This filing consists of 139
pages. The Exhibit Index is
on Page 52.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - K
X Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for fiscal year ended March 31,
2000 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number D-15159
RENTRAK CORPORATION
(exact name of registrant as specified in its charter)
Oregon 93-0780536
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number.)
7700 NE Ambassador Place, Portland, Oregon 97220
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (503) 284-7581
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common stock $.001 par value
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K, or any amendment to this Form 10-K [ X ]
As of June 20, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant, based on the last sales
price as reported by NASDAQ was $34,042,760.
(Excludes value of shares of Common Stock held of record by
directors and officers and by shareholders whose record ownership
exceeded five percent of the shares outstanding at June 20, 2000.
Includes shares held by certain depository organizations.)
As of June 20, 2000, the Registrant had 12,289,883 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF THE DEFINITIVE PROXY STATEMENT FOR THE 2000 ANNUAL
MEETING OF THE SHAREHOLDERS ARE INCORPORATED BY REFERENCE INTO PART
III OF THIS FORM 10-K
TABLE OF CONTENTS
PART I
Item Page
1. Business 3
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security 11
Holders
PART II
5. Market for the Registrant's Common Stock and 12
Related Stockholder Matters
6. Selected Financial Data 13
7. Management's Discussion and Analysis of 14
Financial Conditions and Results of Operations
7A. Quantitative and Qualitative Disclosures About 21
Market Risk
8. Financial Statements and Supplementary Data 22
9. Changes in and Disagreements with Accountants 22
on Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the 49
Registrant
11. Executive Compensation 49
12. Security Ownership of Certain Beneficial 49
Owners
and Management
13. Certain Relationships and Related Transactions 49
PART IV
14. Exhibits, Financial Statement Schedules and 50
Reports on Form 8-K
PART I
ITEM 1. BUSINESS
GENERAL
The Company's primary business is the
distribution of videocassettes to home video
specialty stores and other retailers using its Pay
Per Transaction system (the "PPT System"). Under
the Company's PPT system, home video specialty
stores and other retailers that rent videocassettes
to consumers ("Retailers"), including grocery
stores and convenience stores, lease videocassettes
and other media ("Cassettes") from Rentrak for a
low up-front fee and share a portion of each retail
rental transaction with the Company. The Company's
PPT System generated 79 percent, 85 percent and 91
percent of total revenues in fiscal years 2000,
1999 and 1998, respectively.
The Company engages in several additional
lines of business through the following wholly-
owned subsidiaries:
3PF.COM (formerly ComAlliance), provides order
processing, inventory management, and
fulfillment services to Internet retailers and
wholesalers and to other businesses requiring
just-in-time fulfillment. 3PF.COM's Web-site
can be accessed at www.3PF.COM.
formovies.com, Inc., provides Web-site
services to Retailers and a video locator
service for consumers through its innovative
Web-site www.formovies.com.
BlowOut Video, Inc., sells videocassettes and
digital videodiscs through its Web- site
www.blowoutvideo.com, and through seven retail
outlets.
PAY-PER-TRANSACTION
The Company distributes Cassettes principally
to home video specialty stores through its PPT
System. The PPT System enables Retailers to obtain
Cassettes at a significantly lower initial cost
than if they purchased the Cassettes from
traditional video distributors.
Under traditional distribution, a motion
picture studio, licensee, or other owner of the
rights to certain video programming ("Program
Suppliers") sells Cassettes to a distributor for an
average price of approximately $64. The
distributor then sells Cassettes to a Retailer for
an average price of approximately $70. The
Retailer then rents Cassettes to the consumer at an
average price of $2.50 and retains all of the
rental revenue. Under the PPT System, after the
Retailer is approved for participation in the PPT
System, Cassettes are leased to the Retailer for a
low initial fee (the "Order Processing Fee") plus a
percentage of revenues generated by the Retailers
from rentals to consumers (the "Transaction Fee").
The Company retains a portion of each Order
Processing Fee and Transaction Fee and remits the
remainder to the appropriate Program Suppliers that
hold the distribution rights to the Cassettes. Due
to the lower costs of "bringing Cassettes in the
door", Retailers generally obtain a higher number
of Cassettes under the PPT System than the
traditional distribution method. The expected
benefit to the Retailer is a higher volume of
rental transactions, as well as a reduction in
capital cost and risk. The expected benefit to the
Program Supplier is an increase in the total number
of Cassettes shipped, resulting in increased
revenues and opportunity for profit. The expected
benefit to the consumer is the potential of finding
more copies of certain newly released hit titles
and a greater selection of other titles at
Retailers participating in the PPT System
("Participating Retailers").
The Company markets its PPT System throughout
the United States, Canada and the United Kingdom.
The Company also owns a nine percent interest in
Rentrak Japan, K.K. ("Rentrak Japan"), a Japanese
corporation which markets a similar service to
video retailers in Japan.
In February 1998, the Company entered into a
Shareholders Agreement and a PPT License Agreement
with Columbus Holdings Limited and Rentrak UK
Limited to develop the Company's PPT distribution
and information processing business in the United
Kingdom through Rentrak UK. The Company originally
owned 25 percent of Rentrak UK. On March 31, 1999,
the Company acquired an additional 67 percent
interest, and now owns 84 percent of Rentrak UK.
As of March 31, 2000, Rentrak UK is not generating
income or positive cash flow. Accordingly, the
Company wrote-off its investments of $222,000.
Management of the Company is evaluating Rentrak
UK's operations and is exploring options including
selling or closing down the operations. Management
intends to make a decision in the second quarter of
fiscal 2001.
The Company currently offers substantially all
of the titles of a number of Program Suppliers,
including Buena Vista Pictures Distribution, Inc.,
a subsidiary of The Walt Disney Company, Paramount
Home Video, Inc., and Twentieth Century Fox Home
Entertainment (formerly Fox Video), a subsidiary
of Twentieth Century Fox Film Corporation. The
Company's arrangements with Program Suppliers are
of varying duration, scope and formality. In some
cases, the Company has obtained Cassettes pursuant
to contracts or arrangements with Program Suppliers
on a title-by-title basis and in other cases the
contracts or arrangements provide that all titles
released for distribution by such Program Supplier
will be provided to the Company for the PPT System.
Many of the Company's agreements with Program
Suppliers, including all major Program Suppliers,
may be terminated upon relatively short notice.
Therefore, there can be no assurance that any of
the Program Suppliers will continue to distribute
Cassettes through the PPT System, continue to have
available for distribution titles which the Company
can distribute on a profitable basis, or continue
to remain in business. Even if titles are
otherwise available from Program Suppliers to the
Company, there can be no assurance that they will
be made available on terms acceptable to the
Company. During the last three years, the Company
has not experienced any material difficulty
acquiring suitable Cassettes for the Company's
markets on acceptable terms and conditions from
Program Suppliers that have agreed to provide the
same to the Company. The Company has one Program
Supplier that supplied product that generated 25
percent; a second that generated 19 percent, and a
third that generated 13 percent of Rentrak revenues
for the year ended March 31, 2000. There were no
other Program Suppliers who provided product that
generated more than 10 percent of revenues for the
year ended March 31, 2000.
The Company currently receives a significant
amount of product from three Program Suppliers.
Although management does not believe that these
relationships will be terminated in the near term,
a loss of any of these suppliers could have an
adverse affect on operating results.
Certain Program Suppliers have requested, and
the Company has provided, financial or performance
commitments from the Company, including advances,
warrants, or guarantees, as a condition of
obtaining certain titles. The Company determines
whether to provide such commitments on a case-by-
case basis, depending upon the Program Supplier's
success with such titles prior to home video
distribution and the Company's assessment of
expected success in home rental distribution. The
Company intends to continue this practice of
providing such commitments and there can be no
assurance that this practice will not in the future
result in losses which may be material.
Distribution of Cassettes
The Company's proprietary Rentrak Profit Maker
Software (the "RPM Software") allows Participating
Retailers to order Cassettes through their Point of
Sale ("POS") system software and provides the
Participating Retailers with substantial
information regarding all offered titles. Ordering
occurs via a networked computer interface. To
further assist the Participating Retailers in
ordering, the Company also produces a monthly
product catalogue called "Ontrak."
To be competitive, Retailers must be able to
rent their Cassettes on the "street date" announced
by the Program Supplier for the title. Rentrak has
contracted with 3PF.COM to distribute Rentrak's
Cassettes via overnight air courier to assure
delivery to Participating Retailers on the street
date. The freight costs of such distribution
comprise a portion of the Company's cost of sales.
Computer Operations
To participate in the Company's PPT System,
Retailers must install Rentrak approved computer
software and hardware to process all of their
rental and sale transactions. Participating
Retailers are required to use one of the POS
software vendors approved by the Company as
conforming to the Company's specifications. The
Company's RPM Software resides on the Retailer's
POS computer system and transmits a record of PPT
transactions to the Company over a
telecommunications network. The RPM Software also
assists the Retailer in ordering newly released
titles and in managing the inventory of Cassettes.
The Company's computer processes these
transactions and prepares reports for Program
Suppliers and Retailers. In addition, it
determines variations from statistical norms for
potential audit action. The Company's computer
also transmits information on new titles and
confirms orders made to the RPM Software at the
Retailer location.
Year 2000
Many computer software programs, as well as
hardware with embedded software, use a two-digit date
field to track and refer to any given year. There was
concern that in 2000, these software and hardware
systems would interpret the year "00" as "1900," which
would cause them to perform faulty calculations or shut
down altogether (the "Year 2000 Problem").
Accordingly, the Company assessed the scope of the
Year 2000 problem both internally and among its
suppliers and customers in March 1997, and implemented
remedial measures soon thereafter. The total cost of
the company's assessments, corrective measures, and
testing was less than $250,000.
The Company has not and does not anticipate
experiencing any significant problems related to the
Year 2000 issue that would be material to the Company.
Retailer Auditing
From time to time, the Company audits
Participating Retailers in order to verify that
they are reporting all rentals and sales of
Cassettes on a consistent, accurate and timely
basis. Several different types of exception
reports are produced weekly. These reports are
designed to identify any Participating Retailers
that vary from the Company's statistical norms.
Depending upon the results of the Company's
analysis of the reports, the Company may conduct an
in-store audit. Audits are conducted with and
without notice and any refusal to allow such an
audit can be cause for immediate termination from
the PPT System. If audit violations are found, the
Participating Retailer is subject to fines, audit
fees, immediate removal from the PPT System and/or
repossession of all leased Cassettes.
Seasonality
The Company believes that the home video
industry is seasonal because Program Suppliers tend
to introduce hit titles at two periods of the year,
early summer and Christmas. Since the release to
home video usually follows the theatrical release
by approximately six months (although significant
variations occur on certain titles), the seasonal
peaks for home video also generally occur in early
summer and at Christmas. The Company believes its
volume of rental transactions reflects, in part,
this seasonal pattern, although the growth of
Program Suppliers, titles available to the Company,
and Participating Retailers may tend to obscure any
seasonal effect. The Company believes such
seasonal variations may be reflected in future
quarterly patterns of its revenues and earnings.
Retailer Financing Program
In 1992, the Company established a Retailer
Financing Program whereby, on a selective basis, it
provided financing to Participating Retailers that
the Company believed had potential for substantial
growth in the industry. In connection with these
financings, the Company typically made a loan
and/or an equity investment in the Participating
Retailer. In some cases, the Company obtained a
warrant to purchase stock in the Participating
Retailer. As part of such financing, the
Participating Retailer typically agreed to cause
all of its current and future retail locations to
participate in the PPT System for a designated
period of time (usually 5 - 20 years). Under these
agreements, Participating Retailers were typically
required to obtain all of their requirements of
Cassettes offered under the PPT System or obtain a
minimum amount of Cassettes based on a percentage
of the Participating Retailer's revenues.
Notwithstanding the long term nature of such
agreements, both the Company and the Participating
Retailer may, in some cases, retain the right to
terminate such agreement upon 30-90 days prior
written notice. These financings are speculative
in nature and involve a high degree of risk and no
assurance of a satisfactory return on investment
can be given.
The Rentrak Video Retailer Loan Program was
adopted in 1992 at a time when the video industry
was experiencing rapid growth. The underlying
rationale for this program was the belief that the
Company could expand its business and at the same
time participate in the rapid growth experienced by
the video retailers in which it invested. Now that
the video industry is entering a phase of
maturation, the Company does not expect to utilize
this program in any material respect for any new
participants. However, the Company may make follow
on loans or investments in existing Video Retailer
Loan Participants.
As of March 31, 2000, the Company had
approximately $6,900,000 in loans and investments
outstanding under the program and reserves of
approximately $5,700,000 of the total original loan
or investment amount. As of March 31, 1999, the
Company had approximately $14,000,000 in loans and
investments outstanding under the Retailer
Financing Program and had provided reserves of
approximately $9,600,000.
Competition
The Cassette distribution business is a highly
competitive industry that is rapidly changing. The
traditional, and still dominant, method of distributing
Cassettes to Retailers is through purchase
transactions; i.e., a Retailer purchases Cassettes from
a distributor and then offers the Cassettes for rental
or sale to the general public. As described in greater
detail above (see "Pay-Per-Transaction"), the Company's
PPT System offers Retailers an alternative method of
obtaining Cassettes. Accordingly, the Company faces
intense competition from all of the traditional
distributors, including Ingram Entertainment, Inc.,
Major Video Concepts, Inc., Baker and Taylor, Inc., and
Video One Canada, Ltd. These and other traditional
distributors have extensive distribution networks, long-
standing relationships with Program Suppliers and
Retailers, and, in some cases, significantly greater
financial resources than the Company.
In the last two years certain traditional
distributors have taken steps to offer Cassettes to
Retailers on a revenue sharing basis. For example,
several traditional distributors have executed
licensing agreements with Supercomm, Inc.
("Supercomm"), a wholly-owned subsidiary of The Walt
Disney Company, to market product on revenue sharing
terms. Several traditional distributors have also
executed revenue sharing agreements with motion picture
studios ("Studios"). Several traditional distributors
have also entered into licensing agreements with the
Company to distribute Cassettes to Retailers using the
PPT System.
The Company also competes with Supercomm on two
levels: (1) domestically - for processing data for
certain Studios' direct relationships with Blockbuster
and other Retailers; and (2) internationally in certain
markets. Supercomm also processes data for traditional
distributors such as Ingram who then competes with the
Company for revenue sharing cassettes as well as
traditional cassettes.
The Company also faces direct competition from the
Studios. Beginning in 1997, several major Studios
offered Retailers discounted pricing if such Retailers
substantially increased the quantity of cassettes
purchased. Also, some major Studios have offered
Cassettes to Retailers on a lease basis. In addition,
all major Studios sell Cassettes directly to major
Retailers including Blockbuster, the world's largest
chain of home video specialty stores. The Company
believes all of the major Studios have executed direct
revenue sharing agreements with Blockbuster and
Hollywood Entertainment, the world's second largest
chain of home video specialty stores. The Company also
believes that certain Studios have executed direct
revenue sharing agreements with several other large
Retailers. The Company does not believe that the
Studios have executed direct revenue sharing agreements
with other smaller Retailers, but there can be no
assurance that they will not do so in the future.
The Studios also compete with the Company by
releasing certain Cassette titles on a "sell-through"
basis; i.e., they bypass the traditional rental period
by selling the Cassettes directly to consumers at a
price of approximately $14.95 to $29.95. To date, such
"sell-through" distribution has generally been limited
to certain newly released hit titles with wide general
family appeal. However, because the Company's PPT
business is partially dependent upon the existence of a
rental period, a shift toward such "sell-through"
distribution, particularly with respect to popular
titles, could have a material adverse effect on the
Company's business.
The Company also competes with businesses that use
alternative distribution methods to provide video
entertainment directly to consumers, such as the
following: (1) direct broadcast satellite transmission
systems; (2) traditional cable television systems; (3)
pay-per-view cable television systems; and (4) delivery
of programming via the Internet. Each of these
distribution methods employs digital compression
techniques to increase the number of channels available
to consumers and, therefore, the number of movies that
may be transmitted. Technological improvements in this
distribution method, particularly "video-on-demand,"
may make this option more attractive to consumers and
thereby materially diminish the demand for Cassette
rentals. Such a consequence could have a material
adverse effect on the Company's business.
Foreign Operations
On December 20, 1989, the Company entered into
an agreement with Culture Convenience Club, Co.,
Ltd. ("CCC"), a Japanese corporation, which is
Japan's largest video specialty retailer. Pursuant
to the agreement, the parties formed Rentrak Japan,
a Japanese corporation, which is presently owned 9
percent by the Company and 90 percent by CCC's
largest shareholder, Tsutaya Shoten Co., Ltd.
Rentrak Japan was formed to implement the PPT
System in Japan. The Company provided its PPT
technology and the use of certain trademarks and
service marks to Rentrak Japan, and CCC provided
management personnel, operating capital, and
adaptation of the PPT technology to meet Japanese
requirements. On August 6, 1992, the Company
entered into an expanded definitive agreement with
CCC to develop the PPT System in certain markets
throughout the world.
Prior to June 16, 1994 the Company owned a
thirty-three and one-third percent interest in
Rentrak Japan. On June 16, 1994, the Company and
CCC entered into an amendment to the definitive
agreement. Pursuant to this agreement, the Company
will receive a royalty of 1.67% for all sales of up
to $47,905,000 plus one-half of one percent of
sales greater than $47,905,000 in each royalty year
(June 1 - May 31). Pursuant to the amendment, the
Company received royalty payments of $1,000,000 in
fiscal year 1995 and $1,000,000 in fiscal year
1999. The term of the agreement was extended from
2001 to 2039. The Company currently owns
approximately 9% of Rentrak Japan.
In December 1999, the Company received a
prepayment of $2,500,000 in exchange for $4,000,000
of credit related to the annual royalty described
above, which is being recognized in revenues as
royalties are earned under the terms of the
contract. As of March 31, 2000, approximately
$1,640,000 has been recorded as deferred revenue on
the accompanying consolidated balance sheet to be
recognized in future periods.
In February 1998, the Company entered into a
Shareholders Agreement and a PPT License Agreement
with Columbus Holdings Limited, and Rentrak UK
Limited to develop the Company's PPT distribution
and information processing business in the United
Kingdom through Rentrak UK. Rentrak UK was
originally structured as a joint venture between
the Company, which owned 25 percent, Columbus
Holdings Limited, which owned 66.7 percent and
Rentrak Japan, which owned 8.3 percent. On March
31, 1999, the Company acquired Columbus Holdings
Limited's 67 percent interest, and now owns 84
percent of Rentrak UK. The PPT Agreement remains
in force in perpetuity, unless terminated due to
material breach of contract, liquidation of Rentrak
UK or non-delivery by the Company to Rentrak UK, of
all retailer and studio software, including all
updates. Pursuant to the PPT Agreement, during the
term of the PPT Agreement, the Company will receive
a royalty of 1.67 percent of Rentrak UK's gross
revenues from any and all sources.
Trademarks, Copyrights, and Proprietary Rights
The Company has registered its "RENTRAK",
"PPT", "Pay Per Transaction", "Ontrak",
"BudgetMaker", "DataTrak", "Prize Find" , "Blowout
Video", "Fastrak", "GameTrak", "RPM", "Videolink+",
"Unless You're Rich Enough Already", "Sportrak",
"Movies For The Hungry Mind", "VidAlert", "Active
Home Video", "Movie Wizard", and "Gotta Have It
Guarantee" marks under federal trademark laws. The
Company has applied and obtained registered status
in several foreign countries for many of its
trademarks. The Company claims a copyright in its
RPM Software and considers it to be proprietary.
Employees
As of March 31, 2000, including all
subsidiaries, the Company employs 277 full-time
employees. The Company considers its relations
with its employees to be good.
Financial Information About Industry Segments
See Note 12 of the Notes to the Consolidated
Financial Statements.
ITEM 2. PROPERTIES
The Company currently maintains its executive
offices in Portland, Oregon where it leases 53,566
square feet of office space. The lease began on
January 1, 1997 and expires on December 31, 2006.
3PF.COM, Inc., Inc. maintains its distribution
facilities in Wilmington, and Columbus Ohio where
it leases 321,083 square feet. The Company's
warehouse leases expire on June 30, 2002 and March
31, 2001, respectively. Management believes its
office space is adequate and suitable for current
operations. Management is in the process of
obtaining additional warehouse space for 3PF.COM,
Inc., in order to grow its business. Management
does not anticipate a problem in obtaining
additional suitable warehouse space to meet its
needs.
ITEM 3. LEGAL PROCEEDINGS
In June 1998, Video Update, Inc. ("Video Update")
filed a complaint (the "Video Update Complaint")
against the Company entitled Video Update, Inc. v.
Rentrak Corp., Civil Action No. 98-286, in the United
States District Court for the District of Delaware.
The Video Update Complaint alleges various violations
of the antitrust laws, including that the Company has
attempted to monopolize the market for videocassettes
leased to retail video stores in violation of Section 2
of the Sherman Act. Video Update further alleges that
the Company's negotiation and execution of an
exclusive, long-term revenue-sharing agreement with
Video Update violates Section 1 of the Sherman Act and
Section 3 of the Clayton Act. Video Update is seeking
unspecified monetary relief, including treble damages
and attorneys' fees, and equitable relief, including an
injunction prohibiting the Company from enforcing its
agreement with Video Update or any exclusivity
provision against videocassette suppliers and video
retailers. In August 1998, the Court granted the
Company's motion to dismiss the Video Update Complaint
pursuant to Federal Rules of Civil Procedure Rule
12(b)(3) on the basis of improper venue.
In August 1998, Video Update filed a new complaint
against the Company in the United States District Court
for the District of Oregon (the "Re-Filed Complaint"),
Case No. 98-1013HA. The Re-Filed Complaint is
substantially the same as the previous complaint. The
Company believes the Re-Filed Complaint lacks merit and
intends to vigorously defend against the allegations in
the Complaint. The Company answered the Re-Filed
Complaint denying its material allegations and
asserting several affirmative defenses. The Company
also has counterclaimed against Video Update alleging,
among other things, breach of contract, breach of the
covenant of good faith and fair dealing, promissory
fraud, breach of fiduciary duty, breach of trust,
constructive fraud, negligent misrepresentation and
intentional interference with business advantage, and
seeks damages and equitable relief.
In October 1998, the Company filed a motion for
summary judgment seeking to dismiss Video Update's
claims against Rentrak. In January 1999, the Company
filed a separate motion for partial summary judgment on
its breach of contract counterclaim seeking to recover
more than $4.4 million in fees and interest which the
Company claims Video Update owes to it. In response to
the Company's motions, Video Update asked the court for
additional time to take discovery before having to file
oppositions. The court has given the parties until
June 30, 2000 to complete discovery. The court denied
Rentrak's motions without reaching the merits and
without prejudice to re-filing the motions after
discovery has been conducted. Rentrak expects to re-
file its motions after discovery has taken place. On
October 21, 1999, the Company amended its counterclaims
to add additional breach of contract claims, a claim
for trade secret misappropriation and a claim for
recovery of personal property.
In August 1998, the Company filed a complaint (the
"Movie Buffs Complaint") against Susan Janae Kingston
d/b/a Movie Buffs ("Movie Buffs"), entitled Rentrak
Corporation v. Susan Janae Kingston, an individual,
d/b/a Movie Buffs, Case No. CV 98-1004 HA, in the
United States District Court for the District of
Oregon. The Movie Buffs complaint alleges breach of
contract and conversion claims and seeks damages in the
amount of at least $3.3 million and punitive damages of
$500,000. In September 1998, Movie Buffs filed
counterclaims against the Company and Third Party
Claims against Hollywood Entertainment Corp. (the
"Movie Buffs Counterclaims"). The Movie Buffs
Counterclaims allege that the Company violated the
antitrust laws, including the Sherman, Clayton and
Robinson-Patman Acts. The Counterclaim also seeks
declaratory relief, an accounting and alleges fraud and
conspiracy to defraud, breach of contract, breach of
the implied covenant of good faith, and unfair trade
practices. Movie Buffs seeks an unspecified amount of
damages (at least $10 million), treble damages, general
and consequential damages, punitive damages, attorneys'
fees and court costs.
In September 1998, Roadrunner Video ("Roadrunner
Video") filed a third-party complaint in intervention
against the Company and Hollywood Entertainment Corp.
(the "Roadrunner Complaint"). The Roadrunner Complaint
alleges the same claims as the Movie Buffs
Counterclaims. The Company filed a motion to dismiss
the Robinson-Patman Act claims pursuant to Federal
Rules of Civil Procedure Rule 12(b)(6), which motion
was granted. The court also granted Roadrunner and
Movie Buff's request to dismiss their claims against
Hollywood without prejudice. The Company believes the
Movie Buffs Counterclaims and the Roadrunner Complaint
lack merit and the Company intends to vigorously defend
against all of the allegations therein.
On March 5, 1999 the Court granted the Company's
motion to dismiss the Robinson-Patman Act claims
brought by Roadrunner and Movie Buffs. On April 12,
1999, Roadrunner and Movie Buffs filed amended claims
against Rentrak that added a new claim for fraud. The
Company continues to believe that the remaining
Roadrunner and Movie Buffs claims are without merit and
intends to continue to vigorously defend itself.
On February 10, 2000, the Company filed a
complaint (the "Action Video Complaint") against David
D. Passerallo, and Action Video, Inc. entitled Rentrak
Corporation v. David D. Passerallo, an individual and
Action Video, a North Carolina corporation, Case No. CV
00-214-HA, in the United District Court for the
District of Oregon. The Action Video Complaint alleges
claims for conversion, and breach of contract, payment
on advance agreement and personal guarantee.
On April 10, 2000, Action Video filed
counterclaims against the Company. Action Video's
counterclaims allege that the Company violated
antitrust laws, including the Sherman and Clayton Acts,
based on the Company's alleged efforts to favor certain
customers (such as Hollywood) over others and thereby
restrain competition. The Action Video Counterclaims
also include the following: (1) a demand for a
declaratory ruling that the contract between the
Company and Action Video is unenforceable as
unconscionable and a contract of adhesion, (2) fraud
and conspiracy to defraud, based on allegedly false
representations intended to induce Action Video to act;
(3) breach of contract based on the Company's allegedly
wrongful termination of its contract with Action Video,
allegedly wrongful computation of revenue entitlement,
and certain other alleged actions; (4) breach of an
implied covenant of good faith, based on the Company's
allegedly wrongful termination of its contract with
Action Video; (5) unfair trade practices based on the
Company's alleged conduct during its dealings with
Action Video, including termination of the Company's
contract with Action Video; and (6) a demand for an
accounting of the nature and amount of the parties'
respective obligations under the contract. Action
Video seeks unspecified monetary damages in excess of
$7 million, treble damages, general and consequential
damages, punitive damages in the minimum amount of $30
million, attorneys' fees and court costs.
The Company has taken action to dismiss a number
of Action Video's counterclaims. Action Video has
agreed to dismiss certain of these counterclaims and
has agreed to replead its remaining counterclaims. The
Company believes that the Action Video Counterclaims
are without merit and intends to vigorously defend
against this litigation.
In the event of an unanticipated adverse final
determination in respect of certain matters discussed
above, the Company's consolidated net income and
financial position for the period in which such
determination occurs could be materially affected.
The Company is also subject to certain legal
proceedings and claims that arise in the ordinary
course of its business. In the opinion of
management, the amount of any ultimate liability
with respect to these actions will not materially
affect the financial position or results of
operation of the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of security
holders of the Company through the solicitation of
proxies or otherwise during the fourth quarter of
the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $.001 par value,
is traded on the Nasdaq National Market, where its
prices are quoted under the symbol "RENT". As of
May 31, 2000 there were approximately 328 holders
of record of the Company's common stock. On May
31, 2000, the closing sales price of the Company's
common stock as quoted on the Nasdaq National
Market was $3.63.
The following table sets forth the reported
high and low sales prices of the Company's common
stock for the period indicated as regularly quoted
on the Nasdaq National Market. The over-the-
counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or
commissions and may not necessarily represent
actual transactions.
QUARTER ENDED HIGH LOW
JUNE 30, 1998 $10.06 $5.59
SEPTEMBER 30, 1998 $6.31 $3.28
DECEMBER 31, 1998 $3.94 $2.00
MARCH 31, 1999 $4.22 $2.50
JUNE 30, 1999 $5.25 $2.66
SEPTEMBER 30, 1999 $6.00 $3.50
DECEMBER 31, 1999 $7.41 $3.25
MARCH 31, 2000 $7.25 $5.13
DIVIDENDS:
Holders of the Company's common stock are
entitled to receive dividends if, as, and when
declared by the Board of Directors out of funds
legally available therefor, subject to the dividend
and liquidation rights of any preferred stock that
may be issued and subject to the dividend
restrictions in the Company's bank credit agreement
described in Note 5 of the Notes to the
Consolidated Financial Statements.
No cash dividends have been paid or declared
during the last five fiscal years. The present
policy of the Board of Directors is to retain
earnings to provide funds for operation and
expansion of the Company's business. The Company's
bank credit agreement limits the payment of
dividends in the Company's stock. The Company does
not intend to pay cash dividends in the foreseeable
future.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
(In Thousands, Except Per Share Amounts)
Year Ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Statement of Operations Data
Net revenues:
Application fees $ 311 $ 371 $ 383
Order processing fees 23,086 22,420 25,313
Transaction fees 62,440 72,835 78,671
Sell-through fees 7,811 11,347 9,383
Other 19,736 16,814 9,001
Total net revenues 113,384 123,787 122,751
Cost of sales 91,706 103,943 102,484
Gross profit 21,678 19,844 20,267
Selling and administrative expense 26,449 15,996 13,062
Net (gain) expense on litigation settlement (7,792) 1,099 0
Other income (expense) (1,519) 597 652
Income (loss) from continuing operations before
discontinued operations and benefit (provision)
for income taxes 1,502 3,347 7,857
Income tax benefit (provision) (451) (1,304) (3,199)
Income (loss) from continuing operations before
discontinued operations 1,051 2,043 4,658
Discontinued Operations: (1)
Loss from operations of discontinued subsidiaries
less applicable income tax benefit 0 0 0
Gain (loss) on disposal of discontinued subsidiaries 2,374 0 0
Net income (loss) $ 3,425 $ 2,043 $ 4,658
Diluted income (loss) per share
Continuing operations $ 0.10 $ 0.18 $ 0.41
Discontinued operations 0.22 0.00 0.00
Net income (loss) $ 0.32 $ 0.18 $ 0.41
Common shares and common share equivalents
outstanding 10,759 11,066 11,445
2000 1999 1998
Balance Sheet Data
Working Capital $ 9,871 $ 4,586 $ 1,062
Total Assets 50,473 49,457 51,609
Long-term Deferred Revenue 1,677 0 0
Stockholders' Equity 18,081 14,292 13,254
(1) Discontinued Operations includes the operations of Pro Image and
BlowOut Acquisitions were made by Pro Image and BlowOut during
1996, therefore comparisons between years are not meaningful.
See discontinued operations Note 13 of the Notes to the
Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
Year Ended March 31,
1997 1996
<S> <C> <C>
Statement of Operations Data
Net revenues:
Application fees $ 354 $ 551
Order processing fees 22,720 25,716
Transaction fees 70,467 70,187
Sell-through fees 11,101 10,601
Other 11,634 6,211
Total net revenues 116,276 113,266
Cost of sales 92,416 96,585
Gross profit 23,860 16,681
Selling and administrative expense 14,626 19,443
Net (gain) expense on litigation settlement 0 0
Other income (expense) 999 681
Income (loss) from continuing operations before
discontinued operations and benefit (provision)
for income taxes 10,233 (2,081)
Income tax benefit (provision) (3,950) 595
Income (loss) from continuing operations before
discontinued operations 6,283 (1,486)
Discontinued Operations: (1)
Loss from operations of discontinued subsidiaries
less applicable income tax benefit 0 (18,700)
Gain (loss) on disposal of discontinued subsidiaries 0 (12,100)
Net income (loss) $ 6,283 $(32,286)
Diluted income (loss) per share
Continuing operations $ 0.52 $ (0.13)
Discontinued operations 0.00 (2.62)
Net income (loss) $ 0.52 $ (2.75)
Common shares and common share equivalents
outstanding 12,159 11,755
1997 1996
Balance Sheet Data
Working Capital $ 1,488 $(12,579)
Total Assets 43,048 56,252
Long-term Deferred Revenue 0 0
Stockholders' Equity 11,272 14,404
(1) Discontinued Operations includes the operations of Pro Image and BlowOut
Acquisitions were made by Pro Image and BlowOut during 1996, therefore
comparisons between years are not meaningful. See discontinued operations
Note 13 of the Notes to the Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward Looking Statements
Certain Information included in the Annual Report
on Form 10-K (including Management's Discussion and
Analysis of Financial Conditions and Results of
Operations regarding revenue growth, gross profit
margin and liquidity) constitute forward-looking
statements that involve a number of risks and
uncertainties. Forward looking statements may be
identified by the uses of forward-looking words
such as "may", "will", "expects", "intends",
"anticipates", "estimates", or "continues" or the
negative thereof or variations thereon or
comparable terminology. The following factors are
among the factors that could cause actual results
to differ materially from the forward-looking
statements: the Company's ability to continue to
market the PPT System successfully, the financial
stability of the Participating Retailers and their
performance of their obligations under the PPT
System, non-renewal of line of credit, business
conditions and growth in the video industry and
general economics, both domestic and international;
competitive factors, including increased
competition, expansion of revenue sharing programs
other than the PPT System by Program Suppliers, new
technology, and the continued availability of
Cassettes from Program Suppliers. This Annual
Report on Form 10-K further describes certain of
these factors.
Results of Operations
<TABLE>
<CAPTION>
RENTRAK CORPORATION
STATEMENTS OF OPERATIONS
For The Years Ended March 31, 2000, 1999, and 1998
<S> <C> <C> <C>
2000 1999 1998
REVENUES $113,384,220 $123,787,390 $122,751,046
OPERATING COSTS AND EXPENSES
Cost of sales 91,706,290 103,942,898 102,483,865
Selling and administrative 26,448,569 15,995,941 13,062,064
Net (gain) expense on litigation settlement (7,791,880) 1,099,154 -
110,362,979 121,037,993 115,545,929
INCOME FROM OPERATIONS 3,021,241 2,749,397 7,205,117
Other income (expense) (1,519,378) 597,108 652,381
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION AND GAIN
FROM DISPOSAL FROM DISCONTINUED
OPERATIONS 1,501,863 3,346,505 7,857,498
Income tax provision (450,559) (1,303,999) (3,199,032)
INCOME FROM CONTINUING OPERATIONS 1,051,304 2,042,506 4,658,466
Gain from disposal from discontinued operations
plus income tax benefit of $483,502 2,373,502 - -
NET INCOME $ 3,424,806 $ 2,042,506 $ 4,658,466
</TABLE>
Fiscal 2000 Compared to Fiscal 1999
Continuing Operations - Domestic PPT Operations and
Other Continuing Subsidiaries
For the year ended March 31, 2000, total revenue
decreased $10.4 million to $113.4 million from
$123.8 million in the prior year. Total revenue
includes the following fees: application fees
generated when retailers are approved for
participation in the PPT System; order processing
fees generated when Cassettes are distributed to
retailers; transaction fees generated when
retailers rent Cassettes to consumers; sell-through
fees generated when retailers sell Cassettes to
consumers; royalty payments from Rentrak Japan;
revenue related to the Company's fulfillment, order
processing, and inventory management services to e-
commerce and other companies; and sales of
videocassettes.
The decrease in total revenue was primarily due
to lower revenues from the Company's core PPT
business. The decrease in PPT revenue resulted
primarily from the following: (i) a reduction in
the total number of Cassettes leased under the PPT
System, (ii) an increase in incentives offered by
the Company to entice retailers to order more
product; (iii) an increase in various "copy depth"
programs offered by studios intended to increase
the number of Cassettes in distribution (so-called
"copy depth" programs) that lowered the cost of
rental videocassettes to video retailers; (iv) an
increase in studio direct revenue-sharing
arrangements with the larger video store chains;
and (v) the loss of some customers due to
continuing industry consolidation.
In fiscal 2000, application-fee revenue was $0.3
million compared to $0.4 million in the prior year.
During the year, order processing-fee revenue
increased to $23.1 million from $22.4 million in
fiscal 1999, an increase of $0.7 million, or 3
percent. Transaction-fee revenue totaled $62.4
million, a decrease of $10.4 million, or 14
percent, from $72.8 million the previous year.
Sell-through revenue was $7.8 million in fiscal
2000 as compared to $11.3 million in fiscal 1999, a
decrease of $3.5 million, 31 percent.
Royalty revenue from Rentrak Japan decreased to
$1.8 million during fiscal 2000 from $2.2 million
the previous year. This decrease was due to a one
time royalty payment from Rentrak Japan of $1.0
million in January 1999, which was partially offset
by an increase in the current year royalty due to
increased revenues generated by Rentrak Japan.
Cost of sales in fiscal 2000 decreased to $91.7
million from $103.9 million the prior year, a
decrease of $12.2 million. The change is primarily
due to the factors that led to changes in revenue
noted above. In fiscal 2000, the Company's gross
profit margin increased to 19 percent from 15
percent the previous year, excluding the $1.0
million royalty payment from Rentrak Japan.
Selling, general and administrative expenses
were $26.4 million in fiscal 2000 compared to $16.0
million in fiscal 1999. This increase of $10.4
million, or 65 percent, was primarily due to (i)
increased reserves related to an outstanding
receivable account and write offs of other assets
for a total of approximately $9.0 million in the
fourth quarter of fiscal 2000; (ii) increased
compensation and occupancy costs associated with
the expanding fulfillment and order processing
business; and (iii) increased advertising
expenditures.
In January 2000, the Company recorded a gain of
approximately $7.8 million as a result of settling
litigation with Hollywood Entertainment. See
footnote 10 of the notes to the consolidated
financial statements.
Other income decreased from $0.6 million in
fiscal 1999 to an expense of $(1.5) million for
fiscal 2000, a decrease of $2.1 million. This
decrease is primarily due to the loss on sale of
investments recognized in fiscal 2000 of
approximately $1.2 million compared to a gain on
sale of investments in fiscal 1999 of approximately
$0.5 million.
For the year ended March 31, 2000, the Company
recorded pre-tax income of $1.5 million, or 1
percent of total revenue, compared to $3.3 million,
or 3 percent of total revenue in the prior fiscal
year. This decrease is due primarily to the
increase in selling, general and administrative
expenses as noted above offset by the net gain on
litigation settlement.
The Cassette distribution business is a highly
competitive industry that is rapidly changing. The
effect of these changes could have a material
impact on the Company's operations. Item 1
(Business) Competition section of this Annual
Report on Form 10-K further describes certain of
these factors.
Included in the amounts above are the results
from Other Subsidiaries which are primarily
comprised of operations of 3PF.COM, Inc., and
Blowout Video, Inc.
Total revenues from 3PF.COM, Inc. increased to
11.6 million at March 31, 2000 compared to $10.5
million at March 31, 1999 an increase of $1.1
million. This increase was primarily due to
increased volume from existing customers. Cost of
sales was $10.1 million, an increase of $1.7
million over the $8.4 million recorded in fiscal
1999. This increase is due to the increase in
freight and warehouse labor due primarily to the
increase in revenue as noted above. Selling,
general and administrative expenses increased to
$2.6 million in fiscal 2000 from $1.2 million in
fiscal 1999, an increase of $1.4 million. As a
percentage of total revenue, selling, general and
administrative expenses increased to 22 percent for
fiscal 2000 from 11 percent for the prior year.
This increase was due to increased compensation,
advertising and travel and entertainment expenses.
These costs have increased primarily due to
expanded sales and marketing efforts. The Company
anticipates that these costs will continue to grow
substantially in the near future.
As a result of the foregoing factors, for the
year ended March 31, 2000, 3PF.COM, Inc. recorded
pre-tax loss of $1.0 million, or 9 percent of total
revenue. This compares with pre-tax income of $0.6
million, or 6 percent of total revenue, in fiscal
1999.
Total revenues from Blowout Video, Inc.
increased to $9.5 million in fiscal 2000 from $8.4
million in fiscal 1999, an increase of $1.1
million, or 13 percent. Cost of sales was $6.0
million, an increase of $0.8 million over the $5.2
million recorded in fiscal 1999. Selling, general
and administrative expenses increased to $3.0
million in fiscal 2000 from $2.4 million in fiscal
1999, an increase of $0.6 million. As a percentage
of total revenue, selling, general and
administrative expenses increased to 32 percent for
fiscal 2000 from 29 percent for the prior year.
These increases were primarily the result of
opening 3 new stores during fiscal 2000.
For the year ended March 31, 2000, BlowOut
Video, Inc. recorded pre-tax income of $0.2
million, or 2 percent of total revenue. This
compares with pre-tax income of $0.7 million, or 8
percent of total revenue, in fiscal 1999.
On November 26, 1996, the Company made a
distribution to its shareholders of 1,457,343
shares of common stock (the BlowOut Common Stock)
of BlowOut. BlowOut is not related to the Company's
wholly owned subsidiary BlowOut Video, Inc. The
operations of BlowOut were reflected as
discontinued operations in the March 31, 1996
consolidated financial statements. During the year
ended March 31, 2000, the Company recorded a gain
on the disposal of discontinued operations of $1.9
million related to BlowOut, as the liability
related to BlowOut contingencies was less than
estimated. The Company also reduced the valuation
allowance that was recorded against the deferred
tax asset related to liabilities of discontinued
operations. This reduction of approximately $.5
million in the valuation allowance was recorded as
an income tax benefit from discontinued operations
in the accompanying consolidated income statement.
Consolidated Balance Sheet
At March 31, 2000, total assets were $50.5
million, an increase of $1.1 million from the $49.5
million a year earlier.
Net current liabilities relating to BlowOut at
March 31, 2000 and 1999 of approximately $0.4
million and $3.7 million, respectively, represent
amounts reserved for contingencies not yet settled
as of year end.
Fiscal 1999 Compared to Fiscal 1998
Continuing Operations - Domestic PPT Operations and
Other Continuing Subsidiaries
For the year ended March 31, 1999, total revenue
increased $1.0 million to $123.8 million from
$122.8 million in the prior year. Total revenue
includes the following fees: application fees
generated when retailers are approved for
participation in the PPT System; order processing
fees generated when Cassettes are distributed to
retailers; transaction fees generated when
retailers rent Cassettes to consumers; sell-through
fees generated when retailers sell Cassettes to
consumers; royalty payments from Rentrak Japan;
revenue related to the Company's fulfillment, order
processing, and inventory management services to e-
commerce and other companies, and sale of
videocassettes.
The increase in total revenue was primarily due
to the growth in the Company's fulfillment and
order processing services business. This growth in
revenues was partially offset by the decrease in
revenues in the core videocassette distribution
business ("PPT revenue"). The decrease in PPT
revenue resulted primarily from the following: (i)
a reduction in the total number of Cassettes leased
under the PPT System, due in part to program
suppliers offering more titles on a sell through
basis than historical levels; (ii) an increase in
incentives offered by the Company to entice
retailers to order more product; (iii) an increase
in various "copy depth" programs offered by studios
intended to increase the number of Cassettes in
distribution (so-called "copy depth" programs)
that lowered the cost of rental videocassettes to
video retailers; (iv) an increase in studio direct
revenue-sharing arrangements with the larger video
store chains; and (v) the loss of some customers
due to continuing industry consolidation.
In fiscal 1999, application-fee revenue remained
unchanged from the prior year at $0.4 million.
During the year, order processing-fee revenue
decreased to $22.4 million from $25.3 million in
fiscal 1998, a decrease of $2.9 million, or 11
percent. Transaction-fee revenue totaled $72.8
million, a decrease of $5.9 million, or 7 percent,
from $78.7 million the previous year. Sell-through
revenue was $11.3 million in fiscal 1999 as
compared to $9.4 million in fiscal 1998, an
increase of $1.9 million, or 20 percent.
Royalty revenue from Rentrak Japan increased to
$2.2 million during fiscal 1999 from $1.1 million
the previous year. This increase was due to a
royalty payment from Rentrak Japan of $1.0 million
in January 1999.
Cost of sales in fiscal 1999 increased to $103.9
million from $102.5 million the prior year, an
increase of $1.4 million. The change is primarily
due to factors that led to the changes in revenue
noted above. In fiscal 1999, the Company's gross
profit margin decreased to 15 percent from 17
percent the previous year, excluding the $1.0
million royalty payment from Rentrak Japan.
Selling, general and administrative expenses
were $16.0 million in fiscal 1999 compared to $13.1
million in fiscal 1998. This increase of $2.9
million, or 22 percent, was primarily due to (i)
increased compensation costs associated with the
growing fulfillment and order processing business;
and (iii) increased advertising expenditures.
Also, fiscal 1998 included collection of amounts
that were previously reserved at March 31, 1997.
Other income decreased from $0.7 million in
fiscal 1998 to $0.6 million for fiscal 1999, a
decrease of $0.1 million.
For the year ended March 31, 1999, the Company
recorded pre-tax income of $3.3 million, or 3
percent of total revenue, compared to $7.9 million,
or 6 percent of total revenue in the prior fiscal
year. This decrease is due primarily to the
increase in selling, general and administrative
expenses as noted above.
Included in the amounts above are the results
from Other Subsidiaries which are primarily
comprised of operations of 3PF.COM, Inc., and
Blowout Video, Inc.
Total revenues from 3PF.COM, Inc. increased to
$10.5 million at March 31, 1999 compared to $6.1
million at March 31, 1998 an increase of $4.4
million. This increase was primarily due to
increased volume from existing customers. Cost of
sales was $8.4 million, an increase of $3.7 million
over the $4.7 million recorded in fiscal 1998.
This increase is due to the increase in freight and
warehouse labor due primarily to the increase in
revenue as noted above. Selling, general and
administrative expenses increased to $1.2 million
in fiscal 1999 from $0.8 million in fiscal 1998, an
increase of $0.4 million. This increase was
primarily due to an increase in property taxes paid
in fiscal 1999. As a percentage of total revenue,
selling, general and administrative expenses
decreased to 11 percent for fiscal 1999 from 13
percent for the prior year.
As a result of the foregoing factors, for the
year ended March 31, 1999, 3PF.COM, Inc. recorded
pre-tax income of $0.6 million, or 6 percent of
total revenue. This compares with pre-tax income
of $0.4 million, or 7 percent of total revenue, in
fiscal 1998.
Total revenues from Blowout Video, Inc.
increased to $8.4 million in fiscal 1999 from $6.4
million in fiscal 1998, an increase of $2.0
million, or 31 percent. Cost of sales was $5.2
million, an increase of $1.3 million over the $3.9
million recorded in fiscal 1998. Selling, general
and administrative expenses increased to $2.4
million in fiscal 1999 from $1.8 million in fiscal
1998, an increase of $0.6 million. As a percentage
of total revenue, selling, general and
administrative expenses increased to 29 percent for
fiscal 1999 from 28 percent for the prior year.
For the year ended March 31, 1999, BlowOut
Video, Inc. recorded pre-tax income of $0.7
million, or 8 percent of total revenue. This
compares with pre-tax income of $0.7 million, or 11
percent of total revenue, in fiscal 1998.
Consolidated Balance Sheet
At March 31, 1999, total assets were $49.5
million, a decrease of $2.1 million from the $51.6
million a year earlier. A substantial portion of
the decrease resulted from the Company's use of
cash to repurchase the Company's Common Stock, as
noted below, and to reduce accounts payable.
Net current liabilities relating to BlowOut at
March 31, 1999 and 1998 of approximately $3.7
million and $4.6 million, respectively represent
amounts reserved for contingencies not yet settled
as of year end.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and
other liquid investments of $4.0 million, compared
to $2.1 million at March 31, 1999. At year-end,
the Company's current ratio (current assets/current
liabilities) was 1.32 compared to 1.13 a year
earlier. This improvement is primarily due to the
Company retiring approximately $10.5 million in
debt with the proceeds from the settlement of the
litigation with Hollywood Entertainment.
The Company had an agreement for a line of
credit with a financial institution in an amount
not to exceed the lesser of $7,500,000 or the sum
of 80% of the net amount of eligible accounts
receivable as defined in the agreement. Interest
was payable monthly at the bank's prime rate plus 1
percent (9% at March 31, 2000). The line was
secured by substantially all of the Company's
assets. The terms of the agreement required, among
other things, a minimum amount of tangible net
worth, minimum current ratio and minimum total
liabilities to tangible net worth. The agreement
also restricted the amount of net losses, loans and
indebtedness and limited the payment of dividends
on the Company's stock. The Company was in
compliance with these covenants as of March 31,
2000. At March 31, 2000, the Company had no
amounts outstanding under this agreement.
In May 2000 this line of credit was replaced with a
$12,000,000 line of credit with a different lender.
Interest under this line is payable monthly at the
bank's prime rate plus 1/4 percent. The new line is
secured by substantially all of the Company's assets.
The terms of the agreement require, among other things,
a minimum amount of tangible net worth and working
capital. The agreement also restricts the amount of
loans and indebtedness and limits the payment of
dividends on the Company's stock. The agreement
expires in May 2005.
In 1992, the Company established a retailer
financing program whereby the Company provided, on
a selective basis, financing to video retailers
that the Company believed have the potential for
substantial growth in the industry. In connection
with these financings, the Company typically made a
loan to and/or an equity investment in the
retailer. In some cases, a warrant to purchase
stock of the retailer was obtained. As part of
such financing, the retailer typically agreed to
cause all of its current and future retail
locations to participate in the PPT System for a
designated period of time. Under these agreements,
retailers are typically required to obtain all of
their requirements of Cassettes offered under the
PPT System or obtain a minimum amount of Cassettes
based on a percentage of the retailer's revenues.
Notwithstanding the long term nature of such
agreements, both the Company and the retailer may,
in some cases, retain the right to terminate such
agreement upon 30-90 days prior written notice.
These financings are speculative in nature and
involve a high degree of risk, and no assurance of
a satisfactory return on investment can be given.
The investments individually range from $50,000
to $4.7 million. As of March 31, 2000, the Company
has invested or loaned approximately $6.9 million
under the program and has reserves of approximately
$5.7 million. Included in the $6.9 million
investment balance at March 31, 2000, are gross
notes receivable of $2.7 million which are due as
follows: $1.4 million - 2000; $0.1 million - 2001;
$0.3 million - 2002; $0.4 million - 2003; and $0.5
million - 2008. Interest rates on the various
loans range from 5 percent to prime plus 1.5
percent (10.5 percent at March 31, 2000) per
annum. As the financings are made, and
periodically throughout the terms of the
agreements, the Company assesses the likelihood of
recoverability of the amounts invested or loaned
based on the financial position of each retailer.
This assessment includes reviewing available
financial statements and cash flow projections of
the retailer and discussions with retailers'
management. The amounts the Company could
ultimately receive could differ materially in the
near term from the amounts assumed in establishing
reserves.
On March 22, 1999, BlowOut Entertainment, Inc.
(BlowOut) filed for Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware. At that same
time BlowOut filed a motion to sell substantially
all of its assets. BlowOut is not related to the
Company's wholly owned subsidiary BlowOut Video,
Inc. The sale, to a third party video retailer,
was approved on May 10, 1999 and closed on May 17,
1999. The Company was the principal creditor of
BlowOut. In 1996, the Company had agreed to
guarantee up to $7 million of indebtedness of
BlowOut (Guarantee). Pursuant to the terms of the
Guarantee, the Company agreed to guarantee any
amounts outstanding under BlowOut's credit
facility. As the proceeds from the sale of the
BlowOut assets were not sufficient to cover the
amounts due under this facility, the Company,
pursuant to the Guarantee, agreed to a payment plan
to fulfill BlowOut's obligation under its credit
facility. The amount outstanding at March 31, 2000
is approximately $590,000. The payments, as made,
will be recorded as a reduction of "net current
liabilities of discontinued operations" on the
accompanying balance sheet.
The Company's sources of liquidity include its
cash balance, cash generated from operations and
its available credit resources. These sources are
expected to be sufficient to fund the Company's
operations for the year ending March 31, 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued Statement of
Financial Accounting Standard No. 137 "Accounting for
Derivative Instruments and Hedging Activities"
(SFAS 137). SFAS 137 is an amendment to Statement of
Financial Accounting Standards No. 133, "Accounting for
Derivative and Hedging Activities." SFAS 137
establishes accounting and reporting standards
requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability
measured at its fair value. SFAS 137 also requires
that changes in the derivative instrument's fair value
be recognized currently in results of operations unless
specific hedge accounting criteria are met. SFAS 137
is effective for the Company's fiscal year beginning
April 1, 2001. The Company expects that adoption of
SFAS 137 will not have a material impact on the
Company's financial condition or results of operations.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101
(SAB 101) on revenue recognition. SAB 101 provides
guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB
101 is effective for the Company beginning July 1,
2000. The Company does not expect the adoption of
SAB 101 to have an impact on its results of
operations or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company considered the provision of
Financial Reporting Release No. 48 "Disclosure of
Accounting Policies for Derivative Financial
Instruments and Derivative Commodity Instruments,
and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in
Derivative Financial Instruments, Other Financial
Instruments and Derivative Commodity Instruments."
The Company had no holdings of derivative financial
or commodity instruments at March 31, 2000. A
review of the Company's other financial instruments
and risk exposures at that date revealed that the
Company had exposure to interest rate risk. The
Company utilized sensitivity analyses to assess the
potential effect of this risk and concluded that
near-term changes in interest rates should not
materially adversely affect the Company's financial
position , results of operations or cash flows.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Item Page
Report of Independent Public 23
Accountants
Consolidated Balance Sheets as 24
of March 31, 2000
and 1999
Consolidated Statements of Income 25
for Years Ended March 31, 2000,
1999and 1998
Consolidated Statements of 26
Stockholders' Equity
for Years Ended March 31, 2000,
1999 and 1998
Consolidated Statements of Cash Flows 27
for Years Ended March 31, 2000,
1999 and 1998
Notes to Consolidated Financial 29
Statements
Financial Statement Schedules 48
Schedule II
Schedules not included have been omitted
because they are not applicable or the
required information is shown in the
financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
Report of Independent Public Accountants
To Rentrak Corporation:
We have audited the accompanying consolidated balance sheets of
Rentrak Corporation and subsidiaries as of March 31, 2000 and
1999, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years
in the period ended March 31, 2000. These consolidated financial
statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rentrak Corporation and subsidiaries as of March 31, 2000 and
1999, and the results of their operations and their cash flows
for each of the three years in the period ended March 31, 2000 in
conformity with accounting principles generally accepted in the
United States.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The schedule
listed in the index to financial statements is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the consolidated
financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Portland, Oregon
May 19, 2000
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 AND 1999
ASSETS
2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,028,271 $ 2,145,963
Accounts receivable, net of allowance 21,820,168 23,906,398
for doubtful accounts of $836,945 and
$355,241
Advances to program suppliers 2,982,766 2,840,262
Inventory 3,889,603 2,804,983
Income tax receivable 169,300 3,006,502
Deferred tax asset 1,878,113 1,579,637
Notes receivable 4,523,143 2,512,177
Other current assets 1,295,556 955,296
------------ ------------
Total current assets 40,586,920 39,751,218
------------ ------------
PROPERTY AND EQUIPMENT, net 2,642,700 1,723,448
OTHER INVESTMENTS, net 302,481 2,014,701
DEFERRED TAX ASSET 3,346,212 2,497,762
OTHER ASSETS 3,595,041 3,469,660
------------ ------------
Total assets $ 50,473,354 $ 49,456,789
============ ============
</TABLE>
<TABLE>
(Continued)
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF MARCH 31, 2000 AND 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit $ - $ 7,925,000
Accounts payable 24,162,040 16,628,294
Accrued liabilities 2,645,567 2,822,574
Accrued compensation 1,476,703 941,836
Deferred revenue 1,500,262 100,415
Note payable 500,000 3,000,000
Net current liabilities of 430,923 3,746,766
discontinued operations
------------ ------------
Total current liabilities 30,715,495 35,164,885
------------ ------------
LONG-TERM DEFERRED REVENUE 1,677,272 -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; - -
authorized:
10,000,000 shares
Common stock, $.001 par value; 10,515 10,440
authorized: 30,000,000 shares;
issued and outstanding: 10,514,561
shares in 2000 and 10,439,948 shares
in 1999
Capital in excess of par value 44,445,199 43,644,479
Cumulative other comprehensive income (264,684) 137,747
Accumulated deficit (25,326,951) (28,751,757)
Less- Deferred charge - warrants (783,492) (749,005)
------------ ------------
Total stockholders' equity 18,080,587 14,291,904
------------ ------------
Total liabilities and $ 50,473,354 $ 49,456,789
stockholders' equity
============ ============
The accompanying notes are an integral part of these
consolidated balance sheets.
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
2000 1999 1998
<S> <C> <C> <C>
REVENUES:
PPT $ 93,393,869 $106,406,342 $113,181,910
Other 19,990,351 17,381,048 9,569,136
------------ ------------ ------------
113,384,220 123,787,390 122,751,046
------------ ------------ ------------
OPERATING COSTS AND
EXPENSES:
Cost of sales 91,706,290 103,942,898 102,483,865
Selling and 26,448,569 15,995,941 13,062,064
administrative
Net (gain) expense (7,791,880) 1,099,154 -
from litigation
settlement
(Note 10)
------------ ------------ ------------
110,362,979 121,037,993 115,545,929
------------ ------------ ------------
Income from 3,021,241 2,749,397 7,205,117
operations
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 743,464 429,830 1,135,823
Interest expense (669,373) (381,825) (158,708)
Gain (loss) on (1,207,483) 549,103 (324,734)
investments
Other (385,986) - -
------------ ------------ ------------
(1,519,378) 597,108 652,381
------------ ------------ ------------
(Continued)
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
2000 1999 1998
<S> <C> <C> <C>
Income from continuing $ 1,501,863 $ 3,346,505 $ 7,857,498
operations before income tax
provision and gain from
disposal from discontinued
operations
INCOME TAX PROVISION (450,559) (1,303,999) (3,199,032)
------------ ------------ ------------
Net income from continuing 1,051,304 2,042,506 4,658,466
operations
GAIN FROM DISPOSAL FROM 2,373,502 - -
DISCONTINUED OPERATIONS,
INCLUDING INCOME TAX BENEFIT
OF $483,502
------------ ------------ ------------
Net income $ 3,424,806 $ 2,042,506 $ 4,658,466
============ ============ ============
EARNINGS PER COMMON SHARE:
Basic:
Continuing Operations $.10 $.19 $.42
Discontinued operations .23 - -
---- ---- -----
Total $.33 $.19 $.42
==== ==== ====
Diluted:
Continuing operations $.10 $.18 $.41
Discontinued operations .22 - -
---- ---- ----
Total $.32 $.18 $.41
==== ==== ====
The accompanying notes are an integral part of these
consolidated statements.
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
Common Stock Cumulative
------------------- Capital in Other
Number of Excess of Comprehensive
Shares Amount Par Value Income
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1997 11,847,441 $11,847 $47,931,165 $ 184,932
Repurchase of common stock (1,082,900) (1,082) (4,124,329) -
Issuance of common stock under employee 221,914 222 888,007 -
stock option plans
Net income - - - -
Change in unrealized gain (loss) on - - - (130,287)
investment securities, net of tax
Total comprehensive income
Income tax benefit from stock option exercise - - 320,455 -
Retirements of warrants - - (250,000) -
Issuance of warrants - - 600,000 -
Amortization of warrants - - - -
---------- ------- ----------- ---------
BALANCE AT MARCH 31, 1998 10,986,455 10,987 45,365,298 54,645
Repurchase of common stock (592,484) (593) (1,964,622) -
Issuance of common stock
under employee stock 45,977 46 118,375 -
option plans
Net income - - - -
Change in unrealized gain (loss) on - - - 83,102
investment securities, net of tax
Total comprehensive income
Income tax benefit from stock option exercise - - 41,428 -
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
Common Stock Capital in Cumulative
------------------- Other
Number of Excess of Comprehensive
Shares Amount Par Value Income
<S> <C> <C> <C> <C>
Issuance of warrants - $ - $ 84,000 $ -
Amortization of warrans - - - -
---------- ------- ----------- ---------
BALANCE AT MARCH 31, 1999 10,439,948 10,440 43,644,479 137,747
Issuance of common stock under
employee stock 74,613 75 228,882 -
option plans
Net income - - - -
Change in unrealized gain (loss) on - - - (402,431)
investment securities, net of tax
Total comprehensive income
Income tax benefit from stock option exercise - - 27,699 -
Issuance of warrants - - 544,139 -
Amortization of warrants - - - -
---------- ------- ----------- ---------
BALANCE AT MARCH 31, 2000 10,514,561 $10,515 $44,445,199 $(264,684)
========== ======= =========== =========
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
Deferred
Accumulated Charge Total Comprehensive
Deficit Warrants Income
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1997 $(35,452,729) $(1,403,158) $11,272,057
Repurchase of common stock - - (4,125,411)
Issuance of common stock under - - 888,229
employee stock option plans
Net income 4,658,466 - 4,658,466 $4,658,466
Change in unrealized gain (loss) on - - (130,287) (130,287)
investment securities, net of tax
----------
Total comprehensive income $4,528,179
Income tax benefit from stock option - - 320,455 ==========
exercise
Retirements of warrants - - (250,000)
Issuance of warrants - (600,000) -
Amortization of warrants - 620,616 620,616
------------ ----------- -----------
BALANCE AT MARCH 31, 1998 (30,794,263) (1,382,542) 13,254,125
Repurchase of common stock - - (1,965,215)
Issuance of common stock under - - 118,421
employee stock option plans
Net income 2,042,506 - 2,042,506 $2,042,506
Change in unrealized gain (loss) on - - 83,102 83,102
investment securities, net of tax
----------
Total comprehensive income $2,125,608
Income tax benefit from stock - - 41,428 ==========
option exercise
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
Deferred
Accumulated Charge Total Comprehensive
Deficit Warrants Income
<S> <C> <C> <C> <C>
Issuance of warrants $ - $ (84,000) $ -
Amortization of warrants - 717,537 717,537
------------ ----------- -----------
BALANCE AT MARCH 31, 1999 (28,751,757) (749,005) 14,291,904
Issuance of common stock under - - 228,957
employee stock option plans
Net income 3,424,806 - 3,424,806 $3,424,806
Change in unrealized gain (loss) on - - (402,431) (402,431)
investment securities, net of tax
----------
Total comprehensive income $3,022,375
Income tax benefit from stock option - - 27,699 ==========
exercise
Issuance of warrants - (544,139) -
Amortization of warrants - 509,652 509,652
------------ ----------- -----------
BALANCE AT MARCH 31, 2000 $(25,326,951) $ (783,492) $18,080,587
============ =========== ===========
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
<TABLE>
<CAPTION>
RENTRAK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
2000 1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,424,806 $ 2,042,506 $ 4,658,466
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities-
Gain on disposal of discontinued
operation (2,373,502) - -
(Gain) loss on 1,207,483 (549,103) 324,734
investments
Gain on (7,791,880) - -
litigation
settlement
Depreciation and 1,780,966 1,286,515 696,883
amortization
Write-off of 421,675 - -
intangibles
Amortization of 509,652 717,537 620,616
warrants
Provision (credit)for 6,341,032 (125,000) (300,000)
doubtful accounts
Retailer (373,394) 141,698 (518,450)
financing
program
reserves
Reserves on 110,918 17,596 150,977
advances to
program
suppliers
Deferred income (900,272) 1,176,909 1,277,239
taxes
Net proceeds from 1,847,505 - -
litigation settlement
Change in specific
accounts:
Accounts (3,231,008) 778,471 (9,139,446)
receivable
Advances to (253,422) (2,425,883) (658,014)
program suppliers
Inventory (1,084,620) (377,807) (524,558)
Income tax 2,864,901 (1,014,739) (802,511)
receivable
Notes 1,227,099 (537,802) (557,407)
receivable and other
current assets
Accounts 7,233,746 (4,561,190) 6,173,164
payable
Accrued 357,860 158,730 (203,803)
liabilities and compen-
sation
Deferred 3,077,119 (729,448) (1,842,986)
revenue
Net current (942,341) (1,176,530) (47,741)
liabilities of dis-
continued operations ----------- ----------- -----------
Net cash 13,454,323 (5,177,540) (692,837)
provided by (used in)
operating activities ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (1,790,501) (503,030) (508,398)
and equipment
Investments in (384,500) (1,329,778) (550,000)
retailer financing program
Proceeds from 228,539 - 518,450
retailer financing program
Purchases of (398,122) (570,512) (1,076,299)
investments
Proceeds from sale of 975,305 1,525,538 289,016
investments
Reduction (additions) (6,693) (1,238,601) 701,761
of other assets and intangibles ------------ ----------- -----------
Net cash used (1,375,972) (2,116,383) (625,470)
in investing activities ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (7,925,000) 1,925,000 1,000,000
(payments) on line of credit
Net borrowing (2,500,000) 3,000,000 -
(payments) on notes payable
Retirement of - - (250,000)
warrants
Repurchase of common - (1,965,215) (4,125,411)
stock
Issuance of common 228,957 118,421 888,229
stock ------------ ----------- -----------
Net cash (10,196,043) 3,078,206 (2,487,182)
provided by(used in)
financing activities ------------ ----------- -----------
NET INCREASE (DECREASE) 1,882,308 (4,215,717) (3,805,489)
IN CASH AND CASH EQUIVALENTS
CASH AND CASH 2,145,963 6,361,680 10,167,169
EQUIVALENTS AT BEGINNING OF YEAR ------------ ----------- -----------
CASH AND CASH $ 4,028,271 $ 2,145,963 $ 6,361,680
EQUIVALENTS AT END OF YEAR ============ =========== ===========
The accompanying notes are an integral part of these
consolidated statements.
</TABLE>
RENTRAK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000, 1999 AND 1998
1. BUSINESS OF THE COMPANIES, SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND OTHER ITEMS:
Introduction
Rentrak Corporation (the Company) (an Oregon corporation) is
principally engaged in the processing of information regarding
the rental and sale of video cassettes and the distribution of
prerecorded video cassettes to the home video market throughout
the United States and Canada using its Pay-Per-Transaction (PPT)
revenue sharing program.
Under its PPT program, the Company enters into contracts to lease
video cassettes from program suppliers (producers of motion
pictures and licensees and distributors of home video cassettes)
which are then leased to retailers for a percentage of the
rentals charged by the retailers.
The Company's wholly owned subsidiary, 3PF.COM,Inc. (3PF),
provides e-fulfillment order processing and inventory management
services to e-tailers, wholesalers and businesses requiring just-
in-time fulfillment.
The Company's wholly owned subsidiary BlowOut Video, Inc. sells
video cassettes and DVDs through its 7 retail video stores that
operate under the name of BlowOut Video.
Rentrak Japan
In December 1989, the Company entered into a definitive agreement
with Culture Convenience Club Co., Ltd. (CCC) to develop the
Company's PPT distribution and information processing business in
certain markets throughout the world.
On June 16, 1994, the Company and CCC amended the agreement.
Pursuant to this amendment, the Company receives a royalty of
1.67% for all sales of up to $47,905,000, plus one-half of
one percent (0.5%) of sales greater than $47,905,000 in each
fiscal year. In addition, the Company received a one-time
royalty of $2 million, of which $1 million was paid in fiscal
1995 and $1 million was paid in fiscal 1999. The term of the
Agreement was extended from the year 2001 to the year 2039. The
Company currently owns approximately 9% of Rentrak Japan.
In December 1999, the Company received a prepayment of $2,500,000
in exchange for $4,000,000 of credit related to the annual
royalty described above. This credit is being recognized in
revenues as royalties are earned under the terms of the contract.
As of March 31, 2000, $1,638,363 has been recorded as deferred
revenue on the accompanying consolidated balance sheet to be
recognized in future periods.
Rentrak UK Limited
In February 1998, the Company entered into a Shareholders
Agreement and a PPT License Agreement with Columbus Holdings
Limited and Rentrak UK Limited (Rentrak UK) to develop the
Company's PPT distribution and information processing business in
the United Kingdom through Rentrak UK. The PPT Agreement remains
in force in perpetuity, unless terminated due to material breach
of contract, liquidation of Rentrak UK or non-delivery, by the
Company to Rentrak UK, of all retailer and studio software,
including all updates. Pursuant to the PPT Agreement, during the
term of the PPT Agreement, the Company will receive a royalty of
1.67% of Rentrak UK's gross revenues from any and all sources.
Rentrak UK was originally structured as a joint venture between
the Company, which owned 25%, Columbus Holdings Limited, which
owned 67% of the venture and Rentrak Japan, which owns 8%. On
March 31, 1999, the Company acquired Columbus Holdings Limited's
67% interest, and now owns 84% of Rentrak UK. The acquisition,
which was not material to the operations of the Company, was
accounted for as a purchase. As of March 31, 2000, Rentrak UK is
not generating income or positive cash flow. Accordingly, the
Company wrote-off its investment of $222,000. Management of the
Company is evaluating Rentrak UK's operations and is exploring
options including selling or closing down the operations.
Management intends to make a decision in the second quarter of
2001.
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% are accounted for by the
equity method.
Management Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. These estimates include, among
others, reserves on retailer financing program investments
(Note 4). Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with a maturity of three months or less at acquisition to be cash
equivalents.
Investment Securities
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities"
(SFAS 115), requires the Company to classify and account for its
security investments as trading securities, securities available
for sale or securities held to maturity depending on the
Company's intent and ability to hold or trade the securities at
time of purchase. Securities available for sale are stated on
the balance sheet at their fair market value with an adjustment
to stockholders' equity reflected in other comprehensive income
as change in net unrealized gains and losses, net of tax.
Securities held to maturity are stated at amortized cost.
Detail of the proceeds from the sales of available for sale
securities and realized gains and losses on sales of equity
securities for the years ended March 31 are as follows:
<TABLE>
<CAPTION>
Proceeds Gross Gains Gross Losses
<C> <C> <C> <C>
2000 $ 975,305 $554,971 $(121,105)
1999 1,525,538 843,749 (294,646)
1998 519,688 24,375 (118,437)
</TABLE>
When, in management's opinion, available for sale securities have
experienced an other than temporary decline, the amount of the
decline in market value below cost is recorded in the income
statement as a loss on investments.
In fiscal years 2000 and 1998, management determined that certain
investments had incurred unrealized losses resulting from other
than temporary declines in market value below the cost of the
investments. Unrealized losses from other than temporary decline
in market value of $1,245,157 and $230,672 were recorded in gain
(loss) on investments in the March 31, 2000 and 1998 consolidated
statement of income, respectively. There were no unrealized
losses recognized in the March 31, 1999 consolidated statement of
income.
Financial Instruments
A financial instrument is cash or a contract that imposes or
conveys a contractual obligation or right, to deliver or receive,
cash or another financial instrument. The estimated fair value
of all material financial instruments, including retail financing
program notes receivable, approximated their carrying values at
March 31, 2000 and 1999.
Inventory
Inventory consists of videocassettes held for sale and is carried
at the lower of cost (first-in, first-out method) or market
value.
Property and Equipment
Depreciation of property and equipment is computed on the
straight-line method over estimated useful lives of three to five
years. Leasehold improvements are amortized over the lives of
the underlying leases or the service lives of the improvements,
whichever is shorter.
Intangibles
The Company reviews its intangible assets for asset impairment at
the end of each quarter, or more frequently when events or
changes in circumstances indicate that the carrying amount of
intangibles may not be recoverable. The Company estimates the
sum of expected future undiscounted preinterest expense net cash
flows from operating activities. If the estimated net cash flows
are less than the carrying amount of intangibles, the Company
will recognize an impairment loss in an amount necessary to write
down intangibles to a fair value as determined from expected
discounted future cash flows.
Revenue Recognition
The PPT agreements generally provide for a one-time initial order
processing fee and continuing transaction fees based on a
percentage of rental revenues earned by the retailer upon renting
the video cassettes to their customers. The Company recognizes
order-processing fees as revenue when the video cassettes are
shipped to the retailers and recognizes transaction fees when the
video cassettes are rented to the consumers.
When the Company's revenue is fixed and determinable at time of
shipment of video cassettes to the retailers, deferred revenue is
recorded and recognized as revenue in the statement of income
when the video cassettes are rented to the consumers. The
corresponding liability to video program suppliers for their
share of the fees is recorded to cost of sales when the revenue
is recognized with a corresponding amount to accounts payable.
The Company also may charge retailers an application fee upon
admission to the PPT program. This fee is recognized as PPT
revenue when the application to participate in the PPT program is
approved.
Revenues derived from fulfillment services are recognized when
products are shipped.
During fiscal 2000, the company received a $2,500,000 prepayment
from a customer in exchange for $4,000,000 in credit related to a
long-term agreement. This prepayment related to periods
subsequent to March 31, 2000 and has therefore been recorded as
deferred revenue on the accompanying consolidated balance sheet.
Deferred revenue will be recognized in future periods as revenues
are earned under the terms of the contract.
Stockholders and directors, or their families own interests in
several stores participating in the PPT program. The Company
realized revenues from these stores of approximately $47,000,
$99,000 and $323,000 during fiscal 2000, 1999 and 1998,
respectively.
Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109). Under the liability method
specified by SFAS 109, deferred tax assets and liabilities are
determined based on the temporary differences between the
financial statement basis and tax basis of assets and liabilities
as measured by the enacted tax rates for the years in which the
taxes are expected to be paid.
Earnings Per Share
Basic earnings per common share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per common share
is computed on the basis of the weighted average shares of common
stock outstanding plus common equivalent shares arising from
dilutive stock options.
<TABLE>
<CAPTION>
The weighted average number of shares of common stock and common
stock equivalents and net income used to compute basic and
diluted earnings per share for the years ended March 31 were
calculated as follows:
2000 1999 1998
--------------------- --------------------- ---------------------
Basic Diluted Basic Diluted Basic Diluted
<S> <C> <C> <C> <C> <C> <C>
Weighted average number 10,477,334 10,477,334 10,775,126 10,775,126 11,222,443 11,222,443
of shares of common
stock outstanding
Dilutive effect of
exercise of stock - 281,787 - 291,017 - 222,378
options
---------- ---------- ---------- ---------- ---------- ----------
Weighted average number 10,477,334 10,759,121 10,775,126 11,066,143 11,222,443 11,444,821
of shares of common
stock outstanding and
common stock
equivalents
========== ========== ========== ========== ========== ==========
Net income:
Continuing operations $1,051,304 $1,051,304 $2,042,506 $2,042,506 $4,658,466 $4,658,466
Discontinued 2,373,502 2,373,502 - - - -
operations
---------- ---------- ---------- ---------- ---------- ----------
Net income $3,424,806 $3,424,806 $2,042,506 $2,042,506 $4,658,466 $4,658,466
========== ========== ========== ========== ========== ==========
Earnings per share:
Continuing operations $0.10 $0.10 $0.19 $0.18 $0.42 $0.41
Discontinued 0.23 0.22 - - - -
operations
----- ----- ----- ----- ----- -----
Earnings per share $0.33 $0.32 $0.19 $0.18 $0.42 $0.41
===== ===== ===== ===== ===== =====
</TABLE>
Options and warrants to purchase approximately 4,400,000,
4,400,000 and 4,300,000 shares of common stock were outstanding
during the years ended March 31, 2000, 1999 and 1998,
respectively, but were not included in the computation of diluted
EPS because the exercise price of the options and warrants were
greater than the average market price of the common shares.
Advertising Expense
Advertising expense, net of advertising reimbursements, totaled
approximately $952,000, $641,000 and $71,000 for the years ended
March 31, 2000, 1999 and 1998, respectively.
<TABLE>
Statements of Cash Flows
The Company had the following transactions for the years ended
March 31:
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
CASH PAID (RECEIVED) FOR:
Interest $ 656,723 $ 328,802 $ 153,398
Income taxes, net of refunds (1,645,085) (493,645) 2,790,158
NONCASH FINANCING AND INVESTING
ACTIVITIES:
Reclassification of accounts 1,023,794 269,775 1,478,869
receivable to other assets and
other investments
Issuance of warrants (544,139) (84,000) (600,000)
Tax benefit from stock option (27,699) (41,428) (320,455)
exercises
Receipt of note receivable in 4,000,000 - -
litigation settlement (Note
10)
Receipt of common stock in 1,944,375 - -
litigation settlement (Note
10)
Change in unrealized gain (402,431) 83,102 (130,287)
(loss) on investment
securities, net of tax
</TABLE>
Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130). The Company has
adopted SFAS 130. The statement establishes presentation and
disclosure requirements for reporting comprehensive income.
Comprehensive income includes charges or credits to equity that
is not the result of transactions with shareholders. Components
of the Company's comprehensive income consist of the change in
unrealized gain (loss) on investment securities (net of tax), net
of the reclassification adjustment for gains (losses) included in
net income as of March 31 is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Holding gains (losses) arising $(534,988) $291,761 $(166,031)
during the period, net of tax
Less- Reclassification 132,557 208,659 (35,744)
adjustment for gains (losses)
included in net income, net of
tax
--------- -------- ---------
Change in unrealized gains $(402,431) $ 83,102 $(130,287)
(losses) on investment
securities, net of tax ========= ======== =========
</TABLE>
Impact of Recent Accounting Pronouncements
In June 1999, the FASB issued Statement of Financial Accounting
Standard No. 137 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 137). SFAS 137 is an amendment to
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative and Hedging Activities." SFAS 137 establishes
accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either
an asset or liability measured at its fair value. SFAS 137 also
requires that changes in the derivative instrument's fair value
be recognized currently in results of operations unless specific
hedge accounting criteria are met. SFAS 137 is effective for the
Company's fiscal year beginning April 1, 2000. The Company
expects that adoption of SFAS 137 will not have a material impact
on the Company's financial condition or results of operations.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 (SAB 101) on revenue
recognition. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements.
SAB 101 is effective for the Company beginning July 1, 2000. The
Company does not expect the adoption of SAB 101 to have a
material impact on its results of operations or financial
position.
Reclassifications
Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
2. INVESTMENT SECURITIES:
The carrying value and estimated fair value of marketable
securities at March 31 were as follows:
<TABLE>
<CAPTION>
Carrying Unrealized Unrealized
Value Gross Gain Gross Loss Fair Value
<S> <C> <C> <C> <C>
As of March 31,
2000:
Available for
sale-
Noncurrent:
Corporate $2,335,290 $ 30,319 $(457,233) $1,908,376
securities ========== ======== ========= ==========
As of March 31,
1999:
Available for
sale-
Noncurrent:
Corporate $ 35,108 $222,249 $ (77) $ 257,280
securities ========== ======== ========= ==========
</TABLE>
Investment securities that have limited marketability are
classified as noncurrent as it is management's intent not to
dispose of the securities within one year.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
Property and equipment, at cost, consists of:
March 31,
-----------------------
2000 1999
<S> <C> <C>
Furniture and fixtures $ 7,054,568 $ 5,861,824
Machinery and equipment 438,312 213,412
Leasehold improvements 2,060,114 1,687,257
----------- -----------
9,552,994 7,762,493
Less- Accumulated depreciation (6,910,294) (6,039,045)
----------- -----------
$ 2,642,700 $ 1,723,448
=========== ===========
</TABLE>
4. RETAILER FINANCING PROGRAM:
In 1992, the Company established a retailer financing program
whereby on a selective basis it provided financing to video
retailers that the Company believed had potential for substantial
growth. In connection with these financings, the Company
typically made a loan and/or equity investment in the retailer.
In some cases, a warrant to purchase stock was obtained. As part
of such financings, the retailer typically agreed to cause all of
its current and future retail locations to participate in the PPT
System for a designated period of time. These financings are
speculative in nature and involve a high degree of risk and no
assurance of a satisfactory return on investment can be given.
As of March 31, 2000, the Company has invested or made oral or
written commitments to loan to or invest approximately $6,900,000
in various video retailers. The amounts outstanding under this
program individually range from $50,000 to $4,700,000. The
notes, which have payment terms that vary according to the
individual loan agreements, are due from 2000 through 2007.
Interest rates on the various loans range from 5% to prime plus
1.5% (10.5% at March 31, 2000). Due to the nature of these
loans, interest income is not recognized until received.
The loans are reviewed for impairment in accordance with FASB
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" (SFAS 114). A valuation
allowance has been established for the amount by which the
recorded investment in the loan exceeds the measure of the
impaired loan. As the financings are made, and periodically
throughout the terms of the agreements, the Company assesses the
recoverability of the amounts based on the financial position of
each retailer. The amounts the Company could ultimately receive
could differ materially in the near-term from the amounts assumed
in establishing the reserves.
At March 31, 2000 the Company had invested or loaned
approximately $6,900,000 under the program and had provided
reserves of approximately $5,700,000. At March 31,1999 the
Company had invested or loaned approximately $14,000,000 under
the program and had provided reserves of approximately
$9,600,000. These balances are included in other assets.
The activity in the total reserves for the retailer-financing
program is as follows for the years ended March 31:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Beginning balance $ 9,575,688 $9,353,995
Additions to reserve 1,245,157 240,614
Write offs (5,115,665) -
Recoveries (20,997) (18,921)
----------- ----------
Ending balance $ 5,684,183 $9,575,688
=========== ==========
</TABLE>
A substantial portion of the write-offs in fiscal 2000 related to
assets which were fully reserved in prior years.
5. LINE OF CREDIT:
The Company had an agreement for a line of credit with a
financial institution in an amount not to exceed the lesser of
$7,500,000 or the sum of 80% of the net amount of eligible
accounts receivable as defined in the agreement. Interest was
payable monthly at the bank's prime rate plus 1 percent (9% at
March 31, 2000). The line was secured by substantially all of the
Company's assets. The terms of the agreement required, among
other things, a minimum amount of tangible net worth, minimum
current ratio and minimum total liabilities to tangible net
worth. The agreement also restricted the amount of net losses,
loans and indebtedness and limited the payment of dividends on
the Company's stock. The Company was in compliance with these
covenants as of March 31, 2000. At March 31, 2000 and 1999, the
Company had $0 and $7,925,000, respectively, outstanding under
this agreement.
In May 2000 this line of credit was replaced with a $12,000,000
line of credit with a different lender. Interest under this line
is payable monthly at the bank's prime rate plus 1/4 percent.
The new line is secured by substantially all of the Company's
assets. The terms of the agreement require, among other things,
a minimum amount of tangible net worth and working capital. The
agreement also restricts the amount of loans and indebtedness and
limits the payment of dividends on the Company's stock. The
agreement expires in May 2005.
6. RELATED PARTY NOTE PAYABLE:
On January 29, 1998, the Company entered into a $3,000,000
unsecured note payable with a director of the Company. The 10%
interest-bearing note was repaid in full in January 2000. During
fiscal 2000, the Company's subsidiary, Blowout Video Holding
Company, entered into a $3,000,000 line of credit with a director
of the Company. The line expires in August 2002 and bears
interest at prime plus 1.5 percent (10.5% at March 31, 2000).
The line is secured by substantially all the assets of BlowOut
Video Holding Company. At March 31, 2000, the Company had
$500,000 outstanding under this agreement which is recorded in
accrued liabilities in the accompanying consolidated balance
sheet.
7. INCOME TAXES:
<TABLE>
<CAPTION>
The provision (benefit) for income taxes is as follows for the
years ended March 31:
2000 1999 1998
<S> <C> <C> <C>
Current tax provision:
Federal $ - $ - $1,689,658
Foreign - - 1,500,000
State 125,192 - 232,133
-------- ---------- ----------
125,192 - 3,421,791
Deferred tax provision 325,367 1,303,999 (222,759)
(benefit)
-------- ---------- ----------
Income tax provision $450,559 $1,303,999 $3,199,032
======== ========== ==========
</TABLE>
The reported provision for income taxes from continuing
operations differs from the amount computed by applying the
statutory federal income tax rate of 34% to income before
provision for income taxes as follows for the years ended
March 31:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Provision computed at $ 510,633 $1,137,812 $2,688,549
statutory rates
State taxes, net of federal 59,474 133,860 117,464
benefit
Amortization of warrants 193,667 272,664 235,834
Recognition of net operating (131,507) - -
loss carryforward
Other (181,708) (240,337) 157,185
--------- ---------- ----------
$ 450,559 $1,303,999 $3,199,032
========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Deferred tax assets and (liabilities) from continuing operations
are comprised of the following components at March 31, 2000 and
1999:
2000 1999
<S> <C> <C>
Deferred tax assets:
Current-
Allowance for doubtful accounts $ 78,113 $ 78,113
Retailer-related accruals - 140,703
Foreign tax credit 823,559 713,497
Net operating loss carryforward - 539,108
Capital loss carryforward 327,749 195,543
Deferred revenue 570,100 -
Other 78,592 (87,327)
---------- ----------
Total current deferred tax assets 1,878,113 1,579,637
---------- ----------
Noncurrent-
Depreciation 423,846 433,691
Retailer financing program 320,107 552,775
reserve
Program supplier reserves 484,910 442,761
Unrealized loss on investments 299,296 143,675
Foreign tax credit 1,000,000 1,000,000
Deferred revenue 637,361 -
Intangibles amortization - (160,237)
Other 180,692 85,097
---------- ----------
Total noncurrent deferred tax assets 3,346,212 2,497,762
---------- ----------
Total deferred tax assets $5,224,325 $4,077,399
========== ==========
</TABLE>
8. STOCKHOLDERS' EQUITY:
Stock Options and Warrants
Effective March 31, 1997, the Company adopted the 1997 Non-
Officer Employee Stock Option Plan. The aggregate number of
shares which may be issued upon exercise of options under the
plan shall not exceed 750,000. In August 1997, the Company
adopted the 1997 Equity Participation Plan. The aggregate number
of shares which may be issued upon exercise of options under the
plan shall not exceed 1,600,000. The plans are administered by
the Stock Option Committee of the Board which determines the
terms and conditions of options issued under the plans. Options
granted to date under the plans are exercisable over four to five
years and expire ten years after date of grant. As of March 31,
2000, the Company has 387,170 and 168,934 options available to be
granted under the 1997 Non-Officer Employee Stock Option Plan and
1997 Equity Participation Plan, respectively.
The Company has elected to account for its stock-based
compensation plans in accordance with APB 25, under which no
compensation expense has been recognized. The Company has
computed for pro forma disclosure purposes the value of all
options granted during fiscal years 2000, 1999 and 1998, using
the Black-Scholes option pricing model as prescribed by SFAS 123
and the following assumptions:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Risk-free interest rate 5.37 - 6.91% 4.46 - 6.03% 5.56 - 7.17%
Expected dividend yield 0% 0% 0%
Expected lives 5 - 10 years 5 - 10 years 5 - 10 years
Expected volatility 72.20% 68.94% 48.53%
</TABLE>
Adjustments were made for options forfeited prior to vesting.
Had compensation expense for these plans been determined in
accordance with SFAS 123, the Company's net income and earnings
per share reflected on the March 31, 2000, 1999 and 1998
statements of income would have been the following unaudited
pro forma amounts:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Net income
As reported $3,424,806 $2,042,506 $4,658,466
Pro forma 2,293,758 95,767 3,873,988
Basic earnings per share
As reported $.33 $.19 $.42
Pro forma .22 .01 .35
Diluted earnings per share
As reported $.32 $.18 $.41
Pro forma .21 .01 .34
</TABLE>
The table below summarizes the plans' activity:
<TABLE>
<CAPTION>
Options Outstanding
-------------------------
Weighted
Number of Average
Shares Exercise Price
<S> <C> <C>
Balance at March 31, 1997 2,956,123 $4.72
Granted-
Option price = fair market value 549,174 4.11
Option price > fair market value 45,714 4.98
Option price < fair market value 10,000 2.94
Issued (221,914) 4.14
Canceled (513,772) 4.89
--------- -----
Balance at March 31, 1998 2,825,325 4.60
Granted-
Option price = fair market value 919,216 5.04
Issued (45,977) 2.77
Canceled (252,458) 4.77
--------- -----
Balance at March 31, 1999 3,446,106 4.73
Granted-
Option price = fair market value 607,837 3.97
Option price > fair market value 15,000 7.38
Option price < fair market value 12,500 2.81
Issued (74,613) 3.08
Canceled (147,128) 5.75
--------- -----
Balance at March 31, 2000 3,859,702 $4.60
========= =====
</TABLE>
Using the Black Scholes methodology, the total value of options
granted during fiscal years 2000, 1999 and 1998 was approximately
$2,560,000, $4,633,000 and $2,510,000, which would be amortized
on a pro forma basis over the vesting period of the option. The
weighted average fair value of options granted during the years
ended March 31, 2000, 1999 and 1998 was $4.03, $5.04 and $4.15,
respectively. Options to purchase 2,494,190, 2,006,932 and
1,560,482 shares of common stock were exercisable at March 31,
2000, 1999 and 1998, respectively. These exercisable options had
weighted average exercise prices of $4.70, $4.57 and $4.62 at
March 31, 2000, 1999 and 1998, respectively.
The following table summarizes information about stock options
outstanding at March 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------ --------------------
Weighted
Outstand- Average Weighted Exercisable Weighted
Range of ing as of Remaining Average as of Average
Exercise March 31, Contract- Exercise March 31, Exercise
Prices 2000 ual Life Price 2000 Price
<C> <C> <C> <C> <C> <C>
$1.00-$2.59 37,922 0.0 $ 1.28 37,922 $ 1.28
2.60-6.49 3,745,251 5.9 4.54 2,389,739 4.63
6.50-9.78 76,529 7.8 9.38 66,529 9.36
--------- ---------
1.00-9.78 3,859,702 5.9 4.60 2,494,190 4.70
========= =========
</TABLE>
In November 1996, the Company adjusted the number of shares of
common stock issued and outstanding to employees under the 1986
stock option plan. The adjustment, which increased the number of
shares outstanding by 222,408 shares, also included reduction in
the exercise price. This adjustment was done to equalize the
options' values before and after the distribution of the common
stock of BlowOut in November 1996 (Note 13).
In September 1992, the Company agreed to issue warrants to buy up
to 1,000,000 shares of the Company's common stock at an exercise
price of $7.14 per share, which approximated market value at date
of grant. The warrants were issued in connection with entering
into a long-term licensing agreement with a program supplier. At
March 31, 1997, all warrants had been issued. In November 1996,
the Company adjusted the number of shares of common stock under
the warrant to 1,083,900 and decreased the price to $6.578. This
adjustment was done in connection with the distribution of the
common stock of BlowOut Entertainment, Inc. (BlowOut) in November
1996 (Note 13). The adjustment was done pursuant to the
supplier's agreement that requires the Company to adjust the
warrant if a distribution of the Company's assets occurs. During
fiscal year 1998, the warrants were canceled. The consideration
of $250,000 which was paid by the Company for the cancellation of
these warrants and the warrant for 459,303 shares of the
Company's common stock as noted below was charged to
stockholders' equity.
As a result of the stock adjustment which was done in connection
with the distribution of the common stock of BlowOut, the Company
issued warrants to acquire 423,750 shares of the Company's common
stock to another program supplier under a "favored nations"
clause in the contract with that program supplier. These
warrants were also issued at an exercise price of $7.13 per
share, which approximated market value at date of grant. In
November 1996, the Company adjusted the number of shares of
common stock under the warrant to 459,303 and decreased the price
to $6.578. This adjustment was done in connection with the
distribution of the common stock of BlowOut in November 1996
(Note 13). The adjustment was done pursuant to the supplier's
agreement that requires the Company to adjust the warrant if a
distribution of the Company's assets occurs. During fiscal year
1998, the warrants were canceled.
In March 1998, the Company agreed to issue warrants to buy up to
1,000,000 shares of the Company's common stock at an exercise
price of $6.59 per share, which exceeded market value at date of
grant. The warrants were issued in connection with entering into
a long-term agreement with a customer. These warrants expired
unexcercised in March 2000.
All warrants which the Company agreed to issue in 1995 and 1998
were valued by an outside valuation firm using standard warrant
valuation models. The value of the warrants of $4,133,977 was
recorded in the equity section and is being amortized over the
associated periods to be benefited by each warrant. In fiscal
2000, 1999 and 1998, expense associated with the warrants was
approximately $510,000 $718,000 and $621,000, respectively.
In May 1995, the Board of Directors approved a shareholders'
rights plan designed to ensure that all of the Company's
shareholders receive fair and equal treatment in the event of
certain proposals to acquire control of the Company. Under the
rights plan, each shareholder received a dividend of one right
for each share of the Company's outstanding common stock,
entitling the holders to purchase one additional share of the
Company's common stock. The rights become exercisable after any
person or group acquires 15% or more of the Company's outstanding
common stock, or announces a tender offer which would result in
the offeror becoming the beneficial owners of 15% or more of the
Company's outstanding stock. Prior to the time that a person or
group acquires beneficial ownership of 15% or more of the
Company's outstanding stock, the Board of Directors, at their
discretion, may waive this provision with respect to any
transaction or may terminate the rights plan.
9. COMMITMENTS:
Leases
The Company leases certain facilities and equipment under
operating leases expiring at various dates through 2009.
Approximate rental payments over the term of the leases exceeding
one year are as follows:
Year Ending March 31,
2001 $ 2,685,000
2002 2,231,000
2003 1,820,000
2004 1,655,000
2005 1,649,000
2006 and thereafter 3,411,000
-----------
$13,451,000
===========
The leases provide for payment of taxes, insurance and
maintenance by the Company. The Company also rents vehicles and
equipment on a short-term basis. Rent expense under operating
leases was approximately $2,335,000, $1,926,000 and $2,111,000
for the years ended March 31, 2000, 1999 and 1998, respectively.
Guarantees and Advances
The Company has entered into several guarantee contracts with
program suppliers providing titles for distribution under the PPT
system. In general, these contracts guarantee the suppliers
minimum payments. In some cases these guarantees were paid in
advance. Any advance payments that the Company has made and will
be realized within the current year are included in advances to
program suppliers. The long-term portion is included in other
assets. Both the current and long-term portion are amortized to
cost of sales as revenues are generated from the related
cassettes.
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 March 31, 2000, the Company has reserved approximately
$2,000,000 for potential losses under such guarantee
arrangements.
On March 22, 1999, BlowOut filed for Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. At that same time BlowOut filed a motion
to sell substantially all the assets of BlowOut. BlowOut is not
related to the Company's wholly owned subsidiary BlowOut Video,
Inc. The sale, to a third party video retailer, was approved on
May 10, 1999 and closed on May 17, 1999. The Company was the
principal creditor of BlowOut. In 1996, the Company had agreed
to guarantee up to $7 million of indebtedness of BlowOut
(Guarantee). Pursuant to the terms of the Guarantee, the Company
agreed to guarantee any amounts outstanding under BlowOut's
credit facility. As the sale of the BlowOut assets were not
sufficient to cover the amounts due under this facility, the
Company, pursuant to the guarantee, has agreed to a payment plan
to fulfill BlowOut's obligation under its credit facility. The
amount outstanding at March 31, 2000 is approximately $590,000.
The payments, as made, will be recorded as a reduction of "net
current liabilities of discontinued operations" on the
accompanying balance sheet.
10. CONTINGENCIES:
In April 1998, the Company filed a complaint (the Hollywood
Complaint) against Hollywood Entertainment, Inc. (Hollywood),
entitled Rentrak Corporation v. Hollywood Entertainment et al.,
case No. 98-04-02811, in the Circuit Court of the State of Oregon
for the County of Multnomah, Portland, Oregon. In January 2000,
the Company and Hollywood settled the case. Pursuant to the
settlement, Hollywood paid the Company $14,000,000, $10,000,000
of which was paid in cash and $4,000,000 of which was paid by
promissory note due within six months of the settlement. In
addition, Hollywood issued to the Company 200,000 shares of
Hollywood common stock. After considering legal costs and
accounts receivable due from Hollywood, the Company recorded a
gain of $7,791,880.
In June 1998, Video Update, Inc. (Video Update) filed a complaint
(the Video Update Complaint) against the Company entitled Video
Update, Inc. v. Rentrak Corp., Civil Action No. 98-286, in the
United States District Court for the District of Delaware. The
Video Update Complaint alleges various violations of the
antitrust laws, including that the Company has attempted to
monopolize the market for videocassettes leased to retail video
stores in violation of Section 2 of the Sherman Act. Video
Update further alleges that the Company's negotiation and
execution of an exclusive, long-term revenue-sharing agreement
with Video Update violates Section 1 of the Sherman Act and
Section 3 of the Clayton Act. Video Update is seeking
unspecified monetary relief, including treble damages and
attorneys' fees, and equitable relief, including an injunction
prohibiting the Company from enforcing its agreement with Video
Update or any exclusivity provision against videocassette
suppliers and video retailers. In August 1998, the Court granted
the Company's motion to dismiss the Video Update Complaint
pursuant to Federal Rules of Civil Procedure Rule 12(b)(3) on the
basis of improper venue.
In August 1998, Video Update filed a new complaint against the
Company in the United States District Court for the District of
Oregon (the Re-Filed Complaint), Case No. 98-1013HA. The Re-
Filed Complaint is substantially the same as the previous
complaint. The Company believes the Re-Filed Complaint lacks
merit and intends to vigorously defend against the allegations in
the Complaint. The Company has answered the Re-Filed Complaint
denying its material allegations and asserting several
affirmative defenses. The Company also has counterclaimed
against Video Update alleging, among other things, breach of
contract, breach of the covenant of good faith and fair dealing,
promissory fraud, breach of fiduciary duty, breach of trust,
constructive fraud, negligent misrepresentation and intentional
interference with business advantage, and seeks damages and
equitable relief.
In October 1998, the Company filed a motion for summary judgment
seeking to dismiss the lawsuit filed against it by Video Update.
In January of 1999, the Company filed a separate motion for
partial summary judgment on its breach of contract counterclaim
seeking to recover more than $4.4 million in fees and interest
which the Company claims Video Update owes to it. In response to
the Company's motions, Video Update asked the court for time to
take discovery before having to file oppositions. The court has
given the parties until June 30, 2000 to conduct discovery. The
court denied Rentrak's motions without reaching the merits and
without prejudice to re-filing the motions after discovery has
been conducted. Rentrak expects to re-file its motions after
discovery has taken place. On October 21, 1999, the Company
amended its counterclaims to add additional breach of contract
claims, a claim for trade secret misappropriation and a claim for
recovery of personal property. The amended countercomplaint also
added Video Update's chairman, Daniel Potter as a defendant to
the fraud and negligent misrepresentation claims. As of
March 31, 2000, the Company has approximately $4,600,000 in
accounts receivable relating to PPT transactions from Video
Update which the Company believes are recoverable. Management
intends to monitor the situation quarterly and when management
becomes aware of information that indicates that the asset will
not be recovered, an appropriate reserve will be recorded.
In August 1998, the Company filed a complaint (the Movie Buffs
Complaint) against Susan Janae Kingston d/b/a Movie Buffs (Movie
Buffs), entitled Rentrak Corporation v. Susan Janae Kingston, an
individual, d/b/a Movie Buffs, Case No. CV 98-1004 HA, in the
United States District Court for the District of Oregon. The
Movie Buffs complaint alleges breach of contract and conversion
claims and seeks damages in the amount of at least $3.3 million
and punitive damages of $500,000. In September 1998, Movie Buffs
filed counterclaims against the Company and Third Party Claims
against Hollywood Entertainment Corp. (the Movie Buffs
Counterclaims). The Movie Buffs Counterclaims allege that the
Company violated the antitrust laws, including the Sherman,
Clayton and Robinson-Patman Acts. The Counterclaim also seeks
declaratory relief, an accounting and alleges fraud and
conspiracy to defraud, breach of contract, breach of the implied
covenant of good faith, and unfair trade practices. Movie Buffs
seeks an unspecified amount of damages (at least $10 million),
treble damages, general and consequential damages, punitive
damages, Attorneys' fees and court costs. In September 1998,
Roadrunner Video (Roadrunner Video) filed a third-party complaint
in intervention against the Company and Hollywood Entertainment
Corp. (the Roadrunner Complaint). The Roadrunner Complaint
alleges the same claims as the Movie Buffs Counterclaims. The
Company filed a motion to dismiss the Robinson-Patman Act claims
pursuant to Federal Rules of Civil Procedure 12(b)(6), which
motion was granted on March 5,1999. The court also granted
Roadrunner and Movie Buff's request to dismiss their claims
against Hollywood without prejudice. The Company believes the
Movie Buffs Counterclaims and the Roadrunner Complaint lack merit
and the Company intends to vigorously defend against all of the
allegations therein.
On April 12, 1999, Roadrunner and Movie Buffs filed amended
claims against Rentrak that added a new claim for fraud. The
Company continues to believe that the remaining Roadrunner and
Movie Buffs claims are without merit and intends to continue to
vigorously defend itself.
On February 10, 2000, the Company filed a complaint (the "Action
Video Complaint") against David D. Passerallo, and Action Video,
Inc. entitled Rentrak Corporation v. David D. Passerallo, an
individual and Action Video, a North Carolina corporation, Case
No. CV 00-214-HA, in the United District Court for the District
of Oregon. The Action Video Complaint alleges claims for
conversion, and breach of contract, payment on advance agreement
and personal guarantee.
On April 10, 2000, Action Video filed counterclaims against the
Company. Action Video's counterclaims allege that the Company
violated antitrust laws, including the Sherman and Clayton Acts,
based on the Company's alleged efforts to favor certain customers
(such as Hollywood) over others and thereby restrain competition.
The Action Video Counterclaims also include the following: (1) a
demand for a declaratory ruling that the contract between the
Company and Action Video is unenforceable as unconscionable and a
contract of adhesion, (2) fraud and conspiracy to defraud, based
on allegedly false representations intended to induce Action
Video to act; (3) breach of contract based on the Company's
allegedly wrongful termination of its contract with Action Video,
allegedly wrongful computation of revenue entitlement, and
certain other alleged actions; (4) breach of an implied covenant
of good faith, based on the Company's allegedly wrongful
termination of its contract with Action Video; (5) unfair trade
practices based on the Company's alleged conduct during its
dealings with Action Video, including termination of the
Company's contract with Action Video; and (6) a demand for an
accounting of the nature and amount of the parties' respective
obligations under the contract. Action Video seeks unspecified
monetary damages in excess of $7 million, treble damages, general
and consequential damages, punitive damages in the minimum amount
of $30 million, attorneys' fees and court costs.
The Company has sought to dismiss a number of Action Video's
counterclaims. Action Video has agreed to dismiss certain of
these counterclaims and has agreed to replead its remaining
counterclaims. The Company believes that the Action Video
Counterclaims are without merit and intends to vigorously defend
against this litigation.
In the event of an unanticipated adverse final determination in
respect of certain matters discussed above, the Company's
consolidated net income for the period in which such
determination occurs could be materially affected.
The Company is also subject to certain legal proceedings and
claims that arise in the ordinary course of its business. In the
opinion of management, the amount of any ultimate liability with
respect to these actions will not materially affect the financial
position or results of operation of the Company.
11. EMPLOYEE BENEFIT PLANS:
At January 1, 1991, the Company established an employee benefit
plan (the 401(k) Plan) pursuant to Section 401(k) of the Internal
Revenue Code for certain qualified employees. Contributions made
to the 401(k) Plan are based on percentages of employees'
salaries. The amount of the Company's contribution is at the
discretion of Board of Directors. Contributions under the 401(k)
Plan for the years ended March 31, 2000, 1999 and 1998 were
approximately $77,000, $76,000 and $68,000, respectively.
The Company has an Employee Stock Purchase Plan (the Plan). The
Board of Directors has reserved 200,000 shares of the Company's
common stock for issuance under the Plan, of which 143,773 shares
remain authorized and available for sale to employees.
All employees meeting certain eligibility criteria may be granted
the opportunity to purchase common stock, under certain
limitations, at 85% of market value. Payment is made through
payroll deductions.
Under the Plan, employees purchased 3,257 shares for aggregate
proceeds of $14,370, 4,245 shares for aggregate proceeds of
$20,214 and 5,351 shares for aggregate proceeds of $20,993, in
2000, 1999 and 1998, respectively.
12. BUSINESS SEGMENTS, SIGNIFICANT SUPPLIERS AND MAJOR CUSTOMER:
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information," (SFAS 131). SFAS 131 requires the Company to
report certain information about operating segments. The Company
classifies its services in three segments, PPT, 3PF.COM and
Other. Other services include operations of BlowOut Video, a
video retailer, website services and amounts received pursuant to
royalty agreements.
<TABLE>
<CAPTION>
Business Segments
2000 1999 1998
<S> <C> <C> <C>
Net sales (1):
PPT $ 94,149,121 $106,972,685 $113,748,857
3PF.COM (2) 11,648,770 10,501,958 6,436,412
Other 13,345,044 8,102,348 4,175,449
------------ ------------ ------------
$119,142,935 $125,576,991 $124,360,718
============ ============ ============
Income (loss) from
operations
PPT $ 2,032,875 $ (1,086,669) $ 4,752,502
3PF.COM(2) (1,131,187) 862,257 664,672
Other 2,119,550 2,973,809 1,787,943
------------ ------------ ------------
$ 3,021,238 $ 2,749,397 $ 7,205,117
============ ============ ============
Identifiable assets(1):
PPT $ 44,571,673 $ 45,618,408 $ 49,330,378
3PF.COM 2,703,360 1,152,171 549,439
Other 6,195,923 4,302,726 3,540,549
------------ ------------ ------------
$ 53,470,956 $ 51,073,305 $ 53,420,366
============ ============ ============
(1)Total amounts differ from those reported on the
consolidated financial statements as intercompany
transactions and investments in subsidiaries are not
eliminated for segment reporting purposes.
(2) 3PF.COM's revenues related to the shipment of cassettes
to Rentrak's PPT Customers was $3,300,000, $3,800,000 and
$4,500,000 for the years ended March 31, 2000, 1999 and
1998, respectively.
</TABLE>
The Company has one program supplier that supplied product that
generated 25%, a second that generated 19%, and a third that
generated 13% of the Company's revenues for the year ended
March 31, 2000. The Company has one program supplier that
supplied product that generated 28%, a second that generated 26%,
and a third that generated 15% of the Company's revenues for the
year ended March 31, 1999. The Company has one program supplier
that supplied product that generated 48%, a second that generated
17%, and a third that generated 15% of the Company's revenues for
the year ended March 31, 1998. There were no other program
suppliers who provided product accounting for more than 10% of
sales for the years ended March 31, 2000, 1999 and 1998.
The Company currently receives a significant amount of product
from three program suppliers. Although management does not
believe that these relationships will be terminated in the near
term, a loss of one of these suppliers could have an adverse
affect on operating results.
One customer accounted for 13% of the Company's revenues in 1999.
Another customer accounted for 11% of the Company's revenues in
1998. No customer accounted for more than 10% of the Company's
revenue in fiscal 2000.
13. DISCONTINUED OPERATIONS:
On November 26, 1996, the Company made a distribution to its
shareholders of 1,457,343 shares of common stock (the BlowOut
Common Stock) of BlowOut. BlowOut is not related to the Company's
wholly owned subsidiary BlowOut Video, Inc. During the year
ended March 31, 2000, the Company recorded a gain on the disposal
of discontinued operations of $1,900,000 related to BlowOut, as
the liability related to BlowOut contingencies was less than
estimated. The Company also reduced the valuation allowance that
was recorded against the deferred tax asset related to
liabilities of discontinued operations. This reduction of
approximately $500,000 in the valuation allowance was recorded as
an income tax benefit from discontinued operations in the
accompanying consolidated income statement. Net current
liabilities of discontinued operations at March 31, 2000 relate
to amounts to be paid pursuant to the Guarantee, net of tax
benefit.
<TABLE>
<CAPTION>
RENTRAK CORPORATION
Valuation and Qualifying Accounts
Schedule II
Balance at Charged to Balance at
Beginning of Write Off and Other Recoveries The End of
Year Ended: Period Expenses Accounts (Deductions) Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
March 31, 1998 409,313 (4,655,356) - 4,832,684 586,641
March 31, 1999 586,641 (7,865,333) - 7,633,933 355,241
March 31, 2000 355,241 (3,892,947) - 4,374,651 836,945
Advances to program suppliers reserve
March 31, 1998 1,768,514 110,581 (696,338) - 1,182,757
March 31, 1999 1,182,757 (17,597) - - 1,165,160
March 31, 2000 1,165,160 110,918 - - 1,276,078
Other Current Assets-
Retailer Financing Program reserve
March 31, 1998 - - - - -
March 31, 1999 - - 994,935 1 - 994,935
March 31, 2000 994,935 - (500,000) 1 - 494,935
Other Assets-
Retailer Financing Program reserve
March 31, 1998 10,340,375 - (467,930) 2 (518,450) 9,353,995
March 31, 1999 9,353,995 (194,888) (559,433) 1 (18,921) 8,580,753
March 31, 2000 8,580,753 1,245,157 (4,615,665) 2 (20,997) 5,189,248
1 - Reclassified from Other Current Assets to Other Assets.
2 - Eliminated against Other Assets.
</TABLE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Pursuant to General Instruction G(3) to Form 10-K, the
information called for by this item 10 is incorporated by
reference from the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended. See "Election of Directors" and "Executive
Officers".
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) to Form 10-K, the
information called for by this item 11 is incorporated by
reference from the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended. See "Executive Compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND
MANAGEMENT
Pursuant to General Instruction G(3) to Form 10-K, the
information called for by this item 12 is incorporated by
reference from the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended. See "Security Ownership of Certain Beneficial
Owners and Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) to Form 10-K, the
information called for by this item 13 is incorporated by
reference from the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended. See "Compensation Committee Interlocks And
Insider Participation" and "Certain Relationships And
Transactions".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON
FORM 8-K
(a)(1) Financial Statements
The following documents are filed as part of the
Report:
Consolidated Financial Statements: The
Consolidated Financial Statements of the Company
are included in Item 8 of this Report:
Report of Independent Public
Accountants
Consolidated Balance Sheets as of March 31, 2000
and 1999
Consolidated Statements of Income for Years
Ended March 31, 2000, 1999 and
1998
Consolidated Statements of Stockholders' Equity
for Years Ended March 31, 2000,
1999 and 1998
Consolidated Statements of Cash Flows for
Years Ended
March 31, 2000, 1999, and 1998
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Consolidated Financial Statement Schedules:
The following consolidated financial statement
schedule has been included in Item 8 of this
Report:
Schedule II - Valuation and Qualifying Accounts
Schedules not included have been omitted because they
are not applicable or the required information is
shown in the financial statements or notes thereto.
(a)(3) Exhibits: The exhibits required to be filed
pursuant to Item 601 of Regulation S-K are set forth
in the Exhibit Index.
(b) Form 8-K Reports. During the fourth quarter of fiscal
2000, the Company filed no reports on Form 8-K.
(c) Exhibits (See Exhibit Index)
1. A shareholder may obtain a copy of any exhibit
included in this Report upon payment of a fee to cover the
reasonable expenses of furnishing such exhibits by written
request to Rick Nida, Vice President Investor Relations,
Rentrak Corporation, PO Box 18888, Portland, Oregon 97218
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
RENTRAK CORPORATION
By /S/ F. Kim Cox
F. Kim Cox, President
Date June 29, 2000
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in
the capacities and the dates indicated.
Principal Executive Officer:
By /S/ Ron Berger June 29, 2000
Ron Berger, CEO
Principal Financial Officer:
By /S/ Carolyn Pihl June 29, 2000
Carolyn A. Pihl, Chief Financial Officer
Majority of Board of Directors:
By /S/ Pradeep Batra June 29, 2000
Pradeep Batra, Director
By /S/ Peter Balner June 29, 2000
Peter Balner, Director
By /S/ Skipper Baumgarten June 29, 2000
Skipper Baumgarten, Director
By /S/ Ron Berger June 29, 2000
Ron Berger, Chairman
By /S/ Takaaki Kusaka June 29, 2000
Takaaki Kusaka, Director
By /S/ James P. Jimirro June 29, 2000
James P. Jimirro, Director
By /S/ Bill LeVine June 29, 2000
Bill LeVine, Director
By /S/ Muneaki Masuda June 29, 2000
Muneaki Masuda, Director
By /S/ Stephen Roberts June 29, 2000
Stephen Roberts, Director
EXHIBIT INDEX
The following exhibits are filed herewith or, if
followed by a number in parentheses, are incorporated
herein by reference from the corresponding exhibit filed in
the report or registration statement identified in the
footnotes following this index:
Exhibit Exhibit Page
Number
3.1 Amended and Restated Articles of
Incorporation and amendments thereto
(1)
3.2 1995 Restated Bylaws, as amended to
date (2)
3.3 Amendment No. 1 to the 1995 Restated
Bylaws of Rentrak Corporation. (3)
3.4 Amendment No. 2 to the 1995 Restated
Bylaws of Rentrak Corporation. (26)
4.1 Articles of Incorporation, as amended
to date (incorporated by reference to
Exhibit 3.1)
4.2 Articles II and V of the 1995
Restated Bylaws (incorporated by
reference to Exhibit 3.2)
10.1* 1986 Second Amended and Restated
Stock Option Plan and Forms of Stock
Options Agreements (4)
10.2* Stock Option Agreement with Ron
Berger, dated April 18, 1995 (5)
10.3* Rentrak Corporation Amended and
Restated Directors Stock Option Plan
(6)
10.4* Rentrak Corporation's 401-K Plan (7)
10.5* Amended and Restated 1992 Employee
Stock Purchase Plan of Rentrak
Corporation (8)
10.6 Joint Development Agreement with CCC
dated August 6, 1993 (9)
10.7 Second Amendment to Business
Cooperation Agreement between
Rentrak Corporation, Culture
Convenience Club Co., Ltd., and
Rentrak Japan dated June 16, 1994
(10)
10.8* Employment Agreement with Carolyn
Pihl dated May 6, 1996 (11)
10.9 Guarantee Agreement dated as of June
26, 1996 between Rentrak Corporation
and BlowOut Entertainment, Inc. (12)
10.10* The 1997 Non-Officer Employee Stock
Option Plan of Rentrak Corporation (13)
10.11* Employment Agreement with Marty Graham
dated May 17, 1997 (14)
10.12* Employment Agreement with Michael
Lightbourne dated July 10, 1997 (15)
10.13* Employment Agreement with Christopher
Roberts dated October 27, 1997 (16)
10.14* Employment Agreement with Ron Berger
dated April 21, 1998 (17)
10.15* The 1997 Equity Participation Plan of
Rentrak Corporation (18)
10.16* Amendment to the 1997 Non-Officer
Employee Stock Option Plan of Rentrak
Corporation (19)
10.17* Form of Non-Qualified Stock Option
Agreement (20)
10.18* Form of Incentive Stock Option
Agreement (21)
10.19 Amendment to the 1997 Equity
Participation Plan of Rentrak
Corporation dated August 24, 1998. (22)
10.20 Amendment to the 1997 Equity
Participation Plan of Rentrak
Corporation (23)
10.21* Employment Agreement with F. Kim Cox
dated April 1, 1998 (24)
10.22 Amendment to the 1997 Equity
Participation Plan of Rentrak
Corporation dated August 23, 1999. (25)
10.23* Addendum to Employment Agreement with 55
Marty Graham dated June 8, 2000
10.24* Addendum to Employment Agreement with 57
Christopher Roberts dated June 8, 2000
10.25* Promissory Note entered into with F. 59
Kim Cox dated June 16, 2000
10.26* Promissory Note entered into with Ron 63
Berger dated June 16, 2000
10.27 Loan and Security Agreement with 67
Guaranty Business Credit Corporation
dated May 26, 2000
10.28 General Continuing Guarantee with 85
Guaranty Business Credit Corporation
dated May 26, 2000
10.29 Amendment to Rentrak Corporation 98
Amended and Restated Directors Stock
Option Plan dated May 19, 2000
10.30 Amendment to Rentrak Corporation 1986 99
Second Amended and Restated Stock
Option Plan dated May 19, 2000
10.31 Warrant Agreement and Certificate To 100
Purchase Shares of Common Stock of
3PF.COM, Incorporated dated November
29, 1999
10.32 Loan and Security Agreement with Bill 115
LeVine dated August 1999
21 List of Subsidiaries of Registrant 138
23 Consent of Arthur Andersen LLP 139
27 Financial Data Schedule N/A
* Management Contract
1. Filed in S-3 Registration Statement, File # 338511 as filed on
November 21, 1994.
2. Filed as Exhibit B to 1994 Proxy Statement dated July 11, 1994
3. Filed as Exhibit 10.41 to 1998 Form 10-K filed on June 25, 1998
4. Filed as Exhibit 10.1 to Form 10-K filed on June 28, 1993
5. Files as Exhibit 10.5 to 1998 form 10-K filed on June 25, 1998
6. Filed as Exhibit B to 1994 Proxy Statement dated July 11, 1994
7. Filed as Exhibit 10.1 to Form 10-K filed on June 28, 1993
8. Filed as Exhibit 10.13 to Form 10-K filed on June 29, 1995
9. Filed as Exhibit 10.5 to Form 10-K filed on June 28, 1993
10. Filed as Exhibit to 1994 form 10-K filed on June 29, 1994
11. Filed as Exhibit 10.25 to Form 10-K filed on June 19, 1997
12. Filed as Exhibit 2 to Form 8-K filed on December 9, 1996
13. Filed as Exhibit 4.1 to Form S-8 filed on June 5, 1997
14. Filed as Exhibit 10.1 to Form 10-Q filed on November 3, 1997
15. Filed as Exhibit 10.2 to Form 10-Q filed on November 3, 1997
16. Filed as Exhibit 10.3 to Form 10-Q filed on November 3, 1997
17. Filed as Exhibit 10.35 to 1998 Form 10-K filed on June 25, 1998
18. Incorporated by reference to the Company's Proxy Statement
dated June 25, 1997 for the Company's 1997 Annual Meeting of
Shareholders
19. Filed as Exhibit 4.1 to Form S-8 filed on October 29, 1997
20. Filed as Exhibit 10.6 to Form 10-Q filed on November 3, 1997
21. Filed as Exhibit 10.1 to Form 10-Q filed on February 9, 1998
22. Filed as Exhibit 10.40 to 1998 Form 10-K filed on June 25, 1998
23. Filed as Exhibit 10.1 to Form 10-Q on November 6, 1998
24. Filed as Exhibit 10.2 to Form 10-Q filed on November 6, 1998
25. Filed as Exhibit 10.1 to Form 10-Q filed on November 9, 1999
26. Filed as Exhibit 3.4 to 1999 Form 10-K filed on June 25, 1999
