-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oyZR3chGCJK6xN+Z5CFPf5nEuTuod9wubcHXaIjuMXJfHaaWG/Uz+H7DOgAT/9wL a6OQGivAvonxYUuqgc4RQg== 0000800458-95-000015.txt : 19950814 0000800458-95-000015.hdr.sgml : 19950814 ACCESSION NUMBER: 0000800458-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 930780536 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15159 FILM NUMBER: 95561301 BUSINESS ADDRESS: STREET 1: 7227 NE 55TH CITY: PORTLAND STATE: OR ZIP: 97218 BUSINESS PHONE: 5032847581 MAIL ADDRESS: STREET 1: PO BOX 18888 CITY: PORTLAND STATE: OR ZIP: 97218 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL VIDEO INC DATE OF NAME CHANGE: 19881004 10-Q 1 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, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to For Quarter Ended: Commission file number: 0-15159 RENTRAK CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0780536 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification no.) 7227 N.E. 55th Avenue, Portland, Oregon 97218 (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 August 4, 1995, the Registrant had 11,220,067 shares of Common Stock outstanding. Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The following unaudited 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 dis- closures 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, 1995 are not necessarily indicative of the results to be expected for the entire fiscal year ended March 31, 1996. Consolidated Statements of Operations for the three month periods ended June 30, 1995 and June 30, 1994 Consolidated Balance Sheets as of June 30, 1995 and March 31, 1995 Consolidated Statements of Cash Flows for the three month periods ended June 30, 1995 and June 30, 1994 Notes to Consolidated Financial Statements Page 3 RENTRAK CORPORATION STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended June 30, 1995 1994 REVENUES: PPT $ 22,024,957 $ 16,661,331 Sports Apparel 5,862,029 1,801,256 Other 2,257,782 1,508,919 30,144,768 19,971,506 OPERATING COSTS AND EXPENSES: Cost of sales 22,841,615 14,661,191 Selling and administrative 8,754,691 6,086,456 31,596,306 20,747,647 INCOME (LOSS) FROM OPERATIONS (1,451,538) (776,141) OTHER INCOME (EXPENSE): Interest income 269,285 151,568 Interest expense (8,325) - Other 514,232 2,826,849 775,192 2,978,417 INCOME (LOSS) BEFORE INCOME TAXES (676,346) 2,202,276 INCOME TAX PROVISION (BENEFIT) (340,229) 440,455 NET INCOME (LOSS) $ (336,117) $ 1,761,821 EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE (Note C) $ (0.03) $ 0.16 SHARES USED IN PER SHARE CALCULATION (Note C) 11,523,846 10,967,681 The accompanying notes are an integral part of these statements. Page 4 RENTRAK CORPORATION BALANCE SHEETS ASSETS (Unaudited) June 30, March 31, 1995 1995 CURRENT ASSETS: Cash and cash equivalents $ 7,576,480 $ 10,709,405 Accounts receivable, net of allowance for doubtful accounts of $364,902 and $642,580 13,651,595 14,711,439 Advances to program suppliers (Note E) 3,389,781 2,683,710 Inventory 7,135,376 6,291,032 Deferred tax asset 1,238,520 915,404 Other current assets 1,899,544 2,112,021 Total current assets 34,891,296 37,423,011 PROPERTY AND EQUIPMENT, net 6,742,076 4,924,122 INTANGIBLES, net 14,504,643 11,011,121 NOTES RECEIVABLE, net (Note I) 1,200,980 3,035,787 OTHER INVESTMENTS, net (Note I) 3,349,880 2,601,693 DEFERRED TAX ASSET 1,491,377 1,926,673 OTHER ASSETS 2,546,377 3,577,035 $ 64,726,629 $ 64,499,442 The accompanying notes are an integral part of these statements. Page 5 RENTRAK CORPORATION BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) June 30, March 31, 1995 1995 CURRENT LIABILITIES: Current portion of long-term debt $ 107,757 $ - Borrowings on line of credit 2,200,000 - Accounts payable 15,158,144 17,799,146 Accrued liabilities 4,483,177 3,301,513 Accrued compensation 1,007,706 2,016,820 Deferred revenue 1,005,618 1,408,076 Total current liabilities 23,962,402 24,525,555 LONG TERM DEBT, less current portion 1,291,660 - COMMITMENTS AND CONTINGENCIES (Note I) 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: 11,209,770 shares at June 30, 1995 and 11,277,246 shares at March 31, 1995 11,209 11,277 Capital in excess of par value 44,265,232 44,598,939 Net unrealized gain (loss) on investment securities (Note D) (170,747) (170,747) Accumulated deficit (1,734,836) (1,398,719) Less- Deferred charge - warrants (2,898,291) (3,066,863) 39,472,567 39,973,887 $ 64,726,629 $ 64,499,442 The accompanying notes are an integral part of this balance sheet. Page 6 RENTRAK CORPORATION STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended June 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (Loss) $ (336,117) $ 1,761,821 Adjustments to reconcile income (loss) to net cash provided (used) in operations Gain on investment/asset sales (558,286) (2,826,849) Depreciation 510,712 376,819 Amortization of intangibles 336,079 211,155 Amortization of warrants 168,572 - Provision for doubtful accounts (277,678) (203,018) Retailer financing program reserves (69,528) 1,865,700 Studio advance reserves 350,000 377,300 Change in specific accounts, net of effects of purchase of business: Accounts receivable 1,367,397 1,135,214 Advance to program suppliers (1,056,071) 283,891 Inventory 396,462 - Other current assets 764,222 (3,984,521) Accounts payable (4,582,458) (2,879,942) Accrued liabilities and compensation 1,561,978 1,798,525 Deferred revenue (402,458) - Net cash used by continuing operations (1,827,174) (2,083,905) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,452,760) (64,411) Payment for purchase of business, net of cash acquired (377,848) - Purchases of other assets and intangibles 801,089 1,044,883 Investment/reduction in retailer financing program (1,019,167) (3,490,699) Proceeds from sale of investments/assets 1,100,000 2,836,849 Purchases of investments - (4,400,253) Maturity of investments - 64,303 Net cash used by investing activities (948,686) (4,009,328) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt (23,290) - Issuance of Common Stock (333,775) (175,990) Net cash provided used by financing activities (357,065) (175,990) NET DECREASE IN CASH AND CASH EQUIVALENTS (3,132,925) (6,269,223) CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 10,709,405 13,815,718 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,576,480 $ 7,546,495 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for - Interest $ 1,636 $ - Income taxes $ 7,952 $ -
Page 7 RENTRAK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Consolidation The 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 intercompany accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. Pro Image ("TPI") year-end is February 28. As there are no intervening events which materially affect the financial position or results of operations, the consolidated statements include TPI's balance sheet as of May 31, 1995 and 1994 and the statement of operations and cash flows for the three month periods ended May 31, 1995 and 1994, respectively. NOTE B: Adjustments to Unaudited Interim Financial Statements All normal and recurring adjustments have been made to the unaudited interim financial statements which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. NOTE C: Net Income/Loss Per Share At June 30, 1995 and 1994, primary earnings per share are based on the weighted average number of shares outstanding and the assumed exercise of common stock equivalent options and warrants. For the June 30, 1995 primary earnings per share calculation, 11,523,846 common shares and common share equivalents are assumed outstanding. For the June 30, 1994 primary earnings per share calculation, 10,967,681 common shares and common share equivalents are assumed outstanding. NOTE D: Investments Securities, classified as held to maturity and available for sale, are shown at market with an adjustment to shareholders' equity to reflect unrealized gains and losses, net of tax. Short-term investments are recorded at cost which approximates market and consists of U.S. Treasury obligations and certificates of deposit. NOTE E: Guarantees and Advances The Company has entered into several guarantee contracts with program suppliers providing titles for distribution under the Pay Per Transaction ("PPT") revenue sharing system. In Page 8 general, these contracts guarantee the suppliers minimum payments. In some cases these guarantees were paid in advance. Any advance payments that the Company has made and will be realized within the current year are included in advances to program suppliers. The long-term portion is included in other assets. Both the current and long-term portion are amortized to cost of sales as revenues are generated from the related cassettes. Approximately seventy-two percent of the combined current and long-term advance payments as of June 30, 1995 is expected to be amortized within the next three years. The remaining twenty-eight percent or approximately $672,000 of the combined current and long-term advance payments has been reserved for based on lower than expected revenues. The Company, using empirical data, estimates the projected revenue stream to be generated under these guarantee arrangements and accrues for projected losses or reduces the carrying amount of advances to program suppliers for any guarantee that it estimates will not be fully recovered through future revenues. Total commitments under guarantees as of June 30, 1995, are approximately $65,189,656 of which $62,778,134 has been provided for or earned. As of June 30, 1995, the Company has recorded $8,042 for potential losses under such guarantee arrangements. NOTE F: Interest in Foreign Corporation In December 1989, the Company entered into an agreement with a Japanese Corporation and formed a jointly-owned Japanese corporation, Rentrak Japan. Rentrak Japan's purpose is to market PPT in the Pacific Rim. The Company has provided its PPT technology and certain trademarks and service marks. The Japanese owner has provided substantially all operating capital. The Company has a one-fourth interest in Rentrak Japan. The Company accounts for its interest in Rentrak Japan using the equity method. As of June 30, 1995, the Company's investment in Rentrak Japan has been written down to zero. The Company has provided no guarantees or other financial commitments for the investee which would require the recognition of additional losses under the equity method. For the three month period ended June 30, 1995, the joint venture realized a profit. Page 9 Summarized financial data for the joint venture, after translation to U.S. currency, at June 30, 1995, and for the three month period then ended is as follows: Current assets $ 37,066,769 Noncurrent assets $ 5,495,340 Current liabilities $ 39,348,201 Noncurrent liabilities $ 5,454,878 Shareholders' deficit $ (2,240,970) For The Three Months Ended June 30, 1995: Net sales $ 31,936,884 Cost of sales $ 22,813,503 Net Income $ 1,206,068
NOTE G: Major Suppliers For the quarter ended June 30, 1995, the Company had one program supplier whose product generated 28 percent and a second that generated an additional 20 percent of Rentrak revenues. No other program suppliers provided product which generated more than 10 percent of revenue for the three month period ended June 30, 1995. For the quarter ended June 30, 1994, the Company had one program supplier whose product generated 26 percent and a second that generated an additional 18 percent of Rentrak revenues. No other program suppliers provided product which generated more than 10 percent of revenue for the three month period ended June 30, 1994. NOTE H: Entertainment One On May 26, 1995 the Company entered into an agreement to acquire 3.2 million shares of Entertainment One, Inc. ("E-1"). When combined with the 669,230 shares the Company purchased in 1994, the Company's ownership increased to 57.22% of the issued and outstanding stock of E-1, or a controlling interest. As of July 30, 1995, E-1 operates 51 video departments inside Wal Mart stores in 14 states and Canada. The consolidated statements include E-1's Balance Sheet as of June 30, 1995 and the Statement of Operations and Cash Flows for the one month period ended June 30, 1995. Page 10 NOTE I: Retailer Financing Program The Company has established a retailer financing program whereby on a selective basis the Company will provide financing to video retailers which the Company believes have demonstrated the prospect for substantial growth in the industry. In connection with these financings, the Company typically makes a loan and/or equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financings, the retailer typically agrees to cause all of its current and future retail locations to participate in the PPT System for a designated period of time. These financings are speculative in nature and involve a high degree of risk and no assurance of a satisfactory return on investment can be given. The Board of Directors has authorized up to $14 million to be used in connection with the Company's retailer financing program. As of July 1995 the Company has invested or made oral or written commitments to loan to or invest in various video retailers in amounts totalling substantially all of the $14 million authorized. The loans, investments or commitments are to various retailers and individually range from $200,000 to $2,000,000. The investments are accounted for at cost as all investments represent less than 10 percent of the entity's equity. The notes, which have payment terms that vary according to the individual loan agreements, are due in 1995 through 1999. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 3 percent. As the financings are made, and periodically throughout the terms of the agreements, the Company assesses the recoverability of the amounts based on the financial position of each retailer. As of June 30, 1995, the Company has invested or loaned approximately $7.4 million under the program. Because of the financial condition of a number of these retailers, the Company has reserved approximately 39 percent or $2.9 million of the original loan or investment amount. NOTE J: Long Term Debt In connection with the acquisition of E-1, the Company assumed long term debt of approximately $1.3 million. The debt, which has payment terms that vary according to the individual loan agreements, are due in 1995 through 2000. Interest rates on the various loans range from 2.9 percent to prime rate plus 2.25 percent (11.25 percent as of June 30, 1995). Page 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations For a more meaningful analysis, results are presented for four groups of operations: Domestic PPT Operations, which include Canadian PPT operations; Pro Image, Inc. and its subsidiaries ("TPI"); Other Domestic Subsidiaries; and Corporate. The following tables break out these groups for the quarters ended June 30, 1995 and June 30, 1994. All significant intercompany transactions have been eliminated.
QUARTER ENDED DOMESTIC JUNE 30, PPT OTHER 1995 OPERATIONS TPI(1) SUBSIDIARIES CORPORATE CONSOLIDATED Revenues $22,024,957 $5,862,029 $2,257,782 $ - $30,144,768 Cost of Sales 18,381,438 3,362,443 1,097,734 - 22,841,615 Gross Profit margin 3,643,519 2,499,586 1,160,048 - 7,303,153 SG&A 2,597,469 3,737,939 1,699,375 719,908 8,754,691 Other income 31,418 12,926 492,981 237,867 775,192 Net income (loss) before taxes $1,077,468 $ (1,225,427) $(46,346) $(482,041) $ (676,346) Income tax benefit 340,229 Net loss $ (336,117) QUARTER ENDED DOMESTIC PPT OTHER JUNE 30, 1994 OPERATIONS TPI(2) SUBSIDIARIES CORPORATE CONSOLIDATED Revenues $16,661,331 $1,801,256 $1,508,919 $ - $19,971,506 Cost of sales 13,015,584 1,207,935 437,672 - 14,661,191 Gross profit margin 3,645,747 593,321 1,071,247 - 5,310,315 SG&A 3,504,280 794,832 1,231,488 555,856 6,086,456 Other income 2,725,950 7,547 90 244,830 2,978,417 Net income (loss) before taxes $2,867,417 $ (193,964) $ (160,151) $(311,026) 2,202,276 Income tax (provision) (440,455) Net income $ 1,761,821 (1) Includes Results of Operations from March 1, 1995 through May 31, 1995 (2) Includes Results of Operations from March 1, 1994 through May 31, 1994
Page 12 Domestic PPT Operations For the quarter ended June 30, 1995, total revenue from Domestic PPT Operations increased $5.3 million, or 32 percent, rising to $22.0 million from $16.7 million in the quarter ended June 30, 1994. In addition to royalty payments from Rentrak Japan, total revenue includes the following fees: processing fees generated when retailers are approved for participation in the PPT system; handling fees generated when prerecorded videocassettes ("Cassettes") are distributed to retailers; transaction fees generated when retailers rent Cassettes to consumers; and sell-through fees generated when retailers sell Cassettes to consumers. The increase in total revenue and the increases described in the following paragraphs were primarily due to the growth in (i) the number of retailers approved to lease Cassettes from the Company (the "Participating Retailers"); (ii) the number of participating program suppliers ("Program Suppliers"), primarily Buena Vista; (iii) the number of titles released to the system; and (iv) the total number of Cassettes leased under the system. By quarter-end, the number of Participating Retailers had grown 18 percent to 3,823 from 3,242 a year earlier. As of June 30, 1995, there were 3,224 retailers located in the United States and 599 located in Canada. Total revenue and the gross profit margin are expected to grow at a modest rate over the next year. For the quarter ended June 30, 1995, processing-fee revenue decreased to $0.1 million from $0.3 million for the quarter ended June 30, 1994, a decline of $0.2 million, or 56 percent. The decrease was due to a reduction in the amount of processing fees charged. During the quarter, handling-fee revenue rose to $ 5.0 million from $3.6 million for the quarter ended June 30, 1994, an increase of $1.4 million, or 40 percent. Transaction-fee revenue totaled $14.5 million, an increase of $4.2 million, or 41 percent, from $10.3 million the previous year. Sell-through revenue was $2.3 million for the quarter ended June 30, 1995 as compared to $1.5 million for the quarter ended June 30, 1994, an increase of $0.8 million, or 50 percent. Royalty revenue from Rentrak Japan decreased to $0.2 million during fiscal 1996 from $0.7 million during fiscal 1995. Included in the quarter ended June 30, 1994's royalty revenue was a nonrecurring payment of $0.5 million. Cost of sales for the quarter ended June 30, 1995 rose to $18.4 million from $13.0 million the prior year, an increase of $5.4 million, or 41 percent. This change parallels the change in total revenues. For the quarter, the gross profit margin decreased to 17 percent from 22 percent the previous year. The decrease is primarily due to the inclusion of the nonrecurring payment of $0.5 million from Rentrak Japan in the quarter ended June 30, 1994 and the inclusion of an additional $350,000 reserve for studio guarantees plus $168,000 of warrant cost amortization in the quarter ended June 30, 1995. In addition, as compared to the quarter ended June 30, 1994, the decrease reflects an increase in major motion picture studio product, which traditionally has a lower gross margin. Page 13 Selling, general and administrative expenses were $ 2.6 million for the quarter ended June 30, 1995 compared to $3.5 million for the quarter ended June 30, 1994. This decrease of $0.9 million, or 26 percent, was primarily due to the quarter ended June 30, 1994 including the establishment of a reserve for the retailer financing program in the amount of $1.9 million and from a reduction of $0.5 million in reserves for doubtful accounts due to improved management and reduced risk. As a percentage of total revenue, selling, general and administrative expenses decreased to 12 percent at quarter- end from 21 percent the previous year. Other income decreased from $2.7 million for the quarter ended June 30, 1994 to $0.1 million for fiscal 1996, an decrease of $2.6 million. This decrease was due to the sale of certain investment securities held for sale for a gain of $2.8 million for the quarter ended June 30, 1994. For the quarter ended June 30, 1996, Domestic PPT Operations recorded a pretax profit of $1.1 million, or 5 percent of total revenue, compared to a pretax profit of $2.8 million, or 17 percent of total revenue, for the quarter ended June 30, 1994. The Pro Image, Inc. For TPI's quarter ended May 31, 1995, they recorded total revenue of $5.9 million, a gross margin of $2.5 million (43 percent), and a pretax loss of $1.2 million (21 percent of revenue). Comparisons to the quarter ended May 31, 1994, are not meaningful because the acquisition of Team Spirit, Inc. ("Team Spirit") happened on September 1, 1994. Management expects TPI's revenue to increase substantially in the current fiscal year due to the inclusion of Team Spirit for the entire year, revenue generated from new company-owned Pro Image retail stores, and franchise fees generated internationally. Revenues from domestic franchise fees and franchise royalties are expected to be flat this year. Management expects the gross margin percentage to increase due to a higher percentage of sales generated by company- owned stores. Management also expects operating expenses to decrease as a percentage of sales because overhead expenses should remain flat or decrease as revenues and store operating expenses increase. Other Subsidiaries Other Subsidiaries are comprised of video retail and wholesale operations and a software development company. Total revenue from Other Subsidiaries including E-1, increased to $2.3 million for the quarter ended June 30, 1995 from $1.5 million for the quarter ended June 30, 1994, an increase of $0.8 million, or 50 percent. Page 14 Cost of sales was $1.1 million, an increase of $0.7 million (151 percent) over the $0.4 million recorded for the quarter ended June 30, 1994. Selling, general and administrative expenses increased to $1.7 million in the first quarter of fiscal 1996 from $1.2 million for the quarter ended June 30, 1994, an increase of $0.5 million, or 38 percent. As a percentage of total revenue, selling, general and administrative expenses decreased to 75 percent at quarter-end from 82 percent a year earlier. For the quarter ended June 30, 1995, Other Subsidiaries recorded a pretax loss of $0.1 million, or 2 percent of total revenue. This compares with a pretax loss of $0.2 million, or 11 percent of total revenue, for the quarter ended June 30, 1994. Changes in revenues, cost of sales, selling and administrative costs and pretax losses were due to the inclusion of E-1, the start-up status of three of the entities, and to expansion efforts by the other entities. Corporate Selling general and administrative expenses increased to $0.7 million in the quarter ended June 30, 1995 from $0.6 million in the quarter ended June 30, 1994, an increase of $0.1 million, or 30 percent. Other Income (Expense) was $0.2 million for both quarters ended June 30, 1994 and 1995. The Company recognized a tax benefit of $0.3 million in the quarter ended June 30, 1995, as compared to a tax provision of $0.4 million in the quarter ended June 30, 1994. Consolidated Balance Sheet Total assets increased from $64.5 million as of March 31, 1995 to $64.7 million as of June 30, 1995, an increase of $0.2 million. As of June 30, 1995, inventory had increased $0.8 million to $7.1 million from $6.3 million as of March 31, 1995. This increase is primarily due to the consolidation of E-1. As of June 30, 1995, property and equipment had increased $1.8 million to $6.7 million from $4.9 million at year-end. Of this increase, approximately $1.7 million was related to the E-1 acquisition. At quarter- end, intangibles had risen to $14.5 million from $11.0 million at the end of fiscal year 1994, an increase of $3.5 million. Most of this amount was related to the acquisition of E-1. Accrued compensation decreased $1.0 million from $2.0 million March 31, 1995, to $1.0 million June 30, 1995. The decrease is primarily due to the payment of annual bonuses. All warrants which the Company issued for the quarter ended June 30, 1994, have been valued by an outside valuation firm using standard warrant valuation models. The value of the warrants of $3.5 million has been recorded in the equity section and will be amortized over the associated periods to be benefited by each group of warrants. For the quarter, expense associated with the warrants is $0.2 million. Page 15 LIQUIDITY AND CAPITAL RESOURCES At June 30, 1995, the Company had cash and other liquid investments of $7.6 million, compared to $10.7 million at March 31, 1995. At June 30, 1995, the Company's current ratio (current assets/current liabilities) declined to 1.46 from 1.53 at March 31, 1995. This decline was primarily due to inclusion of E-1. The Company has an agreement with a financial institution for a line of credit in the amount of $7.5 million. The agreement expires on September 25, 1995. Interest is payable monthly at a rate that varies in relation to the bank's prime rate. The lender has been granted a warrant to purchase 10,000 unregistered shares of common stock of the Company at $7 per share, which exceeded market value at the date of grant. The line of credit is secured by substantially all of the Company's assets, excluding TPI's. The terms of the agreement require, among other things, a minimum amount of tangible net worth, minimum current ratio and minimum ratio of total liabilities to tangible net worth. In addition, the Company is required to maintain average compensating balances of $1.5 million in its checking and money accounts. The agreement also restricts the amount of net losses, loans and indebtedness and limits the payment of dividends on the Company's stock. The Company borrowed $2.2 million under the line of credit as of June 30, 1995. In April 1994, TPI entered into a $2.0 million line-of-credit arrangement with a financial institution. Interest on borrowings under this credit agreement accrue at the bank's prime rate. Borrowings are collateralized by the Company's accounts receivable and inventory, and require monthly payments of principal plus accrued interest. In January 1995, the available borrowing under this agreement was increased to the lesser of $4.0 million or the amount of the borrowing base as defined in the agreement. Interest under the revised agreement is accrued at the bank's prime rate plus 0.5 percent. There were no borrowings under the credit agreement at May 31, 1995. The credit agreement expires on August 31, 1995. In August 1994, the Company acquired all of the outstanding stock of Team Spirit. Team Spirit operates 39 licensed sports apparel stores in 15 states, most of which are in the Midwest. Simultaneously with the acquisition, Rentrak transferred all of the assets of Team Spirit to TPI, and Team Spirit became a wholly owned subsidiary of TPI. The net purchase price was approximately $4.4 million and was paid via issuance of approximately 557,000 shares of common stock. The Company intends to continue to expand its licensed sport apparel business through further acquisitions, through sales of new franchises and through the opening of new corporate stores. Working capital needed to fund the increased inventory and fixed assets associated with the increase in company-owned stores is expected to be provided by existing bank credit agreements. The Company intends to pay the purchase price for any such acquisitions in cash, shares of the Company's common stock or other securities, or a combination thereof. Page 16 On May 26, 1995 the Company entered into an agreement to acquire 3.2 million shares of E-1. When combined with the 669,230 shares the Company purchased in 1994, the Company's ownership now consists of 57.22% of the issued and outstanding stock of E-1, or a controlling interest. The Company has established a retailer financing program whereby on a selective basis the Company will provide financing to video retailers which the Company believes have demonstrated the prospect for substantial growth in the industry. In connection with these financings, the Company typically makes a loan and/or equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financings, the retailer typically agrees to cause all of its current and future retail locations to participate in the PPT System for a designated period of time. These financings are speculative in nature and involve a high degree of risk and no assurance of a satisfactory return on investment can be given. The Board of Directors has authorized up to $14 million to be used in connection with the Company's retailer financing program. As of July 1995 the company has invested or made oral or written commitments to loan to or invest in various video retailers in amounts totalling substantially all of the $14 million authorized. The loans, investments or commitments are to various retailers and individually range from $200,000 to $2,000,000. The investments are accounted for at cost as all investments represent less than 10 percent of the entity's equity. The notes, which have payment terms that vary according to the individual loan agreements, are due in 1995 through 1999. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 3 percent. As the financings are made, and periodically throughout the terms of the agreements, the Company assesses the recoverability of the amounts based on the financial position of each retailer. As of June 30, 1995, the Company has invested or loaned approximately $7.4 million under the program. Because of the financial condition of a number of these retailers, the Company has reserved approximately 39 percent or $2.9 million of the original loan or investment amount. The Company is currently either negotiating extensions of its existing credit facilities or negotiating new credit facilities with its existing financial institutions. The Company is also considering the placement of long-term debt or the issuance of additional securities in the public market. No assurance can be given that any of the credit facilities will be extended or new ones obtained or that the Company will be able to issue either long-term debt or additional securities on terms acceptable to the Company. Subject to the foregoing, the Company believes its existing cash, cash generated from operations and available credit facilities (assuming such facilities are extended or new ones obtained) will be sufficient to meet its cash requirements for at least the next 12 months. Page 17 PART II Item 1. Legal Proceedings. None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of matters to a Vote of Security Holders None Item 5. Exhibits and Reports on Form 8-K (a) Exhibits - One - Exhibit 11 - Calculations of Net Income Per Share (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 11th day of August, 1995 RENTRAK CORPORATION: /S/ Karl D. Wetzel Karl D. Wetzel Chief Accounting Officer Signing on behalf of the registrant EX-11 2 Exhibit 11 Rentrak Corporation Computation of Net Income (Loss) Per Share
For the Three Months Ended For the Three Months Ended June 30, 1995 June 30, 1994 Fully Fully Primary Diluted(*) Primary Diluted Weighted average number of shares of common stock outstanding 11,209,770 11,209,770 10,192,904 10,192,904 Dilutive effect of exercise of stock options 314,076 488,806 774,777 774,777 Weighted average number of shares of common stock and common stock equivalents 11,523,846 11,698,576 10,967,681 10,967,681 Net Income (Loss) ($336,117) ($336,117) $1,761,821 $ 1,761,821 Net Income (Loss) per Share ($0.03) ($0.03) $0.16 $0.16 (*) As Fully Diluted Earnings Per Share is antidilutive, only Primary is presented in the Statement of Operations.
EX-27 3
5 3-MOS MAR-31-1996 JUN-30-1995 7,576,480 0 13,651,595 364,902 7,135,376 34,891,296 6,742,076 510,712 64,726,629 23,962,402 0 11,209 0 0 39,461,358 64,726,629 30,144,768 30,144,768 22,841,615 31,596,306 0 0 8,325 (676,346) (340,229) (336,117) 0 0 0 (336,117) (0.03) (0.03)
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