RWY Rent Way

Rent-Way Reports Fiscal 2004 Third Quarter Results Announces Acceleration of New Store Openings ERIE, Pa., July 29 /PRNewswire-FirstCall/ -- Rent-Way, Inc. (NYSE:RWY) today reported financial results for its fiscal 2004 third quarter ended June 30, 2004. The company reported consolidated revenues of $124.1 million versus $122.4 million in the same quarter last year. Revenues from the company's rental business (which excludes the company's dPi Teleconnect unit) were $117.5 million versus $113.4 million in the same quarter last year. Same store revenues increased 3.4% versus last year's quarter. Consolidated operating income in the quarter was $11.8 million, down from $15.2 million in the same period last year. Consolidated net income allocable to common shareholders was $3.9 million, or $0.14 per share, versus net income of $4.4 million last year, or $0.17 per share. The comparability of consolidated operating income and consolidated net income allocable to common shareholders in the 2004 fiscal third quarter with the same quarter in fiscal 2003 is affected by several significant items in the 2003 quarter that had a total net beneficial impact of approximately $5.7 million. Consolidated operating income and net income in the fiscal 2004 third quarter were beneficially impacted by an annual retrospective insurance adjustment of $1.6 million. "This is the fourth quarter in a row that we have posted positive same store revenue increases. While we ended the quarter with fewer rental agreements than we had hoped, the fundamentals of our business are strong," stated William Morgenstern, Rent-Way's Chairman and CEO. "Despite a somewhat slow retail environment, we look forward to ending fiscal 2004 on a strong note. In addition, at the end of the last quarter we announced that we intended to open 6-8 new stores by the end of the 2004 calendar year. As a result of recent merger activity in our industry, we believe the opportunity to better than double that number exists and we are taking the necessary steps to seize the opening we see in the market place." William McDonnell, Vice President and Chief Financial Officer stated, "For the quarter, we met our guidance on revenue and operating income. Looking forward to the next quarter, based on our best estimates today, we expect to hit the mid to high end of our original fourth quarter revenue target and the low to mid point of our operating margin target. Our cash flow remains strong. We reduced our bank debt to approximately $18 million, down from about $22 million in the prior quarter and we expect to pay off the balance by the end of the fiscal year." The company reported EBITDA for the quarter of $15.7 million versus $19.6 million in the same quarter last year. EBITDA is defined by the Company as 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 provided by operations for the quarter of $3.6 million versus net cash used in operations of $23.6 million in the same quarter last year. A reconciliation of EBITDA to net cash provided by (used in) operations is presented in the chart of supplemental information attached to this release. About Rent-Way Rent-Way is one of the nation's largest operators of rental-purchase stores. Rent-Way rents quality name brand merchandise such as home entertainment equipment, computers, furniture and appliances from 753 stores in 33 states. 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, business and demographic 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 service 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 filings 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) June 30, 2004 September 30, 2003 Cash and cash equivalents $3,466 $3,303 Prepaid expenses 10,788 8,144 Rental merchandise, net 165,361 171,982 Total Assets 430,722 457,859 Accounts payable 14,055 30,244 Debt 221,838 214,592 Total Liabilities 292,305 335,079 Shareholders' Equity 111,513 106,789 RENT-WAY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (all dollars in thousands except per share data) For the three months ended June 30, 2004 2003 (unaudited) (unaudited) Revenues: Rental revenue $102,574 82.6% $99,144 81.0% Prepaid phone service revenue 6,602 5.3% 9,004 7.4% Other revenue 14,959 12.1% 14,227 11.6% Total Revenue 124,135 100.0% 122,375 100.0% Costs and operating expenses: Depreciation and amortization: Rental merchandise 31,295 25.2% 30,071 24.6% Property and equipment 3,846 3.1% 4,156 3.4% Amortization of intangibles 86 0.1% 262 0.2% Cost of prepaid phone service 4,075 3.3% 5,549 4.5% Salaries and wages 33,101 26.7% 32,295 26.4% Advertising, net 4,986 4.0% 3,576 2.9% Occupancy 8,589 6.9% 8,414 6.9% Restructuring costs - 0.0% 1,214 1.0% Other operating expenses 26,370 21.2% 21,643 17.7% Total costs and operating expenses 112,348 90.5% 107,180 87.6% Operating income 11,787 9.5% 15,195 12.4% Other income (expense): Settlement of class action lawsuit - 0.0% - 0.0% Interest expense (7,398) -6.0% (8,082) -6.6% Interest income 9 0.0% 23 0.0% Amortization and write-off of deferred financing costs (227) -0.2% (1,584) -1.3% Other income (expense), net 1,600 1.3% 1,421 1.2% Income (loss) before income taxes 5,771 4.6% 6,973 5.7% Income tax expense 1,395 1.1% 1,089 0.9% Income (loss) before discontinued operations 4,376 3.5% 5,884 4.8% Loss from discontinued operations (12) 0.0% (1,401) -1.1% Net income (loss) $4,364 3.5% $4,483 3.7% Dividend and accretion of preferred stock (487) -0.4% (124) -0.1% Net income (loss) allocable to common shareholders $3,877 3.1% $4,359 3.6% Income (loss) per common share: Basic income (loss) per common share Income (loss) before discontinued operations $0.17 $0.22 Net income (loss) allocable to common shareholders $0.15 $0.17 Diluted income (loss) per common share Income (loss) before discontinued operations $0.14 $0.22 Net income (loss) allocable to common shareholders $0.14 $0.17 Weighted average common shares outstanding: Basic 26,216 25,726 Diluted 30,125 25,726 RENT-WAY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (all dollars in thousands except per share data) For the nine months ended June 30, 2004 2003 (unaudited) (unaudited) Revenues: Rental revenue $316,128 82.6% $300,420 80.6% Prepaid phone service revenue 19,676 5.1% 28,196 7.6% Other revenue 46,985 12.3% 43,836 11.8% Total Revenue 382,789 100.0% 372,452 100.0% Costs and operating expenses: Depreciation and amortization: Rental merchandise 101,298 26.5% 92,084 24.7% Property and equipment 11,569 3.0% 14,966 4.0% Amortization of intangibles 310 0.1% 1,214 0.3% Cost of prepaid phone service 13,007 3.4% 17,288 4.6% Salaries and wages 100,341 26.2% 98,601 26.5% Advertising, net 15,387 4.0% 17,057 4.7% Occupancy 25,784 6.7% 24,519 6.6% Restructuring costs 48 0.0% 3,429 0.9% Other operating expenses 79,498 20.8% 76,083 20.4% Total costs and operating expenses 347,242 90.7% 345,241 92.7% Operating income 35,547 9.3% 27,211 7.3% Other income (expense): Settlement of class action lawsuit - 0.0% (14,000) -3.8% Interest expense (22,919) -6.0% (25,291) -6.8% Interest income 792 0.2% 77 0.0% Amortization and write-off of deferred financing costs (748) -0.2% (2,720) -0.7% Other income (expense), net (1,493) -0.4% 4,703 1.3% Income (loss) before income taxes 11,179 2.9% (10,020) -2.7% Income tax expense 4,185 1.1% 3,190 0.8% Income (loss) before discontinued operations 6,994 1.8% (13,210) -3.5% Loss from discontinued operations (1,722) -0.4% (15,586) -4.2% Net income (loss) $5,272 1.4% $(28,796) -7.7% Dividend and accretion of preferred stock (1,286) -0.3% (124) 0.0% Net income (loss) allocable to common shareholders $3,986 1.1% $(28,920) -7.7% Income (loss) per common share: Basic income (loss) per common share Income (loss) before discontinued operations $0.27 $(0.52) Net income (loss) allocable to common shareholders $0.15 $(1.13) Diluted income (loss) per common share Income (loss) before discontinued operations $0.26 $(0.52) Net income (loss) allocable to common shareholders $0.15 $(1.13) Weighted average common shares outstanding: Basic 26,155 25,699 Diluted 26,700 25,699 Calculation of EBITDA and Reconciliation of Net Cash Provided by (Used in) Operations to EBITDA For the Three Months Ended June 30, 2004 and 2003 (all dollars in thousands) Three Months Ended 06/30/04 06/30/03 Calculation of EBITDA Operating income $11,787 $15,195 Depreciation - property and equipment 3,846 4,156 Amortization of intangibles 86 262 EBITDA $15,719 $19,613 Reconciliation of Net Cash Provided by (Used in) Operations to EBITDA Three Months Ended 06/30/04 06/30/03 Net cash provided by (used in) operating activities $3,612 $(23,577) Depreciation and amortization (35,577) (34,471) Depreciation - property and equipment 3,846 4,156 Amortization of intangibles 86 262 Interest expense 7,398 8,082 Interest income (9) (23) Amortization and write off of deferred financing costs 227 1,584 Other income (expense) (1,600) (1,421) Income taxes 1,395 1,089 Deferred income taxes (1,395) (1,088) Market adjustment for interest rate swap derivative 1,111 1,043 Market adjustment for preferred stock conversion option derivative 233 (233) Write-off of deferred financing costs - (1,143) Write-off of property and equipment (116) (532) Gain on sale of assets - 47 Changes in assets and liabilities: Prepaid expenses (485) (1,031) Rental merchandise 18,148 20,292 Rental merchandise deposits and credits due from vendors (231) 3,417 Income tax receivable (5) (33) Other assets 2,356 (2,666) Accounts payable 6,278 13,551 Other liabilities 10,435 30,906 Cash used in discontinued operations 12 1,402 EBITDA $15,719 $19,613 DATASOURCE: Rent-Way, Inc. CONTACT: Bill Morgenstern, Chairman & CEO of Rent-Way, Inc., +1-814-455-5378 Web site: http://www.rentway.com/

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