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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------
 
                                  FORM 10-K/A
 
           [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
 
           [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM           TO

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                        COMMISSION FILE NUMBER: 0-22026
 
                                 RENT-WAY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
      PENNSYLVANIA                                      25-1407782
(STATE OF INCORPORATION)                    (I.R.S. EMPLOYER IDENTIFICATION NO.)
 
                  ONE RENTWAY PLACE, ERIE, PENNSYLVANIA 16505
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
 
                                  814-455-5378
                          (ISSUER'S TELEPHONE NUMBER)
 
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:     NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                           COMMON STOCK, NO PAR VALUE
                                (TITLE OF CLASS)
 
Check whether the issuer (1) 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
 
Check if there is no disclosure of delinquent filers in response to Items 405 of
Regulation S-K in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [  ]
 
Based on the closing sales price on November 4, 1997 the aggregate market value
of stock held by non-affiliates of the issuer was $117,806,561.
 
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
 
<TABLE>
<S>                  <C>
       CLASS                 OUTSTANDING AS OF NOVEMBER 4, 1997
   Common Stock                           7,772,613
</TABLE>
 
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                                 RENT-WAY, INC.
 
                                     PART I
 
ITEM I BUSINESS
 
GENERAL
 
     Rent-Way, Inc. (the "Company") has been engaged in the rental-purchase
business since 1981 and currently operates 184 stores that provide quality brand
name merchandise in 14 states and the District of Columbia. The Company offers
home entertainment equipment, furniture, major 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. Management believes that these rental-purchase arrangements
appeal to a wide variety of customers by allowing them to obtain merchandise
that they might otherwise be unable or unwilling to obtain due to insufficient
cash resources or lack of access to credit or because they have a temporary,
short-term need for the merchandise or a desire to rent rather than purchase the
merchandise.
 
     The Company was formed in 1981 to operate a rental-purchase store in Erie,
Pennsylvania. By 1993, as a result of acquisitions and new store openings, the
Company was operating 19 stores in three states and had completed its initial
public offering. As of September 30, 1997, principally as a result of
acquisitions, the Company was operating 184 stores in 14 states and the District
of Columbia.
 
     The Company's principal executive offices are located at 3230 West Lake
Road, Erie, Pennsylvania 16505, and its telephone number is (814) 836-0618.
 
FISCAL 1997 ACQUISITIONS
 
     On January 2, 1997, the Company acquired all of the outstanding stock of
Bill Coleman TV, Inc. ("Bill Coleman TV") for a purchase price consisting of
approximately $6.7 million in cash, an option to purchase 25,000 shares of the
Company's Common Stock at an exercise price of $8.875 per share and the
assumption of certain liabilities (the "Coleman Acquisition"). Bill Coleman TV
operated 15 rental-purchase stores in Michigan and had revenues of approximately
$8.6 million for the twelve months ended December 31, 1996.
 
     On February 6, 1997, the Company acquired all of the outstanding stock of
Perry Electronics, Inc. d/b/a Rental King ("Rental King") for a purchase price
of $23.0 million consisting of cash and the assumption of certain liabilities
(the "Rental King Acquisition"). Rental King operated 70 rental-purchase stores
in Ohio, Michigan, Florida, Colorado, Indiana, West Virginia and Kentucky and
had revenues of approximately $24.0 million for the twelve months ended December
31, 1996.
 
     The Company also acquired a four store rental-purchase chain with stores
located in Pennsylvania in July 1997 and three rental-purchase stores located in
the Washington, D.C. area in September 1997.
 
PENDING ACQUISITION
 
     On October 6, 1997, the Company signed a letter of intent to acquire
substantially all of the assets of the Ace TV Rentals rental-purchase chain
("Ace Rentals") for a purchase price of approximately $24.5 million (the "Ace
Rentals Acquisition"). Ace Rentals operates 46 stores in South Carolina and 4
stores in California.
 
     The Company expects to close the acquisition in early January 1998, subject
to the satisfaction of certain conditions, including negotiation of a definitive
purchase agreement. Consummation of the Ace Rentals Acquisition will provide the
Company with a presence in the southeastern United States, which the Company
believes to be a growing rental-purchase market.
 
THE RENTAL-PURCHASE INDUSTRY
 
     Begun in the mid-to-late 1960s, the rental-purchase business is a
relatively new segment of the retail industry offering an alternative to
traditional retail installment sales. The rental-purchase industry provides
brand name merchandise to customers generally on a week-to-week or
month-to-month basis under a full service rental
 
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agreement, which in most cases includes a purchase option. The customer may
cancel the rental agreement at any time without further obligation by returning
the product to the rental-purchase operator.
 
     APRO, the industry's trade association, estimated that at the end of 1996
the U.S. rental-purchase industry comprised approximately 7,500 stores providing
5.8 million products to 2.9 million households. Management believes that its
customers generally have annual household incomes ranging from $20,000 to
$40,000. Based on APRO estimates, the rental-purchase industry had gross
revenues of $4.1 billion in 1996. The U.S. rental-purchase industry is highly
fragmented. Management estimates that the ten largest industry participants
account for less than 50% of total industry stores and that the majority of the
industry consists of operations with fewer than 20 stores. See "--Strategy",
"--Competition."
 
     Management believes that the rental-purchase industry is experiencing
increasing consolidation due to, among other factors, the recognition by smaller
operators of the increased operating efficiencies and better competitive
position achievable through larger organizations, greater availability of
capital for larger organizations, and the willingness of an older generation of
operators to resolve succession issues through disposition of the business. In
addition, management believes that many smaller industry operators lack the
management information systems necessary to manage a large multi-store
rental-purchase operation efficiently and profitably. Management believes that
this trend toward consolidation of operations in the industry presents an
opportunity for well-capitalized rental-purchase operators to continue to
acquire additional stores on favorable terms.
 
STRATEGY
 
     Management believes that the Company's continued success depends on
successful implementation of the following business strategies:
 
     Acquiring and Opening New Stores
 
     The Company currently intends to expand its operations by acquiring
existing stores and opening new stores, both within its present market areas and
in geographic regions not currently served by the Company. At present, the
majority of that expansion is expected to be accomplished through acquisitions.
The Company believes that acquisitions can effectively increase the Company's
market share while simultaneously expanding its customer base. In addition, in
pursuing its growth strategies, the Company expects to benefit from both
enhanced purchasing power and the ability to exploit economies of scale for
certain fixed operational expenses. The Company continually reviews acquisition
opportunities, and management believes that a number of acquisition
opportunities currently exist. Except as disclosed herein, the Company presently
has no plans, proposals, arrangements or understandings with respect to
significant acquisitions. See "Pending Acquisition".
 
     In identifying targets for acquisition, the Company intends to focus on
operations that complement the Company's existing markets, while remaining open
to the possibility of making acquisitions in other areas. The Company has not
established formal criteria for potential acquisitions. Generally, however, the
Company seeks to acquire rental-purchase businesses that operate profitably and
are located in geographic markets that complement the Company's existing stores
or that the Company views as growth markets for the rental-purchase industry.
The Company seeks to acquire such businesses at purchase prices that will permit
the Company a prompt return on its investment in the form of increased earnings.
The Company has no formal policy with respect to acquisitions with related
entities. To date, no related party acquisitions have been considered nor does
the Company anticipate considering such acquisitions in the future. Management
believes that its senior management has a level of ability and experience that
provides the Company with a competitive advantage in the evaluation and
consummation of acquisition opportunities.
 
     Customer-Focused Philosophy
 
     Management believes that through the continued adherence to its "Welcome,
Wanted and Important" business philosophy it should be able to increase its new
and repeat customer base, and thus the number of units it has on rent, thereby
increasing revenues and net income. The "Welcome, Wanted and Important"
philosophy is a method by which the Company seeks to create a store atmosphere
conducive to customer loyalty. The Company attempts to create this atmosphere
through the effective use of advertising and merchandising strategies, by
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maintaining the clean and well-stocked appearance of its stores, and by
providing a high level of customer service (such as the institution of a
toll-free 1-800-RENTWAY complaint and comment line). The Company's advertising
emphasizes brand name merchandise from leading manufacturers. In addition,
merchandise selection within each product category is periodically updated to
incorporate the latest offerings from suppliers. Services provided by the
Company to the customer include home delivery, installations, ordinary
maintenance and repair services and pick-up during the term of the contract at
no additional charge. Store managers also work closely with each customer in
choosing merchandise, setting delivery dates and arranging a suitable payment
schedule. As part of the "Welcome, Wanted and Important" philosophy, store
managers are empowered, encouraged and trained to make decisions regarding store
operations subject only to certain Company-wide operating guidelines and general
policies. All acquired stores are promptly evaluated and, if necessary,
remodeled.
 
     Expanding the Company's Product Lines
 
     One of the Company's principal strategies is to provide the rental-purchase
customer with the opportunity to obtain merchandise of higher quality than the
merchandise available from its competitors on competitive terms. To this end,
the Company attempts to maintain a broad selection of products while emphasizing
higher priced merchandise. The Company intends to continue expanding its
offerings of higher priced products in all product areas. Management believes
that previous offerings of higher priced products have succeeded in both
increasing the Company's profitability and attracting new customers to the
Company's existing stores. In addition, the Company selectively tests new
merchandise. Management believes that opportunities exist to provide additional
or non-traditional merchandise to its customers.
 
     Monitoring Store Performance
 
     Each store is provided with a management information system that allows
management to track rental and collection activity on a daily basis. The system
generates detailed reports that track inventory movement by piece and by product
category and the number and frequency of past due accounts and other collection
activity. In addition, physical inventories are regularly conducted at each
store to ensure the accuracy of the management information system data. Senior
management monitors this information to ensure adherence to established
operating guidelines. Management believes the Company's management information
system enhances its ability to monitor and affect the operating performance of
existing stores and to integrate and improve the performance of newly acquired
stores.
 
     Results-Oriented Compensation
 
     Management believes that an important reason for the Company's positive
financial performance and growth has been the structure of its management
compensation system, which provides incentives for both regional and store
managers to increase store revenues and operating profits. A significant portion
of the Company's regional and store managers' total compensation is dependent
upon store performance. As further incentive, the Company grants managers stock
options in the Company. Management believes that the Company's emphasis on
incentive-based compensation has been instrumental in the Company's ability to
attract, retain and motivate its regional and store managers.
 
     Manager Training
 
     Management believes that well-trained store managers are important to the
Company's efforts to maximize individual store performance. The Company employs
a full-time trainer who conducts classroom programs in the areas of sales, store
operations and personnel management. These training programs often continue for
several months and culminate in an exam. The Company requires its managers to
attend, at Company expense, leadership and management programs offered by
leading management and organization experts.
 
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OPERATIONS
 
     Company Stores
 
     The Company currently operates 184 stores in 14 states and the District of
Columbia, as follows:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                                                               STORES
                                                               ------
<S>                                                           <C>
Ohio........................................................     49
Michigan....................................................     28
Pennsylvania................................................     24
New York....................................................     20
Indiana.....................................................     17
Maryland....................................................     11
Illinois....................................................      8
Virginia....................................................      8
Florida.....................................................      7
Delaware....................................................      4
Colorado....................................................      3
West Virginia...............................................      2
Kentucky....................................................      1
New Jersey..................................................      1
Washington, D.C. ...........................................      1
</TABLE>
 
     The Company's stores average approximately 3,000 square feet in floor space
and are generally located in strip shopping centers in or near low to middle
income neighborhoods. Often, such shopping centers offer convenient free parking
to the Company's customers. The Company's stores are generally uniform in
interior appearance and design and display of available merchandise. The stores
have separate storage areas but generally do not use warehouse facilities. In
selecting store locations, the Company uses a variety of market information
sources to locate areas of a town or city that are readily accessible to low and
middle income consumers. The Company believes that within these areas the best
locations are in neighborhood shopping centers that include a supermarket. The
Company believes this type of location makes frequent rental payments at its
stores more convenient for its customers.
 
     Product Selection
 
     The Company offers brand name home entertainment equipment (such as
television sets, video recorders, video cameras and stereos), furniture, major
appliances and jewelry. Major appliances offered by the Company include
refrigerators, ranges, washers and dryers. The Company's product line currently
includes the Zenith, RCA, Pioneer and JVC brands in home entertainment
equipment, the Kenmore and Crosley brands in major appliances and the Ashley
brand in furniture. The Company closely monitors customer rental requests and
adjusts its product mix to offer rental merchandise desired by customers.
 
     For the year ended September 30, 1997, payments under rental-purchase
contracts for home entertainment products accounted for approximately 44.1%,
furniture for 27.4%, appliances for 24.5%, jewelry for 2.8% and miscellaneous
other items for 1.2% of the Company's rental revenues. Customers may request
either new merchandise or previously rented merchandise. Previously rented
merchandise is typically offered at the same weekly or monthly rental rate as is
offered for new merchandise, but with an opportunity to obtain ownership of the
merchandise after fewer rental payments. Weekly rentals currently range from
$4.99 to $59.99 for home entertainment equipment, from $1.99 to $49.99 for
furniture, from $3.99 to $36.99 for major appliances and from $1.99 to $34.99
for jewelry.
 
     Rental-Purchase Agreements
 
     Merchandise is provided to customers under written rental-purchase
agreements that set forth the terms and conditions of the transaction. The
Company uses standard form rental-purchase agreements which are reviewed
 
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by legal counsel and customized to meet the legal requirements of the various
states in which they are to be used. Generally, the rental-purchase agreement is
signed at the store, but may be signed at the customer's residence if the
customer orders the product by telephone and requests home delivery. Customers
rent merchandise on a week-to-week and, to a lesser extent, on a month-to-month
basis. The rent for the first week or month and each succeeding week or month
during the term of the agreement is payable in advance. At the end of the
initial and each subsequent rental period, the customer retains the merchandise
for an additional week or month by paying the required rent or may terminate the
agreement without further obligation. If the customer decides to terminate the
agreement, the merchandise is returned to the store and is then available for
rent to another customer. The Company retains title to the merchandise during
the term of the rental-purchase agreement. If a customer rents merchandise for a
sufficient period of time, usually 12 to 24 months, ownership is transferred to
the customer without further payments being required. Rental payments are
typically made in cash, by check or money order. The Company does not extend
credit. See "--Government Regulation."
 
     Product Turnover
 
     Generally, a minimum rental term of between 12 and 24 months is required to
obtain ownership of new merchandise. Based upon merchandise returns for the year
ended September 30, 1997, the Company believes that the average period of time
during which customers rent merchandise is 16 to 17 weeks. However, turnover
varies significantly based on the type of merchandise being rented, with certain
consumer electronic products, such as camcorders and VCRs, generally being
rented for shorter periods, while appliances and furniture are generally rented
for longer periods. Each rental-purchase transaction requires delivery and
pickup of the product, weekly or monthly payment processing and, in some cases,
repair and refurbishment of the product. In order to cover the relatively high
operating expenses generated by greater product turnover, rental-purchase
agreements require larger aggregate payments than are generally charged under
installment purchase or credit plans.
 
     Customer Service
 
     The Company offers same day delivery, installation and pick-up of its
merchandise at no additional cost to the customer. The Company also provides any
required service or repair without charge, except for damage in excess of normal
wear and tear. If the product cannot be repaired at the customer's residence,
the Company provides a temporary replacement while the product is being
repaired. The customer is fully liable for damage, loss or destruction of the
merchandise, unless the customer purchases an optional loss/damage waiver. Most
of the products offered by the Company are covered by a manufacturer's warranty
for varying periods, which, subject to the terms of the warranty, is transferred
to the customer in the event that the customer obtains ownership. Repair
services are provided through in-house service technicians, independent
contractors or under factory warranties. The Company recently introduced
Rent-Way Plus, a fee-based membership program that provides special loss and
damage protection and an additional one year of service protection on rental
merchandise, preferred treatment in the event of involuntary job loss,
accidental death and dismemberment insurance and discounted emergency roadside
assistance, as well as other discounts on merchandise and services.
 
COLLECTIONS
 
     Management believes that effective collection procedures are important to
the Company's success in the rental-purchase business. The Company's collection
procedures increase the revenue per product with minimal associated costs,
decrease the likelihood of default and reduce charge-offs. Senior management, as
well as store managers use the Company's computerized management information
system to monitor cash collections on a daily basis. In the event a customer
fails to make a rental payment when due, store management will attempt to
contact the customer to obtain payment and reinstate the contract or will
terminate the account and arrange to regain possession of the merchandise.
However, store managers are given latitude to determine the appropriate
collection action to be pursued based on individual circumstances. Depending on
state regulatory requirements, the Company charges for the reinstatement of
terminated accounts or collects a delinquent account fee. Such fees are standard
in the industry and may be subject to state law limitations. See "--Government
Regulation." Despite the fact that the Company is not subject to the federal
Fair Debt Collection Practices Act, it is the Company's policy to abide by the
restrictions of such law in its collection procedures. Charge-offs due to lost
or
 
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stolen merchandise were approximately 3.0% and 2.7% of the Company's revenues
for the years ended September 30, 1997 and 1996, respectively. The charge-off
rate for chains with over 20 stores reporting to APRO in 1996 was 2.9%.
 
MANAGEMENT
 
     The Company's stores are organized geographically with several levels of
management. At the individual store level, each store manager is responsible for
customer and credit relations, deliveries and pickups, inventory management,
staffing and certain marketing efforts. A Company store normally employs one
store manager, one assistant manager, two account managers, one full-time office
manager, and one full-time delivery and installation technician. The staffing of
a store depends on the number of rental-purchase contracts serviced by the
store.
 
     Each store manager reports to one of 29 regional managers, each of whom
typically oversees six to eight stores. Regional managers are primarily
responsible for monitoring individual store performance and inventory levels
within their respective regions. The Company's regional managers, in turn,
report to four directors of operations, located at the Company's headquarters,
who monitor the operations of their respective regions and, through the regional
managers, individual store performance. The directors of operations report to
the Chief Operating Officer who is responsible for overall Company-wide store
operations. Senior management at the Company's headquarters directs and
coordinates purchasing, financial planning and controls, management information
systems, employee training, personnel matters and acquisitions. Headquarters
personnel also evaluate the performance of each store and conduct on-site
reviews.
 
MANAGEMENT INFORMATION SYSTEM
 
     The Company believes that its proprietary management information system
provides it with a competitive advantage over many small rental-purchase
operations. The Company uses an integrated computerized management information
and control system to track each unit of merchandise and each rental-purchase
agreement. The Company's system also includes extensive management software and
report generating capabilities. Reports for all stores are reviewed daily by
senior management and any irregularities are addressed the following business
day. Each store is equipped with a computer system that tracks individual
components of revenue, idle items, items on rent, delinquent accounts and other
account information. Management electronically gathers each day's activity
report through the computer located at the headquarters office. This system
provides the Company's management with access to operating and financial
information about any store location or region in which the Company operates and
generates management reports on a daily, weekly, month-to-date and year-to-date
basis for each store and every rental-purchase transaction. Utilizing the
management information system, senior management, regional managers and store
managers can closely monitor the productivity of stores under their supervision
compared to Company-prescribed guidelines. This system has enabled the Company
to expand its operations while maintaining a high degree of control over cash
receipts, inventory, merchandise units in repair and customer transactions. To
date, the Company has successfully integrated all of its acquired stores into
its management information system. The Company believes the information system
is adequate to meet its needs for the foreseeable future.
 
PURCHASING AND DISTRIBUTION
 
     The Company's general product mix is determined by senior management, based
on an analysis of customer rental patterns and introduction of new products on a
test basis. Individual store managers are responsible for determining the
particular product selection for their store from a list of products approved by
senior management. All purchase orders are executed through regional managers
and the Company's purchasing department to insure that inventory levels and mix
throughout the store regions are appropriate. The Company maintains only minimal
warehouse space for storage of merchandise, and merchandise is generally shipped
by vendors directly to each store, where it is held for rental. The Company
purchases its merchandise directly from manufacturers or distributors. The
Company generally does not enter into written contracts with its suppliers.
Although the Company currently expects to continue its existing relationships,
management believes there are
 
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numerous sources of products available to the Company, and does not believe that
the success of the Company's operations is dependent on any one or more of its
present suppliers.
 
MARKETING
 
     The Company promotes its products and services primarily through direct
mail solicitations and, in certain markets, through television advertising and,
to a lesser extent, through radio and secondary print media advertisement. The
Company also solicits business by telephoning former and prospective customers.
The Company has recently begun dedicating an increasing percentage of its
marketing dollars to television advertising to build brand recognition in
markets where it is economically attractive to do so. The Company's print
advertisements emphasize product and brand name selection, prompt delivery and
repair, and the absence of any downpayment, credit investigation or long-term
obligation. Advertising expense as a percentage of revenue for the year ended
September 30, 1997 was approximately 4.4%. As the Company obtains new stores in
its existing markets, the advertising expenses of each store in the market can
be reduced by listing all stores in the same market-wide advertisement.
 
     The Company does not use any formal criteria to select its customers, such
as a credit check or similar investigation. Because of the nature of the
Company's rental-purchase transactions where the majority of customers pay cash
in advance on a weekly basis or return the merchandise, the Company does not
believe the absence of any criteria to qualify customers is material.
 
COMPETITION
 
     The rental-purchase industry is highly competitive. The Company competes
with other rental-purchase businesses and, to a lesser extent, with rental
stores that do not offer their customers a purchase option. Competition is based
primarily on rental rates and terms, product selection and availability, and
customer service. With respect to consumers who are able to purchase a product
for cash or on credit, the Company also competes with department stores,
discount stores and retail outlets. These competitors may offer an installment
sales program or may compete with the Company simply on the basis of product and
price. The Company competes with its rental-purchase industry competitors by
attempting to offer better rental terms, better service and a greater selection
of higher quality merchandise. The Company competes with its non-rental-purchase
industry competitors by offering better service (including free delivery and
set-up and prompt repair services) and greater flexibility in payment terms.
Several competitors in the rental-purchase business are national in scope and
have significantly greater financial and operating resources and name
recognition than does the Company.
 
PERSONNEL
 
     As of September 30, 1997, the Company had approximately 944 employees, of
whom 58 are located at the corporate office in Erie, Pennsylvania. None of the
Company's employees is represented by a labor union. Management believes its
relations with its employees are good.
 
GOVERNMENT REGULATION
 
     Forty-five states have enacted laws regulating or otherwise impacting the
rental-purchase transaction, including all of the states in which the Company's
stores are located other than New Jersey. These laws generally require certain
contractual and advertising disclosures concerning the nature of the transaction
and also provide varying levels of substantive consumer protection, such as
requiring a grace period for late payments and contract reinstatement rights in
the event the agreement is terminated for nonpayment of rentals. No federal
legislation has been enacted regulating rental-purchase transactions. The
Company instructs its managers in its required procedures through training
seminars and policy manuals and believes that it has operated in compliance with
the requirements of applicable law in all material respects. In addition, the
Company provides its customers with a toll-free number, 1-800-RENTWAY, to
telephone corporate headquarters to report any irregularities in service or
misconduct by its employees. Any such calls are reviewed daily and are the
subject of immediate follow-up investigation by senior management.
 
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SERVICE MARKS
 
     The Company has registered the "Rent-Way" service mark under the Lanham
Act. The Company believes that this mark has acquired significant market
recognition and goodwill in the communities in which its stores are located. The
service mark "Rent-Way Because There's Really Only One Way" and the related
design have also been registered by the Company.
 
RELATED PARTY TRANSACTIONS
 
     Although the Company has in the past and may in the future enter into
transactions with related parties, the Company has adopted no formal policies,
procedures or controls with respect to such transactions. Generally, however,
the Company requires that any transactions with related entities be on terms no
less favorable to the Company than would be available from an unrelated third
party.
 
     During the fiscal year ended September 30, 1997, the Company leased two
locations from Marc W. Joseffer, a director of the Company, and a company
controlled by him. Rent paid during this year related to these leases was
$92,238. The Company leased six locations from Marc W. Joseffer and a company
controlled by him during the 1996 and 1995 fiscal years. The Company paid
$238,634 and $217,162 in rent related to these leases during such years,
respectively. The leases have average remaining lives of one year and require
the Company to pay real estate taxes.
 
     On May 21, 1996, the Company was paid in full for a loan made to William E.
Morgenstern, the President and Chief Executive Officer and a director of the
Company. The loan carried an annual interest rate of 7.6% and the balance
including accrued interest as of May 21, 1996 was $311,310. The loan was
satisfied by the surrender to the Company of 10,800 shares of Common Stock
valued at $15.00 per share, with the balance paid in cash.
 
     As of September 30, 1995, the Company was in possession of land and
building lots acquired from Erie Business Management Corporation ("EBMC"), a
corporation controlled by Gerald A. Ryan, the Chairman of the Board and a
director of the Company. The Company obtained the right to require EBMC to
repurchase any or all of the remaining land and building lots during a period of
30 days commencing May 31, 1996. Upon exercise of this "put" right, EBMC would
have the option of paying the purchase price in cash, marketable securities
(including common stock of the Company) or a combination of both. On June 4,
1996, the Company exercised its right to "put" the land and building lots to
EBMC. The total amount due from EBMC was $946,450, comprised of the land and
building lots, carrying costs, accrued interest, the difference between any
dividends paid in 1993 to Mr. Ryan and any profit recognized by the Company on
any sales of the land or building lots prior to the exercise of the "put"
option. The repurchase was satisfied in full by a combination of cash, common
stock of the Company, the surrender for cancellation of 52,500 stock options
held by Mr. Ryan and the conveyance to the Company of a building and related
mortgage owned by Mr. Ryan, in which the Company had a 15 year capital lease.
There was no gain or loss recorded by the Company as a result of the exercise of
the "put".
 
     The Company has entered into employment contracts with Gerald A. Ryan,
William E. Morgenstern and Jeffrey A. Conway, the Chief Financial Officer of the
Company. The agreements are for a three year term commencing October 1, 1995.
The Company paid $510,000 and $393,600 related to these agreements for the years
ended September 30, 1997 and 1996, respectively. Payments for the year ending
September 30, 1998 will be $535,000.
 
     The Company paid a brokerage fee of $170,000, and issued 37,500 warrants
exercisable at the rate of $10 per share for a five year period ending September
1, 2000 to a company in which Robert B. Fagenson, a director of the Company, is
a shareholder. The fee was incurred in connection with the acquisition of
McKenzie Leasing Corporation in July 1995.
 
     In connection with the acquisition of D.A.M.S.L. Corp. ("DAMSL") in the
fiscal year ended September 30, 1994, the Company entered into an employment
contract, consulting agreements and non-compete agreements with Marc W.
Joseffer, a director of the Company, and David Jones, the former shareholders of
DAMSL. The employment agreement has payment terms of $172,666, $134,677 and
$162,667 for the three year period ended in May 1996. The payment terms for the
consulting and non-compete agreements are $165,428, $151,428, $275,428,
$255,428, $295,428, $267,428 and $319,428 for 1994 and the six years next
following. Expenses
                                        9
<PAGE>   10
 
related to the above agreements are expensed over the terms of the agreements
and aggregated $268,761, $296,185 and $312,763 for the years ended September 30,
1997, 1996 and 1995, respectively.
 
                                       10
<PAGE>   11
 
                                 RENT-WAY, INC.
 
                                    PART II
 
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
       OF OPERATIONS
 
GENERAL
 
     As of September 30, 1997, the Company operated 184 rental-purchase stores
located in 14 states and the District of Columbia. Primarily through the
acquisitions, the number of stores operated by the Company has increased from 19
as of September 30, 1993 to 184 as of September 30, 1997. The following table
shows the number of stores opened, acquired and/or combined during this
five-year period.
 
<TABLE>
<CAPTION>
                                                         YEARS ENDED SEPTEMBER 30,
                                                      --------------------------------
                                                      1993   1994   1995   1996   1997
                                                      ----   ----   ----   ----   ----
<S>                                                   <C>    <C>    <C>    <C>    <C>
Open at Beginning of Period.........................   17     19     40     83    108
Opened..............................................    2      3     --     --     --
Acquired............................................   --     20     50     32     92
Closed or Combined..................................   --      2      7      7     16
                                                       --     --     --    ---    ---
Open at End of Period...............................   19     40     83    108    184
                                                       ==     ==     ==    ===    ===
</TABLE>
 
     During the year ended September 30, 1997, the Company entered into several
acquisitions in which the Company acquired 92 stores (the "1997 Acquisitions").
On January 2, 1997, the Company acquired 15 stores in Michigan in the Coleman
Acquisition. On February 6, 1997, the Company acquired 70 stores located in
Colorado, Florida, Indiana, Kentucky, Michigan, West Virginia, and Ohio in the
Rental King Acquisition. In July and September 1997, the Company acquired seven
rental purchase stores located in Pennsylvania, Maryland, and Virginia. In
connection with the acquisition of stores, the Company implements a strategy to
improve the operations of the acquired stores. As part of this strategy, the
Company purchases new merchandise, upgrades the appearance of the stores,
increases the amount of advertising utilized per store, and implements a
training program for the store employees.
 
     On October 6, 1997, the Company signed a letter of intent to acquire
substantially all of the assets of the Ace Rentals rental-purchase chain. Ace
Rentals operates 46 stores in South Carolina and four stores in California. The
Company expects to close the acquisition in early January 1998, subject to the
satisfaction of certain conditions, including the negotiation of a definitive
purchase agreement. Consummation of Ace Rentals Acquisition will provide the
Company with a presence in the southeastern United States, which the Company
believes to be a growing rental-purchase market.
 
                                       11
<PAGE>   12
 
RESULTS OF OPERATIONS
 
     As an aid to understanding the Company's operating results, the following
table expresses certain items of the Company's Statements of Income for the
years ended September 30, 1997, 1996 and 1995 as a percentage of total revenues.
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                              1997     1996     1995
                                                              ----     ----     ----
<S>                                                           <C>      <C>      <C>
Revenues:...................................................
  Rental revenue............................................   88.0%    85.8%    85.4%
  Other revenue.............................................   12.0     14.2     14.6
                                                              -----    -----    -----
     Total revenues.........................................  100.0    100.0    100.0
Costs and operating expenses:
  Depreciation and amortization:
     Rental merchandise.....................................   23.1     25.9     29.5
     Property and equipment.................................    1.7      1.5      1.9
     Amortization of goodwill...............................    2.2      1.7      1.2
  Salaries and wages........................................   25.9     25.6     24.5
  Advertising...............................................    4.4      4.1      4.5
  Occupancy.................................................    6.8      6.4      6.7
  Other operating expense...................................   20.2     21.8     22.6
                                                              -----    -----    -----
     Total costs and operating expenses.....................   84.3     87.0     90.9
                                                              -----    -----    -----
  Operating income..........................................   15.7     13.0      9.1
  Interest expense..........................................   (3.6)    (2.9)    (4.1)
  Other income (expenses), net..............................   (0.4)      .1       .2
                                                              -----    -----    -----
     Income before income taxes.............................   11.7     10.2      5.2
  Income tax expense........................................   (5.3)    (4.6)    (1.6)
                                                              -----    -----    -----
     Income before extraordinary item.......................    6.4      5.6      3.6
  Extraordinary item........................................   (0.2)      --       --
                                                              -----    -----    -----
     Net income.............................................    6.2%     5.6%     3.6%
                                                              =====    =====    =====
</TABLE>
 
COMPARISON OF YEARS ENDED SEPTEMBER 30, 1997 AND 1996
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, total revenues increased to $88.0 million from $51.2
million, or 72.1%. The increase was due to the inclusion of a full year's
results for the stores acquired by the Company in fiscal 1996 (the "1996
Acquisitions"), a partial year's operations for the stores acquired in the 1997
Acquisitions, and increased same store revenues. The stores acquired in the
Rental King Acquisition, consummated on February 6, 1997, accounted for $16.8
million, or 45.5%, of the increase, the stores acquired in the Coleman
Acquisition, consummated on January 2, 1997, accounted for $6.1 million, or
16.5%, of the increase, the stores acquired in the 1996 Acquisitions accounted
for $11.1 million, or 30.1%, of the increase, the Company's same stores
accounted for $2.3 million, or 6.2%, of the increase, and other 1997
Acquisitions accounted for $0.6 million, or 1.7%, of the increase.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, total costs and operating expenses increased to $74.3
million from $44.5 million principally as a result of costs and operating
expenses associated with the 1996 Acquisitions, the Coleman Acquisition, and the
Rental King Acquisition, but decreased to 84.3% from 87.0% of total revenues.
This resulted principally from a decrease in depreciation expense as a
percentage of total revenues and other operating expenses as a percentage of
total revenues. Depreciation expense related to rental merchandise increased to
$20.3 million from $13.2 million, but decreased to 23.1% from 25.9% of total
revenues principally due to increases in weekly rental rates, lower purchase
costs of rental merchandise due to increased volume, and improved realization of
collectible rent. Amortization of goodwill increased to 2.2% from 1.7% of total
revenues principally because of the increase in goodwill related to
 
                                       12
<PAGE>   13
 
the Coleman Acquisition and the Rental King Acquisition. Salaries and wages
increased to $22.8 million from $13.1 million principally due to the addition of
the store personnel associated with the 1996 Acquisitions, the Coleman
Acquisition, the Rental King Acquisition, and the addition of several key
management personnel in the Company's operations, human resource, marketing,
accounting, and information systems departments. Salaries and wages were 25.9%
and 25.6% of total revenues for the years ended September 30, 1997 and 1996,
respectively. Advertising expense increased to $3.9 million from $2.1 million
principally due to the addition of stores associated with the Coleman
Acquisition and the Rental King Acquisition. Advertising expense increased to
4.4% from 4.1% of total revenues. Occupancy expense increased to $6.0 million
from $3.3 million principally due to the addition of stores associated with the
Coleman Acquisition and the Rental King Acquisition, and increased to 6.8% from
6.4% of total revenues. Other operating expenses increased to $17.8 million from
$11.1 million primarily due to the addition of the stores acquired in the
Coleman Acquisition and the Rental King Acquisition, but decreased to 20.2% from
21.8% of total revenues.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, operating income increased to $13.8 million from $6.7
million, or 107.3%, and increased to 15.7% from 13.0% of total revenues. The
$7.1 million increase in operating income and the 2.7% increase in operating
income as a percentage of total revenues occurred principally because of the
successful integration and conversion of the stores acquired in the 1996
Acquisitions, the Coleman Acquisition in January 1997, and the Rental King
Acquisition in February 1997, the increase in same-store revenues, and the other
factors discussed above.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, interest expense increased to $3.1 million from $1.5
million, and increased to 3.6% from 2.9% of total revenues principally due to
borrowings drawn on the Company's credit facility in connection with the Coleman
Acquisition and the issuance by the Company of its $20.0 million of 7%
Convertible Subordinated Debentures due 2007 (the "Debentures") in connection
with the Rental King Acquisition.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, income tax expense increased to $4.6 million from $2.4
million principally because the Company generated greater taxable income and
because of the decrease in the Company's net deferred tax asset for the year
ended September 30, 1997. The decrease in the deferred tax asset of $0.4 million
was comprised of the deferred tax provision of $1.2 million, which is offset by
$0.8 million of deferred tax asset recorded in connection with the Coleman
Acquisition. Sufficient taxable income exists in the carryback periods to
recognize the deferred tax asset, accordingly, no valuation allowance has been
recognized. The Company is recording income tax expense based on an effective
tax rate of 44.9%, which is higher than the statutory tax rates, principally due
to amortization expense related to goodwill incurred in connection with certain
acquisitions that is not deductible for tax purposes.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, net income increased to $5.4 million from $2.8 million, or
90.2%. The increase, which resulted in net income increasing to 6.2% from 5.6%
of total revenues, was due to the factors discussed above.
 
COMPARISON OF YEARS ENDED SEPTEMBER 30, 1996 AND 1995
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, total revenues increased to $51.2 million from $28.2
million, or 81.5%. The increase was due to the inclusion of a full year's
results for the stores acquired in the McKenzie Leasing Corporation Acquisition
(the "McKenzie Acquisition") a partial year's operations for the stores acquired
in the 1996 Acquisitions and increased same store revenues. The stores acquired
in the McKenzie Acquisition, which was consummated July 21, 1995, accounted for
$19.7 million, or 85.6%, of the increase, the stores acquired in the 1996
Acquisitions accounted for $2.5 million, or 10.9%, of the increase, and the
Company's same stores accounted for $0.8 million, or 3.5%, of the increase.
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, total costs and operating expenses increased to $44.5
million from $25.6 million principally as a result of costs and operating
expenses associated with the McKenzie Acquisition and the 1996 Acquisitions, but
decreased to 87.0% from 90.9% of total revenues. This 3.9% net decrease resulted
primarily from a decrease in depreciation expense as a percentage of total
revenues. Depreciation expense related to rental merchandise increased to $13.2
million from
                                       13
<PAGE>   14
 
$8.3 million, but decreased to 25.9% from 29.5% of total revenues principally
due to increases in weekly rental rates, lower purchase costs of rental
merchandise due to increased volume, and improved realization of collectible
rent. Amortization of goodwill increased to 1.7% from 1.2% of total revenues
principally because of the increase in goodwill related to the McKenzie
Acquisition. Salaries and wages increased to $13.1 million from $6.9 million
principally due to the addition of the store personnel associated with the
McKenzie Acquisition, the 1996 Acquisitions, and the addition of several key
Company management personnel in the operations, legal, human resource,
accounting, and information systems departments. Salaries and wages were 25.6%
and 24.5% of total revenues for the years ended September 30, 1996 and 1995,
respectively. Advertising expense increased to $2.1 million from $1.3 million
principally due to the addition of stores associated with the McKenzie
Acquisition. Advertising expense decreased to 4.1% from 4.5% of total revenues.
Occupancy expense increased to $3.3 million from $1.9 million principally due to
the addition of stores associated with the McKenzie Acquisition, but decreased
to 6.4% from 6.7% of total revenues. Other operating expenses increased to $11.1
million from $6.4 million principally due to the addition of the stores acquired
in the McKenzie Acquisition, but decreased to 21.8% from 22.6% of total
revenues.
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, operating income increased to $6.7 million from $2.6
million, or 157.8%, and increased to 13.0% from 9.1% of total revenues. The $4.1
million increase in operating income and the 3.9% increase in operating income
as a percentage of total revenues occurred principally because of the successful
integration and conversion of the stores acquired in the McKenzie Acquisition in
July 1995, the increase in same-store revenues, and the factors discussed above.
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, interest expense increased to $1.5 million from $1.2
million, but decreased to 2.9% from 4.1% of total revenues principally due to
the repayment of $13.2 million of outstanding borrowings under the Company's
collateralized credit agreement with First Source Financial LLP in March 1996.
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, income tax expense increased to $2.4 million from $0.4
million principally because the Company generated greater taxable income and
because of the increase in the deferred tax expense. The deferred tax asset
increased by $0.1 million resulting from the recording of $0.8 million of
deferred tax asset acquired from Diamond Leasing Corporation which is offset by
$0.7 million deferred tax expense. The Company believes it is more likely than
not to realize the net deferred tax asset, and accordingly no valuation
allowance has been recognized. This conclusion is based on the Company's taxable
income in carryback periods and, to the extent necessary, management's estimate
of taxable income in future periods. The Company is recording income tax expense
based on an effective tax rate of 45.5%, which is higher than the statutory tax
rates, principally due to amortization expense related to goodwill incurred in
connection with its acquisitions that is not deductible for tax purposes.
 
     For the year ended September 30, 1996 as compared to the year ended
September 30, 1995, net income increased to $2.8 million from $1.0 million, or
182.3%. The increase, which resulted in net income increasing to 5.6% from 3.6%
of total revenues, was due to the factors discussed above.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     On November 22, 1996, the Company entered into a new collateralized
revolving credit facility (the "New Facility") with a syndicate of banks led by
National City Bank of Pennsylvania ("National City Bank"), providing for loans
or letters of credit up to $40.0 million, subject to formula-based availability.
The syndicate consists of four banks, with National City Bank, LaSalle National
Bank, and Harris Trust and Savings Bank each committed for a ratable share of
27.25%, and Heller Financial, Inc. committed for an 18.25% ratable share. The
New Facility replaces the existing $15.0 million collateralized credit agreement
with First Source Financial LLP. Of the $40.0 million available under the New
Facility, approximately $7.0 million was used to refinance previously existing
senior indebtedness and $0.8 million was used to redeem the Company's Series A
Redeemable Preferred Stock. The Company redeemed the preferred stock at a 25%
discount to face value resulting in a gain of $0.3 million. As of September 30,
1997, the unused portion of the New Facility was approximately $19.0 million
with approximately $12.0 million of availability.
 
                                       14
<PAGE>   15
 
     The New Facility requires the Company to comply with certain covenants,
including financial covenants. These covenants generally restrict the Company
from incurring additional indebtedness, granting additional liens on its assets,
making dividends or distributions, disposing of assets other than in the
ordinary course, issuing additional stock, making additional acquisitions or
making capital expenditures, in each case subject to certain exceptions. Under
the New Facility, the Company is restricted from incurring additional
indebtedness except secured indebtedness not exceeding $100,000, subordinated
intercompany indebtedness, indebtedness incurred in connection with certain
acquisitions permitted under the New Facility, certain capitalized leases or
purchases of fixed assets with payments that do not exceed $2,000,000 in the
aggregate in any fiscal year, and any other lease, which is not a capitalized
lease, or the rental of any real or personal property of another entity with
payments that do not exceed $250,000 in the aggregate in any fiscal year. The
Company is also required to comply with the following financial covenants:
maintain a maximum leverage ratio with respect to total funded debt and senior
funded debt of 3.5 to 1 and 3.0 to 1, respectively; maintain a minimum interest
coverage ratio of 3.5 to 1; and maintain a minimum tangible net worth of at
least $13.2 million.
 
     On February 6, 1997, the Company completed the private placement of the
Debentures. The Debentures are due February 1, 2007 and are convertible into
shares of common stock, without par value, of the Company at a conversion price
of $13.37 per share. The Debentures will become subject to redemption at the
option of the Company on February 5, 2000 at a price of 103%. The redemption
price will decrease at a rate of 1% per year, reaching a price of 100% in the
year 2003 and remaining fixed until the date of maturity. The indebtedness
evidenced by the Debentures is subordinated and junior in right of payment to
the extent of payment in full of all amounts due on all senior indebtedness. The
Debentures bear an annual interest rate of 7% with semi-annual payments in
August and February, beginning August 1, 1997. The Company filed a registration
statement to register for resale the Debentures and the shares of Common Stock
underlying the Debentures with the Securities and Exchange Commission on May 9,
1997 and the registration statement became effective on June 19, 1997. The net
proceeds raised on issuance of the Debentures were used in conjunction with the
Rental King Acquisition (see Note 3 to the financial statements).
 
     On October 8, 1997, the Company exercised its right to convert mandatorily
the $7.0 million 10% Convertible Subordinated Notes ("the Notes") held by
Massachusetts Mutual Life Insurance Company and certain of its affiliates. The
Notes were convertible by the Company at a conversion price of $9.94 per share
upon the Company's Common Stock trading at a price above $16.50 per share for 20
consecutive days during any 30-day period. The Notes converted into 704,225
shares of Common Stock, which have been registered for resale pursuant to a
shelf registration statement filed by the Company that became effective in June
1997.
 
     For the year ended September 30, 1997, the Company's net cash provided by
(used in) operating activities increased to $0.7 million from ($1.2) million for
the year ended September 30, 1996. The increase was principally due to a $7.2
million increase in rental merchandise purchases, a $2.6 million increase in net
income, a $9.1 million increase in non-cash depreciation and amortization, a
$1.5 million decrease in other liabilities, a $1.9 million decrease in income
taxes payable and a $0.5 million increase in deferred income taxes. The increase
in depreciation and amortization and rental merchandise resulted primarily from
the Coleman Acquisition and the Rental King Acquisition, which significantly
increased the size of the Company.
 
     For the year ended September 30, 1997 as compared to the year ended
September 30, 1996, the Company's net cash used in investing activities
increased to ($30.6) million from ($10.6) million. The increase in net cash used
in investing activities was principally due to the 1997 Acquisitions and the
remodeling costs and computer hardware costs incurred in connection with the
Coleman Acquisition and the Rental King Acquisition.
 
     For the year ended September 30, 1997, as compared to the year ended
September 30, 1996, the Company's net cash provided by financing activities
increased to $30.4 million from $11.1 million. The increase in net cash provided
by financing activities was principally due to cash received in connection with
the Company's private placement of the Debentures issued in connection with the
Rental King Acquisition. Historically, the Company's growth has been financed
through internally generated working capital, borrowings under its available
credit facilities and, in connection with acquisitions, issuances of its Common
Stock, Preferred Stock and Convertible Debt. During fiscal 1997, the Company's
acquisitions were financed by a combination of cash generated by the Company's
private placement of the Debentures and borrowings under the New Facility.
 
                                       15
<PAGE>   16
 
     The Company's primary requirements for capital (other than those related to
acquisitions) consist of purchasing additional rental merchandise and replacing
rental merchandise that has been sold or is no longer suitable for rent. The
Company intends to increase the number of stores it operates primarily through
acquisitions. Such acquisitions will vary in size and the Company will consider
large acquisitions that could be material to the Company. To provide any
additional funds necessary for the continued pursuit of its growth strategies,
the Company may incur, from time-to-time, additional short and long-term bank or
other institutional indebtedness and may issue, in public or private
transactions, its equity and debt securities, the availability of which will
depend upon market and other conditions. There can be no assurance that such
additional financing will be available on terms acceptable to the Company.
 
INFLATION
 
     During the year ended September 30, 1997, the cost of rental merchandise,
store lease rental expense and salaries and wages have 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.
 
                                 OTHER MATTERS
 
     Effective July 1, 1995, the Company changed its depreciation method for
rental merchandise from the straight-line method to the units of activity method
for new purchases. This change had no significant impact on the Company's
financial position or results of operations.
 
     The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" for
the year ended September 30, 1995. The adoption of SFAS No. 121 had no impact on
the Company's financial position or results of operations.
 
     In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation" effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company adopted this Standard's disclosure-only provisions in fiscal 1997.
The adoption of this standard had no impact on the Company's financial position
or results of operations.
 
     In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share, effective
for periods ending after December 15, 1997. The Company has disclosed the
estimated impact of SFAS 128 on the years ended September 30, 1997, 1996 and
1995 (see Note 2 to the financial statements).
 
     In March 1997, the FASB also issued SFAS NO. 129, "Disclosure of
Information about Capital Structure" effective for fiscal years beginning after
December 15, 1997. The adoption of SFAS No. 129 will have no impact on the
Company's financial statements.
 
     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", both effective for fiscal years beginning after December
15, 1997. The Company is currently studying the provisions of these SFAS's and
has not adopted such provisions in its September 30, 1997 financial statements.
 
                              CAUTIONARY STATEMENT
 
     This Report on Form 10-K and the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations contains various
"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. The Company's Annual Report to Shareholders, any Report on Form 10-Q
or Form 8-K or any other written or oral statements made by or on behalf of the
Company may include forward looking statements. Forward-looking statements
represent the Company's expectations or beliefs concerning future events. Any
forward-looking statements made by or on behalf of the Company are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements. These uncertainties and other factors include,
but are not limited to, (i) the ability of the Company to acquire additional
rental-purchase stores on favorable terms, (ii) the
                                       16
<PAGE>   17
 
ability of the Company to improve the performance of such acquired stores and to
integrate such acquired stores into the Company's operations, and (iii) the
impact of state and federal laws regulating or otherwise affecting the
rental-purchase transaction.
 
     Undo reliance should not be placed on any forward-looking statements made
by or on behalf of the Company as such statements speak only as of the date
made. The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, the
occurrence of future events or otherwise.
 
                                       17
<PAGE>   18
 
                                    PART III
 
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
 
     Certain information regarding the directors and executive officers of the
Company is set forth below.
 
<TABLE>
<CAPTION>
                   NAME                     AGE                    POSITION
                   ----                     ---                    --------
<S>                                         <C>   <C>
Gerald A. Ryan............................  62    Chairman of the Board and Director
                                                  President, Chief Executive Officer and
William E. Morgenstern....................  39    Director
William Lerner............................  61    Director and Secretary
Vincent A. Carrino........................  38    Director
Robert B. Fagenson........................  47    Director
Marc W. Joseffer..........................  49    Director
Jeffrey A. Conway.........................  40    Vice President and Chief Financial Officer
Ronald D. DeMoss..........................  46    Vice President and General Counsel
Kirk R. Smithee...........................  34    Chief Operating Officer
</TABLE>
 
     Gerald A. Ryan, a founder of the Company, has served as Chairman of the
Board of the Company since its formation in 1981. Mr. Ryan has also been
instrumental in the formation of several other companies, including Spectrum
Control, Inc., a company listed on the Nasdaq National Market, which produces
electronic components. He presently serves as Chairman of the Board of Spectrum
Control, Inc. In 1986, Mr. Ryan acquired Skinner Engine Company, a
privately-held company, which manufactures and rebuilds mixers for use in the
rubber industry, and serves as Chairman of the Board of that company. Mr. Ryan
is a Class I director of the Company whose term expires in 1999.
 
     William E. Morgenstern, a founder of the Company, has served as its
President and Chief Executive Officer since its formation in 1981. Mr.
Morgenstern began his rental-purchase industry career with Rent-A-Center in 1979
in Ft. Worth, Texas. While employed by Rent-A-Center, he held the positions of
store manager and district manager for Pennsylvania and New York. Mr.
Morgenstern is former President of the Pennsylvania Association of Rental
Dealers ("PARD"), a trade association that monitors activities in the state
legislature that affect the rental-purchase industry. From 1986 to 1988, he
served on the Board of Directors of APRO, the rental-purchase industry's
national trade association. Mr. Morgenstern is a Class III director of the
Company whose term expires in 1998.
 
     William Lerner has been a director of the Company since November 1992 and
its Secretary since January 1993. Mr. Lerner, a practicing attorney in New York
since 1961 and in Pennsylvania since 1990, is of counsel to Snow Becker Krauss
P.C., New York, New York. Mr. Lerner is also a director of Seitel, Inc., a
company listed on the New York Stock Exchange ("NYSE") that develops and
maintains a seismic data bank for the oil and gas industry, Helm Resources,
Inc., a company listed on the American Stock Exchange with interests in the
packaging and distribution of plastic resins, the distribution of films to cable
television companies and asset based lending activities and
Micros-to-Mainframes, Inc., a company listed on the Nasdaq National Market that
is a provider and systems integrator of advanced technology communications
products and Internet services. From 1986 to 1989, Mr. Lerner was General
Counsel to The Geneva Companies, which provides merger and acquisition services
to privately-owned middle market companies, and from 1989 to 1990 was General
Counsel to Hon Development Company, a southern California real estate
development company. Mr. Lerner is a Class II director of the Company whose term
expires in 2000.
 
     Vincent A. Carrino has been director since January 1995 when he was elected
by the Board for a one-year term expiring in 1996. At the 1996 Annual Meeting of
Shareholders, Mr. Carrino was elected as a Class III director of the Company
whose term expires in 1998. For more than the last five years, Mr. Carrino has
been President of Brookhaven Capital Management, Inc., an investment management
company headquartered in Menlo Park, California, which Mr. Carrino founded in
1986.
 
     Robert B. Fagenson has been a director since August 1993. He has, for more
than the past five years, been President and a director of Fagenson & Co., Inc.,
a NYSE specialist firm, and a Vice President and director of Starr Securities,
Inc., a registered broker-dealer and member of the NYSE. Mr. Fagenson is also a
director of the
 
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<PAGE>   19
 
NYSE, of Healthy Planet Products, Inc., a company listed on the American Stock
Exchange that designs, publishes and markets greeting cards, Hudson Hotel
Corporation (formerly Microtel Franchise and Development Corporation), a company
listed on the Nasdaq National Market and a developer of economy lodging
facilities and owner and operator of hotel, motel and resort properties,
AutoInfo, Inc., a company listed on the Nasdaq National Market and a dealer in
computerized products and services for after-market motor vehicle parts, and
Nu-Tech Biomedical, Inc., a company listed on the Nasdaq Small-Cap Market that
researches medicines for the treatment of cancer. Mr. Fagenson is a Class I
director of the Company whose term expires in 1999.
 
     Marc W. Joseffer has been a director of the Company since May 1994 and was
employed by the Company in various management positions from May 1994 through
October 1996. For more than five years prior thereto, he was Vice President and
a principal shareholder of D.A.M.S.L. Corp., a privately-owned company engaged
in the rental-purchase industry. D.A.M.S.L. Corp. was acquired by the Company in
May 1994, at which time Mr. Joseffer was elected a director of the Company by
the Board. Mr. Joseffer is a Class II director of the Company whose term expires
in 2000.
 
     Jeffrey A. Conway was employed by the Company as a financial advisor from
February 1992 through September 1992 and in October 1992 was appointed Vice
President and Chief Financial Officer. He served as Chief Financial Officer of
Rentclub, Inc., a 17 store rental-purchase chain, from June 1990 through
November 1991. From 1979 through June 1987 and from July 1987 to October 1989,
Mr. Conway was employed by the independent accounting firms of Coopers & Lybrand
and Ernst & Young, respectively, as an Audit Manager. Mr. Conway is a certified
public accountant.
 
     Ronald D. DeMoss was elected Vice President and General Counsel of the
Company in February 1996. From June 1990 through November 1995, Mr. DeMoss was
employed as a corporate counsel for Rent-A-Center and, in such capacity, was
involved in the enactment of rental-purchase legislation in 11 states. During
1995, Mr. DeMoss also served as Rent-A-Center's Director of Government
Relations. In August 1996, Mr. DeMoss was elected to APRO's Board of Directors
for a two-year term. Mr. DeMoss also serves on APRO's Government Relations
Committee. From 1981 through 1990, Mr. DeMoss was a practicing attorney in
Wichita, Kansas.
 
     Kirk R. Smithee was hired by the Company in September 1995 as a regional
manager, in July 1996 was named a director of operations and in October 1997 was
promoted to Chief Financial Officer. From September 1987 through September 1995,
Mr. Smithee served in various management positions with Rent-A-Center, including
field training manager, district manager and regional manager.
 
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten (10%) of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely upon its review
of copies of such forms furnished to it, or written representations from
reporting persons that no such forms were required for those persons, the
Company believes that during fiscal year 1997 all filing requirements applicable
to executive officers, directors, and greater than ten-percent beneficial owners
were complied with, except (i) two reports, covering an aggregate of two
transactions, were filed late by Marc W. Joseffer, a director of the Company,
(ii) one report, covering an aggregate of one transaction, was filed late by
Thomas E. Wurm and (iii) one report, covering an aggregate of one transaction,
was filed late by Ronald D. DeMoss.
 
ITEM 13 CERTAIN TRANSACTIONS
 
     In connection with the acquisition of D.A.M.S.L. Corp. in May 1994, the
Company entered into a consulting agreement and non-compete agreement with Marc
W. Joseffer, a director of the Company. Mr. Joseffer receives payments from the
Company under a five-year consulting agreement which expires on May 18, 1999.
Annual payments to Mr. Joseffer under such consulting agreement are $132,000,
$120,000, $144,000, $132,000 and $192,000, respectively. Under the terms of the
non-compete agreement entered into by Mr. Joseffer, he receives monthly payments
from the Company of $2,143, which monthly payments continue through March 1999.
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<PAGE>   20
 
     The Company leases two store locations from Mr. Joseffer or a company
controlled by him. The Company paid $92,238 in rent and related amounts under
such leases for the year ended September 30, 1997. The Company believes the
lease rate and terms, which include the Company's obligation to pay real estate
taxes, are similar to those obtainable on an arms'-length basis.
 
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<PAGE>   21
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
Registrant: RENT-WAY, INC.
 
By: /s/ WILLIAM E. MORGENSTERN
    -------------------------------
    President and Chief
    Executive Officer
    (Principal Executive Officer)
 
    November 5, 1998
 
    -------------------------------
    Date
By: /s/ JEFFREY A. CONWAY
    -------------------------------
    Vice President and Chief
    Financial Officer
    (Principal Financial and
    Accounting Officer)
 
    November 5, 1998
 
    -------------------------------
    Date
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                  SIGNATURE                                       TITLE                        DATE
                  ---------                                       -----                        ----
<S>                                                   <C>                               <C>
 
/s/ GERALD A. RYAN                                    Chairman of the Board of            November 5, 1998
---------------------------------------------         Directors
Gerald A. Ryan
 
/s/ WILLIAM E. MORGENSTERN                            Director                            November 5, 1998
---------------------------------------------
William E. Morgenstern
 
/s/ MARC W. JOSEFFER                                  Director                            November 5, 1998
---------------------------------------------
Marc W. Joseffer
 
/s/ ROBERT B. FAGENSON                                Director                            November 5, 1998
---------------------------------------------
Robert B. Fagenson
 
/s/ WILLIAM LERNER                                    Secretary and Director              November 5, 1998
---------------------------------------------
William Lerner
 
/s/ VINCENT CARRINO                                   Director                            November 5, 1998
---------------------------------------------
Vincent Carrino
 
/s/ PAUL N. UPCHURCH                                  Director                            November 5, 1998
---------------------------------------------
Paul N. Upchurch
</TABLE>
 
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