Rainbow Rentals today reported financial results for its third quarter and nine months ended September 30, 2002.

Revenue for the third quarter was $24.4 million, up 7.6 percent from $22.7 million for the comparable period in 2001. Revenue at comparable stores (those opened before July 1, 2001) was up 3.8 percent, marking the fourth consecutive quarter of comparable store revenue increases.

Net income for the quarter was $335,000, or $0.06 per share, compared to net income of $394,000, or $0.07 per share, in the third quarter of 2001. Net income for the quarter was affected by costs associated with the 12 new stores opened in 2002, including six stores opened in the third quarter, which offset the effects of higher comparable store revenue and operating income. During the comparable 2001 period, the company opened only six stores. Net income for the quarter was also affected by costs associated with the consolidation of one store and the required write-down of leasehold improvements at a store identified for sale. These costs were approximately $0.02 per share. Proforma net income for the third quarter 2001 was $469,000, or $0.08 per share, to reflect the required adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, under which the company discontinued amortization of goodwill.

For the nine months ended September 30, 2002, net income was $1.3 million, or $0.23 per share, compared to net income of $1.3 million, or $0.23 per share, for the comparable period in 2001. Revenue for the nine months was $74.2 million, up 5.2 percent from 2001 levels. Revenue for the nine months at comparable stores (those open before January 1, 2001) was up 2.0 percent. Proforma net income for the nine months ended September 30, 2001 was $1.6 million, or $0.27 per share, to reflect the required adoption of SFAS No. 142, under which the company discontinued amortization of goodwill.

"We are pleased that comparable store revenue has continued to rise over the last four quarters," said Wayland J. Russell, chairman and chief executive officer. "However, we are not yet where we need to be in terms of revenue per store and customer growth. Our revenue growth is attributable primarily to improved pricing of both new merchandise and higher-quality, pre-rented inventory, as well as improved collection performance. These improvements, along with cost cutting initiatives implemented last year, have resulted in improved profitability in our mature stores. However, the impact of new store openings is much higher than a year ago, as we have opened 12 stores so far this year, compared to six during 2001. In addition, we consolidated one store during the third quarter, and sold another store on October 29. We will continue to evaluate under-performing stores and identify opportunities to improve future profitability.

"With our 2002 new store expansion program now complete and with improvements realized in pricing and inventory, we look to capitalize on the growth opportunities available during the seasonally strong fourth quarter. We remain committed to returning our core stores to their historical performance of $1 million in revenue and 22 percent operating margins."