"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 CEO

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 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.