Rent Way held it's Q4, fiscal year ending conference call today at 4:30pm. As expected, the major topic of discussion was yesterdays announcement of the sale of 28% of Rent Ways locations to Rent a Center.

Highlights
Rent Way CEO Bill Morgenstern described the sale of 295 stores to Rent a Center "Exciting news". He added "The stores we are selling account for about 28% of our store count, while they account for a little less than 25% of our total revenue". "The vast majority of the stores we sold need significant time and money to increase their earnings", he said.

Rent Way currently operates in 42 states. As a result of the sale, the company will exit 5 states completely. California, Oregon, Washington, Colorado, and South Dakota stores will all be sold. CEO Bill Morgenstern mentioned that Non-Compete agreements will be signed for markets exited. No details on the terms of the non-compete were given.

Bill Morgenstern
CEO
"Our choices were clear, de-lever the company by selling stock at depressed prices, or liquefy certain assets".

"This is a decision to take a bold step to solve our financial difficulties once and for all"

"It's not very often you see a true win-win in a business transaction...In this case, it is a win-win for both company's stakeholders"

Rent Way CFO Bill McDonnell stated that Rent Way would net between $65 and $75 million 0f the $101.5 million sale price. The remainder will be used to pay expenses related to the sale. Rent Way will be responsible for building and vehicle leases on stores that Rent a Center decides to close/merge. Rent Way's agreement with it's lenders does not allow for lower interest rates as a result of overall debt reduction. As a result, interest rates on remaining debt will remain around 15%.

Company officials are still hopeful that a re-finance can be accomplished. The sale of the "underperforming assets" is seen as a step in that direction.

Bill Morgenstern
CEO
"No one knows what tomorrow brings, but our ambitions are to have the re-finance in place by the end of next quarter"

If Rent Way is unable to re-finance existing debt by June 2003, lenders will receive a 15% equity stake in the company, causing further dilution of shares.

As a byproduct of the sale, a "rationalization of corporate overhead", read staffing cuts, will be possible. No specifics were given, but every position will be evaluated.

Rent Way considered selling it's pre-paid dial tone subsidiary, DPI Teleconnect to raise capital, but were unable to find a buyer at the asking price.

Bill Morgenstern
CEO
"We did look at it, candidly, to try and find a buyer, the price ranges we got back were unattractive to us"

After a difficult summer, Rent Way has seen some improvement in October/November, gaining 11,000 customers and 21,000 agreements during the period.

Listen to the archived audio of the conference call here

See earnings release and details here