"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"
William Morgenstern, Rent-Way's Chairman and
Rent-Way, Inc. (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
"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
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.
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