"This year we went to battle and won back a lot of market share we lost last year"

"The business we lost last year was not because customers chose not to do business with Rent Way, [it was because], they came into the stores and we didn't have the products they were accustomed to"
Bill Morgenstern
Rent Way CEO

If you find yourself in a tunnel and approaching a bright light, are you A: Dead and well on your way to the "happy renting grounds," or B: Approaching the successful end of a long and sometimes dark journey. For Rent Way, the answer appears to be B.

Yes, Rent Way is still in the red (barely). Yes, RWY stock is far below it's pre-crash highs. No, the company is not ready to grow...but. What can only be described as restrained jubilation was heard in the voices of Rent Way CEO Bill Morgenstern, CFO Bill McDonnell, and Senior VP Operations Bill Short on the recent Rent Way earnings conference call. Company officials spoke of Rent Way's future with more confidence than has been heard from Erie in a very long time.

2003 was the first year in Rent Way's history the company operated all locations under one Brand. According to CEO Bill Morgenstern, this re-branding and the "We are Family" ad campaigns were meant to "Separate Rent Way in the sea of sameness of rent to own dealers and differentiate our brand." The campaign was evidently successful. Company officials cite independent surveys that show Rent Way as the #1 recognized brand in their markets.

In an odd twist of RTO fate, Rent a Center has agreed to offer Rent Way subsidiary DPI Teleconnect's pre-paid dial tone in 2000 of it's locations. DPI Teleconnect has been a slight drag on earnings in recent quarters due primarily to increased competition in the local dial tone market. This alliance with big brother RAC will boost DPI's revenue and, should Rent Way decide to spin off the company, may provide a ready buyer.

Unlike Rent a Center, Rent Way saw no impact on payouts due to Child Tax Credits. Payouts were flat quarter over quarter and the company gained 900 customers. Senior VP Ops Bill Short covered operational results greater detail than in past quarters.

Potential Weekly Revenue is the total amount due that week. Rent Way's goal is to collect 87% - 89% of potential revenue. In the most recent quarter the company averaged 89.1%, up 1.9% from the same period in 2002.

For the September quarter, deliveries were up 17,000 and returns were down by 14,000.

Charge-offs for the quarter were 3.2% vs 3.3% for the September quarter last year. For the fiscal year, Rent Way charged off's averaged 2.9%.

When asked if Rent Way had a list of underperformers that "might not make it", CEO Bill Morgenstern replied "There are probably 50 stores that are frustrating us to death."

Each year, Rent Way surveys customers to find out "What drives them." The three main drivers are...

1. Dealing with a name they can trust

2. Being treated with respect

3. Friendly people delivering on promises made

Rent Way reports that the number of customers responding "Extremely Satisfied", when asked about the above drivers, rose to 29% vs 20% in 2002. Rent Way also claims a higher rate of customer satisfaction than Rent a Center and Aaron Rents.

HD electronics hit Rent Way stores in September, DVD Recorders will be added later in the fall, Sears Kenmore is back in the company's lineup, and Xbox will soon be packaged in entertainment cabinets designed by Welton.

New store openings are still on hold. CEO Morgenstern stated flatly "We want to make sure we have command and control of the 750 stores we operate today."

How things are said is sometimes more telling than the actual words. Listening to Rent Way's leadership, one gets the distinct impression that the "attitude" is back.