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: September 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 November 6, 1995, the Registrant had 12,126,684 shares of Common
Stock outstanding.
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. 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 and six month periods ended September 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
September 30, 1995 and September 30, 1994
Consolidated Statements of Operations for the six month periods ended
September 30, 1995 and September 30, 1994
Consolidated Balance Sheets as of September 30, 1995 and March 31, 1995
Consolidated Statements of Cash Flows for the six month periods ended
September 30, 1995 and September 30, 1994
Notes to Consolidated Financial Statements
<TABLE>
RENTRAK CORPORATION
STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three Months Ended Sept 30,
1995 1994
<S> <C> <C>
REVENUES:
Rentrak Home Entertainment - PPT $ 25,822,775 $ 17,872,943
Pro Image - Sports Apparel 8,341,518 3,324,422
BlowOut Entertainment & Other 4,426,013 1,517,095
38,590,306 22,714,460
OPERATING COSTS AND EXPENSES:
Cost of sales 28,781,600 16,736,221
Selling and administrative 10,458,894 5,015,225
39,240,494 21,751,446
INCOME (LOSS) FROM OPERATIONS (650,188) 963,014
OTHER INCOME (EXPENSE):
Interest income 279,999 149,806
Interest expense (236,235) -
Other (74,500) -
(30,736) 149,806
INCOME (LOSS) BEFORE INCOME TAXES (680,924) 1,112,820
INCOME TAX PROVISION (BENEFIT) (454,021) 288,866 <PAGE>
NET INCOME (LOSS) $ (226,903) $ 823,954
PRIMARY EARNINGS (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (Note C) $ (0.02) $ 0.07
SHARES USED IN PER SHARE CALCULATION
(Note C) 11,897,209 13,075,528
FULLY DILUTED EARNINGS (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (Note C) $ (0.02) $ 0.07
SHARES USED IN PER SHARE CALCULATION
(Note C) 11,897,209 14,040,202
The accompanying notes are an integral
part of these statements.
RENTRAK CORPORATION
STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Six Months Ended Sept 30,
1995 1994
<S> <C> <C>
REVENUES:
Rentrak Home Entertainment - PPT $ 47,847,732 $ 34,534,274
Pro Image - Sports Apparel 14,203,547 5,125,678
BlowOut Entertainment & Other 6,683,795 3,026,014
68,735,074 42,685,966
OPERATING COSTS AND EXPENSES:
Cost of sales 51,623,215 31,397,412
Selling and administrative 19,213,585 11,101,681
70,836,800 42,499,093
INCOME (LOSS) FROM OPERATIONS (2,101,726) 186,873
OTHER INCOME (EXPENSE):
Interest income 549,284 301,374
Interest expense (244,560) -
Other 439,732 2,826,849
744,456 3,128,223
INCOME (LOSS) BEFORE INCOME TAXES (1,357,270) 3,315,096
INCOME TAX PROVISION (BENEFIT) (794,250) 729,321
NET INCOME (LOSS) $ (563,020) $ 2,585,775 <PAGE>
PRIMARY EARNINGS (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (Note C) $ (0.05) $ 0.22
SHARES USED IN PER SHARE CALCULATION
(Note C) 11,710,528 12,474,939
FULLY DILUTED EARNINGS (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (Note C) $ (0.05) $ 0.21
SHARES USED IN PER SHARE CALCULATION
(Note C) 11,797,893 12,957,276
The accompanying notes are an integral
part of these statements.
RENTRAK CORPORATION
BALANCE SHEETS
ASSETS
<CAPTION>
(Unaudited)
Sept 30, March 31,
1995 1995
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,779,338 $ 10,709,405
Accounts receivable, net of
allowance for doubtful accounts
of $180,887 at Sept 30, 1995
and $642,580 at March 31, 1995 17,293,647 14,711,439
Advances to program suppliers
(Note E) 2,712,514 2,683,710
Inventory 6,723,013 5,480,793
Deferred tax asset 471,849 915,404
Other current assets 4,209,195 2,112,021
Total current assets 38,189,556 36,612,772
VIDEO CASSETTE RENTAL INVENTORY, net 6,080,348 810,239
PROPERTY AND EQUIPMENT, net 8,513,982 4,924,122
INTANGIBLES, net 15,887,290 11,011,121
NOTES RECEIVABLE, net (Note I) 1,721,279 3,035,787
OTHER INVESTMENTS, net (Note I) 5,523,577 2,601,693<PAGE>
DEFERRED TAX ASSET 1,487,890 1,926,673
OTHER ASSETS 3,233,073 3,577,035
$ 80,636,995 $ 64,499,442
The accompanying notes are an integral
part of these statements.
RENTRAK CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
(Unaudited)
Sept 30, March 31,
1995 1995
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 543,931 $ -
Borrowings on line of credit 4,700,000 -
Accounts payable 17,745,889 17,799,146
Accrued liabilities 7,764,954 3,301,513
Accrued compensation 1,339,399 2,016,820
Deferred revenue 1,569,903 1,408,076
Total current liabilities 33,664,076 24,525,555
LONG TERM DEBT, less current portion 559,419 -
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: 12,126,686 shares
at September 30, 1995 and 11,277,246 shares at
March 31, 1995 12,126 11,277
Capital in excess of par value 49,811,109 44,598,939
Net unrealized gain (loss) on investment
securities (Note D) 1,281,723 (170,747)
Accumulated deficit (1,961,739) (1,398,719)
Less- Deferred charge - warrants (2,729,719) (3,066,863)
46,413,500 39,973,887 <PAGE>
$ 80,636,995 $ 64,499,442
The accompanying notes are an integral
part of this balance sheet.
RENTRAK CORPORATION
STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Six Months Ended Sept 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) $ (563,020) $ 2,585,775
Adjustments to reconcile
income (loss) to net
cash provided (used) in operations
Gain on investment/asset sales (236,964) (2,826,849)
Depreciation 1,069,403 835,108
Amortization of intangibles 681,348 280,279
Amortization of warrants 337,144 -
Provision for doubtful accounts (461,693) (71,270)
Retailer financing program reserves (503,098) (2,190,699)
Studio advance reserves 350,000 377,300
Change in specific accounts, net of
effects of purchase of business:
Accounts receivable (1,890,640) (1,641,839)
Advance to program suppliers (378,804) 761,664
Inventory 2,000,584 (1,140,100)
Other current assets (242,876) (4,799,425)
Accounts payable 2,705,287 (1,849,360)
Accrued liabilities and compensation 3,606,738 567,778
Deferred revenue 161,827 -
Net cash (used) by continuing
operations 6,635,236 (9,111,638)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,579,734) (934,360)
Payment for purchase of business,
net of cash acquired (511,579) (77,507)
Purchases of other assets
and intangibles (2,731,117) (1,718,663)
Investment/reduction in retailer
financing program (6,018,774) 2,190,699
Proceeds from sale of investments/assets 1,100,000 2,836,849
Purchases of investments - (4,400,253)
Maturity of investments - 4,344,506
Net cash (used) provided by
investing activities (15,741,204) 2,241,271
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 696,939 -
Issuance of Common Stock 4,478,962 1,277,525 <PAGE>
Net cash provided
by financing activities 5,175,901 1,277,525
NET DECREASE IN CASH AND CASH
EQUIVALENTS (3,930,067) (5,592,842)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THIS PERIOD 10,709,405 13,815,718
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 6,779,338 $ 8,222,876
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for -
Interest $ 30,601 $ -
Income taxes $ 69,903 $ 112,559
NON-CASH INVESTING ACTIVITIES:
Increase (decrease) in net unrealized gain on
investment securities $ 1,376,992 $ (1,434,182)
Purchases of businesses through issuance
of common stock $ 5,213,125 $ 4,425,280
</TABLE>
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.
The Pro Image's ("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 August 31, 1995 and February 28, 1995 and the statement of
operations and cash flows for the three month and six month periods ended
August 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
For the quarter and six month periods ended September 30, 1995, net loss
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 these periods.
For the quarter and six month periods ended September 30, 1994, net
earnings per share is computed using the "modified" treasury stock method.
Under this method, the number of treasury shares assumed to be purchased
with the proceeds form the exercise of dilutive 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 interest income, adjusted for appropriate tax
effects, added to net income for purposes of calculating earnings per
share.
NOTE D: Investment Securities
Securities, classified as 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 consist 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 general, these contracts guarantee the
suppliers minimum payments. In some cases these guarantees were paid in
advance. Any advance payments which the Company has made and which 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.
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. As of September 30, 1995, the Company has
recorded $989,231 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 September
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 and six
month periods ended September 30, 1995, the joint venture realized a
profit.
Summarized financial data for the joint venture, after translation to U.S.
currency, at September 30, 1995, and for the three month and six month
periods then ended is as follows:
<TABLE>
<S> <C>
Current assets $ 35,186,508
Noncurrent assets $ 4,781,614
Current liabilities $ 37,228,619
Noncurrent liabilities $ 4,346,497
Shareholders' deficit $ (1,606,995)
For The Three Months Ended
September 30, 1995:
Net sales $ 28,725,554
Cost of sales $ 24,050,782
Net Income $ 335,930
For The Six Months Ended
September 30, 1995:
Net sales $ 60,662,438
Cost of sales $ 50,396,337
Net Income $ 1,541,998
</TABLE>
NOTE G: Major Suppliers
For the quarter ended September 30, 1995, the Company had one program
supplier whose product generated 27 percent and a second that generated an
additional 15 percent of Rentrak revenues. For the six month period ended
September 30, 1995, the Company had one program supplier whose product
generated 28 percent and a second that generated an additional 17 percent
of Rentrak revenues. No other program suppliers provided product which
generated more than 10 percent of revenue for either the three month or six
month periods ended September 30, 1995.
For the quarter ended September 30, 1994, the Company had one program
supplier whose product generated 25 percent and a second that generated an
additional 12 percent of Rentrak revenues. For the six month period ended
September 30, 1994, the Company had one program supplier whose product
generated 25 percent and a second that generated an additional 15 percent
of Rentrak revenues. No other program suppliers provided product which
generated more than 10 percent of revenue for either the three month or six
month periods ended September 30, 1994.
NOTE H: BlowOut Entertainment Acquisitions
In May 1995 the Company acquired 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 October 31, 1995, E-1 operated 72 video departments inside Wal Mart
stores in 27 states.
The consolidated statements include E-1's Balance Sheet as of September 30,
1995 and the Statement of Operations and Cash Flows for the four month
period ended September 30, 1995.
On August 31, 1995 the Company acquired certain assets of SuperCenter
Entertainment Corporation ("SEC") which constitute SEC's retail video
business. As consideration for the acquisition, the Company issued SEC
878,000 shares of Common Stock of the Company.
As of October 31, 1995, SEC operates 53 video rental departments inside Wal
Mart shopping centers and 25 video rental outlets inside K-Mart and Super
K-Mart shopping centers. As a result of rapid expansion during the past
year, the operations have been unprofitable to date.
Summarized pro forma financial data for the three month and six month
periods ended September 30, 1995 and 1994, presented as if the SEC
acquisition had occurred at the beginning of each period, is as follows:
<TABLE>
<CAPTION>
For The Three Months Ended
September 30 1995 1994
<S> <C> <C>
Revenues $40,059,917 $23,685,146
Net Income (Loss) $ (542,019)$ 354,943
Net Income (Loss) per share $ ( 0.04)$ 0.02
<CAPTION>
For The Six Months Ended
September 30 1995 1994
<S> <C> <C>
Revenues $72,197,475 $44,150,083
Net Income (Loss) $ (814,966)$ 1,879,465
Net Income (Loss) per share $ (0.07)$ 0.14
</TABLE>
The pro forma information given above does not purport to be indicative of
the results that actually would have been obtained if the operations were
combined during the periods presented, and is not intended to be a
projection of future results or trends. The pro forma information above
does not include E-1 as it was determined to be insignificant.
The Company's consolidated statements include SEC's Balance Sheet as of
September 30, 1995 and the Statement of Operations and Cash Flows for the
one month period ended September 30, 1995.
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
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. These loans and investments 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 October 1995 the Company loaned, invested in, 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 loans or investments 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 September 30, 1995, the Company has invested or loaned
approximately $7.5 million under the program. Because of the financial
condition of a number of these retailers, the Company has reserved
approximately 33 percent or $2.4 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, is due in 1995 through
2000. Interest rates on the various loans range from 0 percent to prime
rate plus 2.25 percent (11.0 percent as of September 30, 1995).
NOTE K: Income Tax Provision/Benefit
The Company's effective income tax rate increased from 22 percent for the
six month period ended September 30, 1994 to 59 percent for the six month
period ended September 30,1995. The increase is primarily due to the non-
deductibility of certain intangible assets for tax purposes.
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: Rentrak Home Entertainment ("RHE") which includes North
American PPT Operations; Pro Image, Inc. and its subsidiaries ("TPI");
BlowOut Entertainment, which includes BlowOut Video, Inc.; E-1.; and the
leased video department operations of SEC and Supermarket Video Management,
Inc (SVI) and Other Domestic Subsidiaries and Corporate. The following
tables break out these groups for the three month and six month periods
ended September 30, 1995 and September 30, 1994. All significant
intercompany transactions have been eliminated.
<TABLE>
<CAPTION>
OTHER
QUARTER ENDED RHE TPI(1) BLOWOUT SUBS/
SEPTEMBER 30, 1995 ENTERTAINMENT CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Revenues $25,822,775 $8,341,518 $4,163,709 $ 262,304 $38,590,306
Cost of sales 21,369,521 5,434,264 1,963,885 13,930 28,781,600
Gross profit margin 4,453,254 2,907,254 2,199,824 248,374 9,808,706
SG&A 2,514,169 3,708,252 3,068,386 1,168,087 10,458,894
Other income (expense) (11,392) (42,476) 84,832 (61,700) (30,736)
Income (loss) before
taxes $1,927,693 $ (843,474) $ (783,730) $(981,413) (680,924)
Income tax benefit 454,021
Net loss $ (226,903)
1. Includes Results of Operations from June 1, 1995 through August 31, 1995
<CAPTION>
QUARTER ENDED RHE TPI(2) BLOWOUT OTHER SUBS/ CONSOLIDATED
SEPTEMBER 30, 1994 ENTERTAINMENT CORPORATE
<S> <C> <C> <C> <C> <C>
Revenues $ 17,872,943 $3,324,422 $ 1,266,472 $ 250,623 $ 22,714,460
Cost of sales 13,854,892 2,356,455 524,874 - 16,736,221
Gross profit margin 4,018,051 967,967 741,598 250,623 5,978,239
SG&A 1,873,432 1,182,230 943,425 1,016,138 5,015,225
Other income (expense) (244,178) 7,991 (90) 386,083 149,806
Income (loss) before
taxes $ 1,900,441 (206,272) (201,917) (379,432) 1,112,820
Income tax (288,866)
(provision)
Net income $ 823,954
(2) Includes Results of Operations from June 1,1994 through August 31, 1994
<CAPTION>
SIX MONTHS ENDED RHE TPI(1) BLOWOUT OTHER CONSOLIDATED
SEPTEMBER 30, 1995 ENTERTAINMENT SUBS/
CORPORATE
<S> <C> <C> <C> <C> <C>
Revenues $47,847,723 $14,203,547 $ 6,120,208 $ 563,587 $ 68,735,074
Cost of sales 39,750,959 8,796,707 3,061,619 13,930 51,623,215
Gross profit margin 8,096,773 5,406,840 3,058,589 549,657 17,111,859
SG&A 5,111,638 7,446,191 4,378,520 2,277,236 19,213,585
Other income (expense) 20,026 (29,550) 579,434 174,546 744,456
Income (loss) before
taxes $ 3,005,161 $(2,068,901) (740,497) (1,553,033 (1,357,270)
Income tax benefit 794,250
Net loss $ (563,020)
<CAPTION>
SIX MONTHS ENDED RHE TPI(2) BLOWOUT OTHER CONSOLIDATED
SEPTEMBER 30, 1994 ENTERTAINMENT SUBS/
CORPORATE
<S> <C> <C> <C> <C> <C>
Revenues $ 34,534,274 $5,125,678 $ 2,587,178 $ 438,836 $ 42,685,966
Cost of sales 26,870,476 3,564,390 962,546 - 31,397,412
Gross profit margin 7,663,798 1,561,288 1,624,632 438,836 11,288,554
SG&A 5,377,712 1,977,062 1,889,817 1,857,090 11,101,681
Other income 2,481,772 15,538 - 630,913 3,128,223
Income (loss) before
taxes $ 4,767,858 $ (400,236) $ (265,185) $ (787,341)$ 3,315,096
Income tax (729,321)
(provision)
Net income $ 2,585,775
(1) Includes Results of Operations from March 1, 1995 through
August 31, 1995
(2) Includes Results of Operations from March 1, 1994 through
August 31, 1994
</TABLE>
Rentrak Home Entertainment
For the quarter ended September 30, 1995, total revenue from RHE increased
$7.9 million, or 44 percent, rising to $25.8 million from $17.9 million in
the quarter ended September 30, 1994. For the six month period ended
September 30, 1995, total revenue from RHE increased $13.3 million, or 39
percent, rising to $47.8 million from $34.5 million in the six months ended
September 30, 1994.
The increase in total revenue was 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 24 percent to 4,077 from 3,301 a year earlier. As of
September 30, 1995, there were 3,467 retailers located in the United States
and 610 located in Canada.
Cost of sales for the quarter ended September 30, 1995 rose to $21.4
million from $13.9 million the prior year, an increase of $7.5 million, or
54 percent. Cost of sales for the six months ended September 30, 1995 rose
to $39.8 million from $26.9 million the prior year, an increase of $12.9
million, or 48 percent. These changes approximately parallel the changes
in total revenues. For the quarter and six months ended September 30,
1995, the gross profit margin decreased to 17 percent from 22 percent the
previous year. The decrease for the quarter is primarily due to the
inclusion of the nonrecurring payment of $0.5 million from Rentrak Japan in
the quarter ended September 30, 1994 and the inclusion of an additional
$168,000 of warrant cost amortization in the quarter ended September 30,
1995. The decrease for the six months is primarily due to the inclusion of
the nonrecurring payment of $1.0 million from Rentrak Japan in the six
months ended September 30, 1994 and the inclusion of an additional $336,000
of warrant cost amortization in the six months ended September 30, 1995.
In addition, as compared to the quarter and six month periods ended
September 30, 1994, the decrease reflects an increase in major motion
picture studio product which traditionally has a lower gross margin.
Selling, general and administrative expenses were $2.5 million for the
quarter ended September 30, 1995 compared to $1.9 million for the quarter
ended September 30, 1994. Selling, general and administrative expenses
were $5.1 million for the six months ended September 30, 1995 compared to
$5.4 million for the six months ended September 30, 1994. As a percentage
of total revenue, selling, general and administrative expenses were 10
percent for the quarters ended September 30, 1995 and September 30, 1994.
As a percentage of total revenue, selling, general and administrative
expenses decreased to 11 percent for the six months ended September 30,
1995 from 16 percent the previous year.
Other income (expense) increased from an expense of $0.2 million for the
quarter ended September 30, 1994 to expense of less than $0.1 million for
the quarter ended September 30, 1995, an increase of $0.2 million. Other
income decreased from $2.5 million for the six months ended September 30,
1994 to less than $0.1 million for the six months ended September 30, 1995,
a decrease of $2.5 million. This decrease was due to the sale of certain
investment securities for a gain of $2.8 million in the quarter ended June
30, 1994.
For the quarter ended September 30, 1995, RHE recorded a pretax profit of
$1.9 million, or 7 percent of total revenue, compared to a pretax profit of
$1.9 million, or 11 percent of total revenue, for the quarter ended
September 30, 1994. For the six months ended September 30, 1995, RHE
recorded a pretax profit of $3.0 million, or 6 percent of total revenue,
compared to a pretax profit of $4.8 million, or 14 percent of total
revenue, for the quarter ended September 30, 1994.
The Pro Image, Inc.
Comparisons to the quarter and six month periods ended August 31, 1994, are
not meaningful because the acquisition of Team Spirit, Inc. ("Team Spirit")
occurred on September 1, 1994, but are presented for informational purposes.
Total revenue from TPI increased to $8.3 million for the quarter ended
August 31, 1995 from $3.3 million for the quarter ended August 31, 1994, an
increase of $5.0 million, or 151 percent. Total revenue from TPI increased
to $14.2 million for the six months ended August 31, 1995 from $5.1 million
for the six months ended August 31, 1994, an increase of $9.1 million, or
177 percent.
Cost of sales was $5.4 million, an increase of $3.1 million (131 percent)
over the $2.4 million recorded for the quarter ended August 31, 1994. Cost
of sales was $8.8 million, an increase of $5.2 million (147 percent) over
the $3.6 million recorded for the six months ended August 31, 1994.
Selling, general and administrative expenses increased to $3.7 million in
the quarter ended August 31, 1995 from $1.2 million for the quarter ended
August 31, 1994, an increase of $2.5 million, or 214 percent. Selling,
general and administrative expenses increased to $7.4 million in the six
months ended August 31, 1995 from $2.0 million for the six months ended
August 31, 1994, an increase of $5.5 million, or 277 percent. As a
percentage of total revenue, selling, general and administrative expenses
increased to 44 percent for the quarter ended August 31, 1995 from 36
percent a year earlier. As a percentage of total revenue, selling, general
and administrative expenses increased to 52 percent for the six months
ended August 31, 1995 from 39 percent a year earlier.
For the quarter ended August 31, 1995, TPI recorded a pretax loss of $0.8
million, or 10 percent of total revenue. This compares with a pretax loss
of $0.2 million, or 6 percent of total revenue, for the quarter ended
August 31, 1994. For the six months ended August 31, 1995, TPI recorded a
pretax loss of $2.1 million, or 15 percent of total revenue. This compares
with a pretax loss of $0.4 million, or 8 percent of total revenue, for the
six months ended August 31, 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.
BlowOut Entertainment
Comparisons to the quarter and six month periods ended September 30, 1994
are not meaningful because of the acquisition of a controlling interest in
E-1 (May, 1995) and SEC (September, 1995), but are presented for
informational purposes.
In a series of acquisitions culminating in June 1995, the Company acquired
a fifty-seven percent (57%) interest in E-1, a company which operates
"store within a store" outlets in Wal-Mart Supercenter stores under the
trade name "BlowOut Video". The Company holds additional convertible debt
of E-1 which, if fully converted, would increase its interest in E-1 to
ninety-four percent (94%). E-1 currently operates 70 stores in Wal-Mart
Supercenter stores, all of which are participating retailers in the Rentrak
PPT System. Only 22 of the E-1 stores have been open for more than a
year. To date, E-1 has not generated a profit.
On August 31, 1995, the Company acquired certain assets of SEC consisting
of 45 retail video "store within a store" outlets in Wal-Mart Supercenter
stores and 25 retail video outlets in K-Mart and K-Mart "SuperK" stores.
The acquired stores, which will be operated by the Company under the trade
name "BlowOut Video", rent and sell video cassettes, video games, computer
games and programs, and CD-ROM titles, and are participating retailers in
the Rentrak PPT System. These operations were rapidly expanded over the
last year and to date have not generated a profit.
Together, the Company and E-1 are the sole operators of the "store within a
store" video outlets in Wal-Mart stores and the largest operator of "store
within a store" outlets in K-Mart stores. The Company and E-1 have entered
into master leases with Wal Mart. The Company has also entered into a
master lease with K-Mart. Each individual video outlet lease under the
Wal-Mart and K-Mart master leases is for a five year term with an option to
extend for an additional five years. Pursuant to the master leases, neither
the Company nor E-1 is required to open any further video outlets in either
Wal-Mart or K-Mart stores, and neither Wal-Mart nor K-Mart is obligated to
lease any further video outlets to either the Company or E-1. Wal-Mart has
recently announced that it intends to open 110 Supercenters during 1996.
Assuming Wal-Mart consents to leasing additional video outlets in such
stores and assuming sufficient capital resources are available to the
Company or E-1, it is the Company's and E-1's current intention to open
additional video outlets in substantially all, if not all, of such
Supercenters. It is anticipated that the Company and E-1 each will incur
substantial opening and start-up costs in connection with the opening of
additional stores ($65,000 to $100,000 per store), and there can be no
assurance that video operations will generate a profit in the foreseeable
future.
Total revenue from BlowOut Entertainment increased to $4.2 million for the
quarter ended September 30, 1995 from $1.3 million for the quarter ended
September 30, 1994, an increase of $2.9 million. Total revenue from
BlowOut Entertainment increased to $6.1 million for the six months ended
September 30, 1995 from $2.6 million for the six months ended September 30,
1994, an increase of $3.5 million.
Cost of sales was $2.0 million, an increase of $1.5 million over the $0.5
million recorded for the quarter ended September 30, 1994. Cost of sales
was $3.1 million, an increase of $2.1 million over the $1.0 million
recorded for the six months ended September 30, 1994. As a percentage of
total revenue, cost of sales increased to 47 percent for the quarter ended
September 30, 1995 from 41 percent a year earlier. As a percentage of
total revenue, cost of sales increased to 50 percent for the six months
ended September 30, 1995 from 37 percent a year earlier.
Selling, general and administrative expenses increased to $3.1 million in
the quarter ended September 30, 1995 from $0.9 million for the quarter
ended September 30, 1994, an increase of $2.2 million, or 225 percent.
Selling, general and administrative expenses increased to $4.4 million in
the six months ended September 30, 1995 from $1.9 million for the six
months ended September 30, 1994, an increase of $2.5 million, or 132
percent. As a percentage of total revenue, selling, general and
administrative expenses remained at 74 percent for the quarter ended
September 30, 1995. As a percentage of total revenue, selling, general and
administrative expenses decreased to 72 percent for the six months ended
September 30, 1995 from 73 percent a year earlier.
For the quarter ended September 30, 1995, BlowOut Entertainment recorded a
pretax loss of $0.8 million, or 19 percent of total revenue. This compares
with a pretax loss of $0.2 million, or 16 percent of total revenue, for the
quarter ended September 30, 1994. For the six months ended September 30,
1995, BlowOut Entertainment recorded a pretax loss of $0.7 million, or 12
percent of total revenue. This compares with a pretax loss of $0.3
million, or 10 percent of total revenue, for the six months ended September
30, 1994. Changes in revenues, cost of sales, selling and administrative
costs and pretax losses were due to the inclusion of E-1 as of June 1, 1995
and the acquisition of SEC as of September 1, 1995.
There are certain risks associated with the Company's "store within a
store" operations that Rentrak stockholders and prospective investors
should consider carefully.
Both the Company and E-1 are following aggressive expansion strategies
during 1996, within Wal-Mart and K-Mart stores. Substantial capital
outlays and management resources are required to open each new store, and
there can be no assurance that either the Company or E-1 will be able to
obtain sufficient capital on reasonable terms or that it will be able to
attract and retain a sufficient number of skilled store managers to
implement its growth strategy. Furthermore, neither E-1 nor SEC operated
at a profit, and there can be no assurance that E-1 or the Company will be
able to meet the demands of a growth strategy and operate at a profit an
any time in the foreseeable future.
Through its subsidiaries, the Company has entered into master leases with
Wal-Mart and K-Mart, respectively, for its stores, and E-1 has entered into
a similar master lease with Wal-Mart. The master leases provide for an
initial five-year term for each new store, with an additional five-year
optional renewal term. Either party to the Wal-Mart lease can elect to
close stores which fail to generate a minimum level of revenues, although
any such closure would require the Company or E-1, as the case may be, to
pay Wal-Mart a termination fee (equal to $3,000) for each store closed.
Neither company has any exclusive right to open stores or any control over
the geographic area or market in which the new stores will be located. The
master leases also allow Wal-Mart or K-Mart, under certain conditions, to
restrict the ability of the company and E-1 to sell videocassette titles
which are being sold in particular Wal-Mart or K-Mart stores, respectively.
Both the Company and E-1 are highly dependent on their relationships with
their host stores. There can be no assurance that Wal-Mart or K-Mart will
not open additional stores in markets which the Company or E-1 deem to be
either highly competitive or otherwise undesirable, or that the number of
future stores opened by Wal-Mart or K-Mart will meet the Company or E-1's
current expansion plans. Either Wal-Mart or K-Mart could change its
development or operation plans at any time, and there can be no assurance
that either the Company or E-1 will be able to operate stores within either
the Wal-Mart or K-Mart stores for any period of time following the terms
provided in the master leases. Furthermore, if Wal-Mart or K-Mart
terminate their relationship with the Company or E-1, there can be no
assurance that the Company or E-1 could find a suitable national retail
mass merchant with sufficient stores to support their "store within a
store" retail concept.
The Company and E-1 operate stores in 21 different states. The geographic
diversity of these states poses special challenges with respect to store
management, inventory controls and communications. The opening of
additional stores in new states or regions could lead to redundancies and
inefficiencies in operations.
The video rental industry is highly competitive. Competitors such as
Blockbuster Video have substantially greater financial resources and
marketing capabilities. Because a majority of the Wal-Mart and K-Mart
stores are located in rural areas, the video operations also face
competition from supermarket rental operations, one of the fastest growing
segments of the video rental market. In addition, the Company and E-1
compete with a number of other leisure and retail entertainment providers,
including television, movie theaters, bowling alleys and sporting events.
Through its acquisition of the SEC operations and a controlling interest in
E-1, the Company has significantly increased the overall level and scope of
its business operations. The expansion in the scope of the Company's
operations has resulted in a need for a significant investment in
infrastructure and systems. The challenges of the Company's expansion are
expected to be magnified with the opening of additional outlets. These
challenges include, without limitation, securing adequate financial
resources to successfully integrate and manage the operation, retention of
key employees, integration of the outlets into the PPT system and
consolidation of certain operations, each of which could pose significant
challenges.
Future operating results may be affected by the number and timing of store
openings, the quality of new release titles available for rental and sale,
weather and other special and unusual events. Spending on entertainment
items such as video rentals and purchases is discretionary and may be
particularly susceptible to regional and national economic conditions. In
addition, any concentration of new store openings and related new store
pre-opening costs near the end of a fiscal quarter could have an adverse
effect on the financial results for that quarter.
Other Subsidiaries
Other Subsidiaries is primarily comprised of a software development
company. The software development company ceased operations on September
30, 1995. Total revenue from Other Subsidiaries was $0.3 million for the
quarter ended September 30, 1995 and the quarter ended September 30, 1994.
Total revenue from Other Subsidiaries, increased to $0.6 million for the
six months ended September 30, 1995 from $0.4 million for the six months
ended September 30, 1994, an increase of $0.2 million, or 28 percent.
Selling, general and administrative expenses increased to $0.3 million in
the quarter ended September 30, 1995 from $0.2 million for the quarter
ended September 30, 1994, an increase of $0.1 million, or 73 percent.
Selling, general and administrative expenses increased to $0.7 million in
the six months ended September 30, 1995 from $0.5 million for the six
months ended September 30, 1994, an increase of $0.2 million, or 51
percent. As a percentage of total revenue, selling, general and
administrative expenses increased to 119 percent for the quarter ended
September 30, 1995 from 72 percent a year earlier. As a percentage of
total revenue, selling, general and administrative expenses increased to
125 percent for the six months ended September 30, 1995 from 106 percent a
year earlier.
For the quarter ended September 30, 1995, Other Subsidiaries recorded a
pretax loss of $0.3 million, or 102 percent of total revenue. This
compares with a pretax profit of $0.1 million, or less than 1 percent of
total revenue, for the quarter ended September 30, 1994. For the six
months ended September 30, 1995, Other Subsidiaries recorded a pretax loss
of $0.4 million, or 64 percent of total revenue. This compares with a
pretax loss of less than $0.1 million, or 6 percent of total revenue, for
the six months ended September 30, 1994.
Corporate
Selling general and administrative expenses were $0.8 million in the
quarter ended September 30, 1995 and the quarter ended September 30, 1994.
Selling general and administrative expenses increased to $1.6 million in
the six months ended September 30, 1995 from $1.4 million in the six months
ended September 30, 1994, an increase of $0.2 million, or 13 percent.
Other Income (Expense) decreased to $0.1 million for the quarter ended
September 30, 1995 from $0.4 million in the quarter ended September 30,
1994, a decrease of $0.3 million, or 63 percent. Other Income (Expense)
decreased to $0.4 million for the six months ended September 30, 1995 from
$0.6 million in the quarter ended September 30, 1994, a decrease of $0.1
million, or 40 percent. The Company recognized a tax benefit of $0.5
million in the quarter ended September 30, 1995, as compared to a tax
provision of $0.3 million in the quarter ended September 30, 1994. The
Company recognized a tax benefit of $0.8 million in the six months ended
September 30, 1995, as compared to a tax provision of $0.7 million in the
six months ended September 30, 1994.
Consolidated Balance Sheet
Total assets increased from $64.5 million as of March 31, 1995 to $80.6
million as of September 30, 1995, an increase of $16.1 million. As of
September 30, 1995, rental inventory had increased $5.3 million to $6.1
million from $0.8 million as of March 31, 1995. This increase is primarily
due to the consolidation of E-1 and the acquisition of SEC. As of
September 30, 1995, property and equipment had increased $3.6 million to
$8.5 million from $4.9 million at year-end. Of this increase,
approximately $1.7 million was related to the E-1 acquisition and $1.6
million was related to the SEC acquisition. At quarter-end, intangibles
had risen to $15.9 million from $11.0 million at the end of fiscal year
1994, an increase of $4.9 million. Most of this amount was related to the
acquisition of E-1 and SEC. Accrued compensation decreased $0.7 million
from $2.0 million March 31, 1995, to $1.3 million September 30, 1995. The
decrease is primarily due to the payment of annual bonuses. All warrants
which the Company issued during 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 was $0.2 million.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had cash and other liquid investments of
$6.8 million, compared to $10.7 million at March 31, 1995. At September
30, 1995, the Company's current ratio (current assets/current liabilities)
declined to 1.13 from 1.49 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 $10.0 million. The agreement expires on October
27, 1996. Interest is payable monthly at a rate that varies in relation to
the bank's prime rate plus .5 percent. 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 quick ratio and minimum ratio
of 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 has borrowed $4.7 million
under the line of credit as of September 30, 1995.
In July 1995, TPI entered into a $6.0 million line-of-credit agreement with
a financial institution. Interest on borrowings under this credit
agreement accrue at the bank's prime rate plus .25 percent. Borrowings are
collateralized by the Company's accounts receivable and inventory, and
require monthly payments of accrued interest. The available borrowing
under this agreement is the lesser of $6.0 million or the borrowing base as
described in the agreement with the final $1.0 million being available only
with a concurrent cash equity infusion to The Pro Image of an equal dollar
amount. There were no borrowings under the credit agreement at August 31,
1995. The credit agreement expires on July 31, 1997.
In August 1994, the Company acquired all of the outstanding stock of Team
Spirit. Team Spirit operated 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. As consideration
for the acquisition, the Company issued approximately 557,000 shares of
common stock.
The Company intends to continue to expand its licensed sports 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.
On May 26, 1995 the Company acquired 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.
On August 31, 1995 the Company acquired certain assets of SuperCenter
Entertainment Corporation ("SEC") which constitute SEC's retail video
business. As consideration for the acquisition, the Company issued SEC
878,000 shares of Common Stock of the Company.
There are certain risks associated with the Company's "store within a
store" operations that Rentrak stockholders and prospective investors
should consider carefully.
Both the Company and E-1 are following aggressive expansion strategies
during 1996, within Wal-Mart and K-Mart stores. Substantial capital
outlays and management resources are required to open each new store, and
there can be no assurance that either the Company or E-1 will be able to
obtain sufficient capital on reasonable terms or that it will be able to
attract and retain a sufficient number of skilled store managers to
implement its growth strategy. Furthermore, neither E-1 nor SEC operated
at a profit, and there can be no assurance that E-1 or the Company will be
able to meet the demands of a growth strategy and operate at a profit an
any time in the foreseeable future.
Through its subsidiaries, the Company has entered into master leases with
Wal-Mart and K-Mart, respectively, for its stores, and E-1 has entered into
a similar master lease with Wal-Mart. The master leases provide for an
initial five-year term for each new store, with an additional five-year
optional renewal term. Either party to the Wal-Mart lease can elect to
close stores which fail to generate a minimum level of revenues, although
any such closure would require the Company or E-1, as the case may be, to
pay Wal-Mart a termination fee (equal to $3,000) for each store closed.
Neither company has any exclusive right to open stores or any control over
the geographic area or market in which the new stores will be located. The
master leases also allow Wal-Mart or K-Mart, under certain conditions, to
restrict the ability of the company and E-1 to sell videocassette titles
which are being sold in particular Wal-Mart or K-Mart stores, respectively.
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
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. These loans and investments 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 October 1995 the company has loaned, invested in, 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 loans or investments 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 September 30, 1995, the Company has invested or loaned
approximately $7.5 million under the program. Because of the financial
condition of a number of these retailers, the Company has reserved
approximately 33 percent or $2.4 million of the original loan or investment
amount.
To raise additional funding to continue the expansion of E-1 and SEC the
Company is 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.
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
(a) On August 28, 1995, the Company conducted its Annual Meeting
of Shareholders ("meeting").
(b) Both of the Company's nominees to election as Director were
elected. Voting for Directors was as follows:
<TABLE>
<CAPTION>
Nominees For Percentage(3) Withheld Percentage
<S> <C> <C> <C> <C>
L. Barton 8,644,002 98.96% 90,931 1.04%
Alexander
Peter Dal Bianco 8,645,097 98.97% 89,836 1.03%
(3) Percentage of votes cast at the Meeting or by Proxy
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 10 - Employment agreement with Ron Berger
Exhibit 11 - Calculations of Net Income Per Share
(b) Reports on Form 8-K - Three
Item 5 - Other Events
Item 7 - Financial Statements and Exhibits - filed September 1,
1995
Item 2 - Acquisition or Disposition of Assets
Item 7 - Financial Statements and Exhibits - filed September 15,
1995
Item 7 - Financial Statement and Exhibits - filed November 14,
1995
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 14th day of November, 1995
RENTRAK CORPORATION:
/S/ Karl D. Wetzel
Karl D. Wetzel
Chief Accounting Officer
Signing on behalf of the registrant
Exhibit 11
<TABLE>
Rentrak Corporation
Computation of Net Income (Loss) Per Share
<CAPTION>
For the Three Months Ended For the Six Months Ended
September 30, 1995 September 30, 1995
Fully Fully
Primary Diluted Primary Diluted
<S> <C> <C> <C> <C>
Weighted average number
of shares of common stock 11,527,397 11,527,397 11,378,797 11,378,797
outstanding
Dilutive effect of
exercise of stock
options, net of 369,812 369,812 331,731 419,096
assumed purchases of
treasury stock with
proceeds from
exercise of options
Weighted average number
of shares of
common stock and common 11,897,209 11,897,209 11,710,528 11,797,893
stock equivalents
outstanding
Net Income (Loss) ($226,903) ($226,903) ($563,020) ($563,020)
Net Income (Loss) per ($0.02) ($0.02) ($0.05) ($0.05)
Share
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 6,799,338
<SECURITIES> 0
<RECEIVABLES> 17,293,647
<ALLOWANCES> 180,887
<INVENTORY> 6,723,013
<CURRENT-ASSETS> 38,189,556
<PP&E> 8,513,982
<DEPRECIATION> 6,672,657
<TOTAL-ASSETS> 80,636,995
<CURRENT-LIABILITIES> 33,664,076
<BONDS> 0
<COMMON> 12,126
0
0
<OTHER-SE> 46,401,374
<TOTAL-LIABILITY-AND-EQUITY> 80,636,995
<SALES> 68,735,074
<TOTAL-REVENUES> 68,735,074
<CGS> 51,623,215
<TOTAL-COSTS> 70,836,800
<OTHER-EXPENSES> (989,016)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244,560
<INCOME-PRETAX> (1,357,270)
<INCOME-TAX> (794,250)
<INCOME-CONTINUING> (563,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (563,020)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this
"Agreement") is made and entered into as of this ____ day of
______________, 1995 by and between RENTRAK CORPORATION, an Oregon
corporation ("Employer"), and RON BERGER ("Employee").
WHEREAS, Employer currently employs Employee in the capacity
of Chairman of the Board of Directors ("Chairman"), President and
Chief Executive Officer and Employee is one of the key executives
of the Employer;
WHEREAS, Employer and Employee have entered into an
Employment Agreement dated as of June 1, 1994 (the "Employment
Agreement") and Employer and Employee desire to modify the terms
of the Employment Agreement upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the terms of this Agreement shall supersede in its
entirety the terms of the Employment Agreement;
WHEREAS, Employer considers it essential to the best
interests of its shareholders to foster the continuous employment
of Employee;
WHEREAS, the Board of Directors of Employer (the "Board")
recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change of Control (as defined
below) may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of Employer and its shareholders;
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention
and dedication of members of Employer's management, including
Employee, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of Change of Control; and
WHEREAS, the Board has determined that it is in the best
interests of Employer and its shareholders to clarify certain
provisions of the Employment Agreement in order to more
effectively carry out the purposes of Employment Agreement and
avoid potential disputes in connection with the enforcement of the
Employment Agreement following a Change of Control.
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
1. EMPLOYMENT.
1.1 Position and Title.
Employer hereby employs and engages the services of Employee
for the position of Chairman of the Board of Directors, Chief
Executive Officer and President of Employer, during the Term (as
the term is defined in Section 2 of this Agreement) of this
Agreement, on the terms and conditions hereinafter set forth.
Employee further agrees to accept election and to serve during the
Term of this Agreement in such positions and as an officer and/or
director of any subsidiary or affiliate of Employer, without any
additional compensation therefor, except as set forth in this
Agreement, when and if elected to any such position by the
shareholders of Employer or by the Board of Directors of Employer,
as the case may be. This employment shall be exclusive to
Employee except that with majority approval of the Board of
Directors of Employer and the written consent of Employee,
Employer may (i) elect a new Chairman provided that Employee shall
remain as the President and Chief Executive Officer of Employer or
(ii) elect a new President provided that Employee shall remain as
Chairman and Chief Executive Officer. Employee agrees to serve
Employer during the Term of this Agreement as provided herein and
that the employment relationship specified herein shall be the
exclusive employment of Employee.
1.2 Duties and Place of Employment.
(a) Employee shall perform all duties customarily
performed by executives of publicly-held companies engaged in a
business similar to Employer's business and who are employed in
the same capacity as Employee pursuant to this Agreement.
Employee shall devote his full business time during normal
business hours to the business and affairs of Employer, use his
best efforts to promote the interests of Employer and, use his
best efforts to perform faithfully and efficiently
responsibilities assigned to Employee hereunder. To the extent
Employee has performed personal, civic or charitable activities or
served on corporate boards or committees not significantly
interfering with the performance of his responsibilities to
Employer prior to the date of this Agreement, the continued
conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the date of this
Agreement shall not be deemed to interfere with the performance of
Employee's responsibilities to the Company. It is expressly
agreed that Employee's continuing service on any boards or
committees with which he shall be connected, as a member or
otherwise, as of the date of this Agreement, or any such service
approved by Employer during the Term of this Agreement, shall, not
be deemed to interfere with the performance of Employee's services
to Employer pursuant to this paragraph (a). Employee shall report
directly and only to the Board of Directors or an executive
committee of the Board of Directors. Employee shall perform his
duties, at Employer's principal executive offices which are
currently located at 7227 N.E. 55th Avenue, Portland, Oregon
97218, or such other location as shall be mutually agreed upon by
Employee and Employer. Subject to the terms of this Agreement,
Employee shall comply promptly and faithfully with Employer's
reasonable instructions, directions, requests, rules and
regulations. Employer shall not be deemed to have waived the
right to require Employee to perform any duties hereunder by
assigning Employee to any other duties or services.
(b) After a Change of Control (as defined below)
during the Term of this Agreement, Employee shall continue to
serve Employer in the same capacity and have the same authority,
responsibilities and status as he had as of the date immediately
prior to the Change of Control. After a Change of Control,
Employee's services shall be performed at the location where
Employee was employed as of the date immediately prior to the
Change of Control, or at such other location as may be mutually
agreed between Employer and Employee.
(c) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred upon the first
fulfillment of the conditions set forth in any one of the
following four paragraphs:
(1) any "person" (as such term is defined in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an
employee benefit plan of Employer, is or becomes a
beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of Employer, representing twenty-five percent
(25%) or more of the combined voting power of Employer's
then outstanding securities; or
(2) a majority of the directors elected at any
annual or special meeting of stockholders are not
individuals nominated by Employer's then incumbent Board; or
(3) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation, other
than a merger or consolidation which would result in the
voting securities of Employer outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least seventy-five percent (75%) of
the combined voting power of the voting securities of
Employer or such surviving entity outstanding immediately
after such merger or consolidation, or the shareholders of
Employer approve a plan of complete liquidation of Employer
or an agreement for the sale or disposition by Employer of
all or substantially all of its assets.
2. TERM.
The term ("Term") of this Agreement shall commence on June
1, 1994 and shall terminate on May 31, 1999, unless sooner
terminated pursuant to Section 5, provided that in the event of a
Change of Control, this Agreement shall terminate on the later of
May 31, 1999 and two years after such Change of Control, unless
sooner terminated pursuant to Section 5. Notwithstanding the
foregoing, if the parties hereto shall, after such termination
date, continue to perform this Agreement as provided hereunder,
the Term of this Agreement shall automatically be extended until
terminated by either party giving one hundred twenty (120) days
prior written notice to the other at any time thereafter.
3. COMPENSATION.
As full compensation for all services to be performed by
Employee pursuant to this Agreement, Employer agrees to pay
Employee the compensation set forth in this Section 3, in addition
to such other benefits and compensation as are provided elsewhere
in this Agreement.
3.1 Base Salary.
(a) Employee shall be paid an annual base salary of
$300,000 for the first year of employment under this Agreement.
The annual base salary shall be paid to Employee in equal semi-
monthly installments in arrears on the seventh (7th) and twenty-
second (22nd) day of each month, commencing as of the month in
which this Agreement is executed. Should the seventh (7th) or the
twenty-second (22nd) day of any month not be a business day,
Employee's semi-monthly installment of base salary otherwise due
on such date shall be paid to Employee on the immediately
preceding business day. Employee's initial base salary shall be
increased pursuant to Section 3.1(b) hereof and, any increase in
Employee's annual base salary shall in no way limit or reduce any
other obligation of Employer hereunder. Once established at an
increased specified rate, Employee's annual base salary hereunder
shall not thereafter be reduced.
(b) During the Term hereof, the base salary payable
to Employee pursuant to Section 3.1(a) hereof shall be increased
on each anniversary of the date of the commencement of the Term of
this Agreement as follows:
From June 1, 1995 to May 31, 1996 - $320,000
From June 1, 1996 to May 31, 1997 - $340,000
From June 1, 1997 to May 31, 1998 - $360,000
From June 1, 1998 to May 31, 1999 - $390,000
Section 3.1(a) of this Agreement shall thereupon be deemed to be
amended without further action by Employer or Employee and
Employee's base salary shall be as set forth above effective as of
each anniversary date of this Agreement.
(c) Nothing herein contained shall preclude the
Board of Directors of Employer from authorizing the payment of
additional compensation to Employee over and above the base salary
at any time payable to him under this Agreement, whether as a
bonus or otherwise. The payment of such additional compensation
shall not operate as an amendment obligating Employer to make any
similar payment or to pay additional compensation at any future
time or for any future period or be deemed to affect the base
salary in any manner.
3.2 Annual Bonus.
In addition to the base salary, Employee shall be awarded,
for each of Employer's fiscal years during the Term of this
Agreement commencing with fiscal year ending March 31, 1995, an
annual bonus (the "Annual Bonus") as determined by this Section
3.2. The Annual Bonus for fiscal year 1995 shall equal five
percent (5%) of the amount by which "Employer's Pre-Tax Profits"
(as that term is defined in Annex A attached hereto) exceeds $1
million (the "Bonus Base"). Thereafter, for each subsequent year,
the Bonus Base shall be adjusted to equal the. actual Employer's
Pre-Tax Profits for the prior fiscal year plus 15%; or $1,000,000,
whichever is greater. All income below the Bonus Base shall not
qualify for or be used in determining the Annual Bonus. In
subsequent fiscal years during the term of this Agreement, an
Annual Bonus equal to 5% of the amount by which Employer's Pre-Tax
Profits for the current fiscal year exceeds the Bonus Base shall
be paid to Employee. The Annual Bonus shall be paid in cash to
Employee on the earlier of (a) the date Employer files its annual
report on Form 10-K with the Securities and Exchange Commission,
or (b) the date that is one hundred twenty (120) days after the
end of Employer's fiscal year.
3.3 Stock Option.
In connection with and as a further inducement to Employee
to enter into this Agreement, the Employer's Stock Option
Committee has awarded to Employee certain stock options, copies of
which are attached hereto as Exhibit A.
3.4 Additional Benefits.
3.4.1 Business Expenses.
During the Term of this Agreement, Employee shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by Employee in the performance of his duties
pursuant to this Agreement in accordance with the policies and
procedures of Employer now or hereinafter in effect. During the
Term of this Agreement, Employer shall furnish Employee with an
automobile to be used by Employee in the performance of his duties
hereunder and shall pay such expenses and other amounts with
respect thereto as are customarily paid for senior executives in
corporations substantially similar to Employer. Such automobile
shall be of a price and class similar to that currently used by
Employee.
3.4.2 Insurance.
During the Term of this Agreement, Employer shall provide,
at no expense to Employee, a term life insurance policy on the
life of Employee and payable to Employee's designated beneficiary
in accordance with the current policies and procedures of Employer
in effect, and shall continue in force the disability insurance
now in effect. Employer shall further provide Employee during the
Term of this Agreement with group accident, medical, dental and
hospital insurance coverage in accordance with the policies and
procedures of Employer in effect from time to time and to the
extent permissible by law, Employer shall extend medical and
health insurance coverage to Employee's wife and child dependents.
Further, Employer shall use its best efforts to provide Employee
with Directors and Officers Liability Insurance appropriate to the
nature of his responsibilities hereunder, provided that Employer
is able to obtain such insurance coverage for all of its directors
and officers at reasonable expense, as determined by the Board of
Directors in its sole discretion. For five years following a
Change of Control, Employer shall use its best efforts to continue
to provide directors' and officers' liability insurance covering
Employee (with respect to events occurring prior to termination of
Employment) on terms no less favorable (in terms of coverage and
amounts) than those of such insurance in effect immediately prior
to the Change of Control. Following a Change of Control, Employer
will indemnify and hold harmless Employee (and advance expenses)
to the full extent provided in the Articles of Incorporation and
Bylaws of Employer as in effect immediately prior to the Change of
Control.
3.4.3 Vacation and Holidays.
Employee shall be entitled to three (3) weeks paid vacation
during each full year of employment. In addition to the above
vacation, Employee shall be entitled to the number of paid
holidays provided for under the current policies and procedures of
Employer in effect from time to time.
3.4.4 Benefits Generally Offered.
In addition to any other compensation or benefits to be
received by Employee pursuant to the terms of this Agreement,
Employee shall be entitled to participate in all employee benefits
which Employer may from time to time provide its key officers.
4. RESTRICTIVE COVENANTS.
4.1 Non-Competition.
(a) During the term of Employee's employment under
this Agreement and for eighteen (18) months thereafter, Employee
shall not own or have any interest directly in, or act as an
officer, director, agent, employee or consultant of, or assist in
any way or in any capacity, any person, firm, association,
partnership, corporation, or other entity which is a wholesale
distributor of home video cassettes or related media or is engaged
in the specialty retail sports apparel business or is otherwise
engaged in a business that is substantially similar to and/or
competes with the business then engaged in by Employer (a
"Competitive Entity") , in any geographical area where Employer
engages in such business. The restrictions of this Section
prohibiting ownership in a competitive business shall not apply to
Employee's ownership of less than ten percent (10%) of the
publicly traded securities of any Competitive Entity.
(b) While the Employer and Employee acknowledge that
the restrictions contained in this Section 4.1 are reasonable, in
the unlikely event that any court should determine that any of the
restrictive covenants contained in Section 4.1(a), or any part
thereof, is unenforceable because of the duration of such
provision or the area covered thereby, such court shall have the
power to reduce the duration or area of such provision and, in its
reduced form, such provision shall then be enforceable and shall
be enforced.
4.2 Delivery of Records.
Upon termination of Employee's employment with Employer,
Employee shall deliver to Employer all books, records, lists,
brochures and all other property belonging to Employer or
developed by Employee in connection with the business of Employer.
4.3 Confidentiality.
Except in connection with the performance of his duties
hereunder, Employee shall not at any time during or after his
employment with Employer, reveal, divulge or make known to any
person, firm or corporation any confidential knowledge or
information which is treated as confidential and secret by
Employer and which relates to Employer's business (the
"Confidential Information"), including, but not limited to, any
confidential facts concerning any suppliers, purchasers, methods,
processes, developments, schedules, lists or loans of or relating
to the business of Employer and Employee will retain all
Confidential Information which he has acquired or which he will
acquire during his employment; provided, however, that this
restriction shall not apply to any knowledge, information or fact
held by or known to Employee that is generally known to the trade
through no fault of Employee or which was acquired by Employee
other than in his capacity as Employee; provided, further, that
this restriction shall not apply to any knowledge, information or
fact that, in the unqualified opinion of Employee's counsel,
Employee is required to reveal or disclose as a result of court
order, subpoena or similar legal duress or if disclosure is
otherwise required by law. Employee shall give Employer prompt
written notice of Employee's intention to disclose such
information along with a copy of any such order or subpoena, and
Employee shall give Employer a reasonable opportunity (under the
circumstances) prior to disclosure to seek a protective order.
Employee shall not be required to seek any protective order or
commence any process to do so.
4.4 Survival.
The provisions of this Section 4 shall survive the
termination of this Agreement and shall inure to the benefit of
Employer, its successors and assigns.
5. TERMINATION.
5.1 Termination for Cause. Employee's employment
may be terminated by Employer immediately for "Cause" as that term
is defined in Section 6.2.1.
5.2 Termination for Death or Disability. Employee's
employment may be terminated by Employer immediately upon
Employee's "Disability" as that term is defined in Section 6.2.2
or death.
5.3 [Intentionally Omitted]
5.4 Termination for Good Reason or by Employer.
(a) Employee's employment may be terminated by
Employee (i) within 120 days after a Change of Control or (ii) at
any time for "Good Reason" as that term is defined in Section
6.2.3. Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(b) Employee's employment under the terms of
Agreement may be terminated by Employer in the exercise of its
sole discretion at any time upon written notice to Employee.
6. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
6.1 Payments.
(a) In the event of the termination of Employee's
employment by Employer pursuant to Section 5.1 for Cause, within
ten days of termination Employer shall pay to Employee the full
amount of base salary accrued through the date of termination
pursuant to Section 3.1 and the amount of bonus, if any, accrued
through the date of termination pursuant to Section 3.2. No other
compensation shall be due or payable under this Agreement in the
event of a termination for Cause.
(b) In the event of the termination of Employee's
employment by Employer pursuant to Section 5.2 due to the death or
Disability of Employee, within ten days of termination Employer
shall pay to Employee or his estate or legal representative, in a
lump sum, the amount of base salary and bonus accrued through the
date of termination pursuant to Sections 3.1 and 3.2 plus an
additional amount equal to one year's base salary pursuant to
Section 3.1. During the period of Employee's disability, but
prior to Employee's termination of Employment, Employee shall be
entitled to receive all compensation as set forth in this
Agreement.
(c) In the event of the termination of Employee's
employment by Employee pursuant to Section 5.4(a) or following a
Change of Control or Potential Change of Control, the termination
of Employee's employment by Employer pursuant to Section 5.4(b),
within ten days of termination Employer shall pay to Employee, in
a lump sum, the greater of (i) all base salary and bonus which
Employer is obligated to pay to Employee pursuant to Sections 3.1
and 3.2 for the remainder of the Term of this Agreement (with
bonus being calculated as the greater of the bonus amount paid
with respect to the immediately preceding fiscal year or the
average of the bonus amounts paid for the three immediately
preceding fiscal years), or (ii) three times the sum of (A) the
base salary which Employer is obligated to pay to Employee
pursuant to Section 3.1 during the current fiscal year plus (B)
the greater of the bonus amount which Employer paid with respect
to the immediately preceding fiscal year or the average of the
bonus amounts which Employer paid for the three immediately
preceding fiscal years.
(d) In the event of the termination of Employee's
employment by Employer pursuant to Section 5.4(b) (prior to a
Change of Control or Potential Change of Control), Employer shall
pay to Employee all base salary and bonus which Employer is
obligated to pay to Employee pursuant to Sections 3.1 and 3.2 for
the remainder of the Term of this Agreement, when and at such
times as such compensation would otherwise have been earned and
paid to Employee pursuant to the terms of this Agreement, as if
Employee had remained in the employ of Employer through the entire
term of this Agreement.
(e) In the event of a termination of Employee's
employment, all stock options held by Employee as described in
Section 3.3 of this Agreement shall be treated in the manner
described in the stock option agreements entered into between
Employer and Employee.
(f) Employee is entitled to elect to continue the
insurance described in Section 3.4.2 of this Agreement during a
period of two (2) years following an event of termination
described in subsections (c) and (d) of this Section 6.1. If
Employee elects to continue such coverage, Employer shall
reimburse Employee for the premiums paid by Employee for such
insurance as such premiums are paid until such time as the
continued insurance terminates or Employee obtains replacement
full-time employment and is covered by such new employer's group
medical health and life insurance plan with benefits substantially
similar to those provided by Employer's insurance plan and without
any pre-existing conditions, exclusions, limitations or
restrictions, whichever occurs first. Such reimbursement shall be
reduced for an amount equivalent to the amounts charged Employee
for health coverage immediately prior to the occurrence of the
Change of Control.
(g) Employee, in his sole and absolute discretion,
shall have the right to decline all or a portion of any payments
under this Agreement.
6.2 Definitions.
6.2.1 Cause.
"Cause" shall mean (i) an act or acts of personal dishonesty
taken by Employee and intended to result in substantial personal
enrichment of Employee at the expense of Employer, or (ii) the
conviction of Employee of a felony.
6.2.2 Disability.
"Disability" shall mean Employee's inability due to
incapacity due to physical or mental illness to perform Employee's
duties for a consecutive period of at least 90 days or for at
least 180 days in a twelve-month period.
6.2.3 Good Reason.
"Good Reason" shall mean (i) the failure of Employer to
comply with the terms of this Agreement, or (ii) the occurrence
(without Employee's express written consent), within two (2) years
after any Change of Control, or after any Potential Change of
Control (treating all references in subsections (a) through (g)
below to a "Change of Control" as references to a "Potential
Change of Control"), of any one of the following acts by Employer,
or failures by Employer to act:
(a) the assignment to Employee of any duties
inconsistent with Employee's status as an executive officer of
Employer or a substantial adverse alteration in the nature or
status of Employee's title, position, duties, functions, working
conditions or responsibilities from those in effect immediately
prior to the Change of Control other than any such alteration
primarily attributable to the fact that Employer may no longer be
a public company, including, among other things, removal or
failure to nominate Employee as a member of the Board if Employee
is serving as such a member immediately prior to the occurrence of
a Change of Control;
(b) a reduction by Employer in Employee's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time;
(c) the relocation of Employer's principal executive
offices to a location more than thirty-five miles from the
location of such offices immediately prior to the Change of
Control or Employer's requiring Employee to be based anywhere
other than Employer's principal executive offices except for
required travel on Employer's business to an extent substantially
consistent with Employee's business travel obligations immediately
prior to the Change of Control;
(d) the failure by Employer, without Employee's
consent, to pay to Employee any portion of Employee's current
compensation;
(e) the failure by Employer to continue in effect
any compensation plan in which Employee participates immediately
prior to the Change of Control which is material to Employee's
total compensation unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by Employer to continue Employee's
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the terms and conditions of such
benefits, including, without limitation, the level of Employee's
participation relative to other participants, as such relative
level existed at the time of the Change of Control;
(f) the failure by Employer to continue to provide
Employee with benefits substantially similar to those enjoyed by
Employee under any of Employer's pension, life insurance, medical,
health and accident, or disability plans in which Employee was
participating immediately prior to the Change of Control, the
taking of any action by Employer which would directly or
indirectly materially reduce any of such benefits or deprive
Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Change of Control, or the failure by
Employer to provide Employee with the number of paid vacation days
to which Employee is entitled on the basis of years of service
with Employer in accordance with Employer's normal vacation policy
in effect immediately prior to the Change of Control; or
(g) the failure of Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 13 hereof.
6.2.4 Potential Change of Control. A "Potential
Change of Control" shall mean a potential change of control of
Employer, which shall be deemed to have occurred if the conditions
set forth in any one of the following three events shall occur:
(i) Employer enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; (ii) any
person (including Employer) publicly announces an intention to
take or to consider taking actions which, if consummated, would
constitute a Change of Control; or (iii) the Board adopts a
resolution to the effect that, for purposes of this Agreement, a
Potential Change of Control has occurred.
6.3 Disputes Concerning Termination
(a) If within fifteen (15) days after any notice of
termination for Good Reason is given by Employee pursuant to
Section 5.4(a), Employer notifies Employee that a dispute exists
concerning the termination, the date of termination of this
Agreement shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or
by a final determination; provided further that the date of
termination shall be extended by a notice of dispute from Employer
only if such notice is given in good faith and Employer pursues
the resolution of such dispute with reasonable diligence.
Employee shall have the right to notify Employer that a dispute
exists within fifteen (15) days after any notice of termination is
given by Employer, and shall have the right to dispute any denial
of the payments and benefits described in this Agreement and to
dispute the amount of such payments and benefits. Following a
Change of Control, a Employer shall provide all witnesses and
evidence reasonably required by Employee to present Employee's
case. Employer shall pay to Employee all reasonable expenses and
legal fees incurred by Employee as a result of a termination in
seeking to obtain or enforce any right or benefit provided by this
Agreement (whether or not Employee is successful in obtaining or
enforcing such right or benefit).
(b) If a purported termination by Employee for Good
Reason occurs and such termination is disputed, Employer shall do
either of the following.
(1) If Employee continues to provide services,
Employer shall continue to pay Employee the full
compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to,
salary and estimated bonus) and continue Employee as a
participant in all compensation, benefit and insurance
plans in which Employee was a participant when the
notice giving rise to the dispute was given, until the
dispute is finally resolved; or
(2) If Employee is no longer providing
services, Employer shall pay Employee fifty percent
(50%) of the amount specified in Sections 6.1(a), (b),
(c) and (d), and Employer will provide Employee with
the other benefits provided in Section 6, if, but only
if, Employee agrees in writing that if the dispute is
resolved against Employee, Employee will promptly
refund to Employer all payments Employee receives
under this paragraph (b) plus interest at the rate
provided in Section 1274(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), compounded
quarterly. If the dispute is resolved in Employee's
favor, promptly after resolution of the dispute
Employer will pay Employee the sum which was withheld
during the period of the dispute plus interest at the
rate provided in Section 1274(d) of the Code,
compounded quarterly.
Amounts paid under this paragraph (b) shall offset against and
reduce other amounts due under this Agreement. If the dispute is
resolved by a determination that Employee did not have Good
Reason, this Agreement, in accordance with its terms, will
continue to apply to the circumstances of Employee's employment by
Employer and any termination thereof.
(c) If there is a termination by Employer followed by
a dispute as to whether Employee is entitled to the payments and
other benefits provided under this Agreement, then, during the
period of that dispute Employer will pay Employee fifty percent
(50%) of the amount specified in Sections 6.1(a), (b), (c) and
(d), and Employer will provide Employee with the other benefits
provided in Section 6, if, but only if, Employee agrees in writing
that if the dispute is resolved against Employee, Employee will
promptly refund to Employer all payments Employee receives under
this paragraph (c) plus interest at the rate provided in Section
1274(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), compounded quarterly. If the dispute is resolved in
Employee's favor, promptly after resolution of the dispute
Employer will pay Employee the sum which was withheld during the
period of the dispute plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly.
7. PERSONAL NATURE.
This Agreement is personal, and is being entered into based
upon the singular skill, qualifications and experience of
Employee. Employee shall not assign this Agreement or any rights
hereunder without the express written consent of Employer.
Employee hereby grants to Employer the right to use Employee's
name, likeness and/or biography in connection with the services
performed by Employee hereunder and in connection with the
advertising or exploitation of any project with respect to which
Employee performs services hereunder.
8. NOTICES.
Any and all notices or other communications required or
permitted by this Agreement or by law shall be deemed duly served
and given when personally delivered to the party to whom such
notice or communication is directed or, in lieu of such personal
service, when deposited in the United States mail, certified,
return receipt requested, first class postage prepaid, addressed
as follows:
EMPLOYER: RENTRAK CORPORATION
7227 N.E. 55th Avenue
P.O. Box 18888
Portland, Oregon 97218
EMPLOYEE: RON BERGER
P.O. Box 2190
Gresham, Oregon 97030
Each party may change its address for purposes of this
Section by giving written notice of such change in the manner
provided for in this Section.
9. GOOD FAITH.
All approvals required to be given by any party shall be
given or denied in good faith and may not be unreasonably denied.
Each party shall use due diligence in its attempt to accomplish
any act to be accomplished by that party.
10. ATTORNEY FEES.
Except as provided in Section 6.3, in the event that it
should become necessary for any party to bring an action,
including arbitration, either at law or in equity, to enforce or
interpret the terms of this Agreement, each party shall pay its
own legal fees in connection with such action.
11. APPLICABLE LAW/VENUE.
This Agreement is executed and intended to be performed in
the State of Oregon and the laws of such State shall govern its
interpretation and effect. If suit is instituted by any party
hereto by any other party hereto for any cause or matter arising
from or in connection with the respective rights or obligations of
the parties hereunder, the sole jurisdiction and venue for such
action shall be the Superior Court of the State of Oregon in and
for the County of Multnomah.
12. INTEGRATED AGREEMENT.
This Agreement constitutes the entire agreement of the
parties with respect to the subject matter of this Agreement and
supersedes all prior agreement between the parties with respect
thereto.
13. HEIRS AND ASSIGNS.
Subject to any restriction on assignment contained herein,
this Agreement shall be binding upon and shall inure to the
benefit of the respective party's heirs, successors and assigns.
Employer will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of Employer, by
agreement in form and substance satisfactory to Employee, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. This Agreement
shall not be terminated by Employer's voluntary or involuntary
dissolution or by any merger or consolidation in which Employer is
not the surviving or resulting corporation, or on any transfer of
all or substantially all of the assets of Employer. In the event
of any such merger, consolidation, or transfer of assets, the
provisions of this Agreement shall be binding on and inure the
benefit of the surviving business entity or the business entity to
which such assets shall be transferred.
14. SEVERABILITY.
Any provision in this Agreement which is, by competent
judicial authority, declared illegal, invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting
the legality, validity or enforceability of such provision in any
other jurisdiction. The parties hereto agree to negotiate in good
faith to replace any illegal, invalid or unenforceable provision
of this Agreement with a legal, valid and enforceable provision
that, to the extent possible, will preserve the economic bargain
of this Agreement, or otherwise to amend this Agreement, including
the provision relating to choice of law, to achieve such result.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
EMPLOYER: EMPLOYEE:
RENTRAK CORPORATION,
an Oregon Corporation
BY:
F. KIM COX RON BERGER
Executive Vice President
BY:
STEVE ROBERTS
Chairman, Compensation Committee,
Board of Directors
