-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AuF7MaUAJip7MPVMM/sr68XErlaWQtE9/K2TK5m/kl+a8MdXgD/Zt3a4FL47On1R a7ZcJplhHQr9STLtUOD9/Q== /in/edgar/work/20000810/0000800458-00-000016/0000800458-00-000016.txt : 20000921 0000800458-00-000016.hdr.sgml : 20000921 ACCESSION NUMBER: 0000800458-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: [7822 ] IRS NUMBER: 930780536 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15159 FILM NUMBER: 690858 BUSINESS ADDRESS: STREET 1: ONE AIRPORT CTR STREET 2: 7700 N E AMBASSADOR PL CITY: PORTLAND STATE: OR ZIP: 97220 BUSINESS PHONE: 5032847581 MAIL ADDRESS: STREET 1: 7227 NE 55TH AVENUE CITY: PORTLAND STATE: OR ZIP: 97218 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL VIDEO INC DATE OF NAME CHANGE: 19881004 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number: 0-15159 RENTRAK CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0780536 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification no.) 7700 NE Ambassador Place, Portland, Oregon 97220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(503)284-7581 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) As of July 31, 2000, the Registrant had 12,293,684 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 and March 31, 2000 Consolidated Statements of Income for the three month periods ended June 30, 2000 and June 30, 1999 Consolidated Statements of Cash Flows for the three month periods ended June 30, 2000 and June 30, 1999 Notes to Consolidated Financial Statements
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS (UNAUDITED) June 30, March 31, 2000 2000 CURRENT ASSETS: Cash and cash equivalents $ 6,368,417 $ 4,028,271 Accounts receivable, net of allowance for doubtful accounts of $820,857 and $836,945 19,779,554 21,820,168 Advances to program suppliers 2,999,931 2,982,766 Inventory 3,692,406 3,889,603 Income tax receivable 190,617 169,300 Deferred tax asset 1,878,113 1,878,113 Notes receivable 4,142,222 4,061,618 Other current assets 2,517,671 1,757,081 Total current assets 41,568,931 40,586,920 PROPERTY AND EQUIPMENT, net 2,820,240 2,642,700 OTHER INVESTMENTS, net 302,481 302,481 DEFERRED TAX ASSET 3,370,175 3,346,212 OTHER ASSETS 3,620,960 3,595,041 TOTAL ASSETS $51,682,787 $50,473,354 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) June 30, March 31, 2000 2000 CURRENT LIABILITIES: Line of credit $ 4,385,350 $ - Accounts payable 18,998,388 24,162,040 Accrued liabilities 3,262,039 2,645,567 Accrued compensation 736,388 1,476,703 Current portion of deferred revenue 1,511,694 1,500,262 Notes payable 500,000 500,000 Net current liabilities of discontinued operations 319,281 430,923 Total current liabilities 29,713,140 30,715,495 LONG-TERM DEFERRED REVENUE 2,474,326 1,677,272 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock $.001 par value; Authorized: 10,000,000 shares - - Common stock, $.001 par value; Authorized: 30,000,000 shares Issued and outstanding: 12,293,684 shares at June 30, 2000 and 10,514,561 at March 31, 2000 12,294 10,515 Capital in excess of par value 52,810,473 44,445,199 Notes receivable (8,097,636) - Cumulative other comprehensive income (loss) (303,785) (264,684) Accumulated deficit (24,281,029) (25,326,951) Less - Deferred charge - warrants (644,996) (783,492) 19,495,321 18,080,587 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,682,787 $50,473,354 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended June 30, 2000 1999 REVENUES: PPT $23,599,375 $26,441,311 Other 6,685,572 4,553,759 30,284,947 30,995,070 OPERATING COSTS AND EXPENSES: Cost of sales 22,971,790 24,437,684 Selling, general, and administrative 5,940,041 3,968,129 Net (gain) expense from litigation settlement (225,000) 531,024 28,686,831 28,936,837 INCOME FROM OPERATIONS 1,598,116 2,058,233 OTHER INCOME (EXPENSE): Interest income 156,566 38,183 Interest expense (183,484) (165,425) (26,918) (127,242) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION 1,571,198 1,930,991 INCOME TAX PROVISION 525,279 691,505 INCOME FROM CONTINUING OPERATIONS 1,045,919 1,239,486 GAIN FROM DISPOSAL OF DISCONTINUED SUBSIDIARIES (PLUS INCOME TAX BENEFIT OF $483,502) - 2,373,502 NET INCOME $ 1,045,919 $ 3,612,988 EARNINGS PER SHARE: Basic: Continuing operations $ 0.10 $ 0.12 Discontinued operations $ - $ 0.23 $ 0.10 $ 0.35 Diluted: Continuing operations $ 0.10 $ 0.12 Discontinued operations $ - $ 0.23 $ 0.10 $ 0.35 The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended June 30, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $1,045,919 $3,612,988 Adjustments to reconcile income to net cash provided by (used in) in operating activities Gain on disposal of discontinued operations - (2,373,502) Depreciation and Amortization 299,153 328,879 Amortization of warrants 138,496 177,041 Provision for doubtful accounts 15,093 - Retailer financing program reserves - 305 Deferred income taxes (23,963) - Change in specific accounts: Accounts receivable 2,025,521 (3,092,312) Advances to program suppliers (17,165) (1,207,335) Inventory 197,197 437,620 Income tax receivable (21,317) 367,032 Notes receivable (80,604) - Other current assets (760,590) 307,082 Accounts payable (5,163,652) (230,005) Accrued liabilities & compensation (123,843) 975,256 Deferred revenue (current) 11,432 11,363 Net current liabilities of discontinued operations (111,642) (643,194) Deferred revenue (long-term) 797,054 - Net cash used in operations (1,772,911) (1,328,782) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, equipment, and inventory (454,664) (65,939) Disposal (purchase) of other assets & intangibles (87,046) 150,483 Net cash provided by (used in) investing activities (541,710) 84,544 CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under line of credit 4,385,350 325,000 Issuance of common stock 269,417 5,769 Net cash provided by financing activities 4,654,767 330,769 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,340,146 (913,469) CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 4,028,271 2,145,963 CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,368,417 $1,232,494 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $49,552 $195,095 Income taxes paid, net of refunds received 79,830 19,330 NON-CASH TRANSACTIONS Reclassification of accounts receivable to other investments - 10,174 Change in unrealized gain (loss) on investment securities, net of tax (39,098) (52,396) Notes issued for common stock 8,097,636 - The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of RENTRAK CORPORATION (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three month period ended June 30, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2001. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company's 2000 Annual Report to Shareholders. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal and recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The Condensed Consolidated Financial Statements include the accounts of the Company, its majority owned subsidiaries, and those subsidiaries in which the Company has a controlling interest after elimination of all inter-company accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. NOTE B: Net Income Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per common share is computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arising from dilutive stock options and warrants. The weighted average number of shares of common stock equivalents and net income used to compute basic and diluted earnings per share for the three month periods ended June 30, 2000 and 1999 were as follows: Note B: Net Income Per Share
Three-Months Ended Three-Months Ended June 30, 2000 June 30, 1999 Basic Diluted Basic Diluted Weighted average number of shares of common stock outstanding 10,816,915 10,816,915 10,440,614 10,440,614 Dilutive effect of exercise of stock options - 113,276 - 101,071 Weighted average number of shares of common stock outstanding and common stock equivalents 10,816,915 10,930,191 10,440,614 10,541,685 Net Income: Continuing operations $ 1,045,919 $1,045,919 $1,239,486 $1,239,486 Discontinued operations - 2,373,502 2,373,502 Net income: $1,045,919 $1,045,919 $3,612,988 $3,612,988 Earnings per share: Continuing operations $0.10 $0.10 $0.12 $0.12 Discontinued operations - 0.23 0.23 Net income $0.10 $0.10 $0.35 $0.35
NOTE C: Business Segments, Significant Suppliers and Major Customer The Company classifies its services in three segments, PPT, 3PF.COM, Inc. and Other. Under its Pay-Per-Transaction (PPT) revenue sharing program, the Company enters into contracts to lease videocassettes from program suppliers (producers of motion pictures and licensees and distributors of home video cassettes) which are then leased to retailers for a percentage of the rentals charged by the retailers. 3PF.COM, Inc. is the Company's e-commerce provider of order processing, fulfillment and inventory management services. Other includes the operations of BlowOut Video, a video retail subsidiary, ForMovies.Com, an internet service and amounts received pursuant to royalty agreements, primarily form Rentrak Japan. Business Segments
Three Months Ended Three Months Ended June 30, 2000 June 30, 1999 NET SALES: (1) PPT $23,876,756 $26,555,648 3PF.COM, Inc. (2) 4,305,100 3,500,810 OTHER 3,151,661 2,072,560 $31,333,517 $32,129,018 INCOME (LOSS) FROM OPERATIONS: (1) PPT $2,200,127 $1,576,148 3PF.COM, Inc. (2) (828,576) 342,034 OTHER 226,565 140,051 $1,598,116 $2,058,233 (1) Total amounts differ from those reported on the consolidated financial statements, as intercompany transactions are not eliminated for segment reporting purposes. (2) 3PF.COM, Inc's revenues related to the shipment of cassettes to PPT Customers was $771,189 and $1,019,611 for the three- month periods ended June 30, 2000 and 1999, respectively.
For the quarter ended June 30, 2000, the Company had one program supplier whose product generated 21 percent, a second that generated 19 percent, and a third that generated 11 percent of Rentrak revenue. No other program supplier provided product, which generated more than 10 percent of revenue for the three- month period ended June 30, 2000. One customer accounted for 11 percent of the Company's revenue in the three-month period ended June 30, 2000. For the quarter ended June 30, 1999, the Company had one program supplier whose product generated 22 percent, a second that generated 19 percent, and a third that generated an additional 18 percent of Rentrak revenue. No other program supplier provided product, which generated more than 10 percent of revenue for the three-month period ended June 30, 1999. No customer accounted for more than 10 percent of the Company's revenue in the three- month period ended June 30, 1999. NOTE D: Discontinued Operations On November 26, 1996, the Company made a distribution to its shareholders of 1,457,343 shares of common stock of BlowOut Entertainment, Inc. ("BlowOut"). The operations of BlowOut were reflected as discontinued operations in the March 31, 1996 consolidated financial statements. On March 22, 1999, BlowOut filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time BlowOut filed a motion to sell substantially all the assets of BlowOut. The sale to a third party video retailer was approved by the Bankruptcy Court on May 10, 1999, and closed on May 17, 1999. The Company was the principal creditor of BlowOut. In 1996, the Company had agreed to guarantee up to $7 million of indebtedness of BlowOut ("Guarantee"). Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under BlowOut's credit facility. As the proceeds from the sale of the BlowOut assets were not sufficient to cover the amounts due under this facility, the Company, pursuant to the Guarantee, agreed to a payment plan to fulfill BlowOut's obligation under its credit facility. The amount outstanding at June 30, 2000 is approximately $319,000. The funds remaining, if any, after payment of administrative and cost claims after dismissal of the case may further reduce the amount due under the credit facility. During the quarter ended June 30, 1999, the Company recorded a gain on the disposal of discontinued operations of $1.9 million related to BlowOut, as the liability related to BlowOut contingencies was less than estimated. The Company also reduced the valuation allowance, which was recorded against the deferred tax asset related to liabilities of discontinued operations. This reduction of approximately $0.5 million in the valuation allowance was recorded as an income tax benefit from discontinued operations in the accompanying consolidated income statement. Net current liabilities of discontinued operations at June 30, 2000 and June 30, 1999, relate to amounts to be paid pursuant to the Guarantee, net of tax benefit. NOTE: E Agreement In June 2000, the Company entered into an agreement with one of its customers, modifying an existing contract. Under terms of the agreement the customer made a payment to the Company in the amount of $2.5 million. $1.25 million of the payment has been recorded as revenue in the consolidated statement of income for the quarter ended June 30, 2000, as the amount relates to the modification of certain contractual obligations. The additional $1.25 million was paid to the Company as a prepayment toward services through June 30, 2006. As services are provided by the Company's subsidiary, 3PF.COM, Inc., the customer can apply the prepaid $1.25 million as payment for certain of these services. Accordingly, this $1.25 million has been recorded as long-term deferred revenue on the Company's balance sheet as of June 30, 2000. NOTE F: Related Party Transactions On June 16, 2000, the Company loaned $8,097,636 to two of its officers to purchase 1,663,526 shares of stock upon exercise of their employee stock options. The loans bear interest at the federal funds rate in effect on the date of the loan (6.5%) and interest is payable annually. The principal amount of the loans is due on the earliest to occur of: (1) one year prior to the expiration of the term of the borrower's current employment agreement with Rentrak, (2) one year after borrower leaves Rentrak's employment unless such departure follows a "change of control" (as defined in the loan agreements), (3) five years from the date of the loan, or (4) one year from the date of the borrower's death. The loans are secured by the stock purchased. The loans are without recourse (except as to the stock securing the loans) as to principal and are with full recourse against the borrower as to interest. The notes receivable arising from these transactions are presented as deductions from stockholders' equity. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Forward Looking Statements Certain information included in Management's Discussion and Analysis of Financial Condition and Results of Operation constitute forward-looking statements that involve a number of risks and uncertainties. Forward looking statements are identified by the use of forward-looking words such as "may", "will", "expects", "intends", "anticipates", "estimates", or "continues" or the negative thereof or variations thereon or comparable terminology. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: the Company's ability to continue to market the Pay Per Transaction ("PPT") System successfully, the financial stability of participating retailers and their performance of their obligations under the PPT System, non- renewal of the Company's line of credit, business conditions and growth in the video industry and general economics, both domestic and international; competitive factors, including increased competition, expansion of revenue sharing programs other than the PPT System by program suppliers, new technology and the continued availability of prerecorded videocassettes ("Cassettes") from program suppliers. Such factors are discussed in more detail in the Company's 2000 Annual Report to Shareholders. Results of Operations For the quarter ended June 30, 2000, total revenue decreased $0.7 million, or 2 percent, to $30.3 million from $31.0 million for the quarter ended June 30, 1999. Total revenue includes the following PPT Program fees: application fees generated when retailers are approved for participation in the PPT System; order processing fees generated when Cassettes are ordered by and distributed to retailers; transaction fees generated when retailers rent Cassettes to consumers; sell-through fees generated when retailers sell Cassettes to consumers and buy out fees generated when retailers purchase Cassettes at the end of the lease term. In addition, total revenue includes charges to customers of the Company's wholly owned subsidiary, 3PF.COM, Inc., which provides e-commerce order processing, fulfillment and inventory management services, sales of Cassettes through the Company's retail subsidiary, BlowOut Video, charges for internet services provided by ForMovies.Com and royalty payments primarily from Rentrak Japan. The decrease in total revenues for the three month period ended June 30, 2000 is primarily due to the reduction in (i) the total number of Cassettes leased under the PPT System due in part to program suppliers offering more titles under copy depth programs than historical levels and program suppliers engaging in direct revenue sharing with the larger chains; and (ii) the number of titles released to the PPT System. These reductions in revenue were partially offset by an increase in revenue related to the 3PF.COM, Inc.'s Services, as well as the recognition of $1.25 million of revenue related to an agreement with a customer as noted above (See Note E.). Cost of sales for the quarter ended June 30, 2000 decreased to $23.0 million from $24.4 million for the quarter ended June 30, 1999, a decrease of $1.4 million, or 6 percent. The decrease is due to the reduction in revenue as noted above and due to the recognition of $1.25 million of revenue related to an agreement with a customer as noted above (See Note E.) that had negligible cost of sales associated with the transaction. As a result, the gross profit margin increased to 24 percent in the quarter ended June 30, 2000 from 21 percent in the quarter ended June 30, 1999. Selling, general and administrative expenses were $5.7 million for the quarter ended June 30, 2000 compared to $4.5 million for the quarter ended June 30, 1999, an increase of $1.2 million, or 27 percent. The increase in selling, general and administrative expenses is primarily due to: (1) increased investments in advertising for the Company's business segments; (2) increased investments in systems and infrastructure to support continuing growth of 3PF.COM, Inc.; (3) costs associated with the opening of new retail video stores by the Company and (4) increased legal costs. The effective tax rate during the quarter ended June 30, 2000 was 33% compared to 36% during the quarter ended June 30, 1999. As a result, for the quarter ended June 30, 2000, the Company recorded income from continuing operations of $1.0 million, or 3 percent of total revenue, compared to income from continuing operations of $1.2 million, or 4 percent of total revenue in the quarter ended June 30, 1999. Discontinued Operations On March 22, 1999, BlowOut Entertainment, Inc. ("BlowOut") filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time BlowOut filed a motion to sell substantially all the assets of BlowOut. BlowOut is not related to the Company's wholly owned subsidiary BlowOut Video, Inc. The sale to a third party video retailer was approved on May 10, 1999 and closed on May 17, 1999. During the quarter ended June 30, 1999, the Company recorded a gain on the disposal of discontinued operations of $1.9 million related to BlowOut as the liability related to BlowOut contingencies was less than anticipated. The Company also reduced the valuation allowance, which was recorded against the deferred tax asset related to liabilities of discontinued operations. This reduction of $0.5 million in the valuation allowance was recorded as an income tax benefit from discontinued operations in the accompanying consolidated income statement. Consolidated Balance Sheet At June 30, 2000, total assets were $51.7 million, an increase of $1.2 million from the $50.5 million at June 30, 2000. As of June 30, 2000, cash increased $2.4 million to $6.4 million from $4.0 million at March 31, 2000, primarily due to a $2.5 million payment related to an agreement with a customer as noted above (See Note E.). Accounts receivable decreased $2.0 million from $21.8 million at March 31, 2000 to $19.8 million at June 30, 2000 primarily due to the decrease in revenues for the quarter as noted above and due to the write off of approximately $0.6. in accounts deemed uncollectible. Other current assets increased $0.8 million from $1.7 million at March 31, 2000 to $2.5 million at June 30, 2000. Outstanding borrowings under the line of credit increased $4.4 million from $0 at March 31, 2000 to $4.4 million at June 30, 2000 due to changes in working capital needs and investments in equipment during the quarter. Accounts payable decreased $5.2 million from $24.2 million at March 31, 2000 to $19.0 million at June 30, 2000 due primarily to the timing of studio and other vendor payments. Accrued liabilities increased $0.6 million from $2.6 million at March 31, 2000 to $3.2 million at June 30, 2000 due primarily to the income tax accrual for the pre-tax results of operations for the quarter. Deferred revenue increased $0.8 million from $3.2 million at March 31, 2000 to $4.0 million at June 30, 2000 due to the $1.25 million non-refundable advance payment for future services of 3PF.COM, Inc. related to an agreement with a customer as noted above (See Note E). LIQUIDITY AND CAPITAL RESOURCES At June 30, 2000, the Company had cash of $6.4 million compared to $4.0 million at March 31, 2000. At June 30, 2000, the Company's current ratio (current assets/current liabilities) increased to 1.40 from 1.32 at March 31, 2000. The Company had an agreement for a line of credit with a financial institution in an amount not to exceed the lesser of (a) $7.5 million or (b) the sum of 80 percent of the net amount of eligible accounts receivable as defined in the agreement. Interest was payable monthly at the bank's prime rate plus one percent (9.0 percent at March 31, 2000). The line was secured by substantially all of the Company's assets. The terms of the agreement required, among other things, a minimum amount of tangible net worth, minimum current ratio and minimum total liabilities to tangible net worth. The agreement also restricted the amount of net losses, loans and indebtedness and limited the payment of dividends on the Company's stock. As of March 31, 2000, the Company was in compliance with these covenants or waivers had been obtained. The Company had $0 outstanding borrowings under this agreement at March 31, 2000. In May 2000 this line of credit was replaced with a line of credit with a different lender in an amount not to exceed the lesser of (a) $12 million or (b) the sum of 85% of the net amount of eligible accounts receivable. Interest under the new line is payable monthly at the bank's prime rate plus 1/4 percent (9.75 percent at June 30, 2000). The line is secured by substantially all of the Company's assets. The terms of the agreement require, among other things, a minimum amount of tangible net worth, working capital and annual net profit. The agreement also restricts the amount of loans and indebtedness and limits the payment of dividends on the Company's stock. As of June 30, 2000 the Company was in compliance with these covenants. This agreement expires in May 2005. At June 30, 2000, the Company had $4.4 million outstanding borrowings under this agreement. In 1992, the Company established a Retailer Financing Program whereby, on a selective basis, it provided financing to Participating Retailers that the Company believed had potential for substantial growth in the industry. In connection with these financings, the Company typically made a loan to and/or an equity investment in the Participating Retailer. In some cases, the Company obtained a warrant to purchase stock in the Participating Retailer. As part of such financing, the Participating Retailer typically agreed to cause all of its current and future retail locations to participate in the PPT System for a designated period of time (usually 5 - 20 years). Under these agreements, Participating Retailers were typically required to obtain some or all of their requirements of Cassettes from those offered under the PPT System or obtain a minimum amount of Cassettes based on a percentage of the Participating Retailer's revenues. Notwithstanding the long term nature of such agreements, both the Company and the Participating Retailer may, in some cases, retain the right to terminate such agreement upon 30-90 days prior written notice. These financings are highly speculative in nature and involve a high degree of risk, and no assurance of a satisfactory return on investment can be given. The Rentrak Video Retailer Loan Program was adopted in 1992 at a time when the video industry was experiencing rapid growth. The underlying rationale for this program was the belief that the Company could expand its business and at the same time participate in the rapid growth experienced by the video retailers in which it invested. Now that the video industry is entering a phase of maturation, the company does not expect to utilize this program in any material respect for any new participants. However, the Company may make follow on loans or investments in existing Video Retailer Loan Participants. As of June 30, 2000, the Company had approximately $6.9 million in loans and investments outstanding under the program and reserves of approximately $5.7 million of the total original loan or investment amount. The Company was the principal creditor of BlowOut Entertainment, Inc. ("BlowOut"). In 1996, the Company had agreed to guarantee up to $7 million of indebtedness of BlowOut ("Guarantee"). BlowOut had a credit facility (the "Credit Facility") in an aggregate principal amount of $2 million for a five-year term. Amounts outstanding under the Credit Facility bear interest at a fixed rate per annum equal to 14.525 percent. Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under the Credit Facility until the lender is satisfied, in its sole discretion, that BlowOut's financial condition is sufficient to justify the release of the Guarantee. As the proceeds from the sale of the BlowOut assets were not sufficient to cover the amounts due under this facility, the Company, pursuant to the Guarantee, has agreed to a payment plan to fulfill BlowOut's obligation under the Credit Facility. The funds remaining, if any, after payment of administrative and cost claims after dismissal of the case may further reduce the amount due under the Credit Facility. As of June 30, 2000, the balance owing under this obligation is approximately $319,000. On July 21, 2000 the Company received a payment in the amount of $4.16 million, including interest, from a customer pursuant to the settlement of a claim. The promissory note was recorded as a note receivable on the balance sheet of the Company at June 30, 2000. During July 2000 the Company sold and received cash proceeds of approximately $1.4 million from 200,000 shares of stock it received previously pursuant to the settlement of a claim. As of June 30, 2000 the book value of these shares of was recorded as other assets on the balance sheet of the Company. Based on the Company's current budgets and projected cash needs, the Company believes that its available sources of liquidity are expected to be sufficient to fund the Company's operations for the fiscal year ending March 31, 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. None. PART II - OTHER INFORMATION Item 1. Legal Proceedings In June 1998, Video Update, Inc. ("Video Update") filed a complaint (the "Video Update Complaint") against the Company entitled Video Update, Inc. v. Rentrak Corp., Civil Action No. 98- 286, in the United States District Court for the District of Delaware. The Video Update Complaint alleges various violations of the antitrust laws, including that the Company has monopolized or attempted to monopolize a market for videocassettes leased to retail video stores in violation of Section 2 of the Sherman Act. Video Update further alleges that the Company's negotiation and execution of an exclusive, long-term revenue sharing agreement with Video Update violates Section 1 of the Sherman Act and Section 3 of the Clayton Act. Video Update is seeking unspecified monetary relief, including treble damages and attorneys' fees, and equitable relief, including an injunction prohibiting the Company from enforcing its agreement with Video Update or any exclusivity provision against videocassette suppliers and video retailers. In August 1998, the Court granted the Company's motion to dismiss the Video Update Complaint pursuant to Federal Rules of Civil Procedure Rule 12(b)(3) on the basis of improper venue. In August 1998, Video Update filed a new complaint against the Company in the United States District Court for the District of Oregon (the "Re-Filed Complaint"), Case No. 98-1013HA. The Re- Filed Complaint is substantially the same as the previous complaint. The Company believes the Re-Filed Complaint lacks merit and intends to vigorously defend against the allegations in the Complaint. The Company has answered the Re-Filed Complaint denying its material allegations and asserting several affirmative defenses. The Company also has counterclaimed against Video Update alleging, among other things, breach of contract, breach of the covenant of good faith and fair dealing, promissory fraud, breach of fiduciary duty, breach of trust, constructive fraud, negligent misrepresentation and intentional interference with business advantage, and seeking damages and equitable relief. In October 1998, the Company filed a motion for summary judgment seeking to dismiss the lawsuit filed against it by Video Update. In January 1999, the Company filed a separate motion for partial summary judgment on its breach of contract counterclaim seeking to recover more than $4.4 million in fees and interest which the Company claims Video Update owes to it. In response to the Company's motions, Video Update asked the court for time to take discovery before having to file oppositions. The court has given the parties until June 30, 2000 to conduct discovery. The court denied Rentrak's motions without reaching the merits and without prejudice to re-filing the motions after discovery has been conducted. Rentrak expects to re-file its motions after discovery has been conducted. On October 21, 1999, the Company amended its counterclaims to add additional claims, including a claim for trade secret misappropriation and a claim for recovery of personal property. The amended countercomplaint also added Video Update's chairman, Daniel Potter as a defendant to the fraud and negligent misrepresentation claims. As of June 30, 2000, the Company had approximately $4,413,000 in accounts receivable relating to PPT transactions from Video Update, which the Company believes, are recoverable. Management intends to monitor the situation quarterly and when management becomes aware of information that indicates that the asset will not be recovered, an appropriate reserve will be recorded. On July 31, 2000, the Company filed multiple motions for summary judgement including a motion seeking to dismiss Video Update's antitrust claim and a motion seeking a finding that Video Update breached its contract with Rentrak. No hearing has been set. Trial is scheduled to begin on January 9, 2001, in Portland, Oregon. In August 1998, the Company filed a complaint (the "Movie Buffs Complaint") against Susan Janae Kingston d/b/a/ Movie Buffs ("Movies Buffs"), entitled Rentrak Corporation v. Susan Janae Kingston, an individual, d/b/a/ Movie Buffs, Case no. CV 98-1004 HA, in the United States District Court for the District of Oregon. In September 1998, Movie Buffs filed counterclaims against the Company and Third Party Claims against Hollywood ("Movie Buffs Counterclaims"). In September 1998 Roadrunner Video ("Roadrunner Video") filed a third-party complaint in intervention against the Company and Hollywood ("the Roadrunner Complaint"). This case is described in the Company's 10-Q for the quarter ended September 30, 1999. The Company filed a motion to dismiss the Robinson-Patman Act claims pursuant to Federal Rules of Civil Procedure 12(b)(6), which motion was granted. The Court also granted Roadrunner and Movie Buff's request to dismiss their claims against Hollywood without prejudice. The Company believes the Movie Buffs Counterclaims and the Roadrunner Complaint lack merit and the Company intends to vigorously defend against all of the allegations therein. On July 17, 2000 the Company announced that Roadrunner voluntarily dismissed with prejudice all of its claims against the Company. Movie Buffs also has agreed to dismiss with prejudice certain of its claims against the Company, including its allegations that the Company violated anti-trust laws. The Company has contemporaneously filed a motion for summary judgement against the remaining Movie Buffs claims. The Company paid no money to either Roadrunner or Movie Buff to obtain dismissal of the various claims. On February 10, 2000 the Company filed a complaint ("the Action Video Complaint") against David D. Passerallo, and Action Video, Inc. entitled Rentrak Corporation v. David D. Passerallo, an individual and Action Video, a North Carolina corporation, Case No. CV 00-214-HA, in the United District Court for the District of Oregon. The Action Video Complaint alleges claims for conversion, breach of contract, payment on advance agreement and personal guarantee. On April 10, 2000, Action Video filed counterclaims against the Company ("the Action Video Counterclaims). This case is described in the Company's 10-K for the year ended March 31, 2000. The Company has sought to dismiss a number of Action Video's counterclaims. Action Video agreed to dismiss certain of these counterclaims and has repled its remaining counter claims. Action Video is no longer asserting any antitrust claims against the Company. The Company believes that the Action Video Counterclaims are without merit and intends to vigorously defend against this litigation. On June 13, 2000 in the United States Federal District Court in Portland, Oregon, the Company filed a lawsuit against Donald Kundinger, Paul Bogdanich, Jackson Hole Advisors, Paul Rosenbaum, and a number of other shareholders and prospective board nominees who had either been identified in a Schedule 13D filed by Mr. Rosenbaum or had served on Rentrak a demand for a special shareholders meeting. The suit claims that the defendants have violated Sections 13 and 14 of the Securities Exchange Act by, among other things filing a late and misleading Schedule 13D and engaging in false and misleading solicitations. The suit also alleges that Messrs. Kundinger and Bogdanich and Jackson Hole Advisors have breached a contract entered into with Rentrak and their fiduciary duties owed to Rentrak and that they have engaged in fraud. The suit prays for declaratory and preliminary and permanent injunctive relief against all the defendants and seeks compensatory and punitive damages against Messrs. Kundinger and Bogdanich and Jackson Hole Advisors. Rentrak has sough and obtained a court order authorizing expedited discovery and is vigorously conducting discovery against the defendants and certain third parties. On July 7, 2000, certain of the defendants who purport to be members of a shareholder group identifying itself as the Committee for Achievement of Rentrak Excellence filed their answer denying the material allegations of the complaint, asserting various affirmative defenses and asserting a counterclaim against Rentrak, its directors, Rentrak Japan, K.K. and Culture Convenience Club Co., Ltd. Alleging that Rentrak and the other defendants have violated Section 13 (d) of the Securities Exchange Act by failing to file a Schedule 13D within 10 days after they allegedly formed a group to acquire Rentrak stock with the purpose or effect of influencing control of Rentrak. As part of their allegations, the counterclaimants allege that Rentrak has violated Regulation U promulgated by the Board of Governors of the Federal Reserve System by granting loans to Messrs. Berger and Cox to enable them to exercise certain stock options for the purpose of defeating an impending proxy fight for control of Rentrak. The counterclaimants pray for declaratory and preliminary and permanent injunctive relief. Rentrak does not believe that it or any of the other defendants have violated Section 13 (d) or have formed any group. In addition, Rentrak believes that the loans made to Messrs. Berger and Cox in connection with the exercise of their stock options complied with Regulation U. Rentrak and the other defendants are vigorously defending against these allegations and the relief sought. In the event of an unanticipated adverse final determination in respect to one or more of the cases discussed above, the Company's consolidated net income for the period in which such determination occurs could be materially affected. The Company is also subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of any ultimate liability with respect to these actions is not expected to materially affect the financial position or results of operations of the Company as a whole. Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated this 10th day of August, 2000 RENTRAK CORPORATION: /s/ F. Kim Cox F. Kim Cox President Signing on behalf of the registrant EX-27 2 0002.txt
5 3-MOS MAR-31-2001 JUN-30-2000 6,368,417 0 20,600,411 820,857 3,692,406 41,568,931 10,007,658 7,187,418 51,682,787 29,713,140 0 0 0 12,294 19,483,027 51,682,787 30,284,947 30,284,947 22,971,790 28,686,831 26,918 0 183,484 1,571,198 525,279 1,045,919 0 0 0 1,045,919 0.10 0.10
-----END PRIVACY-ENHANCED MESSAGE-----