Rainbow Rentals held it's Q4, year end earnings conference call today. A summary of the call is below.

Conference Call Tidbits

The increase in 'same store revenues' was fueled almost exclusively by increases in rental rates on new and used merchandise. As a result of higher rates, rental revenues increased even as the average customers per store decreased year over year.

As a result of Rainbows renewed focus on employee retention, a higher percentage of employees are making it past the 90 day waiting period and becoming eligible for health insurance. (Rainbow offers employees free healthcare coverage. The company is self insured and utilizes a 3rd party administrator)

Rainbow decreased debt by 25% while increasing store count by 10% in 2002. Year end debt was $7.5 million or only $61,000 per store!

Rainbow Increased APU (Average Price per Unit) over $2.00 during 2002.

Rainbow opened 12 stores during 2002, more than any other year in company history

The company's new marketing campaign "I'd rather rent it at Rainbow" launched in January. The campaign is designed to reinforce with consumers, Rainbows desire to be 'first to market' with new products and technologies.

Rainbow recently began outsourcing direct response campaigns that focus exclusively on customer retention. The campaign insures constant customer contact and relationship management.

As a result of high turnover, Rainbow has delayed opening new stores in 2003 until July. This will allow an 18 month 'new manager incubation period'.

According to company officials, the average new store loses $100,000 in the first 9 to 12 months.

January 2003 was the "second best January in 5 years".

Notable Quotes

Wayland Russell
CEO
"2002 was not a banner year for Rainbow Rentals, but it was an improvement over 2001 and marked a turnaround after 2 years of decline"

"We remain financially solid, increasingly profitable, and committed to further growth and financial improvement"

Best Quote
In response to an analyst's question 'Can you continue to afford to offer free health care to employees?'...Mr. Russell defends Rainbow's above average compensation.
"We can't afford to run the business with mindless store caretakers. We need executive level people to run the stores with an entrepreneurial spirit to want to drive those stores to higher levels"

"We have 17 years of experience and several million deliveries...we are focusing on customer re-acquisition"

"We have competitors that can have greater frequency [in advertising] than us, so we have to be very surgical in our message"

"Training, training, training...Mr. Hendrix, our Chief Operating Officer, is just fanatical about it."

"We believe that, once we get the customer in the door, we've got the customer"

"Our model does not work with low revenue. If we didn't believe that we could drive that top line up then we would have to re-tool our model....we truly believe we can do that"

In response to a question regarding the availability of recently laid off Rent Way employees from the RAC acquisition.
"We do not in any way directly solicit associates from other companies. But I can assure you we have a pipeline full of competitor associates looking for a position"

Michael Viveiros
President
"The product mix is shifting into more technologically advanced [merchandise] that the customer is putting a higher value on"

"We haven't bought an analog projection TV since June or July of last year. The returns we are getting now are going to continue to go out at higher rates than our returns have gone out in the past"