05-10-02
RTO Online
As we reported in our article
Rent Way Q2
Summary, Rent Way reported Net Income for the quarter of $1.6 million
compared to a $4 million loss for the same period last year. A long fought,
much needed turnaround battle that began 18
months ago is being slowly won. Although Rent Way hasn't declared
victory, they are celebrating a ray of
sunshine in an otherwise gloomy year.
As
Earnings Conference Calls go, this one was a bit unusual. In addition to
questions concerning the
private equity deal
struck between Rent Way and Calm Waters Partnership, very detailed and
|
Rent Way Factoids |
| Projected September Margins 11-12% |
| 70 fewer stores than last year |
| Revenue decline 7.2% |
| Operates 1068 stores |
| Depreciation 29.3% for Qtr |
| Rent Way spends 3.3% of revenue for advertising |
| $12.7 million interest expense for the quarter |
| $318 million in debt = $297,000 per store |
| Uses 24 month straight-line depreciation on all PC's |
| Avg Weekly rental rate $19.58 |
| Avg Computer Weekly Rate $25.65 |
83% inventory utilization
17% Idle |
| $234 million inventory on rent |
| $6 million over 90 days idle |
| $128,000 inventory charged off in quarter |
| $5.5 million in skips/stolen in quarter (3.3% of sales) |
| 4.37 turns in April |
| 7-8% past due |
| 92,000 Computers on Rent |
| 16,000 Computers IDLE |
| Computers account for 19.9% of revenue |
| $700,000 per month in depreciation expense for IDLE
computers |
pointed questions were asked by investors. Questions regarding
depreciation, idle inventory, 90 day plus idle, past due percentages, and
dollars lost due to skips/stolen.
These basic 'Rent and Collect' principles of our industry may
not have glamorous acronyms like EBITDA, P/E or PIPE...but they are the engine
that drives us. To hear them discussed in detail by stock brokers demonstrates
the growing acceptance of a simple fact..."Fundamentals matter". It also
demonstrates an increased level of RTO knowledge within the investment
community. And that, as Martha would say, is a very good thing.
Rent Way has yet to file a 10Q for the quarter. Investors were
disappointed that the conference call took place ahead of the filing. With the
absence of a 10Q, investors must rely solely on the companies press release for
information. Rent Way committed to improve both the timing of the earnings
conference call, and the level of 10Q detail in future
quarters.
Below are some quotes from CEO William Morgenstern
Bill Morgenstern
"I can't tell you how great it is to hold a conference call where the news
is good..."
"The energy in this company is, in my mind, at the highest level
ever"
"You can't rent air for 8 bucks"
"The execution of our strategy to prune and trim stores,
unprofitable product lines, and expenses has made us stronger"
"From the last week in January through the last week in March,
we grew over $600,000 in PGWRR (Potential Gross Weekly Rental Revenue).
"I heard [somewhere] that it was bad luck to mention your
competition on these calls. I'm going to risk violating that this one
time....Rent A Center and Aarons reported very good results this past quarter. I
tip my hat to them. Last year we were not only not in the race...we were barely
crawling. If I had to compare us to a patient in a hospital we were flat on our
backs in intensive care. Today we're out of the hospital and we're back on our
feet"
"Our competitors have demonstrated they can deliver operating
margins over 12%...so can we They have shown positive comp sales...so can we"
"Our number one objective between now and the end of the year is
to get the company re-financed"
end
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