majority-owned subsidiary, dPi Teleconnect, LLC ("DPI"). On January
1, 1999, the Company formed four wholly-owned subsidiaries: Rent-Way TTIG, L.P.,
an Indiana limited partnership, Rent-Way of Tomorrow, Inc., Rent-Way of
Michigan, Inc. and Rent-Way Developments, Inc., all Delaware corporations. The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q, and therefore, do not
include all information and notes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(which, except as discussed herein consist of normal recurring adjustments),
which are necessary for a fair statement of the financial position, results of
operations and cash flows of the Company have been made. The results of
operations for the interim periods are not necessarily indicative of the results
for the full year.

    The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

    These financial statements and the notes thereto should be read in
conjunction with the Company's audited financial statements included in its
Annual Report on Form 10 K/A for the fiscal year ended September 30, 2000.

2.  RESTATEMENTS:

    Prior to the issuance of the Company's consolidated financial statements as
of and for the year ended September 30, 2000, it was determined that the results
reported in the Company's unaudited interim financial statements as of and for
the periods ended December 31, 1999; March 31, 2000; and June 30, 2000, were
misstated. The Audit Committee of the Board of Directors immediately instituted
an investigation with the assistance of legal counsel and an accounting
investigative team.

    After evaluating information revealed in the investigation and in
preparation of its fiscal 2000 year-end financial statements, the Company
determined that accounting improprieties occurred in fiscal 2000, 1999 and 1998
that overstated assets and income and understated liabilities and expense. As a
result, the Company decided to restate its previously reported fiscal 1999 and
1998 financial statements. The quarterly financial information for fiscal year
1999 and for the interim periods ended December 31, 1999; March 31, 2000; and
June 30, 2000, have also been restated. The restated financial statements as of
and for the three and six months ended March 31, 2000, have been included in the
condensed consolidated financial statements included herein.

    A summary of the effects of the restatement on the Statement of Operations
for the six month period ended March 31, 2000 is set forth in Note 9.



                                       6
<PAGE>   7


                                 RENT-WAY, INC.

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                (all dollars in thousands, except per share data)

3.  EARNINGS (LOSS) PER COMMON SHARE:

    Basic earnings (loss) per common share is computed using income (loss)
available to common shareholders divided by the weighted average number of
common shares outstanding. Diluted earnings (loss) per common share is computed
using income (loss) available to common shareholders adjusted for anticipated
interest savings, net of related taxes, on conversion of the Company's
convertible subordinated debentures and the weighted average number of shares
outstanding is adjusted for the potential impact of options, warrants and the
convertible subordinated debentures where the effects are dilutive. Because
operating results were a loss for the three- and six-month periods ended March
31, 2001 and for the three-month period ended March 31, 2000, basic and diluted
loss per common share were the same.

    The following table discloses the reconciliation of numerators and
denominators of the basic and diluted earnings (loss) per common share
computation:

<TABLE>
<CAPTION>
                                                                           FOR THE THREE MONTHS            FOR THE SIX MONTHS
                                                                                 ENDED                           ENDED
                                                                                MARCH 31,                       MARCH 31,
                                                                               (UNAUDITED)                     (UNAUDITED)
                                                                         ------------------------        ------------------------
         COMPUTATION OF EARNINGS (LOSS) PER SHARE:                         2001            2000            2001            2000
         -----------------------------------------                       --------        --------        --------        --------
                                                                                      (As Restated)                    (As Restated)
                                                                                                                        (See Note 9)
<S>                                                                     <C>          <C>                <C>           <C>
         BASIC
         Earnings (loss) applicable to common shares .................   $ (4,025)       $   (326)       $(29,776)       $  3,997
                                                                         ========        ========        ========        ========
         Weighted average number of common shares
           outstanding during the period .............................     24,509          22,673          24,492          22,326
                                                                         ========        ========        ========        ========

         Basic earnings (loss) per common share:
           Net income (loss) .........................................   $  (0.16)       $  (0.01)       $  (1.22)       $   0.18
                                                                         ========        ========        ========        ========

         DILUTED
         Earnings (loss) applicable to common shares .................   $ (4,025)       $   (326)       $(29,776)       $  3,997
         Interest on 7% convertible debentures (net of tax) ..........         --              --              --              --
                                                                         --------        --------        --------        --------
         Earnings (loss) applicable for diluted earnings per share....   $ (4,025)       $   (326)       $(29,776)       $  3,997
                                                                         ========        ========        ========        ========
         Weighted average common shares used in calculating
           basic earnings (loss) per share ...........................     24,509          22,673          24,492          22,326
         Shares issuable upon exercise of stock options,
           warrants and escrowed shares ..............................         --              --              --              --
         Shares issued on conversion of 7% convertible
           debentures ................................................         --              --              --              --
                                                                         --------        --------        --------        --------
         Weighted average number of shares used in calculation
           of diluted earnings (loss) per share ......................     24,509          22,673          24,492          22,326
                                                                         ========        ========        ========        ========

         Diluted earnings (loss) per common share:
           Net income (loss) .........................................   $  (0.16)       $  (0.01)       $  (1.22)       $   0.18
                                                                         ========        ========        ========        ========
</TABLE>


4.  DEBT:

    The Company's credit facility with a syndicate of banks was amended on June
28, 2000. The amended facility, co-led by National City Bank, acting as
administrative agent, Bank of America, N.A., acting as documentation agent, and
Bank of Montreal and Harris Trust and Savings Bank, acting as syndication
agents, provides for loans and letters of credit of up to $435,000 (revolving
notes and letters of credit $114,444, Term Loans A $143,056 and Term Loans B
$177,500). The amendment amended the Company's credit facility dated September
23, 1999, as amended November 17, 1999; December 6, 1999; and December 7, 1999.

    In November 2000, absent a waiver, the Company would have failed to meet
certain covenants in its bank credit facility including financial covenants,
monthly and quarterly financial reporting requirements and record keeping
requirements. The Company obtained a waiver of these requirements conditioned on
the non-occurrence of certain events. As a result of the Company's announcement
in December 2000 of an increase in the total adjustments resulting from the
accounting matters then under investigation, the waiver expired by its terms,
and the Company and its bank lenders entered into a forbearance agreement dated
December 18, 2000. The forbearance agreement limited revolving credit loans to
$91,124. The forbearance agreement was subsequently amended several times. The
sixth amendment to the forbearance agreement, which expires on October 5, 2001,
limits the maximum borrowings under the revolving portion of the credit facility
to $61,128. The Company is negotiating with its banks to amend its credit
facility.


                                       7
<PAGE>   8

                                 RENT-WAY, INC.

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
               (all dollars in thousands, except per share data)


4.  DEBT, CONTINUED:

    As of March 31, 2001, the Company's credit facility debt under both the
euro-rate option and base-rate option plans were as follows:


<TABLE>
<CAPTION>
                       BORROWING OPTION PLAN         AMOUNT          RATE
                       ---------------------         ------          ----
<S>                                                <C>              <C>
           Base-rate............................   $175,900         11.00%
           Base-rate............................    134,472         10.25%
           Base-rate............................     50,631         10.25%
                                                   --------
                                                   $361,003
                                                   ========
</TABLE>


5.  DERIVATIVE FINANCIAL INSTRUMENTS:

    At March 31, 2001, the Company had interest rate swaps in the notional
amount of $184,000 and a fair market value of $(6.2).The variable pay interest
rate ranges from 5.09% to 6.97%. The maturity dates run through August 2005.

    The Company's interest rate swaps do not meet the qualifications for hedge
accounting treatment under Statement of Financial Accounting Standards ("SFAS")
No. 133. The Company adopted SFAS No. 133 on October 1, 2000, and as a result,
the fair value of the swaps was recorded as an asset in the amount of $2,510
with the offset to other comprehensive income. There was no tax impact to other
comprehensive income resulting from the adoption, due to a full net deferred tax
asset valuation allowance existing at September 30, 2000. The reduction to the
deferred tax asset, net of liabilities of $979 was offset by a reduction to the
deferred tax valuation allowance of $979 at adoption. The transition asset is
being amortized into earnings over the remaining life of the interest rate swap
agreements. For the quarter ended March 31, 2001, the Company's adverse change
in the fair market value of the interest rate swap portfolio of $4,557 was
charged to other expense in the Company's Consolidated Statements of Operations.

    On December 18, 2000, interest rate swaps in the notional amount of $20,000
were terminated by the issuing financial institution. The Company received in
cash the fair value of these terminated swaps and reduced the swap asset by $59
as a result of the termination.

6.  COMPREHENSIVE INCOME:

    Comprehensive income encompasses net income and changes in the components of
accumulated other comprehensive income not reflected in the Company's
Consolidated Statements of Operations during the periods presented. Accumulated
other comprehensive income consists of the transition asset recorded at the time
of adoption of SFAS No. 133.

<TABLE>
<CAPTION>
                                                     Other         Accumulated Other
                                                  Comprehensive      Comprehensive
                                                     Income             Income
                                                     ------             ------

<S>                                              <C>              <C>
         Net loss for the three months
              ended December 31, 2000               $(25,751)
         SFAS 133 Transition amount                    2,510            $2,510
         Amortization of SFAS 133
              Transition amount                         (216)             (216)
                                                    --------            ------
         Total for three months ended
              December 31, 2000                     $(23,457)           $2,294
                                                    --------            ------

         Net loss for the three months
              ended March 31, 2001                  $ (4,025)
         SFAS 133 Transition amount
         Amortization of SFAS 133
           Transition amount                        $   (216)           $ (216)
                                                    --------            ------
         Total for the six months ended
              March 31, 2001                        $(27,698)           $2,078
                                                    ========            ======
</TABLE>



                                       8
<PAGE>   9



                                 RENT-WAY, INC.

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                (all dollars in thousands, except per share data)


7.  CONTINGENCIES, CONTINUED:

    As of August 1, 2001, Rent-Way has been served with twelve complaints in
purported class action lawsuits filed in or transferred to the U.S. District
Court for the Western District of Pennsylvania. The complaints allege that,
among other things, as a result of accounting irregularities, the Company's
previously issued financial statements were materially false and misleading thus
constituting violations of federal securities laws by the Company and by certain
officers. The actions allege that the defendants violated Sections 10(b) and/or
Section 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated
thereunder. The actions seek damages in unspecified amounts. The actions purport
to be brought on behalf of purchasers of the Company's common stock during
various periods, all of which fall between January 18, 2000, and October 30,
2000. The District Court has ordered that the actions be consolidated. Rent-Way
is currently evaluating these claims and possible defenses thereto. Additional
purported class action lawsuits similar to those described above may be filed,
and the existing lawsuits may be amended to increase the purported class.

    Certain of Rent-Way's officers and directors and Rent-Way, as nominal
defendant, have been sued in a shareholder derivative action brought on behalf
of Rent-Way in the U.S. District Court for the Western District of Pennsylvania.
The derivative complaint purports to assert claims on behalf of Rent-Way against
the defendants for violation of duties asserted to be owed by the defendants to
Rent-Way and which relate to the events which gave rise to the purported class
actions described above. All proceedings in the derivative case have been
stayed, pending the resolution of the class actions. Rent-Way cannot predict the
outcome of the litigation.

    Pursuant to its bylaws, Rent-Way is obligated to indemnify its officers and
directors under certain circumstances against claims made in these lawsuits.
Rent-Way may also be obligated to indemnify certain of its officers and
directors for the costs they incur as a result of the lawsuits.

    While it is not feasible to predict or determine the final outcome or timing
of these or similar proceedings, or to estimate the amounts or potential range
of loss with respect to these matters, management believes that an adverse
outcome with respect to such proceedings could have a material adverse impact on
the Company's financial position and results of operations.

    The Company is subject to legal proceedings and claims in the ordinary
course of its business that have not been finally adjudicated. Certain of these
cases have resulted in contingent liabilities ranging from $38,097 to $38,252.
The majority of such claims are, in the opinion of management, covered by
insurance policies or indemnification agreements and therefore should not have a
material effect on the Company's financial position and results of operations.
Additional claims exist of approximately $139 for which management believes it
has meritorious defenses but for which the likelihood of an unfavorable outcome
is currently not determinable. Additionally, claims exist for which management
is not able to estimate a potential loss. In management's opinion, none of these
claims will have a material adverse affect on the Company's financial position
and results of operations.

    The Company is self-insured for certain losses related to workers'
compensation, employee medical and employee dental claims, vehicle and general
liability.

    The Company has purchased stop-loss coverage in order to limit its exposure
to any significant levels of claims. Self-insurance reserves are accrued based
upon the Company's estimates of the aggregate liability for uninsured claims
incurred using certain actuarial assumptions followed in the insurance industry
and the Company's historical experience. The Company has obtained letters of
credit of $6,000 to guarantee the payment of future claims. The face value of
the letters of credit approximates their market value at March 31, 2001.

    On February 5, 2001, as a result of the significant price drop in Rent-Way
stock following disclosure of the accounting investigation (See Note 2), the
Company made an additional cash contribution of $366 to the Rent-Way, Inc.
401(k) Retirement Savings Plan ("the Rent Way Plan") in order to restore a
portion of the loss in value of Rent-Way stock held in participant accounts
under the plan. The Company also committed to make additional contributions in
future years to the extent Rent-Way stock price does not reach certain levels.



                                       9
<PAGE>   10

                                 RENT-WAY, INC.

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                (all dollars in thousands, except per share data)


8.  INCOME TAXES:

    The Company recorded no tax benefit on its operating losses for the quarter
ended March 31, 2001, due to the uncertainty of its realization. The deferred
tax asset, net of liabilities increased from $10,050 at September 30, 2000, to
$19,723 at March 31, 2001, for an increase of $1,501 and $8,172 for the quarters
ended March 31, 2001 and December 31, 2000, respectively. A full valuation
allowance has been provided against that net deferred tax asset.

9.  RESTATEMENT:

    The summary of the significant effects of the restatement of the Condensed
Consolidated Statement of Operations reported on the Form 10-Q for the six
months ended March 31, 2000, are as follows:

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (all dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                               FOR THE SIX MONTHS ENDED
                                                                                     MARCH 31, 2000
                                                            --------------------------------------------------------------

                                                            (AS PREVIOUSLY REPORTED)                         (AS RESTATED)
                                                                  (UNAUDITED)          (ADJUSTMENTS)          (UNAUDITED)
                                                                  -----------          -------------          -----------

<S>                                                         <C>                        <C>                   <C>
         REVENUES:
         Rental revenue ...............................            $ 247,004                    --             $ 247,004
         Other revenue ................................               42,796                    --                42,796
                                                                   ---------             ---------             ---------
              Total revenues ..........................              289,800                    --               289,800

         COSTS AND OPERATING EXPENSES:
         Depreciation and amortization:
           Rental merchandise .........................               67,476                 5,924                73,400
           Property and equipment .....................                7,587                 4,059                11,646
           Amortization of goodwill ...................                6,537                    99                 6,636
         Salaries and wages ...........................               71,305                   680                71,985
         Advertising ..................................               11,491                (3,193)                8,298
         Occupancy ....................................               21,289                 2,045                23,334
         Other operating expenses .....................               56,322                17,123                73,445
                                                                   ---------             ---------             ---------
              Total costs and operating expenses ......              242,007                26,737               268,744
                                                                   ---------             ---------             ---------
              Operating income ........................               47,793               (26,737)               21,056

         OTHER INCOME (EXPENSE):
         Interest expense .............................              (12,974)                 (805)              (13,779)
         Equity in loss of subsidiary .................                 (197)                 (376)                 (573)
         Interest income ..............................                   84                    (6)                   78
         Other income (expense), net ..................                 (198)                   17                  (181)
                                                                   ---------             ---------             ---------
                Income before income taxes ............               34,508               (27,907)                6,601
         Income tax expense ...........................               13,450               (10,846)                2,604
                                                                   ---------             ---------             ---------
         Net income ...................................            $  21,058             $ (17,061)            $   3,997
                                                                   =========             =========             =========

         EARNINGS (LOSS) PER COMMON SHARE (SEE NOTE 2):
            Basic earnings per common share:
                Net income ............................            $    0.94                                   $    0.18
                                                                   =========                                   =========
            Diluted earnings per common share:
                Net income ............................            $    0.90                                   $    0.18
                                                                   =========                                   =========
            Weighted average common shares outstanding:
                Basic .................................               22,326                                      22,326
                                                                   =========                                   =========
                Diluted ...............................               23,834                                      22,326
                                                                   =========                                   =========
</TABLE>


    Additional information regarding adjustments made in connection with the
restatement of the Company's Condensed Consolidated Statements of operations for
the six months ended March 31, 2000, is contained in the Company's Annual Report
on Form 10 K/A for the year ended September 30, 2000.





                                       10
<PAGE>   11

                                 RENT-WAY, INC.

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                (all dollars in thousands, except per share data)

10.  SEGMENT INFORMATION:

     Rent-Way is a national rental-purchase chain that provides a variety of
services to its customers including rental of household items and prepaid local
telephone service on a week-by-week or a month-by-month basis. The Company has
determined that its reportable segments are those that are based on the
Company's method of internal reporting, which disaggregates its business by
product category. The Company's reportable segments are household rentals and
prepaid telephone service. Its household rental segment rents name brand
merchandise such as furniture, appliances, electronics and computers on a
weekly, biweekly, semimonthly or bimonthly basis. Its prepaid telephone service
segment provides a local dial tone on a month-by-month basis.

     The financial results of the Company's segments follow the same accounting
policies as described in "Summary of Significant Accounting Policies" (see Note
1). The information presented below does not include the results of the prepaid
telephone service segment prior to its acquisition on January 4, 2000.

<TABLE>
<CAPTION>
                                                      Household
                                                       Rental          Prepaid Telephone
         For the three months ended March 31, 2001     Segment               Service          Total Segments
         -----------------------------------------     -------               -------          --------------
<S>                                                   <C>              <C>                    <C>
         Total revenue ..........................     $ 165,776             $   9,192            $ 174,968
                                                      =========             =========            =========
         Operating income (loss).................     $  10,830             $     800            $  11,630
                                                      =========             =========            =========
         Net income (loss) ......................     $  (4,714)            $     689            $  (4,025)
                                                      =========             =========            =========
</TABLE>

<TABLE>
<CAPTION>
                                                      Household
                                                       Rental          Prepaid Telephone
         For the six months ended March 31, 2001       Segment               Service          Total Segments
         ---------------------------------------       -------               -------          --------------
<S>                                                  <C>              <C>                    <C>
         Total revenue ..........................     $ 316,331             $  17,374            $ 333,705
                                                      =========             =========            =========
         Operating income (loss).................     $     105             $     851            $     956
                                                      =========             =========            =========
         Net income (loss) ......................     $ (30,441)            $     665            $ (29,776)
                                                      =========             =========            =========

         Total Assets ...........................     $ 726,118             $   5,279            $ 731,397
                                                      =========             =========            =========
</TABLE>


     Intercompany revenues between Rent-Way and DPI have been eliminated in the
consolidated financial statements. These revenues were $0.5 million for the
three months ended March 31, 2001, and $1.0 million for the six months ended
March 31, 2001.

11.  RECENT ACCOUNTING PRONOUNCEMENTS:

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 142 requires the cessation of
amortization of goodwill and other indefinite-lived intangibles on its balance
sheet. Goodwill on the balance sheet must then be tested for impairment at least
annually. The Company expects to early adopt SFAS 142 effective October 1, 2001,
but has not yet determined the impact of adopting this statement.

     In June 2001, FASB issued Statement of Financial Accounting Standard No.
143 "Accounting for Asset Retirement Obligations ("SFAS No. 143"). SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Company is currently evaluating the
provisions of this statement.

12.  LIQUIDITY:

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. In November 2000 absent a waiver,
the Company would have failed to meet certain covenants in its bank credit
facility including financial covenants, monthly and quarterly financial
reporting requirements and record keeping requirements. The Company obtained a
waiver of these requirements conditioned on the non-occurrence of certain
events. As a result of the Company's announcement in December 2000 of an
increase in the total adjustments resulting from the accounting matters under
investigation (see Note 2), the waiver expired by its terms, and the Company and
its bank lenders entered into a forbearance agreement dated December 18, 2000.
The forbearance agreement limited revolving credit loans and letters of credit
to $91,124. The forbearance agreement was subsequently amended several times.
The sixth amendment to the forbearance agreement, which expires on October 5,
2001, limits the maximum borrowing under the Company's revolving portion of the
credit facility to $61,128.

     The Company is in negotiations with its lenders to amend its credit
facility such that it will provide the Company with sufficient borrowing
capacity and revised loan covenants. There can be no assurance that the Company
will be successful in negotiating an amended credit facility.

     The Company's ability to operate as a going concern is largely dependent on
its ability to successfully negotiate with its bank lenders an amendment to the
Company's existing credit facility.




                                       11
<PAGE>   12



                                 RENT-WAY, INC.

            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITIONS AND RESULTS OF OPERATIONS
                           (all dollars in thousands)


    The Company has determined that its unaudited financial statements as of and
for the period ended March 31, 2000, were inaccurate and require restatement.
These inaccuracies and required restatements are discussed at Notes 2 and 9 of
the notes to the Company's unaudited financial statements included in this
report and in the Company's Annual Report on Form 10 K/A for the fiscal year
ended September 30, 2000. This Management's Discussion and Analysis of Financial
Condition and Results of Operations for the periods ended March 31, 2001 and
2000 reflects the restatement of the Company's previously reported financial
results for the period ended March 31, 2000.

OVERVIEW

    Rent-Way is the second largest operator in the rental purchase industry
with 1,130 stores located in 42 states as of August 22, 2001. The Company offers
quality brand name home entertainment equipment, computers, furniture,
appliances, and jewelry to customers under full-service rental-purchase
agreements that generally allow the customer to obtain ownership of the
merchandise at the conclusion of an agreed upon rental period. The Company also
provides prepaid local phone service to consumers on a monthly basis through its
majority-owned subsidiary, dPi Teleconnect, L.L.C. ("DPI").

RESULTS OF OPERATIONS

    The following table sets forth, for the periods indicated, certain items
from the Company's unaudited Condensed Consolidated Statements of Operations,
expressed as a percentage of revenues.


<TABLE>
<CAPTION>
                                                                      THREE MONTHS                          SIX MONTHS
                                                                     ENDED MARCH 31                       ENDED MARCH 31
                                                               ---------------------------------------------------------------
                                                                2001               2000               2001               2000
                                                               ---------------------------------------------------------------
                                                                               (As Restated)                        (As Restated)
                                                                                                                     (See Note 9)
<S>                                                            <C>            <C>                  <C>             <C>
         REVENUES:
           Rental revenue ...........................           80.6%              85.3%              80.7%              85.2%
           Prepaid phone service revenue ............            5.3                 --                5.2                 --
           Other revenue ............................           14.1               14.7               14.1               14.8
                                                               -----              -----              -----              -----
              Total revenues ........................          100.0              100.0              100.0              100.0

         COSTS AND OPERATING EXPENSES:
         Depreciation and amortization
           Rental merchandise .......................           30.0               26.7               29.6               25.3
           Property and equipment ...................            4.6                4.3                4.6                4.0
           Amortization of goodwill .................            2.1                2.3                2.2                2.3
                                                               -----              -----              -----              -----
              Total depreciation and amortization....           36.7               33.3               36.4               31.6
         Cost of prepaid phone service ..............            2.9                 --                3.0                 --
         Salaries and wages .........................           22.5               24.3               24.3               24.8
         Advertising ................................            1.0                3.0                3.9                2.9
         Occupancy ..................................            7.1                8.2                7.4                8.1
         Other operating expenses ...................           23.1               26.2               24.6               25.3
                                                               -----              -----              -----              -----
              Total costs and operating expenses.....           93.4               95.0               99.7               92.7
                                                               -----              -----              -----              -----
              Operating income ......................            6.6                5.0                0.3                7.3
         Interest expense ...........................           (6.4)              (5.0)              (6.6)              (4.8)
         Equity in loss of subsidiary ...............             --               (0.4)                --               (0.2)
         Interest income ............................             --                 --                 --                 --
         Other income ...............................           (2.6)                --               (2.7)              (0.1)
                                                               -----              -----              -----              -----
              Income before income taxes ............           (2.3)              (0.3)              (8.9)               2.3
         Income tax expense (benefit) ...............             --               (0.1)                --                0.9
                                                               -----              -----              -----              -----
         Net Income (loss) ..........................           (2.3)%             (0.2)%             (8.9)%              1.4%
                                                               =====              =====              =====              =====
</TABLE>


COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (AS RESTATED)

    Total revenues. Total revenues increased $26.1 million, or 17.5%, to $175.0
million from $148.9 million. The increase is attributable to the addition of DPI
revenue, the inclusion of a partial year's operations for the stores acquired
and opened in fiscal 2000 and 2001, and increased same store revenues offset by
the revenue lost from stores closed. DPI revenue accounted for $9.2 million, or
35.2%, of the increase. Stores opened in fiscal 2000 and 2001 accounted for $9.2
million, or 35.2%, of the increase. The Company's same stores accounted for $9.6
million, or 36.8%, of the increase. Stores acquired in 2000 and 2001 accounted
for $2.3 million, or 8.8%, of the increase. These increases were offset by a
$4.2 million loss in revenue that resulted from stores closed. Same store
revenues increased 7.0%. This increase in same store revenues is due in part to
Gateway computers and prepaid phone service added to the Company's


                                       12
<PAGE>   13

line of products and services during fiscal 2000. Management believes
opportunities exist to provide additional non-traditional merchandise and
services to its customers.

    Depreciation and Amortization. Depreciation expense related to rental
merchandise increased to 30% as a percentage of total revenues from 26.7%. This
increase was primarily due to the depreciation expense related to Gateway
computers. These computers were added to the Company's product line in June 2000
and are depreciated on a straight-line basis.

    Depreciation expense related to property and equipment increased to 4.6% as
a percentage of total revenues from 4.3%. This increase is primarily due to the
build-outs for new stores and remodels of acquired stores since March 31, 2000.

    Amortization of goodwill decreased to 2.1% as a percentage of total revenues
from 2.3%. This decrease is primarily a function of higher revenues.

    Cost of Prepaid Phone Service. The cost of prepaid phone service was $5
million or 2.9% of total revenues in fiscal year 2001. The Company began
consolidating DPI when it achieved majority ownership during the third quarter
of fiscal 2000.

    Salaries and Wages. Salaries and wages increased by $3.2 million to $39.4
million from $36.2 million, primarily due to the addition of acquired stores
during fiscal 2000, the new stores that opened after the March quarter of fiscal
year 2000 and fiscal year-to-date 2001, and DPI's salary and wage expense.
Salaries and wages decreased to 22.5% as a percentage of total revenues from
24.3%.

    Advertising. Advertising expense decreased from $4.5 million to $1.8 million
or 1% of total revenues. This was primarily because the Company spent heavily in
the fall season (1st quarter) and then reduced advertising during the following
quarters of fiscal 2001.

    Occupancy. Occupancy expense increased to $12.5 million from $12.2 million
primarily due to the acquisition of stores during the second half of fiscal 2000
and new stores that opened after the March quarter of fiscal year 2000 and
fiscal year-to-date 2001.

    Other Operating Expense. Other operating expense increased by $1.4 million
and decreased to 23.1% as a percentage of total revenues from 26.2%. This
decrease in percentage terms is primarily a function of higher revenues
leveraging more fixed-type of costs.

    During the second quarter of fiscal 2001, accounting fees, legal fees and
consulting fees related to the investigation, shareholder litigation and the
audit were $2.9 million.

    Interest Expense. Interest expense increased from 5.0% to 6.4% as a
percentage of total revenues. This increase is due to in increased debt from the
prior year and the higher effective interest rate that is being paid due to the
existence of covenant defaults under the Company's bank credit facility. The
increase in debt was primarily for store acquisitions/openings, the launching of
the Gateway program and funding operating losses.

    Other Expense. Other expense increased to $4.5 million in the second quarter
of fiscal year 2001, primarily as a result of an adverse change in the fair
market value of the interest swap portfolio resulting in an expense of $4.2
million

    Income Tax Expense. During the second quarter of fiscal 2001, the Company
recorded no income tax benefit related to the operating losses due to the
uncertainty of its realization. The increase to the deferred tax asset, net of
liabilities was $1.5 million for the quarter which was offset by a full
valuation allowance.

    Net Loss. Net loss increased $3.7 million in the period as a result of the
factors described above.

COMPARISON OF SIX MONTHS ENDED MARCH 31, 2001 AND 2000 (AS RESTATED)

    Total revenues. Total revenues increased $43.9 million, or 15.2%, to $333.7
million from $289.8 million. The increase is attributable to the addition of DPI
revenue, the inclusion of a partial year's operations for the stores acquired
and opened in fiscal 2000 and 2001, and increased same store revenues offset by
the revenue lost from stores closed. DPI revenue accounted for $17.4 million, or
39.6%, of the increase. Stores opened in fiscal 2000 and 2001 accounted for
$16.7 million, or 38.0%, of the increase. The Company's same stores accounted
for $13.8 million, or 31.7%, of the increase. Stores acquired in 2000 and 2001
accounted for $4.3 million, or 9.8%, of the increase. These increases were
offset by an $8.3 million loss in revenue that resulted from stores closed.
Same store revenues increased


                                       13
<PAGE>   14

5.4%. This increase in same store revenues is due in part to Gateway computers
and prepaid phone service added to the Company's line of products and services
during fiscal 2000. Management believes opportunities exist to provide
additional non-traditional merchandise and services to its customers.

    Depreciation and amortization. Depreciation expense related to rental
merchandise increased to 29.6% as a percentage of total revenues from 25.3%.
This increase is primarily due to the depreciation expense related to Gateway
computers. These computers were added to the Company's product line in June 2000
and are depreciated on a straight-line basis.

    Depreciation expense related to property and equipment increased to 4.6% as
a percentage of total revenues from 4%. This increase is primarily due to the
build-outs for new stores and remodels for acquired stores since March 31, 2000.

    Amortization of goodwill decreased to 2.2% as a percentage of total revenues
from 2.3%. It increased by $.7 million due primarily to the 24 stores acquired
after the first quarter of fiscal year 2000. This decrease in percentage terms
is primarily a function of higher revenues.

    Cost of prepaid phone service was $10 million or 3% of total revenues The
Company began consolidating DPI when it achieved majority ownership during the
third quarter of fiscal 2000.

    Salaries and Wages. Salaries and wages increased by $9.0 million to $81.0
million from $72.0 million primarily due to the addition of acquisition stores
during fiscal 2000, the new stores that opened during fiscal year 2000 and
fiscal year-to-date 2001, and DPI's salary and wage expense. Salaries and wages
decreased to 24.3% as a percentage of total revenues from 24.8%.

    Advertising. Advertising expense increased from $8.3 million to $13.2
million primarily due to the roll-out of the Gateway program, the opening of new
stores during the period, and television production costs for the fall 2000
campaign.

    Occupancy. Occupancy expense increased to $24.7 million from $23.3 million.
This was due to the acquisitions that occurred during the last 6 months of
fiscal 2000, the new stores that have opened during the last 12 months, and
lease terminations for stores during the first 6 months of fiscal 2001.
Occupancy expense decreased to 7.4% as a percentage of total revenues from 8.1%.

    Other Operating Expense. Other operating expense increased by $8.6 million
to $82.0 million from $73.4 million. This increase is primarily due to higher
rental merchandise losses, health and disability insurance costs, utility costs,
accounting fees, legal fees and consulting fees. It increased to 24.6% as a
percentage of total revenues from 25.3%.

    For the first six months of fiscal 2001, accounting fees, legal fees and
consulting fees related to the audit and investigation were $3.9 million.

    Interest Expense. Interest expense increased from 4.8% to 6.6%. This
increase is due to the increased debt levels and the higher effective interest
rate that is being paid due to the existence of covenant defaults under the
Company's bank credit agreement and $.5 million in forbearance fee expenses. The
increase in debt was primarily for store acquisitions/openings, the launching of
the Gateway program and funding operating losses.

    Other Expense. Other expense increased to $8.9 million in fiscal 2001
primarily as a result of an adverse change in the fair market value of the
interest swap portfolio, which resulted in an expense of $8.9 million being
recorded.

    Income Tax Expense. During fiscal 2001, the Company recorded no income tax
benefit related to the operating losses in 2001 due to the uncertainty of its
realization. The increase to the deferred tax asset, net of liabilities, for the
six months ended March 31, 2001, was $9.7 million, which was offset by a full
valuation allowance.

    Net Loss. A net loss of $29.8 million was incurred in the period as a result
of the factors described above compared to net income in the same period last
year of $4.0 million.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's capital requirements relate primarily to purchasing additional
rental merchandise and replacing rental merchandise that has been sold or is no
longer suitable for rent. As a result of the accounting matters described above,
the Company became in default of several of the covenants contained in its bank
credit facility and is now operating under a forbearance agreement with its bank
lenders, which expires on October 5, 2001. Currently, the Company's ability to
borrow funds is limited. The Company is in negotiations with its bank lenders to
obtain an amended credit facility that will provide the



                                       14
<PAGE>   15

Company with sufficient borrowing capacity and revised loan covenants. There can
be no assurance that the Company will be successful in negotiating an amended
credit facility. If the Company cannot obtain an amended credit facility on
acceptable terms, its financial condition and results of operation would be
materially adversely affected.

    For the six months ended March 31, 2001 operations provided $45.1 million
compared to operations using $23.3 million for the six months ended March 31,
2000. In the fiscal 2001 period, depreciation and amortization provided $121.8
million, utilization of deposits with vendors provided $29.0 million, and income
tax refunds provided $12.0 million offset by a net loss of $29.8 million, the
purchase of rental merchandise of $105.7 million, and the reduction of accounts
payable of $8.0 million. In the fiscal 2000 period, cash was used primarily to
purchase rental merchandise of $121.1 million offset by net income of $4.0
million and depreciation and amortization of $91.9 million.

    Net cash used in investing activities was $6.7 million for the six months
ended March 31, 2001, compared to $23.0 million used in investing activities for
the six months ended March 31, 2000. In the fiscal 2001 period, the purchase of
property and equipment accounted for $7.3 million offset by sale proceeds from
store sales of $0.9 million. In the fiscal 2000 period, the purchase of
businesses accounted for $9.9 million and the purchase of property and equipment
accounted for $13.0 million.

    Financing activities used $30.8 million for the six months ended March 31,
2001 to pay down bank borrowings by $31.2 million as compared to the six months
ended March 31, 2000 when the Company borrowed $43.5 million for the purchase of
rental merchandise, property and equipment, and new store openings.

SEASONALITY AND INFLATION

    Management believes that the Company's operating results may be subject to
seasonality. The first quarter typically has a greater percentage of rentals
because of traditional holiday shopping patterns. Management plans for these
seasonal variances and takes particular advantage of the first quarter with
product promotions, marketing campaigns, and employee incentives. Because many
of the Company's expenses do not fluctuate with seasonal revenue changes, such
revenue changes may cause fluctuations in the Company's quarterly earnings.

    During the six months ended March 31, 2001, the cost of rental merchandise,
energy costs, store lease rental expense and salaries and wages has increased
modestly. These increases have not had a significant effect on the Company's
results of operations because the Company has been able to charge commensurately
higher rental for its merchandise. This trend is expected to continue in the
foreseeable future.

RECENT ACCOUNTING PRONOUNCEMENTS

    Effective October 1, 2000, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"). SFAS No. 133 requires that the Company record all
derivatives on the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships. The Company's credit
agreement requires that it enter into interest rate swap agreements to
mitigate or eliminate its interest rate risk as a result of its interest rates
indexed to LIBOR and prime rates.

    As a result of the Company being in default under its credit agreement and
not having a policy in place, it could not effectively hedge its interest rate
swaps and, therefore, did not qualify for hedge accounting treatment. As a
result of adopting SFAS No. 133 and in accordance with the transition
provisions, the Company recorded a gain of $2.5 million to accumulated
comprehensive income. The transition amount will be amortized into earnings over
the remaining term of the interest rate swaps of 3 to 5 years. There was no tax
impact to other comprehensive income resulting from this charge as the net
deferred tax asset was reduced by $979 with an offsetting reduction to the
deferred tax valuation allowance of $979.

    During the quarter, the Company recorded the ineffectiveness related to cash
flow hedges to other expense. This increased other expense by $4.6 million.

    Once its credit agreement is amended, the Company will assess on an on-going
basis whether to adopt hedge accounting treatment for its interest rate swaps.

    The Company does not enter into derivative instruments for speculative
purposes.

    In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 142 requires the cessation of
amortization of goodwill and other indefinite-lived intangibles on its balance
sheet. Goodwill on the balance sheet must then be tested for impairment at least
annually. The Company expects to early adopt SFAS 142 effective October 1, 2001,
but has not yet


                                       15
<PAGE>   16

determined the impact of adopting this statement.

     In June 2001, FASB issued Statement of Financial Accounting Standard No.
143 "Accounting for Asset Retirement Obligations ("SFAS No. 143"). SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Company is currently evaluating the
provisions of this statement.

CAUTIONARY STATEMENT

     This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. See particularly Item 2,
"Management's Discussion and Analysis of Financial Condition," among others.
These statements may be identified by terms and phrases such as "anticipate",
"believe", "intend", "estimate", "expect", "continue", "should", "could", "may",
"plan", "project", "predict", "will" and similar expressions and relate to
future events and occurrences. These statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. Factors that could cause actual results to differ materially from
those expressed or implied in such statements include but are not limited to:

    Rent-Way's ability to control and normalize operating expenses and to
    continue to realize operating efficiencies.

    Rent-Way's ability to make principal and interest payments on its high-level
    of outstanding bank debt.

    Rent-Way's ability to negotiate an amendment to its existing senior credit
    facility, under which it is currently in default, or to refinance the debt
    thereunder.

    The outcome of any class action and derivative lawsuits commenced against
    Rent-Way and its officers and directors and any proceedings or
    investigations involving Rent-Way commenced by governmental authorities,
    including the Securities and Exchange Commission and the United States
    Department of Justice.

    Rent-Way's ability to develop, implement, and maintain reliable and adequate
    internal accounting systems and controls.

    Rent-Way's ability to retain existing senior management and attract
    additional management employees.

    General economic, business, and demographic conditions, including demand for
    Rent-Way's products and services.

    General conditions relating to the rental-purchase industry and the prepaid
    local phone service industry, including the impact of state and federal laws
    regulating or otherwise affecting the rental-purchase transaction and
    prepaid local phone service transaction.

    Competition in the rental-purchase industry and prepaid local phone service
    industry, including competition with traditional retailers.

    Rent-Way's ability to enter into and to maintain relationships with vendors
    of its rental merchandise including its ability to obtain goods and services
    on favorable credit terms.

     Given these factors, undue reliance should not be placed on any
forward-looking statements and statements regarding Rent-Way's future prospects
and performance. Such statements speak only as of the date made. Rent-Way
undertakes no obligation to update or revise any such statements whether as a
result of new information, the occurrence of future events, or otherwise.

     A wide range of factors could materially affect future developments and
performance. A list of such factors is set forth in the Company's Annual Report
on Form 10 K/A for the year ended September 30, 2000, under the heading
"Cautionary Statement Regarding Forward Looking Statements and Future
Prospects."

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's major market risk exposure is primarily due to possible
fluctuations in interest rates. As of March 31, 2001, the Company had $361.0
million in loans with floating interest rates indexed to current LIBOR and prime
rates. Because the floating rates expose the Company to the risk of increased
interest cost if interest rates rise, the Company began a policy in 1998 of
managing interest rate risk by utilizing interest rate swap agreements to
convert a portion of the floating interest rate loans to fixed interest rates.
As of March 31, 2001, the Company has $184.0 million in interest rate swap


                                       16
<PAGE>   17


agreements that lock in a LIBOR rate ranging from 5.09% to 6.97%. This
effectively fixes the interest rate on $184.0 million of loans, thus hedging
this risk. These interest rate swap agreements have maturities ranging from 2002
to 2005. The market value of the interest rate swaps will be negatively impacted
by falling interest rates and/or a flattening of the yield curve.

    Given the Company's current capital structure, including interest rate swap
agreements, there is $173 million, or 47.9% of the Company's total debt, in
floating rate loans. A hypothetical 1.0% change in the LIBOR rate would affect
pre-tax earnings by approximately $1.8 million.

    The Company does not enter into derivative financial instruments for trading
or speculative purposes. The interest rate swap agreements are entered into with
major financial institutions thereby minimizing the risk of credit loss.



                                       17
<PAGE>   18


PART II--OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

FEDERAL INVESTIGATIONS

    There are currently pending federal governmental investigations by the SEC
and the United States Attorney involving the Company's financial reporting.
Rent-Way is cooperating fully in these investigations. Also, the law firms of
Hodgson Russ LLP and Ross & Hardies have conducted an independent investigation
of financial reporting issues. A joint interim attorneys' report regarding this
investigation date June 19, 2001, has been conveyed to the board of directors
and to management and was considered in connection with the preparation of the
Company's financial statements and this report. The investigations are ongoing,
and the Company cannot predict their outcomes. If Rent-Way were convicted of any
crime or subjected to sanctions, substantial penalties, damages or other
monetary remedies are assessed against Rent-Way, this could have a material
adverse effect on the Company's results of operations and financial condition.

SECURITIES LITIGATION

    As of August 1, 2001, Rent-Way has been served with twelve complaints in
purported class action lawsuits filed in or transferred to the U.S. District
Court for the Western District of Pennsylvania. The complaints allege that,
among other things, as a result of accounting irregularities, the Company's
previously issued financial statements were materially false and misleading thus
constituting violations of federal securities laws by the Company and by certain
officers. The actions allege that the defendants violated Sections 10(b) and/or
Section 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated
thereunder. The actions seek damages in unspecified amounts. The actions purport
to be brought on behalf of purchasers of the Company's common stock during
various periods, all of which fall between January 18, 2000, and October 30,
2000. The District Court has ordered that the actions be consolidated and on
March 9, 2001, appointed Cramer Rosenthal McGlynn, LLC, an investment advisor
that purchased the Company's common stock for the accounts of its clients to
serve as lead plaintiff and the firm of Gold, Bennett, Cera & Sidener LLP to
serve as lead counsel. The lead plaintiff must file a consolidated complaint
within 20 days of the filing of the Company's amended Annual Report on Form 10
K/A for the 2000 fiscal year.. Rent-Way is currently evaluating these claims and
possible defenses thereto. Additional purported class action lawsuits similar to
those described above may be filed, and the existing complaints may be amended
to increase the purported class.

    Certain of Rent-Way's officers and directors and Rent-Way, as nominal
defendant, have been sued in a shareholder derivative action brought on behalf
of Rent-Way in the U.S. District Court for the Western District of Pennsylvania.
The derivative complaint purports to assert claims on behalf of Rent-Way against
the defendants for violation of duties asserted to be owed by the defendants to
Rent-Way and which relate to the events which gave rise to the purported class
actions described above. All proceedings in the derivative case have been
stayed, pending the resolution of the class action lawsuits.

    Rent-Way is presently unable to predict or determine the final outcome of,
or to estimate the amounts or potential range of loss with respect to, these
matters, management believes that these matters could have a material adverse
impact on the Company's financial position and results of operations.

    Pursuant to its bylaws, Rent-Way is obligated to indemnify its officers and
directors under certain circumstances against claims made in these lawsuits.
Rent-Way may also be obligated to indemnify certain of its officers and
directors for the costs they incur as a result of the investigations and
lawsuits described above.

OTHER LITIGATION

    Rent-Way is also subject to litigation in the ordinary course of business.
In the opinion of management, the ultimate outcome of any existing litigation,
other than the investigations and the lawsuits described above, would not have a
material adverse effect on the Company's financial condition and results of
operations.



                                       18
<PAGE>   19


                                 RENT-WAY, INC.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    As a result of the accounting matters described herein, the Company became
in default of several of the covenants contained in its bank credit facility
including, without limitation, the covenants regarding maximum leverage ratio,
minimum interest coverage ratio, minimum net worth, fixed charge coverage ratio,
and rental merchandise usage and the covenants regarding delivery of monthly,
quarterly and annual financial statements of the Company and is now operating
under a forbearance agreement with its bank lender which expires on October 5,
2001. Currently, the Company's ability to borrow funds is limited. The Company
is in negotiations with its bank lenders to obtain an amended credit facility
that will provide the company with sufficient borrowing capacity and revised
loan covenants. There can be now assurance that the company will be successful
in negotiating an amended credit facility. If the Company cannot obtain an
amended credit facility on acceptable terms, its financial condition and results
of operations would be materially adversely affected.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


       a.  EXHIBITS

           None.

       b.  REPORTS ON FORM 8-K


           The Company filed the following reports on Form 8-K in the quarter
ended March 31, 2001:

            (1) Form 8-K dated January 17, 2001, filing a press release
                regarding the status of the Company's Form 10-K for the 2000
                fiscal year.

            (2) Form 8-K dated February 5, 2001, filing a press release
                regarding an upcoming conference call for investors.

            (3) Form 8-K dated February 5, 2001, filing a press release
                regarding the Company's expected fiscal 2001 financial results.

            (4) Form 8-K dated February 15, 2001, filing a press release
                regarding the status of the Company's Form 10-K for the 2000
                fiscal year.

            (5) Form 8-K dated March 22, 2001, filing a press release regarding
                an upcoming conference call for investors.

            (6) Form 8-K dated March 26, 2001, filing a press release regarding
                the status of the Company's Form 10-K for the 2000 fiscal year
                and related matters.



                                       19
<PAGE>   20




                                 RENT-WAY, INC.

                                   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 thereunto duly authorized.


                                        Rent-Way, Inc.
                                    ---------------------
                                        (Registrant)



                                    By:

      August 22, 2001                         /s/ William A. McDonnell
---------------------------         ------------------------------------------
           Date                                    (Signature)
                                              William A. McDonnell
                                    Vice President and Chief Financial Officer



                                    By:

      August 22, 2001                           /s/ John A. Lombardi
---------------------------         ------------------------------------------
           Date                                     (Signature)
                                                 John A. Lombardi
                                      Chief Accounting Officer and Controller
























                                       20