-----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, RyFpBcNdAiMJ1de7cOP2D529ni20opVJ8vqA+5UzV1MUHonZgtMs9JaLDd2Ve0Xo tABVqmUwkTr2sEd1XNG2+Q== 0000800458-97-000014.txt : 19970808 0000800458-97-000014.hdr.sgml : 19970808 ACCESSION NUMBER: 0000800458-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970807 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] 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: 97653016 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 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, 1997 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 (I.R.S. 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 August 4, 1997, the Registrant had 11,499,043 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three month periods ended June 30, 1997 and June 30, 1996 Consolidated Balance Sheets as of June 30, 1997 and March 31, 1997 Consolidated Statements of Cash Flows for the three month periods ended June 30, 1997 and June 30, 1996 RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Three Months Ended June 30, 1997 1996 REVENUES: PPT $ 29,011,516 $ 22,648,696 Other 1,603,035 1,114,414 30,614,551 23,763,110 OPERATING COSTS AND EXPENSES: Cost of sales 25,038,640 19,454,334 Selling and administrative 3,419,737 3,622,828 28,458,377 23,077,162 INCOME FROM OPERATIONS 2,156,174 685,948 OTHER INCOME (EXPENSE): Interest income 122,851 173,621 Interest expense (5,000) (119,915) Other - 208,875 117,851 262,581 INCOME BEFORE INCOME TAX PROVISION 2,274,025 948,529 INCOME TAX PROVISION 962,891 372,233 NET INCOME $ 1,311,134 $ 576,296 FULLY DILUTED EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE $ 0.10 $ 0.05 SHARES USED IN PER SHARE CALCULATION 15,757,068 12,243,069 The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
UNAUDITED June 30, March 31, 1997 1997 CURRENT ASSETS: Cash and cash equivalents $ 7,348,811 $ 10,167,169 Accounts receivable, net of allowance for doubtful accounts of $230,862 and $409,313 16,008,217 16,434,566 Advances to program suppliers 643,118 492,844 Inventory 1,942,268 1,902,618 Deferred tax asset 817,253 1,365,064 Other current assets 3,788,548 2,901,964 Total current assets 30,548,215 33,264,225 PROPERTY AND EQUIPMENT, net 1,962,435 2,006,556 INTANGIBLES, net 350,913 171,509 OTHER INVESTMENTS, net 748,515 778,950 DEFERRED TAX ASSET 3,745,975 3,637,563 OTHER ASSETS 4,305,464 3,189,192 TOTAL ASSETS $ 41,661,517 $ 43,047,995 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, 1997 1997 CURRENT LIABILITIES: Line of credit $ - $ 5,000,000 Accounts payable 20,436,842 17,160,492 Accrued liabilities 1,252,065 613,669 Accrued compensation 771,426 1,695,814 Deferred revenue 2,563,172 2,672,849 Net current liabilities of discontinued operations 4,589,916 4,633,114 Total current liabilities 29,613,421 31,775,938 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:11,609,543 shares at June 30, 1997 and 11,847,441 at March 31, 1997 11,610 11,847 Capital in excess of par value 47,223,518 47,931,165 Net unrealized gain on investment securities 206,023 184,932 Accumulated deficit (34,141,595) (35,452,729) Less - Deferred charge - warrants (1,251,460) (1,403,158) 12,048,096 11,272,057 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,661,517 $ 43,047,995 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended June 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,311,134 $ 576,296 Adjustments to reconcile income to net cash provided (used) in operations Gain on investment / asset sales - (208,875) Depreciation 187,772 265,593 Amortization of intangibles 22,723 42,436 Amortization of warrants 151,698 37,409 Provision for doubtful accounts (5,246) (23,250) Retailer financing program reserves - 45,000 Studio advance reserves (12,126) (67,478) Deferred income taxes 426,471 161,331 Change in specific accounts: Accounts receivable (600,031) (2,204,310) Advance to program suppliers (138,148) (449,595) Inventory (39,650) 479,743 Other current assets 113,416 945,631 Accounts payable 3,276,350 (7,268,677) Accrued liabilities & compensation (285,992) 702,389 Deferred revenue (109,677) 1,606,326 Net current liability of discontinued operations (43,198) - Net cash provided (used) by operation 4,255,496 (5,360,031) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (143,651) (25,174) Purchase of other assets and intangibles - 28,366 (Investments)/reduction in retailer financing program (545,108) 955,000 Proceeds from sale of investment / assets - 434,864 (Purchase)/reduction of other assets & intangibles (677,211) - Net cash provided (used) by investing activities (1,365,970) 1,393,056 CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (payments) under line of credit (5,000,000) 3,000,000 Repurchase of common stock (732,366) (1,155) Issuance of common stock 24,482 - Net cash provided (used) by financing activities (5,707,884) 2,998,845 NET DECREASE IN CASH AND CASH EQUIVALENTS (2,818,358) (968,130) CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 10,167,169 2,683,128 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,348,811 $ 1,714,998 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $ 5,000 $ 94,833 Income taxes 142,093 116,016 NON-CASH TRANSACTIONS Increase (decrease) in net unrealized gain on investment securities 21,091 (338,285) Reduction of warrants - 496,913 Retailer Loan Program Investment through conversion of accounts receivable 1,031,626 - 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, 1997 are not necessarily indicative of the results to be expected for the entire fiscal year ended March 31, 1998. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company's 1997 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 intercompany 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 For the quarter ended June 30, 1997, net earnings per share is computed using the "modified" treasury stock method. Under this method, the number of shares is based on the weighted average number of shares outstanding and the assumed exercise of common stock equivalent options and warrants regardless of whether the market price of the common stock exceeded the exercise price of the options and warrants. In addition, contingent warrants were assumed to have been exercised. The number of treasury shares assumed to be purchased with the proceeds from the exercise of stock options and warrants is limited to 20 percent of the outstanding shares at period end. Proceeds from exercise of the options and warrants in excess of those used to purchase treasury shares were assumed to have been invested in government securities with the resultant net interest income, adjusted for appropriate tax effects, added to net income for purposes of calculating earnings per share. For the quarter ended June 30, 1996, net income per share of common stock is computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arising from dilutive stock options, using the treasury stock method. The Company's outstanding warrants were not dilutive during this period. NOTE C: Major Suppliers For the quarter ended June 30, 1997, the Company had one program supplier whose product generated 55 percent, a second that generated 18 percent, and a third that generated an additional 15 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, 1997. For the quarter ended June 30, 1996, the Company had one program supplier whose product generated 40 percent, a second that generated 28 percent, and a third that generated and additional 12 percent of Rentrak revenues. No other program supplier provided product which generated more than 10 percent of revenue for the three month period ended June 30, 1996. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements Information included in Management's Discussion and Analysis of Financial Conditions and Results of Operations regarding revenue growth, gross profit margin and liquidity constitute forward-looking statements that involve a number of risks and uncertainties. Forward looking statements can be identified by the uses 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: business conditions and growth in the video industry and general economics, both domestic and international; competitive factors, including increased competition, new technology, and the continued availability of Cassettes from Program Suppliers. Such factors are discussed in more detail in the Company's 1997 Annual Report to Shareholders. Results of Operations For the quarter ended June 30, 1997, total revenue increased $6.8 million, or 28.6 percent, rising to $30.6 million from $23.8 million in the quarter ended June 30, 1996. Total revenue includes the following fees: application fees generated when retailers are approved for participation in the Pay Per Transaction ("PPT") system; order processing fees generated when prerecorded videocassettes ("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; buy out fees when retailers purchase Cassettes at the end of the lease term; royalty payments from Rentrak Japan; and sale of Cassettes. The increase in total revenue and the increases described in the following paragraph were primarily due to the growth in (i) the number of retailers approved to lease Cassettes under the PPT system from the Company (the "Participating Retailers"); (ii) the number of titles released to the PPT system; and (iii) the total number of Cassettes leased under the PPT system. Cost of sales for the quarter ended June 30, 1997 rose to $25.0 million from $19.5 million the prior year, an increase of $5.5 million, or 28.2 percent. The increase is due to the increase in revenue noted above. Selling, general and administrative expenses were $3.4 million in fiscal 1997 compared to $3.6 million in fiscal 1996, a decrease of $0.2 million, or 6 percent. As selling, general and administrative expenses remained relatively flat over the same quarter in the prior fiscal year while revenues increased dramatically, the Company was able to achieve a decrease from 15 percent for the quarter ended June 30, 1996 to 11 percent for the quarter ended June 30, 1997 in the percentage of selling, general and administrative expenses to total revenue. Other income was $0.1 million for the quarter ended June 30, 1997 and $0.3 million for the quarter ended June 30, 1996. In 1996, other income includes a gain of $0.2 million on the sale of corporate securities. For the quarter ended June 30, 1997, the Company recorded a pre-tax profit of $2.3 million, or 7.5 percent of total revenue, compared to a pre-tax profit of $0.9 million, or 4 percent of total revenue in the quarter ended June 30, 1996. This increase is primarily due to an increase in total revenue which resulted in increased gross margin dollars. Included in the amounts above are the results from Other Subsidiaries which are comprised of other video retail and other operations. For the quarter ended June 30, 1996, Other Subsidiaries recorded pre-tax income of $124,634 compared to $13,000 for the quarter ended June 30, 1996. Consolidated Balance Sheet At June 30, 1997, total assets were $41.7 million, a decrease of $1.3 million from the $43.0 million at March 31, 1997. As of June 30, 1997, Cash had decreased $2.9 million to $7.3 million from $10.2 million at March 31, 1997. The decrease is primarily due to the repayment of the $5.0 million line of credit which was outstanding at March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1997, the Company had cash and other liquid investments of $7.3 million, compared to $10.2 million at March 31, 1997. At June 30, 1997, the Company's current ratio (current assets/current liabilities) decreased to 1.03 from 1.05 at March 31, 1997. The Company has an agreement for a line of credit with a financial institution in an amount not to exceed the lesser of $10 million or the sum of (a) 80 percent of the net amount of eligible accounts receivable as defined in the agreement. The line of credit expires on December 18, 1997. Interest is payable monthly at the bank's prime rate plus .5 percent (9.0 percent at June 30, 1997). The lender has an option 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 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, minimum current ratio and minimum total liabilities to tangible net worth. 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 is in compliance with these covenants or has obtained waivers of noncompliance as of June 30, 1997. At March 31, 1997, the Company had $5.0 million outstanding borrowings under this agreement. The Company repaid the $5.0 million in April, 1997. As of June 30, 1997, available borrowing capacity totaled $10 million. The Company has established a retailer financing program whereby the Company will provide, on a selective basis, financing to video retailers who the Company believes have the potential for substantial growth in the industry. In connection with these financings, the Company typically makes a loan to and/or an equity investment in the retailer. In some cases, a warrant to purchase stock may be obtained. As part of such financing, 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. Under these agreements, retailers are typically required to obtain some or all of their requirements of Cassettes offered under the PPT system or obtain a minimum amount of Cassettes based on a percentage of the retailer's revenues. Notwithstanding the long term nature of such agreements, both the Company and the 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 amounts the Company could ultimately receive could differ materially in the near term from the amounts assumed in establishing reserves. The Board of Directors has authorized up to $18 million to be used in connection with the Company's retailer financing program. As of June 30, 1997, the Company has invested or loaned approximately $14.5 million in various retailers. The investments individually range from $0.2 million to $5.9 million. Interest rates on the various loans range from the prime rate plus 1 percent to the prime rate plus 2 percent. As the financings are made, and periodically throughout the terms of the agreements, the Company assesses the likelihood of recoverability of the amounts invested or loaned based on the financial position of each retailer. This assessment includes reviewing available financial statements and cash flow projections of the retailer and discussions with retailers' management. As of June 30, 1997, the Company reserved approximately $10.1 million. As noted in the Company's 1997 Annual Report to Shareholders, the Company distributed to its Shareholders 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. Net current liabilities of discontinued operations include management's best estimates of the anticipated losses from discontinued operations through the final resolution of all contingencies related to the disposition of BlowOut. The estimates are based on an analysis of the costs which may be incurred to dispose of the entity. The amounts the Company will ultimately incur could differ materially in the near term from the amounts assumed in arriving at the loss on disposal of the discontinued operations. BlowOut is essentially a start-up company and is experiencing rapid growth requiring additional financing if it is to continue its expansion and to support operations of recently opened stores. The Company is the principal creditor to BlowOut. The Company has agreed to guarantee up to $7 million of indebtedness of BlowOut (Guarantee). The Guarantee expires for future borrowings on the earlier of (i) December 31, 1997 or (ii) such time as the total indebtedness of BlowOut subject to the Rentrak Guarantee is equal to $7 million. During the term of the Rentrak Guarantee, and/or so long as any guarantee is thereunder outstanding, BlowOut has agreed to pay the Company a weekly fee at a rate equal to .02 percent per week of then-currently outstanding indebtedness subject to the Rentrak Guarantee. BlowOut has executed a $3 million note in favor of the Company which accrues interest at 9% per annum and is due in April 1999. At March 31, 1997, the total outstanding balance of the debt under such note, including accrued interest, was $3.4 million. BlowOut has 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 13.98 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 Company's guarantee. As of June 30, 1997, BlowOut had borrowed approximately $1.5 million under the Credit Facility. BlowOut also has a revolving line of credit (Line of Credit) in a maximum principal amount at one time outstanding of $5 million. Under the Line of Credit, BlowOut may only draw up to 80% of the Orderly Liquidation Value (as defined in the Line of Credit) of eligible new and used Cassette inventory. Advances under the Line of Credit bear interest at a floating rate per annum equal to the Bank of America Reference Rate plus 2.75% percent (11.25 percent as of June 30, 1997). The term of the Line of Credit is three years. The Company has agreed, under certain circumstances in the event of default under the Line of Credit, to repurchase BlowOut's Cassette inventory at specified amounts. As of June 30, 1997, BlowOut had borrowed approximately $2.6 million under the Line of Credit. The Company's exposure related to adverse financial and operational developments at BlowOut is limited to its receivables from BlowOut [See Note 4 of the Notes to the Consolidated Financial Statements] and the obligations under the Guarantee [See Note 9 of the Notes to the Consolidated Financial Statements]. On November 26, 1996, the Board authorized the re-purchase of up to two million shares of Common Stock in open market and negotiated purchases. In the quarter ended June 30, 1997, the Company had acquired 257,594 shares for an aggregate amount of approximately $732,000. These purchases were funded through cash flows from operations. The Company's sources of liquidity include its cash balance, cash generated from operations and its available credit facility. These sources are expected to be sufficient to fund the Company's operations for the year ending March 31, 1998. 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: Exhibit 11 - Statement of Computation of per share earnings. 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 7th day of August, 1997 RENTRAK CORPORATION: s/s Carolyn A. Pihl Carolyn A. Pihl Chief Accounting Officer Signing on behalf of the registrant EX-11 2 Rentrak Corporation Computation of Net Income Per Share For the Quarter Ended June 30, 1997
Primary Fully Diluted Weighted average number of shares of common stock outstanding 11,697,712 11,697,712 Dilutive effect of exercise of stock options 4,588,062 6,381,265 Less: purchase of treasury shares, up to 20% of shares outstanding at period end (2,321,909) (2,321,909) Weighted average number of shares of common stock and common stock equivalents 13,963,865 15,757,068 Net Income $ 1,311,134 $ 1,311,134 Plus: interest income from investments assumed purchased with proceeds from exercise of stock options and warrants in excess of proceeds used to purchase treasury stock. 137,468 221,913 Net Income for purposes of computing earnings per share. $ 1,448,602 $ 1,533,047 Net Income per Share $ 0.10 $ 0.10 The computation of net income per share for the quarter ended June 30, 1996 is not provided since it can be clearly determined form the material contained in the footnotes to the financial statements.
EX-27 3
5 3-MOS MAR-31-1998 JUN-30-1997 7,348,811 0 16,239,079 230,862 1,942,268 30,548,215 6,875,395 4,912,960 41,661,517 29,613,421 0 0 0 11,610 12,036,486 41,661,517 30,614,551 30,614,551 25,038,640 28,458,377 0 0 5,000 2,274,025 962,891 1,311,134 0 0 0 1,311,134 0.10 0.10
-----END PRIVACY-ENHANCED MESSAGE-----