08-07-02
RTO Online

Factoids

Rent Way founded by William Morgenstern in 1981

Latest 10Q, May 14 2002

William Morgenstern, CEO Began his rent to own career in 1979 as a Rent-A-Center store manager in Ft. Worth, Texas.

William A. McDonnell, VP, CFO Prior to coming to Rent Way, McDonnell was a director in the Global Distribution Group for the Bank of Montreal.

Ron DeMoss, VP and General Counsel Began rent to own career in 1990 as a corporate counsel for Rent-A-Center. Involved in the enactment of rental-purchase legislation in 11 states. Chairman of APRO's Government Relations Committee spearheading HR1701

John A. Lombardi VP, Corporate Controller and Chief Accounting Officer Former EVP & CFO of Northstar Health Services and specialty consulting services of Arthur Andersen LLP

Recent Rent Way Stories

Rent Way Q2 Quotes and Factoids

Rent Way Sets New 52 Week High

Rent Way Q2 2002 Conference Call Summary

Rent Way stock took a dive at the opening bell, falling by 25%. At publishing time, the stock remains down 23% at $4.90.

(update: RWY closed at $4.65 down  -27.34% on volume of 831,400 shares, 4 times avg volume)

Trading volume is extremely high. This follows a rather gloomy quarterly conference call Wednesday. There was much to report ...unfortunately, most of the news wasn't good.

The company reported $159.5 million total revenue. While this number was in line with projections, it yielded only 5.9% operating margin and a net loss of $6 million. Rent Way same store sales also declined 1%.

The one bright spot in the quarter was the continued reduction of Rent Way's debt. Total debt on June 30 was $303 million. This is down from a high of over $400 million dollars 2 years ago.

But the reduction in overall debt is more than offset by an overwhelming 15% interest rate. Rent Way's interest rate is based on an S&P rating of CCC+.

Interest Expense is an open wound
Rentway's interest expense for the quarter was $11.8 million. Calculated on a 'per-store' basis, that's a staggering $11,000 per store in interest for the quarter, nearly double the per store interest of rival Rent A Center at $6,400.

Company officials stated that Rent Way could re-finance now, but will wait for "better terms". The question remains...if re-financing is possible...why wait? Even a modest reduction in interest expense could mean the difference between loss and profit.

Too much of a good thing...
Some time ago, Rent Way began discounting "...old, tired" merchandise, replacing it with higher end goods. William Morgenstern, CEO stated that the company "went too far" with this strategy. The company focused on purchasing the higher end goods, at the expense of the tried and true Rent to Own lineup. As a result, stores were not able to meet the demand.

William Morgenstern
CEO
"I think we may have overcorrected slightly in our inventory rationalization"
"Our focus on higher end, better margin products is not wrong. We just need to make sure we have a balanced mix..."

Advertising
Rentway spent 60% of it's yearly ad budget in the first 3 months of the fiscal year. As a result, Rent Way authorized a $1.6 million increase in ad spending to cover the shortfall.

William Morgenstern
CEO
"In hindsight, this was a tactical mistake".
 

Rent Way will work on balancing it's advertising expense throughout the year in future quarters.

Revised Estimates
As a result of lower expected revenues, increased advertising costs, and the continued high interest rates, Rent Way has revised earlier Q4 estimates downward. Margins are expected to be between 5% - 7%, versus an earlier estimate of 10% to 15%. Revenue projections were also lowered significantly. Earlier revenue projections were $145 million to $150 million. Revised revenue projections $138 million to $141 million.

The company also reported that Bill Short has replaced Jeff Underwood as Senior Vice President of Operations. In a twist, Jeff Underwood has taken over as Divisional VP in charge of Florida Operations. A position of lesser responsibility. No Specifics were given as to the sudden change.

William Morgenstern
CEO
" {Jeff Underwood}...who, for a variety of personal and professional reasons, has taken the position of divisional vice president in our Florida Stores"

The conference call lasted nearly 2 hours. A link to the archived call can be found on our Stock Page.

View the financial statement here.

Rent Way has yet to file a 10Q. We will post the link here when available.

end

Home