SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 31, 1995
Rentrak Corporation
(Exact Name of Registrant as Specified in its Charter)
Oregon D-15159 93-0780536
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
7227 N.E. 55th Avenue,
Portland, Oregon 97218
(Address of Principal Executive (Zip Code)
Offices)
(503) 284-7581
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Index to Exhibits appears at page 2.
Item 7. Financial Statements and Exhibits
In form 8-K's dated August 25, 1995 and August 31, 1995, the Company
reported its acquisition of certain assets constituting the retail video
business of Supercenter Entertainment Corporation ("SEC") pursuant to an
Asset Purchase Agreement by and among the Company, SEC and Jack Silverman,
the principal shareholder of SEC. A copy of the Agreement was previously
filed as Exhibit 1 to the Company's Form 8-K dated August 25, 1995. The
following historical and pro forma financial statements are included in
this Form 8-K in connection with such acquisition.
(a) Financial Statements for Businesses Acquired
Audited Financial Statements
1) Audited Balance Sheets as of December 31, 1994 and 1993
2) Audited Statements of Operations for years ended December 31,
1994 and 1993
3) Notes to Financial Statements
Unaudited Financial Statements
1) Unaudited Balance Sheet as of June 30, 1995
2) Unaudited Statement of Operations for the six month period ended
June 30, 1995
(b) Pro Forma Financial Information
1) Unaudited Pro Forma Statements of Operations for the six month
period ended September 30, 1995
2) Unaudited Pro Forma Statements of Operations for the year ended
March 31, 1995
3) Notes to Pro Forma Financial Statement
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 hereunto duly authorized.
November 14, 1995
RENTRAK CORPORATION
/s/ F. Kim Cox
By:
Name: F. Kim Cox
Title: Executive Vice President
and Secretary
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
Financial Statements
As Of December 31, 1994 And 1993
Together With Report Of Independent Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Supercenter Entertainment Corporation - Retail Division:
We have audited the accompanying balance sheets of Supercenter
Entertainment Corporation - Retail Division as of December 31, 1994 and
1993, and the related statements of operations for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Supercenter
Entertainment Corporation - Retail Division as of December 31, 1994 and
1993, and the results of its operations for the years then ended, in
conformity with generally accepted accounting principles.
Dallas, Texas,
October 16, 1995
<TABLE>
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
BALANCE SHEETS--DECEMBER 31, 1994 AND 1993
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash $ 151,431 $ 43,260
Receivables 7,667 -
Merchandise inventories 322,686 34,434
Other current assets 83,081 8,856
Total current assets 564,865 86,550
RENTAL INVENTORIES, net 1,410,230 292,994
PROPERTY AND EQUIPMENT, net 1,555,294 151,289
OTHER ASSETS 15,391 -
Total assets $ 3,545,780 $ 530,833
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 947,061 $117,745
Accrued expenses 321,256 14,535
Total current liabilities 1,268,317 132,280
COMMITMENTS
EQUITY 2,277,463 398,553
Total liabilities and equity $ 3,545,780 $ 530,833
The accompanying notes are an integral part of these financial statements.
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
<S> <C> <C>
REVENUES:
Rental revenue, net $ 2,954,640 $ 539,764
Product sales 498,281 211,382
3,452,921 751,146
OPERATING COSTS AND EXPENSES:
Cost of product sales 1,535,853 329,010
Selling and administrative 4,176,476 847,853
OPERATING LOSS (2,259,408) (425,717)
INTEREST EXPENSE 3,766 32
LOSS BEFORE INCOME TAXES (2,263,174) (425,749)
PROVISION FOR INCOME TAXES - -
NET LOSS $(2,263,174) $ (425,749)
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
The accompanying financial statements relate to the accounts of the retail
division (retail video centers located in K-Mart and Wal-Mart) of
Supercenter Entertainment Corporation (the "Retail Division"). Supercenter
Entertainment Corporation (the "Company") was incorporated in December 1991
and operated under the name CEVAXS U.S. Corporation through August 1994, at
which time the name was changed to Supercenter Entertainment Corporation.
From December 1991 through October 1992, the Company's sole operation was
in wholesale video services to the supermarket industry. Beginning in
October 1992, the Company expanded its operation to include Company-owned
retail video centers located in stores owned by Wal-Mart Stores, Inc. In
early 1994, the Company expanded its host retailer relationships to include
K-Mart Corporation.
At December 31, 1994 and 1993, the Retail Division had 56 and 7 locations,
respectively.
Revenue Recognition
Revenues are recognized at the time of rental or sale of video cassettes.
Merchandise Inventories
Merchandise inventories consist of prerecorded video cassettes and games
and are stated at the lower of cost or market; cost is determined on the
first-in, first-out method.
Rental Inventories
Rental inventories are stated at the lower of amortized cost or market and
consist of prerecorded video cassettes classified as new release, catalog
stock, and video games. New release video cassettes are amortized over ten
months using a declining percentage basis to a $6 salvage value. Catalog
stock video cassettes are amortized over 36 months on a straight-line basis
to a $6 salvage value. Video games are amortized over 24 months on a
straight-line basis to an $8 salvage value.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method based on the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line method over the
shorter of the estimated useful lives or the respective lease terms. The
estimated useful lives are as follows:
Furniture and fixtures 5 years
Computer equipment 3 years
Leasehold improvements 3 years
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the year in which those
temporary differences are expected to be reversed or settled. The effect
on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
2. RENTAL INVENTORIES:
Rental inventories at December 31, 1994 and 1993, consisted of the
following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
New release video cassettes $1,036,162 $211,334
Catalog stock video cassettes 578,796 82,054
Video games 503,490 44,493
2,118,448 337,881
Less- Accumulated amortization (708,218) (44,887)
$ 1,410,230 $ 292,994
</TABLE>
The Company maintained a centralized warehouse to process inventory for all
of the Company's operations, including the Retail Division. Included in
the above rental inventory amounts for 1994 is $68,538 of rental inventory
which was located in the Company's warehouse at year-end and allocated to
the Retail Division based upon the pro rata portion of inventory
subsequently shipped to the Retail Division. At December 31, 1993, no
inventory in the Company's warehouse was allocated to the Retail Division
due to the amount being insignificant.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1994 and 1993, consisted of the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
Furniture and fixtures $ 976,618 $122,861
Computer equipment 619,323 89,020
Leasehold improvements 240,264 -
1,836,205 211,881
Less- Accumulated depreciation
and amortization (280,911) (60,592)
$ 1,555,294 $ 151,289
</TABLE>
4. INCOME TAXES:
The Company and the Retail Division have had cumulative losses since
inception. Also, as discussed further in Note 9, the assets of the Retail
Division have been sold subsequent to year-end. All differences between
the financial statement carrying amount and the tax basis in these assets
prior to the sale are eliminated at the time of the sale. Due to the above
and the lack of earnings history for the Retail Division, no current or
deferred taxes have been reflected in the accompanying financial
statements.
5. EQUITY:
Equity represents the sole shareholder's net investment in the Retail
Division. The following table reflects the activity in the equity account
for the two years ended December 31, 1994:
<TABLE>
<S> <C>
Equity, December 31, 1992 $ 313,521
Owner investments 1,272,469
Transfers to owner (761,688)
Losses (425,749)
Equity, December 31, 1993 398,553
Owner investments 7,479,167
Transfers to owner (3,337,083)
Losses (2,263,174)
Equity, December 31, 1994 $ 2,277,463
</TABLE>
6. CORPORATE ALLOCATIONS:
As discussed in Note 1, the accompanying financial statements relate to the
Retail Division of the Company. The Retail Division shares common
corporate functions/activities with the rest of the Company. The corporate
costs primarily include general management, finance, data processing,
logistics, and marketing. Corporate costs have been allocated to the
Retail Division based upon the relation of Retail Division net revenues to
total Company net revenues. Management believes this allocation method is
reasonable and reflects the utilization of corporate costs. The allocation
percentages and allocated costs for the Retail Division were 61% and
$977,381 in 1994 and 18% and $179,487 in 1993. All allocated corporate
costs are included in selling and administrative expenses in the
accompanying financial statements.
7. RELATED-PARTY TRANSACTIONS:
The sole shareholder of the Company funds the operations of the Company and
is closely involved in the daily activities of the Company. The sole
shareholder does not draw a salary for his services, and the accompanying
balance sheet does not include any amounts owing to the sole shareholder.
A substantial portion of the Retail Division's purchases and other
transactions are made by the Company on behalf of the Retail Division.
In August 1994, the sole shareholder of the Company sold his 100% ownership
in a company which is one of the Retail Division's major vendors.
Subsequent to the sale and until August 1995, the Company had a revenue
sharing arrangement with this vendor whereby it leased video cassettes from
the vendor for a six-month term for an up-front payment of up to $10 per
unit. The video cassettes were rented by the Company to customers and the
rental revenues generated were distributed evenly between the Company and
the vendor. The Company had an option to purchase the video cassettes for
$8 per unit at the conclusion of the lease term. Amounts due to this
vendor and included in accounts payable at December 31, 1994 and 1993, are
$370,710 and $19,703, respectively.
8. LEASES:
The Company has several noncancelable operating leases, primarily for the
rental of its retail video center locations. The leases are typically for
an initial five-year term and one five-year renewal option exercisable by
the Company, subject to the fulfillment of certain conditions.
Future minimum lease payments under noncancelable operating leases for the
Retail Division as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
<C> <C>
1995 $1,617,000
1996 1,655,000
1997 1,600,000
1998 1,496,000
1999 877,000
Total future minimum lease payments $7,245,000
</TABLE>
Rent expense for the Retail Division was $793,910 and $135,290 for the
years ended December 31, 1994 and 1993.
9. SUBSEQUENT EVENTS:
On August 31, 1995, substantially all of the Retail Division's assets were
purchased by Rentrak Corporation. The sole shareholder received 878,000
shares of Rentrak Corporation's common stock as consideration for the
acquisition.
<TABLE>
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
BALANCE SHEET--JUNE 30, 1995
<CAPTION>
(Unaudited)
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 87,825
Receivables 12,709
Merchandise inventories 274,893
Other current assets 25,558
Total current assets 400,985
RENTAL INVENTORIES, net 1,847,994
PROPERTY AND EQUIPMENT, net 1,654,989
OTHER ASSETS -
Total assets $ 3,903,968
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $1,366,910
Accrued expenses 490,723
Total current liabilities 1,857,633
COMMITMENTS
EQUITY 2,046,335
Total liabilities and equity $ 3,903,968
SUPERCENTER ENTERTAINMENT CORPORATION - RETAIL DIVISION
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995
<CAPTION>
(Unaudited)
<S> <C>
REVENUES:
Rental revenue, net $ 3,247,070
Product sales 625,869
3,872,939
OPERATING COSTS AND EXPENSES:
Cost of product sales 2,293,437
Selling and administrative 3,865,424
OPERATING LOSS (2,285,922)
INTEREST EXPENSE 14,539
LOSS BEFORE INCOME TAXES (2,300,461)
PROVISION FOR INCOME TAXES -
NET LOSS $(2,300,461)
</TABLE>
RENTRAK CORPORATION
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
SEPTEMBER 30, 1995
(Unaudited)
The accompanying unaudited pro forma statements of operations for the
periods ended March 31, 1995 and September 30, 1995 have been prepared to
present the effect of the purchase of all of the assets of Supercenter
Entertainment Corporation ("SEC"). No pro forma balance sheet has been
presented as the transaction is already reflected in the consolidated
September 30, 1995 balance sheet.
The pro forma statements assume that such events were effective at the
beginning of the respective periods.
The pro forma statements of operations have been prepared based upon the
historical financial statements of Rentrak Corporation and SEC. Pro forma
adjustments are described in the accompanying notes. The Pro Forma
Statements of Operations may not be indicative of the results of operations
that actually would have occurred if the transactions had been in effect as
of the beginning of the respective periods nor do they purport to indicate
the results of future operations of Rentrak Corporation. The pro forma
statements of operations should be read in conjunction with the audited and
unaudited financial statements and notes thereto of SEC included elsewhere
in this Form 8-K.
<TABLE>
RENTRAK CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<CAPTION>
Rentrak SuperCenter Pro Forma Pro Forma
Corporation Entertainment D Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES:
PPT $47,847,732 - - $47,847,732
Other 20,887,342 3,872,939 - 24,760,281
68,735,074 3,872,939 - 72,608,013
OPERATING COSTS AND EXPENSES:
Cost of Sales 51,623,215 2,293,437 (530,658) 3 53,385,994
Selling and administrative 19,213,585 3,865,424 75,155 4 23,154,164
70,836,800 6,158,861 (455,503) 76,540,158
LOSS FROM OPERATIONS (2,101,726) (2,285,922) 455,503 (3,932,145)<PAGE>
OTHER INCOME (EXPENSE)
Interest income 549,284 - - 549,284
Interest expense (244,560) (14,539) - (259,099)
Other 439,732 - - 439,732
744,456 (14,539) 0 729,917
INCOME/(LOSS) FROM OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (1,357,270) (2,300,461) 455,503 (3,202,228)
INCOME TAX BENEFIT 794,250 - 2,055,733 5 2,849,983
NET INCOME/(LOSS) ($563,020) ($2,300,461) $2,511,236 $352,245
NET INCOME (LOSS) PER SHARE ($0.05) N/A N/A ($0.03)
SHARES USED IN PER SHARE
CALCULATION 11,797,893 N/A 730,076 B 12,527,969
The accompanying notes are an integral part of these statements.
RENTRAK CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1995
(UNAUDITED)
<CAPTION>
Rentrak SuperCenter Pro Forma Pro Forma
Corporation Entertainment C Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES:
PPT $79,793,584 - - $79,793,584
Other 32,372,647 3,452,921 - 35,825,568
112,166,231 3,452,921 - 115,619,152
OPERATING COSTS AND EXPENSES:
Cost of Sales 83,533,328 1,535,853 - 85,069,181
Selling and administrative 26,183,434 4,176,476 180,372 1 30,540,282
109,716,762 5,712,329 180,372 115,609,463
LOSS FROM OPERATIONS 2,449,469 (2,259,408) (180,372) 9,689
OTHER INCOME (EXPENSE)
Interest income 600,415 - - 600,415
Interest expense (35,979) (3,766) - (39,745)
Other 2,826,849 - - 2,826,849
3,391,285 (3,766) 0 3,387,519
INCOME/(LOSS) FROM OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 5,840,754 (2,263,174) (180,372) 3,397,208
INCOME TAX PROVISION (BENEFIT) 727,231 - (897,091) 2 (169,860)
NET INCOME/(LOSS) $5,113,523 ($2,263,174) $716,719 $3,567,068<PAGE>
EARNINGS PER COMMON SHARE
AND COMMON EQUIVALENT SHARE:
NET INCOME (LOSS) PER SHARE $0.41 N/A N/A $0.28
SHARES USED IN PER SHARE
CALCULATION 13,397,951 N/A 878,000 B 14,275,951
EARNINGS PER COMMON SHARE
AND COMMON EQUIVALENT SHARE -
assuming issuance of all dilutive
contingent shares:
NET INCOME (LOSS) PER SHARE $0.40 N/A N/A $0.27
SHARES USED IN PER SHARE
CALCULATION 14,317,380 N/A 878,000 B 15,195,380
The accompanying notes are an integral part of these statements.
</TABLE>
RENTRAK CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
A. The pro forma statements of operations show the adjustments for the
acquisition of all ofthe assets of SEC. The adjustments reflect the acquisition
as if such acquisition had occurred at the beginning of the respective periods.
The pro forma adjustments for the above transaction are as follows:
1. Selling and Administrative - Year Ended March 31, 1995
(a) To record amortization of intangibles of $180,372 related
to the stock purchase (assumes amortization period of ten
(10) years which is based on the period of time covered by the
lease agreements).
2. Income Tax Provision (Benefit) - Year Ended March 31, 1995
(a) To record an income tax benefit of $897,091 based on the
Company's effective tax rate of five percent.
3. Cost of Sales - Six Months Ended September 30, 1995
(a) To eliminate a non-recurring expense of $530,658 which
is associated with a liability which was not assumed.
4. Selling and Administrative - Six Months Ended September 30, 1995
(a) To record amortization of intangibles of $75,155 related to
the stock purchase (assumes amortization period of ten (10) years
which is based on the period of time covered by the lease
agreements).
5. Income Tax Provision (Benefit) - Six Months Ended
September 30, 1995
(a) To record an income tax benefit of $2,055,733 based on the
Company's projected current effective tax rate of eighty-nine
percent.
B. Includes 878,000 shares issued upon acquisition.
C. These amounts represent the results of operations for the period
January 1, 1994 through December 31, 1994.
D. These amounts represent the results of operations for the period
January 1, 1995 through June 30, 1995.
