Rent-Way Reports Fiscal 2005 First Quarter Financial Results

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., [phone]



Web site:  http://www.rentway.com/ 

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