Bill Johnson's background and knowledge of the rental industry will be instrumental in taking Insta-rent to the next level which could include a restructuring of the rental business or other strategic alternatives.
RentCash

RentCash Inc (TSXV: RCS) today announced results for the quarter ended March 31, 2006.

Mr. Gordon Reykdal, President and CEO commented, "I'm pleased with the progress made this quarter in strengthening our management team and operational practices. We've added a wealth of additional experience, knowledge and skill to our existing infrastructure. Some of our most recent hires include a President & COO for the rental division, Director of Risk Management, Vice President of Finance and a Director of Internal Audit." He added, "We also remain focused on improving the collection process and the credit worthiness of customers brokered to third party lenders. While the positive impact of these changes may not yet be fully realized, management believes that the changes will result in improved earnings."

Third Quarter Financial Results

Net income for the third quarter was $2.8 million ($0.14 diluted earnings per share), compared to $3.1 million ($0.17 diluted earnings per share) for the same quarter in fiscal 2005. Total revenues were $38.0 million for the quarter, compared to $18.8 million for the three months ended March 31, 2005 with the significant growth due to an almost doubling of the number of stores in operation and a 13 percent increase in same store sales. The third quarter earnings were impacted by an increase in the administrative allowance provision to $6.2 million or 19.9 percent of brokerage revenues, compared to $792,000 or 5.3 percent for the same quarter last year. The increased administrative allowance reflects the impact of the implementation of the no rollover policy in January 2005. The after tax impact of the increased administrative allowance on the current quarter was a reduction in net income of approximately $3.4 million. While the administrative allowance increased over the same quarter last year, it has improved from $6.9 million or 20.7 percent of brokerage revenue in the second quarter of this year.

Cash and cash equivalents improved to $10.7 million as at March 31, 2006, compared to $7.2 million at the end of the second quarter.

Divisional Financial Results

The company's brokerage division had net income of $3.9 million in the third quarter, up $120,000 from the same quarter last year. For the nine months ended March 31, 2006, the brokerage division's net income increased 65 percent to $14.1 million, compared to $8.6 million for the same period in 2005. The third quarter and nine month results were negatively impacted by the impact of the no rollover policy and the resulting increased administrative allowance provision.

Brokerage revenue more than doubled to $31.1 million in the third quarter, compared to $15.1 million in the same quarter last year. The increase reflects the growth of stores in operation to 332 at March 31, 2006, compared to 158 a year ago and a 4 percent increase in third quarter same-store sales over the same quarter last year. For the nine months ended March 31, 2006, brokerage revenue totalled $98.6 million, compared to $35.6 million in the same quarter last year.

Also, in the third quarter of fiscal 2006, a new lender was added to the brokerage division thereby increasing the base of lenders that customers may choose from.

The company's rental division had a net loss of $637,000 in the third quarter, compared to a net loss of $193,000 for the same quarter in fiscal 2005. For the nine months ended March 31, 2006, the rental division had a net loss of $1.7 million, compared to $492,000 for the same period in 2005. In April 2006, Mr. Bill Johnson was named as the new President and Chief Operating Officer of Insta-rent. Mr. Johnson, for the past ten years, was the Executive Vice President and Chief Financial Officer of the largest merchandise rental company in Canada. His background and knowledge of the rental industry will be instrumental in taking Insta-rent to the next level which could include a restructuring of the rental business or other strategic alternatives that the Board of Directors of Rentcash may review. The rental division's third quarter revenue totaled $6.9 million, compared to $3.8 million for the same quarter last year. The strong revenue growth reflects an increase in stores operation to 93 at March 31, 2006, compared to 69 a year ago and a 48 percent increase in third quarter same-store sales over the same quarter last year. For the nine months, rental revenues almost doubled to $17.9 million, from $9.1 million for the nine months ended March 31, 2006.

Business Developments

In the third quarter, the company began to explore the possibility of expanding its check cashing business. Enhanced systems and processes are being developed and the initiative is being tested in a few select locations. The company currently only generates about $100,000 per month in check cashing revenue. Management believes that this initiative has the potential to substantially grow the brokerage division's check cashing revenue. The intention is to roll out this enhanced service slowly across the country with more aggressive marketing once the company is comfortable with its systems and processes.

During the third quarter the company opened ten new brokerage stores and two new rental centers, compared to 16 brokerage stores and 16 rental centers during the same period in fiscal 2005. The company also closed three rental centers situated in United Furniture Warehouse stores during the quarter. For the first nine months of fiscal 2006 the company opened 55 new brokerage stores (including six acquired stores) and ten new rental centers compared to 41 new brokerage stores and 29 new rental centers in the first nine months of fiscal 2005. As at March 31, 2006, the company had expanded its national operating network to a total of 332 brokerage stores and 93 rental centers in nine provinces and two territories.

Change in Accounting

Effective March 31, 2006, the company changed its accounting with respect to accumulated aggregate store losses available to be offset against future payments under its license agreements with The Brick Warehouse LP and United Furniture Warehouse LP. Prior to March 31, 2006, the estimated future benefit of these aggregate store losses was recorded in deposits and other assets. With the change in accounting, the benefit of the aggregate store losses will now be recorded when realized. The change has been implemented retroactively with the restatement of prior periods. Accordingly, the company will be re-filing its financial statements for the year ended June 30, 2005. The cumulative impact on the June 30, 2005 financial statements was a decrease in deposits and other assets of $1.1 million, an increase in future tax assets of $377,000, a decrease in retained earnings of $684,000 and a decrease in net income of $518,000. The cumulative impact on the March 31, 2006 balance sheet was a $1.5 million decrease in deposits and other assets, an increase in future tax assets of $541,000 and a decrease in retained earnings of $982,000. The accounting change also resulted in a decrease in net income of $137,000 for the three months ended March 31, 2006 (2005 - $172,000) and $435,000 for the nine months ended March 31, 2006 (2005 - $419,000).

No Rollover Policy

In January 2005, the company implemented a no rollover policy in response to an amendment of the Code of Best Practices of the Canadian Payday Loan Association (CPLA). This policy resulted in increased loan losses experienced by third party lenders as well as a significant increase in the company's administrative allowance provision. For additional information on the administrative allowance see Rentcash's Management Discussion and Analysis document for the period ended March 31, 2006, available on SEDAR at www.sedar.com and the company's website at www.rentcash.ca. The CPLA is the governing association for the payday advance industry and represents members who operate retail outlets that provide payday loans. Rentcash has embraced the association's Code of Best Practices which includes Full and Accurate Disclosure, Promoting Consumer Responsibility, the Right to Rescind, and beginning January 2005, a no rollover policy. The company believes that the introduction of the no rollover policy is a positive step forward in eliminating the perception that payday advance companies promote a cycle of debt for their customers. In addition, one of the major concerns with the industry that was expressed by government officials, both provincially and federally, related to the practice of rolling over of loans. Implementing the no rollover policy was important to both government and consumers. Rentcash strongly supported this policy change and believes it will have a positive long term impact on the company and the payday loan industry. For further information on the payday advance industry please visit the Canadian Payday Loan Association (CPLA) website at www.cpla-acps.ca.