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Rent-Way's same-store revenues up 6.6% in 1Q but net loss mounts

By Furniture Today Staff -- Furniture Today, February 8, 2004

ERIE, Pa. — Rent-Way executives said they were pleased with a 6.6% same-store revenue gain and higher operating earnings in the first fiscal quarter, although the rent-to-own chain reported a larger net loss after accounting adjustments.

"Our strategy of focusing on top-line growth to drive operating profits higher is beginning to take hold," said William Morgenstern, chairman and CEO of the 753-store company.

Revenues of $123.6 million in the quarter ended Dec. 31 were up 3.1% from the same period a year ago. The core rental business — excluding prepaid phone service revenues, which are declining — rose 5.9% to $117.6 million.

Operating income of $8.6 million was up more than 70%. But Rent-Way posted a net loss of $6.2 million, compared with a net loss of $5.4 million a year ago, after accounting charges of $7.1 million, including a non-cash charge related to a conversion feature on preferred stock.

"We exceeded our earlier guidance on revenue and operating income for the period," said William McDonnell, vice president and chief financial officer. "Shareholders should note that the $5.7 million charge (related to the preferred stock) is directly related to the healthy improvement in our stock price over the quarter."

An accounting standard requires the company to evaluate the value of an imbedded derivative in its $15 million preferred stock instrument, he said, adding the charge "does not reflect any increase in our cash obligations to the preferred shareholders."

Rent-Way said it had operating income plus depreciation and amortization of $12.6 million in the quarter, up from $10.6 million a year ago.

Rent-Way
Earnings per share are fully diluted, and all figures in parentheses are loses or declines.
Quarter ended 12/31	2003	2002	Change
(a) Includes non-rental revenues of $21.2 million in the 2003 quarter and $23.1 million in the 2002 quarter. (b) Revenues minus depreciation and amortization of rental merchandise and property and equipment, cost of prepaid phone service, salaries and wages, net advertising, occupancy and other operating expenses. (c) Includes losses from discontinued operations of $1.3 million in the 2003 quarter and $827,000 in the 2002 quarter. The 2003 quarter is after $395,000 in amortization of deemed dividend and accretion of preferred stock.
Revenues (a)	$123,609,000	$119,838,000	3.1%
Operating income (b)	8,634,000	4,972,000	73.7%
Net income (c)	(6,212,000)	(5,361,000)	—
Earnings per share	(0.24)	(0.21)	—

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