-----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, JdKKwpKkiITy9X4Um2foIp2uUkxYYbd1Xrootv9O011rcvCVDgqA4JPKddA5LT7C MJB6veZ0t4cKZ9FsFzQjHQ== /in/edgar/work/0000800458-00-000023/0000800458-00-000023.txt : 20001114 0000800458-00-000023.hdr.sgml : 20001114 ACCESSION NUMBER: 0000800458-00-000023 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20001113 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/A SEC ACT: SEC FILE NUMBER: 000-15159 FILM NUMBER: 759787 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/A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 (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. EXPLANATORY NOTE This Amendment No. 1 on Form 10-Q/A amends Items 1 and 2 of Part I and Item 6 of Part II of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, as filed by the Registrant on August 10, 2000, and is being filed to reflect the restatement of the Registrant's condensed consolidated financial statements (the "Restatement"). The Restatement reflects corrections of accounting for certain revenues and deferred revenues not recorded correctly during the quarter ended June 30, 2000. A discussion of the Restatement and a summary of the effects of the Restatement are presented in Note B. to the condensed consolidated financial statements. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 (as restated) and March 31, 2000 Consolidated Statements of Income for the three-month periods ended June 30, 2000 (as restated) and June 30, 1999 Consolidated Statements of Cash Flows for the three- month periods ended June 30, 2000 (as restated) and June 30, 1999 Notes to Consolidated Financial Statements
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS (AS RESTATED) (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 (AS RESTATED) (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 2,867,638 2,645,567 Accrued compensation 676,709 1,476,703 Current portion of deferred revenue 2,761,694 1,500,262 Notes payable 500,000 500,000 Net current liabilities of discontinued operations 319,281 430,923 ------------- ------------- Total current liabilities 30,509,060 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 (25,076,949) (25,326,951) Less - Deferred charge - warrants (644,996) (783,492) ------------- ------------- 18,699,401 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 $22,349,375 $26,441,311 Other 6,685,572 4,553,759 ------------- ------------- 29,034,947 30,995,070 ------------- ------------- OPERATING COSTS AND EXPENSES: Cost of sales 22,971,790 24,437,684 Selling, general, and administrative 5,880,362 3,968,129 Net (gain) expense from litigation settlement (225,000) 531,024 ------------- ------------- 28,627,152 28,936,837 ------------- ------------- INCOME FROM OPERATIONS 407,795 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 380,877 1,930,991 INCOME TAX PROVISION 130,878 691,505 ------------- ------------- INCOME FROM CONTINUING OPERATIONS 249,999 1,239,486 GAIN FROM DISPOSAL OF DISCONTINUED SUBSIDIARIES (PLUS INCOME TAX BENEFIT OF $483,502) - 2,373,502 ------------- ------------- NET INCOME $ 249,999 $ 3,612,988 ============= ============= EARNINGS PER SHARE: Basic: Continuing operations $ 0.02 $ 0.12 Discontinued operations $ - $ 0.23 ------------- ------------- $ 0.02 $ 0.35 ============= ============= Diluted: Continuing operations $ 0.02 $ 0.12 Discontinued operations $ - $ 0.23 ------------- ------------- $ 0.02 $ 0.35 ============= ============= The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (AS RESTATED) (UNAUDITED) (UNAUDITED) Three Months Ended June 30, ------------ ------------ 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $249,999 $3,612,988 Adjustments to reconcile income to net cash provided by (used 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 (577,923) 975,256 Deferred revenue (current) 1,261,432 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: Restatement In September 2000 the Company determined that it was necessary to revise its June 30, 2000 interim quarterly financial statements. The restatement was required because additional information became known at that time regarding the terms and conditions of an agreement the Company entered into with one of its customers in June 2000 (see Note F. Agreement). With the knowledge of this additional information, the Company immediately recognized it had incorrectly recorded $1.25 million as revenue for the quarter ended June 30, 2000, that should have been recorded as deferred revenue, until certain agreements between the Company and this customer are completed. In view of the effect of the incorrectly recorded revenue and deferred revenue related to this matter, the Company restated its quarterly consolidated financial statements for the first quarter of the fiscal year ending March 31, 2001 to adjust previously reported revenue and deferred revenue. The financial statements and related notes set forth in this Form 10-Q/A reflect all such restatements related to these adjustments to revenue and deferred revenue noted above. A summary of the impact of the restatements to reduce previously reported revenue with an associated reduction in bonus accrual for the quarter ended June 30, 2000 and as of June 30, 2000 follows:
Consolidated Statement of Income Three Months Ended June 30, 2000 -------------- -------------- Previously As Reported Restated REVENUES: PPT $23,599,375 $ 22,349,375 Other 6,685,572 6,685,572 -------------- -------------- 30,284,947 29,034,947 -------------- -------------- OPERATING COSTS AND EXPENSES: Cost of sales 22,971,790 22,971,790 Selling, general, and administrative 5,940,041 5,880,362 Net (gain) expense from litigation settlement (225,000) (225,000) -------------- -------------- 28,686,831 28,627,152 -------------- -------------- INCOME FROM OPERATIONS 1,598,116 407,795 -------------- -------------- OTHER INCOME (EXPENSE): Interest income 156,566 156,566 Interest expense (183,484) (183,484) -------------- -------------- (26,918) (26,918) -------------- -------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION 1,571,198 380,877 INCOME TAX PROVISION 525,279 130,878 -------------- -------------- INCOME FROM CONTINUING OPERATIONS 1,045,919 249,999 GAIN FROM DISPOSAL OF DISCONTINUED SUBSIDIARIES (PLUS INCOME TAX BENEFIT OF $483,502) - - -------------- -------------- NET INCOME $ 1,045,919 $ 249,999 ============== ============== EARNINGS PER SHARE: Basic: Continuing operations $ 0.10 $ 0.02 Discontinued operations $ - $ - -------------- -------------- $ 0.10 $ 0.02 ============== ============== Diluted: Continuing operations $ 0.10 $ 0.02 Discontinued operations $ - $ - -------------- -------------- $ 0.10 $ 0.02 ============== ==============
Consolidated Balance Sheet June 30, 2000 --------------- --------------- Previously As Reported Restated --------------- --------------- CURRENT LIABILITIES: Accrued liabilities $ 3,262,039 $ 2,867,638 Accrued compensation 736,388 676,709 Current portion of deferred revenue 1,511,694 2,761,694 Total Current Liabilities 29,713,140 30,509,060 STOCKHOLDERS' EQUITY: Accumulated deficit $(24,281,029) $(25,076,949) Total Stockholders' Equity 19,495,321 18,699,401
NOTE C: 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 C: Net Income Per Share (As Restated) 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 $ 249,999 $249,999 $1,239,486 $1,239,486 Discontinued operations - - 2,373,502 2,373,502 ------------ ------------ ------------ ------------ Net income: $249,999 $249,999 $3,612,988 $3,612,988 ============ ============ ============ ============ Earnings per share: Continuing operations $0.02 $0.02 $0.12 $0.12 Discontinued operations - - 0.23 0.23 ------------ ------------ ------------ ------------ Net income $0.02 $0.02 $0.35 $0.35 ============ ============ ============ ============
Options and warrants to purchase approximately 2,900,000 and 5,600,000 shares of common stock were outstanding for the three month period ended June 30, 2000 and 1999 respectively, but were not included in the computation of diluted EPS because the warrants' and options' exercise prices were greater than the average market price of the common shares. The options and warrants, which expire during fiscal years 2000 through 2008, remain outstanding at June 30, 2000. NOTE D: 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 from Rentrak Japan. Business Segments (As Restated) Three Months Ended Three Months Ended June 30, 2000 June 30, 1999 NET SALES: (1) PPT $22,626,756 $26,555,648 3PF.COM, Inc. (2) 4,305,100 3,500,810 OTHER 3,151,661 2,072,560 $30,083,517 $32,129,018 INCOME (LOSS) FROM OPERATIONS: (1) PPT $1,009,806 $1,576,148 3PF.COM, Inc. (2) (828,576) 342,034 OTHER 226,565 140,051 $ 407,795 $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 22 percent, a second that generated 19 percent, and a third that generated 12 percent of Rentrak revenues. No other program supplier provided product that generated more than 10 percent of revenues for the three- month period ended June 30, 2000. No customer accounted for more than 10 percent of the Company's revenues 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 18 percent of Rentrak revenues. No other program supplier provided product that generated more than 10 percent of revenues for the three- month period ended June 30, 1999. No customer accounted for more than 10 percent of the Company's revenues in the three-month period ended June 30, 1999. NOTE E: 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 a petition under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Simultaneously 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 F: Agreement In June 2000, the Company entered into an agreement with one of its customers to modify an existing contract. Under the terms of the agreement, the customer made a payment to the Company in the amount of $2.5 million and also increased its obligation to purchase PPT product. The entire payment has been recorded as deferred revenue on the Company's restated balance sheet at June 30, 2000. As part of this agreement, the customer agreed to enter into certain additional agreements to be agreed upon by the parties. One-half of the payment relates to the modification of certain contractual obligations, still to be negotiated by the Company and the customer. This $1.25 million has been recorded as current deferred revenue until the contract is complete. The additional $1.25 million was paid to the Company as a prepayment toward services to be provided by the Company's subsidiary, 3PF.COM, Inc., through June 30, 2006, pursuant to an agreement under negotiation. As services are provided by 3PF.COM, Inc., it is contemplated that 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. The customer has taken the position that it is entitled to a refund of the $2.5 million payment upon its request if the additional agreements were not finalized by July 14, 2000. The customer has made such a request for refund; in addition, the parties are continuing to negotiate the additional agreements. NOTE G: 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 the 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. NOTE H: Subsequent Event In May 2000 the Company obtained a replacement line of credit with a lender in an amount not to exceed the lesser of (a) $12 million or (b) the sum of 85 percent of the net amount of eligible accounts receivable. The terms of the credit agreement include financial covenants requiring: (1) a minimum amount of tangible net worth to be maintained at all times; (2) a minimum consolidated net profit to be achieved each fiscal year and (3) a minimum amount of working capital to be maintained at all times; an additional covenant places limits on payments for obligations to officers, directors, shareholders or affiliates of the Company. Subsequent to June 30, 2000 the Company has determined that it will likely be out of compliance with one or more of these covenants as of September 30, 2000. The Company intends to promptly seek waivers from its lenders with respect to each covenant as to which it is determined to not be in compliance. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements Certain information included in Management's Discussion and Analysis of Financial Condition and Results of Operations 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 economic conditions, 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 $2.0 million, or 6 percent, to $29.0 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 revenue 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 3PF.COM, Inc.'s services. 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. As a result, the gross profit margin remained consistent at 21 percent in the quarter ended June 30, 2000 with 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, including the net gain and expense resulting from a litigation settlement for these quarters, respectively. 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; (4) increased legal costs and (5) the offset to expense in the quarter ended June 30, 2000 resulting from the gain from the litigation settlement. The effective tax rate during the quarter ended June 30, 2000 was 34% 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 $0.25 million, or 1 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 a petition under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. BlowOut simultaneously 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 March 31, 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 (See Note F). 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 million 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 $0.3 million from $2.6 million at March 31, 2000 to $2.9 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 $2.0 million from $3.2 million at March 31, 2000 to $5.2 million at June 30, 2000 due to the $2.5 million payment related to an agreement with a customer (See Note F). 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 1.36 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 terminated and 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 former customer pursuant to a promissory note given in connection with 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 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. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 27 - Amended Financial Data Schedule (b) Reports on Form 8-K - No reports on Form 8-K were filed by the registrant during the quarter ended June 30, 2000. 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 13th day of November, 2000 RENTRAK CORPORATION: /s/ F. Kim Cox F. Kim Cox President Signing on behalf of the registrant EX-27 2 0002.txt
5 This schedule contains summary financial information extracted from the Company's balance sheet and related statement of income for the period ended June 30, 2000 and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-31-2001 JUN-30-2000 6,468,417 0 20,600,411 820,857 3,692,406 41,568,931 10,007,658 7,187,418 51,682,787 30,509,060 0 0 0 12,294 18,687,107 51,682,787 29,034,947 29,034,947 22,971,790 28,627,152 26,918 0 183,484 380,877 130,878 249,999 0 0 0 249,999 0.02 0.02
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