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> 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> Page 3
<TABLE>
RENTRAK CORPORATION
STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three Months Ended June 30,
1995 1994
<S> <C> <C>
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> Page 4
RENTRAK CORPORATION
BALANCE SHEETS
ASSETS
<CAPTION>
(Unaudited)
June 30, March 31,
1995 1995
<S> <C> <C>
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> Page 5
RENTRAK CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
(Unaudited)
June 30, March 31,
1995 1995
<S> <C> <C>
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> Page 6
RENTRAK CORPORATION
STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Three Months Ended June 30,
1995 1994
<S> <C> <C>
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 <PAGE>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for -
Interest $ 1,636 $ -
Income taxes $ 7,952 $ - <PAGE>
</TABLE>
<PAGE> 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> 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> 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:
<TABLE>
<S> <C>
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
</TABLE>
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> 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> 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.
<TABLE>
<CAPTION>
QUARTER
ENDED DOMESTIC
JUNE 30, PPT OTHER
1995 OPERATIONS TPI(1) SUBSIDIARIES CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C>
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)
<CAPTION>
QUARTER ENDED DOMESTIC PPT OTHER
JUNE 30, 1994 OPERATIONS TPI(2) SUBSIDIARIES CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C>
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
</TABLE>
<PAGE> 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> 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> 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> 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> 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> 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
<TABLE>
Exhibit 11
Rentrak Corporation
Computation of Net Income (Loss) Per Share
<CAPTION>
For the Three Months Ended For the Three Months Ended
June 30, 1995 June 30, 1994
Fully Fully
Primary Diluted(*) Primary Diluted
<S> <C> <C> <C> <C>
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.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 7,576,480
<SECURITIES> 0
<RECEIVABLES> 13,651,595
<ALLOWANCES> 364,902
<INVENTORY> 7,135,376
<CURRENT-ASSETS> 34,891,296
<PP&E> 6,742,076
<DEPRECIATION> 510,712
<TOTAL-ASSETS> 64,726,629
<CURRENT-LIABILITIES> 23,962,402
<BONDS> 0
<COMMON> 11,209
0
0
<OTHER-SE> 39,461,358
<TOTAL-LIABILITY-AND-EQUITY> 64,726,629
<SALES> 30,144,768
<TOTAL-REVENUES> 30,144,768
<CGS> 22,841,615
<TOTAL-COSTS> 31,596,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,325
<INCOME-PRETAX> (676,346)
<INCOME-TAX> (340,229)
<INCOME-CONTINUING> (336,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (336,117)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
