-----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, Hbt5s3MuPb/FCBv3BCkXlEpUlHXE+RimV52BIr0k85cY2S2kCS0Ztx5YoMd2kviS Z7TInmr+7037XefrkGvbOw== 0000800458-99-000012.txt : 19990817 0000800458-99-000012.hdr.sgml : 19990817 ACCESSION NUMBER: 0000800458-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: SEC FILE NUMBER: 000-15159 FILM NUMBER: 99690993 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, 1999 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, 1999, the Registrant had 10,471,806 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1999 and March 31, 1999 Consolidated Statements of Income for the three month periods ended June 30, 1999 and June 30, 1998 Consolidated Statements of Cash Flows for the three month periods ended June 30, 1999 and June 30, 1998 Notes to Consolidated Financial Statements RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
(UNAUDITED) June 30, March 31, 1999 1999 CURRENT ASSETS: Cash and cash equivalents $1,232,494 $2,145,963 Accounts receivable, net of allowance for doubtful accounts of $371,831 and $355,241 26,988,536 23,906,398 Advances to program suppliers 4,047,292 2,840,262 Inventory 2,367,363 2,804,983 Deferred tax asset 1,579,637 1,579,637 Income tax receivable 2,639,470 3,006,502 Other current assets 3,160,391 3,467,473 Total current assets 42,015,183 39,751,218 PROPERTY AND EQUIPMENT, net 1,607,083 1,723,448 OTHER INVESTMENTS, net 2,616,801 2,014,701 DEFERRED TAX ASSET 2,529,873 2,497,762 OTHER ASSETS 2,796,169 3,469,660 TOTAL ASSETS $51,565,109 $49,456,789 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, 1999 1999 CURRENT LIABILITIES: Line of credit $8,250,000 $7,925,000 Accounts payable 16,698,289 16,628,294 Accrued liabilities 6,958,694 5,822,574 Accrued compensation 780,972 941,836 Deferred revenue 111,778 100,415 Net current liabilities of discontinued operations 730,070 3,746,766 Total current liabilities $33,529,803 $35,164,885 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock $.001 par value; Authorized: 10,000,000 shares 0 0 Common stock, $.001 par value; Authorized: 30,000,000 shares Issued and outstanding: 10,442,345 shares at June 30, 1999 and 10,439,948 at March 31, 1999 10,442 10,440 Capital in excess of par value 43,650,246 43,644,479 Cumulative other comprehensive income 85,351 137,747 Accumulated deficit (25,138,769) (28,751,757) Less - Deferred charge - warrants (571,964) (749,005) 18,035,306 14,291,904 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $51,565,109 $49,456,789 The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) Three Months Ended June 30, 1999 1998 REVENUES: PPT $26,441,311 $30,441,358 Other 4,553,759 3,018,084 30,995,070 33,459,442 OPERATING COSTS AND EXPENSES: Cost of sales 24,437,684 27,547,868 Selling, general, and administrative 4,499,153 3,761,942 28,936,837 31,309,810 INCOME FROM OPERATIONS 2,058,233 2,149,632 OTHER INCOME (EXPENSE): Interest income 38,183 121,862 Interest expense (165,425) (18,225) Other 0 (117,768) (127,242) (14,131) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION 1,930,991 2,135,501 INCOME TAX PROVISION 691,505 845,657 INCOME FROM CONTINUING OPERATIONS 1,239,486 1,289,844 GAIN FROM DISPOSAL OF DISCONTINUED SUBSIDIARIES (PLUS INCOME TAX BENEFIT OF $483,502) 2,373,502 0 NET INCOME $3,612,988 $1,289,844 EARNINGS PER SHARE: Basic: Continuing operations $0.12 $0.12 Discontinued operations $0.23 $0.00 $0.35 $0.12 Diluted: Continuing operations $0.12 $0.11 Discontinued operations $0.23 $0.00 $0.35 $0.11 The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended June 30, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $3,612,988 $1,289,844 Adjustments to reconcile income to net cash provided by (used in) in operations Gain on disposal of discontinued operations (2,373,502) 0 (Gain) loss on asset and investment sales 0 117,768 Depreciation and Amortization 328,879 196,494 Amortization of warrants 177,041 157,864 Provision for doubtful accounts 0 (131,653) Reserves on advances to program suppliers 305 0 Change in specific accounts: Accounts receivable (3,092,312) 3,231,437 Advances to program suppliers (1,207,335) (4,495,386) Inventory 437,620 (312,023) Income tax receivable 367,032 0 Other current assets 307,082 (636,867) Accounts payable (230,005) 6,186,843 Accrued liabilities & compensation 975,256 19,500 Deferred revenue 11,363 (775,924) Net current liabilities of discontinued operations (643,194) 0 Net cash provided by (used in) operations (1,328,782) 4,847,897 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, equipment, and inventory (65,939) (72,087) Proceeds from retailer financing program 0 65,121 Reduction (additions) of other assets and intangibles 150,483 (107,745) Net cash used in investing activities 84,544 (114,711) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under line of credit 325,000 (6,000,000) Issuance of common stock 5,769 85,770 Net cash provided by (used in) financing activitie 330,769 (5,914,230) NET DECREASE IN CASH AND CASH EQUIVALENTS (913,469) (1,181,044) CASH AND CASH EQUIVALENTS AT BEGINNING OF THIS PERIOD 2,145,963 6,361,680 CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,232,494 $5,180,636 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $195,095 $18,225 Income taxes, net of refunds 19,330 107,857 NON-CASH TRANSACTIONS Reclassification of accounts receivable to other investments 10,174 0 Change in unrealized gain (loss) on investment securities, net of tax (52,396) (110,869) 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, 1999 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2000. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company's 1999 Annual Report to Shareholders. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal and recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The Condensed Consolidated Financial Statements include the accounts of the Company, its majority owned subsidiaries, and those subsidiaries in which the Company has a controlling interest after elimination of all inter-company accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. NOTE B: Net Income Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per common share is computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arising from dilutive stock options and warrants. The weighted average number of shares of common stock and common stock equivalents and net income used to compute basic and diluted earnings per share at June 30 were calculated as follows:
Note B: Net Income Per Share 3-Months Ended 3-Months Ended June 30, 1999 June 30, 1998 Basic Diluted Basic Diluted Weighted average number of shares of common stock outstanding 10,440,614 10,440,614 11,004,333 11,004,333 Dilutive effect of exercise of stock options - 101,071 - 931,306 Weighted average number of shares of common stock outstanding and common stock equivalents 10,440,614 10,541,685 11,004,333 11,935,639 Net Income: Continuing operations $1,239,486 $1,239,486 $1,289,844 $1,289,844 Discontinued operations 2,373,502 2,373,502 - - Net income: $3,612,988 $3,612,988 $1,289,844 $1,289,844 Earnings per share: Continuing operations $0.12 $0.12 $0.12 $0.11 Discontinued operations 0.23 0.23 - - Net income $0.35 $0.35 $0.12 $0.11
Options and warrants to purchase approximately 5,900,000 and 305,000 shares were outstanding for the three month periods ended June 30, 1999 and 1998, 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 during the periods. The options and warrants, which expire during fiscal years 2000 through 2008, remain outstanding at June 30, 1999. NOTE C: Major Suppliers For the quarter ended June 30, 1999, the Company had one program supplier whose product generated 22 percent, a second that generated 19 percent, and a third that generated an additional 18 percent of Rentrak revenues. No other program supplier provided product which generated more than 10 percent of revenue for the three month period ended June 30, 1999. For the quarter ended June 30, 1998, the Company had one program supplier whose product generated 32 percent, a second that generated 31 percent, and a third that generated an additional 17 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, 1998. NOTE D: Discontinued Operations On November 26, 1996, the Company made a distribution to its shareholders of 1,457,343 shares of common stock of BlowOut Entertainment, Inc. ("BlowOut"). The operations of BlowOut were reflected as discontinued operations in the March 31, 1996 consolidated financial statements. On March 22, 1999, BlowOut filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time BlowOut filed a motion to sell substantially all the assets of BlowOut. The sale to a third party video retailer was approved by the Bankruptcy Court on May 10, 1999, and closed on May 17, 1999. The Company was the principal creditor of BlowOut. In 1996, the Company had agreed to guarantee up to $7 million of indebtedness of BlowOut ("Guarantee"). Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under BlowOut's credit facility. As the proceeds from the sale of the BlowOut assets were not sufficient to cover the amounts due under this facility, the Company, pursuant to the Guarantee, has agreed to a payment plan to fulfill BlowOut's obligation under its credit facility. The amount outstanding at June 30, 1999 of approximately $800,000 will be paid in monthly installments of approximately $36,000. 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 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 approximately $500,000 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, 1999, relate to amounts to be paid pursuant to the BlowOut guarantees, net of tax benefit. ITEM 2. 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 liquidity and capital resources 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: 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 line of credit, business conditions and growth in the video industry and general economics, both domestic and international; competitive factors, including increased competition, expansion of revenue sharing programs other than the PPT System by Program Suppliers, new technology, the ability of the Company and its suppliers and customers to address potential Year 2000 problems, the continued availability of prerecorded videocassettes ("Cassettes") from Program Suppliers and the cost associated with certain litigation involving the Company as well as the outcome of that litigation. Such factors are discussed in more detail in the Company's 1999 Annual Report to Shareholders. Results of Continuing Operations For the quarter ended June 30, 1999, total revenue decreased $2.5 million, or 7.5 percent, falling to $31.0 million from $33.5 million in the quarter ended June 30, 1998. Total revenue includes the following 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; buy out fees generated when retailers purchase Cassettes at the end of the lease term. In addition total revenue includes royalty payments from Rentrak Japan, charges to customers of the Company's fulfillment business known as ComAlliance, and sales of Cassettes. The decrease in total revenue and the decreases described in the following paragraph were primarily due to the decline in (i) the total number of Cassettes leased under the PPT System; and (ii) the number of titles released to Rentrak for distribution under the PPT System. Cost of sales for the quarter ended June 30, 1999 fell to $24.4 million from $27.5 million in the quarter ended June 30, 1998, a decrease of $3.1 million, or 11.3 percent. The decrease is due to the decrease in revenue noted above. Selling, general and administrative expenses were $4.5 million for the quarter ended June 30, 1999 compared to $3.8 million in the quarter ended June 30, 1998, an increase of $0.7 million, or 18.4 percent. The increase in selling, general and administrative expenses is primarily due to increased legal fees related primarily to the lawsuit with Hollywood Video. For the quarter ended June 30, 1999, the Company recorded income from continuing operations of $1.2 million, or 4.0 percent of total revenue, compared to income from continuing operations of $1.3 million, or 3.9 percent of total revenue in the quarter ended June 30, 1998. Discontinued Operations On March 22, 1999, BlowOut filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time BlowOut filed a motion to sell substantially all the assets of BlowOut. 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 (the "closing"). 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 income tax benefit from discontinued operations in the accompanying consolidated income statement. Net current liabilities of discontinued operations at June 30, 1999, relate to amounts to be paid pursuant to the BlowOut guarantees, net of tax benefit. Consolidated Balance Sheet At June 30, 1999, total assets were $51.6 million, an increase of $2.1 million from the $49.5 million at March 31, 1999. As of June 30, 1999, cash decreased $0.9 million to $1.2 million from $2.1 million at March 31, 1999. Accounts receivable increased $3.1 million from $23.9 million at March 31, 1999 to $27 million at June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company had cash and other liquid investments of $1.2 million, compared to $2.1 million at March 31, 1999. At June 30, 1999, the Company's current ratio (current assets/current liabilities) was 1.25 compared to 1.13 at March 31, 1999. The Company has an agreement for a line of credit with a financial institution in an amount not to exceed the lesser of $12.5 million or the sum of 80 percent of the net amount of eligible accounts receivable as defined in the agreement. The line of credit expires on December 18, 1999. Interest is payable monthly at the bank's prime rate (7.75 percent at June 30, 1999). 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 as of June 30, 1999. At June 30, 1999, the Company had $8.3 million outstanding borrowings under this agreement. The Company has established a retailer financing program whereby the Company will provide, on a selective basis, financing to video retailers that 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 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 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 $18 million to be used in connection with the Company's retailer financing program. The investments individually range from $35,000 to $4.9 million. Interest rates on the various loans range from 5 to 10 percent per annum. 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. The amounts the Company ultimately receives could differ materially in the near term from the amounts assumed in establishing reserves. 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"). 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 its 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, 1999, the balance owing under this obligation is approximately $800,000. The Company's sources of liquidity include its cash balance, cash generated from operations and its available credit resources. These sources are expected to be sufficient to fund the Company's operations for the year ending March 31, 2000. PART II Item 1. Legal Proceedings. Note 10 to the Company's Consolidated Financial Statements, under the caption "Contingencies" in the Company's 1999 Annual Report to Shareholders, provides information on certain litigation in which the Company is involved. There have been no material developments with respect to these litigation matters. 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. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - One The Company filed one report on form 8K dated June 14, 1999, during the quarter for which this report is filed, and reported information contained in Item 5 - Other Events. 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 August, 1999 RENTRAK CORPORATION: /S/ Carolyn A. Pihl Carolyn A. Pihl Vice President Finance Signing on behalf of the registrant EX-27 2
5 3-MOS MAR-31-2000 JUN-30-1999 1,232,494 0 27,360,367 371,831 2,367,363 42,015,183 7,828,432 6,221,349 51,565,109 33,529,803 0 0 0 10,442 18,024,864 51,565,109 30,995,070 30,995,070 24,437,684 28,936,837 127,242 0 165,425 1,930,991 691,505 1,239,486 2,373,502 0 0 3,612,988 0.35 0.35
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