RWY Rent Way

Rent-Way Reports Fiscal 2005 First Quarter Financial Results Operating Income Up 40.5%; 61.6% Before Change in Accounting Method ERIE, Pa., Jan. 27 /PRNewswire-FirstCall/ -- Rent-Way, Inc. (NYSE:RWY) today reported financial results for its fiscal 2005 first quarter ended December 31, 2004. In the quarter, the company changed its method of recognizing rental business revenue to the accrual method. This change means that the company will recognize revenues over the rental term, not as collected. For the quarter, the company reported revenues of $126.3 million versus $123.6 million in the same quarter last year. Revenues from the company's core rental business (which excludes the company's dPi Teleconnect unit) were $121.9 million versus $117.6 million in the same quarter last year. Same store rental business revenues increased 3.4% versus last year's quarter. Operating income in the quarter was $12.0 million, up from $8.5 million in the same period last year. Net loss was $0.7 million versus a net loss of $5.8 million in the first quarter last year. Net loss allocable to common shareholders was $1.3 million, or $(0.05) per share versus a net loss of $6.2 million last year or $(0.24) per share. Net loss for the quarter gives effect to a non-cash $2.2 million FAS 133 charge related to the conversion feature of the company's preferred stock and a $2.6 million one-time non-operating, non- cash charge for the change in accounting method. Without the impact of the change in accounting method, for the quarter the company would have reported revenues of $129.0 million and core rental business revenues of $124.5 million. Same store rental business revenues would have increased 5.3% over last year's quarter. Operating income would have been $13.8 million, net income $3.6 million and net income available to common shareholders $3.1 million, or $0.12 per share. Adding back the FAS 133 charge, net income allocable to common shareholders in the quarter would have been $5.3 million, or $0.20 per share, which is significantly higher than consensus analyst estimates. "We had an excellent quarter reflecting our team's hard work and successful execution of our plan to continue improving operating margins in our core stores while moving forward with our new store opening program," stated William Morgenstern, Rent-Way's Chairman and CEO. "By the end of the quarter we had 13 new stores open and an additional 14 are in the pipeline scheduled to open by the end of the current quarter. We are well on our way to our goal of 50 new stores in 2005. For the quarter, we decided to make a change in the way we account for rental business revenue. Even with this change, we met our revenue and exceeded our operating income guidance both for core stores and core stores with new stores. For the quarter, our core stores revenue and operating income was $121.5 million and $13.6 million, respectively. If we back out the change in accounting method, the numbers would have been $124.1 million and $15.4 million, respectively," concluded Mr. Morgenstern. William McDonnell, Rent-Way's Vice President and CFO stated, "The change in accounting for rental business revenues is an issue that we have been monitoring. The company has historically recognized rental business revenues as collected. To date, the timing difference between these methods has been immaterial. Because our 2005 fiscal first quarter ended on a Friday and our stores were closed on Saturday, the first day of January, we received significantly higher payments to us on Friday for the following week than historically normal. As a result we think it's a good idea to implement the change now at the start of a fiscal year and during the year in which we will deliver our first 404 internal controls certification." Mr. McDonnell also stated, "We do not expect the change in accounting method to require any change in our previous 2005 and 2006 guidance." The Company ended the quarter with $28.0 million outstanding on its bank revolver, down from $47.8 million at the end of December 31, 2003. The company reported EBITDA for the quarter of $15.8 million versus $12.6 million in the same quarter last year. EBITDA as defined by the company is operating income plus depreciation of property and equipment and amortization of goodwill and other intangibles. The company believes EBITDA provides investors useful information regarding its ability to service its debt and generate cash for other purposes, including for capital expenditures and working capital. The company reported net cash used in operations for the quarter of $11.8 million versus $20.3 million in the same quarter last year. Reconciliations of the non-GAAP measures mentioned above to the nearest comparable GAAP measures are presented in the chart of supplemental information attached to this release. Safe-Harbor Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements contain the words "projects," "anticipates," "believes," "expects," "intends," "will," "may" and similar words and expressions. Each such statement is subject to uncertainties, risks and other factors that could cause actual results or performance to differ materially from the results or performance expressed in or implied by such statements. The forward-looking statements in this news release that contain projections of the company's expected financial performance and other projections regarding future performance are inherently subject to change given the nature of projections and the company's actual performance may be better or worse than projected. Uncertainties, risks and other factors that may cause actual results or performance to differ materially from any results or performance expressed or implied by forward- looking statements in this news release include: (1) the company's ability to control its operating expenses and to realize operating efficiencies, (2) the company's ability to develop, implement and maintain adequate and reliable internal accounting systems and controls, (3) the company's ability to retain existing senior management and to attract additional management employees, (4) general economic and business conditions, including demand for the company's products and services, (5) general conditions relating to the rental-purchase industry, including the impact of state and federal laws regulating or otherwise affecting the rental-purchase transaction, (6) competition in the rental-purchase industry, including competition with traditional retailers, (7) the company's ability to make principal and interest payments on its high level of outstanding debt, and (8) the company's ability to open new stores and cause those new stores to operate profitably. A discussion of other risk factors that may cause actual results to differ from the results expressed in or implied by these forward-looking statements can be found in the company's filing with the SEC. The company disclaims any duty to provide updates to the forward-looking statements made in this news release. RENT-WAY, INC. SELECTED BALANCE SHEET DATA (all dollars in thousands) December 31, 2004 September 30, 2004 (unaudited) (unaudited) Cash and cash equivalents $6,518 $3,412 Prepaid expenses 8,591 8,496 Rental merchandise, net 194,564 173,164 Total Assets 460,529 430,655 Accounts payable 27,336 26,187 Debt 231,020 203,934 Total Liabilities 324,567 295,780 Shareholders' Equity 113,851 115,085 RENT-WAY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (all dollars in thousands except per share data) For the three months ended December 31, 2004 2003 (unaudited) (unaudited) Revenues: Rental revenue $105,942 83.9% $102,428 82.9% Prepaid phone service revenue 4,561 3.6% 6,190 5.0% Other revenues 15,794 12.5% 14,991 12.1% Total Revenues 126,297 100.0% 123,609 100.0% Costs and operating expenses: Depreciation and amortization: Rental merchandise 32,516 25.7% 32,872 26.6% Property and equipment 3,766 3.0% 3,982 3.2% Amortization of intangibles 28 0.0% 115 0.1% Cost of prepaid phone service 2,906 2.3% 3,979 3.2% Salaries and wages 34,820 27.6% 33,642 27.2% Advertising, net 5,353 4.2% 6,129 5.0% Occupancy 8,996 7.1% 8,701 7.0% Other operating expenses 25,942 20.5% 25,670 20.8% Total costs and operating expenses 114,327 90.5% 115,090 93.1% Operating income 11,970 9.5% 8,519 6.9% Other income (expense): Interest expense (7,068) -5.6% (7,859) -6.4% Interest income 6 0.0% 770 0.6% Amortization and write-off of deferred financing costs (280) -0.2% (344) -0.3% Other income (expense), net (3,832) -3.0% (4,236) -3.4% Income (loss) before income taxes and discontinued operations 796 0.6% (3,150) -2.5% Income tax expense 1,395 1.1% 1,395 1.1% Loss before discontinued operations (599) -0.5% (4,545) -3.7% Loss from discontinued operations (127) -0.1% (1,272) -1.0% Net loss $(726) -0.6% $(5,817) -4.7% Preferred stock dividend and accretion of preferred stock (535) -0.4% (395) -0.3% Net loss allocable to common shareholders $(1,261) -1.0% $(6,212) -5.0% Loss per common share: Basic loss per common share Loss before discontinued operations $(0.02) $(0.17) Net loss allocable to common shareholders $(0.05) $(0.24) Diluted loss per common share Loss before discontinued operations $(0.02) $(0.17) Net loss allocable to common shareholders $(0.05) $(0.24) Weighted average common shares outstanding: Basic 26,244 26,078 Diluted 26,244 26,078 Calculation of EBITDA and Reconciliation of Net Cash Used in Operations to EBITDA For the Three Months Ended December 31, 2004 and 2003 (all dollars in thousands) Three Months Ended 12/31/04 12/31/03 (unaudited) (unaudited) Calculation of EBITDA Operating income $11,970 $8,519 Depreciation - property and equipment 3,766 3,982 Amortization of intangibles 28 115 EBITDA $15,764 $12,616 Reconciliation of Net Cash Used in Operations to EBITDA Three Months Ended 12/31/04 12/31/03 Net cash used in operating activities $(11,766) $(20,291) Net cash used in discontinued operations 127 245 Adjustments to reconcile net income to net cash used in operating activities (39,944) (44,487) Changes in assets and liabilities 50,857 58,716 Depreciation - property and equipment 3,766 3,982 Amortization of intangibles 28 115 Interest expense 7,068 7,859 Interest income (6) (770) Amortization and write off of deferred financing costs 280 344 Other expense 3,832 4,236 Income taxes 1,395 1,395 Loss from discontinued operations 127 1,272 EBITDA $15,764 $12,616 RENT-WAY, INC. RECONCILIATION OF REVENUES, OPERATING INCOME AND NET INCOME (LOSS) EXCLUDING THE IMPACT OF THE CHANGE IN ACCOUNTING METHOD For the Three Months Ended December 31, 2004 (all dollars in thousands except per share data) Net Operating Income Revenues Income (Loss) As reported $126,297 $11,970 $(726) Impact of change in accounting method for the three months ended December 31, 2004 2,658 1,796 1,796 Impact of change in accounting method at October 1, 2004 - - 2,568 Excluding the impact of the change in accounting method $128,955 $13,766 $3,638 RENT-WAY, INC. RECONCILIATION OF NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS EXCLUDING THE IMPACT OF THE CHANGE IN ACCOUNTING METHOD AND SFAS 133 CHARGE For the Three Months Ended December 31, 2004 (all dollars in thousands except per share data) Net loss allocable to common shareholders, as reported $(1,261) Impact of change in accounting method for the three months ended December 31, 2004 1,796 Impact of change in accounting method at October 1, 2004 2,568 Net income allocable to common shareholders excluding the impact of the change in accounting method $3,103 SFAS 133 charge related to conversion feature of preferred stock 2,191 Net income allocable to common shareholders excluding the impact of the change in accounting method and SFAS 133 charge $5,294 Earnings per share excluding the impact of the change in accounting method $0.12 Earnings per share excluding the impact of the change in accounting method and SFAS 133 charge $0.20 RENT-WAY, INC. RECONCILIATION OF CORE STORES REVENUES AND OPERATING INCOME EXCLUDING THE IMPACT OF THE CHANGE IN ACCOUNTING METHOD For the Three Months Ended December 31, 2004 (all dollars in thousands except per share data) Operating Revenues Income Rent-Way, Inc., as reported $126,297 $11,970 New store revenues and operating loss (406) 1,743 DPI revenues and operating income (4,561) (45) DPI commissions 149 (30) Core stores revenues and operating income $121,479 $13,638 Impact of change in accounting method for the three months ended December 31, 2004 2,658 1,796 Core stores revenues and operating income excluding the impact of the change in accounting method $124,137 $15,434 RENT-WAY, INC. RECONCILIATION OF RENT-WAY CORE RENTAL BUSINESS REVENUES EXCLUDING THE IMPACT OF THE CHANGE IN ACCOUNTING METHOD For the Three Months Ended December 31, 2004 and 2003 (all dollars in thousands except per share data) 2004 2003 Rent-Way, Inc., as reported $126,297 $123,609 DPI revenues (4,561) (6,190) DPI commissions 149 183 Core rental business revenues $121,885 $117,602 Impact of change in accounting method for the three months ended December 31, 2004 2,658 - Core rental business revenues excluding the impact of the change in accounting method $124,543 $117,602 DATASOURCE: Rent-Way, Inc. CONTACT: William Morgenstern of Rent-Way, Inc., +1-814-455-5378 Web site: http://www.rentway.com/

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