"...we expect fiscal 2005 to be a breakout year with continued focus on improving the top and bottom line performance of our core operations and simultaneously opening new stores and pursuing other new growth initiatives"
William Morgenstern, Rent-Way's Chairman and CEO

Rent-Way, Inc. (RWY) today reported full year same store sales up 5.2% and operating income up 12.9% (quarter and fiscal year ended September 30, 2004.)

For the fiscal 2004 fourth quarter, the company reported consolidated revenues of $121.0 million, up from $118.9 million in the same quarter of last year. Revenues from the company's core rental business (which excludes the company's dPi Teleconnnect unit) were $115.7 million, up from $111.7 million in the same quarter last year. For the quarter, same store revenues increased 3.3%. Consolidated operating income was $5.6 million, down from $9.3 million in the same period last year. Consolidated net income was $4.0 million versus a consolidated net loss of $0.6 million last year. Net income allocable to common stockholders was $3.5 million compared with a net loss of $1.0 million in the 2003 fourth quarter. Net income in the quarter was positively impacted by a $7.2 million adjustment related to the conversion feature of the company's preferred stock. This positive adjustment is reversed in the calculation of net income per diluted share, resulting in a net loss per diluted share of $(0.11) in the quarter.

For the fiscal 2004 full year, the company reported consolidated revenues of $503.8 million, up from $491.3 million in the prior year. Revenues from the company's core rental business were $478.8 million, up from $456.0 million last year. For the full fiscal year, same store revenues increased 5.2%. Consolidated operating income was $41.2 million, up from $36.5 million in the prior year. Consolidated net income for the year was $9.2 million, up from a consolidated net loss of $29.4 million last year. Net loss for fiscal 2003 was unfavorably impacted by a $14.0 million expense on settlement of the company's class action lawsuit and a $15.8 million loss from discontinued operations. Net income allocable to common stockholders for fiscal 2004 was $7.4 million, or $0.25 per diluted share.

Stated William Morgenstern, Rent-Way's Chairman and CEO, "In fiscal 2004 we achieved our objectives of returning our company to profitability and driving significant top line growth. Looking forward, we expect fiscal 2005 to be a breakout year with continued focus on improving the top and bottom line performance of our core operations and simultaneously opening new stores and pursuing other new growth initiatives."

"Strong top line and cash flow performance in our stores combined with an opportunity created in the wake of the acquisition of two large RTO chains by our largest competitor, motivated us to accelerate our expansion plans"
William Morgenstern

Morgenstern continued, "The performance our operations team delivered over the first 3 quarters of the year convinced us that we had regained solid control of our business. Strong top line and cash flow performance in our stores combined with an opportunity created in the wake of the acquisition of two large RTO chains by our largest competitor, motivated us to accelerate our expansion plans. In essence, we identified a large number of markets, many contiguous with our own, that went from housing three competitors to one virtually overnight. We decided to ramp up the investments necessary to seize that opportunity. As a result, we opened 10 stores by the end of November and are well on our way to opening an additional 30-40 stores over the next 9-12 months. We also decided to invest in a program to offer a lease purchase option in Levitz Home Furnishings, Inc. stores on a test basis. As we announced last week, we have entered into an exclusive arrangement with Levitz and have launched a test program in two of their 129 stores," Morgenstern concluded.

"With respect to our performance against our forecasts, we are pleased to have exceeded our full year guidance on revenues and to have been at the high end of our guidance on operating income," stated William McDonnell, Rent-Way's Vice President and CFO. "While we met our revenue guidance, our operating income for the 2004 fourth quarter was below guidance for several reasons, largely related to the investments we made to grow our business. In addition to the expenses related to new stores and other growth initiatives, other items that impacted our fourth quarter operating income were an increase in rental merchandise depreciation of approximately $450,000, largely related to the record growth in computer rentals we experienced in the quarter, and charges related to the Florida hurricanes of approximately $500,000. Also, consistent with new industry practice, we took a one-time charge to establish a rental merchandise allowance reserve of $1.1 million," stated Mr. McDonnell.

The company reported EBITDA for the 2004 fourth quarter and fiscal year of $9.4 million and $56.9 million, respectively. EBITDA for the company is operating income plus depreciation of property and equipment and amortization of 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 fourth quarter and fiscal year of $21.4 million and $26.7 million, respectively. A reconciliation of EBITDA to net cash provided by (used in) operating activities is presented in the chart of supplemental information attached to this release.

The company is providing guidance for both the core store base of 751 stores and for the core store base combined with new store growth and new initiatives. This guidance is for the company's rental business revenues (which excludes the company's dPi Teleconnect unit) and operating income. For the core 751 stores guidance is as follows:

                           Core Stores (751 stores)
    Quarter Ending                Revenue               Operating Income
    December 31, 2004    $121.1 - $122.3 million     $11.4 - $12.3 million
    March 31, 2005       $126.9 - $128.2 million     $11.6 - $12.7 million
    June 30, 2005        $120.9 - $122.2 million     $12.2 - $13.6 million
    September 30, 2005   $118.9 - $121.3 million     $11.8 - $13.4 million
      Fiscal 2005 Total  $487.8 - $494.0 million     $47.0 - $52.0 million
      Fiscal 2006 Total  $497.0 - $508.0 million     $53.0 - $58.0 million

As the company opens new stores, revenues will be higher, and because of start-up costs, operating income will be lower in the short term. Rent-Way's objective is to open about 50 new stores in 2005 and an additional 50 new stores in 2006. Combining the core store guidance above with the planned new store growth and projected impact of the new Levitz initiative leads to the combined guidance provided below.

                         Core Stores with New Stores
    Quarter Ending                Revenue               Operating Income
    December 31, 2004    $121.4 - $122.7 million      $9.0 - $10.0 million
    March 31, 2005       $128.7 - $130.0 million      $8.2 -  $9.3 million
    June 30, 2005        $125.2 - $126.4 million     $10.1 - $11.4 million
    September 30, 2005   $125.4 - $127.8 million      $9.7 - $11.3 million
      Fiscal 2005 Total  $500.7 - $506.9 million     $37.0 - $42.0 million
      Fiscal 2006 Total  $547.0 - $558.0 million     $50.0 - $55.0 million

The fiscal 2006 guidance in the table above assumes that 50 new stores in fiscal 2005 add between $30 and $32 million in revenue and $3.5 and $4.0 million in operating income in fiscal 2006.