Wednesday June 27, 5:49 pm Eastern Time
Rent-Way charges from probe exceed forecasts
(UPDATE: Recasts; adds details of debt payment and recovery plans in paragraph 6)
NEW YORK, June 27 (Reuters) - Rental store operator Rent-Way Inc. (NYSE:RWY - news) on Wednesday said extraordinary charges resulting from an investigation into accounting improprieties totaled $129 million for the years 1998, 1999 and 2000, above previous estimates.
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Erie, Pennsylvania-based Rent-Way, which made the announcement in conjunction with the filing of its 10-K for fiscal 2000, said $98 million in charges were directly related to improper entries while another $31 million in unrelated charges were recorded in the same period.
Last month, Rent-Way said it expected charges to total about $127 million, well above previous estimates of $65 million to $75 million.
The embattled company said there was no evidence to show that members of Rent-Way's senior management team had any knowledge of the accounting manipulation, which was implemented by a small number of employees.
The accounting scheme worked by masking cost increases associated with Rent-Way's rapid growth in store count while operating margins were reported in line with historical levels, William McDonnell, chief financial officer of Rent-Way, said in a statement
Rent-Way, which has reduced its bank debt by $40 million since January, reiterated plans to restore profit margins of between 14 and 16 percent by March of 2002.
The company said it expects to file 10-Qs for the quarters ended Dec. 31, 2000 and March 31, 2001 by the end of July. For the quarter ended June 30, results will be released in a timely manner, the company said.
Shares of Rent-Way fell 14 cents to close at $9.15 on the New York Stock Exchange, well below its 52-week high of $32.25.
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